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Spirit Airlines Reports Second Quarter 2022 Results

·19 min read

MIRAMAR, Fla., Aug. 9, 2022 /PRNewswire/ -- Spirit Airlines, Inc. ("Spirit" or the "Company") (NYSE: SAVE) today reported second quarter 2022 financial results.

(PRNewsfoto/Spirit Airlines, Inc.)
(PRNewsfoto/Spirit Airlines, Inc.)

Ended the second quarter 2022 with $1.5 billion of unrestricted cash, cash equivalents, short-term investment securities and liquidity available under the Company's revolving credit facility.

 


As Reported




(unaudited)




Second Quarter 2022


Second Quarter 2021


Second Quarter 2019







Total operating revenues

$1,366.6 million


$859.3 million


$1,013.0 million

Pre-tax income (loss)

$(67.5) million


$(273.3) million


$148.6 million

Pre-tax margin

(4.9) %


(31.8) %


14.7 %

Net income (loss)

$(52.4) million


$(287.9) million


$114.5 million

Diluted earnings (loss) per share

$(0.48)


$(2.73)


$1.67

 


Adjusted1


Second Quarter 2022


Second Quarter 2021


Second Quarter 2019







Total Operating Revenues

$1,366.6 million


$859.3 million


$1,013.0 million

Adj. Pre-tax income (loss)

$(38.9) million


$(56.9) million


$150.1 million

Adj. Pre-tax margin

(2.8) %


(6.6) %


14.8 %

Adj. Net income (loss)

$(32.2) million


$(45.7) million


$115.7 million

Adj. Net income (loss) per share, diluted

$(0.30)


$(0.43)


$1.69

 

"Top line revenue growth in the second quarter 2022 exceeded our expectations, driving a better-than-expected adjusted pre-tax margin despite much higher than anticipated fuel prices. On the operations side, following a rough start to the quarter, we implemented key operational changes and quickly saw meaningful improvements in our operational reliability and recoverability.  We finished the quarter on a strong note with a 98.8 percent completion factor for June.  And, our completion factor for July was 99.7 percent, including 15 days of 100 percent completion factor," said Ted Christie, Spirit's President and Chief Executive Officer.  "The robust demand for leisure travel during the peak summer period resulted in busy airports and high load factors, and I want to thank our Team Members for staying focused on supporting each other and delivering a high value experience for our Guests."

"On July 28, 2022, we announced plans to unite with JetBlue Airways Corporation ("JetBlue") to create a compelling national low-fare challenger to the dominant U.S. carriers.  I am thrilled we were able to reach an agreement with JetBlue that delivers value for our stockholders, Team Members, and Guests."

The Company believes that providing analysis of financial and operational performance compared to second quarter 2019 is a more relevant measure of performance than comparing to second quarter 2021 due to the severe impacts from the COVID-19 pandemic on the Company's financial results and operational performance for 2021.

Second Quarter 2022 Results
For the second quarter 2022, Spirit reported a net loss of $52.4 million, or a net loss of $0.48 per diluted share. Excluding special items, adjusted net loss for the second quarter 2022 was $32.2 million1, or an adjusted net loss of $0.30 per diluted share1.

For the second quarter 2022, Spirit reported a pre-tax loss of $67.5 million and a pre-tax margin of negative 4.9 percent. Adjusted pre-tax loss for the second quarter was $38.9 million and adjusted pre-tax margin was negative 2.8 percent.

Capacity and Load Factor
Capacity, or available seat miles ("ASMs"), in the second quarter 2022 increased 9.9 percent compared to the same period in 2019. Load factor for the second quarter 2022 was 86.0 percent, up 1.0 percentage point compared to the second quarter 2019.

Aircraft utilization in the second quarter 2022 was 10.7 hours, down 16.4 percent compared to the 12.8 hours in the same period of 2019.

Revenue Performance  
Total operating revenues for the second quarter 2022 were $1.4 billion, an increase of 34.9 percent compared to the second quarter 2019 primarily due to increased flight volume and higher operating yields. Total revenue per ASM ("TRASM") was 11.54 cents, up 22.8 percent compared to second quarter 2019.

