The company's financial situation is getting tighter and tighter
Spirit Airlines reported earnings Thursday, and yet again the numbers were bad. The company served up its 11th consecutive quarterly loss, out $150 million on $1.2 billion in revenue. It’s caught in a difficult spot, stuck between a low-cost-carrier present where its customers are pulling back on spending and its transition to a “normal” carrier future where it will have to compete more straightforwardly with the likes of Delta Air Lines and United Airlines.
“The continued intense competitive battle for the price-sensitive leisure traveler further reinforces our belief that we are on the right path with our transformation plan to redefine low-fare travel,” CEO Ted Christie said in a statement accompanying the quarterly business figures.
The company’s shares were down about 8% in Thursday trading and have fallen more than 82% this year.
Ever since Spirit called off its merger with JetBlue Airways in March, Spirit has been desperately trying to buy time toward figuring out a solo future. It’s deferring airplane deliveries, pushing back the due date on a revolving credit facility, and alongside its earnings announcement, said that it would be furloughing 240 of its pilots (after furloughing 260 of them just a few months ago), offering “voluntary unpaid leaves of absence” to flight attendants, and shutting down recruitment of both groups. The moves are expected to help save $100 million by the end of the year.
Spirit really needs the money: Its fuller financial report says that it has more than $1.3 billion in debt coming due by the end of next year and just $725 million in cash. And if the company can’t get its creditors to cut it a break, its revolving facility — something like a giant credit card — comes due more quickly.
“We remain in active discussions with the advisors to the noteholders to address the upcoming debt maturities and will provide updates on our progress when appropriate,” Christie said in his statement.
Faith in Spirit’s turnaround abilities are fading. Before the earnings even came out, TD Cowen downgraded the stock to a “sell” from a “hold.” Though analyst Thomas Fitzgerald wrote that the bank thinks it’s possible the company finds a way to renegotiate its debt load and makes other financial maneuvers, “we believe the risk of a pre-packaged [bankruptcy] filing, and deteriorating fundamentals make the stock a “stay away.’” The team doesn’t expect Spirit to actually have profitable quarter until two summers from now at the earliest — if it’s around that long.
Christie tried to put a brave face on his company’s situation. “As the saying goes: The hottest fire forges the strongest steel, and I’m seeing that every day with our group,” he said on the company’s earnings call. “The Spirit team has not and will not back away from the challenges… the chatter in the market about Spirit is notable, but we are not distracted.”
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