Joining a long list of companies making employment cuts, Spirit Airlines has announced furloughs for a large group of pilots.
Spirit Airlines Looks to Save Money
Budget airline Spirit Airlines has been a preferred option for years for many people who prefer to travel light.
Their hefty baggage fees offset the low flight prices, but for folks who don’t need more than a backpack, it’s possible to save.
Staff Furloughs on the Horizon
But after a difficult financial year, Spirit Airlines is making cuts to staff in an effort to save money and avoid more drastic measures.
Starting September 1st, around 260 pilots will be temporarily displaced.
Deferred Aircraft Deliveries Expected
The airline is also pushing some aircraft deliveries that were scheduled from 2025 through 2026 out to 2030 at the earliest.
They plan to continue to accept deliveries for other years, but the one-year break is expected to ease Spirit’s financial woes.
Spirit’s Amended Contract with Airbus
Spirit Airlines had to make changes to a contract it had in place with Airbus to defer the aircraft deliveries, but Spirit’s president and CEO Ted Christie says the decision will have a positive impact on the company’s bottom line.
Airline Expects to Save Millions
In a statement released this week, Spirit explained the updated plans in detail: “the agreement with Airbus will improve Spirit’s liquidity position by approximately $340 million over the next two years.”
Short-Term Solutions for Long-Term Success
In the statement, Christie noted that the planned furloughs were part of a long-term plan to prevent permanent financial damage to the company as a whole.
“Protect Team Members”
The CEO suggested that the goal was to avoid layoffs and “protect Team Members while balancing our responsibility to return to positive cash-flow.”
“We Had to Make the Difficult Decision”
“I am extremely proud of our dedicated Spirit team for their focus and resilience over the last few years,” Christie said in the statement.
“Unfortunately, we had to make the difficult decision to furlough Pilots given the grounded aircraft in our fleet and our deferral of future deliveries.”
Number of Aircraft Deliveries Not Impacted
Spirit’s release also confirms that the deferrals do not impact how many aircraft they will ultimately buy from Airbus, and that the plan only shifts the timeline of some of the deliveries.
CEO Reacts to Revenue Loss With Optimism
After a 5% total drop in revenue for 2023, Christie spoke optimistically about the plan to get back on track.
“The Spirit Team is 100% Clear and Focused”
“The Spirit team is 100% clear and focused on the adjustments we are currently deploying and will continue to make throughout 2024 to drive us back to cash flow generation and profitability,” he said.
A Merger Gone Awry
Last year, it was announced that Spirit Airlines hoped to merge with JetBlue in a move that would combine the two companies’ resources.
Federal Judge Blocks JetBlue Merger
However, this merger was shut down in a federal court earlier this year when the U.S. Department of Justice shared concerns that it would deliver a blow to airline competition.
Concerns About Industry Impacts
The DOJ said that the merger would have negative impacts on the industry, causing airfare price hikes and decreasing competition.
A federal judge blocked the merger in an attempt to prevent the DOJ’s concerns from becoming reality.
“Competition is the Lifeblood of the Airline Industry”
“Competition is the lifeblood of the airline industry, and we must ensure it thrives to protect consumers,” said an unnamed DOJ official at the time.
JetBlue and Spirit Unhappy with Court’s Decision
JetBlue and Spirit Airlines did not take the rejection of their merger without a fight, saying they were confident that the move would ultimately benefit consumers and their competition.
Arguments in Favor of the Merger
Citing expected cost reductions that would reduce airline prices and more extensive route options, the airlines said they expected the merger to have positive effects.
Spirit’s Pilots Weigh Options
With furloughs coming in September, Spirit’s pilots will now be faced with whether to wait out the financial concerns of their company in hopes of returning to the skies or searching for a new job.
Furloughed Employees Await More Information
Details of the furloughs have not been announced, but generally, furloughed employees do not receive their salary. Typically, affected employees will continue to receive benefits like health insurance.
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The post Spirit Airlines Takes Tough Measures: Furloughs Pilots, Delays Aircraft Orders first appeared on From Frugal to Free.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
