Spirit Airlines (SAVE) lowers Q2 guidance
Spirit Airlines (NYSE: SAVE) disclosed:
The second quarter 2024 and full year 2024 estimates and guidance provided below are based on the current estimates of Spirit Airlines, Inc. (“Spirit” or the “Company”) and are not a guarantee of future performance. The Company’s unaudited interim condensed consolidated financial statements for the second quarter 2024 are not yet complete and results for second quarter 2024 may vary from these preliminary estimates upon completion of closing procedures and finalization of the unaudited interim financials statements. There are significant risks and uncertainties that could cause actual results to differ materially, including the risk factors discussed in the Company's reports on file with the Securities and Exchange Commission. Spirit undertakes no duty to update any forward-looking statements or estimates.
Total revenue for the second quarter 2024 is estimated to be approximately $1.28 billion, lower than previously expected primarily due to lower-than-expected non-ticket revenue. In early May, the Company anticipated there would be significant pressure on leisure ticket yields throughout the second quarter and continuing into the third quarter due to large industry capacity increases. Estimated ticket revenue per segment for the second quarter is in-line with the Company’s previous expectations.
However, non-ticket revenue for the quarter underperformed the Company’s initial estimate. The Company attributes this underperformance to incremental pressure on ancillary pricing due to changes in the competitive marketplace. The Company estimates non-ticket revenue per passenger segment will be about $64 for the second quarter 2024, several dollars lower than anticipated.
Spirit has begun to execute on its transformation plan to better align with the current market dynamics. As the Company progresses on its transformation strategy, it anticipates that over time it will be able to drive improvement in total revenue per passenger segment.
In March 2024, the Company entered into an agreement with International Aero Engines, LLC (“IAE”), an affiliate of Pratt & Whitney, pursuant to which IAE will provide the Company with a monthly credit from October 1, 2023 through the end of 2024, subject to certain conditions, as compensation for each of the Company’s aircraft unavailable for operational service due to geared turbo fan engine issues. Credits issued by Pratt & Whitney based on aircraft on ground (“AOG”) days in the fourth quarter 2023 were approximately $26 million. The Company estimates AOG credits to be issued by Pratt & Whitney based on AOG days in the second quarter 2024 of $37 million, bringing the year-to-date estimate through June 30, 2024 to about $68 million. For the second quarter 2024, the Company estimates $7.0 million will be recorded within the Company’s condensed consolidated statement of operations, of which an estimated $3.5 million will be recorded as a credit within maintenance, materials and repairs, $2.0 million recorded as aircraft rent and $1.5 million recorded as a credit to depreciation and amortization. The Company estimates $52 million will be recorded as a reduction in the cost of assets on the Company's condensed consolidated balance sheet in the second quarter. Year-to-date through June 30, 2024, the Company estimates AOG credits have benefited liquidity by $94 million which includes credits that have been issued related to AOG days in the fourth quarter 2023 and year-to-date through June 30, 2024. For the full year 2024, the Company estimates AOG credits to be issued by Pratt & Whitney will enhance liquidity by approximately $150 to $200 million.
Spirit estimates its second quarter 2024 adjusted operating margin will be negative 13.5 percent to negative 12.5 percent. If the Company had recognized all the AOG credits to be received for AOG aircraft in the second quarter 2024, the Company estimates its operating margin would have been negative 11.2 percent to negative 10.2 percent.
The Company plans to provide updated estimates for full year 2024 capacity and year-end liquidity when it provides its third quarter 2024 estimates for capacity, revenue and operating income in conjunction with reporting its second quarter earnings results which it plans to do in early August 2024.
| Q2 2024E | Previous Q2 2024E | |||||||
| Total revenues ($millions) | $1,280 | $1,320 to $1,340 | ||||||
| Adj. Operating income (loss), non-GAAP ($millions)(1) | $(173) to $(160) | $(145) to $(121) | ||||||
| Adj. Operating margin (%)(1) | (13.5)% to (12.5)% | (11.0)% to (9.0)% | ||||||
| Total other (income) expense ($millions)(2) | $37 | $35 | ||||||
| Tax rate for adjusted net income(1)(3) | 22.6% | 22.6% | ||||||
| Weighted average diluted share count (millions) | 109.5 | 109.5 | ||||||
| Fuel cost per gallon ($)(4) | $2.78 | $2.80 | ||||||
| Fuel gallons (millions) | 147 | 147 | ||||||
| Supplemental Disclosures | ||||||||
| Adj. for AOG credit ($millions) | $30 | $35 | ||||||
| Adj. Operating income (loss) adj. for AOG credits, non-GAAP ($millions)(5) | ($143) to ($130) | ($110) to $(86) | ||||||
| Adj. Operating margin adj. for AOG credits(5) | (11.2)% to (10.2)% | (8.5)% to (6.5)% | ||||||
| Full Year 2024E | Previous FY 2024E | |||||||
| Capital expenditures ($millions)(6) | ||||||||
| Pre-delivery deposits on flight equipment, net of refunds | $(175) | $(175) | ||||||
| Purchase of property and equipment | $145 | $145 | ||||||
| Total capital expenditures (credit) | $(30) | $(30) | ||||||
| Q2 2024 | Previous Q2 2024E | ||||||||||
| Available seat miles % change vs. 2023 | 1.7% | ~2% | |||||||||
(1)Excludes special items, which may include loss (gain) on disposal of assets, special charges and (credits) and other items which are not estimable at this time.
(2)Includes interest expense, capitalized interest, interest income and other income and expense.
(3)Based on the Company’s statutory tax rate.
(4)Includes fuel taxes and into-plane fuel cost.
(5)Excludes special items and adjusts for the difference between the AOG credits to be received related to the AOG aircraft in the second quarter 2024 and the AOG credits recognized in the Company’s operating statement for the second quarter 2024.
(6)Total capital expenditures assumes all new aircraft deliveries are either delivered under direct leases or financed through sale-leaseback transactions.