Spirit Airlines anticipating domestic recovery in 2024

Ground staff and a Spirit Airlines aircraft parked on the ramp.
Photo Credit: Spirit Airlines

Spirit Airlines, Inc. (NYSE: SAVE) has reported its fourth quarter and full year 2023 financial results.

Overall, the airline negotiated a sound fleet management strategy amid continued challenges with neo engine issues impacting capacity.

The carrier now supports the view of a domestic market recovery in the 2024 calendar year.

Q4 Operations

During the fourth quarter of 2023, Spirit Airlines showcased a commendable load factor of 80.1 percent.

Moreover, the Company reported an impressive Department of Transportation (DOT) on-time performance of 76.8 percent and a DOT Completion Factor of 99.2 percent.

Ted Christie, Spirit’s President and Chief Executive Officer, emphasized the significance of operational reliability in enhancing customer satisfaction and driving revenue growth.

“As we enter 2024, we are beginning to see benefits from the tactical and strategic changes we implemented in 2023,” Christie said. He further outlined the airline view of a recovery in the domestic market this year.

“Current booking trends further our confidence that the domestic environment is beginning to rebound,” he continued.

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“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.”

Notably, the robust operational performance during the holiday season contributed approximately $10 million of additional revenue, surpassing revenue projections for the period.

Two Spirit Airlines aircraft parked at Southwest Florida Airport
Photo Credit: Spirit Airlines

Financial Highlights of Q4 2023

Spirit’s financial report for the fourth quarter of 2023 revealed a net loss of $183.7 million, translating to a net loss of $1.68 per diluted share.

However, excluding special items, the adjusted net loss stood at $148.7 million, or $1.36 per diluted share.

Despite the challenging economic landscape, Spirit demonstrated resilience in revenue generation, with total operating revenues amounting to $1.3 billion.

It’s noteworthy that Spirit reported a Total Revenue per Available Seat Mile (TRASM) of 8.94 cents, marking a 17.3 percent decline compared to the previous year.

Strategic Insights and Outlook

Scott Haralson, Spirit’s Chief Financial Officer, shed light on the strategic initiatives aimed at bolstering operational efficiency and ensuring financial stability.

“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,” he said.

With a focus on liquidity management, Spirit maintains a total liquidity of $1.3 billion, positioning the Company to navigate uncertainties effectively.

Haralson expressed confidence in achieving positive cash flow generation by the second quarter of 2024, underscoring Spirit’s commitment to long-term sustainability.

Spirit Airlines' first Airbus A321neo (N702NK) at the airline's maintenance facility in Detroit.
Photo Credit: Spirit Airlines

Fleet Management and Challenges

Spirit Airlines managed its fleet adeptly during the fourth quarter of 2023, acquiring four new aircraft while retiring one. This also translated to gains as a result of improved efficiency.

“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,” said Haralson.

However, challenges surfaced regarding Pratt & Whitney’s geared turbofan (GTF) neo engines, impacting the operational capacity.

The carrier’s aircraft utilization in the fourth quarter 2023 was constrained due to engine availability issues primarily driven by unscheduled engine maintenance events, resulting in aircraft not being available for service.

In January 2024, the airline 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.

Spirit currently estimates its capacity for the full year 2024 will be flat to up mid-single digits compared to the full year 2023.

Discussions with Pratt & Whitney regarding compensation for engine availability issues are underway, with Spirit anticipating significant liquidity infusion in the coming years.

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Spirit Airlines remains confident of a domestic recovery in 2024, playing out a sound fleet management strategy amid ongoing engine issues.
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