Thursday, 29 October 2020

"Our future is very bright" claims the boss of Spirit Airlines, while the carrier posts a loss of over $99 million in Q3

"Our future is very bright. While the pandemic continues to affect demand for air travel, we do not believe it changes our competitive position." claims the  President and Chief Executive Officer of the U.S. ultra-low-cost carrier Spirit Airlines, in the latest update from the firm that lists third-quarter losses of over $99 million. 

There is no doubt that airline has been hit hard by the downturn in business caused by the coronavirus COVID-19 pandemic and the company continues to try and implement mitigation strategies while working to preserve cash and protect the long-term survival of the airline. Yet, even with much-reduced schedules,  and rock bottom fares,  Spirit is still experiencing low demand, its load factor for the third quarter of 2020 was 68.1%.

For the fourth quarter 2020, Spirit estimates its capacity will be down approximately 25 percent year over year. On a monthly basis, Spirit estimates its capacity for October will be down approximately 36 percent and that November and December will both be down about 20 percent compared to the same periods last year. 

Total operating revenue for the third quarter 2020 was $401.9 million, a decrease of 59.5 percent year over year as demand for air travel remains depressed due to the COVID-19 pandemic. Based on current demand and level of operation assumptions, Spirit estimates its fourth quarter total operating revenue will be down approximately 43 to 45 percent year over year.

Cost Performance
For the third quarter 2020, total GAAP operating expenses, including $148.3 million of special items, were $501.4 million, a decrease of 42.2 percent, year over year. Adjusted operating expenses for the third quarter 2020 were $649.7 million4, a decrease of 24.3 percent year over year. These changes were primarily driven by a 62.9 percent decrease in aircraft fuel expense due to decreases in both fuel rate and volume. In addition, other expenses, such as distribution, ground handling, and crew accommodation expenses were lower year over year due to a 37.4 percent decrease in flight volume. Better operational performance also drove a significant decrease in passenger re-accommodation expense compared to the same period last year. Despite a significant decrease in flight volume compared to the third quarter last year, other rents and landing fees increased year over year due to airport signatory adjustments and rate increases at various airports Spirit serves.

In late August 2020, the Company and its unions and work group representatives worked to find a solution to mitigate planned furloughs that were set to take effect on October 1, 2020. Various voluntary time-off programs in place through May 2021 will enable the Company to capture savings similar to what would have been achieved with the planned furloughs while preserving jobs, and maintaining options, should demand trends worsen or recover faster than expected.

Spirit took delivery of one new A320neo aircraft during the third quarter 2020, which was debt financed. Spirit ended the quarter with 155 aircraft in its fleet. Earlier in October 2020, Spirit took delivery of its two remaining 2020 deliveries, one of which was debt financed and the other was secured under a sale/leaseback transaction.

"Our future is very bright. While the pandemic continues to affect demand for air travel, we do not believe it changes our competitive position. Our excellent operational performance, strong Guest satisfaction metrics, and industry-leading cost structure, position us well to be among the first to reach sustained profitability," said Ted Christie, Spirit's President and Chief Executive Officer. "I thank the entire Spirit team for how well they have navigated the challenges in this incredibly dynamic time, shoring up our resources, and putting us in a position of strength to fully participate when demand recovers."

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