Spirit Airlines' stock slides nearly 10% after air carrier's quarterly loss, weak guidance

By Ciara Linnane

Bad weather and air traffic control delays weighed during the quarter

Spirit Airlines Inc.'s stock fell 9.5% Monday, after the discount carrier posted a wider-than-expected first-quarter loss as it refocuses on its future as a standalone company after its planned merger with JetBlue Airways Corp. was scrapped in March.

Dani Beach, Florida-based Spirit (SAVE) had a net loss of $142.6 million, or $1.30 a share, for the quarter, wider than the loss of $103.9 million, or 95 cents a share, posted in the year-earlier period. The airline's adjusted per-share loss was $1.46, wider than the $1.45 FactSet consensus.

Revenue rose 0.7% to $1.47 billion from $1.46 billion a year ago, ahead of the $1.27 billion FactSet consensus.

Spirit guided for second-quarter revenue between $1.32 billion and $1.34 billion, and an adjusted operating loss of between $110 million and $86 million.

"Although the results did not bring many surprises, the guide looks weak, with the carrier stating that it would need to see more improvements in off-peak demand in order to meet its forecast," Citi analyst Stephen Trent said in a note Monday.

Spirit's second-quarter guidance is "significantly below our and consensus expectations as well as Spirit's early-February indication of generating positive margins" by the second or third quarter of this year, Raymond James analyst Savanthi Syth said in her note.

The first-quarter numbers met Spirit's own expectations despite a 230-basis-point headwind from deferred recognition in earnings of a significant portion of the credits from engine maker Pratt & Whitney related to aircraft that were unavailable for service, the company said.

Pratt & Whitney, which is owned by RTX Corp. (RTX), said last year that some of its engines would need to be removed from service for inspection after it discovered a rare contamination in powdered metal used to make certain engine parts.

"The competitive environment remains challenging due to elevated capacity in many of the markets we serve," said Spirit Chief Executive Ted Christie in prepared remarks.

Bad weather and delays related to air traffic control - especially along the Eastern Seaboard and in Florida - along with civil unrest in Haiti weighed during the quarter, he said.

The company's load factor fell 0.1 points to 80.7%. Total revenue per available seat mile came to 9.38 cents, down 8.2% on 2.1% more capacity.

Total revenue per passenger flight segment fell 8.1% to $117.03. Fare revenue per segment fell 16.3% to $48.08 and non-ticket revenue per segment was down 1.4% to $68.95.

Operating costs totaled $1.47 billion, while average economic fuel price a gallon was $2.90.

The airline ended the quarter with $1.2 billion in cash and liquidity available under a revolving credit facility. It received a $69 million payment from JetBlue related to the termination of their merger.

Spirit is now focused on the first phase of its standalone business plan, said Christie.

The first phase "involved finalizing our AOG compensation agreement with Pratt & Whitney, reducing near term capacity to improve working capital, rightsizing the resources in the business to our expected lower level of capacity and additional liquidity improvements," he said.

The combination of AOG compensation, aircraft deferrals and cost savings is expected to boost cash by $450 million to $550 million in 2024.

The company has started talks with loyalty bondholders and holders of its convertible debt that comes due in September 2025 and May 2026. It expects a resolution "at some point this summer," he said.

The stock has fallen 80% in the year to date, while the S&P 500 has gained 8%.

Claudia Assis in San Francisco contributed.

-Ciara Linnane

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05-06-24 1333ET

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