The stock of Spirit Airlines (SAVE) is up 17% after the discount carrier announced a sweeping cost reduction plan that includes job cuts and the sale of multiple aircraft.
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Management at Spirit Airlines have outlined a plan to lower costs and raise cash by selling 23 older Airbus aircraft, which should net the company $519 million. Spirit also plans to reduce costs by $80 million through the elimination of jobs. The number of jobs to be cut, and the impacted employee groups, was not disclosed.
The cost-cutting measures come a week after the struggling airline announced that a deadline for it to refinance more than $1 billion in debt has been pushed back to late December, giving it more time to work with creditors and improve its financial situation.
Ongoing Struggles at Spirit Airlines
Spirit has struggled with mounting debt and a lack of profitability ever since its aircraft were grounded during the Covid-19 pandemic. Many of its aircraft have also been grounded due to problems with the Pratt & Whitney engines that power them.
Spirit Airlines had entered into an agreement that would have seen it acquired by JetBlue Airways (JBLU). However, a judge blocked that deal citing competition concerns. In recent days, media reports have surfaced claiming that Spirit and Frontier Airlines (ULCC) are holding discussions behind closed doors about a possible merger.
Even with today’s big move higher, SAVE stock is still down 82% on the year. The company’s shares currently trade for less than $3, making it a penny stock.
Is SAVE Stock a Buy?
Spirit Airlines has a consensus Strong Sell rating among seven Wall Street analysts. That rating is based on one Hold and six Sell recommendations assigned in the last three months. There are no Buy ratings on the stock. The average SAVE price target of $2.40 implies 15.19% downside risk from current levels.
