Embattled South Florida-based Spirit Airlines saw its stock drop about 10% on Monday after it posted a first quarter net loss of $142.6 million, and blamed the declines on external factors such as “adverse weather and air traffic control related delays,” tough competition from other airlines, and continued civil disorder in Haiti.
The company, which posted a first quarter net loss of $103.9 million in 2023, also said the forthcoming second quarter will look worse than last year.
On Wall Street, investors responded by driving down the price of airline’s common shares to $3.35, or just under 10%. Earlier in the day, the shares fell to a 52-week low of $3.18. The year’s high was $18.44.
But top executives declared they’re confident they can execute a financial recovery plan they started after the collapse of JetBlue Airways’ bid to take over Spirit for $3.8 billion.
“While we reported a loss in the first quarter 2024, we are making progress towards our financial goals,” said Ted Christie, Spirit’s President and Chief Executive Officer in a statement.
“The competitive environment remains challenging due to elevated capacity in many of the markets we serve,” he added. In its report, management said “excess capacity” from rivals in key markets also weighed heavily on Spirit, which was compelled to use deep discounts to attract more passengers. As a result, the average fare per passenger fell 16% in the quarter versus the same period in 2023.
Even now, industry capacity in the leisure markets that Spirit relies upon remains high.
“Nevertheless, we are confident that the strategic changes we are implementing, together with our cost saving initiatives, will allow Spirit to compete effectively in today’s marketplace and drive continuous improvement in the years ahead,” Christie said.
He thanked Spirit’s workforce “for their continued focus on running a reliable operation and delivering value to our guests as we implement our go-forward standalone plan.”
Recovery measures continuing
Last month, the company unveiled its newly constructed corporate headquarters complex in Dania Beach south of Fort Lauderdale-Hollywood International Airport, where Spirit remains the predominant airline in passengers carried.
During an interview, Christie was upbeat about the airline’s ability to recover, though he acknowledged that a number of challenges now face the carrier, including the grounding of multiple jetliners as a result of a manufacturer’s engine recall. At the time, he said 20 of the company’s more than 200 planes were on the ground for inspections, and anticipated the number would rise to 40 by year’s end. The airline has a multimillion dollar compensation agreement with a subsidiary of Pratt & Whitney for 2024, improving liquidity by $150 million to $200 million.
The company has also deferred the deliveries of new Airbus 320neo jetliners and has announced the furloughs of more than 200 pilots starting Sept. 1.
In the financial statement issued Monday, Scott Haralson, Spirit’s chief financial officer, said the compensation, aircraft delivery deferrals and cost savings “will improve our cash levels by $450-$550 million in 2024.”
“We are on the cusp of making changes which we believe will position us on the road back to sustained profitability,” he said.
But during an earnings call with analysts Monday, Haralson acknowledged that the engine recall has hampered Spirit’s operations.
“The impact on our business associated with these Pratt engine issues cannot be understated,” he said.
