Spirit Airlines Inc.’s stock soared Friday as the discount air carrier gave an upbeat revenue outlook and looked to reassure investors amid concerns that the failed merger with JetBlue Airways Corp. could result in a bankruptcy.
Spirit said in a filing with regulators that it had $1.3 billion of liquidity at the end of 2023, including unrestricted cash and cash equivalents, short-term investment securities and $300 million of liquidity under the company’s revolving-credit facility.
The stock
SAVE,
ended 17% higher on Friday, after gaining more than 25% earlier in the session. The close in the black snapped a five-day losing streak for the shares, which closed at a record $5.70 low on Thursday.
Spirit said it “took several steps to shore up its liquidity” in the fourth quarter so it could work on “necessary strategic shifts” to better compete and return the business to profitability.”
It raised $419 million in cash and repaid $465 million in debt from sale-leaseback transactions on aircraft in January and December.
The company was addressing concerns about its balance sheet after a federal judge on Tuesday moved to block the merger with JetBlue
JBLU,
due to competition concerns. The stock plunged 47.1% that day, and has fallen nearly 62% in the three days since the merger was blocked.
A number of analysts have raised the possibility that the blocked merger could result in a bankruptcy filing, with credit rating agency Fitch Ratings being the latest to cast doubt on Spirit’s prospects as a standalone airline.
On Friday, however, Raymond James analyst Savanthi Syth said that a bankruptcy filing is not “a foregone conclusion,” although variables include Spirit’s work in addressing fixed costs to support a smaller operation and how the domestic air travel market shapes up to be this year.
Moreover, “it is clear to us that Spirit is pressing JetBlue to appeal the anti-trust ruling, but we continue to believe the chances of success are low,” Syth said in a note.
Read: JetBlue dodged a bullet after judge blocked Spirit acquisition, J.P. Morgan says.
Spirit said it expects fourth-quarter revenue of $1.32 billion, as bookings during the peak travel period over the Christmas and New Years holidays were “strong.” FactSet consensus calls for fourth-quarter revenue of $1.305 billion.
Lower fuel and airport costs helped push operating expenses for the quarter below expectations, and the guidance range for operating margins was improved to negative 12%-to-13% from negative 15%-to-19%, the company said.
Citi analyst Stephen Trent said in a note that Friday’s filing “brings at least some better view around 4Q’s guide itself,” but kept his sell rating on Spirit’s stock.
Spirit said it expects a “significant source of liquidity over the next couple of years” from negotiations with Pratt & Whitney on compensation for financial damages related to geared turbofan (GTF) neo-engine availability issues.
Spirit Airlines said it’s weighing options to refinance its 2025 debt maturities, including the $1.1 billion of aggregate principal amount of 8.00% senior secured notes.
Spirit’s stock has tumbled 59.1% over the past three months, while the U.S. Global Jets ETF
JETS
has climbed 16.6% and the S&P 500 index
SPX
has rallied 11.9%.
—Tomi Kilgore and Claudia Assis contributed to this article.
