Spirit Airlines Says Its Merger Agreement With JetBlue Is Intact Despite Court Ruling

Spirit Airlines issued an update to its investors several days after the United States (US) District Court for the District of Massachusetts blocked its merger with JetBlue. According to the low-cost carrier, its merger agreement with the latter remains intact, with the two airlines reviewing the decision and weighing their options going forward.

Positive but loss-making quarter for Spirit Airlines

Spirit Airlines detailed that while it had a better-than-expected Q4 2023, the company would still post a loss for the three-month period in an investor update on January 19, 2024. The airline said that the quarter’s revenue would be at the higher end of its previous guidance due to strong bookings during the Christmas and New Year travel period, with operating expenses being better than expected because of lower fuel costs due to an improvement in fuel efficiency, lower airport costs, and other items.

Furthermore, Spirit Airlines remarked that its operational performance and reliability were “strong.” As a result, its adjusted operating margin guidance for Q4 2023 was adjusted from negative 15% to 19% to between negative 12% and 13%. Its revenue estimates for the quarter are $1.3 billion, with its estimated Q3 2023 capacity, measured in Available Seat Miles (ASM), growing by 14.8% compared to Q3 2022.

Photo: Vincenzo Pace I Simple Flying

The airline also stated that it had $1.3 billion of liquidity at the end of the year and a $300 million revolving credit facility. One of its steps to strengthen its balance sheet was to sell 25 of its aircraft in a sale-and-leaseback transaction worth in December 2023 and January 2024, adding $419 million of net cash to its liquidity reserves. Furthermore, the transactions resulted in the repayment of $645 million of debt to the aircraft lessors.

Looking forward, it is still in negotiations with Pratt & Whitney regarding the Geared Turbofan (GTF), which is one of the engine options for the Airbus A320neo aircraft family groundings. According to Spirit Airlines, the negotiations with the engine maker have been progressing, yet an agreement has yet to be reached.

“[…] the Company believes the amount of compensation it will receive will be a significant source of liquidity over the next couple of years.”

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Denying bankruptcy plans

Shortly after the District Judge announced his decision to block the merger between JetBlue and Spirit Airlines, Helane Becker, a managing director and senior analyst at TD Cowen, predicted that the airline would either be looking for another buyer or enter into Chapter 11 bankruptcy proceedings or even liquidate. The latter scenario was more likely, according to Becker.

Photo: Lukas Souza | Simple Flying

However, a Spirit Airlines representative told Bloomberg that the airline has no plans to restructure via bankruptcy proceedings. In the same investor update, the low-cost carrier reiterated that its merger agreement with JetBlue “remains in full force and effect.” As the two airlines have stated beforehand, the pair is currently reviewing the judge’s decision and evaluating the next steps.

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