On a per passenger flight segment basis, compared to the same period in 2019, total revenue per passenger flight segment ("segment") for the second quarter 2022 increased 24.3 percent to $140.61. Compared to the second quarter 2019, fare revenue per segment increased 25.7 percent to $72.41 and non-ticket revenue per segment increased 22.8 percent to $68.202.

Cost Performance
Total GAAP operating expenses for the second quarter 2022 increased 66.3 percent compared to the second quarter 2019 to $1,412.0 million. Adjusted operating expenses for the second quarter 2022 increased 63.2 percent compared to the second quarter 2019 to $1,383.3 million3. Compared to the second quarter 2019, these increases were primarily driven by increases in flight volume, additional aircraft, higher fuel prices and inflationary wage pressures.

"Good cost management and benefits from improved reliability resulted in better-than-expected non-fuel costs for the second quarter, mitigating the majority of the impact from higher-than-expected fuel prices," said Scott Haralson, Spirit's Chief Financial Officer. "Looking ahead to the third quarter, we continue to face constraints that limit our ability to both optimize our network and operate our fleet at full utilization. One of the primary limiters is the continued constraint on U.S. continental flights to/from Florida. Therefore,  while demand trends continue to be strong as we head into the off-peak shoulder season, we are estimating pre-tax margins will be between negative one percent to positive one percent for the third quarter 2022."

Fleet
Spirit took delivery of four new A320neo aircraft during the second quarter 2022. The Company ended the quarter with 180 aircraft in its fleet, an increase of 33.3 percent since the end of second quarter 2019.

Liquidity and Capital Deployment
Spirit ended second quarter 2022 with unrestricted cash, cash equivalents, short-term investment securities and liquidity available under the Company's revolving credit facility of $1.5 billion.

Total capital expenditures, including net pre-delivery purchase deposits, for the six months ended June 30, 2022, were $113.6 million, primarily related to the purchase of spare parts, including two spare engines, and expenditures related to the building of Spirit's new facilities in Dania Beach, Florida.

Tax Rate
On a GAAP basis, the Company's effective tax rate for the second quarter 2022 was 22.4 percent. The Company's non-GAAP tax rate for the second quarter 2022 was 17.2 percent.

Forward Looking Guidance
The third quarter and full year 2022 guidance items provided below are based on the Company's current estimates and are not a guarantee of future performance. There could be significant risks and uncertainties that could cause actual results to differ materially, including the risk factors discussed in the Company's reports on file with the Securities and Exchange Commission. Spirit undertakes no duty to update any forward-looking statements or estimates.

Adjusted operating expenses and adjusted pre-tax margin are non-GAAP financial measures, which are provided on a forward-looking basis. The Company does not provide a reconciliation of non-GAAP forward-looking measures on a forward-looking basis where the Company believes such reconciliation would imply a degree of precision and certainty that could be confusing to investors and is unable to reasonably predict certain items included in/excluded from the GAAP financial measures without unreasonable efforts. This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred and are out of the Company's control or cannot be reasonably predicted. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Non-GAAP forward-looking measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

 


Third Quarter 2022E

Adj. operating expenses ($Millions)(1)

$1,320 to $1,330

Adj. Pre-tax margin (%)(1)

(1)% to 1%

Fuel cost per gallon ($)(2)

$3.55 to $3.60

Fuel gallons (Millions)

134.6

Total other (income) expense ($Millions)(3)

$27

Effective tax rate(1)

21 %

Diluted share count (Millions)(4)

108.7 or 110.7




Full Year 2022E

Total capital expenditures ($Millions)(5)


Pre-delivery deposits, net of refunds

$(10)

Aircraft and engine purchases

$40

Other capital expenditures

$240



 


1Q2022A


2Q2022A


3Q2022E


4Q2022E

                Available Seat Miles % Change vs. 2019

19.2 %


9.9 %


~14.0%


~25%









(1)  Excludes special items which may include loss on disposal of assets, special charges and credits, and other items which are not estimable at this time.

(2)  Includes fuel taxes and into-plane fuel cost.

(3)  Includes interest expense, capitalized interest, Interest income, and other income and expense.

