Troubled Spirit Airlines shares rebounded despite more losses ahead

Troubled Spirit Airlines shares rebounded despite more losses ahead

Mike Blake/Reuters

A Spirit commercial plane prepares to land at San Diego International Airport.

New York

Shares of struggling Spirit Airlines rebounded more than 20% in Friday trading as the company… It tried to reassure investors that a court ruling blocking its purchase by JetBlue Airways would not force it out of business.

In a securities filing, Spirit also said it had not given up on a potential purchase by JetBlue, despite a federal judge’s ruling Tuesday blocking the deal on antitrust grounds.

The discount airline said in the filing that it expects to beat analysts’ end-of-year expectations. But that doesn’t mean making a profit, it just means the company believes it will lose less money than expected in the fourth quarter, which would still be worse off than the fourth quarter of 2022. The company also wants to refinance $1.1. $1 billion of debt due September 2025.

Spirit shares fell 47% in Tuesday trading after a court blocked JetBlue’s takeover and another 22% on Wednesday. A note written by Cowen Aviation analyst Helen Becker late Wednesday speculated that Spirit may be forced to liquidate because aircraft leasing companies, which own more than half of Spirit’s more than 200 Airbus aircraft, are likely to… You repossess the planes and find other clients instead. To negotiate new financing terms.

Other analysts did not expect bankruptcy or liquidation, but they still expect a difficult path for Spirit, which is trying to achieve this on its own. Although “we do not (yet) expect an immediate bankruptcy filing by Spirit, we cannot reasonably determine a viable return to profitability anytime soon,” airline analysts at JPMorgan Chase wrote in a note.

The airline said in its guidance on Friday that its revenue should reach $1.32 billion, slightly better than expectations of $1.31 billion. Its operating losses were estimated at $158 million to $172 million, down from an operating loss of $178 million in the third quarter, and better than expectations for a loss of $197 million.

But this quarter will still be worse than the fourth quarter of last year when it had revenue of $13.9 billion and adjusted operating profit of $58 million.

All U.S. airlines were hemorrhaging billions during the first two years of the pandemic, despite receiving billions of dollars in federal aid to keep flying and prevent widespread layoffs. But as demand for air travel rebounds in 2022, so does profitability at major carriers.

But smaller airlines – such as Spirit – that offer lower prices to attract bargain-hunting leisure travelers have continued to struggle. After $1 billion in losses in 2020 and 2021, the company lost $264 million in the first nine months of 2023. It is expected to lose another $175 million for the last three months of 2023, and an additional loss of $310 million this year, according to analysts who Surveyed by Refinitiv.

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