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Spirit Airlines(SAVE) - 2022 Q2 - Quarterly Report
2022-08-08 21:41
Part I. Financial Information [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents Spirit Airlines' unaudited condensed consolidated financial statements, including operations, balance sheets, cash flows, and equity, with notes on the JetBlue merger and key accounting policies [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total operating revenues** | **$1,366,643** | **$859,309** | **$2,333,958** | **$1,320,588** | | Total operating expenses | $1,411,973 | $766,098 | $2,590,756 | $1,329,907 | | Operating income (loss) | ($45,330) | $93,211 | ($256,798) | ($9,319) | | **Net loss** | **($52,406)** | **($287,863)** | **($247,109)** | **($400,184)** | | Diluted loss per share | ($0.48) | ($2.73) | ($2.27) | ($3.94) | - Operating revenues for Q2 2022 increased significantly to **$1.37 billion** from **$859.3 million** in Q2 2021, but a sharp rise in operating expenses, particularly aircraft fuel, led to an operating loss of **$45.3 million** compared to an operating income of **$93.2 million** in the prior-year period[9](index=9&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$8,715,023** | **$8,540,025** | | Cash and cash equivalents | $1,197,065 | $1,333,507 | | Total current assets | $1,761,854 | $1,842,491 | | Total liabilities | $6,841,808 | $6,426,000 (Calculated) | | **Total shareholders' equity** | **$1,873,215** | **$2,114,035** | - Total assets increased slightly to **$8.72 billion** as of June 30, 2022, from **$8.54 billion** at year-end 2021, while total shareholders' equity decreased to **$1.87 billion** from **$2.11 billion** over the same period, primarily due to the net loss incurred[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $86,767 | $484,116 | | Net cash used in investing activities | ($123,058) | ($179,023) | | Net cash used by financing activities | ($100,151) | ($240,307) | | **Net decrease in cash, cash equivalents, and restricted cash** | **($136,442)** | **$64,786** | - For the first six months of 2022, net cash provided by operating activities was **$86.8 million**, a significant decrease from **$484.1 million** in the same period of 2021, with the company using cash in both investing (**$123.1 million**) and financing (**$100.2 million**) activities, resulting in a net decrease in cash of **$136.4 million**[17](index=17&type=chunk)[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, significant events like the JetBlue merger, revenue disaggregation, lease agreements, debt obligations, and fair value measurements - On July 27, 2022, Spirit terminated its merger agreement with Frontier and paid Frontier **$25.0 million** for expenses[29](index=29&type=chunk) - On July 28, 2022, Spirit entered into a new merger agreement with JetBlue for **$33.50 per share** in cash, subject to certain prepayments, with JetBlue reimbursing Spirit for the **$25.0 million** paid to Frontier[30](index=30&type=chunk)[31](index=31&type=chunk) - The JetBlue merger agreement includes potential termination fees: Spirit would pay JetBlue **$94.2 million** under certain circumstances, while JetBlue would pay Spirit **$70.0 million** and Spirit stockholders up to **$400.0 million** (less prepayments) if the deal fails to obtain antitrust clearance[35](index=35&type=chunk) Disaggregated Operating Revenues (in thousands) | Revenue Type | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Fare | $703,778 | $1,122,196 | | Non-fare | $644,093 | $1,175,419 | | **Total passenger revenues** | **$1,347,871** | **$2,297,615** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, including the JetBlue merger, Q2 2022 revenue growth, increased fuel costs, and liquidity, alongside operational challenges and fleet plans - The company's business model focuses on value-conscious travelers, offering unbundled base fares and generating significant non-ticket revenue from ancillary services like baggage and seat assignments[122](index=122&type=chunk)[123](index=123&type=chunk) Q2 2022 vs Q2 2021 Operating Statistics | Metric | Q2 2022 | Q2 2021 | Percent Change | | :--- | :--- | :--- | :--- | | Available seat miles (ASMs) (thousands) | 11,846,547 | 10,226,746 | 15.8% | | Load factor (%) | 86.0% | 84.4% | 1.6 pts | | TRASM (cents) | 11.54 | 8.40 | 37.4% | | CASM (cents) | 11.92 | 7.49 | 59.1% | | Adjusted CASM ex-fuel (cents) | 6.96 | 6.52 | 6.7% | | Average economic fuel cost per gallon ($) | 4.30 | 1.95 | 120.5% | - For Q2 2022, the company reported a negative operating margin of **3.3%**, a decrease of **14.1 percentage points** from the prior year, and a net loss of **$52.4 million**[136](index=136&type=chunk) - As of June 30, 2022, the company had **$1.54 billion** of liquidity, comprising unrestricted cash, short-term investments, and available funds under its revolving credit facility[182](index=182&type=chunk) [Comparison of three months ended June 30, 2022 to three months ended June 30, 2021](index=29&type=section&id=Comparison%20of%20three%20months%20ended%20June%2030%2C%202022%20to%20three%20months%20ended%20June%2030%2C%202021) - Operating revenues increased by **$507.3 million (59.0%)** to **$1.37 billion** in Q2 2022, driven by a **34.8%** increase in average yield and an **18.0%** increase in traffic due to strong travel demand[141](index=141&type=chunk) - Operating expenses rose by **$645.9 million (84.3%)**, primarily due to a **$343.8 million (160.0%)** increase in aircraft fuel expense, with the average economic fuel cost per gallon surging **120.5%** to **$4.30**[143](index=143&type=chunk)[144](index=144&type=chunk) - Salaries, wages, and benefits increased by **$51.4 million (20.0%)** due to higher salaries, crew overtime, and a **15.8%** increase in pilot and flight attendant workforce[149](index=149&type=chunk) - Other operating expenses increased by **$70.7 million (62.0%)**, driven by higher ground handling costs, travel expenses, and significant passenger reaccommodation costs from flight delays and cancellations caused by weather and ATC issues[157](index=157&type=chunk)[158](index=158&type=chunk) [Comparison of six months ended June 30, 2022 to six months ended June 30, 2021](index=32&type=section&id=Comparison%20of%20six%20months%20ended%20June%2030%2C%202022%20to%20six%20months%20ended%20June%2030%2C%202021) - For the first half of 2022, operating revenues increased by **$1.01 billion (76.7%)** to **$2.33 billion**, driven by a **33.8%** increase in traffic and a **32.1%** rise in average yield[163](index=163&type=chunk) - Operating expenses for the six-month period increased by **$1.26 billion (94.8%)**, largely due to a **$569.5 million (159.2%)** increase in aircraft fuel expense[165](index=165&type=chunk) - Adjusted CASM ex-fuel for the six months ended June 30, 2022, decreased slightly to **6.82 cents** from **6.93 cents** in the prior year period, as the **29.5%** increase in ASMs helped spread fixed costs over a larger base[167](index=167&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2022, total liquidity was **$1.54 billion**, consisting of unrestricted cash, short-term investments, and availability under a revolving credit facility[182](index=182&type=chunk) - During the first six months of 2022, the company took delivery of **seven aircraft** via sale-leaseback transactions and purchased **two spare engines** with cash[185](index=185&type=chunk) - The company has firm orders for **113 A320 family aircraft** with deliveries through 2027 and has secured financing for deliveries through 2024[191](index=191&type=chunk) Future Contractual Obligations (in millions) | Obligation Type | Remainder of 2022 | 2023 - 2024 | 2025 - 2026 | 2027 and beyond | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $96 | $559 | $1,455 | $1,029 | $3,139 | | Lease obligations | $145 | $557 | $481 | $2,047 | $3,230 | | Flight equipment purchase | $507 | $1,907 | $2,411 | $873 | $5,698 | | **Total** | **$853** | **$3,278** | **$4,518** | **$4,072** | **$12,721** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are aircraft fuel prices and interest rates, with fuel representing **35.8%** of operating expenses and a **10%** price increase potentially raising annual fuel expense by **$148 million** - The company's main market risks are aircraft fuel prices and interest rates[236](index=236&type=chunk) - Aircraft fuel accounted for approximately **35.8%** of operating expenses in the first half of 2022, and a hypothetical **10%** increase in the average fuel price would have increased annual into-plane fuel expense by about **$148 million**[237](index=237&type=chunk) - As of June 30, 2022, the company held no jet fuel derivatives and had no outstanding variable-rate long-term debt[237](index=237&type=chunk)[240](index=240&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - Based on an evaluation as of June 30, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[244](index=244&type=chunk) - There were no material changes in the company's internal control over financial reporting during the quarter ended June 30, 2022[245](index=245&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company faces commercial litigation and regulatory proceedings, including an IRS assessment of **$27.5 million** for federal excise taxes on seat selection charges - Following an IRS audit, the