Spirit Airlines, Inc. today reported fourth quarter and full year 2021 financial results.

Ended the year 2021 with $1.7 billion of unrestricted cash, cash equivalents, short-term investment securities and liquidity available under the Company’s revolving credit facility.

“Our fourth quarter 2021 results came in better-than-expected, despite the negative impact from Omicron-related flight disruptions, primarily due to very strong demand over the peak December holiday period. I want to thank the entire Spirit team for their professionalism and commitment to providing excellent service to our Guests,” said Ted Christie, Spirit’s President and Chief Executive Officer.

“Looking ahead to the first quarter 2022, we have seen sequential improvement in bookings since mid-January and early trends indicate travel demand in the second half of the first quarter should be quite strong. Also, today we announced that Spirit and Frontier have signed a definitive merger agreement under which we plan to combine to bring more ultra-low fares to more travelers in more destinations across the United States, Latin America and the Caribbean. We are excited about this combination and believe it will have tremendous benefits for consumers, Team Members, and shareholders.”

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. 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 Annual Report on Form 10-K for the period ending December 31, 2021 for additional disclosures regarding these measures.

The Company believes that providing analysis of financial and operational performance compared to fourth quarter 2019 is a more relevant measure of performance due to the severe impacts from the COVID-19 pandemic on our financial results and operational performance for 2020.

Fourth Quarter 2021 Results
Adjusted EBITDA for the fourth quarter 2021 was $14.9 million. The Company had an unusual number of operational disruptions and flight cancellations during the peak December 2021 holiday period, due to staffing shortages as a result of the rapid spread of the Omicron variant. The irregular operations during the peak December 2021 holiday period negatively impacted fourth quarter 2021 Adjusted EBITDA by approximately $30 million, primarily due to additional passenger re-accommodation expenses and higher labor expenses, partially offset by lower fuel expense and landing fees. Despite this impact, Adjusted EBITDA margin for the fourth quarter 2021 was 1.5 percent, better than the Company’s initial expectations of flat to negative 5 percent.

Capacity and Operations
Load factor for the fourth quarter 2021 was 79.8 percent on a 9.5 percent capacity increase versus fourth quarter 2019. Spirit’s fourth quarter 2021 DOT on-time performance² was 78.1 percent and its Completion Factor² was 97.7 percent.

The Company’s operations stabilized during the first week of January 2022 and for the full month of January 2022, the Company’s on-time performance² was 73.8% and Completion Factor² was 96.5%.

Revenue Performance  
Total operating revenues for the fourth quarter 2021 came in better than expected at $987.6 million, an increase of 1.8 percent versus fourth quarter 2019. The irregular operations over the peak December 2021 holiday period negatively impacted total operating revenues by approximately $7 million.

On a per passenger flight segment basis, for the fourth quarter 2021 total revenue per passenger flight segment (“Segment”) increased 3.1 percent compared to the same period in 2019 to $114.15. Fare revenue per Segment increased 0.5 percent to $52.93 and Non-ticket revenue per Segment increased 5.5 percent to $61.22³. Investments in enhanced product offerings and improved merchandising as well as the realized benefits from revenue management initiatives continue to drive the improvement in Non-Ticket revenue performance.

Cost Performance
Compared to the fourth quarter 2019, total GAAP operating expenses for the fourth quarter 2021 increased 24.1 percent to $1,049.1 million. Adjusted operating expenses for the fourth quarter 2021 increased 24.7 percent compared to the fourth quarter 2019 to $1,047.6 million⁴. Compared to the fourth quarter 2019, in addition to costs driven by increased flight volume and a greater number of aircraft, these increases were primarily driven by passenger re-accommodation expense incurred as a result of the irregular operations over the peak December 2021 holiday period and rate increases related to fuel, labor, and airport rents.

For the fourth quarter 2021, the Company’s adjusted operating expenses came in better than expected as the net costs related to the December irregular operations were more than offset by lower average fuel rates, lower airport costs, and overall effective cost management.

“Our Adjusted EBITDA margin for the fourth quarter 2021 was 1.5 percent, 400 basis points better than the mid-point of our guide on higher revenue and lower costs,” said Scott Haralson, Spirit’s Chief Financial Officer. “Over the next year we will leverage opportunities to restore and optimize our network and we will continue to push the horizon on non-ticket production. We will also remain keenly focused on managing costs and finding efficiencies to offset inflationary cost headwinds we face.”

Fleet
Spirit took delivery of five new A320neo aircraft during the fourth quarter 2021. The Company ended the year with 173 aircraft in its fleet.

