Spirit Airlines, Inc. reported its second quarter 2024 financial results.
Second Quarter 2024 Financial Results
| (unaudited) | |||
| As Reported | Adjusted1 | ||
| Total operating revenues | $1,280.9 million | $1,280.9 million | |
| Operating income (loss) | $(152.5) million | $(166.9) million | |
| Operating margin | (11.9) % | (13.0) % | |
| Net income (loss) | $(192.9) million | $(157.9) million | |
| Diluted earnings (loss) per share | $(1.76) | $(1.44) | |
“Summer demand remains robust and load factors have been strong; however, significant industry capacity increases together with ancillary pricing changes in the competitive environment have made it difficult to increase yields, resulting in disappointing revenue results for the second quarter of 2024,” said Ted Christie, Spirit’s President and Chief Executive Officer. “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 with new, high-value travel options that will allow Guests to choose an elevated experience at an affordable price. I want to thank our entire team for their dedication and patience as we execute on these initiatives intended to drive improvement in overall revenue production and put us on the path to profitability.”
Transforming our Guest Experience
During the second quarter, Spirit began to execute on its transformation plan to better align its business model with the current market dynamics. On July 30, 2024, Spirit announced the next phase of its go forward strategy. The Company is introducing new offerings, including brand new premium selections, as part of a significant transformation that delivers an even friendlier, more comfortable, and cost-effective travel experience. The new premium selections and experience will range from elevated to economical to meet the needs of all travelers. Spirit will begin offering the new travel options for booking on Aug. 16 and launch the newly transformed Guest experience by August 27, 2024.To date, announced changes include:
- Four travel options: Go Big, Go Comfy, Go Savvy and Go
- Designated priority check-in at more than 20 airports for Guests who purchase the Go Big fare option or are Free Spirit® Gold members or Free Spirit World Elite Mastercard holders
- Enhanced boarding experience aimed to reduce boarding time and enhance operational performance
- Expanded Guest-friendly policies:
- All four travel options include the flexibility of no change or cancel fees
- Increased checked bag weight allowance up to 50 pounds
- Extended Future Travel Vouchers expiration to 12 months (for vouchers issued on or after June 3, 2024)
Delivering on Cost Saving Initiatives and Network Changes
- On track to achieve $100 million of annual run-rate cost savings with approximately $75 million expected to be achieved by year-end 2024
- Initiatives include:
- Temporarily suspending the recruitment of pilots and flight attendants and related training costs
- Offering voluntary unpaid leaves of absences to flight attendants
- Right-sizing overhead and non-crew operational positions
- Reducing discretionary capital spend
- Furloughing approximately 240 pilots and downgrading approximately 100 captains
- Realigning the network
- Compared to the third quarter 2023, in the third quarter 2024 the Company will have exited 42 markets and added 77 new ones
- Offering more day of week routes which allows for route expansion at a lower risk profile
- Aggressively managing capacity to better match seasonal and daily demand variances
- Aligning capacity to markets where the supply/demand trends are more in balance
- In addition to other liquidity-enhancing initiatives, the Company deferred all aircraft on order with Airbus that were scheduled to be delivered in the second quarter of 2025 through the end of 2026 to 2030-2031
Second Quarter 2024 Operations
- System completion factor of 98.5 percent
- System controllable completion factor2 of 99.8 percent
- Capacity increase of 1.7 percent year over year
- Load factor of 83.2 percent, an increase of 0.3 pts year over year
- Aircraft utilization of 10.6 hours, down 6.2 percent compared to the second quarter last year of 11.3 hours, primarily due to aircraft unavailable for operational service due to PW1100G-JM geared turbo fan engine availability issues (“AOG”)
Second Quarter 2024 Revenues
Elevated domestic industry capacity restrained the Company’s ability to drive increased ticket yields, pressuring fare revenue per passenger flight segment (“segment”) during the second quarter of 2024. The Company also experienced downward pressure on non-ticket revenue per segment, primarily due to the elimination of charging for change and cancellation fees and competitive price reductions of ancillary items.
- Total operating revenues of $1,280.9 million, a decrease of 10.6 percent year over year
- Total revenue per ASM (“TRASM”) of 9.05 cents, a decrease of 12.1 percent year over year on 1.7 percent more capacity
- Total revenue per segment of $108.46, a decrease of 15.3 percent year over year
- Fare revenue per segment of $45.02, a decrease of 22.2 percent year over year
- Non-ticket revenue per segment of $63.44,1 a decrease of 9.6 percent year over year
As the Company executes on its transformation strategy, it anticipates that over time it will be able to drive improvement in total revenue per segment.
Second Quarter 2024 Cost Performance
- Total operating expense of $1,433.4 million and adjusted operating expenses of $1,447.8 million1
- Adjusted non-fuel cost of $1,040.5 million1
- Average fuel price per gallon of $2.78
- Total non-operating expense of $37.1 million
Second Quarter 2024 Liquidity and Capital Deployment
- Ended the quarter with unrestricted cash and cash equivalents, short-term investment securities and liquidity available under the Company’s revolving credit facility of $1.1 billion
- Extended the final maturity of its $300 million revolving credit facility to September 30, 2026, subject to certain conditions
- Recorded pre-delivery deposit refunds, net of pre-delivery payments of $162.2 million for the six months ending June 30, 2024, partially offset by $60.6 million spent on the purchase of property and equipment
- Recognized $57.1 million1 of AOG credits on the Company’s condensed consolidated statements of Cash Flows, bringing the year-to-date benefit recognized to $75.0 million1
- Estimates AOG credits to be issued in 2024 by Pratt & Whitney for AOG aircraft will benefit full year 2024 liquidity by approximately $150 million to $200 million
“The Spirit management team is focused on returning to profitability, and we believe the transformation plan we recently announced places us on the path to improved financial performance,” said Fred Cromer, Spirit’s Chief Financial Officer. “We will continue to aggressively manage our costs to maintain our position as a low-cost leader in the industry and to make every effort to maintain adequate liquidity. Earlier this week, we closed on a Direct Lease and Pre-Delivery Payment Transaction that raised, in the aggregate, approximately $186 million. We expect to end the year 2024 with over $1.0 billion of liquidity, including unrestricted cash and cash equivalents, short-term investment securities, liquidity available under our revolving credit facility and additional liquidity initiatives, assuming that we are able to close those initiatives that are currently in process. Meanwhile, 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.”
Second Quarter 2024 Fleet and NEO Engine Update
- Took delivery of four new A320neo aircraft and four new A321neo aircraft
- Retired five A319ceo aircraft
- Ended the quarter with a fleet of 210 aircraft
- Secured $37.2 million of AOG credits to be issued by Pratt & Whitney based on AOG days during the quarter
- Recorded $7.1 million of AOG credits within the Company’s condensed consolidated statements of operations, of which $3.6 million was recorded as a credit within maintenance, materials and repairs, $2.0 million was recorded as credit within aircraft rent and $1.5 million was recorded as a credit to depreciation and amortization
- Estimates that it will average about 20 AOG aircraft for the full year 2024
- Spirit intends to discuss appropriate arrangements with Pratt & Whitney in due course for any Spirit AOG aircraft after December 31, 2024
Spirit Airlines aircraft photo gallery:
