Spirit Airlines, as part of its campaign to shrink to profitability, has asked a U.S. Bankruptcy Court for permission to terminate the leases of 87 Airbus jetliners, a move that would cut the South Florida-based carrier’s fleet by about 40%.
The Dania Beach-based airline, which has been simultaneously shaving cities from its route network while furloughing hundreds of employees, was operating 214 planes when it filed for Chapter 11 bankruptcy protection for a second time on Aug. 29.
In a motion filed Thursday in U.S. Bankruptcy Court in New York, the carrier declared it intends to offload 87 planes by Oct. 27, a move that would reduce its fleet to 127 aircraft.
“Spirit is committed to redesigning its network to focus its flying on key markets to provide more destinations, frequencies and enhanced connectivity in certain of its focus cities, while simultaneously reducing its presence in certain other cities,” Fred Cromer, executive vice president and chief financial officer of Spirit Aviation Holdings Inc., wrote in an affidavit accompanying Spirit’s court motion.
“To do so, Spirit must right-size its fleet to match capacity with profitable demand, which will materially lower Spirit’s debt and lease obligations and realize hundreds of millions of dollars in annual operating savings,” he said.
“Rejecting these leases, which together amount to the leases on 87 aircraft, will relieve Spirit of the burden of unprofitable leases and of the costs of maintaining and storing several aircraft that are already out of service,” Cromer added.
In the affidavit, he indicated Spirit might not be finished cutting its fleet. He said the airline “is also continuing to evaluate its fleet needs. As part of that ongoing analysis Spirit may determine that it is appropriate for additional aircraft and related equipment to be retired — and any associated leases rejected — in the future.”
Cromer also reportedly conducted a virtual meeting with Spirit creditors early Friday, one day after the airline filed its fleet reduction plans with the court.
Multi-faceted cost reductions
In a staff memo last month, CEO and President Dave Davis announced Spirit’s intentions to cut capacity by 25% by November and said Spirit intended to speak with all of its labor groups about finding cost savings.
Management informed its contingent of the Air Line Pilots Association that it was seeking $100 million in cost concessions from its pilots by this past Wednesday.
On Friday, the company said talks have been “productive” and are continuing.
“As part of our ongoing restructuring, we have engaged with Air Line Pilots Association (ALPA) leadership to identify cost savings within our collective bargaining agreement,” the company said in a statement to the South Florida Sun Sentinel. “Talks have been productive and are ongoing. We are continuing discussions and remain committed to working with ALPA to reach a consensual agreement that positions Spirit and our Pilots for success.”
ALPA did not immediately respond to a request for comment.
Thus far, the airline has acknowledged plans to furlough 270 pilots and 1,800 flight attendants.
While reducing its fleet and workforce, the airline said this week it had obtained commitments from major creditors for $475 million in “debtor-in-possession” financing, which will give the company cash to fly operate during the bankruptcy case.
Management also announced a “global” agreement to restructure a series of leasing deals with its top leasing company, AerCap Ireland Ltd. That agreement is intended to produce another $150 million in liquidity for the company. All of the negotiated arrangements require court approvals, which are expected at a scheduled Oct. 10 hearing in New York.
Route cuts taking hold
At the same time, Spirit has been vacating airports around the country after announcing plans to terminate service.
This past Thursday, the airline was scheduled to activate its plan to drop 11 cities: Albuquerque, New Mexico; Birmingham, Alabama; Boise, Idaho; Chattanooga, Tennessee; Columbia, South Carolina; Portland, Oregon; Oakland, Sacramento, San Diego and San Jose, California, and Salt Lake City, Utah.
More recently, Hartford, Connecticut, to be dropped Oct. 31, and Minneapolis-St. Paul, Minnesota, to be dropped Dec. 1, were listed as cities to be eliminated from Spirit’s schedule.
“We apologize to our Guests for any inconvenience and will reach out to those with affected reservations to issue a refund,” the company said in a statement. “We thank our airport, business and community partners in Connecticut and Minnesota for their support over the years.”
The airline said that while it “routinely” evaluates and adjusts its network, “we do not anticipate any additional airport exits in the near future.”