Spirit stock down way more than competitors?
 

Any idea why our stock is down WAY more than competing airlines? Obviously everyone is taking a huge hit for the coronavirus, but why is Spirit doing the worst? I personally felt we were in a somewhat decent position comparatively to weather this storm.
I admit, I'm not the most savvy when it comes to anything Wall St. related, but this is a bit concerning, is it not?

In the past month, this is how aviation stocks have fared:

SAVE down 66%
DAL - 35%
LUV - 29%
ALGT - 32%
JBLU - 48%
AAL - 52%
HA - 50%
UAL - 48%
ALK - 42%

I had the same thought. I just don’t get it.

Puzzling. We have more cash than the stock is worth. Seems like a good buy but it feels like the massive spread of this virus is just beginning and it is possible for domestic airlines to shut down for a while till this all settles.

I’m keeping as much cash on hand as possible to try and survive this.

Somebody once told me that a lot of people get us mixed up with Spirit Aerospace (the company that makes aircraft parts) so that could have something to do with it.

Again today, we’re down more than our peers. Our balance sheet looks so much better than some competitors... doesn’t make sense. Obviously no one wants to touch this sector right now, but a multi billionaire could potentially buy us with play money (Though I don’t see that happening).

Leverage and overall sentiment. Investors havent been comfortable with SAVEs debt for some time now. Just because Ted says all is well doesn't mean investors have to agree.

A large portion of trading these days is done not by analytical humans comparing business strategies and balance sheets, but algorithms that make trades based on trends, volumes, and industries as a whole. If a few large pension funds or index funds decide to dump travel/airline stocks as a whole, that volume will trigger more sell offs. As a smaller company, such trading has a multiplied effect. (This is also one of the reasons we have the “circuit breakers” so that computer algorithms don’t tank the market cascading massive and continuous reactionary sell offfs)

The market price is generally based on perception, not reality. Personally, I think it's a steal at $20, at $12, it is stealing. With that said, I am going to wait things out before buying more.

I'm not an investing expert by any means, so take this with a grain of salt.


From Spirit's 2019 10-K:

Spirit has $1.55B in contractual obligations due for 2020. This does not include the cost of operations, just debt principal, interest, aircraft leases, and aircraft purchase obligations. So while the ~$1.1B in cash/short term investments on hand looks good, it's not enough to satisfy the debt obligations the company has for an entire year even if the airline did not have to consider things like fuel, labor, landing fees, taxes, etc.


To put that in comparison, from SWA's 2019 10-k.

SWA has $3.6B in contractual obligations. However, over $2b of that is aircraft orders (max) which they may not be obligated to pay for considering the aircraft is un-airworthy. Regardless, even if they did take the entire order they have ~$4.0B in cash/short term investments on hand.


More food for thought is how leveraged the aircraft are at each company. While for example Delta is indeed parking aircraft, it's because they have the luxury of having a paid off fleet and can downsize as necessary. I can't say for certain but I would imagine the most of the newer fleet at Spirit would be leased/mortgaged thus requiring payment whether or not an aircraft is generating revenue. Obviously not something great for business if demand falls to nearly 0.


Lastly, I think there is also an investor perception that the government would be more apt to help SWA or the big 3 versus something like Spirit/Frontier... but that's just a wild guess.


That is my best guess as to what I think Wall Street is seeing. In my personal opinion I think SAVE is tremendously undervalued overall though. I think the business model is robust and I also think the type of passengers will be quicker to bounce back versus the business travelers that the big 3 rely on to generate the most revenue. I also believe that even if we ban domestic travel for 30 days, the spool up will go back to normal a lot quicker than most downturns we've seen in the industry based on the fact that this is just a consumer fear issue that hopefully will be resolved if this gets under control.

It says they think spirit has a higher chance of BK.

Dude this is just silly

i think so too

This is it. Investors have been sounding the alarms since for quite a while. Stock price hasn't just started tanking now due to COVID, this is an extension of a longer period of declining value and increased risk.

Another thing that is pretty wild to see is Spirit (thus far) is still planing to grow year over year for the months of April and May, when everyone, including their peers at Frontier are reducing capacity. There very well could be something the public doesn't see (bookings/etc). However, it also makes me believe they are either waiting to see how this plays out, doing too little, or the worst case scenario: are forced to press forward.

If you have a lot of leveraged/leased aircraft and you don't have the luxury of downsizing, Spirit may just be pressing forward because they have no other option than to do so. That fleet is going to be burning through cash sitting or flying, so they might as well not give up the market share and are gambling that this will be a short term demand issue.

Pretty solid insight. I've gotta wonder what happens with our huge aircraft order and $250M new HDQ. $250M is now close to 1/3 of our entire market cap.

