Originally Posted by
Balder
I like your analysis, but... I am clearly bad at math, so Cujo can call me an idiot if I'm wrong. But isn't the 6.6 billion cumulative for the next 5 years, with roughly 900 million in contractual obligations every year? Mostly "Flight equipment purchase obligations"? Basically our fleet growth that will enable us to make much more money than we do now?
You are correct. However the leases are on 7 and 12 year notes. So even though it is cumulative, the debt we sign up for this year won't be paid for by 2021. Hence by 2021 we will still have close to 6 billion in debt. What worries me is we already have over half the airplanes yet we only have 1/8th of the debt. This tells me most of these deals are back loaded with higher payments due at the tail end of the agreements. And while more airplanes do have potential to generate more revenue, a nice down turn in the economy, a terrorist attack, or God forbid, a fatal accident could all stop the "record" profits music real quick. We aren't big enough or important enough for the DOJ to bail out if things go South. A lot of us want to leave for greener pastures but a lot of dudes wanna make Spirit a career. The new contract needs to not only be super competitive and represent true fair market value, but it also needs to be sustainable. I see Spirit as a big tanker ship that is slowly starting to pile on the containers. When the North Atlantic is calm all is well. Throw in a nice winter storm and next thing you know, the top heavy debt and finiacial structure of this Airline will flip us over and take us to the bottom.