Spirit Airlines Reports Fourth Quarter and Full Year 2023 Results

MIRAMAR,  Fla., Feb. 8, 2024 /PRNewswire/ -- Spirit Airlines (NYSE:SAVE), Inc. ("Spirit" or the "Company") (NYSE: SAVE) today reported fourth quarter and full year 2023 financial results.

"As we enter 2024, we are beginning to see benefits from the tactical and strategic changes we implemented in  2023.  In  addition,  current  booking  trends further  our  confidence  that  the  domestic environment  is  beginning to rebound. Together with the changes we have made, we estimate this will result in an unprecedented sequential improvement in total revenue per available seat mile (TRASM) from fourth quarter 2023 to first quarter 2024, which supports our view of a domestic recovery in 2024," said Ted Christie, Spirit's President and Chief Executive Officer.

"The  Spirit  team  is  100%  clear  and  focused  on  the  adjustments  we  are  currently  deploying  and  will  continue to make throughout 2024 to drive us back to cash flow generation and profitability."

Operations
For  the  fourth  quarter 2023,  the  Company's  load  factor  was  80.1  percent. For  the  fourth quarter  2023,  Spirit reported a DOT on-time performance² of 76.8 percent and a DOT Completion Factor²  of 99.2 percent.

"In  addition to  operational  reliability  being  a  core  element  of  caring  for  our  Guests, it  also  benefits  the  top  and bottom line. During the fourth quarter 2023 peak holiday period, the Spirit team ran a great operation. We estimate this strong operational performance contributed $10 million of incremental revenue, allowing us to exceed  our  mid-December  revenue guidance  for  the  fourth  quarter and  deliver  cost  performance  in  excess  of our expectations. We have continued this operational excellence and finished January 2024 as the No. 2 airline in reliability²," commented Christie.

Fourth Quarter 2023 Financial Results
For  the  fourth quarter  2023,  Spirit  reported  a  net  loss  of  $183.7 million,  or  a  net  loss  of  $1.68 per  diluted share. Excluding special items, adjusted net loss for the fourth quarter 2023 was $148.7 million¹, or an adjusted net loss of $1.36 per diluted share¹.

For the fourth quarter 2023, Spirit reported a pre-tax loss of $228.3 million and a pre-tax margin of negative  17.3  percent. Adjusted  pre-tax  loss  for  the  fourth  quarter was  $192.2  million¹  and  adjusted  pre-tax margin was negative 14.5 percent¹

Revenue
Total  operating  revenues for  the  fourth  quarter  2023  were  $1.3  billion,  a  decrease  of  5.0  percent compared  to the fourth quarter 2022. Total revenue per  ASM ("TRASM") was 8.94 cents, a decrease of 17.3 percent compared to fourth quarter 2022 on 14.8 percent more capacity.

On  a  per  passenger  flight segment  basis,  compared to  the  same  period  in  2022,  total revenue  per  passenger flight segment ("segment") for the fourth quarter 2023 decreased 15.3 percent to $114.84. Compared to the fourth  quarter  2022, fare  revenue  per  segment  decreased 25.0  percent  to  $48.24  and  non-ticket  revenue per segment decreased 6.6 percent to $66.60³.

Cost Performance
Total GAAP operating expenses for the fourth quarter 2023 decreased 9.5 percent compared to the fourth quarter 2022 to $1,536.6 million. Adjusted operating expenses for the fourth quarter 2023 increased 11.3 percent compared to fourth quarter 2022 to $1,485.1 million⁴. The decrease in operating expenses was primarily driven by a decrease in special charges year over year, partially offset by increases primarily related to increased flight volume, additional leased aircraft and inflationary pressures. The increase in adjusted operating expenses year over year was primarily driven by expenses related to increased flight volume, additional leased aircraft and inflationary pressures.

Aircraft  utilization  in  the  fourth  quarter  2023  was  11.2  hours,  up  3.7  percent compared  to  the  10.8  hours  in  the same period of 2022. The Company's aircraft utilization in the fourth quarter 2023 was constrained due to engine availability issues primarily driven by unscheduled engine maintenance events resulting in aircraft  not being available for service.

Total other (income) expense on a GAAP basis was lower year over year primarily due to gains recognized from favorable interest rate swap provisions contained in certain debt agreements extinguished during the fourth  quarter  related  to  20  of  the  sale  leaseback transactions  completed  during  the  quarter, partially  offset  by the write-off of unamortized debt issuance costs.  Adjusted total other (income) expense was lower year over year largely due to a decrease in interest expense, primarily driven by a decrease in the unfavorable mark to market adjustment related to the change in fair value of the derivative liability associated with the Company's Convertible Notes Due 2026 and an increase in capitalized interest.

