Spirit Airlines Inc SAVE shares have been volatile in recent sessions, gaining sharply last week after the announcement of a significant transaction and an update on its financial performance.
What To Know: In an SEC filing last week, the budget airline disclosed that it had entered into a binding term sheet with GA Telesis for the sale of 23 A320ceo/A321ceo aircraft, valued at approximately $519 million.
The delivery of these aircraft is set to begin in October 2024 and will continue through February 2025, contingent upon the execution of definitive documentation and customary conditions.
This move is expected to provide a much-needed boost to Spirit’s liquidity, with the airline estimating that the net proceeds from the aircraft sale, along with the discharge of associated debt, will enhance its financial position by about $225 million through the end of 2025.
Such an infusion of capital comes at a critical time for Spirit, as the company grapples with a challenging financial landscape characterized by increased operational costs and a substantial debt load of $3.3 billion.
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What Else: Adding to investor optimism, Spirit Airlines recently provided preliminary estimates for its third quarter of 2024, revealing that the estimated adjusted operating margin will be approximately 300 basis points higher than previously anticipated.
This improvement is attributed to stronger-than-expected revenue growth stemming from the company’s ongoing transformation initiatives. However, Spirit’s outlook for 2025 reflects a more cautious approach, with capacity projected to decrease in the mid-teens percentage range.
This reduction is due to a combination of factors, including the recent aircraft sale, ongoing removal of neo aircraft from service because of Pratt & Whitney engine availability issues, and the retirement of its remaining A319ceo aircraft. On a brighter note, the company plans to introduce six new A321neo aircraft into its fleet.
What’s Next: To support its pathway to profitability, Spirit Airlines has identified about $80 million in annualized cost reductions, which are expected to begin in early 2025. These reductions primarily involve workforce cuts aligned with anticipated flight volumes.
The company is also actively engaged in discussions with holders of its senior secured notes due 2025 and convertible senior notes due 2026, indicating a proactive approach to managing its debt obligations.
The airline’s stock has been volatile in 2024, largely due to operational disruptions from an engine recall and regulatory setbacks surrounding its proposed acquisition of JetBlue Airways Corporation JBLU. Moreover, Spirit has missed analysts’ expectations on both revenue and earnings in its last two quarterly reports.
Recent reports suggest that Spirit Airlines is exploring potential bankruptcy options, a move that underscores the financial pressures the company is facing. However, the airline says it remains committed to bolstering its liquidity and addressing its debt load, anticipating over $1 billion in liquidity by the end of 2024.
This figure encompasses unrestricted cash, cash equivalents and short-term investment securities, contingent upon the successful execution of ongoing initiatives.
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How To Buy SAVE Stock
Besides going to a brokerage platform to purchase a share – or fractional share – of stock, you can also gain access to shares either by buying an exchange traded fund (ETF) that holds the stock itself, or by allocating yourself to a strategy in your 401(k) that would seek to acquire shares in a mutual fund or other instrument.
For example, in Spirit Airlines’ case, it is in the Industrials sector. An ETF will likely hold shares in many liquid and large companies that help track that sector, allowing an investor to gain exposure to the trends within that segment.
According to data from Benzinga Pro, SAVE has a 52-week high of $17.02 and a 52-week low of $1.40.
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