In November 2024, we saw Spirit Airlines file for Chapter 11 bankruptcy protection, after accruing billions of dollars in losses since the start of the pandemic. The airline is now exiting bankruptcy protection, following a restructuring that wiped out around $795 million in debt.
While the company’s accumulating debt issues have been addressed, what hasn’t been addressed is that the company is continuing to hemorrhage money at a rate we simply haven’t seen at any other airline, and it’s clear the airline doesn’t have an independent future.
In this post:
Spirit reports negative 22.5% operating margin
Spirit Airlines has filed its 2024 SEC 10-K report, providing a comprehensive overview of the company’s financial performance. While 2023 was an awful year for Spirit, 2024 was much worse, as nothing at the airline seems to be trending in the right direction. Let’s cover a few of the 2024 highlights:
- Spirit had operating revenue of $4.9 billion, a decrease of 8.4% from 2023, primarily due to a decrease in average average yield of 5.1%, and a decrease in traffic of 3.5%
- Spirit had an operating loss of $1.1 billion, resulting in a negative operating margin of 22.5%, compared to a 2023 operating loss of $496 million
- Spirit had a net loss of $1.2 billion, compared to a 2023 net loss of $447 million, primarily due to higher operating costs and lower operating revenues
- Spirit had total revenue per passenger flight segment of $111.21, a decrease of 8.5% from 2023, when average revenue was $121.58
- Spirit had a cost per air seat mile (CASM) ex-fuel of 7.97 cents, an increase of 12.9% from 2023, primarily due to increased wages, aircraft rent expenses, and landing fees
There’s literally not a single good thing here. Revenue is down (in absolute terms and per segment), costs are up, etc. And a negative margin of 22.5%?! My gosh, that’s just… next level.
Spirit’s independent days are very numbered
As Spirit emerges from bankruptcy protection, bondholders have committed to injecting $350 million into the company, via an equity-rights offering. I’m not sure what numbers they’re looking at, but with Spirit racking up an average of roughly $100 million in losses per month, that money won’t last long.
Spirit has rejected multiple takeover bids from Frontier, arguing that it sees more potential independently. I’m not sure what’s going on in Dania Beach, but the clock is ticking, and they’ve gotta figure out a plan stat, in their fancy new ($250 million) headquarters building.
Will there be some last minute acquisition? Will the airline be parted out, with planes, slots, etc., going to different airlines? With losses averaging $3 million per day, we should find out soon…
Bottom line
Spirit Airlines has disclosed its 2024 financial results, and they’re awful. We knew the airline wasn’t doing well, but the situation keeps getting worse. The company’s operating margin for the year was negative 22.5%, and total loses were $1.2 billion. It’s nice that Spirit bondholders will inject $350 million into the airline, but that’s not going to last them very long.
How do you see the Spirit situation playing out in the coming months?
Would merging with jetblue be a better choice for them back then?
Don’t know? That was blocked by the DOJ.
Well, this article gets right to the point about Spirit’s financial problems. But it doesn’t mention anything about the Pratt & Whitney engine recall issues that they are having with their airplanes. Currently, there are about 30 airplanes parked with the possibility of up to about 50 airplanes by the end of 2025. So it’s no wonder the company is having financial problems when they have to carry the cost of those airplanes not being...
Well, this article gets right to the point about Spirit’s financial problems. But it doesn’t mention anything about the Pratt & Whitney engine recall issues that they are having with their airplanes. Currently, there are about 30 airplanes parked with the possibility of up to about 50 airplanes by the end of 2025. So it’s no wonder the company is having financial problems when they have to carry the cost of those airplanes not being able to provide revenue. The company is receiving some reimbursement from Pratt & Whitney but it’s not nearly enough to cover the cost of what the revenue generated from 30 to 50 airplanes in service could provide. But that was conveniently left out of this article. Every airline has high salary’s they are dealing with. Fuel prices. Landing fees, etc. But not every airline has the engine issues going on. Spirit has the most. However, people would rather bash the airline because that is a lot more fun. At the same time forgetting that Spirit is one of the safest in operation. American, Delta and United can’t say that. Also, there are a lot of good people that work for Spirit. And they rely on that job to provide for their families.
Asset sale incoming.
There's nothing about Spirit that makes me want to fly them. Amateur, disruptive passengers. An unnecessarily primitive user experience. Nothing included. Poor reliability... The website is even annoying to use.
And on most routes if you opt for their comfortable front seating, they're now more expensive than better airlines.
Maybe when I was a cash-poor, skinny college kid, who would take that middle seat as an opportunity to socialize or meet people- but there's nothing...
There's nothing about Spirit that makes me want to fly them. Amateur, disruptive passengers. An unnecessarily primitive user experience. Nothing included. Poor reliability... The website is even annoying to use.
And on most routes if you opt for their comfortable front seating, they're now more expensive than better airlines.
Maybe when I was a cash-poor, skinny college kid, who would take that middle seat as an opportunity to socialize or meet people- but there's nothing about Spirit I want to put up with as an adult.
