The Main Squawk: Spirit is spared from bankruptcy, at least for now
In a move that shocked Wall Street analysts, Spirit announced Friday it was able to extend a deadline to make payments on some of its debt. The Airline was facing an October 21 deadline to make payments on a card processing agreement with U.S. Bancorp. Fortunately, through the sheer will and expertise of overpaid executives, the start of those payments now won’t begin until December 23.
In the same announcement, Spirit also revealed it maxed out a $300 million line of credit with Citibank to help it meet its goal of ending the year with over $1.0 billion in cash. For those struggling to see the big picture here, this is equivalent to passing on “GO” in Monopoly, collecting your $200, and then immediately landing on “Income Tax.” Say goodbye to that $200!
On another front, it is unclear whether talks with the Airline’s bondholders to restructure payments are still underway. Nearly one-third of the Company’s $3.3 billion in liabilities are held by investors who at some point were ballsy enough to hand them a fist full of cash. (They’d probably have better luck lending to a three-year-old.)
Boeing and the International Association of Machinists and Aerospace Workers (IAM) have a new proposal on the table to end the strike. The offer surfaced over the weekend and includes the following enhancements to the Company’s previously announced “best and final” offer:
- 35% increase in wages over four years, broken down as:
- Year 1: 12% increase
- Year 2: 8% increase
- Year 3: 8% increase
- Year 4: 7% increase
- Reinstated incentive pay program with a “guaranteed” minimum annual payout of 4% starting February 2025
- 401(k) matching of up to 8%, alongside an automatic Company contribution of 4%, and a one-time contribution of $5,000 to each member’s 401(k)
- Ratification bonus of $7,000
If ratified, the offer will outpace inflation by upwards of 2%, according to an analysis by The Air Current. IAM members are expected to vote on the proposal this week.
The strike has been ongoing since September 13 and is costing the Company up to $1 billion per month. Boeing previously warned it could suffer a loss as large as $6 billion for the quarter ending September 30.
United reported a blockbuster quarter with $1 billion in profit on nearly $15 billion in revenue. Its earnings indicate it is successfully capitalizing on American’s drawdown in the corporate sales department, which is up 13%. The largest improvement across the Airline’s network comes from its basic economy product, which is up by over 20% for the quarter.
In addition to its solid earnings report, the Chicago-based airline announced a $1.5 billion share buyback program for investors. It is the first Legacy airline to launch a program of this kind since the pandemic. The Airline currently has $14 billion in cash-on-hand, which is more than any U.S. airline today—including Southwest.
United’s stock is up 56.3% in the past three months as of Friday afternoon.
The DOT announced awards for five long-haul Washington-DCA slots on Wednesday, with five airlines posting large gains. Each slot is exempt from the airport’s 1,250-mile perimeter rule and will operate with the following routes:
- DCA to San Diego, with service operated by Alaska
- DCA to San Antonio, with service operated by American
- DCA to Seattle, with service operated by Delta
- DCA to Las Vegas, with service operated by Southwest
- DCA to San Francisco, with service operated by United
We discussed the auction for these slots earlier this summer and why they are important. Since Dulles isn’t a “fan favorite” airport—unless you’re United—when airlines have an opportunity to expand at DCA, they have to take it. And for these five lucky airlines, they managed to do just that.
The DOT will begin its required 10-day comment period on October 30, which will be sure to draw angst from the LCCs that lost out.
Mesa is switching to an all-Embraer fleet and will eliminate its fleet of fifteen Bombardier CRJ-900 aircraft by March 1. The struggling Regional airline suffered a $20 million loss for Q3 2024 and says the change is being made “at United’s request.”
United’s strategy of curbing its regional footprint has hindered Mesa’s financial health since becoming its only customer in 2022. As a result, the Regional airline has been selling aircraft, furloughing pilots, and deferring class dates for new pilots.
Mesa currently operates exclusively for the United Express network with CRJ bases in Louisville and Phoenix, and ERJ bases in Houston and Washington-IAD.
Alaska is changing the rules associated with its frequent flyer program, something DOT Secretary Pete Buttigieg is watching like a hawk.
American sucked a cargo container into one of its Boeing 787s.
Delta is eliminating buddy passes as a pass travel benefit.
Dunedin in New Zealand is implementing a 3-minute hug limit at the airport.
Newark is trying to go “from worst to best” with newly-announced plans to revitalize Terminal B. (Spoiler alert: no one believes it.)
Southwest pilots are excited about Elliott’s new podcast.
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