company was assessed **$27.5 million** for federal excise taxes on seat selection charges for the period of Q2 2018 to Q4 2020, which the company believes is without merit and plans to challenge[247](index=247&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) New risk factors include potential business disruption and stock price impact from the JetBlue merger, regulatory approval uncertainty, and increased labor costs from union negotiations - The pending merger with JetBlue introduces risks of business disruption, as parties may delay decisions or seek alternative relationships[250](index=250&type=chunk)[252](index=252&type=chunk) - Failure to complete the merger could negatively impact the stock price, and the company may be required to pay JetBlue a breakup fee of **$94.2 million** under certain circumstances[255](index=255&type=chunk)[259](index=259&type=chunk) - Obtaining governmental approvals for the merger is a key risk, as regulators may impose conditions, delay, or prevent the transaction[260](index=260&type=chunk) - Increased labor costs and potential disputes are significant risks, with **79%** of the workforce unionized as of June 30, 2022, and negotiations with the flight attendants' union ongoing while aircraft maintenance technicians are holding a union election[264](index=264&type=chunk)[267](index=267&type=chunk)[271](index=271&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2022, the company repurchased **276 shares** of common stock at an average price of **$19.76** per share from employees for tax withholding purposes Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1-30, 2022 | 69 | $26.06 | | May 1-31, 2022 | 176 | $16.94 | | June 1-30, 2022 | 31 | $21.74 | | **Total** | **276** | **$19.76** | - All stock repurchases during the quarter were from employees to satisfy tax withholding requirements on vested restricted stock[275](index=275&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults on senior securities during the reporting period - None[278](index=278&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[278](index=278&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - None[278](index=278&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including merger agreement amendments and CEO/CFO certifications - Exhibits include amendments to the Frontier merger agreement and required CEO/CFO certifications[279](index=279&type=chunk)
Spirit Airlines(SAVE) - 2022 Q1 - Earnings Call Presentation
2022-05-16 02:20
JetBlue's Offer Concerns - JetBlue's offer is deemed not superior due to regulatory concerns stemming from their Northeast Alliance (NEA), which is already facing a lawsuit [7] - The acquisition of Spirit by JetBlue is viewed as anticompetitive, eliminating a key competitor and vocal opponent of JetBlue's NEA deal [7] - JetBlue's claim of the "JetBlue Effect" is based on economic modeling that Spirit believes is flawed and overstates JetBlue's impact on legacy carriers [7] - JetBlue has not adequately protected Spirit's shareholders through their limited regulatory package and inadequate reverse termination fee, given the significant closing risks [7] Financial Analysis - JetBlue's 2019 passenger yield was 10.7¢, while Frontier's was 10.1¢ and Spirit's was 14.5¢ [14] - JetBlue's 2019 average fare was $182, while Frontier's was $53 and Spirit's was $55 [14] - JetBlue has experienced approximately $1.2 billion in value destruction since making its initial offer for Spirit [21] Frontier/Spirit Merger Advantages - The Spirit Board determined that JetBlue's original proposal represented an unsatisfactorily high degree of completion risk with inadequate protections for Spirit shareholders [9] - The planned Spirit/Frontier merger is considered the superior transaction for Spirit shareholders [7] - The Frontier/Spirit merger is expected to deliver $1 billion in annual consumer savings [32] - The combined Frontier and Spirit are projected to create 10,000 direct jobs by 2026 [32] - The Frontier/Spirit merger is expected to unlock $500 million in annual run-rate operating synergies [32]
Spirit Airlines(SAVE) - 2022 Q1 - Earnings Call Transcript
2022-05-05 19:05
Spirit Airlines, Inc. (NYSE:SAVE) Q1 2022 Earnings Conference Call May 5, 2022 10:00 AM ET Company Participants De Anne Gabel - Senior Director of Investor Relations Ted Christie - Chief Executive Officer Matt Klein - Chief Commercial Officer Scott Haralson - Chief Financial Officer Conference Call Participants Duane Pfennigwerth - Evercore Savi Syth - Raymond James Catherine O'Brien - Goldman Sachs Conor Cunningham - MKM Partners Mike Linenberg - Deutsche Bank Jamie Baker - JPMorgan Tom McCaffrey - Cowen D ...
