Thursday, February 8, 2024
Spirit Airlines, Inc. (“Spirit” or the “Company”) (NYSE: SAVE) today reported fourth quarter and full year 2023 financial results.
“As we enter 2024, we are beginning to see benefits from the tactical and strategic changes we implemented in 2023. In addition, current booking trends further our confidence that the domestic environment is beginning to rebound. Together with the changes we have made, we estimate this will result in an unprecedented sequential improvement in total revenue per available seat mile (TRASM) from fourth quarter 2023 to first quarter 2024, which supports our view of a domestic recovery in 2024,” said Ted Christie, Spirit’s President and Chief Executive Officer.
“The Spirit team is 100% clear and focused on the adjustments we are currently deploying and will continue to make throughout 2024 to drive us back to cash flow generation and profitability.”
Operations
For the fourth quarter 2023, the Company’s load factor was 80.1 percent. For the fourth quarter 2023, Spirit reported a DOT on-time performance2 of 76.8 percent and a DOT Completion Factor2 of 99.2 percent.
“In addition to operational reliability being a core element of caring for our Guests, it also benefits the top and bottom line. During the fourth quarter 2023 peak holiday period, the Spirit team ran a great operation. We estimate this strong operational performance contributed $10 million of incremental revenue, allowing us to exceed our mid-December revenue guidance for the fourth quarter and deliver cost performance in excess of our expectations. We have continued this operational excellence and finished January 2024 as the No. 2 airline in reliability2,” commented Christie.
Fourth Quarter 2023 Financial Overview
In the fourth quarter of 2023, Spirit recorded a net loss of $183.7 million, translating to a net loss of $1.68 per diluted share. Adjusted for special items, the adjusted net loss for the same period was $148.7 million, or an adjusted net loss of $1.36 per diluted share.
The pre-tax loss for the fourth quarter of 2023 stood at $228.3 million with a pre-tax margin of negative 17.3 percent. After adjustments, the pre-tax loss amounted to $192.2 million, with an adjusted pre-tax margin of negative 14.5 percent.
Revenue
Total operating revenues for the fourth quarter of 2023 reached $1.3 billion, marking a 5.0 percent decrease compared to the same period in 2022. Total revenue per ASM (“TRASM”) was 8.94 cents, down by 17.3 percent compared to the fourth quarter of 2022 despite a capacity increase of 14.8 percent.
On a per passenger flight segment basis, total revenue per segment for the fourth quarter of 2023 declined by 15.3 percent to $114.84 compared to the corresponding period in 2022. Fare revenue per segment dropped by 25.0 percent to $48.24, while non-ticket revenue per segment decreased by 6.6 percent to $66.60.
Cost Performance
Total GAAP operating expenses for the fourth quarter of 2023 decreased by 9.5 percent compared to the same period in 2022, amounting to $1,536.6 million. However, adjusted operating expenses increased by 11.3 percent to $1,485.1 million, primarily due to increased flight volume, additional leased aircraft, and inflationary pressures.
Aircraft utilization in the fourth quarter of 2023 increased to 11.2 hours, up by 3.7 percent from 10.8 hours in the fourth quarter of 2022. However, the company’s aircraft utilization was constrained by engine availability issues, primarily driven by unscheduled engine maintenance events.
Total other (income) expense on a GAAP basis decreased year over year, mainly due to gains recognized from favorable interest rate swap provisions related to debt agreements extinguished during the quarter. Adjusted total other (income) expense also decreased due to lower interest expenses and favorable adjustments related to derivative liabilities associated with the Company’s Convertible Notes Due 2026, partially offset by write-offs of unamortized debt issuance costs.
“In the fourth quarter, we saw cost benefits from our high level of on-time performance and completion factor for the quarter, particularly in the peak Thanksgiving and Christmas holiday periods. We also saw fuel efficiency benefits with the increase in the number of neo aircraft in our fleet, particularly the eight A321neos added in 2023. We expect these benefits, along with improved utilization of the aircraft available for operation and the right sizing of our labor costs to be the platform for our ongoing unit cost repair,” said Scott Haralson, Spirit’s Chief Financial Officer.
“Regarding liquidity, we believe our $1.3 billion in total liquidity at year end 2023 should be more than adequate to get us to our primary goal of getting the business to generate cash. This is a milestone we think we will cross as we enter March. We believe we will be operating cash flow positive in the second quarter 2024 and beyond. And, while we have confidence in our ability to return to positive cash generation, we will continue to look at other opportunities to further shore up our liquidity resources as we progress through the year. Also, while Spirit remains focused on consummating the merger with JetBlue and is looking forward to prosecuting the expedited appeal of the U.S. District Court’s order, the Company is aware of its 2025 and 2026 debt maturities and is assessing options to address those maturities when the time is appropriate.”