"In the fourth quarter, we saw cost benefits from our high level of on-time performance and completion factor for the quarter, particularly in the peak Thanksgiving and Christmas holiday periods. We also saw fuel efficiency benefits with the increase in the number of neo aircraft in our fleet, particularly the eight A321neos added in 2023. We expect these benefits, along with improved utilization of the aircraft available for operation and the right sizing of our labor costs to be the platform for our ongoing unit cost repair," said Scott Haralson, Spirit's Chief Financial Officer.

"Regarding liquidity, we believe our $1.3 billion in total liquidity at year end 2023 should be more than adequate to get us to our primary goal of getting the business to generate cash. This is a milestone we think we will cross as we enter March. We believe we will be operating cash flow positive in the second quarter 2024 and beyond. And, while we have confidence in our ability to return to positive cash generation, we will continue to look at other opportunities to further shore up our liquidity resources as we progress through the year. Also, while Spirit remains focused on consummating the merger with  JetBlue and is looking forward to prosecuting the expedited appeal of the U.S. District Court's order, the Company is aware of its 2025 and 2026 debt maturities and is assessing options to address those maturities when the time is appropriate."

Fleet
During  the  fourth quarter  2023,  Spirit took  delivery  of  four  new  aircraft  (two  A320neos  and  two  A321neos) and retired one  A319ceo aircraft, ending the year with 205 aircraft in its fleet.

Neo  Engine Update
During the third quarter 2023, Pratt & Whitney notified the Company that all the geared turbofan (GTF) neo engines in its fleet, are in the potential pool of engines subject to the inspection and possible replacement, of the powdered metal high-pressure turbine and compressor discs. In January 2024, the Company had an average of 13 grounded neo aircraft and estimates that number will climb steadily to an average of about 40 in December 2024, averaging about 25 grounded neo aircraft for the full year 2024. Spirit currently estimates its capacity for the full year 2024 will be flat to up mid-single digits compared to the full year 2023.

The Company and Pratt & Whitney have been in negotiations regarding fair compensation for the financial damages related to the geared turbo fan (GTF) neo engine availability issues. Discussions with Pratt & Whitney have progressed considerably since October, and, while no agreement has been reached to date, the  Company  believes the  amount  of  compensation  it  will  receive will  be  a  significant  source of  liquidity  over the next couple of years.

Liquidity and Capital Deployment
Spirit  ended  fourth  quarter  2023  with  unrestricted  cash  and  cash  equivalents,  short-term  investment securities and liquidity available under the Company's revolving credit facility of  $1.3 billion.

In  November  2023, Spirit  modified  its  Revolving  Credit Facility  to,  among other  things,  extend the  final maturity to September 30, 2025.

In December 2023, the Company completed sale-leaseback transactions for 20 aircraft, resulting in repayment of approximately $325 million of indebtedness on those aircraft and net cash proceeds of approximately $320 million. In January 2024, the Company completed sale-leaseback transactions for an additional five aircraft, resulting in repayment of approximately $140 million of indebtedness on those aircraft and net cash proceeds of approximately $99 million. In total, these transactions resulted in net cash proceeds to the Company of approximately $419 million.

Total capital expenditures for the  year ended December 31, 2023, were $232.4 million, primarily related to expenditures related to the building of Spirit's new headquarters campus in Dania Beach, Florida, and purchases of  spare  parts, including  four  spare engines,  partially  offset by  net  inflows  of  aircraft pre-delivery deposits.

Full  Year  2023  Highlights

Our  People

• Ratified amended collective bargaining agreements with its Pilots represented by the Air Line Pilots Association and with its Flight Attendants represented by the Association of Flight Attendants
• Earned two acknowledgments from Newsweek in 2023, being recognized as one of America's Greatest Workplaces for Diversity and for Parents and Families, underscoring a continued commitment to promoting diversity and equity for all Team Members
• Navigated a tightening labor market, growing its workforce to 13,624 while maintaining its focus on building engagement

Recognitions  and  Accomplishments

• Named Value Airline of the Year by Aviation Week Network's Air Transport World (ATW)
• Recognized for safety with the FAA's "Aviation Maintenance Technician Diamond Award of Excellence" for the sixth consecutive year
• Named a Four-Star Low-Cost Carrier by the Airline Passenger Experience Association (APEX) for consistently providing passengers with exceptional experiences
• Awarded the San Diego International Airport Fly Quiet Award in the small domestic category
• Recognized by Los Angeles World Airports as a bronze winner of the LAX Fly Quieter Award
• Named Most Affordable Airline and No. 2 of 11 overall by WalletHub in its 2023 Best Airline Awards

