Spirit Airlines just reported its latest financial performance and the picture is very bleak, with the carrier racking up a substantial loss during the busy summer months.
Spirit Airlines CEO Ted Christie Explains Massive Loss During Historically Profitable Period
Despite record revenue of $1.2 billion, Spirit Airlines reported a massive loss in the 3Q23 of $157.6 million net loss ($1.44 per share).
Here’s how CEO Ted Christie explained it:
“Softer demand for our product and discounted fares in our markets led to a disappointing outcome for the third quarter 2023. We continue to see discounted fares for travel booked through the pre-Thanksgiving period. And, unfortunately, we have not seen the anticipated return to a normal demand and pricing environment for the peak holiday periods.
“We continue to believe merging with JetBlue and creating a viable competitor to the Big Four US airlines is in the best interest of consumers, Team Members, and shareholders. We are prepared to make the necessary strategic shifts to enable Spirit to compete effectively in this new demand backdrop.
“Our Team Members are among the best and most innovative in the industry. I am confident that whether the Spirit of tomorrow is different from today or whether the aircraft tail says JetBlue or Spirit, their dedication to take care of our Guests and each other will not change.”
TLDR? Christie said that holiday fares are particularly weak, overall demand is weak, and now a JetBlue merger is more important than ever.
The loss comes despite better aircraft utilization and lower than expected interest expenses on debt, but with higher fuel costs.
To address this, Spirit Airlines will scale back growth and defer new aircraft deliveries:
Given these continued trends, we are evaluating our growth profile and our competitive position. We have already taken the first steps by modifying the cadence of our aircraft deliveries through the end of the decade and slowing our capacity growth in the near term.
As Frontier Airlines also reported a massive loss, the question is can the so-called “ultra-low-cost” business model survive? Have passengers had enough of “unbounded” fares?
I always wonder if JetBlue and Spirit are strategically racking up “losses” in order to make a merger more likely when their financial picture actually is not that bad. That is not allegation I am making nor a field I am competent enough to really dive deeply into it, but I do know the way companies and boards think and I wonder if these losses are engineered in the narrow sense that they will make the merger easier?
Spirit Airlines has reported a sizable loss while other carriers like Delta and United have reported a health profit. As Spirit and JetBlue move closer to merger, both carriers are losing money, which they hope will make the case for why a merger should be allowed by US regulators.
image: @SpiritAirlines / Twitter (X)