Spirit Airlines Stock Surges as Carrier Fights Back With Action-Packed Investor Update

Shares of
Spirit Airlines,
the ultra-low-cost carrier, plunged 62% in the three trading days through Thursday after a federal judge blocked its proposed $3.8 billion merger with
JetBlue Airways.
The shares jumped 22% to $6.94 in early trading Friday, but remain far below the $15 level it was trading at last week. It’s on pace for its daily largest percentage increase since Mar.25, 2020, according to Dow Jones Market Data.

Spirit’s investor update contained a flurry of information, all of which paints the airline’s prospects in a slightly more positive light than the gloom of recent days.

The airline said its fourth-quarter revenue is expected to be at the high end of its previous guidance of $1.28 billion to $1.32 billio due to strong bookings in the peak period over the Christmas and New Year’s Day holiday. Operating margin guidance was also revised upward to between minus 12% to minus 13%, from a negative 15%-19% range.

Costs are also set to be better than expected due to lower fuel costs, lower airport costs and operational reliability.

Spirit also reiterated some of its recent efforts to shore up liquidity, noting that it received $419 million from sale-leaseback transactions of 25 jets in December and January. It also expects to receive compensation from Pratt & Whitney over engine availability issues, which will be a “significant source of liquidity over the next couple of years.”

The airline said it had $1.3 billion of liquidity as of Dec. 31, 2023.

Fitch Ratings said Wednesday that Spirit needs to “clearly articulate a near-term plan to preserve and generate liquidity, address its refinancing risk, and improve profitability to avoid a negative rating action.”

The update Friday looks to be an attempt at doing all three of those things.

The filing also reiterated that Spirit disagrees with the court’s ruling and continues to review the decision to block the merger and evaluate its next steps. That could lead to an appeal, although JetBlue may be unconvinced given Spirit’s struggles since the merger was agreed to back in July 2022.

Spirit is trying to convince JetBlue to appeal the decision, Reuters reported Friday, citing people familiar with the discussions.

The Wall Street Journal reported Thursday that Spirit was planning to explore restructuring options following the blocked deal. A spokesperson for the company told Barron’s that Spirit “is not pursuing nor involved in a statutory restructuring.”

The broader sector enjoyed more modest gains, as
Southwest Airlines,

JetBlue,

United Airlines,

Delta Air Lines,
and
American Airlines
were all up around 0.5% ahead of the open of trading.

The storm clouds are still gathering over
Spirit Airlines
but, for the moment at least, the skies are looking slightly brighter.

Write to Callum Keown at [email protected]