(4) For periods beyond second quarter 2022, if the Company is profitable, the Company estimates its weighted average diluted shares outstanding will be 110.7 million, plus the dilutive impacts from outstanding equity awards and warrants.  The Treasury Stock Method will be used to determine the dilutive impact of any outstanding equity awards and warrants. The estimated 110.7 million includes the dilutive impact of approximately 2.0 million shares that are related to the 2025 Convertible Notes outstanding.

(5)  Total capital expenditures assumes all new aircraft deliveries are either delivered under direct leases or financed through sale-leaseback transactions.

 

Second Quarter 2022 Highlights

  • Expanded its network by initiating service to Memphis, Tennessee and Salt Lake City, Utah and announced service to Albuquerque, New Mexico, Reno, Nevada, and Boise, Idaho

  • Added Los Angeles International Airport to its growing list of airports where its award-winning self-bag drop system is offered; Spirit's machines are also equipped with a biometric options, further streamlining the check-in process for Guests. Spirit's self-bag drop system was recently recognized for two prestigious awards: The "2021 Best Airport Innovation" by the APEX/IFSA Awards, and the Skift "2021 IDEA Awards Winner" in the Aviation Category

  • Received the Fly Quiet Award from the Port of Seattle, which noted the airline's "remarkably low takeoff noise levels" at Seattle-Tacoma International Airport

  • Recognized by Los Angeles World Airports as a 2021 gold winner of the LAX Fly Quieter Program, which is the highest in its category

  • Once again recognized by Forbes as one of America's best companies for diversity, equity and inclusion, representing one of 15 organizations in the Transportation and Logistics category recognized by Forbes on America's Best Employers for Diversity annual list

  • Alongside the Company's efforts, the Spirit Airlines Charitable Foundation committed $1 million to 44 non-profit organizations in 2022 in support of the Foundation's commitment to support its three key pillars: children and families, service members, and the environment

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results tomorrow, August 10, 2022, at 8:30 a.m. Eastern US Time. A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.spirit.com. An archive of the webcast will be available under "Events & Presentations" for 60 days.

Merger Agreement with JetBlue
As previously announced, Spirit Airlines, Inc. entered into a merger agreement with JetBlue Airways Corporation on July 28, 2022. The merger is expected to close no later than the first half of 2024, subject to satisfaction of customary closing conditions, including completion of the regulatory review process and approval by Spirit stockholders.

Spirit Airlines
Spirit Airlines (NYSE: SAVE) is committed to delivering the best value in the sky. We are the leader in providing customizable travel options starting with an unbundled fare. This allows our Guests to pay only for the options they choose — like bags, seat assignments and refreshments — something we call À La Smarte. We make it possible for our Guests to venture further and discover more than ever before. Our Fit Fleet® is one of the youngest and most fuel-efficient in the U.S. We serve destinations throughout the U.S., Latin America and the Caribbean and are dedicated to giving back and improving those communities. Come save with us at spirit.com.

Investors are encouraged to read the Company's periodic and current reports filed with or furnished to the Securities and Exchange Commission, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, for additional information regarding the Company.

End Notes
(1) See "Reconciliation of Adjusted Net Income (Loss), Adjusted Pre-Tax Income (Loss), and Adjusted Operating Income (Loss) to GAAP Net Income (Loss)" tables below for more details.
(2) See "Calculation of Total Non-Ticket Revenue per Passenger Flight Segment" table below for more details.
(3) See "Reconciliation of Adjusted Operating Expenses to GAAP Operating Expenses" table below for more details.