Fleet
In the fourth quarter of 2023, Spirit welcomed four new aircraft into its fleet, comprising two A320neos and two A321neos, while retiring one A319ceo aircraft. This brought the total number of aircraft in its fleet to 205 by the year’s end.
Neo Engine Update
In the third quarter of 2023, Pratt & Whitney informed Spirit that all geared turbofan (GTF) neo engines in its fleet could potentially require inspection and replacement of powdered metal high-pressure turbine and compressor discs. As of January 2024, the company had approximately 13 grounded neo aircraft, with estimates indicating this number could rise to an average of about 40 by December 2024, averaging around 25 grounded neo aircraft throughout 2024. Spirit forecasts its capacity for the full year 2024 to remain flat or increase by mid-single digits compared to 2023.
Discussions regarding fair compensation for financial losses due to geared turbofan (GTF) neo engine availability issues have been ongoing between the company and Pratt & Whitney since October. While no agreement has been reached yet, Spirit anticipates the compensation it receives will significantly bolster its liquidity over the next few years.
Liquidity and Capital Deployment
As of the end of the fourth quarter of 2023, Spirit held unrestricted cash and cash equivalents, short-term investment securities, and liquidity from its revolving credit facility totaling $1.3 billion.
In November 2023, Spirit revised its Revolving Credit Facility, extending the final maturity to September 30, 2025.
In December 2023, the company concluded sale-leaseback transactions for 20 aircraft, resulting in the repayment of approximately $325 million of debt and net cash proceeds of around $320 million. Additionally, in January 2024, it completed sale-leaseback transactions for five more aircraft, repaying approximately $140 million of debt and securing net cash proceeds of about $99 million. In total, these transactions generated approximately $419 million in net cash proceeds for Spirit.
Total capital expenditures for the year ending December 31, 2023, amounted to $232.4 million, primarily attributed to expenses related to the construction of Spirit’s new headquarters campus in Dania Beach, Florida, and the procurement of spare parts, including four spare engines, partly offset by aircraft pre-delivery deposit inflows.
Full Year 2023 Highlights
Our People
Successfully renegotiated collective bargaining agreements with its Pilots represented by the Air Line Pilots Association and Flight Attendants represented by the Association of Flight Attendants.
Received recognition from Newsweek in 2023 as one of America’s Greatest Workplaces for Diversity and for Parents and Families, reaffirming its commitment to diversity and equity.
Amidst a tightening labor market, expanded its workforce to 13,624 while maintaining focus on enhancing engagement.
Recognitions and Accomplishments
Honored as the Value Airline of the Year by Aviation Week Network’s Air Transport World (ATW).
Maintained its exemplary safety record by securing the FAA’s prestigious “Aviation Maintenance Technician Diamond Award of Excellence” for the sixth consecutive year.
Acknowledged as a Four-Star Low-Cost Carrier by the Airline Passenger Experience Association (APEX) for consistently delivering exceptional passenger experiences.
Received the San Diego International Airport Fly Quiet Award in the small domestic category.
Earned the bronze distinction in the LAX Fly Quieter Award from Los Angeles World Airports.
Recognized as the Most Affordable Airline and ranked No. 2 overall out of 11 by WalletHub in its 2023 Best Airline Awards.
Supporting our Communities
Won the 2023 Travel Weekly Magellan Awards Gold in the Airline “Overall-Giving Back Initiative” category through the Spirit Charitable Foundation.
Raised over $1.5 million for nonprofit organizations at the sixth annual Spirit Open, alongside the Spirit Charitable Foundation, which supports causes across the U.S., Latin America, and the Caribbean.
Introduced a round-up feature on spirit.com enabling Guests to round up their total to the next dollar during booking, with donations benefiting the Spirit Charitable Foundation’s initiatives.
Contributed $1.7 million in 2023 to over 84 nonprofits, maintaining its commitment to philanthropy across the U.S., Latin America, and the Caribbean.
Network & Aircraft Developments.
Expanded its network by launching service to three new destinations: Charleston, South Carolina; Norfolk, Virginia; and San Jose, California, inaugurating a total of 54 new routes and increasing markets served to over 350 with nearly 830 average daily flights.
Introduced its first Airbus A321neo aircraft into the fleet, ending 2023 with 8 A321neos and plans for delivery of 20 more in 2024.
Merger Agreement with JetBlue
Spirit shareholders voted to approve the Agreement and Plan of Merger with JetBlue Airways Corporation and Sundown Acquisition Corp. on October 19, 2022. The completion of the merger is pending regulatory approvals, with expectations to finalize the process by the first half of 2024. However, a lawsuit filed by the U.S. Justice Department in March 2023 has delayed proceedings. The trial concluded in December 2023, resulting in an injunction against the merger. Spirit and JetBlue filed an appeal, which is set to be heard in June 2024 by the Court of Appeals.
Tags: fleet, Neo Engine Update, revenue, Spirit Airlines
Wednesday, May 1, 2024
Wednesday, May 1, 2024
