In the airline industry, cash is king. It’s expensive to operate an airline but as long as you have cash, you can lose money and survive. Spirit is up against some monster debt coming due in September of next year, and it is now crunch time. By the end of the summer, we should know much more about Spirit’s future. For now, we’re still waiting to find out just what the plan may be.

In its earnings call this week, Spirit posted a big loss but it was basically as expected. The bigger surprise was Spirit’s weak Q2 forecast. It’s expecting a -9 to -11 percent operating margin if you exclude Pratt & Whitney compensation for engine troubles. With that included, the airline is still predicting a rough -6.5 to -8.5 percent operating margin. This is below analyst forecasts, but then again, most of the ultra low cost carriers are failing to impress with their Q2 forecasts.

At the end of Q1, Spirit’s liquidity dropped by about $100 million to $1.2 billion. That may not sound that bad during the weak winter, but keep in mind that this was offset by $99 million that came in from aircraft sale and leasebacks plus $69 million in breakup fees from JetBlue. But don’t worry to much; Spirit has more furniture it can burn, so immediate liquidity is not a problem.

On the earnings call, Spirit made it clear that it is busy working on refinancing that big debt that comes due in 2025/2026 and should be done by the summer. If that happens, the airline will have more time to solve its problems. But in the meantime, we are still waiting to hear details of this coming turnaround plan.

Spirit says it has had a standalone plan the entire time, even when the JetBlue merger was actively being pursued. But it also said it was hamstrung in what it could actually implement while the merger agreement was in place. Here’s how Spirit explained it on its Q1 earnings call:

The JetBlue merger agreement had several operating restrictions that limited what we could do to rightsize the business, address overstaffing levels caused by the issues with GTF engines on our NEO aircraft, and make the necessary changes to our product and strategy to adjust to the evolving industry environment. We no longer have those restrictions and are swiftly taking numerous actions that we believe will lead to cash flow generation and profitability.

Ok, great, swift action is good… but what actually is happening? So far, the activity has been around Spirit working to cut down its costs due to the reality of having dozens of airplanes sitting on the ground waiting for Pratt & Whitney engine maintenance. It has also negotiated a settlement with Pratt to get maintenance credits for all the downtime. Check that work off, but that isn’t enough.

Now it can move on to phase two which is all this “product and strategy” change. What is that? We have absolutely no idea. All we know is this from Spirit’s EVP and Chief Commercial Officer Matt Klein:

… what ended up happening is, throughout COVID and then coming out of COVID, we’ve seen a lot of competitive activity at price points that used to be sort of a place that we would play in and others are now playing in the same price points. So we have to make changes.

And what we’re looking to do is going to be, as [CEO Ted Christie] alluded to, is creating different kinds of opportunities for more breadth of service and product.

What does this mean? Seriously. That’s a real question. If you know, please tell me.

Spirit clearly is going to rollout new ancillary options, because that’s where the money is best. Look at Q1: revenue per segment declined 16.3 percent, but non-ticket (ancillary) revenue per segment was only down 1.4 percent. If the airline’s fares are too low thanks to all that competition, and costs keep climbing, how can it bridge the gap? It has to sell more ancillaries. But what exactly the airline will sell remains a mystery.

Maybe there will be a new extra legroom section similar to what Frontier offers to try to get more upsell. Or perhaps it won’t be something so traditional. You could imagine the airline coming up with all sorts of wacky ways to make a buck, but do note that Spirit is mindful about doing too much damage. In its Q2 investor update, it said

…the Company is making material modifications starting in June that will have a positive impact to the brand, the guest experience, and ultimately to unit revenues.

And back on the earnings call, we were told this:

So instead of just being transactional with our guests, which largely we’ve done in the past, we will begin to become more relationship driven with our guests.

Alrighty, so it’ll be something that makes money but has a positive impact to the brand and helps improve the customer relationship. I do wonder if we’ll see more subscription-style options. Bleh, speculating is useless, but I am intrigued. I hope this lives up to the hype, because so far, there doesn’t seem to be much of a revenue improvement plan to speak of.