Spirit Airlines will shed 23 older aircraft over the next 6 months, more than 10% of its fleet, as it cuts capacity and raises capital to stabilize its finances. The carrier disclosed the deal to sell 23 of its older A320/A321ceo aircraft to GA Telesis in an SEC filing on Friday.
The transaction priced at $519 million. After discharging the associated aircraft-related debt from its balance sheet Spirit expects the deal to boost liquidity by approximately $225 million through year-end 2025.
Spirit currently operates 64 A320ceo and 30 A321neo aircraft. Details on which would be sold were not included in the statement.
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The fleet cuts, as well as trimming of unprofitable routes, will see Spirit operate 20% less capacity YoY in the fourth quarter of 2024. The company expects 2025 capacity to drop in the mid teens, with more planes grounded due to GTF engine issues, slightly offset by six new A321neo deliveries planned.
Read more: Spirit has a plan for profitability; it just needs a little time
On the plus side, Spirit also indicated that Q3 operating margin is now expected to be approximately 3% better than prior forecasts. It attributes this to “stronger-than-expected revenue with early results from its transformation plan exceeding initial expectations.”
The carrier also expects to realize $80 million in annualized cost savings, mostly through reduction in payroll tied to the capacity cuts.
Perhaps most critical for the company’s future, Spirit continues to work on renegotiating its looming debt due in 2025 and 2026. Two weeks ago the carrier negotiated a reprieve from its credit card processor, allowing it to continue work on that refinancing through 23 December. Without that extension the deal would expire at the end of 2024, potentially taking away Spirit’s ability to process credit card transactions or imposing increased holdbacks. If the bank starts to put additional conditions on the payments processing that could impede cashflow, further impacting the carrier’s already precarious financial position.
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