Really? Absolutely nothing? Not even their safety record? But you probably don’t know anything about that do you? American, Delta, Southwest and United can’t say anything about a safety record.
Is that really what Spirit seats look like from the back? (the last photo)
That's actually a little scary, just a plastic shell of a seat wrapped in cloth covering?
It's actually an advantage in terms of leg space that they don't cover the back side, because back side covers take about one inch of leg space.
And that just goes to show you, you have literally never been on Spirit.
Me thinks they are going the way of their FLL neighbor, Silver sadly enough.
Don’t forget how much of their A320neo fleet is parked due to engine inspections. That will get better this year and possibly give some hope.
@ Timtamtrak -- Given their negative operating margins, I feel like parking planes would work to their advantage, rather than against them. After all, by having fewer planes, they can focus on operating in the markets that have the best (or least worst) margins.
@ Ben,
The two evils in the airline business are airframes sitting on the ground & flying with empty seats. Doesn't matter what game theory you apply to empty seats, its lost revenue.
If I understand correctly, Spirit got a stop gap payment of $150M from P&W and is still owed more money. Having these idle jets assigned to profitable routes would mitigate some of the bleeding. You can only cut back so...
@ Ben,
The two evils in the airline business are airframes sitting on the ground & flying with empty seats. Doesn't matter what game theory you apply to empty seats, its lost revenue.
If I understand correctly, Spirit got a stop gap payment of $150M from P&W and is still owed more money. Having these idle jets assigned to profitable routes would mitigate some of the bleeding. You can only cut back so far before you cut your own throat.
Also, I would image the bankruptcy has also scared off some customers who don't want to be stranded should the airline file Chapter 11 again (Chapter 22) or Chapter 7 (kaput). TWA filed three times (Chapter 33) before it was absorbed by AA.
Frontier has already developed a counter offer. If it's shrewd, its calculated multiple scenarios with a corresponding MAX to keep from going too irrational like B6 did with its offer just a year or two ago.
I feel UA, DL, AA, B6, & F9 are praying for Chapter 7. Not because of the reduction in competition, but the opportunity to immediately pick up NEO airframes on the cheap considering constrained delivery schedules from both Airbus & Boeing.
The worst part is the cash flow. Operating cash flow in 2024 was negative 758 million. Just by operating their business, they lit three-quarters of a billion dollars on fire.
Their EOY cash balance is $900 million. Unless someone is crazy enough to lend them more money, I don’t see how they can continue much past 2025.
Adding to my previous comment. Not only are they an ultra low-cost carrier, they’re also an ultra-low-revenue carrier. Revenue per available seat mile is way lower than anybody else. They compete in legacy-dominant markets carrying passengers that are incentivized to spend as little as possible to get from gate to gate.
it's been a while since the big 3 of today and their legacy competitors that became their merger partners were in chapter 11 but those airlines all had massive operating losses in chapter 11 - in part because those losses create tax assets which are very valuable after a company exists from bankruptcy.
Drawing conclusions about the future of the company can't accurately be done from its first annual report in chapter 11.
NK may...
it's been a while since the big 3 of today and their legacy competitors that became their merger partners were in chapter 11 but those airlines all had massive operating losses in chapter 11 - in part because those losses create tax assets which are very valuable after a company exists from bankruptcy.
Drawing conclusions about the future of the company can't accurately be done from its first annual report in chapter 11.
NK may or may not have an independent future but the numbers they presented won't be the basis for determining the future.
and if they are losing that kind of money in real life - rather than in accounting life - they won't be of any use to any other airline.
I feel badly for the employees. Rejecting multiple offers from Frontier cannot be wise. Like you said, Ben, " What are they thinking in Dania Beach ". Wow. Sad.
Seems like very few are paying attention to how much airlines are losing money from flight operations. If it weren't for their revenue from credit cards, they would never survive as companies. https://www.investopedia.com/the-four-biggest-us-airlines-all-lost-money-flying-passengers-last-year-8781856#:~:text=The%20four%20biggest%20U.S.%20airlines,available%20seat%20mile%20in%202024.
This has been the case for a while
I’m glad you brought this up.
The 2024 results does not mater, we shall wait and see for 2025 results where the restructuring started and some benefits were eliminated (Go fares got hit with change / cancel fees, Savvy and Comfy lost free checked luggage benefit also)
Honestly, the issue with Spirit is branding. No one really wants to fly Spirit because of their terrible reputation.
Nothing wrong inherently with ULCCs, Allegiant is excellent. But when you have bottom tier reputation like Spirit, it's just not going to work.
better example is frontier. NK and Allegiant have massively different network & customer models.
Doesn't matter. Even if Spirit had the same network and customers as Allegiant, their bottom tier reputation would follow them and be a net detractor.
Overarching point is that their reputation proceeds them and that's much harder to fix than some business model decisions.
Let's see, they've refused multiple takeover offers and the economy is a mess...
It's a bit sadistic, but I'm almost hoping that when they finally get a wakeup call on some of this, the management finds that they can't get hardly anything for it. Numbers like this seem like a recipe for pilots and FAs to start looking to jump ship, etc.