Tag Archives: Airbus A320-271N WL

Spirit Airlines receives an improved offer from Frontier Airlines, board still prefers Frontier’s offer

Spirit Airlines Airbus A320-271N WL N943NK (msn 10563) IAH (Jarrod Wilkening). Image: 957968.

The bidding war for Spirit Airlines continues between Frontier Airlines and JetBlue Airways.

On Friday, Frontier increased its bid by bumping up its cash component of the deal by $2 per share to $4.13 per share. This also includes 1.9126 Frontier shares for the cash-and-stock offer.

Frontier will also prepay $2.22 per share as a cash dividend to all Spirit stockholders subject to the approval of the buy-out.

Frontier has also increased its termination fee to Spirit Airlines to $350 million.

Frontier also urged all Spirit stockholders to approve the Frontier offer.

Spirit shareholders will vote on the two offers on June 30.

As a result, Spirit Airlines made this announcement:

Spirit Airlines, Inc. has announced the signing of a second amendment (the “Amended Agreement”) to its previously announced merger agreement with Frontier Group Holdings, Inc., parent company of Frontier Airlines, Inc., dated February 5, 2022.

Based on the improved terms offered by Frontier, the Spirit Airlines Board of Directors reiterates its unanimous recommendation that Spirit stockholders vote FOR the merger agreement with Frontier. As part of its determination to recommend the Frontier merger agreement, Spirit’s Board of Directors carefully reviewed the terms of JetBlue’s revised proposal received on June 20, 2022 and instructed Spirit’s management and advisers to engage in extensive discussions with JetBlue, including negotiating further the terms of JetBlue’s draft merger agreement and providing extensive additional due diligence to JetBlue and its advisors. After considering this review and discussions, Spirit’s Board of Directors determined JetBlue’s revised offer is not a Superior Proposal.

Under the terms of the Amended Agreement, which has been approved by the Boards of Directors of both companies:

  • Frontier will increase the per-share cash consideration payable to Spirit stockholders to $4.13 in cash, in addition to the per-share stock consideration of 1.9126 shares of Frontier that Frontier previously agreed to pay Spirit stockholders. Frontier has also agreed that $2.22 per share will be prepaid to Spirit stockholders on a record date to be determined as a cash dividend following approval of the transaction by Spirit stockholders and consistent with all applicable laws, including restrictions under the CARES Act. The $2.22 per share dividend will be funded by Frontier.
  • Frontier will increase its reverse termination fee to $350 million to Spirit in the unlikely event the combination is not consummated for antitrust reasons.
  • The number of directors of the combined company to be named by Frontier will increase by one and the number of directors of the combined company to be named by Spirit will decrease by one.

The Board believes a merger with Frontier is the most financially and strategically compelling path forward for Spirit stockholders and has a greater likelihood of closing.

  • With both cash and stock consideration, the Frontier merger offers Spirit stockholders compelling value now, plus the economic upside of continued ownership at a time when the airline industry outlook is only getting brighter.
    • Today, airline sector stock prices are approaching the lows seen during the depths of the pandemic in 2020. Within a year of those lows, Spirit was trading above $39 per share, having more than quadrupled in price.
    • The outlook for the sector is bright, with TSA check-point traveler numbers equaling or exceeding 2019 levels in recent months and with airline unit revenues reaching their highest levels in ten years.
    • The Spirit Board is focused on maximizing value for Spirit stockholders by agreeing to a transaction that provides a combination of near-term cash and exposure to the airline sector recovery.
  • Under the revised terms of the Frontier merger agreement, the pro forma value to Spirit stockholders by 2024 could exceed $50 per share, driven by the equity upside from the realization of synergies, airline sector recovery, and the ongoing growth of both airlines. Based on work done by Spirit advisors, this assumes:
    • Wall Street analyst earnings forecasts for 2024E;
    • Realization of $500 million in annual net operating synergies; and
    • The pro forma company trades at a price-to-earnings multiple of 11x, based on Spirit’s 2017-2019 pre-pandemic average.
  • In addition to the substantial future value creation available, Spirit stockholders will receive the benefit of a near-term cash dividend following approval of the transaction at the Special Meeting on June 30, 2022.

