18: Spirit Airlines' Descent
How a cascade of unforeseen events and missteps grounded soaring ambitions.
110000Z NOV 24
Hello and welcome to Flightlines,
We're back—better late than never—with a review of Spirit Airlines' year to date. It hasn't been great.
In January, the Department of Justice filed a lawsuit to block the merger between Spirit and JetBlue, citing antitrust concerns. Since then, Spirit has navigated a turbulent path through 2024. But as we approach year's end, they're still flying. We take a look at the events that have brought us to this point and offer our perspective on Spirit's prospects for the future.
Spirit Airlines' Descent
It's undeniable that Spirit Airlines has struggled this year. After a series of missteps and unfortunate events, the carrier finds itself at a critical point. The chart for their stock over the past year shows this clearly:
Starting the year trading just under $16 per share, Spirit Airlines ($SAVE) experienced a persistent decline in its stock price. The steep drop in early January coincided with news of the Department of Justice's lawsuit to block the merger with JetBlue, leaving investors uncertain about the airline's future.
As the year progressed, positive news for Spirit Airlines was scarce. The carrier had to announce missed revenue expectations and faced operational challenges, including asset sales to compensate for debt obligations. Let's look at the timeline.
First, here's a picture of one of Spirit's Airbus A321neos—some red meat for the #AvGeeks.
The timeline…
January 16th, 2024
Spirit-JetBlue Merger Blocked
A federal judge blocks JetBlue Airways' proposed acquisition of Spirit Airlines, agreeing with the Department of Justice that the merger would be anticompetitive and harm consumers.
US judge blocks JetBlue from acquiring Spirit Airlines - Reuters
March 4th, 2024Spirit-JetBlue Merger Ends
Spirit Airlines and JetBlue Airways officially terminate their $3.8 billion merger agreement, with JetBlue paying Spirit a $69 million breakup fee.
JetBlue, Spirit end merger plans to challenge US 'Big 4' - AeroTime
April 8th, 2024Spirit Implements Cost-Cutting Plan
Spirit announces plans to save $340 million over two years by delaying Airbus aircraft deliveries and furloughing pilots.
Spirit Airlines Will Delay Plane Purchases and Furlough Pilots - The NY Times
April 15th, 2024GTF Engine Compensation
Spirit announces it will receive around $200 million in compensation credits from International Aero Engines (IAE) for Pratt & Whitney engine issues grounding its aircraft.
Engine Issues See Spirit Airlines Up $200m In Compensation - Simple Flying
May 6th, 2024Q1 Earnings Miss
Spirit Airlines stock falls 9.6% after reporting a wider-than-expected Q1 2024 loss of $1.46 per share and a 6.2% revenue decline to $1.27 billion.
June 8th, 2024Spirit Denies Bankruptcy Plans
CEO Ted Christie states at an annual shareholder meeting that the company is not evaluating Chapter 11 bankruptcy.
Spirit Airlines Has No Plans To File For Bankruptcy - Simple Flying
July 16th, 2024Q2 Revenue Miss
Spirit expects a larger Q2 2024 loss of $160-173 million versus previous estimates of $145 million.
July 30th, 2024A Premium Pivot
Spirit announces new "Go Big" fare bundles that include perks like priority check-in, roomier seats, and free snacks— a shift from its ultra-low-cost model.
Spirit Airlines is going upscale - AP
August 1st, 2024Spirit Reports Deepening Losses
Spirit warns investors of steeper losses in Q3 2024 due to intense competition for leisure travelers and excess capacity.
October 1st, 2024Fall Route Cuts
Spirit cuts 32 routes across its network, with Boston and Dallas-Fort Worth facing the deepest cuts.
Spirit Airlines to End Dozens of Routes This Fall - Travel & Leisure
October 3rd, 2024Bankruptcy Talks
Spirit stock drops 24.5% after hours as the Wall Street Journal reports the airline is discussing terms for a potential Chapter 11 bankruptcy filing with creditors.
Spirit Airlines prepares for bankruptcy filing - AeroTime
October 20th, 2024Debt Deadline Extension
Spirit Airlines extends its debt refinancing deadline with credit card processors to December.
Spirit Airlines extends debt refinancing deadline hours before expiration - CNBC
October 21st, 2024A $300M Lifeline
Spirit borrows $300 million from its credit facility, delaying potential bankruptcy as it expects to end the year with over $1 billion in liquidity.
October 23rd, 2024Spirit-Frontier Merger Talks
Frontier Airlines and Spirit Airlines have begun preliminary merger discussions, potentially as part of Spirit's debt restructuring process.
Frontier Airlines Eyeing Spirit Airlines Acquisition - Simple Flying
October 30th, 2024Additional Pilot Furloughs
Spirit will furlough approximately 330 pilots on January 31, 2025, as part of cost-cutting measures.
Spirit Airlines to furlough hundreds of pilots to cut costs - Reuters
November 4th, 2024The LaGuardia Raccoon Incident
A raccoon falls through the ceiling at Spirit Airlines' LaGuardia Airport gate, causing chaos among staff and passengers before being safely captured and released.
Raccoon falls from LaGuardia ceiling - NY Post
November 5th, 2024Ben Baldanza's Death
Ben Baldanza, the former CEO who transformed Spirit Airlines into an ultra-low-cost carrier (ULCC) with his "bare fare" model, dies at age 62 from ALS.
Ben Baldanza, 62, Dies; Brought No-Frills Flying to Spirit Airlines - The NY TimesNovember 10th, 2024
Further Route Cuts
Spirit eliminates 24 routes across its network, including major cities like Los Angeles, Nashville, and Dallas, with cuts being implemented between now and March 2025 to focus on stronger performing routes.
Spirit Airlines cuts 24 routes, adds 7 others in latest network shake-up - The Points Guy
Let's all take a deep breath after that. This deluge of news would challenge any CEO. Notice how the frequency of these stories increased in the latter half of the year, as sentiment around the company declined.
Our Thoughts
The passing of Ben Baldanza on November 5th is especially poignant—almost metaphorical—given the airline's circumstances. As the former CEO, his death isn't directly related to the company's current challenges. However, it symbolizes the end of an era and potentially the pure ultra-low-cost model he championed in the U.S., highlighting the significant transitions Spirit is navigating.
The GTF engine issues couldn't have come at a worse time, forcing the airline to ground aircraft exactly when it needed maximum flexibility to compete.
Spirit's recent "Go Big" premium bundles might seem like a reasonable pivot, but it's a difficult prospect. Straddling the line between budget and premium service is like trying to please everyone at a family dinner - you usually end up pleasing no one. Spirit risks confusing its market position just when it needs its identity to be crystal clear.
The Frontier merger talks are interesting. While it might seem like déjà vu after the JetBlue saga, this combination makes sense from an operational and cultural perspective. Both carriers embrace the ultra-low-cost model.
The reality is that Spirit's survival likely involves a significant downsizing of its operations—whether through voluntary restructuring or Chapter 11 bankruptcy. The question isn't just about Spirit, but whether the ULCC model can survive in the U.S. market, where even legacy airlines have become savvier about segmentation and cost control.
For now, Spirit's management is buying time with credit facilities and route optimization. But as we head into the challenging winter season, the clock is ticking on finding a sustainable path forward. —✈
✈
Thank you for reading.
Flightlines will be back next week with more insights and updates from the world of commercial aviation.
Until then, safe travels and happy flying!
Good research and interesting timeline (you know I have to comment on the raccoon incident although that was the last thing they needed in terms of PR)! A wild year indeed.
Seems like it will be a difficult way out of a deep hole for Spirit. Furloughed pilots should have good opportunities elsewhere though, right?