09 April, 2024

Spirit Airlines to hold off on Airbus deliveries as cash becomes tight.....

Low-cost air carrier Spirit Airlines said yesterday morning that it will defer deliveries of new Airbus aircraft and furlough 260 pilots in the interest of saving cash - specifically, $340 million over the next two years, according to The New York Times.

All aircraft on order that are scheduled to be delivered in 2Q2025 through the end of 2026 will be deferred to 2030 - 2031, The Fly Report states

The furlough of 260 pilots starting September 1, 2024 comes as a result of the grounding of aircraft due to Pratt & Whitney GTF engine availability issues, along with the 2025 and 2026 aircraft deferrals, per Spirit’s press release.

As recently announced, Spirit entered into a compensation agreement Pratt & Whitney regarding its GTF engines, which is said to improve the budget carrier's by $150 million to $200 million over the term of that agreement. Additionally, Spirit will continue to evaluate the use of its current financeable asset base to add additional liquidity over the coming months, according to the press release.

"This amendment to our agreement with Airbus is an important part of Spirit's comprehensive plan to bolster profitability and strengthen our balance sheet," said Ted Christie, Spirit's President and Chief Executive Officer. "Deferring these aircraft gives us the opportunity to reset the business and focus on the core airline while we adjust to changes in the competitive environment. In addition, enhancing our liquidity provides us additional financial stability as we position the Company for a return to profitability. We would like to thank our partners at Airbus for their continued support and commitment to the long-term success of Spirit."

Spirit also defers by two years the dates for the optional aircraft included in Spirit's purchase agreement.  Apparently, there is no change to the total number of aircraft on order or Spirit options for additional aircraft, but this may change in later announcements. 

Some commentators have placed a time limit on Spirit's survival in its current state.  There is little doubt since the JetBlue takeover was halted by authorities the budget airline's future was precarious, to say the least. It had been looking around for another suitor that isn't as big as JetBlue, but has a large enough bank balance, yet the search has not proved fruitful.  Sun Country had been offered around as a good tie-up partner, but that isn't looking promising given the current market conditions. 
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