Liquidity and Capital Deployment
Spirit ended fourth quarter 2021 with unrestricted cash, cash equivalents, short-term investment securities and liquidity available under the Company’s revolving credit facility of $1.7 billion.

Total capital expenditures for the twelve months ended December 31, 2021 were $333.1 million, primarily related to pre-delivery deposits associated with future aircraft deliveries and the purchase of four aircraft and two engines off lease, and two spare engines purchased with cash. In addition, one of the three aircraft delivered under sale-leaseback transactions during the fourth quarter 2021 did not qualify to be accounted for as a sale-leaseback; therefore, it is being accounted for as an aircraft financed through fixed-rate long-term debt. The net purchase price of this aircraft was recorded within capital expenditures in the fourth quarter 2021.

From CNN:

Spirit Airlines flight attendants are receiving double pay on any work through January 4, 2022 their union said, as the budget carrier scrambles to keep its schedules intact after U.S. airlines were hammered by a week of mass cancellations according to CNN.

More from CNN:

https://www.cnn.com/2021/12/31/business/spirit-airlines-flight-attendant-pay-covid/index.html

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

Ended the third 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

“I want to thank our Team Members for persevering and overcoming the challenges we have faced along the road to recovery in these last few months and for remaining focused on the road ahead nonetheless. Higher fuel prices, continued travel restrictions, and near-term staffing issues have all played their part in delaying our return to sustained profitability, but they have not changed the long-term outlook for Spirit.  Looking ahead, we continue to position Spirit for the post-pandemic environment – an environment in which Spirit will remain the low-cost leader among U.S. operators, with ample opportunities for continued growth and among the best margins in the business,” said President and Chief Executive Officer Ted Christie.

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. 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 September 30, 2021 for additional disclosures regarding these measures.

The Company believes that providing analysis of financial and operational performance compared to third quarter 2019 is a more relevant measure of performance due to the severe impacts from the COVID-19 pandemic on our financial results and operational performance for 2020.

Capacity and Operations
The Company experienced significant operating challenges during the quarter driven in part by adverse weather conditions which, when combined with airport staffing shortages and crew dislocations, led to an unusually large number of flight delays and cancellations. Following these disruptions, and in light of continued airport staffing issues, Spirit elected to make tactical schedule reductions to help support its operational reliability, which resulted in lower-than-expected capacity growth for the quarter. Load factor for the third quarter 2021 was 77.6 percent on a 3.5 percent capacity increase versus third quarter 2019. Spirit’s DOT on-time performance² was 68.3 percent and its Completion Factor² was 93.5 percent.

Revenue Performance  
Total operating revenues for the third quarter 2021 were $922.6 million, a decrease of 7.0 percent versus third quarter 2019. Despite the operational challenges in the quarter and the continued negative impact on travel demand due to COVID-19, the Company experienced quarter-over-quarter improvements in total operating revenues and operating yields, increasing 7.4 percent and 8.0 percent, respectively from second quarter 2021.

For the third quarter 2021, total revenue per passenger flight segment (“Segment”) increased 0.7 percent compared to the same period in 2019 to $110.91. Fare revenue per Segment decreased 7.6 percent to $50.61 while Non-ticket revenue per Segment increased 8.9 percent to $60.30³. Spirit continues to deliver strong Non-ticket performance as a result of investments in enhanced product offerings and improved merchandising as well as the realized benefits from revenue management initiatives.

Cost Performance
For the third quarter 2021, total GAAP operating expenses, including $78.9 million of special items primarily related to the grant component of the funding received through the payroll support program (further discussed below), increased 4.8 percent compared to the third quarter 2019 to $908.6 million. Adjusted operating expenses for the third quarter 2021 increased 15.1 percent compared to the third quarter 2019 to $987.5 million⁴. Compared to the third quarter 2019, these changes were primarily driven by an increase in a) salaries, wages and benefits related to higher crew member headcount and contracted rate increases; b) other operating expenses driven by increased flight volume and additional costs incurred as a result of the irregular operations during the quarter; c) aircraft rent expense as a result of a greater number of aircraft financed under operating lease arrangements; and d) higher depreciation and amortization expense due to the depreciation of additional aircraft and the amortization of heavy maintenance events.

Excluding fuel, adjusted operating expenses came in lower than the Company’s expectations provided in mid-August primarily due to less flight volume than expected, lower other operating expenses resulting from a slower pace of hiring, and lower airport rents and landing fees, which have been improving at a more accelerated rate than anticipated.

