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.
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?
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