Spirit Airlines(SAVE) - 2022 Q1 - Quarterly Report
2022-05-04 20:25
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________________________________________ Form 10-Q _______________________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission Fil ...
Spirit Airlines (SAVE) Presents At J.P. Morgan 2022 Industrials Conference
2022-03-23 18:15
| --- | --- | |------------------------------------------|-------| | | | | JP Morgan Industrials Conference | | | March 15, 2022 | | | Barry Biffle, Frontier President and CEO | | | Ted Christie, Spirit President and CEO | | Disclaimer No Offer or Solicitation This communication is for informational purposes only and is not intended to and does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, or a solicitation of any vote or approval in any jurisdiction, nor shall th ...
Spirit Airlines(SAVE) - 2021 Q4 - Annual Report
2022-02-08 21:26
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-35186 Spirit Airlines, Inc. (Exact name of registrant as specified in its charter) Delaware 38-1747023 (I.R.S. Employer Identification N ...
Spirit Airlines(SAVE) - 2021 Q3 - Earnings Call Transcript
2021-10-28 17:25
Financial Data and Key Metrics Changes - The company reported a third-quarter loss of $74.6 million, impacted by higher fuel prices, travel restrictions, and staffing issues [5][12] - Adjusted EBITDA margin was positive 1.0%, better than expected due to lower costs [13] - Total operating revenues declined 7% compared to Q3 2019, with total revenue per passenger segment increasing by 0.7% [9][12] Business Line Data and Key Metrics Changes - Passenger revenue per segment decreased by 7.6%, while non-ticket revenue per segment increased by 8.9%, setting a new record for the company [9][10] - Load factors were strong during peak summer demand but softened in the latter half of the quarter due to operational issues [10] Market Data and Key Metrics Changes - The company expects fourth-quarter capacity to be up 11.2% compared to Q4 2019, although this is more than 10 percentage points lower than initial expectations [12] - The company launched new services to Mexico and Honduras, and expanded its network in Miami [11][12] Company Strategy and Development Direction - The company aims to resume appropriate staffing levels and add capacity in key markets, particularly Fort Lauderdale [6][7] - A focus on enhancing operational reliability and efficiency is emphasized, with plans to improve recovery processes during irregular operations [20][21] - The company published its inaugural sustainability report, highlighting its commitment to ESG initiatives [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the pandemic's impacts have lasted longer than anticipated, but remains optimistic about long-term growth [5][6] - The company is adapting its hiring and staffing strategies to better prepare for future demand [38] - Management believes that the market opportunities are as rich as or richer than pre-pandemic levels [63] Other Important Information - The company ended Q3 with $1.9 billion in liquidity, including unrestricted cash and short-term investments [14] - The company is targeting a sub-$0.06 CASM ex-fuel once full fleet utilization is achieved, although this timeline has been extended due to inflationary pressures [19] Q&A Session Summary Question: Concerns about CASM and operational performance - Management acknowledged inflationary pressures affecting CASM but emphasized ongoing efforts to enhance operational reliability and efficiency [28][30] Question: 2022 as a transition year - Management views 2022 as a recovery year, focusing on improving staffing and operational performance [37][38] Question: Margin performance and cost structure - Management reiterated confidence in maintaining strong margins and cost advantages despite industry-wide inflation [41][44] Question: Staffing and network changes - Management is actively working on staffing improvements and network adjustments to enhance operational reliability [48][50] Question: Opportunities in Mexico and M&A - The company sees significant opportunities in Mexico and remains focused on organic growth while being open to M&A possibilities [73][74] Question: Addressing operational issues from August - Management is implementing structural changes to improve recovery from irregular operations and enhance overall reliability [78][82]
Spirit Airlines(SAVE) - 2021 Q3 - Quarterly Report
2021-10-27 20:13
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________________________________________ Form 10-Q _______________________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission ...
