Amid the rush of people taking trips that they've been putting off during the pandemic, 2023 has generally been a profitable time to be an airline.
Delta Air Lines (DAL) -) recently reported a record second quarter profit of $1.72 billion while United Airlines (UAL) -) has also been reporting earnings upwards of $1 billion consistently for several quarters.
Related: United Airlines earnings in focus as Delta sees more travel demand, higher fuel costs
One exception to the overall trend is the Miramar, Florida-based budget airline Spirit Airlines (SAVE) -) — the third-quarter results that the airline released on Oct. 26 show a $157.6 million net loss despite revenue of $1.2 billion. This is a loss of $1.44 per diluted share.
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Spirit 'not seen the anticipated return to normal demand,' says CEO
"Softer demand for our product and discounted fares in our markets led to a disappointing outcome for the third quarter 2023," Spirit President and CEO Ted Christie said in a statement. "We continue to see discounted fares for travel booked through the pre-Thanksgiving period. And, unfortunately, we have not seen the anticipated return to a normal demand and pricing environment for the peak holiday periods."
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The discrepancy between strong revenue and total loss have to do with high operating expenses of $1.4 billion in the third quarter and $4.3 billion in the year to date. In announcing the result, Christie touched upon the higher fuel cost of $3.15 per gallon as well as the bounce back to lower traveler numbers after the traditionally popular travel period in the summer.
Amid the reported results, Spirit shares fell 4.6% in premarket trading on Oct. 26. In announcing the loss, Christie also said that it will slow down its capacity growth in order to have its business model reflect lower demand.
"Given these continued trends, we are evaluating our growth profile and our competitive position," Christie said. "We have already taken the first steps by modifying the cadence of our aircraft deliveries through the end of the decade and slowing our capacity growth in the near term."
Here is what's going on with the Spirit-JetBlue merger in 2023
Christie also touched upon Spirit's planned merger with JetBlue (JBLU) -), which is currently being challenged by the Department of Justice on antitrust grounds.
While Spirit shareholders approved JetBlue's $3.6 billion bid for the low-cost airline in October 2022, concerns around the merger have to do with JetBlue's plans to increase airfare with the ultra-budget airline by as much as 40% while leaving travelers with fewer competitors to choose from.
The trial is set to begin on Oct. 31 and, in announcing the earnings, Christie said that a merged airline would still be "a viable competitor" to the other options out there. To prove how it plans to enable competition, JetBlue had previously agreed to sell some of its assets at Boston International Airport and Newark Liberty airports to low-cost airline Allegiant (ALGT) -).
"We continue to believe merging with JetBlue and creating a viable competitor to the Big Four US airlines is in the best interest of consumers, Team Members, and shareholders," Christie said. "We are prepared to make the necessary strategic shifts to enable Spirit to compete effectively in this new demand backdrop."