Ted Christie, President and CEO of Spirit, said, “We are thrilled to announce the terms of Spirit’s amended agreement with Frontier, which includes nearly double the per-share cash consideration of our prior agreement with Frontier while still allowing stockholders to benefit from the economic upside of airline industry recovery. As this recovery progresses and demand returns, the price of the combined airline’s stock is expected to exceed the per-share price of JetBlue’s fixed, all-cash offer. We urge stockholders to vote FOR the merger agreement with Frontier on the WHITE proxy card prior to the June 30 Special Meeting.”

Spirit Board Conducts Thorough Process and Determines JetBlue’s Offer is NOT a Superior Proposal

The Spirit Board of Directors conducted a thorough process when considering competing proposals from JetBlue and Frontier. JetBlue and Frontier had access to the same due diligence information, on the same terms. Spirit’s process included extensive discussions with Frontier and JetBlue regarding financial terms, regulatory risks and integration processes. Spirit ultimately received revised proposals from both parties this week. Following the conclusion of this process, the Spirit Board determined that the revised offer Spirit received from JetBlue on June 20, 2022 is not a Superior Proposal and continues to recommend Spirit stockholders adopt the merger agreement with Frontier.

A JetBlue transaction faces significantly greater regulatory impediments than a Frontier transaction.

  • Although Spirit has continued to engage with JetBlue and its advisors regarding regulatory matters and strategy, Spirit does not believe that a JetBlue transaction will overcome regulatory objections.
  • Spirit has long taken the position that excessive consolidation in the airline industry over the last two decades has resulted in the three legacy airlines dominating domestic air travel. Merging Spirit into JetBlue and its Northeast Alliance (“NEA”) with American Airlines will exacerbate regulators’ valid concerns over airline industry concentration. The proposed Spirit/Frontier combination will, by contrast, create a stronger, more relevant, and more effective nationwide ULCC challenger to the dominant carriers.
  • JetBlue has made it clear that it is committed to the NEA, which Spirit believes is an anticompetitive and unlawful de facto merger between American and JetBlue that aligns JetBlue’s interests broadly with a legacy carrier. Spirit believes the existence of the NEA makes it even more unlikely that JetBlue’s acquisition of Spirit will be approved. Indeed, the DOJ has sued to block the NEA between JetBlue and American Airlines on grounds that the NEA is anticompetitive, which further increases the regulatory risk of JetBlue’s offer to acquire Spirit and the likelihood that the DOJ will be able to block a JetBlue/Spirit combination.
  • Although JetBlue’s revised offer purports to provide improved regulatory commitments, JetBlue has insisted on maintaining a significant carve-out allowing JetBlue to refuse to take actions needed to gain regulatory approval if – in JetBlue’s sole and absolute discretion – any such actions would materially and adversely affect JetBlue’s anticipated benefits under its NEA venture with American. This broad carve-out creates an unacceptable risk for Spirit stockholders and only confirms that JetBlue will prioritize the NEA over the completion of a transaction with Spirit.
  • The proposed merger of Spirit and Frontier would create a better and more disruptive nationwide ULCC competitor to the Big Four carriers, further democratizing air travel and bringing more ultra-low fares to more destinations. By contrast, a JetBlue/Spirit combination will result in a higher-cost and higher-fare airline that would eliminate a lower-cost and lower-fare airline and remove about half of the ULCC capacity in the United States, resulting in higher fares for consumers.

“The Spirit Board of Directors conducted a thoughtful and thorough process when considering the competing proposals, and after extensive discussions with Frontier and JetBlue, we firmly believe that a combination with Frontier continues to be in the best interests of the Company and our stockholders, especially given the increased per-share consideration and enhanced reverse termination fee,” said Mac Gardner, Chairman of the Board of Spirit. “A merger with Frontier poses less regulatory risk on Spirit stockholders and increases competition in the industry for the benefit of consumers. The Board is confident a merger with Frontier is the most financially and strategically compelling path forward for Spirit stockholders, with more certainty and the strongest likelihood of closing.”

