Spirit Airlines (SAVE) Shares Plummet by 9% Amid Gloomy Q2 Forecast, Shaking US Stock Markets

• Spirit Airlines shares plummeted over 9% in morning trading in New York on Monday, following a weak forecast for Q2 revenue.
• The airline, grappling with issues related to RTX’s Pratt & Whitney Geared Turbofan engines, anticipates sluggish Q2 revenue due to slow recovery in domestic demand and the grounding of numerous aircraft.
• “Spirit’s advisers have started discussions with our loyalty bondholders and convert holders that come due in September 2025 and May 2026, respectively, and expect a resolution at some point this summer,” said Spirit Airlines CFO Scott Haralson.

Spirit Airlines stock takes a hit as the airline predicts weak Q2 revenue amidst slow domestic demand recovery and grounded aircraft.

Shares Slide Amidst Weak Q2 Revenue Forecast

Spirit Airlines shares took a significant hit, dropping by more than 9% in morning trading in New York on Monday. This drop comes in the wake of a weak forecast for Q2 revenue, with the airline citing slow improvement in domestic demand and the grounding of dozens of its aircraft as key factors.

Impact of Grounded Aircraft and Slow Domestic Demand

The airline, which has been impacted by issues with RTX’s Pratt & Whitney Geared Turbofan engines, has had to ground a significant number of its aircraft. This, coupled with a slower-than-expected recovery in domestic demand, has led to a bleak Q2 revenue forecast. The airline expects its Q2 revenue to be between $1.32 billion and $1.34 billion.

Future Outlook and Strategies

Spirit Airlines has taken steps to mitigate these challenges. In April, the airline reached an agreement with Airbus to postpone all aircraft deliveries scheduled from the second quarter of 2025. It also plans to furlough approximately 260 pilots. The airline estimates that it will average about 25 grounded aircraft throughout 2024. However, it believes that compensation for its grounded aircraft, deferred jet deliveries, and cost savings will improve its cash levels by $450 million to $550 million in 2024.

Conclusion

Despite the current challenges, Spirit Airlines is taking steps to manage its situation. With ongoing discussions with bondholders and convert holders, deferred aircraft deliveries, and potential cost savings, the airline is hopeful for a resolution and improved cash levels in the coming years. However, the slow recovery in domestic demand and the impact of grounded aircraft continue to pose significant challenges for the airline’s financial performance.