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DALLAS — Spirit Airlines (NK) has released its financial results for the fourth quarter and full year of 2023. The company reported a total operating revenue of US$1.32 billion and a net loss of US$183.7 million for the fourth quarter.
Spirit's President and CEO, Ted Christie, expressed optimism for the year ahead, stating that the company is starting to see positive results from changes implemented in 2023. He also mentioned that current booking trends indicate a rebound in the domestic travel market.
According to the CEO, these factors, combined with ongoing adjustments, will significantly improve revenue in the first quarter of 2024 and contribute to a domestic recovery for the company in the coming year. Christie assured his team was focused on implementing strategies to generate cash flow and profitability in 2024.
Spirit's 2023 Operations
In the fourth quarter of 2023, the airline achieved an 80.1% load factor, indicating strong passenger demand. The company also reported a Department of Transportation (DOT) on-time performance of 76.8% and a DOT Completion Factor of 99.2%.
The company's strong operational performance during the peak holiday period contributed US$10 million in additional revenue, surpassing revenue guidance for the fourth quarter and exceeding cost performance expectations. In January 2024, Spirit was ranked as the second most reliable airline.
However, despite these achievements, Spirit reported a net loss of $1.68 per diluted share for the fourth quarter. The adjusted net loss was US$148.7 million, excluding special items, or US$1.36 per diluted share. The pre-tax loss for the fourth quarter was US$228.3 million, with an adjusted pre-tax loss of US$192.2 million. Christie pointed out that these financial results reflected the challenging operating environment faced by the airline industry during this period.
As for the airline's liquidity, the CEO said, “Regarding liquidity, we believe our $1.3 billion in total liquidity at year-end 2023 should be more than adequate to get us to our primary goal of getting the business to generate cash. This is a milestone we think we will cross as we enter March. We believe we will be operating cash flow positive in the second quarter of 2024 and beyond."
Spirit's 2023 Fleet Report
During the fourth quarter of 2023, the ultra-low-cost carrier (ULCC) expanded its fleet by adding four new aircraft—two A320neos and two A321neos. By the end of 2023, Spirit had eight A321neos in its fleet, and the ULCC plans to acquire 20 more of these aircraft in 2024. Additionally, the airline retired one A319ceo aircraft, resulting in a total fleet size of 205 aircraft at the end of the year.
In the third quarter of 2023, Pratt & Whitney informed NK that all the geared turbofan (GTF) neo engines in its fleet may require inspection and potential replacement of the powdered metal high-pressure turbine and compressor discs. As a result, NK had an average of 13 grounded neo aircraft in January 2024, and this number is expected to increase steadily to an average of about 40 by December 2024, with an average of approximately 25 grounded neo aircraft throughout 2024.
Spirit is negotiating with Pratt & Whitney regarding fair compensation for the financial damages caused by the availability issues with the GTF neo engines. While no agreement has been reached yet, the ULCC anticipates that the compensation it receives will significantly contribute to its liquidity in the next few years. The company expects its capacity for 2024 to remain flat or increase by mid-single digits compared to 2023.
Furthermore, in December 2023, NK successfully carried out sale-leaseback transactions for 20 aircraft, repaying around US$325 million in debt on those aircraft. The company also received approximately US$320 million in net cash proceeds from these transactions.
In January 2024, NK completed sale-leaseback transactions for five more aircraft, repaying approximately US$140 million in debt and approximately US$99 million in net cash proceeds. These transactions generated approximately US$419 million in net cash proceeds for the company.
Spirit's 2023 Network Growth
In 2023, the airline expanded its network by adding service to three new destinations: Charleston, South Carolina; Norfolk, Virginia; and San Jose, California. This expansion introduced 54 new routes, bringing NK's total number of markets to over 350, with an average of nearly 830 daily flights. Introducing the new A321neos demonstrates the carrier's commitment to expanding its network and operating a modern, fuel-efficient fleet.
On January 16, 2024, the U.S. District Court for the District of Massachusetts issued an injunction against the merger between NK and JetBlue (B6). In response, on January 19, 2024, both companies filed a notice of appeal to reverse the injunction and proceed with the merger. On February 2, 2024, the Court of Appeals granted their motion and agreed to hear arguments regarding the merger in June 2024.
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