Video:

Your Vote Is Important

Spirit has scheduled the Special Meeting of Stockholders (the “Special Meeting”) to approve the proposed merger with Frontier for Thursday, June 30, 2022 at 9:00 a.m., Eastern Time. All stockholders of record as of the close of business on May 6, 2022 are entitled to vote at the Special Meeting.

The Spirit Board of Directors strongly recommends you vote FOR the merger agreement on the WHITE proxy card. As a reminder, a vote against Frontier is not a vote for JetBlue, nor will it necessarily lead to a transaction with JetBlue. It is simply a vote against entering into a highly accretive transaction that is less challenging to complete from a regulatory perspective. To ensure your vote is counted, vote on the WHITE proxy card today.

Top Copyright Photo: Spirit Airlines Airbus A320-271N WL N943NK (msn 10563) IAH (Jarrod Wilkening). Image: 957968.

Spirit Airlines aircraft photo gallery:

Spirit Airlines slide show:

Frontier Airlines to buy Spirit Airlines for $6.6 billion

2021 "Spirit Untamed" promotional livery

Frontier Airlines is about to get a lot larger:

Frontier Airlines has agreed to buy Spirit Airlines for $25.83 a share reflecting a cash deal that will be valued at $6.6 billion, including debt. 

Spirit equity stockholders will receive 1.9126 shares of Frontier stock plus $2.13 in cash for each Spirit share they own. The transaction represents a 19% premium to Spirit’s closing price on Friday.

Spirit Airlines will be merged into Frontier Airlines.

Frontier Airlines issued this statement:

Spirit Airlines, Inc. and Frontier Group Holdings, Inc., parent company of Frontier Airlines, Inc., today announced a definitive merger agreement under which the companies will combine, creating America’s most competitive ultra-low fare airline.

Together, Frontier and Spirit expect to change the industry for the benefit of consumers, bringing more ultra-low fares to more travelers in more destinations across the United States, Latin America and the Caribbean, including major cities as well as underserved communities. The stronger financial profile of the combined company will empower it to accelerate investment in innovation and growth and compete even more aggressively, especially against the dominant “Big Four”1 airlines, among others.

William A. Franke, the Chair of Frontier’s Board of Directors and the managing partner of Indigo Partners, Frontier’s majority shareholder, noted that Indigo has a long history with both Spirit and Frontier, and is proud to partner with them in creating a disruptive airline. “We worked jointly with the Board of Directors and senior management team across both carriers to arrive at a combination of two complementary businesses that together will create America’s most competitive ultra-low fare airline for the benefit of consumers.”

Consumers Win With More Ultra-Low Fares to More Places

The combined airline is expected to:

  • Deliver $1 billion in annual consumer savings.
  • Offer more than 1,000 daily flights to over 145 destinations in 19 countries, across complementary networks.
  • Expand with more than 350 aircraft on order to deliver more ultra-low fares.
  • Increase access to ultra-low fares by adding new routes to underserved communities across the United States, Latin America and the Caribbean.
  • Deliver even more reliable service through a variety of operational efficiencies.
  • Expand frequent flyer and membership offerings.

Team Members Win With Expanded Opportunities and Increased Stability

  • By 2026 Spirit and Frontier expect to add 10,000 direct jobs and thousands of additional jobs at the companies’ business partners.
  • Given the growth of the combined company, it is expected that all current team members will have an opportunity to be a part of the combined airline.
  • Team Members of the combined airline will have better career opportunities and more stability as part of the most competitive ultra-low fare airline in the United States.

Sustainability Wins With America’s Greenest Airline

Frontier and Spirit will be America’s Greenest Airline, providing nationwide access to sustainable and affordable air travel. The combined airline will have the youngest, most modern and fuel-efficient fleet in the United States, featuring the largest fleet of A320neo family aircraft of any airline in the country. The combined airline is expected to achieve over 105 seat miles per gallon by 2025.

Shareholders Win With Superior Value Creation

The combination of Spirit and Frontier is expected to deliver enhanced value to shareholders of both companies.