Supporting our Communities

• Recognized as the 2023 Travel Weekly Magellan Awards Gold Winner, the Spirit Charitable Foundation won in the Airline "Overall-Giving Back Initiative" category
• Raised more than $1.5 million for nonprofit organizations at its sixth annual Spirit Open in conjunction with the Spirit Charitable Foundation; the Foundation makes charitable investments in nonprofit organizations across the U.S., Latin America and the Caribbean that advance its three pillars: Children & Families, Service Members and the Environment. Furthermore, the Foundation continues to honor its long-term commitments and supports immediate community needs, such as last year's hurricane relief efforts in Florida
• Launched a round-up feature on spirit.com where Guests can choose to increase their total to the next whole dollar during booking, which will be donated to the Spirit Charitable Foundation to help make a difference in the lives of children and families, service members, and the environment
• Donated $1.7 million in 2023 to over 84 nonprofits; the Spirit Charitable Foundation continued to be a force for good across the U.S., Latin America and the Caribbean

Network & Aircraft Developments

• Expanded its network by initiating service to three new destinations: Charleston, South Carolina; Norfolk, Virginia and San Jose, California, contributing to the inauguration of 54 new routes, bringing its total markets served to over 350 and average daily flights to nearly 830
• Inaugurated its first Airbus A321neo aircraft into its young, fuel-efficient fleet, ending 2023 with 8 A321neos in its fleet with plans to take delivery of 20 more in 2024

Merger Agreement with  JetBlue
On October 19, 2022, Spirit stockholders voted to approve the  Agreement and Plan of Merger (the "Merger Agreement"),  among  Spirit, JetBlue  Airways  Corporation  ("JetBlue")  and  Sundown Acquisition  Corp.,  a  direct, wholly owned subsidiary of JetBlue, which was entered into on July 28, 2022.  The completion of the transaction is subject to customary closing conditions, including receipt of required regulatory approvals.

Spirit and JetBlue expect to conclude the regulatory process and close the transaction no later than the first half of 2024. On March 7, 2023, the U.S. Justice Department filed suit to block the merger.  The trial for the lawsuit began on October 31, 2023 in the U.S. District Court for the District of Massachusetts (the "Court") and concluded on December 5, 2023. On January 16, 2024, the Court granted a injunction against the Merger  (the  "Injunction").  On  January  19,  2024,  Spirit and  JetBlue  filed a  notice  of  appeal  and  to  reverse the Injunction and allow Spirit and JetBlue to complete the Merger. On February 2, 2024, the Court of  Appeals granted our motion, stating it would hear arguments in June 2024.

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results today at 10:00 a.m. Eastern U.S. Time. A  live audio webcast of the conference call will be available to the public on a listen-only basis at https://ir.spirit.com.  An  archive of  the  webcast  will  be  available  under  "Events  &  Presentations"  for  60  days.

About Spirit Airlines
Spirit  Airlines (NYSE: SAVE) is committed to delivering the best value in the sky. We are the leader in providing  customizable  travel options  starting  with  an  unbundled  fare.  This  allows our  Guests  to  pay  only  for the options they choose ” like bags, seat assignments, refreshments and Wi-Fi ” something we call À La Smarte ®. Our Fit Fleet ® is one of the youngest and most fuel-efficient in the United States. We serve destinations throughout the U.S., Latin  America and the Caribbean, making it possible for our Guests to venture further and discover more than ever before. We are committed to inspiring positive change in the communities where we live and work through the Spirit Charitable Foundation. Come save with us at spirit.com.

Forward Looking Guidance
The forward-looking guidance items provided in this release are based on the Company's current estimates and are not a guarantee of future performance. There could be 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.

Investors  are  encouraged  to  read  this  press  release in  conjunction  with  the  company's  Investor  Update  which provides additional information about the company's forward-looking estimates for certain financial metrics and is included along with this press release in the Current Report on Form 8-K furnished to the U.S. Securities and Exchange Commission. The Investor Update is also available at https://ir.spirit.com.

Management  will  also  discuss certain  business  outlook items  during  the  quarterly  earnings conference  call.