Forward Looking Statements
Forward-Looking Statements in this report and certain oral statements made from time to time by representatives of the Company contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") which are subject to the "safe harbor" created by those sections. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are "forward-looking statements" for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "project," "predict," "potential," and similar expressions intended to identify forward-looking statements. Forward-looking statements include, without limitation, guidance for 2022 and statements regarding the Company's intentions and expectations regarding revenues, cash burn, capacity and passenger demand, additional financing, capital spending, operating costs and expenses, taxes, EBITDA, EBITDA margin, hiring, aircraft deliveries and stakeholders, vendors and government support. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors include, among others, the extent of the impact of the COVID-19 pandemic on the Company's business, results of operations and financial condition, and the extent of the impact of the COVID-19 pandemic on overall demand for air travel, restrictions on the Company's business by accepting financing under the CARES Act and other related legislation, the competitive environment in our industry, our ability to keep costs low and the impact of worldwide economic conditions, including the impact of economic cycles or downturns on customer travel behavior, the consummation of the merger with JetBlue and other factors, as described in the Company's filings with the Securities and Exchange Commission, including the detailed factors discussed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as supplemented in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022. Furthermore, such forward-looking statements speak only as of the date of this release. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Risks or uncertainties (i) that are not currently known to us, (ii) that we currently deem to be immaterial, or (iii) that could apply to any company, could also materially adversely affect our business, financial condition, or future results. Additional information concerning certain factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

The Company does not provide a reconciliation of forward-looking measures on a forward-looking basis where the Company believes such reconciliation would imply a degree of precision and certainty that could be confusing to investors and is unable to reasonably predict certain items included in/excluded from the non-GAAP financial measures without unreasonable efforts. This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred and are out of the Company's control or cannot be reasonably predicted. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Non-GAAP forward-looking measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.

 

SPIRIT AIRLINES, INC.

 Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per-share amounts)

 


Three Months Ended


Percent Change


June 30,



2022


2021


2019


2022 vs. 2021


2022 vs. 2019

Operating revenues:










Passenger

$ 1,347,871


$   846,507


$  994,430


59.2


35.5

Other

18,772


12,802


18,526


46.6


1.3

Total operating revenues

1,366,643


859,309


1,012,956


59.0


34.9











Operating expenses:










Salaries, wages and benefits

308,634


257,236


216,375


20.0


42.6

Aircraft fuel

558,633


214,825


265,006


160.0


110.8

Landing fees and other rents

92,021


81,497


64,711


12.9


42.2

Depreciation and amortization(1)

76,469


73,703


54,913


3.8


39.3

Aircraft rent

68,632


64,641


46,522


6.2


47.5

Maintenance, materials and repairs

45,407


39,639


34,688


14.6


30.9

Distribution

48,724


35,263


40,602


38.2


20.0

Loss on disposal of assets

10,636


189


1,550


NM


NM

Special charges (credits)

18,004


(115,002)



NM


NM

Other operating(2)

184,813


114,107


124,651


62.0


48.3

Total operating expenses

1,411,973


766,098


849,018


84.3


66.3











Operating income (loss)

(45,330)


93,211


163,938


(148.6)


(127.7)











Other (income) expense:










Interest expense

30,124


39,662


25,266


(24.0)


19.2

Loss on extinguishment of debt


331,630



NM


NM

Capitalized interest

(5,677)


(4,631)


(2,975)


22.6


90.8

Interest income

(2,561)


(373)


(7,066)


586.6


(63.8)

Other (income) expense

296


233


144


NM


NM

Total other (income) expense

22,182


366,521


15,369


(93.9)


44.3











Income (loss) before income taxes

(67,512)


(273,310)


148,569


(75.3)


(145.4)

Provision (benefit) for income taxes

(15,106)


14,553


34,068


(203.8)


(144.3)











Net income (loss)

$    (52,406)


$  (287,863)


$  114,501


(81.8)


(145.8)

Basic earnings (loss) per share

$        (0.48)


$        (2.73)


$        1.67


(82.4)


(128.7)

Diluted earnings (loss) per share

$        (0.48)


$        (2.73)


$        1.67


(82.4)


(128.7)











Weighted-average shares, basic

108,697


105,258


68,439


3.3


58.8

Weighted-average shares, diluted

108,697


105,258


68,620


3.3


58.4

 

NM: "Not Meaningful"

 

(1)  2021 includes amounts related to accelerated depreciation. See Special Items table for more details.

(2)  2021 includes federal excise tax recovery amounts. See Special Items table for more details.

                       

SPIRIT AIRLINES, INC.

 Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per-share amounts)












Six Months Ended


Percent Change


June 30,



2022


2021


2019


2022 vs. 2021


2022 vs. 2019

Operating revenues:










Passenger

$  2,297,615


$  1,296,842


$  1,832,495


77.2


25.4

Other

36,343


23,746


36,257


53.0


0.2

Total operating revenues

2,333,958


1,320,588


1,868,752


76.7


24.9











Operating expenses:










Salaries, wages and benefits

614,524


502,928


420,276


22.2


46.2

Aircraft fuel

927,218


357,755


494,642


159.2


87.5

Landing fees and other rents

174,957


153,605


124,360


13.9


40.7

Depreciation and amortization(1)

152,660


148,015


105,639


3.1


44.5

Aircraft rent

134,676


119,423


92,304


12.8


45.9

Maintenance, materials and repairs

90,922


69,542


66,292


30.7


37.2

Distribution

84,075


58,905


76,321


42.7


10.2

Loss on disposal of assets

22,188


1,306


3,463


NM


NM

Special credits

33,567


(291,940)



NM


NM

Other operating(2)

355,969


210,368


233,713


69.2


52.3

Total operating expenses

2,590,756


1,329,907


1,617,010


94.8


60.2











Operating income (loss)

(256,798)


(9,319)


251,742


2,655.6


(202.0)











Other (income) expense:










Interest expense

68,004


84,468


50,237


(19.5)


35.4

Loss on extinguishment of debt


331,630



NM


NM

Capitalized interest

(10,939)


(9,363)


(5,532)


16.8


97.7

Interest income

(3,028)


(4,744)


(13,990)


(36.2)


(78.4)

Other (income) expense

713


181


377


NM


NM

Total other (income) expense

54,750


402,172


31,092


(86.4)


76.1











Income (loss) before income taxes

(311,548)


(411,491)


220,650


(24.3)


(241.2)

Provision (benefit) for income taxes

(64,439)


(11,307)


50,073


469.9


(228.7)











Net income (loss)

$  (247,109)


$  (400,184)


$   170,577


(38.3)


(244.9)

Basic earnings (loss) per share

$         (2.27)


$         (3.94)


$          2.49


(42.4)


(191.2)

Diluted earnings (loss) per share

$         (2.27)


$         (3.94)


$          2.49


(42.4)


(191.2)











Weighted-average shares, basic

108,639


101,537


68,410


7.0


58.8

Weighted-average shares, diluted

108,639


101,537


68,568


7.0


58.4

 

NM: "Not Meaningful"

 

(1)  2021 includes amounts related to accelerated depreciation. See Special Items table for more details. 

(2)  2021 includes federal excise tax recovery amounts. See Special Items table for more details.

 

 

SPIRIT AIRLINES, INC.

Selected Operating Statistics

 (unaudited)

 


Three Months Ended June 30,


 Percent Change

Operating Statistics

2022


2021


2019


2022 vs. 2021


2022 vs. 2019

Available seat miles (ASMs) (thousands)

11,846,547


10,226,746


10,775,878


15.8 %


9.9 %

Revenue passenger miles (RPMs) (thousands)

10,192,686


8,635,827


9,157,488


18.0 %


11.3 %

Load factor (%)

86.0


84.4


85.0


       1.6 pts


       1.0 pts

Passenger flight segments (thousands)

9,719


8,385


8,953


15.9 %


8.6 %

Departures

63,148


53,984


58,517


17.0 %


7.9 %

Total operating revenue per ASM (TRASM) (cents)

11.54


8.40


9.40


37.4 %


22.8 %

Average yield (cents)

13.41


9.95


11.06


34.8 %


21.2 %

Fare revenue per passenger flight segment ($)

72.41


44.09


57.60


64.2 %


25.7 %

Non-ticket revenue per passenger flight segment ($)

68.20


58.39


55.54


16.8 %


22.8 %

Total revenue per passenger flight segment ($)

140.61


102.48


113.14


37.2 %


24.3 %

CASM (cents)

11.92


7.49


7.88


59.1 %


51.3 %

Adjusted CASM (cents) (1)

11.68


8.62


7.86


35.5 %


48.6 %

Adjusted CASM ex-fuel (cents) (1)(2)

6.96


6.52


5.41


6.7 %