  • On a combined basis, the company would have annual revenues of approximately $5.3 billion based on 2021 results.
  • Once combined, Frontier and Spirit expect to deliver annual run-rate operating synergies of $500 million once full integration is completed, which will be primarily driven by scale efficiencies and procurement savings across the enterprise with approximately $400 million in one-time costs.
  • The combined airline is expected to have a strengthened financial profile, with a cash balance of approximately $2.42 billion as of the end of 2021 on a combined basis.

Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of both companies, Spirit equity holders will receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own. This implies a value of $25.83 per Spirit share at Frontier’s closing stock price of $12.39 on February 4, 2022, representing a premium of 19% over the February 4, 2022, closing price of Spirit, and a 26% premium based on the 30 trading-day volume-weighted average prices of Frontier and Spirit. The transaction values Spirit at a fully diluted equity value of $2.9 billion, and a transaction value of $6.6 billion when accounting for the assumption of net debt and operating lease liabilities.

Upon closing of the transaction, existing Frontier equity holders will own approximately 51.5% and existing Spirit equity holders will own approximately 48.5% of the combined airline, on a fully diluted basis, providing both Frontier and Spirit equity holders with substantial upside potential.

Bringing Our Airlines Together – Governance and Timing to Completion

The Board of Directors for the new airline will be comprised of 12 directors (including the CEO), seven of whom will be named by Frontier and five of whom will be named by Spirit. Mr. Franke will be Chairman of the Board of the combined company.

The merger is expected to close in the second half of 2022, subject to satisfaction of customary closing conditions, including completion of the regulatory review process and approval by Spirit stockholders. Frontier’s controlling stockholder has approved the transaction and related issuance of shares of Frontier common stock upon signing of the merger agreement. The combined company’s management team, branding and headquarters will be determined by a committee led by Mr. Franke prior to close.

Top Copyright Photo: Spirit Airlines Airbus A320-271N WL N932NK (msn 10008) (Spirit Untamed) BWI (Brian McDonough). Image: 953897.

Frontier Airlines aircraft slide show:

Spirit Airlines aircraft slide show:

 

Vueling to add five new routes from London Gatwick

Vueling Airlines (Vueling.com) Airbus A320-271N WL EC-MZT (msn 8181) ZRH (Rolf Wallner). Image: 954764.

Vueling Airlines has announced it will add vive new routes from London (Gatwick) in April.

The carrier will fly from LGW to Seville, Granada, Malaga, La Coruña, and Menorca this summer season.

Vueling will have 12 routes from LGW this summer.

Top Copyright Photo: Vueling Airlines (Vueling.com) Airbus A320-271N WL EC-MZT (msn 8181) ZRH (Rolf Wallner). Image: 954764.

Vueling Airlines aircraft slide show:

Vueling Airlines aircraft photo gallery:

 

HK Express is coming to Singapore

HK Express Airbus A320-271N WL D-AUBL (B-LCP) (msn 7598) XFW (Gerd Beilfuss). Image: 941191.

HK Express made this announcement:

Travelling to Singapore is about to get much more affordable and enjoyable. HK Express is thrilled to announce a new direct service between Hong Kong and Singapore, enabling more customers to enjoy the low-cost carrier’s safe and flexible service. Debuting on 1 February 2022, the new link to Singapore will provide a more affordable choice for essential travel during the pandemic period.

HK Express remains committed to supporting Hong Kong’s role as one of the world’s leading international aviation hubs. The airline continuously strives to enhance connectivity across the region, while making travel more accessible for the Hong Kong community.

Customers with plans to visit Singapore must comply with local entry requirements, which may include pre- and post-travel testing, quarantine and declaration forms.

Hong Kong (HKG)<> Singapore (SIN) (local time)
Flight Route Depart Arrive Frequency
UO780 Hong Kong (HKG) > Singapore (SIN) 1235 1625 Tuesday
UO781 Singapore (SIN) > Hong Kong (HKG) 1800 2205 Tuesday

*The service is expected to commence on February 1, 2022, subject to regulatory approval.

Photo caption: HK Express’ inaugural flight to Singapore took off at Hong Kong International Airport on February 1, 2022.

