Yesterday, I covered how Spirit Airlines issued a dire warning about its financial situation in a regulatory filing, stating that there’s “substantial doubt” about the carrier’s ability to keep operating over the next 12 months. The carrier’s current credit card processor agreement expires at the end of 2025, and more collateral is being required, given the company’s finances.
Along those lines, the company’s CEO has sent an interesting memo to employees, trying to paint a very different picture of the company’s reality.
In this post:
CEO says Spirit Airlines isn’t going anywhere!
Following the amount of attention that Spirit has received for its regulatory filing, CEO Dave Davis has sent out a memo to employees, essentially downplaying the risks the company faces.
He emphasizes that the statement in the company’s filing was simply required by outside auditors, but states that the risk is only there if the company doesn’t make changes… but the company is making changes! Here’s his memo, as shared by krisvancleave, which I find to be quite interesting:
Yesterday, we filed our 10-Q, outlining our second quarter 2025 financial results. This filing generated media coverage and, naturally, a lot of questions.
Let me start by providing some context around what’s included in the report. The report uses the phrase “substantial doubt about the Company’s ability to continue as a going concern.” This is a phrase required by our outside auditors to convey that there is risk if we do not make changes. But, we are.
Since my arrival at the airline, the Senior Leadership Team and I have developed a plan that leans into Spirit’s strengths, while moving away from the elements of the business that no longer work. That includes strategically growing our network in stronger markets with more opportunities and making some difficult decisions like re-evaluating unprofitable routes. It also includes improvements to our revenue management system and the way we sell our products. By doing so, the team and I are confident that we can build a Spirit that will continue to provide consumers the unmatched value that they have come to expect for many years to come.
Spirit is a critical part of the U.S. aviation industry. We have saved consumers hundreds of millions of dollars, whether they fly with us or not. We remain hard at work on many initiatives to protect our unique franchise, our valued Team Members, our business partners and our Guests who place their trust in us every day.
What can we make of these Spirit Airlines comments?
The first thing worth calling out is that Dave Davis is a very bright guy, and he only joined Spirit in April 2025, after years at Sun Country. He has only been in his role for several months, and I trust that he’s doing everything he can to improve things. However, I’d argue that there’s only so much that can be done to save a sinking ship.
Nowadays quite a few airlines are struggling, so we hear what various management teams suggest as their plan to turn things around. Here we see Davis basically saying “hey, there’s only a problem if we don’t change things, and we are changing things.” And then you see that the things that they’re changing include *checks notes* “growing in stronger markets” and “re-evaluating unprofitable routes.”
We constantly hear airline executives say that, but it’s such a funny quote to me, as if that’s an actual turnaround plan. The reality is simple — ultra low cost carriers have been squeezed out of so many markets, and it’s incredibly difficult for them to find routes where they can break even, let alone be profitable.
That reflects the overall industry shift we’re seeing, whereby even the profitable airlines aren’t making much money flying, but instead, flying is essentially a loss leader for the frequent flyer program.
The issue is, looking at Spirit’s financials, the situation is still really, really bad. In Q2 2025 (historically one of the strongest quarters), Spirit reported a net loss of $245 million, on just $1 billion in revenue. That’s an even bigger loss than during the same quarter the previous year.
Now, some things are actually improving, compared to the same quarter last year — the carrier’s total revenue per passenger was up 7%, and the company’s total revenue per available seat mile was up 10%. But this was only possible through shrinking massively (a roughly 25% capacity reduction), and that also comes with increased costs, since being low cost relies on growth.
Bottom line
Spirit Airlines CEO Dave Davis is downplaying the company’s regulatory filing regarding “substantial doubt” about being able to continue to operate. He claims there’s only risk if the airline doesn’t make changes, but claims the company is making changes.
That strategy seems to largely be about cutting unprofitable routes and moving upmarket, but that’s easier said than done. As CEO, of course he has to encourage employees and paint a positive picture of what’s going on, but I can’t imagine he really feels that way.
What do you make of these comments from Spirit’s CEO?
He’s rearranging the deck chairs on the Titanic. The changes he is making would take several quarters to show any improvement to the bottom line, and he doesn’t have several quarters. Once Spirit is liquidated, he will have more than enough to retire, and the employees and the airline’s “Guests” will be left holding the bag. What a crying shame.
Tangential to the post, but even though airlines make more revenue from their credit card deals, the reason they do is because those credit card deals are tied to actual flight rewards. The airline may not make as much money off of moving people between point A and B, but without that service, their credit cards are worthless.
At this point would any competitor even want to merge with Spirit? What's in it for them as opposed to just letting it die and buying their assets as they liquidate?
…..keeping a competitor(s) from getting hold of their assets.
Yeah merging with Spirit to get the assets responsible for a -20% operating margin sounds real productive
CPA and public accountant here (I don't work on airlines, nor for the firm that audits Spirit). You can bet that the auditor's assessment on the entity's doubt to continue as a going concern was not added there without a ton of argument with management. When the public accountant puts that disclosure in the 10-Q, they do it knowing that it costs goodwill with the client, and could potentially cost them the engagement in the...
CPA and public accountant here (I don't work on airlines, nor for the firm that audits Spirit). You can bet that the auditor's assessment on the entity's doubt to continue as a going concern was not added there without a ton of argument with management. When the public accountant puts that disclosure in the 10-Q, they do it knowing that it costs goodwill with the client, and could potentially cost them the engagement in the future.
He's correct that actions by the company could change the auditor's assessment, but that doesn't change the fact that the airline is in a tough place, and doesn't currently have either the revenue or cash to continue to exist for another 12-months as it stands.
He's CYA. With a negative operating margin of over (18%) in the stronger second quarter this airline is toast. It's only two saviors will be either a merger with Frontier or convincing the government to bail them out.
They have no coherent plan for a turnaround. The kind of flyer Spirit is trying to attract will not fly them. Sure they can fill seats at $49 fares but that just means it takes a few months longer for another bankruptcy filing.
Davis is not stupid. He saw the financials, he knew what he was getting into. Most likely brought on board to merge Spirit and Suncountry or Spirit & Frontier. If Spirit presents as ready to crumble, government will most likely approve.
Spirit did not get as much relief as it needed during bankruptcy. So much debt is still hanging around their neck. Issuing stock for cash only goes so far. The bankers and private equity got too greedy on this go around.
However, Spirit could pull a Chapter 22 (chapter 11 x 2). TWA pulled a chapter 33 just prior to acquisition by American.
Like putting a band aid on a gun shot wound.
Sprit airlines is basically that meme of Ross from friends saying “I’m fine”
I admire his attempt to put a positive spin on things and there may still be a chance of saving Spirit, but we all saw the numbers in their bankruptcy filing and the numbers just aren't good enough.
accurate article.
They DID have to say what their auditors told them.
and the question is not even what the CEO believes will happen but what their credit card processor believes.
NK might be capable of making some changes at the margin but they are going into the weak fall and winter season still losing a bunch of money; they just don't have time for another year of trying to figure it out
Delta should buy their planes. :D
I'm already trying...
But then they wouldn't be 'premium'