Spirit Airlines, brushing aside Wall Street speculation that it might land in bankruptcy, said Thursday it is capable of making money even without the proposed takeover by JetBlue Airways, and boasts a big enough cash war chest to overcome a $183.7 million loss it posted for the fourth quarter.
During an earnings call, Spirit CEO Ted Christie threw a counterpunch against commentators who said the South Florida-based discount airline may not be able to fly solo after a federal judge ordered a halt to JetBlue’s proposed $3.8 billion buyout of Spirit on the grounds that it would hurt consumers.
“This misguided narrative has been advanced by an assortment of pundits,” Christie said during the call, which was attended mainly by Wall Street analysts, some of whom suggested the airline might need to restructure its finances in bankruptcy court or even liquidate. “However, back in the real world we focus on facts.”
“Liquidity is always king,” Christie said, “and we have enhanced our levels to give us the necessary flexibility to successfully close with JetBlue or to pursue our standalone plans.”
In trading Thursday, Spirit’s stock, which has declined sharply over the last year, rose 2.7% to as high as $7.14 on its report.
A federal appeals court in Boston has set a June hearing on the takeover ruling by U.S. District Judge William Young. The deal’s scheduled closing date is set for late July.
During the call, Christie said Spirit “strongly disagrees” with the ruling and excoriated the U.S. Government, which he said “continues to do nothing to address the anti-competitive nature of our industry.”
“This case should never have been brought,” Christie said of the Justice Department, which along with several states and the District of Columbia sued to stop the deal on antitrust grounds.
“It’s beyond absurd for the government to claim a victory for the American consumer,” he said. “In fact, it’s ridiculous.”
Spirit did not address a regulatory filing in late January by JetBlue that held out the possibility of terminating the deal failing if certain unidentified conditions were not met.
Christie delivered an optimistic outlook for 2024 after the airline reported its loss for the fourth quarter, which was less than Wall Street expected.
Flight path to profitability
In its financial report for 2023, the airline said it ended the year with liquidity of $1.3 billion. The company said it is also assessing ways to deal with large debts that are scheduled to come due in 2025 and 2026.
“The Spirit team is 100% clear and focused on the adjustments we are currently deploying and will continue to make throughout 2024 to drive us back to cash flow generation and profitability,” Christie said in the company’s financial report issued Thursday.
Among other things, those adjustments include cost cuts such adjustments to its route system and slowing the delivery of new jetliners.
In the financial report filed with the Securities and Exchange Commission, Christie said the airline had improved its operational performance for passengers. For the quarter, the airline said, its planes were 80.1% full and its flights had a 99.2% completion factor.
“During the fourth quarter 2023 peak holiday period, the Spirit team ran a great operation,” Christie said. “We estimate this strong operational performance contributed $10 million of incremental revenue, allowing us to exceed our mid-December revenue guidance for the fourth quarter and deliver cost performance in excess of our expectations. We have continued this operational excellence and finished January 2024 as the No. 2 airline in reliability.”
During the conference call, Christie and other executives said the airline’s fortunes have been bolstered by strong bookings at the end of 2023 and for the Spring Break vacation period that starts soon.
The airline, which is a leading carrier at Fort Lauderdale-Hollywood International Airport, is a traditional airline of choice for college students and other budget-minded travelers who want to fly to Florida’s vacation destinations.
Uncertainties remain
While the airline has moved to upgrade its performance, it still faces several of factors that have been difficult for it to control.
ֱ the judge’s rejection of the proposed takeover, the Miramar-based airline has encountered a steep industry decline in domestic air fares, intrusion by rival carriers into its routes, market weakness in the Caribbean, and a manufacturing issue with Pratt & Whitney engines that have led to the grounding of many of Spirit’s Airbus jetliners.
Spirit said it is still in negotiations with Pratt & Whitney for compensation as the airline expects to have an average of 25 planes grounded this year for inspections.
No agreement has been reached, Spirit said. But the airline added it believes the compensation it will receive “will be a significant source of liquidity over the next couple of years.”