Route Map:

Top Copyright Photo: HK Express Airbus A320-271N WL D-AUBL (B-LCP) (msn 7598) XFW (Gerd Beilfuss). Image: 941191.

HK Express aircraft slide show:

HK Express aircraft photo gallery:

American Airlines and IndiGo announce codeshare agreement

IndiGo Airlines Airbus A320-271N WL F-WWDQ (VT-IVQ) (msn 8387) TLS (Paul Bannwarth). Image: 942970.

American Airlines issued this statement about a new codeshare partner:

  • American Airlines and IndiGo announce a codeshare agreement, making it easier than ever for customers to travel to India.
  • American’s customers will have access to 29 new routes from Bengaluru and Delhi.
  • AAdvantage members will earn miles when traveling on American codeshare flights operated by IndiGo.

American Airlines is opening new doors across India this fall thanks to a new codeshare agreement with IndiGo, India’s leading airline.

The agreement, announced today, will place American’s code on 29 of IndiGo’s domestic routes in India, providing a convenient option for American Airlines customers arriving on the carrier’s new Bengaluru (BLR) and Delhi (DEL), India, flights. The codeshare, which will require U.S. and Indian governments’ approvals, is expected to begin in October, as American launches new service between New York (JFK) and DEL on Oct. 31 and between Seattle (SEA) and BLR on Jan. 4, 2022.

IndiGo, India’s largest airline by number of passengers carried, is based in Gurgaon, Haryana, India. With its fleet of 275+ aircraft, the airline operates more than 1,100 daily flights, connecting 70 domestic destinations and 24 international destinations. Since its founding in 2006, IndiGo’s 23,000 employees have professionally served more than 300 million customers.

Top Copyright Photo: IndiGo Airlines Airbus A320-271N WL F-WWDQ (VT-IVQ) (msn 8387) TLS (Paul Bannwarth). Image: 942970.

IndiGo aircraft slide show:

ALC announces lease placement of 10 new Airbus A321-200neos and sale and lease-back of 5 new Airbus A320-200neos with Spirit Airlines

Spirit Airlines Airbus A320-271N WL N927NK (msn 9075) LAX (Michael B. Ing). Image: 954948.

Air Lease Corporation (ALC) has announced long-term lease placements for ten new Airbus A321-200neo aircraft and sale and lease-backs of five new Airbus A320-200neo aircraft with Spirit Airlines.

The five A320neos are scheduled to deliver to Spirit Airlines in 2021 and 2022 and will be owned by one of ALC’s managed aircraft ventures through funds managed by Waterfall Asset Management.

The ten A321neos are scheduled to be delivered to Spirit Airlines from ALC’s order book with Airbus beginning in 2023 through 2024.

Top Copyright Photo: Spirit Airlines Airbus A320-271N WL N927NK (msn 9075) LAX (Michael B. Ing). Image: 954948.

Spirit Airlines aircraft slide show:

Spirit Airlines is finally coming to Miami

2021 "Spirit Untamed" promotional livery

Spirit Airlines has long had a competitive hub at lower-cost Fort Lauderdale-Hollywood Airport (FLL). Now the growing carrier is planning to expand to nearby Miami International Airport (MIA) in October following the moves of other low-cost carriers.

Spirit Airlines is planning to fly from MIA up to 30 domestic and international destinations starting on October 6, 2021.

Current Spirit routes from the FLL hub:

Frontier Airlines has also been expanding at MIA along with Southwest Airlines.

This will put increased pressure on American Airlines’ hub at MIA.

Top Copyright Photo: Spirit Airlines Airbus A320-271N WL N932NK (msn 10008) (Spirit Untamed) BWI (Brian McDonough). Image: 953897.

Spirit Airlines aircraft slide show:

Spirit Airlines prices its offering of 10,594,073 shares of its common stock at $35.05 a share

Spirit Airlines has announced it has priced its underwritten public offering of $440,000,000 aggregate principal amount of 1.00% convertible senior notes due 2026 (the “Convertible Notes” and such offering, the “Convertible Notes Offering”). The net proceeds to Spirit from the Convertible Notes Offering, after deducting underwriting discounts and other offering expenses, are expected to be approximately $428.3 million.

