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Mon, Apr 15, 2024

Spirit Airlines to Delay Airbus Deliveries, Furlough Pilots

Spirit to Delay Airbus Deliveries and Furlough 260 Pilots

In a move to enhance its financial stability, Spirit Airlines announced on Monday its decision to defer the delivery of new Airbus aircraft and furlough approximately 260 pilots. The budget airline, headquartered in Miramar, Florida, is taking these measures as part of its strategy to boost liquidity amidst challenging times.

Spirit's CEO, Ted Christie, emphasized the necessity of these actions for the airline's future, stating, "These steps aren't ones we want to take but they're necessary to ensure a strong and profitable future for Spirit." The airline will postpone the delivery of all Airbus planes scheduled for the second quarter of 2025 through the end of 2026, pushing the deliveries to 2030 and 2031. This deferment excludes direct-lease planes due in the next year and deliveries slated for 2027 through 2029.

The deferral of aircraft deliveries is expected to bolster Spirit's liquidity by approximately $340 million over the next two years. Christie highlighted the opportunity this presents to reset the business and adapt to changes in the competitive environment.

The decision to furlough pilots, set to take effect in September, comes as the airline grapples with the grounding of several Airbus planes due to a Pratt & Whitney engine recall. This has added to the financial strain, further compounded by the failed acquisition by JetBlue Airways earlier this year, which was deemed anti-competitive by a federal judge.

To mitigate the impact of the grounded engines, Spirit will receive monthly compensation payments through the end of 2024, expected to boost liquidity by $150 million to $200 million. Despite the furloughs, the airline has no plans for cabin crew furloughs, with flight attendants already on leaves of absence and the Atlantic City, New Jersey, crew base set to close.

The airline's delivery slots for Airbus aircraft are likely to be in high demand, especially as the industry faces a scarcity of aircraft. Spirit's pilot union, the Air Line Pilots Association, is exploring voluntary measures to minimize the number of furloughs, acknowledging the challenges posed by the retirement of the A319 fleet and ongoing engine issues.

Spirit Airlines is poised to release its next financial outlook for the quarter and full year within the next week and is scheduled to report first-quarter results on May 6.

FMI: spirit.com

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