Originally Posted by
FriendlyPilot
Spirit LOST $96M in October. The GAAP profit of $20M was only because of terminated leases that were accounted for as a non-cash gain. Its accounting for tax purposes, but Spirit didn't "make $20M" nothing like that. According to the financial statement Spirit added $250M in cash. This has to be DIP financing. The earnings statement doesn't show any sales of assets attributable to this much cash being added to the balance sheet.
Spirit drew $250M in cash, but their actual cash burn from the operational losses were $77M, which is slightly better than the $90M.
Spirit has a -38% operating margin. This is not sustainable nor will go away by becoming smaller. Being smaller will only reduce the cash burn so they aren't losing 38% at scale.
The leases were not surrendered until the end of October, so some of that operating loss is due to payments made on those leases that month prior to the rejections at the end of the month. Significant staffing cuts will also be reflected in subsequent months.
The company is by no means healthy, but -38% for Sept/Oct is not a routine margin that can be carried forward and applied for future performance expectations.
And yes, the margin will shrink. They have not cut flights to the same percentages they have cut plane leases and staff. Good strategy or not, open question, but they are cutting expenses more than the cuts to revenue to narrow that margin. 20% flight schedule cut to 30% flight attendant furloughs and something like 40% of plane leases rejected.