Spirit Airlines to receive monthly credit from International Aero Engines through 2024

Spirit Airlines Secures Monthly Credit from International Aero Engines

Spirit Airlines announced on Friday that it has reached an agreement with International Aero Engines (IAE) to receive a monthly credit through the end of 2024. This compensation is in response to the airline's inability to utilize certain aircraft due to engine issues.

Boost in Liquidity

As per the filing submitted to the U.S. Securities and Exchange Commission, the agreement is projected to enhance Spirit Airlines' liquidity by an estimated $150 million to $200 million. The engine manufacturer, an affiliate of RTX Corp's Pratt & Whitney, has agreed to provide this financial support.

Terms of the Agreement

The impact on Spirit's liquidity will be based on the number of days in 2024 during which the airline's aircraft are unavailable due to the aforementioned engine issues. The terms also state that Spirit has released IAE and its affiliates from any claims associated with the affected engines that have arisen or may arise prior to December 31, 2024.

Future Discussions

Looking ahead, Spirit Airlines intends to engage in discussions with Pratt & Whitney to address any remaining issues with Spirit aircraft post-2024, as mentioned in the filing.

Background

Last year, Spirit took proactive measures by removing engines from service and grounding certain A320neo aircraft for inspection following the notification from Pratt & Whitney about a rare metal condition in specific engine parts. This condition necessitated the removal, replacement, or further examination of these parts.

Challenges and Concerns

Spirit Airlines has been grappling with mounting operating costs and persistent supply chain challenges, impacting its liquidity and hindering its path to sustainable profitability. These difficulties have raised concerns about the company's ability to repay debt that is due to mature next year.

Survival Challenges

The airline's survival has been further complicated after regulatory authorities annulled a $3.8 billion merger agreement with JetBlue Airways. The termination of this deal, which could have created the fifth-largest carrier in the U.S., has posed additional threats to Spirit's survival. This comes at a time when the airline is navigating cash burn and debt struggles.