Discount carrier Spirit Airlines seemed immune from the worst ravages of the coronavirus pandemic: the holiday flyers that make up the bulk of its flyers were returning to skies at a steady clip and it was on track to resume most of its flights by year end.
That recovery, however, has proved to be what Spirit CEO Ted Christie called an “outlier” in a Tuesday (July 28) letter to staff that was viewed by TPG.
“For a short time in June, travel slightly rebounded during our traditional busy season, and our July capacity was increased to match,” he said. “Unfortunately, however, the increase in demand reversed as we saw increases in COVID cases and state-imposed quarantines.”
Data from trade group Airlines for America (A4A) shows net passenger bookings — or new reservations minus cancellations — fell at the end of June when COVID infections were spreading and has held steady at down around 80% compared to last year since the beginning of July.
But A4A’s numbers are national and a large portion of Spirit’s flights touch destinations like Florida that have been hit hard by the recent coronavirus surge. As a result, the airline will cut its August schedule by 35% year-over-year and September by 45% year-over-year. And Spirit’s end-of-the-year prognosis is uncertain.
Spirit travelers whose flights are cancelled will receive a credit for the full value of their ticket, or can request a refund from the airline.
As a result of the schedule cuts, Spirit will send federally-mandated notices warning of possible furloughs to between 20% and 30% of its frontline staff on Friday, July 31, said Christie. Notifications will go to pilots, flight attendants, dispatchers, guest service agents and ramp agents.
Employment protections under the federal coronavirus aid package, or CARES Act, expire on Sept. 30. As a result, airlines must send possible furlough or layoff notices by around Aug. 1 to meet federal requirements of at least 60 days notice.
Labor unions, including the Air Line Pilots Association (ALPA) and Association of Flight Attendants-CWA (AFA) that both represent staff at Spirit, are pushing Congress to extend the CARES Act employment protections through March 2021.
“The autumn of our discontent… appears to have arrived with greater voracity than feared,” J.P. Morgan Jamie Baker wrote in a Tuesday report on the outlook for airlines this fall. He first warned of an autumn slowdown in June.
Spirit’s outlook comes after a relatively strong second quarter. The airline nearly broke even in May and June, and lost only $144 million during the three months ending in June. However, during an earnings call on July 23 executives acknowledged a worsening outlook.
Christie told TPG in June that he was not willing to “put a stake in the sand” in terms of when Spirit would recover from the crisis — a now appropriately conservative position considering the twists and turns of the pandemic.
Spirit Airlines lost $144mn in the second quarter.
— Edward Russell (@byerussell) July 22, 2020
Featured image courtesy of Spirit Airlines.