Spirit Airlines’ hopes of double-digit margins dashed by A320neo engine issues

Spirit Airlines said that its expected double-digit operating margin is being hampered by A320neo engine issues
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Spirit Airlines revealed that while it expects to post a positive operating margin in Q2 2023, A320neo engine supply issues and pilot attrition will prevent the company from achieving an even better profit margin during the quarter. 

“For the second quarter 2023, we estimate our operating margin will range between 4.5 to 6.5 percent. In this demand environment, and with a declining fuel price in the second quarter of this year, the business at full utilization should be producing double digit operating margins,” said Scott Haralson, the Chief Financial Officer (CFO) of Spirit Airlines on the company’s Q1 2023 results announcement.  

“However, we continue to be hampered by NEO engine availability and pilot attrition issues that are preventing us from ramping up aircraft utilization,” Haralson added.  

According to the CFO, while engine issues affecting the Airbus A320neo aircraft family should improve, it “will likely remain a drag on utilization for the rest of the year”.  

The A319neo, A320neo, and A321neo and their variants are powered by either the CFM International LEAP-1A or Pratt & Whitney PW1100G engines. All Spirit Airlines A320neo aircraft are powered by the PW1100G engine. 

In terms of pilot attrition, the executive said that “pilot attrition levels have improved slightly from last year, but they are still volatile and they have not yet improved to the levels that we had hoped”. While the low-cost carrier expects to end the year profitably with ever-improving operating margins, its capacity growth will be in the lower range of 18% to 20% expected for 2023. 

The airline ended Q1 2023 with a net loss of $103.9 million with operating revenues of $1.3 billion. Operating costs grew by 24% compared to Q1 2022, which was primarily driven by a 32.3% increase in fuel costs compared to the same period last year. 

“For the first quarter 2023, our adjusted operating margin came in better than expected, helped by lower fuel and a strong revenue per available seat mile (“TRASM”) performance,” noted Ted Christie, the Chief Executive Officer (CEO) of Spirit Airlines. 

Much like JetBlue, Spirit Airlines stated that the companies expect to merge by H1 2024. 

In March 2023, for example, airBaltic stated that it will have to wet lease more aircraft to cover the engine supply issues from Pratt & Whitney. The Latvian airline, which is an all-Airbus A220 operator, is having trouble with the PW1500G engine from the same PW1000G engine family. 

Hawaiian Airlines is yet another airline that has experienced issues with the PW1100G, blaming the lack of availability of its A321neo fleet for the increased fuel bill in Q1 2023 compared to Q1 2022. 

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