Spirit Airlines
has announced that it would not be able to file its Q3 financial report on time, with the low-cost carrier saying that the carrier’s executives’ focus for the time being has been improving its liquidity position.
Negotiations with creditors
In a United States Securities and Exchange Commission (SEC) filing on November 13, Spirit Airlines said that it could not file its Q3 financial report with the commission “without unreasonable effort or expense.”
As previously announced, the airline has been in active discussions with its creditors to delay the maturity date of security notes due 2025 and convertible senior notes due 2026 and restructure the obligations owed to the noteholders.
The carrier’s management has also been exploring alternative ways to improve its liquidity in the near-term future but has “also diverted significant management time and internal resources from the Company’s processes for reviewing and completing its financial statements and related disclosures.”
Photo: Spirit Airlines
“If a definitive agreement with such Noteholders is reached and documented, it would be effectuated through a statutory restructuring that is not expected to impair general unsecured creditors, employees, customers, vendors, suppliers, aircraft lessors or holders of secured aircraft indebtedness, but, if effectuated, is expected to lead to the cancellation of the Company’s existing equity.”
Spirit Airlines warned that if it fails to reach an agreement with its noteholders, it would consider “all alternatives.”
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Failed merger(s)
Previously, the Wall Street Journal (WSJ) reported that Spirit Airlines was getting ready to file for Chapter 11 bankruptcy protection, with its situation deteriorating significantly after Frontier Airlines
had dropped interest in attempting an acquisition of the former.
Frontier Airlines, which was outbid by JetBlue to acquire Spirit Airlines in 2022 when the latter’s shareholders approved the merger plan with JetBlue, reportedly showed interest in attempting to merge once again.
Photo: Lukas Souza | Simple Flying
The airline, which initially offered Spirit Airlines’ shareholders $2.13 and 1.9126 Frontier Airlines stock per one Spirit Airlines stock in February 2022, restarted merger talks in October.
The deal was likely to happen as part of Spirit Airlines’ restructuring efforts under Chapter 11 bankruptcy, a WSJ report in October said.
The Department of Justice (DOJ) and several US states succeeded in blocking the JetBlue and Spirit Airlines merger, with William Young, the district judge at the US District Court for the District of Massachusetts, blocking the merger in January.
Young argued that customers, who have benefitted from Spirit Airlines’ low fares, would suffer harm following the merger, with JetBlue
being more akin to a hybrid airline.
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The airlines’ previous merger agreement collapsed when JetBlue swooped in with a higher offer to Spirit Airlines’ shareholders.
Few, if any, silver linings
The same SEC filing detailed that in Q3, Spirit Airlines expected to report a 12% lower operating and adjusted operating margin year-on-year (YoY) due to lower revenues and higher operating expenses.
The airline’s revenues should be $61 million lower compared to Q3 2023 because of lower average yields – an industry-wide trend – and the company no longer charging for change and cancelation fees.
“Total operating expenses are estimated to have increased approximately $46 million and adjusted operating expenses are estimated to have increased approximately $52 million compared to the third quarter 2023.”
Spirit Airlines said its Q3 costs increased due to higher aircraft rent expenses, other operating costs, salaries, wages, benefits, and higher landing fees. This was partially offset by lower fuel costs, the airline noted.
Photo: HMBSoFL Photography | Shutterstock
The company ended Q2 with $845.3 million in cash, cash equivalents, and restricted cash.
In a filing on October 18, Spirit Airlines detailed that it expects to end the year with around $1 billion in liquidity, “including unrestricted cash and cash equivalents, short-term investment securities and additional liquidity initiatives, assuming that the Company is able to close those initiatives that are currently in process.”
The same filing said that it had successfully pushed back the senior secured notes due 2025 extension or refinancing deadline to December 23, with the early maturity date also being delayed to March 3, 2025.
In addition, Spirit Airlines had used up the entire available $300 million revolving credit facility, which will mature on September 30, 2026. The maturity date could be shortened to June 21, 2025, or February 13, 2026, if the airline’s notes, due in 2025 and 2026, are not extended or refinanced by June 20, 2025, and February 12, 2026, respectively.
On November 4, Spirit Airlines announced that it had entered into a binding term sheet agreement with the US-based aerospace asset manager GA Telesis for 23 Airbus A320ceo
/A321ceo aircraft, which Airbus delivered between 2014 and 2019.
“[…] the Company estimates the net proceeds of the Sale, combined with discharging the Aircraft-related debt from its balance sheet, will benefit its liquidity by approximately $225 million through year-end 2025.”
Photo: Denver International Airport
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