Spirit Airlines CEO Fires Back at Bankruptcy Talk
09.02.2024 - 15:35
/ Spirit Airlines
/ Ted Christie
/ Meghna Maharishi
It’s been a rough few years for Spirit Airlines.
There hasn’t been much demand for the airline’s product. Pratt & Whitney geared turbofan engine issues have grounded several of its planes. It has had years of losses and a staggering $1.1 billion debt due in 2025. And perhaps, the biggest hit: A judge blocked its merger with JetBlue.
But Spirit CEO Ted Christie said the airline still has a viable path to survival during a call with analysts Thursday morning.
“This misguided narrative has been advanced by an assortment of pundits,” Christie said on the call. “However, back in the real world, we are focused on facts.”
Christie focused on Spirit’s efforts to strengthen its finances — the airline recently sold 25 aircraft and leased them back, allowing it to pay off $465 million in debt and net $419 million in cash.
“Liquidity is always king, and we have enhanced our levels to give us the necessary flexibility to successfully close with JetBlue or to pursue our stand-alone plans,” Christie said. “Above all else, margin repair is the key and we have been making network adjustments and cost decisions to recover our margin production.”
The merger with JetBlue would have been a lifeline for Spirit, which hasn’t been profitable since 2019. But a judge struck down the merger, arguing it would reduce competition in the industry and hurt consumers.
After the ruling, some Wall Street analysts speculated that Spirit would either need to find another buyer or risk filing for a Chapter 11 bankruptcy. JetBlue and Spirit recently filed a motion to appeal the ruling, and the First Circuit Court of Appeals will hear the case in June.
Christie said the initial decision against the merger was “ridiculous.”
“It’s beyond absurd for the government to claim a victory for the American consumer,” he said. “In fact, it’s ridiculous.”
The Spirit CEO read out lines from the decision that described the U.S. airline industry as an “oligopoly” that had become more consolidated through a series of mergers in the 2000s.
“Despite that explicit acknowledgment, the government continues to do nothing to address the anticompetitive structure of our industry,” Christie said. “Instead, they have just engaged in an expensive and long litigation process to block the merger of the sixth and seventh largest airlines that, when combined, would still be half the size of the fourth.”
Regardless of the outcome of the appeal, Spirit said it planned to return to a path to profitability as it appeared that demand for domestic travel was improving.
“Nonetheless, you can rest assured that the Spirit team is 100% clear and focused on the adjustments we are currently employing and will continue to make throughout 2024 to drive us back to cash flow