Spirit Airlines Adjusts Q1 Expectations

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Spirit Airlines (NYSE:SAVE) has revised its first-quarter 2024 revenue expectations to $1.265 billion, aligning with the mid-point of its previously guided range of $1.25-$1.28 billion. This adjustment, however, falls slightly below the Zacks Consensus Estimate of $1.27 billion.

The airline now suggests an adjusted operating margin between (13.5%) and (14.5%), compared to the earlier forecast of between (12%) and (15%). This revised guidance factors in approximately $38 million in credits for aircraft on the ground (AOG). Notably, if all AOG credits expected for the quarter were recognized upfront, the operating margin would have been between (11.5%) and (12.5%).

In March 2024, Spirit Airlines agreed with International Aero Engines (IAE), an affiliate of Pratt & Whitney, to receive monthly credits through the end of the current year. These credits are granted to Spirit Airlines for each aircraft affected by issues with geared turbofan (GTF) engines, discovered in July 2023. The agreement is expected to enhance the airline’s liquidity by $150-$200 million, contingent upon the number of days aircraft are grounded due to engine issues throughout 2024.

Spirit Airlines has faced challenges with its A320neo fleet, necessitating inspections and leading to an anticipated increase in grounded aircraft, from an average of 13 in January to approximately 40 by December 2024.

Fuel consumption in the first quarter of 2024 is still projected to reach $140 million, with a fuel price per gallon expected to remain at $2.90. The effective tax rate is anticipated to be 22.6%.

Additionally, available seat miles are forecasted to increase by 2.1% from first-quarter 2023 actuals, surpassing the earlier expectation of a 1.5% rise.

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