Photo by Justin Sullivan
Struggling U.S. budget carrier Spirit Airlines, listed on the NYSE as “SAVE,” revealed on Friday that it foresees receiving a significant sum ranging between $150 million and $200 million in compensation due to the grounding of several of its aircraft following detected defects in Pratt & Whitney engines.
Spirit, identified as SAVE on the NYSE, disclosed that it had inked an agreement on March 26 with International Aero Engines, a subsidiary of RTX, listed as “RTX” on the NYSE, the parent company of Pratt & Whitney. The deal entails a monthly credit until the conclusion of 2024 intended to recompense the carrier for each SAVE aircraft that has been grounded.
Last July, Pratt & Whitney announced the discovery of a “rare condition” in the powdered metal used for crafting certain engine components, necessitating swift inspections of the PW1100G-JM geared turbofan (GTF) fleet that powers the A320neo aircraft.
Spirit (SAVE) disclosed in October of last year that this issue would result in an average grounding of 26 of its Airbus A320neo aircraft for the entirety of 2024.
The budget airline stated in a regulatory filing released on Friday, “The estimated impact of the Agreement on Spirit’s (SAVE) liquidity is currently expected to be between $150 million and $200 million, primarily contingent on the number of days in 2024 in which Spirit (SAVE) aircraft are rendered inoperable due to GTF engine complications.”
Spirit (SAVE) further expressed its intention to engage in discussions with Pratt & Whitney at an appropriate time to establish suitable arrangements for any remaining SAVE aircraft not fit for operational service after December 31, 2024.
This substantial compensation and the alleviation it brings to Spirit’s (SAVE) liquidity are bound to hearten investors, especially given the airline’s struggle to achieve profitability post-pandemic while bearing a heavy debt burden. Furthermore, Spirit’s (SAVE) path forward has appeared uncertain following the collapse of its merger attempt with JetBlue Airways.