Spirit Airlines(US:SAVE)2024-11-25 22:06Business Strategy and Operations - Spirit Airlines launched a no change or cancel fee policy in May 2024, allowing guests to only pay the fare difference or receive a credit for cheaper trips [170]. - The company introduced four new travel options: Go Big, Go Comfy, Go Savvy, and Go, enhancing customer experience with features like priority boarding and increased baggage allowances [171][172]. - Spirit's business model focuses on value-conscious travelers, providing affordable travel options while maintaining a commitment to customer experience [168]. - The new boarding process aims to reduce boarding time and enhance operational performance, with priority boarding for select customers [174]. Financial Performance - For Q3 2024, the company reported a pre-tax loss of $338.0 million and a net loss of $308.2 million on operating revenues of $1,197.1 million, compared to a pre-tax loss of $203.6 million and a net loss of $157.6 million on revenues of $1,258.5 million in Q3 2023 [195]. - Operating revenues decreased by $61.4 million, or 4.9%, primarily due to a 5.1% decrease in average yield, partially offset by a 0.2% increase in traffic year over year [207]. - Operating revenues decreased by $297.3 million, or 7.4%, to $3,743.5 million for the nine months ended September 30, 2024, primarily due to an 8.6% decrease in average yield, partially offset by a 1.4% increase in traffic year over year [229]. - Total revenue per passenger flight segment decreased by 10.0% year over year, driven by a 5.1% decrease in average yield [209]. - Total revenue per passenger flight segment decreased by 11.3% year over year, driven by an 8.6% decrease in average yield, including the impact of no longer charging for change and cancellation fees [230]. Bankruptcy and Restructuring - On November 18, 2024, Spirit commenced a voluntary Chapter 11 bankruptcy case, with plans to restructure its capital structure [175][177]. - The Restructuring Support Agreement includes equitization of $410 million in Senior Secured Notes and $385 million in convertible notes, along with a $350 million new money equity raise [179]. - Spirit secured a $300 million debtor-in-possession financing facility to support operations during the bankruptcy process [185]. - The company plans to issue $840 million in senior secured notes due 2030, with an interest rate of 12% per annum, as part of its restructuring plan [180]. - Spirit's stock began trading on the OTC Pink Market under the symbol "SAVEQ" on November 19, 2024, following its Chapter 11 filing [168]. Operating Expenses - Operating expenses increased by $46.2 million to $1,493.5 million in Q3 2024, primarily due to higher aircraft rent, salaries, and other operating expenses [210]. - Total operating expenses for Q3 2024 were $1,493.5 million, an increase of $46.2 million, or 3.2%, compared to Q3 2023 [215]. - Salaries, wages, and benefits increased by $22.9 million, or 5.7%, in Q3 2024 compared to Q3 2023, primarily due to higher salary and health benefits expenses [216]. - Landing fees and other rents rose by $22.5 million, or 20.9%, in Q3 2024 compared to Q3 2023, attributed to increased landing fees and facility rent [217]. - Aircraft rent expense increased by $51.1 million, or 52.5%, in Q3 2024 compared to Q3 2023, due to the acquisition of 28 new aircraft financed under operating leases [219]. Fuel and Maintenance Costs - The average economic fuel cost per gallon decreased by 15.8% to $2.61 in Q3 2024 from $3.10 in Q3 2023 [192]. - Aircraft fuel expense decreased by $81.8 million, or 18.0%, from $455.2 million in Q3 2023 to $373.4 million in Q3 2024, driven by a 15.8% decrease in average economic fuel cost per gallon and a 2.7% decrease in fuel gallons consumed [212][213]. - Amortization of heavy maintenance costs increased to $33.4 million in Q3 2024 from $23.4 million in Q3 2023, driven by the timing and number of maintenance events [221]. - Amortization of heavy maintenance costs increased to $90.8 million for the nine months ended September 30, 2024, up from $59.7 million in the prior year, reflecting the timing and number of maintenance events [240]. Liquidity and Cash Flow - As of September 30, 2024, the company had $840.7 million in liquidity, consisting of unrestricted cash, cash equivalents, short-term investments, and available funds under its revolving credit facility [254]. - Cash used in operating activities for the nine months ended September 30, 2024, was $634.3 million, compared to $63.9 million used in the same period of 2023 [265]. - Investing activities provided $406.0 million during the nine months ended September 30, 2024, compared to $185.5 million used in the prior year period [266]. - Financing activities used $162.7 million in cash during the nine months ended September 30, 2024, a decrease from $278.6 million used in the same period of 2023 [267]. Future Commitments and Obligations - The company has 56 A320 family aircraft on order with Airbus, with deliveries expected through 2031, including 1 aircraft scheduled for delivery in 2024 [268]. - As of September 30, 2024, aircraft rent commitments for future deliveries are expected to be approximately $1.8 million for the remainder of 2024, $33.8 million in 2025, $40.5 million in 2026, $101.7 million in 2027, $196.6 million in 2028, and $2,538.6 million in 2029 and beyond [275]. - Total future payments on contractual obligations as of September 30, 2024, amount to $15,255 million, including long-term debt, lease obligations, and flight equipment purchase obligations [280]. - The company had secured 41 direct leases for aircraft with third-party lessors, with deliveries scheduled from 2024 through 2028 [275]. Tax and Interest - The effective tax rate for Q3 2024 was 8.8%, a decrease from 22.6% in Q3 2023, primarily due to changes in valuation allowances on deferred tax assets [228]. - The effective tax rate for the nine months ended September 30, 2024, was 6.0%, down from 20.1% in the prior year, primarily due to an adjustment in tax expense [249]. - Interest income for Q3 2024 was $11.3 million, down from $18.4 million in Q3 2023, reflecting changes in cash and investment income [227]. - For the nine months ended September 30, 2024, the company reported interest income of $37.1 million, a decrease of 25.6% from $49.8 million in the same period of 2023 [247].