Skift Take
The compensation could give the struggling Spirit a significant boost to its liquidity.
Spirit Airlines is expecting to receive anywhere from $150 million to $200 million in compensation for grounding some of its planes due to issues with Pratt & Whitney engines.
The carrier said in a regulatory filing on Friday that it entered an agreement with International Aero Engines, an affiliate of Pratt & Whitney, to receive a monthly credit throughout 2024 for the grounded planes.
In July 2023, Pratt & Whitney discovered that its geared turbofan engines manufactured between the fourth-quarter of 2015 and the third-quarter of 2021 had a contaminated powdered metal that could interfere with the functioning of the engines.
The issues primarily affected A320neos, causing carriers like Spirit and JetBlue — both of which rely on the A320neo — to ground several planes. Spirit expected to ground 25 A320neos in 2024 as a result.
Spirit said in the filing it would discuss “appropriate arrangements” with Pratt & Whitney if it has to ground planes past December 31, 2024.
Spirit chief financial officer Scott Haralson previously said during a fourth-quarter earnings call that the carrier had been working on a compensation agreement with Pratt & Whitney.
The compensation could offer Spirit a significant source of liquidity, as the carrier has been struggling to make a profit since the pandemic and has a staggering $1.1 billion in debt set to mature in 2025. To shore up its liquidity, Spirit recently sold 25 aircraft and leased them back, allowing it to pay down $465 million in debt and net $419 million in cash.
And after its merger with JetBlue collapsed, Spirit’s path is unclear. Some Wall Street analysts previously said the airline may need to file for bankruptcy or find another buyer.
Spirit CEO Ted Christie called those comments a “misguided narrative” during a call with analysts in February.
In order to restore its profitability, Spirit is now looking to add more connecting flights in places like Fort Lauderdale and Las Vegas and relying less on the ultra-competitive Florida market, according to The Points Guy.
