The curler coaster experience that has outlined Spirit over the past 5 years seems to be coming to an finish. After pioneering the extremely low price provider (ULCC) mannequin within the US, the airline rose shortly after which fell exhausting. It was by no means capable of flip a revenue after the pandemic, and it filed for chapter safety. It exited chapter in March, and now that the airline is a public firm once more, it has very quietly posted its Q2 outcomes. If you happen to didn’t assume it might be doable to go bankrupt, come out, and in some way publish even worse outcomes… effectively, you have been mistaken.
By the numbers, there wasn’t a lot to say that’s optimistic, although we are able to strive. The airline’s whole unit income (TRASM) rose 4.8 % vs Q2 2024, and its income per passenger flight phase was up 7 % from $108.46 to $116.05. That’s as shut as we are able to get to having excellent news right here.
Now, the unhealthy information. Spirit’s capability plunged 23.9 % year-over-year on 22 % fewer departures. If you happen to’re going to shrink that a lot, you actually need to spice up income to maintain up with price creep. Right here’s the place issues begin to get wild.
Do not forget that the unit income rose 4.8 %, proper? Unit prices have been up about double that. And it was solely that good as a result of there was an enormous fuel-price profit. Unit prices excluding gas and particular objects was up an eye-popping 19.2 %.
The price drawback could be very actual whenever you shrink, and Spirit’s business plan makes that even worse. Spirit ended Q2 with 215 plane which is up from the 210 a 12 months in the past. There are at all times Pratt & Whitney points to contemplate that will have grounded completely different numbers of plane in every quarter, however that hardly explains this. What actually occurred is Spirit simply stopped flying airplanes at off-peak occasions. Its plane utilization tanked 26.4 % to a depressing 7.8 hours per day. That’s good for income, but when income doesn’t climb greater than prices do, you’re out of luck. And people prices… yikes.
Spirit says “The [cost] improve on a per-ASM foundation was primarily resulting from will increase in salaries, wages and advantages expense, different working expense, plane hire expense, touchdown charges and different rents expense, and distribution expense.” It looks like it may need been simpler to only record the issues that weren’t up.
After we deliver this all collectively, the airline posted a -18.1 % working margin which is considerably worse than final 12 months’s -11.9 %. Web margin was -24.1 %. Money and money equivalents have been down to only over $407 million after burning by way of nearly $250 million in Q2 alone. All of this provides as much as the airline being in very critical hassle.
It’s unhealthy sufficient that Spirit has issued a so-called “going concern” warning in its 10-Q, which is what public firms put out in the event that they assume they won’t make it by way of the following 12 months.
Spirit says overcapacity and weak leisure demand within the home market have brought on huge issues. It has been attempting to counteract this in a number of methods, “together with the implementation of community and product enhancements, together with its Premium Financial system journey choice, consummation of sale-leaseback transactions associated to sure of its owned spare engines, and different discretionary price discount methods, together with the pilot furloughs introduced in July 2025.”
However then, Spirit says that’s not sufficient. It has executed the maths, and it will bust by way of the debt covenants and the necessities of the bank card processor settlement if it doesn’t do extra. So it’s mainly seeking to do a fireplace sale. Airplanes, actual property, extra gates, reducing fastened prices, and attempting to lift more cash are all on the desk. But when it may well’t? Nicely, then it’s over.
Notably, the bank card processor deal ends on the finish of this 12 months, and to resume, the corporate needs a much bigger holdback. In different phrases, the cardboard firm will maintain extra of Spirit’s cash till after journey is full in order that it doesn’t get left holding the bag if Spirit fails. And that’s typically the loss of life knell for a struggling airline. In conclusion, the airline coldly notes:
Due to the uncertainty of efficiently finishing the initiatives to adjust to the minimal liquidity covenants and of the result of discussions with Firm stakeholders, administration has concluded there may be substantial doubt as to the Firm’s capability to proceed as a going concern inside 12 months from the date these monetary statements are issued.
Contemplating these outcomes and the bank card processor deal expiring at year-end, I’d be amazed if the airline made it into 2026. The truth is, I don’t see the way it may even get that far with the money burn that it has proper now.
It’s exhausting to not really feel for the folks on the airline who’ve gone by way of a lot in the previous few years. However that’s the airline enterprise. And there shall be alternative for a lot of to go elsewhere. If Spirit fails, this may at the very least strengthen the place of different airways like Frontier, Breeze, JetBlue, and perhaps even United and Solar Nation. However that’s all hypothesis. Proper now, all we all know is that Spirit is in important situation.