Spirit Airlines(SAVE) - 2021 Q2 - Earnings Call Transcript
2021-07-29 20:45
Financial Data and Key Metrics Changes - The company reported a net loss of $36.3 million for Q2 2021, but achieved profitability in June, marking the first month of profit since the pandemic began [7] - Total operating revenue decreased by 15% compared to Q2 2019, with a 5% reduction in capacity [11] - The EBITDA margin for Q2 was a positive 7.2%, significantly better than initial expectations due to improved revenue and lower costs [24] Business Line Data and Key Metrics Changes - Total revenue per passenger segment declined by 9.4% compared to the same period in 2019, with passenger revenue per segment down 23.5% [12] - Non-ticket revenue per segment increased by $2.85 compared to Q2 2019, a 5.1% increase, setting a record for the company [12][13] - Load factors have largely recovered, and yields during peak travel periods have improved significantly [14] Market Data and Key Metrics Changes - The company added 28 new routes and reinstated 11 previously suspended routes in Q2 [17] - Capacity is expected to increase by 10.6% in Q3 compared to Q3 2019, and by approximately 23% in Q4 compared to Q4 2019 [20] - The company is well-positioned to capture market demand, with nearly the entire route network reinstated to pre-pandemic levels [16] Company Strategy and Development Direction - The company is focused on growing its network and enhancing non-ticket revenue through improved product offerings and revenue management initiatives [12][15] - The strategy includes deliberate route deployment to build a sustainable long-term network [19] - The company anticipates a full recovery in travel demand and aims to leverage its low-cost structure to deliver pre-pandemic margins by 2023 [34][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving profitability in both Q3 and Q4 2021 based on current booking trends [7] - The recovery is expected to be choppy, but the company remains optimistic about its long-term prospects [34] - Management highlighted the importance of operational efficiency and cost management as key drivers for future profitability [8][24] Other Important Information - The company ended Q2 with $2.2 billion in liquidity, including unrestricted cash and short-term investments [27] - The average daily aircraft utilization was 9.9 hours, which is 23% lower than Q2 2019, with expectations to ramp up to full utilization by mid-2022 [29] Q&A Session Summary Question: Aircraft acquisition costs and market dynamics - Management indicated that current lease rates are at or below pre-pandemic levels, making them attractive for future aircraft acquisitions [39] Question: Miami market entry and cost structure - The decision to enter Miami was based on a favorable change in the airport's cost structure, allowing for profitable low fares [42] Question: Revenue guidance and yield recovery - Management confirmed that the top end of revenue guidance implies a return to 2019 levels, driven by improved non-ticket revenue and anticipated demand recovery [45] Question: Cost focus and CASM outlook - Management reassured that unit cost remains a strategic focus, with expectations to achieve sub-6 CASM by mid-2022 despite inflationary pressures [49][59] Question: Fourth quarter profitability expectations - Management expects sequential revenue growth into Q4, driven by increased utilization and overall demand recovery [51] Question: Network diversification and new markets - The company has increased its network diversification, with a notable rise in capacity to Latin America and the Caribbean, now at nearly 20% [74] Question: Labor situation and pilot staffing - Management confirmed no furloughs among crew members, with active hiring ongoing to support growth [80] Question: Handling unruly passengers - Management acknowledged concerns regarding unruly passengers but emphasized that such incidents remain a minority and are being addressed through active communication and enforcement [84]
Spirit Airlines(SAVE) - 2021 Q2 - Quarterly Report
2021-07-28 20:19
Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents Spirit Airlines' unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021, along with detailed notes on accounting policies and the impact of the COVID-19 pandemic [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in millions) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total operating revenues** | $859.3 | $138.5 | $1,320.6 | $909.6 | | **Total operating expenses** | $766.1 | $328.9 | $1,329.9 | $1,158.0 | | **Operating income (loss)** | $93.2 | $(190.4) | $(9.3) | $(248.4) | | **Loss on extinguishment of debt** | $331.6 | $— | $331.6 | $— | | **Net loss** | $(287.9) | $(144.4) | $(400.2) | $(172.3) | | **Diluted loss per share** | $(2.73) | $(1.81) | $(3.94) | $(2.33) | - Operating revenues for Q2 2021 recovered significantly to **$859.3 million** from **$138.5 million** in Q2 2020, however, a substantial loss on extinguishment of debt of **$331.6 million** led to a net loss of **$287.9 million** for the quarter[8](index=8&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in millions) | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $1,863.7 | $1,789.7 | | **Total current assets** | $2,388.4 | $2,356.0 | | **Total assets** | $8,671.5 | $8,398.8 | | **Air traffic liability** | $608.1 | $402.0 | | **Total current liabilities** | $1,601.2 | $1,342.0 | | **Long-term debt and finance leases, less current maturities** | $3,015.0 | $3,066.6 | | **Total shareholders' equity** | $2,180.8 | $2,249.7 | - Air traffic liability, a key indicator of future travel demand, increased by **51%** to **$608.1 million** as of June 30, 2021, from **$402.0 million** at year-end 2020, reflecting a strong recovery in bookings[13](index=13&type=chunk)[51](index=51&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in millions) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | **Net cash provided (used) by operating activities** | $484.1 | $(47.0) | | **Net cash used in investing activities** | $(179.0) | $(457.4) | | **Net cash provided (used) by financing activities** | $(240.3) | $682.8 | - For the first six months of 2021, net cash from operating activities was a positive **$484.1 million**, a significant improvement from a use of **$47.0 million** in the same period of 2020, driven by a large increase in air traffic liability[16](index=16&type=chunk) - Financing activities in H1 2021 involved significant transactions, including proceeds from issuing long-term debt (**$563.0 million**) and common stock (**$375.7 million**), offset by substantial debt repayments (**$857.6 million**) and payments for early debt extinguishment (**$317.9 million**)[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's accounting policies, the financial impact of the COVID-19 pandemic, government aid, and significant debt and equity transactions - The company adopted **ASU No. 2020-06**, "Accounting for Convertible Instruments and Contracts in an Entity's Own Equity," effective **January 1, 2021**, which simplified accounting for convertible instruments and resulted in a cumulative effect adjustment to retained earnings and a reclassification from additional paid-in-capital to long-term debt[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial condition and results of operations, highlighting the significant recovery in air travel demand, the impact of COVID-19 and government aid, and details on liquidity, capital resources, and contractual commitments [Comparative Operating Statistics](index=30&type=section&id=Comparative%20Operating%20Statistics) Comparative Operating Statistics | Operating Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change | | :--- | :--- | :--- | :--- | | **Available seat miles (ASMs) (thousands)** | 10,226,746 | 1,809,874 | 465.1% | | **Load factor (%)** | 84.4% | 49.4% | 35 pts | | **TRASM (cents)** | 8.40 | 7.65 | 9.8% | | **Adjusted CASM ex-fuel (cents)** | 6.40 | 25.47 | (74.9)% | - Operational performance in Q2 2021 showed a dramatic recovery from the depths of the pandemic in Q2 2020, with capacity (ASMs) increasing by **465.1%** and load factor improving by **35 percentage points** to **84.4%**, nearing pre-pandemic levels[145](index=145&type=chunk)[149](index=149&type=chunk) [COVID-19 Impact and Government Support](index=32&type=section&id=COVID-19%20Impact%20and%20Government%20Support) - The company received significant financial assistance through government programs, including **$212.1 million** from the **Payroll Support Program 2 (PSP2)** and **$197.9 million** from **PSP3** during H1 2021, which included both grants and low-interest loans[156](index=156&type=chunk)[160](index=160&type=chunk) - The company also utilized the **CARES Act Employee Retention credit**, recording credits of **$16.3 million** and **$37.5 million** for the three and six months ended June 30, 2021, respectively[159](index=159&type=chunk) [Comparison of Results of Operations](index=35&type=section&id=Comparison%20of%20Results%20of%20Operations) This section analyzes changes in operating revenues and expenses for the three and six months ended June 30, 2021, explaining drivers behind revenue recovery and cost fluctuations due to increased operational