Investors are  also  encouraged  to  read  the  Company's  periodic and  current  reports filed  with  or  furnished  to the Securities  and  Exchange Commission,  including  its  Annual  Report on  Form  10-K, Quarterly  Reports  on Form 10-Q and Current Reports on Form 8-K, for additional information regarding the Company.

End  Notes

Cautionary Statement Regarding Forward Looking Statements
Forward-Looking Statements in this release and certain oral statements made from time to time by representatives of the Company contain various forward-looking statements within the meaning of Section 27A  of the Securities  Act of 1933, as amended (the "Securities  Act"), and Section 21E of the Securities Exchange  Act of 1934, as amended (the "Exchange  Act") which are subject to the "safe harbor" created by those  sections.  Forward-looking  statements  are  based  on  our  management's  beliefs  and  assumptions  and  on information currently available to our management.  All statements other than statements of historical facts  are "forward-looking statements" for purposes of these provisions. In some cases, you can identify forward- looking statements by terms such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "project," "predict," "potential," and similar expressions intended to identify forward- looking  statements.  Forward-looking  statements  include, without  limitation,  guidance for  2024  and  statements regarding the Company's intentions and expectations regarding revenues, cash burn, capacity and passenger demand, additional financing, capital spending, operating costs and expenses, pre-tax income, pre-tax margin, taxes, hiring, aircraft deliveries, stakeholders, negotiations with Pratt & Whitney regarding  neo engine availability issues and reimbursements, vendors and government support. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward- looking statements. Factors include, among others, results of operations and financial condition, the competitive environment in our industry, our ability to keep costs low and the impact of worldwide economic conditions, including the impact of economic cycles or downturns on customer travel behavior, the consummation of the merger with JetBlue and other factors, as described in the Company's filings with the Securities and Exchange Commission, including the detailed factors discussed under the heading "Risk Factors" in the Company's  Annual Report on Form 10-K for the fiscal year ended December 31,  2023.

Furthermore, such forward-looking statements speak only as of the date of this release. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Risks or uncertainties (i) that are not currently known to us, (ii) that we currently deem to be immaterial, or (iii) that could apply to any company, could also materially adversely affect our business, financial condition, or future results. Additional information concerning certain factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

Non-GAAP Financial Measures

The Company evaluates its financial performance utilizing various accounting principles generally accepted  in the United States of  America ("GAAP") and non-GAAP financial measures, including  Adjusted operating expenses, Adjusted operating income (loss),  Adjusted operating margin,  Adjusted pre-tax income (loss), Adjusted pre-tax margin,  Adjusted net income (loss),  Adjusted provision (benefit) for income taxes,  Adjusted diluted earnings (loss) per share,  Adjusted CASM and  Adjusted CASM ex-fuel. These non-GAAP financial measures are provided as supplemental information to the financial information presented in this press release that is calculated and presented in accordance with GAAP and these non-GAAP financial measures are presented because management believes that they supplement or enhance management's, analysts' and investors' overall understanding of the Company's underlying financial performance and trends and facilitate comparisons among current, past and future periods.

Because the non-GAAP financial measures are not calculated in accordance with GAAP, they should not be considered superior to and are not intended to be considered in isolation or as a substitute for the related GAAP financial measures presented in the press release and may not be the same as or comparable to similarly titled measures presented by other companies due to possible differences in the method of calculation and in the items being adjusted. We encourage investors to review our financial statements and other filings with the Securities and Exchange Commission in their entirety and not to rely on any single financial measure.

The information below provides an explanation of certain adjustments reflected in the non-GAAP financial measures and shows a reconciliation of non-GAAP financial measures reported in this press release (other than forward-looking non-GAAP financial measures) to the most directly comparable GAAP financial measures. Within the financial tables presented, certain columns and rows may not add due to the use of rounded numbers. Per unit amounts presented are calculated from the underlying amounts.

The Company believes that adjusting for a litigation loss contingency (recorded within other operating expenses within the Company's Consolidated Statement of Operations), loss on disposal of assets, special charges, and loss (gain) on extinguishment of debt is useful to investors because these items are not indicative of the Company's ongoing performance and the adjustments are similar to those made by our peers and allow for enhanced comparability to other airlines.

Operating expenses per available seat mile ("CASM") is a common metric used in the airline industry to measure  an  airline's  cost  structure  and  efficiency.  We  exclude  aircraft fuel  and  related taxes  and  special items  from  operating  expenses to  determine  Adjusted CASM ex-fuel. We also believe that excluding fuel costs from certain measures is useful to investors because it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence and increases comparability with other airlines that also provide a similar metric.  

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SOURCE Spirit Airlines, Inc.