ReportWire

Tag: Frontier Group Holdings Inc

  • Spirit tumbles to record low on report it’s exploring a bankruptcy filing. Here’s how it got here

    Spirit tumbles to record low on report it’s exploring a bankruptcy filing. Here’s how it got here

    [ad_1]

    A Spirit commercial airliner prepares to land at San Diego International Airport in San Diego, California, U.S., January 18, 2024. 

    Mike Blake | Reuters

    Spirit Airlines shares tumbled to a record low on Friday after a report that it’s exploring Chapter 11 bankruptcy protection. The carrier faces a deadline this month to renegotiate more than $1 billion in debt.

    A bankruptcy filing would mark a dramatic turn for the carrier with its iconic yellow planes that caters to budget-conscious travelers.

    Profitable and punctual before the pandemic, Spirit’s no-frills service became a punchline for late-night comedians and a thorn in the side of big network carriers, enticing customers with double-digit fares and fees for everything else from seat assignments to carry-on luggage.

    But big airlines soon successfully copied much of that business model with their lowest bare-bones fares. And a federal judge at the start of the year blocked Spirit’s planned acquisition by JetBlue Airways on antitrust grounds, halting what both carriers argued was a key avenue to compete with larger rivals. The scuttled deal left Spirit on its own to struggle with a Pratt & Whitney engine recall, shifting consumer travel patterns and higher costs.

    After the JetBlue deal fell apart, Spirit said in January that it was looking at options to refinance its debt.

    Spirit has $1.1 billion in loyalty-program backed debt that is due next September. It has until Oct. 21 to refinance or extend those secured notes.

    The carrier has been losing money since 2020 and has reported disappointing results this year, including a nearly $193 million loss in the second quarter. The company has spent much of this year scrambling to cut costs, including furloughing pilots, slashing flights and deferring Airbus jetliner orders.

    Spirit reduced its November and December capacity growth plans by about 17%, Barclays airline analyst Brandon Oglenski said earlier this week.

    “As we’ve said, Spirit has been implementing a comprehensive plan to help us better compete, strengthen our balance sheet, and return to profitability,” CEO Ted Christie said in a note to staff on Friday. “We remain engaged in productive conversations with our bondholders, and we’re focused on securing the best outcome for the business as quickly as possible.”

    A Spirit spokesman declined to comment on a the Wall Street Journal report that the carrier is considering a bankruptcy filing. Spirit adviser Perella Weinberg Partners declined to comment.

    Spirit’s stock price dropped more than 24% Friday to a record low of $1.69. Shares are down nearly 90% so far this year.

    Shares of Frontier Airlines, which originally planned to merge with fellow budget airline Spirit before JetBlue swooped in in 2022, surged 16% on Friday. Shares of other airlines also rallied.

    Read more CNBC airline news

    [ad_2]

    Source link

  • U.S. airlines cool hiring after adding 194,000 employees in post-Covid spree

    U.S. airlines cool hiring after adding 194,000 employees in post-Covid spree

    [ad_1]

    A pilot performs a walkaround before a United Airlines flight

    Leslie Josephs/CNBC

    U.S. passenger airlines have added nearly 194,000 jobs since 2021 as companies went on a hiring spree after spending months in a pandemic slump, according to the U.S. Department of Transportation. Now the industry is cooling its hiring.

    Airlines are close to their staffing needs but the slowdown is also coming in part because they’re facing a slew of challenges.

    A glut of flights in the U.S. has pushed down fares and eaten into airlines’ profits. Demand growth has moderated. Airplanes are arriving late from Boeing and Airbus, prompting airlines to rethink their expansions. Engines are in short supply. Some carriers are deferring airplane deliveries altogether. And labor costs have climbed after groups like pilots and mechanics inked new contracts with big raises, their first in years.

    Annual pay for a three-year first officer on midsized equipment at U.S. airlines averaged $170,586 in March, up from $135,896 in 2019, according to Kit Darby, an aviation consultant who specializes in pilot pay.

    Since 2019, costs at U.S. carriers have climbed by double-digit percentages. Stripping out fuel and net interest expenses, they’ll be up about 20% at American Airlines this year and around 28% higher at both United Airlines and Delta Air Lines from 2019, according to Raymond James airline analyst Savanthi Syth.