capacity - For Q2 2021, operating revenues increased **520.3%** to **$859.3 million**, driven by an **865.0%** increase in traffic (RPMs) as air travel demand recovered, while total revenue per passenger flight segment decreased **33.4%** due to a **35.7%** decrease in average yield[170](index=170&type=chunk)[171](index=171&type=chunk) - Q2 2021 operating expenses increased **132.9%** to **$766.1 million**, primarily due to a **465.1%** increase in capacity, with aircraft fuel expense rising **979.0%** due to a **480.1%** increase in consumption and an **85.7%** increase in average fuel cost per gallon[172](index=172&type=chunk)[175](index=175&type=chunk) - Adjusted CASM ex-fuel for Q2 2021 decreased significantly by **74.9%** to **6.40 cents** from **25.47 cents** in Q2 2020, primarily due to fixed costs being spread over a much larger base of ASMs[178](index=178&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Management details the company's strong liquidity position, sources and uses of cash, and major capital allocation activities, including significant financing and future contractual obligations - As of June 30, 2021, the company had total liquidity of **$2,210.1 million**, consisting of unrestricted cash, short-term investments, and availability under its revolving credit facility[216](index=216&type=chunk) - In H1 2021, the company enhanced its financial position through a **$500.0 million** offering of **1.00% convertible notes** due 2026 and the issuance of **10.6 million shares** of common stock for net proceeds of **$370.8 million**[219](index=219&type=chunk) - The company has firm orders for **124 A320 family aircraft** with deliveries expected through 2027, with committed expenditures for aircraft and spare engines estimated at **$249.2 million** for the remainder of 2021 and **$884.7 million** for 2022[230](index=230&type=chunk)[231](index=231&type=chunk) Contractual Obligations (in millions) | Contractual Obligation | Remainder of 2021 | 2022 - 2023 | 2024 - 2025 | 2026 and beyond | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | **Long-term debt** | $99 | $528 | $946 | $1,713 | $3,286 | | **Interest and fee commitments** | $73 | $230 | $186 | $116 | $605 | | **Finance and operating lease obligations** | $122 | $457 | $377 | $1,392 | $2,348 | | **Flight equipment purchase obligations** | $249 | $1,793 | $2,047 | $2,248 | $6,337 | | **Total** | **$562** | **$3,050** | **$3,589** | **$5,505** | **$12,706** | [Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to market risks, primarily from fluctuations in aircraft fuel prices and interest rates, and its strategies for managing these risks - Aircraft fuel is a significant market risk, representing **26.9%** of operating expenses in H1 2021, where a hypothetical **10%** increase in the average price per gallon of aircraft fuel would have increased annual fuel expense by approximately **$56 million**[274](index=274&type=chunk) - As of June 30, 2021, the company had a substantial amount of fixed-rate debt, including **$2.1 billion** related to aircraft financing, **$510.0 million** in senior secured notes, and **$528.2 million** in convertible debt, mitigating exposure to rising interest rates[276](index=276&type=chunk) [Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2021[280](index=280&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[281](index=281&type=chunk) Part II. Other Information [Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal and regulatory proceedings but does not expect a material adverse effect on its financial position or results - The company does not expect any current legal proceedings to have **no material adverse effect** on its financial condition or results[283](index=283&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K were reported for the quarter - **No material changes** to risk factors were reported for the quarter[285](index=285&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during Q2 2021, primarily from employees to satisfy tax withholding requirements on vested equity awards Common Stock Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1-30, 2021 | 138 | $37.47 | | May 1-31, 2021 | 388 | $33.17 | | June 1-30, 2021 | 87 | $33.54 | | **Total** | **613** | **$34.19** | - All stock repurchases during the quarter were from employees to cover **tax withholding obligations** related to vested equity awards and were not part of a publicly announced buyback program[286](index=286&type=chunk) [Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including warrant agreements, the Payroll Support Program Agreement, and officer certifications