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March 4, 2024
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It was a tough year for Spirit. JetBlue may not go through, leaving Spirit in an awkward position.  Both airlines are trying to get the deal approved.  However, analysts believe Spirit will struggle without it. As noted in an earlier post, we also have concerns about Spirit.

Here are the key numbers.

Spirit Airlines

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.

Aircraft daily utilization in the fourth quarter of 2023 was 11.2 hours, up 3.7% compared to the 10.8 hours in the same period of 2022. The Company’s aircraft utilization in the fourth quarter of 2023 was constrained by engine availability issues primarily driven by unscheduled engine maintenance for the Pratt & Whitney GTF.

Scott Haralson, Spirit’s Chief Financial Officer, remarked, “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 estimate Spirit’s operational costs to be $94 per minute.  Spirit reported a DOT on-time performance of 76.8%, which allows for the 15-minute leeway. Our on-time tracking models show that for 2023, Spirit flights averaged 22.5 minutes in late arrivals.  The industry average was 15.5 minutes.

In 2023, Spirit flew 241,288 flights; 29% had 15-minute or more late arrivals. A simple calculation of the number of late arrivals, averaging 22.5 minutes at $94/minute, adds up to $148m.  The table above shows an adjusted loss of $148.7m.  What an odd outcome.

Regarding the Pratt & Whitney GTF, the airline stated:

  • During the third quarter of 2023, Pratt & Whitney notified the Company that all the geared turbofan (GTF) neo engines in its fleet are in the potential pool of engines subject to the inspection and possible replacement of the powdered metal high-pressure turbine and compressor discs.
  • In January 2024, the Company had an average of 13 grounded neo aircraft and estimates that number will climb steadily to an average of about 40 in December 2024, averaging about 25 grounded neo aircraft for the full year 2024.
  • The Company and Pratt & Whitney have been negotiating fair compensation for the financial damages … the Company believes the amount of compensation it will receive will be a significant source of liquidity over the next couple of years.

GTF compensation will help buttress the cash position, but that isn’t the biggest challenge. Tightening operations to meet the schedule better could generate the savings the airline needs to remain viable.

CEO Ted Christie dubbed the analysts’ view  as “misguided narrative.”  He went on to say, “Liquidity is always king,” He told analysts after the company’s earnings. “We have enhanced our levels to give us the necessary flexibility to successfully close with JetBlue or to pursue our standalone plans.”  Bill Franke probably smiled when he saw that.

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Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.

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