Spirit Airlines (SAVE) stock is up over 17.7% in pre-market trading as of writing, after the company announced layoffs and jet sales to save costs. The low-cost air carrier will cut staff in line with the expected flight volume decline as well as sell 23 aircraft to GA Telesis for roughly $519 million. The layoffs will garner a further $80 million in annualized cost savings that will take effect in early 2025. Spirit shares lost 21.4% in trading on October 24 before the company announced the new cost-saving measures.
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More on Spirit’s Planned Jet Sale
Spirit Airlines’ planned jet sale to GA Telesis, an aircraft maintenance services platform, is expected to begin this month and end in February 2025. The jets belong to the Airbus A320 and A321 models of the 2014-2019 year make. The gross proceeds from the jet sales, after adjusting for aircraft-related debt, will boost Spirit Airlines’ liquidity by $225 million by the end of 2025.
Spirit Airlines is struggling to meet its financial needs and is negotiating for extensions with bondholders for billions of dollars of debt, due soon. Also, it is exploring a Chapter 11 bankruptcy filing. Amid the chaos, a rekindled takeover interest by peer Frontier Group Holdings (ULCC) has kept investor optimism high.
Spirit’s Flight Volume Expected to Plunge 20%
Spirit said that during the third quarter ended September 30, airline capacity (total available seats and flights) fell 1.2% compared to the prior-year period. For the fourth quarter, Spirit is expecting a 20% year-over-year decline in capacity. For the full-year 2025, capacity is projected to fall by mid-teens. These projections account for the planned jet sales and removal of some of Spirit’s aircraft fleet.
The airline also reiterated that it is in active and constructive negotiations with holders of senior secured notes due 2025 and convertible senior notes due 2026 to extend their maturities. The company even noted that it plans to end the year with $1 billion in liquidity, including unrestricted cash and cash equivalents, short-term investment securities, and additional liquidity initiatives, contingent on the company being able to effectively undertake the proposed measures.
Moreover, the airline noted that it expects its Q3 adjusted operating margin to be better than the midpoint of the guidance provided, owing to robust revenue expectations coupled with early results of the transformation plan implemented to date.
Is Spirit Airlines a Buy or Sell?
Wall Street remains highly concerned about Spirit Airlines stock amid the ongoing challenges. On TipRanks, SAVE stock has a Strong Sell consensus rating based on one Hold and six Sell ratings. The average Spirit Airlines price target of $2.40 implies that shares are almost fully valued at current levels. Year-to-date, SAVE shares have lost nearly 84.8%, causing massive damage to shareholder returns.