Spirit has granted the underwriters of the Convertible Notes Offering a 30-day option to purchase up to $60,000,000 aggregate principal amount of additional Convertible Notes, solely to cover over-allotments, in the Convertible Notes Offering. The Convertible Notes will be convertible by holders if certain conditions are met, and during certain periods, based on an initial conversion rate of 20.3791 shares of common stock per $1,000 principal amount of the Convertible Notes, which is equivalent to a conversion price of approximately $49.07 per share, representing a premium of approximately 40.0% over the last reported sale price of $35.05 per share of Spirit’s common stock on April 28, 2021. Spirit will settle conversions of the Convertible Notes in cash or a combination of cash and shares of common stock, at Spirit’s election.

Spirit also separately priced its registered direct offering of 10,594,073 shares of its common stock at an offering price of $35.05 per share (the “Common Stock Offering”).

Spirit expects to use approximately $368.7 million of the net proceeds from the Common Stock Offering to redeem $340.0 million aggregate principal amount of its 8.00% Senior Secured Notes due 2025 at a redemption price equal to 108.0%, plus accrued and unpaid interest on the principal amount being redeemed up to, but excluding, the redemption date. Spirit expects to use the net proceeds from the Convertible Notes Offering (together with existing cash on hand, if the underwriters do not exercise their option to purchase additional Convertible Notes) to repurchase approximately $146.8 million aggregate principal amount of its outstanding 4.75% Convertible Senior Notes due 2025 (the “2025 Convertible Notes”) for approximately $440.7 million, including accrued and unpaid interest on the 2025 Convertible Notes repurchased, pursuant to privately negotiated agreements with a limited number of current holders of such 2025 Convertible Notes, which agreements are conditioned upon the consummation of the Convertible Notes Offering. Spirit expects to use the remaining net proceeds from the Common Stock Offering and any remaining net proceeds from the Convertible Notes Offering for general corporate purposes. Each of the Common Stock Offering and the Convertible Notes Offering is expected to close on April 30, 2021, subject to customary closing conditions. The closing of neither the Common Stock Offering nor the Convertible Notes Offering is conditioned upon the closing of the other offering.

Delivered on January 30, 2020

Above Copyright Photo: Spirit Airlines Airbus A320-271N WL N925NK (msn 9407) FLL (Andy Cripps). Image: 949115.

Spirit Airlines aircraft slide show:

Spirit Airlines loses $112.3 million in the first quarter

Delivered on November 9, 2019

Spirit Airlines, Inc. today reported first quarter 2021 financial results.

The company ended the first quarter 2021 with $1.9 billion of unrestricted cash, cash equivalents, short-term investment securities and liquidity available under the Company’s revolving credit facility

First Quarter 2021

As Reported                           Adjusted

First Quarter 2020

As Reported                  Adjusted

(GAAP)                             (non-GAAP)1

          (GAAP)                      (non-GAAP)1

Total Operating Revenues

$461.3 million                      $461.3 million

       $771.1 million                 $771.1 million

EBITDA

$(28.2) million                    $(199.7) million

$8.0 million                   $8.0 million

EBITDA Margin

   (6.1)%                              (43.3)%

1.0%                            1.0%

Pre-tax Income (Loss)

$(138.2) million                   $(307.9) million

       $(74.6) million               $(74.6) million

Net Income (Loss)

$(112.3) million                   $(242.5) million

        $(27.8) million               $(58.9) million

Diluted Earnings (Loss) Per Share

   $(1.15)                             $(2.48)

$(0.41)                         $(0.86)

“We were very pleased to see how well both our domestic and international network performed as demand strengthened in the last few weeks of the quarter. This strength, along with improvement in forward bookings, drove positive cash from operations for the full first quarter 2021 even when excluding the payroll support program funds received. Assuming these trends continue, we believe we can achieve a positive Adjusted EBITDA margin for the full year 2021,” said Ted Christie, Spirit’s President and Chief Executive Officer. “While acknowledging that the recovery is still in progress and may not be linear, we continue to believe we will be among the first U.S. carriers to reach sustained profitability.”

