US’s Spirit Airlines counts the cost of flight cancellations

The cancellation of more than 2,826 flights over an 11-day stretch between July 30 and August 9, 2021, has cost Spirit Airlines (NK, Fort Lauderdale Int’l) an estimated USD50 million in lost revenue and has caused spending to soar up to USD1 billion.

And the budget carrier is to make further “tactical schedule reductions” throughout the remainder of the 3Q21 ending September 30, citing continued airport staffing shortages. It blamed its previous service meltdown on “overlapping challenges”, primarily airport staffing shortfalls and adverse weather resulting in severe crew dislocations.

Apologising for the disruptions in a regulatory filing on August 16, Spirit’s president and chief executive Ted Christie said the company was experiencing increased short-notice cancellations and softer-than-expected booking trends for the quarter related to rising COVID-19 cases and the short-term negative impact on the brand from the irregular operations.

This was expected to drive an additional USD80 million to USD100 million loss in revenue during the third quarter. The company now estimated its 3Q21 total operating revenues to be 4% to 11% lower at USD885million to USD955 million compared to the same period in 2019.

Spirit estimated its 3Q21 adjusted operating expenses to reach USD1 billion as the irregular operations had pushed up expenses. These included the cost of re-accommodating passengers on other airlines, covering hotel and other travel-related expenses, and additional labour costs, including overtime payments. These increases were partially offset by lower fuel costs and landing fees due to diminished capacity.

The company now expects an adjusted loss before interest, taxes, depreciation, and amortisation margin of 8% to 1%, compared with its previous forecast for a profit margin of 10% to 15%.

“We believe the interruption was a singular event driven by an unprecedented confluence of factors and does not reflect systemic issues,” commented Christie. “Over the past few years, we have made investments to be one of the most efficient and reliable airlines in the U.S. industry, and we are committed to taking the steps necessary to make sure we maintain that standard.”

The US Department of Transportation said it had reminded Spirit of its legal obligations, including its obligation to provide prompt refunds when applicable. It monitored the airline and reviewed complaints about the carrier “to ensure that consumers’ rights are not violated. The Department will act if the airline fails to comply with the applicable law,” it stated.