    It is more pronounced at low-cost airlines. Southwest Airlines‘ costs will likely be up 32%, JetBlue Airways‘ up nearly 35% and Spirit Airlines will see a rise of almost 39% over the same period, estimated Syth, whose data is adjusted for flight length.

    Easing hiring

    Friday’s U.S. jobs report showed air transportation employment in August roughly in line with July’s.

    But there have been pullbacks. In the most severe case, Spirit Airlines furloughed 186 pilots this month, their union said Sunday, as the carrier’s losses have grown in the wake of a failed acquisition by JetBlue Airways, a Pratt & Whitney engine recall and an oversupplied U.S. market. Last year, even before the merger fell apart, it offered staff buyouts.

    Other airlines are easing hiring or finding other ways to cut costs.

    Frontier Airlines is still hiring pilots but said it will offer voluntary leaves of absence in September and October, when demand generally dips after the summer holidays but before Thanksgiving and winter breaks. A spokeswoman for the carrier said it offers those leaves “periodically” for “when our staffing levels exceed our planned flight schedules.”

    Southwest Airlines expects to end the year with 2,000 fewer employees compared with 2023 and earlier this year said it would halt hiring classes for work groups including pilots and flight attendants. CFO Tammy Romo said on an earnings call in July that the company’s headcount would likely be down again in 2025 as attrition levels exceed the Dallas-based carrier’s “controlled hiring levels.”

    United Airlines, which paused pilot hiring in May and June, citing late-arriving planes from Boeing, said it plans to add 10,000 people this year, down from 15,000 in each 2022 and 2023. It plans to hire 1,600 pilots, down from more than 2,300 last year.

    It’s a departure from the previous years when airlines couldn’t hire employees fast enough. U.S. airlines are usually adding pilots constantly since they are required to retire at age 65 by federal law.

    Airlines shed tens of thousands of employees in 2020 to try to stem record losses. Packages of more than $50 billion in taxpayer aid that were passed to get the industry through its worst-ever crisis prohibited layoffs, but many employees took carriers up on their repeated offers of buyouts and voluntary leaves.

    Then, travel demand snapped back faster than expected, climbing in earnest in 2022 and leaving airlines without experienced employees like customer service agents. It also led to the worst pilot shortage in recent memory.

    In response, companies — especially regional carriers — offered big bonuses to attract pilots.

    But times have changed. Even air freight giants were competing for pilots in recent years but demand has waned as FedEx and UPS look to cut costs.

    American Airlines CEO Robert Isom said in an investor presentation in March that the carrier added about 2,300 pilots last year and that it expects to hire about 1,300 this year.

    “We will be hiring for the foreseeable future at levels like that,” he said at the time.

    Despite the lower targets, students continue to fill classrooms and cockpits to train and build up hours to become pilots, said Ken Byrnes, chairman of the flight department at Embry-Riddle Aeronautical University.

    “Demand for travel is still there,” he said. “I don’t see a long-term slowdown.”

    Read more CNBC airline news

    [ad_2]

    Source link

  • Judge blocks JetBlue-Spirit merger after DOJ's antitrust challenge

    Judge blocks JetBlue-Spirit merger after DOJ's antitrust challenge

    [ad_1]

    LaGuardia International Airport Terminal A for JetBlue and Spirit Airlines in New York.

    Leslie Josephs | CNBC

    A federal judge Tuesday blocked JetBlue Airways‘ purchase of Spirit Airlines after the Justice Department sued to stop the merger, saying the deal would drive up fares for price-sensitive consumers by taking the discount carrier out of the market.

    JetBlue’s proposed $3.8 billion purchase of discounter Spirit would have produced the country’s fifth-largest airline, a deal the carriers had said would help them better grow and compete against larger rivals like Delta and United.

    “JetBlue plans to convert Spirit’s planes to the JetBlue layout and charge JetBlue’s higher average fares to its customers,” U.S. District Court Judge William Young wrote in his decision. “The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares.”

