Spirit Airlines' Strategic Move: Selling 25 Aircraft to Alleviate Debt

In a decisive step towards financial stability, Spirit Airlines has recently finalized the sale and leaseback of 25 aircraft, as reported in their filing with the US Securities and Exchange Commission (SEC). This move is part of the airline's effort to address its significant debt burden, following a net loss of over $157 million in the third quarter of 2023.

The transaction, completed on January 3, 2024, aims to relieve approximately $465 million of debt associated with these aircraft. The net cash proceeds from the sale were approximately $419 million, which equates to just over $16.75 million per aircraft. This strategic decision marks a defining moment in Spirit's path to financial recovery and operational stability and the details are in the simpleflying article.

Spirit Airlines has not disclosed which specific aircraft are included in the deal. Historically, the ultra-low-cost carrier (ULCC) has engaged in sale and leaseback agreements to unlock capital. Previous partnerships have included Avolon, GECAS (prior to its acquisition by AerCap), and a deal with Aircraft Leasing & Management (ALM) for five A320neos last year.

Spirit's current fleet, exceeding 200 aircraft, consists exclusively of the Airbus A320 family. The oldest among these are 17 A319-100s, averaging nearly 17 years in age. The airline, focusing on fleet modernization, has gradually transitioned to newer models. It shifted from the A319neo to the larger A321neo, planning to retire all A319s by 2025. A major sale involving 29 A319s in January 2023 emphasized this transition, generating up to $200 million.

The A320 remains the backbone of Spirit's fleet, with 148 aircraft divided between A320-200s and A320neos. The company anticipates adding another 15 A320neos in 2024. The A321s, primarily the older A321-200 model, are also a significant part of the fleet, complemented by eight A321neos, with more on the horizon.

Merger with JetBlue: A Pending Decision

Amidst these financial maneuvers, Spirit Airlines and JetBlue await a crucial ruling on their proposed merger. The trial, concluding in early December, saw objections from the US Department of Justice (DOJ) on antitrust grounds. The DOJ argues that the merger could lead to increased airfares and limited low-cost travel options. The outcome of this decision is pivotal for the future landscape of budget air travel in the United States.

Spirit Airlines' recent aircraft sale is a tactical move aimed at reducing debt and reinforcing its financial foundation. This, coupled with the evolving fleet strategy and the pending merger with JetBlue, illustrates the airline's commitment to adapting and thriving in a challenging industry. As the aviation sector continues to evolve, Spirit's actions today could significantly shape its trajectory and influence the market for budget-friendly air travel.