Spirit Airlines is taking drastic measures to cut costs and secure its financial future, including selling off jets and cutting jobs. The budget carrier has identified about $80 million in cost-cutting measures set to begin early next year, primarily through a reduction in its workforce. The airline has also agreed to sell 23 airplanes to GA Telesis for about $519 million, which is expected to significantly boost its liquidity by $225 million through 2025. Shares for Spirit climbed 25% following the announcement, but the stock is down more than 80% over the last year.
The airline has been facing financial struggles in recent years, failing to return to profitability even as travel rebounded after the COVID-19 pandemic. Rising operational costs and increased competition have made it difficult for Spirit to compete with other carriers offering low-cost, no-frills tickets. Losses have continued to mount, with the company losing more than $2.5 billion since the start of 2020 and facing mounting debt payments totaling more than $1 billion. The airline expects its fourth-quarter capacity to drop by 20% from last year and by the midteens for 2025.
Speculations of bankruptcy have been looming over Spirit, which has become an attractive takeover target. JetBlue attempted to buy Spirit, but the deal was blocked by a federal judge over antitrust concerns. Frontier Airlines also tried to merge with Spirit, but was outbid by JetBlue. Recent reports suggest that Frontier is exploring a renewed bid for Spirit, which could include the airline restructuring its debt and other liabilities in bankruptcy. Spirit’s spokesperson declined to comment on the ongoing discussions with bondholders and potential bankruptcy filing.
The sale of 23 airplanes to GA Telesis is expected to provide some relief for Spirit as it navigates through its financial struggles. The company hopes that the proceeds from the sale, combined with discharging related debt, will help boost its liquidity and support its operations through 2025. Spirit’s decision to cut jobs and sell off jets reflects the challenges faced by the airline industry as a whole, with airlines working to reduce costs and streamline operations in order to survive in the current economic climate. Despite the uncertainties and financial pressures, Spirit remains focused on finding ways to improve its financial position and secure its future in the competitive aviation market.
