Spirit Airlines has reached an agreement with Airbus to defer the delivery of aircraft originally scheduled for the second quarter of 2025 through the end of 2026.
The budget carrier’s decision to postpone these deliveries until 2030 and 2031 is expected to significantly improve its liquidity over the next two years, providing a much-needed financial cushion as the company works towards a return to profitability.
Ted Christie, Spirit’s President and Chief Executive, emphasized the importance of this decision, stating, “Deferring these aircraft gives us the opportunity to reset the business and focus on the core airline while we adjust to changes in the competitive environment.”
RELATED: Electric Grid Upgrades Needed For EVs May Increase Costs For All Consumers
The move is a clear indication of the airline’s proactive approach to adapting to the challenges faced by the industry in recent years.
The deferral of the Airbus aircraft is expected to boost Spirit’s liquidity by approximately $340 million over the next two years, a significant sum that will undoubtedly help the airline weather the current storm.
Spirit Air Defers Plane Deliveries in Bid to Preserve Cash.
Get more on the Bloomberg Intelligence Podcast
Apple: https://t.co/17AYG54m6p
Spotify: https://t.co/V6JoJx0O7v
Anywhere: https://t.co/PCIUuhjaA0 pic.twitter.com/tlqzyBo3eT— Bloomberg Radio (@BloombergRadio) April 8, 2024
However, the decision has not come without its consequences. Spirit also announced plans to furlough 260 pilots from September 1, a direct result of the deferrals and ongoing issues with the availability of Pratt & Whitney GTF engines.
The engine manufacturer recently agreed to compensate Spirit for the grounding of 13 planes in January, a number that was expected to rise.
The compensation agreement is estimated to improve Spirit’s liquidity by an additional $150 million to $200 million, further bolstering the airline’s financial position.
Despite the challenges faced by Spirit, the company’s shares saw a slight increase in morning trading, reaching $4.45 per share.
However, this is a far cry from the airline’s previous highs, with the stock hitting an all-time low this year following the blockage of its $3.8 billion merger with JetBlue.
The failed merger, which was seen as a potential lifeline for the struggling Spirit, was ultimately blocked by a federal judge who cited concerns over the deal’s potential to damage competition and increase prices for air travelers.
READ NEXT: Home Insurance Companies Are Increasingly Dropping Customers Based on Images From Drones
The collapse of the JetBlue deal has left Spirit in a precarious position, with the airline last reporting a full-year profit in 2019.
