Spirit Airlines(SAVE) - 2025 Q2 - Quarterly Report

Part I. Financial Information This section presents the unaudited condensed consolidated financial statements, management's analysis of financial condition, market risk disclosures, and internal controls Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Spirit Aviation Holdings, Inc. for the periods ended June 30, 2025. It includes the Statements of Operations, Comprehensive Income (Loss), Balance Sheets, Cash Flows, and Shareholders' Equity. A key feature is the separation of financial data into "Predecessor" and "Successor" periods, reflecting the company's emergence from Chapter 11 bankruptcy on March 12, 2025, and the application of fresh start accounting, which makes periods non-comparable. The notes also highlight a "Going Concern" uncertainty due to challenging market conditions and liquidity covenant compliance risks * The company emerged from Chapter 11 bankruptcy on March 12, 2025, leading to the application of fresh start accounting. Financial statements are presented for "Predecessor" (before emergence) and "Successor" (after emergence) periods, which are not comparable[25][26] * Management has concluded there is substantial doubt about the company's ability to continue as a going concern within the next 12 months due to challenges in complying with minimum liquidity covenants in its debt and credit card processing agreements amid adverse market conditions[33][34][35] Q2 2025 vs Q2 2024 Statement of Operations Highlights (in thousands) | Metric | Q2 2025 (Successor) | Q2 2024 (Predecessor) | Change | | :--- | :--- | :--- | :--- | | Total operating revenues | $1,019,833 | $1,280,889 | -20.4% | | Total operating expenses | $1,203,956 | $1,433,401 | -16.0% | | Operating income (loss) | ($184,123) | ($152,512) | -20.7% | | Net income (loss) | ($245,831) | ($192,927) | -27.4% | | Diluted earnings (loss) per share | ($7.24) | ($1.76) | -311.4% | Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 (Successor) | December 31, 2024 (Predecessor) | | :--- | :--- | :--- | | Cash and cash equivalents | $407,511 | $902,057 | | Total current assets | $1,481,219 | $2,109,122 | | Total assets | $8,576,287 | $9,595,178 | | Total current liabilities | $1,453,528 | $1,769,365 | | Long-term debt, net | $2,242,448 | $1,761,215 | | Total liabilities | $8,096,842 | $9,675,312 | | Total shareholders' equity (deficit) | $479,445 | ($80,134) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting the significant impact of its emergence from Chapter 11 bankruptcy and the adoption of fresh start accounting. The analysis covers key trends, including efforts to drive higher unit revenues, reduce network capacity, and maintain low unit costs amidst challenges like the Pratt & Whitney GTF engine issues. The company reported a wider operating loss in Q2 2025 compared to Q2 2024, driven by a 20.4% decrease in operating revenues due to reduced capacity. The discussion reiterates the substantial doubt about the company's ability to continue as a going concern and outlines its liquidity enhancement strategies * The company is implementing strategic changes to drive higher unit revenues, including enhancing its Premium Economy travel option and realigning its network to focus on markets with strong leisure demand[235][258] * Ongoing issues with Pratt & Whitney GTF engines are expected to require engine removals and inspections through at least 2026, negatively impacting capacity and financial results, although a compensation agreement with the manufacturer provides some offsetting credits[238][239] Q2 2025 vs Q2 2024 Key Operating Statistics | Operating Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Available seat miles (ASMs) (thousands) | 10,761,858 | 14,146,192 | (23.9)% | | Load factor (%) | 79.4% | 83.2% | (3.8) pts | | TRASM (cents) | 9.48 | 9.05 | 4.8% | | CASM (cents) | 11.19 | 10.13 | 10.5% | | Adjusted CASM ex-fuel (cents) | 8.77 | 7.36 | 19.2% | | Average economic fuel cost per gallon ($) | 2.37 | 2.78 | (14.7)% | * The company's liquidity as of June 30, 2025, was $682.5 million, comprising unrestricted cash and available funds under its Exit Revolving Credit Facility. Management is pursuing additional liquidity measures, including asset sales, to address going concern issues[312][320] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company identifies its primary market risks as commodity prices (specifically aircraft fuel) and interest rates. Aircraft fuel represented 21.6% of operating expenses for the first six months of 2025, and price volatility remains a significant risk. The company also has exposure through its fixed-rate debt instruments * The company's main market risks are aircraft fuel prices and interest rates. It does not hold any derivative financial instruments for trading purposes[380] * A hypothetical 10% increase in the average price of aircraft fuel would have increased annual into-plane fuel expense by approximately $121 million, based on consumption over the last 12 months. As of June 30, 2025, the company had no outstanding jet fuel derivatives[381] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective at a reasonable assurance level. There were no material changes in internal control over financial reporting during the quarter * Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[386] * No changes occurred in the company's internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[387] Part II. Other Information This section details legal proceedings, updated risk factors, equity security sales, and a list of filed exhibits Item 1. Legal Proceedings The company is involved in various commercial litigation and regulatory proceedings, which it does not expect to have a material adverse effect on its financial condition. A specific matter disclosed is an ongoing challenge to a $27.5 million IRS assessment related to federal excise taxes on optional seat selection charges * The company is challenging a $27.5 million assessment from the IRS related to the collection of federal excise taxes on optional passenger seat selection charges for the period of Q2 2018 through Q4 2020. The company believes a loss is not probable and has not recorded a loss contingency[389] Item 1A. Risk Factors This section highlights material risks to the company, focusing on its high dependency on cash balances and operating cash flows to fund operations and meet obligations. It also emphasizes the risk associated with reliance on third-party service providers, particularly the upcoming expiration of its primary credit card processing agreement on December 31, 2025, which may require additional collateral for renewal * The company is highly dependent on its cash balances and operating cash flows. Inadequate liquidity could impact compliance with debt covenants and adversely affect its ability to raise capital or continue as a going concern[392][394] * A significant risk is the reliance on third-party service providers. The primary credit card processing agreement expires on December 31, 2025, and the processor has requested additional collateral to renew, which could materially reduce unrestricted cash[395][396] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of its securities and no repurchases of its common stock during the quarter ended June 30, 2025 * There were no unregistered sales of equity securities during the quarter ended June 30, 2025[398] * There were no repurchases of the company's common stock during the quarter ended June 30, 2025[399] Item 3. Defaults Upon Senior Securities This item is not applicable Item 4. Mine Safety Disclosures This item is not applicable Item 5. Other Information No other information was reported under this item Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including various agreements such as employment and separation agreements, the 2025 Incentive Award Plan, and required CEO/CFO certifications