    The decision, handed down Tuesday, marks a victory for a Justice Department that has aggressively sought to block deals it views as anti-competitive.

    “Today’s ruling is a victory for tens of millions of travelers who would have faced higher fares and fewer choices had the proposed merger between JetBlue and Spirit been allowed to move forward,” Attorney General Merrick Garland said in a statement. “The Justice Department will continue to vigorously enforce the nation’s antitrust laws to protect American consumers.”

    The DOJ alleged in its lawsuit, filed in March, that JetBlue’s acquisition of the budget airline would force many passengers to pay higher fares by eliminating Spirit and “about half of all ultra-low-cost airline seats in the industry.”

    Spirit has grown rapidly in recent years by offering cheap fares and fees for everything else from seat assignments to carry-on luggage, a no-frills model that has become a favorite punchline for late-night comedians.

    “Spirit is a small airline. But there are those who love it,” Young, who was appointed by former President Ronald Reagan, wrote in his ruling. “To those dedicated customers of Spirit, this one’s for you.”

    Spirit shares plunged after the ruling and ended the day down 47%, while JetBlue’s stock gained about 5%.

    Spirit’s market capitalization as of Friday’s close was $1.66 billion, less than half of JetBlue’s proposed purchase price. The Miramar, Florida-based airline has been struggling with grounded airplanes due to an engine manufacturing issue and softer-than-expected travel demand.

    Stock Chart IconStock chart icon

    Spirit Airlines and JetBlue Airways stock after a federal judge blocked the carrier’s proposed merger.

    JetBlue and Spirit said in a joint statement that they disagreed with the ruling and were evaluating next steps.

    “We continue to believe that our combination is the best opportunity to increase much needed competition and choice by bringing low fares and great service to more customers in more markets while enhancing our ability to compete with the dominant U.S. carriers,” the carriers said.

    A different U.S. District Court judge in Massachusetts sided with the Justice Department last year to block JetBlue’s regional alliance with American Airlines in the Northeast, a partnership that allowed the carriers to coordinate routes and schedules.

    JetBlue and Spirit said Tuesday that “JetBlue’s termination of the Northeast Alliance and commitment to significant divestitures have removed any reasonable anti-competitive concerns that the Department of Justice raised.”

    Hard-won deal

    JetBlue fought hard for Spirit. It launched a hostile takeover bid weeks after Frontier Airlines and Spirit agreed to merge in a cash-and-stock deal. Frontier’s business model is more similar to Spirit’s, and both airlines have similar fleet configurations, unlike JetBlue’s more full-service model which stands in contrast to Spirit’s discount strategy.

    After Spirit’s board rejected JetBlue’s initial takeover offer, Spirit CEO Ted Christie said in May 2022 that he didn’t think a JetBlue deal would be approved by regulators, citing the American Airlines partnership and JetBlue’s plan to take seats out of the market.

    “It will not happen in our opinion and for that reason our board has rejected it and to imply otherwise again, we think is insulting,” he said on CNBC’s “Squawk Box” at the time.

    Spirit shareholders ended up rejecting the Frontier deal and months later approving a sweetened JetBlue proposal in October 2022.

    New CEO

    Young’s decision leaves New York-based JetBlue grappling with next steps, tasking incoming CEO Joanna Geraghty with steering the airline on a new path. Geraghty was announced as successor to CEO Robin Hayes after he said earlier this month that he would retire.

    JetBlue argued access to Spirit’s similar fleet of Airbus planes would allow it to grow quickly when planes and pilots are in short supply, growth it said it needs to compete against bigger airlines. The carrier operates in highly congested airspace in New York and other cities, and had planned to use Spirit as a way to gain access to more routes and travelers.

    Years of previous consolidation left United, Delta, American and Southwest in control of about three-quarters of the domestic market.

    JetBlue planned to remodel Spirit’s yellow planes by removing the branding and seats from the tightly packed jets to provide more of a full-service model.

    “Although Spirit’s yellow aircraft livery would not immediately be repainted as JetBlue planes, at the moment the merger is consummated, Spirit and JetBlue would no longer be competitors,” Young wrote in his decision.

    Don’t miss these stories from CNBC PRO:

    [ad_2]

    Source link