Why Spirit Airlines’s Stock Is Spiraling Down 60% | WSJ What Went Wrong

Spirit Airlines isn't wasting any time Spirit Airlines also wasn't wasting money when it ipoed in 2011 it was the most profitable airline in the US earning 40% more per plane than any other carrier in the following years it stock soared with flights 30% cheaper than competitors but after engine troubles plane delivery delays and two failed mergers spared Airlines shares have taken a nose dive and now after reporting narrower losses for the last quarter its future is up in the air so what went wrong $5 for a boarding pass $30 for checked luggage $3 for water $1 for animal crackers Spirit Airlines charged for basically everything allowing it to sell tickets at rock bottom prices the only complimentary item on the plane Ice Spirit bet there were a lot of customers that regular Airlines were kind of leaving on the table because they just can't afford the cost of a ticket uh they didn't give us any peanuts or anything but it's okay and even at those low prices Spirit beta can make a lot of money from 2008 through 2012 Spirit earned $289 million with just 40 planes at most in operation only two US Airlines earned more in the period Southwest and Alaska Air which both had far more planes and 3 years after going public Spirit was the most profitable fastest growing US airline stock prices hit an all-time high but as profits were reaching New Heights cracks and its business were starting to show in 2011 Spirit was also the airline with the most complaints from a customer perspective like it didn't necessarily have the best reputation and at the time you know their CEO was kind of like and you know no one goes into McDonald's and is surprised that they don't see filet Manan on the menu right even still spirit exx said they were optimistic the company had pioneered a new Airline business model in the US and for the first 5 years it had been successful but other companies had been watching as soon as fuel prices dipped in 2015 carriers slashed prices on some tickets cutting into spirit's customer base and Delta introduced a new cabin class basic economy in an effort to compete with spe you know people started to get very nervous like how could spe survive given the choice between a basic economy ticket on American Delta United or a spe ticket why would you still choose Spirit other airlines followed suit United American JetBlue and Hawaiian Airlines launched basic economy seats ticket prices fell across the US stock prices tumbled for Spirit something had to change so in 2016 the company replaced longtime CEO Ben baldon with industry vet Robert fro the old CEO was kind of really aggressive about touting the ultra low cost discount model and he was famous for like funny ads and you know he would get in the overhead Bend had we not implemented this there's no telling what people would try to put in an overhead bin to sort of you know sell the idea that Spirit was going to charge you for the overhead bin so I think they wanted to kind of soften their image and and go in a New Direction fornara set out to address the growing number of customer complaints reorienting the company toward customer service by lowering fees and delays he pulled Spirit out of its freef fall but before the company could rebuild the breaking news stay at home as the coron virus pandemic spreads the airline industry taking a devastating hit major airlines preparing to voluntarily shut down coming out of the pandemic people were not really traveling for business in the same way they had before and the bigger Airlines started going after people going on vacation flying for leisure and those had always kind of been spirit's best customers so no one was surprised when 2 years later Frontier another Budget Airline announced a $2.9 billion cash and stock deal to buy Spirit the deal was announced and everything kind of seemed to be going along and then kind of out of nowhere in April Jet Blue swoops in with its own offer for spirit that offer came in 2022 all cash $3.6 billion shares Rose 22% jet Blue's offer was not solicited um and spirit was really resistant to it Spirit exact set of Jet Blue I have wondered whether blocking our deal with Frontier is in fact their goal by July the frontier deal fell through and on the 28th JetBlue agreed to acquire spirit for $3.8 billion I talked to the CEO Spirit and the CEO of Jet Blue right after they came ultimately came to their agreement and coo Spirit Ted Christie basically said like well business is business spirit's problems didn't end with the failed merger it had ordered expensive new planes from Airbus to run more flights but deliveries were delayed then in July 2023 there was a recall for an Airbus engine Spirit had to ground some of its planes exposure to this issue is very unique and material for us and is having an impact on our margin Spirit was already in debt so it sold more than two dozen planes and used that money to pay down $465 million then rented the planes back to keep flights running Spirits plan to get out of debt seemed to be working but on January 16th a federal judge blocked JetBlue's acquisition of spirit citing Anti-Trust issues that day shares fell 47% even though spirit is a really small player you the justice department felt that it plays a really important role it serves people who Maybe wouldn't have access to travel otherwise who just couldn't afford to travel on another airline as of January the company has roughly $ 1.1 billion in debt due in September 2025 there are analysts who think that Spirit doesn't necessarily have much of a path forward and might ultimately have to file for bankruptcy and and maybe even liquidate um rather than going through a chapter 11 but for now spirit's share price is suffering

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Keywords: spirit, spirit airlines, spirit stock, spirit airlines stock, spirit news, aviation, airlines, aviation news, IPO, jetblue, spirit jetblue merger blocked, spirit jetblue merger, engine troubles, plane delivery, southwest, alaska airlines, basic economy, aa, american airlines, delta airlines, united airlines, spirit bankruptcy, spirit stock price, airbus, spirit frontier merger, antitrust laws, antitrust, ultra low cost carrier, wsj, what went wrong, flying spirit airlines, bnss

Id: JTfwq81LMCI

Length: 6min 40sec (400 seconds)

Published: Fri Feb 09 2024