Justin Sullivan
U.S. budget carrier Spirit Airlines (NYSE:SAVE) on Friday said it expects to get between $150M and $200M in compensation for the grounding of some of its planes due to a defect in Pratt & Whitney engines.
Spirit (SAVE) said it had entered into an agreement on March 26 with International Aero Engines, an affiliate of RTX (NYSE:RTX) unit Pratt & Whitney, for a monthly credit through the end of 2024 as compensation for each SAVE aircraft that was grounded.
Last year in July, Pratt & Whitney said that it had found a “rare condition” in the powdered metal used to make certain engine parts that would require “accelerated inspection” of the PW1100G-JM geared turbo fan (GTF) fleet, which powers the A320neo aircraft.
Spirit (SAVE) in October last year said the issue would ground an average of 26 of its Airbus (OTCPK:EADSF) (OTCPK:EADSY) A320neo aircraft for the full year 2024.
“The estimated impact of the Agreement on Spirit’s (SAVE) liquidity is currently expected to be between $150M and $200M, primarily determined by the number of days accumulated in 2024 in which Spirit (SAVE) aircraft are unavailable for operational service due to GTF engine issues,” the budget airline said in Friday’s regulatory filing.
“Spirit (SAVE) intends to discuss appropriate arrangements with Pratt & Whitney in due course for any Spirit (SAVE) aircraft that remain unavailable for operational service after December 31, 2024,” the carrier added.
The compensation and the boost to Spirit’s (SAVE) liquidity will likely please investors, as the company has been struggling to turn in a profit since the pandemic and is laden with debt. Moreover, Spirit’s (SAVE) future is unclear after the collapse of its attempted merger with JetBlue Airways (JBLU).