COVID-19
Since its initial onset in early 2020, the impact of the COVID-19 pandemic has evolved and continues to be fluid. Therefore, the Company’s financial and operational outlook remains subject to change. The Company continues to monitor the impact of the pandemic on its operations and financial condition, and to adjust its mitigation and operational strategies, accordingly, in order to protect the long-term sustainability and growth of the Company. Spirit has implemented measures for the safety of its Guests and Team Members as well as to mitigate the impact of COVID-19 on its financial position and operations. Please see the Company’s Quarterly Report on Form 10-Q for the period ending March 31, 2021 for additional disclosures regarding these measures.

Capacity and Operations
Load factor for the first quarter 2021 was 72.1 percent on a year-over-year capacity decrease of 26.9 percent. During the first quarter 2021, the U.S. government implemented negative COVID-19 testing requirements for all inbound international travelers entering the United States. About 12 percent of Spirit’s first quarter 2021 capacity was negatively impacted by this new regulation.

Spirit continued to deliver strong operational results during the first quarter 2021. As measured by the DOT, first quarter 2021 Completion Factor2 was 98.6 percent and on-time performance2 was 85.3 percent.

Revenue Performance
Total operating revenues for the first quarter 2021 were $461.3 million, a decrease of 40.2 percent year over year as a result of continued negative impacts to demand for air travel due to the COVID-19 pandemic. Early in the first quarter 2021, the Company experienced another setback in demand as the new international testing requirements were implemented and some states increased jurisdictional restrictions following spikes in COVID-19 case counts. However, in March 2021, as the vaccine rollout gained traction and jurisdictional restrictions eased, domestic and international demand rebounded strongly.

For the first quarter 2021, total revenue per passenger flight segment (“Segment”) decreased 16.4 percent year over year to $84.27. Fare revenue per Segment decreased 24.2 percent to $31.84 while non-ticket revenue per Segment decreased 10.8 percent to $52.433. As has been the case since the start of the COVID-19 pandemic, non-ticket revenue per segment for the first quarter 2021 was impacted by the suspension or reduction of certain booking-related fees; however, as the quarter progressed and domestic and international demand strengthened, average non-ticket revenue per segment improved to above $55.00 for most of March 2021.

Cost Performance
For the first quarter 2021, total GAAP operating expenses decreased 32.0 percent year over year to $563.8 million, primarily due to the grant component of the funding received through the payroll support program (further discussed below). Adjusted operating expenses for the first quarter 2021 decreased 11.5 percent year over year to $733.5 million4. The decrease in adjusted operating expenses was primarily driven by reductions in various flight-volume related expenses compared to the first quarter last year, such as fuel, ground handling and distribution. These decreases were partially offset by higher aircraft rent and higher depreciation and amortization. Additionally, despite the significant decrease in flight operations compared to the first quarter last year, some variable expenses increased. Salaries, wages and benefits increased marginally due to increased costs related to Team Member benefits, primarily driven by a higher volume of health insurance claims, and landing fees and other rents also increased year over year due to rate increases at various airports Spirit serves and decreases in signatory adjustment credits.

“Our first quarter 2021 Adjusted EBITDA margin of negative 43.3 percent was better than we initially expected due to both revenue and non-fuel operating expense coming in at the better end of our range. Since the beginning of March 2021, demand trends have been progressively improving. Assuming these trends continue, we estimate our second quarter 2021 Adjusted EBITDA margin will be between negative 5 percent to breakeven, assuming a fuel price per gallon of $1.95,” said Scott Haralson, Spirit’s Chief Financial Officer. “With our industry-leading low cost structure, we remain confident that the strength of our business model will allow us to fully capitalize on the growth potential ahead of us and drive sustainable, long-term value for our shareholders.”

Fleet
Spirit took delivery of two new A320neo aircraft during the first quarter 2021, financed through direct operating leases, and purchased two A319ceo aircraft off lease. The Company ended the quarter with 159 aircraft in its fleet.

Liquidity and Capital Deployment
Spirit ended first quarter 2021 with unrestricted cash, cash equivalents, short-term investment securities and liquidity available under the Company’s revolving credit facility of $1.9 billion.

