S&P moves Spirit outlook to negative

S&P said it changed its outlook for Spirit Airlines Inc. to negative from stable and affirmed the B issuer rating.

“We believe various operating constraints will continue to hamper Spirit's ability to improve its profitability and cash flow generation through 2024. In September 2023, RTX Corp. (Pratt and Whitney's parent company) announced that a manufacturing flaw in an engine component could require it to remove, inspect, and repair about 3,000 geared turbofan (GTF) engines over the next two to three years.

“This included an initial 200 engines that were to be removed from service for accelerated inspection in the third quarter of 2023, due to which Spirit recently removed three Airbus A320neo aircraft from its fleet. The details of how many more engines from Spirit's fleet will be included in the remaining 2,800 identified by RTX is currently unknown. While RTX has announced its intention to compensate all airlines whose operations have been disrupted by this issue, the form and timing of this compensation is currently unknown,” the agency said in a press release.

The negative outlook reflects the position that Spirit's performance in 2023 will be weaker than S&P’s previous forecasts due to various factors, including engine issues, fuel prices and pressure on ticket pricing. “Excluding a potential acquisition by JetBlue Airways Corp., we expect FFO to debt will approach 0% in 2023, improving somewhat to the mid-single-digit percent area in 2024,” the agency said.

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