On Wednesday, Spirit Airlines CEO Dave Davis informed staff about impending job cuts and a significant reduction in the airline's flight schedule for November. This announcement comes just weeks after the carrier declared its second bankruptcy in less than a year, highlighting ongoing challenges within the budget airline's operations.
Davis conveyed in a memo, which was reviewed by CNBC, that employees can expect a 25% reduction in capacity over the next year as the airline aims to optimize its network and focus on its most profitable markets. This capacity reduction mirrors a similar decrease observed from the time Spirit emerged from bankruptcy in March until the end of June. The new cuts signal a strategic shift in the airline's approach to managing its near-term flight schedule while actively working to lower operational costs.
As part of its restructuring efforts, the struggling discount carrier is currently in discussions with vendors and aircraft lessors, while also evaluating its fleet size. Davis emphasized that these evaluations are crucial for the airline to regain stability and that they will likely impact the size of its workforce. "We are committed to keeping you updated as these decisions are made," he noted in his communication to employees. The CEO acknowledged the uncertainty these changes may bring but stressed that they are necessary for Spirit to emerge stronger from this challenging situation.
When asked about the number of employees who would be affected by these changes, Spirit Airlines informed CNBC that they are engaging with labor unions to discuss the repercussions of the network and fleet adjustments on their team members. The airline has already implemented furloughs and demotions affecting hundreds of pilots, with some flight attendants opting for voluntary unpaid leaves of absence. The Association of Flight Attendants-CWA, the union representing Spirit flight attendants, expressed concerns regarding potential changes to their collective bargaining agreement and is preparing for any necessary actions to protect their interests.
Spirit Airlines, known for its distinctive bright yellow planes and low fares coupled with numerous fees, has faced significant challenges in recent years. High operational costs, shifting consumer travel preferences, and increased competition from larger airlines have disrupted the carrier's previous success. A failed acquisition attempt by JetBlue Airways further complicated the situation, leaving Spirit to navigate these turbulent waters independently.
After emerging from bankruptcy in March, the airline's leadership aimed to achieve stable financial footing. However, they focused primarily on negotiating with bondholders, exchanging nearly $800 million in debt for equity. Unfortunately, the airline has continued to grapple with escalating costs and a weaker-than-expected demand for domestic travel. From March 13 to the end of June, Spirit reported a staggering loss of nearly $257 million.
Earlier this month, Spirit Airlines announced flight cuts to 11 destinations and decided against launching a 12th route as originally planned. Meanwhile, competitors such as United Airlines, Frontier Airlines, and JetBlue Airways have unveiled plans for new flights aimed at capturing Spirit's customer base. As the airline industry continues to evolve, Spirit's ability to adapt to these changes will be critical for its survival and future growth.
