MIRAMAR, Fla. - Spirit Airlines , Inc. (NYSE: NYSE:SAVE) announced today that it has negotiated with Airbus to postpone the delivery of all aircraft originally scheduled for the second quarter of 2025 through the end of 2026 to the years 2030 and 2031.
This adjustment excludes direct-lease aircraft set for delivery in the same timeframe, with one aircraft each in the second and third quarters of 2025. The airline anticipates that this deferment will enhance its liquidity by around $340 million over the next two years.
The company confirmed there are no changes to the delivery schedule of aircraft for the years 2027 to 2029. However, due to grounded aircraft stemming from Pratt & Whitney GTF engine availability issues, and the subsequent delivery deferments, Spirit plans to furlough about 260 pilots starting September 1, 2024.
Spirit's President and CEO, Ted Christie, emphasized that the revised agreement with Airbus is a pivotal element of Spirit's strategy to boost profitability and solidify its financial foundation. He expressed regret over the furloughs but noted the necessity of the measure in light of the current situation with the grounded aircraft and the deferred future deliveries.
Additionally, Spirit has entered into a compensation agreement with Pratt & Whitney concerning its GTF engines, projected to improve the airline's liquidity by $150 million to $200 million over the term of the agreement. Spirit is also exploring options to leverage its financeable asset base to further increase liquidity in the coming months.
The amendment with Airbus also includes a two-year postponement of the option exercise dates for additional aircraft in Spirit's purchase agreement, without altering the total number of aircraft ordered or the options for more aircraft.
Spirit Airlines continues to take measures to ensure the robustness of its balance sheet and the continuity of its operations, including evaluating refinancing opportunities for upcoming debt maturities and bonds. The airline has engaged Perella Weinberg & Partners L.P. and Davis Polk & Wardwell LLP as advisors to aid in these efforts.
This news is based on a press release statement from Spirit Airlines, Inc.
InvestingPro Insights
In light of Spirit Airlines' recent strategic moves to defer aircraft deliveries and manage its financials, certain metrics and tips from InvestingPro offer deeper insight into the company's current market position. Spirit Airlines, with a market capitalization of $484.99 million, reflects a modest size in the airline industry. The company's Price / Book multiple, as of the last twelve months ending Q4 2023, stands at 0.43, indicating that the stock may be undervalued compared to its book value, which could be of interest to value investors.
However, the company's financial health raises concerns, as indicated by a couple of InvestingPro Tips. Spirit operates with a significant debt burden and may have difficulty making interest payments on its debt. This is reinforced by the company's negative P/E ratio of -1.07 and adjusted P/E ratio of -1.28 for the same period, suggesting that it was not profitable over the last twelve months.
The price of Spirit's stock has also experienced significant volatility, with a one-year total return of -72.35% as of the latest data, which could be a red flag for risk-averse investors. The dividend yield of 27.09% appears significant, but given the company's current financial challenges, investors should consider the sustainability of such dividends.
For readers interested in a thorough analysis, there are additional InvestingPro Tips available, which can be accessed through the company's specific InvestingPro page. These tips offer valuable insights for those considering an investment in Spirit Airlines. To enhance your research, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of financial data and expert analysis.
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