Spirit Airlines (SAVE) Pushes Back Airbus Aircraft Deliveries

Spirit Airlines SAVE inked a deal with Airbus to defer all jets on order that were scheduled to be delivered in the second quarter of 2025 through 2026-end to 2030-2031. The agreement with Airbus will improve SAVE’s liquidity position by approximately $340 million over the next two years.  

These deferrals exclude the direct-lease aircraft scheduled for delivery in that period, one each in the second and third quarters of 2025, respectively. However, the delivery schedule of the jets on order with Airbus that are scheduled to be delivered in 2027-2029 remains unchanged.

SAVE also intends to furlough approximately 260 pilots effective Sep1, as a result of grounded aircraft due to Pratt & Whitney geared turbofan (GTF) engine availability issues, and 2025 and 2026 aircraft deferrals.

The agreement with Airbus is the second measure by SAVE to improve its liquidity. A few days ago, management inked a deal with International Aero Engines, or IAE, an affiliate of Pratt & Whitney. Per the deal, IAE will extend monthly credits to Spirit Airlines through the current-year end. Credit will be given to SAVE for each aircraft unavailable due to problems with GTF engines, discovered in July 2023.

GTF engines are produced by Pratt & Whitney. The agreement, estimated to bolster the company’s liquidity by $150 million to $200 million, hinges on the number of days aircraft are grounded due to engine issues throughout 2024. 

Spirit Airlines is one of the largest operators of GTF-powered aircraft in the United States. Apart from the engine issues, it is grappling with escalated operating costs, supply-chain disruptions and financial strain, following the collapse of a proposed merger with JetBlue Airways JBLU.  

We remind investors that in March 2024, JetBlue’s $3.8 billion acquisition of Spirit Airlines was canceled on antitrust grounds. JBLU’s management believes that the legal and regulatory approvals necessary for the deal’s success “were unlikely to be met” by the dates specified.

Price Performance

Due to the woes, Spirit Airlines shares have plummeted 71.2% year to date against its industry’s 3.2% growth.

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Image Source: Zacks Investment Research

Zacks Rank

SAVE currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Investors interested in the broader Transportation sector may consider stocks like Delta Air Lines DAL and Air Lease AL. Each stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DAL has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once. The average beat is 3.02%. Strong air travel demand and shareholder-friendly efforts are boosting DAL’s revenues.

The Zacks Consensus Estimate for 2024 earnings has been revised 0.15% upward over the past 60 days. The company has an expected earnings growth rate of 4.96% for 2024. Shares of DAL have rallied 38.4% in the past year.

Air Lease is benefiting from the continuous growth in its fleet and an increase in sales activity. The Zacks Consensus Estimate for AL’s 2024 earnings has improved 25.80% over the past 60 days. Shares of Air Lease have risen 28.3% in the past year.

AL has an expected earnings growth rate of 29.96% for 2024. The company delivered a trailing four-quarter earnings surprise of 20.15%, on average.

 

 


 

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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