Spirit Airlines (SAVE, Financial) has announced a significant shift in its aircraft acquisition strategy by postponing the delivery of 99 new aircraft from European manufacturer Airbus (EADSY, Financial). Originally set for 2Q25 through the end of 2026, these deliveries are now rescheduled for 2030-2031. This move reflects the airline's strategic adjustment to its immediate financial challenges and long-term growth plans.
Key points from the announcement include:
- The delay in aircraft deliveries might initially seem counterproductive for SAVE's revenue growth, as it limits the airline's ability to expand its fleet and increase capacity. This is particularly critical as competition intensifies with major airlines boosting their capacity to meet surging travel demand.
- Despite potential short-term revenue impacts, this decision is largely seen as a positive step for SAVE. It is expected to enhance the airline's liquidity by approximately $340 million over the next two years, adding to the previously announced $150-$200 million liquidity improvement.
- Another factor contributing to SAVE's current financial strategy is a recent agreement with International Aero Engines (IAE), addressing a manufacturing issue with GTF engines. This issue led to aircraft groundings and engine shortages, prompting IAE to compensate SAVE with monthly credits until the end of 2024.
- The deferral of new aircraft deliveries and engine issues have compelled SAVE to furlough about 260 pilots starting September 1, 2024. This decision underscores the challenges SAVE faces, especially after ending a potential deal with JetBlue Airways (JBLU, Financial) that could have offered financial respite.
- SAVE's financial obligations include approximately $1.1 billion in senior secured notes due next year and $500 million in convertible bonds maturing in 2026. With just about $1.0 billion in cash as of December 31, 2023, the airline's financial health is under scrutiny.
The strategic postponement of aircraft deliveries and other financial maneuvers are designed to navigate Spirit Airlines through immediate financial headwinds. However, the airline's ability to return to profitability and compete effectively in the increasingly competitive aviation market remains uncertain, especially after recent financial losses.
