Can Spirit achieve its path back to profitability?

Shares of Spirit Airlines (SAVE) are down 57% year-to-date as the company's merger with JetBlue Airways (JBLU) was struck down by a federal judge in Boston. In its latest earnings release, Spirit CEO Ted Christie "The Spirit team is 100% clear and focused on the adjustments we are currently deploying and will continue to make throughout 2024 to drive us back to cash flow generation and profitability."

Boyd Group International President Mike Boyd joins Yahoo Finance to discuss Spirit CEO's comments and the performance of Spirit moving forward.

On what Spirit must do to succeed, Boyd points out: "The first issue is surviving. Take a look at that entire ultra low-cost sector...The real issue is what kind of traffic base is going to be out there for them. As more and more discretionary income starts to wane a little bit... the well is growing dry of the number of people who want to make an impulse trip to Las Vegas. You see Frontier (ULCC) cutting way back on Las Vegas and way back on Florida. I think that's a harbinger of things to come. They're going to have to find other types of revenue out there over the next year. It's going to be really hard... The good news again, is Spirit is aware of this and they have a management team that can pull it off."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

BRAD SMITH: Spirit airlines posting a narrower loss in the fourth quarter. And saying, it's assessing options to address its 2025 and 2026 debt maturities. The company's CEO saying Spirit is clear and focused on driving the company back towards profitability in 2024.

Our next guest, though, warned Spirit's next problem may be the ultra, low-cost model itself. Mike Boyd, Boyd Group International President, joins us now. Mike, always a pleasure to get some of your insights, especially on all things the aerospace here.

First and foremost, you take a look at these earnings. You hear what the company is saying about its pathway to profitability. What type of timeline are we talking about for that profitability?

MIKE BOYD: We're probably talking a year or so. The real issue is, of course, Ted Christie the CEO, knows what he's doing. One of the best people in the industry. So the airline is in good hands. The question is, will the market hold up? Keep in mind, we are looking at inflation. It's out there. And inflation does affect a number of people that want to go down to Disneyland and ride Dumbo or whatever they do down there.

So these discretionary kinds of travel are going to be affected. They're going to have to adjust for that. And, again, the costs aren't going in the right direction.

SEANA SMITH: Make you talk about the fact that the costs aren't going in the right direction. What about just Spirit's ability to compete? They're saying that they are going to be able to survive, if they are a standalone company. But there's a difference between surviving and then succeeding here. What does that competition landscape look like?

MIKE BOYD: Well, the first issue is surviving. Take a look at that entire ultra, low-cost sector. And the ultra is pretty much gone in all those airlines. The real issue is what kind of traffic base is going to be out there for them as more and more discretionary income starts to wane a little bit, or even just plumbing, you drive-- the well is going dry. The number of people that want to make an impulse trip to Las Vegas. You already see Frontier cutting way back on Las Vegas, way back on Florida.

I think that's a harbinger of things to come. They're going to have to find other types of revenue out there over the next year. And it's going to be really hard. Like Frontier wants to compete with American Airlines out of Charlotte. Good luck, guys. I don't know if there's enough traffic there at whatever fare.

So they're going to have to dance around. But the good news, again, is Spirit's aware of this. And they've got a management team that can pull it off.

BRAD SMITH: And so with that in mind, we've also got the acknowledgment of the fact that they have still waited to see. And, of course, now, it looks like all eyes are going to be pointing towards June with regard to JetBlue, Spirit, and the appeal process, the appellate process that they're trying to have expedited there.

We've talked about those expectations in the past. But if this deal does not go through, now, how does Spirit need to adjust what even its timeline toward profitability, towards the customer environment, what that looks like?

MIKE BOYD: I think internally, probably, Spirit is banking or planning on-- not banking on, but certainly planning on another negative result or net negative ruling in June. I think that's just going through the motions right now.

And they have to go through the motions because it's good for the consumer. It's good for Spirit. It's good for JetBlue. The DOT just doesn't understand that. But the fact of the matter is, I think, they're well aware that they're going to have to be going forward by themselves. And I think when you look at their fleet, the airplanes on order, things happening in the airframe business, where suddenly, we might have Airbus needing a few extra airplanes for United Airlines. And knocking on Spirit's door and saying, those airplanes you have on order, can we have them?

So there are some options out there for Spirit. They've got some assets that really aren't well recognized.