Total capital expenditures for the first quarter 2021 were approximately $92 million, primarily related to pre-delivery deposits associated with future aircraft deliveries and the purchase of two A319 aircraft off lease.

On March 12, 2021, the Company entered into the First Amendment to Credit and Guaranty Agreement (the “First Amendment”), amending its existing Senior Secured Revolving Credit Facility. The First Amendment increases the existing lending commitments by $60 million, for total lending commitments of $240 million, and extends the maturity date from March 30, 2022 to March 30, 2024. The additional $60 million remained undrawn as of March 31, 2021.

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law. This new legislation extended the payroll support program of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) through March 31, 2021 (“PSP2”). On January 15, 2021, the Company entered into an agreement with the United States Department of the Treasury (“Treasury”) in connection with the PSP2 funding. During the first quarter of 2021, the Company received a total of $184.5 million through the PSP2, used exclusively to pay for salaries, wages and benefits for the Company’s Team Members through March 31, 2021. Of that amount, a total of $25.3 million is in the form of a low-interest, 10-year loan. Also, in connection with its participation in the PSP2, the Company issued warrants to the Treasury to purchase up to 103,761 shares of the Company’s common stock at a strike price of $24.42 per share (the closing price of the shares of the Company’s common stock on December 24, 2020). The remaining amount of $156.5 million, net of related costs, is in the form of a grant and was recognized within special credits on the Company’s condensed consolidated statements of operations during the first quarter 2021.

The American Rescue Plan Act of 2021 (“ARP”) was enacted on March 11, 2021, authorizing Treasury to provide additional assistance to passenger air carriers that received financial assistance under PSP2 (“PSP3”). Under the ARP, Treasury will provide up to $14 billion to fund the PSP3 for employees of passenger air carriers. In April 2021, the Company was notified that, subject to final execution of an agreement with Treasury, it will receive approximately $197.9 million under the PSP3 and an additional $27.7 million under the PSP2. The PSP3 extends certain restrictions imposed on participating airlines, including the restriction to refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2021.

Diluted Share Count
The Company elected to early adopt ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” effective January 1, 2021. Per ASU No. 2020-06, if the Company records a net profit, it will use the “If-Converted Method” for its convertible debt. The dilutive impact from the convertible debt under the “If-Converted Method” based on the convertible debt outstanding as of March 31, 2021 would have been 13.7 million shares had the Company recorded a net profit. The Company anticipates it will continue to use the Treasury Stock Method for the dilutive impact related to outstanding warrants.

Top Copyright Photo: Spirit Airlines Airbus A320-271N WL N918NK (msn 9259) FLL (Ken Petersen). Image: 948841.

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Volaris announces the addition of eight incremental Airbus A320neo aircraft in 2021

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Volaris has made this announcement:

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (Volaris), the ultra-low-cost airline serving Mexico, the United States and Central America, has announced the addition of eight more Airbus A320neo aircraft to its fleet in 2021, on top of the three aircraft from its purchase order with Airbus, closing the year with at least 98 aircraft.

Volaris has been able to take advantage of the favorable leasing market conditions under which these aircraft can be added to the fleet, all on long-term leases. Our competitors have been scaling down and this has represented an unprecedented opportunity for Volaris to add additional healthy capacity.

As the vaccination rollout gains momentum in our markets, confidence in air travel has accelerated accordingly and therefore Volaris will be incorporating eight additional A320neo aircraft to its fleet in 2021 through straight operating leases, five of which will enter into service this summer. This additional capacity will be deployed primarily to strengthen our leading position in the Mexican domestic market. The Company is evaluating further market opportunities to add additional aircraft.

These fuel-efficient aircraft will enable Volaris to take advantage of market opportunities in the second half of the year and will further increase the percentage of A320neo family aircraft in its fleet. All this aligned to the Company’s sustainability strategy to ensure industry and business viability in the future.

Top Copyright Photo: Volaris Airbus A320-271N WL N530VL (msn 7553) (WW84) LAX (Michael B. Ing). Image: 952586.

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