Spirit Airlines is on shakier ground after avoiding hard decisions in bankruptcy – CNBC
Spirit continues to teeter, most recently agreeing to extend its credit card processor agreement but only after giving up millions to make it happen. The struggle continues.
At least it avoided a 100% holdback. That would’ve been catastrophic.
Nick – But is this not a 100% holdback? It looks like Spirit transferred $50 million into an account for USB to reduce its exposure. And then it says in the 8-K, “Spirit agreed to
allow USB (i) to holdback up to $3 million per day until USB’s exposure is fully collateralized and (ii) to remain fully collateralized as USB’s exposure increases or decreases.”
This is beyond my area of expertise, but it sounds like that’s a 100% holdback, no?
Brett, I’m not an expert either, but back when Frontier had to file bankruptcy because of the 100% holdback that was total. They didn’t get a dime until the flight flew.
Looking at 2024, Spirit had $4.9 billion in revenue. On average that’s $13 million a day. So on average they’ll be getting somewhere between $7 and $11 million a day after the holdback. Given how that section is phrased, it’s probably a percentage hold back, upto the ceiling of $3 million.
I’m sure their revenue is down. But that at least gets them some of the revenue at booking instead of none of it. And some percentage of their costs are always after the flight lands and they get 100% of the revenue . (E.g. Employees, airport fees, maybe fuel if those folks aren’t too skittish..)
I’m not optimistic about their chances of survival at this point. I wouldn’t be surprised if they go into Ch.7 before 2026. I can’t think of any carrier offhand that would want to buy/merge with the yellow disaster.
They’d be sold off in pieces, planes and pilots are still valuable.
I’ve seen a fair bit of speculation about UA wanting some of the fleet.
It also might be worthwhile for an acquirer to continue operate flights as Spirit until the crews and planes can be converted slowly, a la Southwest’s integration of AirTran.
The other thing is airlines are valuable to the companies whom the airlines buy from, which is why they’re so hard to completely shut down. Remember US Airways went through bankruptcy twice in short order in the 2000s.
Is that $15.8 million per month lease rate for an A321 engine figures accurate? I was under the impression that the purchase price was in that ballpark. Eve in if that figure includes maintenance costs, it seems high.
I had the same thought. We’re right. Per Gemini, the average monthly lease costs for an Airbus A321 are:
Older A321 (CEO): Mid-life aircraft from the previous generation (CEO, or “Current Engine Option”) lease for around $250,000 per month.
Newer A321neo (NX): The current-generation A321neo, with its more fuel-efficient engines, leases for around $460,000 per month.
Extended-Range A321XLR: This newest, most advanced version is likely the most expensive, with estimated lease rates topping $500,000 per month.
It was three short years ago that JetBlue desperately wanted to buy this heaping pile of garage for a mere $3.8 billion.
The people responsible for that decision should be sacked. They already were? Then they should be rehired so they can be sacked again.
JetBlue wanted Spirit’s pilots and airplanes. They didn’t want Sprit’s business model, and were quite open that they’d be reconfiguring Sprit’s airplanes to JetBlue standards and dropping the routes that didn’t work with JetBlue’s business model. And this honesty is a big part in what got the merger blocked, since it would have meant the loss of a low fare competitor.
That is very well known. Regardless, do you think that made NK worth $3.8 billion?
JetBlue has a difficult time flying its existing planes profitably. What makes you think they could do this with an additional 200+ planes AND having to pay off the better part of $4 billion?
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