“The resiliency and strength of our business model has allowed us to deliver financial performance that is among the best throughout the pandemic and gives us confidence in our ability to navigate the challenges ahead in what has proven to be a prolonged recovery period. Considering labor resource uncertainties, we are slowing the pace at which we are going to push the airline back to full fleet utilization and expect to produce 53 to 55 billion available seat miles in 2022”, said Chief Financial Officer Scott Haralson. “We are still targeting sub-6 cent adjusted cost per available seat mile ex-fuel (“Adjusted CASM ex-fuel”) once we get to full utilization. The timeline to achieve that target has stretched out to late 2022/early 2023 due to our slower pace of growth, and increased inflationary pressures – particularly labor and airport costs – will push the target closer to six than we originally expected. We are confident that we will still be among the best margin producers in the business, while remaining the low-cost leader, when the recovery has fully taken hold.”

Fleet
Spirit took delivery of four new A320neo aircraft during the third quarter 2021, three of which were financed through direct operating leases and one under a sale leaseback transaction. The Company ended the quarter with 168 aircraft in its fleet.

Liquidity and Capital Deployment
Spirit ended third 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 nine months ended September 30, 2021 were approximately $249 million, primarily related to pre-delivery deposits associated with future aircraft deliveries and the purchase of four aircraft and two engines off lease.

As previously disclosed, in April 2021, Spirit entered into an extension of the Payroll Support Program (the “PSP3”) under Title VII, Subtitle C of The American Rescue Plan of 2021, with the United States Department of the Treasury (“Treasury”), pursuant to which the Company received a total of $197.9 million used exclusively to pay for salaries, wages and benefits for the Company’s Team Members through September 30, 2021. Of that amount, $29.4 million is in the form of a low-interest 10-year loan. In connection with the Company’s participation in the PSP3, the Company issued a warrant to the U.S. Treasury to purchase up to 80,539 shares of the Company’s common stock, (the “Warrant”), in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. The Warrant may be exercised at an exercise price of $36.45 at any time prior to the fifth anniversary of its issuance. The remaining amount of $167.0 million, net of related costs, is in the form of a grant, which  was recognized in special credits in the Company’s condensed consolidated statement of operations during the second and third quarters 2021.

Tax Rate
On a GAAP basis, the Company’s effective tax rate for the third quarter of 2021 was 186.9 percent, materially higher than the Company’s historic average GAAP tax rate. The higher-than-usual GAAP tax rate was driven by a tax benefit resulting from a change in the expected 2021 annualized tax rate. The Company’s non-GAAP tax rate for the third quarter 2021 was 22.1 percent.

Forward Looking Guidance
The fourth quarter and full year 2021 guidance items provided below are based on the Company’s current estimates, and are not a guarantee of future performance. There could be significant risks and uncertainties that could cause actual results to differ materially, including the risk factors discussed in the Company’s reports on file with the Securities and Exchange Commission. Spirit undertakes no duty to update any forward-looking statements or estimates.

Third Quarter 2021 Highlights

• Spirit initiated service to Puerto Vallarta, Mexico
• During third quarter 2021, Spirit announced new service to Tegucigalpa, Honduras starting November, 2021
• Spirit announced plans to donate more than $200,000 in the second half of 2021 alongside ticket donations and sponsorships for a total of 17 nonprofit organizations, including many philanthropic efforts in South Florida. The donations come from the Company’s longstanding Corporate Social Responsibility efforts and from The Spirit Charitable Foundation, with ongoing support for nonprofit organizations focused on education, the environment, the arts, service members and disaster recovery

Spirit Airlines has announced it has signed an agreement with Pratt & Whitney, a Raytheon Technologies business, through its affiliate, IAE International Aero Engines AG, for PW1100G-JM engines to power its latest order of new Airbus A320neo Family aircraft.

Deliveries from the firm 100-aircraft order are expected to begin in 2023, and the agreement includes options for another 50 aircraft.

Spirit Airlines announced plans to serve Ponce via Mercedita International Airport (PSE), adding to existing options in San Juan (SJU) and Aguadilla (BQN).

Spirit is starting service at PSE with daily flights to Orlando (MCO) launching Feb. 16, 2022. MCO is one of Spirit’s largest airport operations with around 70 flights each day, which will provide one-stop options between PSE and more than a dozen cities throughout the country.

Spirit flew its first flights to Puerto Rico in 2001 when it inaugurated service to San Juan. The airline followed up in 2007 with an expansion to Aguadilla. Adding Ponce will provide Spirit’s Guests with eight nonstop route choices for travel between airports throughout Florida and Puerto Rico.