The Main Squawk: Spirit is in discussions with creditors of a potential bankruptcy filing, signaling the obvious
Spirit is in talks with creditors about a potential bankruptcy filing, according to an exclusive published by The Wall Street Journal. The discussions appear to be focused on keeping the Airline out of the courtroom, possibly by changing the terms of some of its accounts payable.
CEO Ted Christie did not supply The Journal with details of the discussion, but said, “Needless to say, [this] is a priority, and we are focused on securing the best outcome … as quickly as possible.”
The sense of urgency is real. Since the court struck down its merger with JetBlue in January, the Company’s debts have increased to $3.3 billion, one-third of which are bonds. The carrier is facing a deadline to refinance or extend payments on those bonds by October 21. Anything short of an agreement to address the timing of payments on those bills has the potential to send the Airline into a frenzy to come up with cash.
The Company’s shares were down nearly 30% at the end of the week.
Southwest has “too many planes” on order for its current expansion plans, according to CFO Tammy Romo. As mentioned in last week’s recap, the Dallas-based carrier is not happy with Boeing’s delivery timeline. The delays are preventing its ability to tap into markets best-served by the Boeing 737 MAX 7, which is impacting the Company’s ability to grow at the rate it wants.
The proposed “Band-Aid” to remedy the situation, as CEO Bob Jordan puts it, is to “monetize [the] order book.” With nearly 500 aircraft on order and options for 200 more, this idea can work, but it’s going to be slow-going.
Source: Southwest’s “Investor Day” last month
The rough outline of the plan involves selling aircraft that are currently in the Airline’s fleet, and replacing them with new aircraft as they roll off the production line. There is a market for airlines in need of used Boeing 737 aircraft (hello Avelo). The question is: how quickly will Southwest shed those aircraft to drum up cash while it awaits delivery of new Boeing 737 MAXs?
Boeing and the International Association of Machinists and Aerospace Workers (IAM) resume negotiations on Monday in hopes of resolving their labor dispute. The meeting will mark the third time union leaders and management have met since the start of the strike on September 13.
The aircraft manufacturer’s previous “best and final” offer was rejected by the IAM last month, which You’re on Guard! learned was slid across the table by the Company with zero input from the Union.
Unionized labor costs make up less than 5% of overall costs at the manufacturer, according to its Q2 2024 earnings release.
United passed the FAA’s “enhanced oversight and approval process,” freeing the Company from its restraints, and surprising absolutely no one. The Administrator announced last week that despite a few wheels falling off here and there, it found no major safety issues with the carrier and that it was free to resume its expansion.
The Chicago-based carrier suffered some high-profile safety events earlier this year, including a Boeing 777 nearly plunging into the Pacific on departure from Hawaii, a tire falling off a Boeing 777 on takeoff in San Francisco, another tire falling off a Boeing 757 in Los Angeles, and a runway excursion in Houston-IAH involving a Boeing 737 MAX.
The FAA previously launched an investigation into the Airline following those events, placing a six-month pause on its expansion plans. This slowed the ability for the Company to accept delivery of aircraft, hurting Boeing, and triggering a momentary pause in hiring earlier this year.
The Airline is on track to hire 1,600 pilots by the end of the year.
Aer Lingus will begin service from Dublin to Nashville in April 2025. The route will be served by its fleet of Airbus A321XLRs.
Air France inks a deal with Starlink.
Alaska expands its partnership with Starlux.
Delta is expanding its Bombardier CRJ-550 operation to Detroit.
The FAA will permit pilots to credit flight time flown in experimental aircraft toward additional ratings and certificates, and will cancel its practice of printing CFI certificates with expiration dates. Flight instructors will still need to maintain currency to exercise the privileges of their certificate.
Frontier made an emergency landing at Las Vegas after experiencing smoke in the cabin and cockpit.
Hurricane Milton may strike the West Coast of Florida as early as Tuesday night.
KLM plans major cost cuts to strengthen its finances.
Southwest shares rise on news former U.S. Airways CEO Rakesh Gangwal takes a $100 million stake in the Company.
United flight attendants are demanding an immediate 28% pay increase.
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