Ted said in his first update we have 39 planes we can easily park.

I expect an updated outlook either today or tomorrow with massive cuts like everyone else.

If this blows over quicker than anticipated, it could really work out in Spirit's favor and put us in a comparatively good position. If not, it could end BADLY. I imagine we'll follow suit with capacity reductions in the near future though.

Agreed, seems like management is gambling on this being a blip and blowing over. Hoping their gamble pays off, otherwise we all could be in trouble.

Well if it doesn’t blow over quick the whole industry is in trouble regardless of what’s done. So could be a low risk bet.

Fair point. Although, I’m sure the legacies will get a bailout though, NK on the other hand......

Yep
You honestly have to ask who JP Morgan is gonna lose more investment on ?
That’s who our bought politicians are gonna bail out. Even in Chapter 11 the banks get paid first.
wash rinse repeat

**Not a financial expert**

I don't think that is an accurate characterization of the debt obligations. $988 Million of that $1,552 Million of that are Flight equipment purchase obligations. How much of that is paid for in cash or current assets ? I'm guessing very little. E.G. I bought a $1,000,000 house but i financed the remaining $900,000 with secured financing and a $100,000 down payment. (I didn't, just an example) I believe a better look is at current assets vs current liability for short term viability.

But you're right, debt & purchase obligations and cash flow are a major problem for airlines with young growing fleets. How creative can management get with securing financing , and at what interest cost and schedule will determine the future of the airline. Godspeed

I'm pretty sure the 2020 obligations are the actual amounts due for that particular year. For example, if you mortgage ~100 planes, you have ~100 planes worth of down-payments and payments due for that fiscal year.

I could be mistaken with how I'm interpreting the 10-k but it's a yearly breakdown which leads me to believe that they actually have $1.5b due in obligations this year.

I am also not a financial guru by any means. Buy low sell high. That’s about all I can grasp when it comes to reading the market. For those that are worried about the airline going under... I think we would be looking at a merger/consolidation before the unthinkable happens.

I could be mistaken too, just trying to have a conversation for mutual understanding. I'm referencing the debt obligation table on pg 53 of the 10-K filed on March 5, 2020; which is where I figured you found the $1,500 Million debt due in 2020. Spirit takes 15 planes in 2020; $988 Million in flight equipment purchase obligation / 15 planes = approx $68 million/plane (+/- an engine or two) seems more in line with the purchase price than a buyback lease or secured financing down payment considering the list price is around $100 million/plane

I don't think any of this is based on any kind of reality. When a disease that in almost 6 months has killed 6,000 people WORLDWIDE is allowed to shut damn near the whole world down, something is clearly going on that's not based on anything tangible.

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Slow reaction
 

Analysts are getting nervous with NK’s lack of preventive measures. Christie doesn’t seemed too concerned about preserving cash, betting it’ll be over soon enough and this will be a great opportunity to increase market share and some other precious items like A320 slots and gates at a bargain. Problem is, every day it passes, he looks more and more like a rookie and ambitious CEO. If he could pull this off, he’d be a genius. Unfortunately, I agree (more or less) with wall st.
We need to park the unencumbered A319s ASAP. Keep them on active storage, that way is easy to bring them back whenever. Defer new airplanes, and start unloading debt. I can see 30-40% capacity reductions in the short term (2-4 months) and slowly back to normal (for NK) by 4th QTR (hopefully).

He has 999x more information than us (and experince) to make such decisions. Way too early to judge. Communication could be a lot better though!

Of course he does. I was referring to SAVE’s recent price divergence from other US carriers. When you have a company that is betting that the rest are wrong in their predictions, it’s natural that investors will start feeling wary. Maybe Christie knows it’s going to be bad but he’s reluctant to make large cuts just yet. Maybe he’s extremely talented and he’ll outmaneuver the big 3.

As far as what measures should we take, I was just stating the obvious ones. We can’t see the data they have. I’m sure upper management is working round the clock.

Save stock down way more than competitors?
 

I agree. It seems like amateur hour around here compared to other airlines, unless of course it’s supposed to be like that and they are trying to figure out how much money they can take before we go under. But we are still running classes [emoji849]


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Well..... this hit the legacies a tad sooner. (Intl lockdown) They also have a much older group, multiple fleets etc. They have a lot more variables.....

what is SWA doing, ? How much capacity have they cut?

God yes. Can you even imagine the problems at Delta? Twelve different type ratings and the most senior people flying the international widebodies that are now parked. Every guy they furlough off the bottom starts a domino effect in training, as that guy is replaced by someone no longer senior enough to hold his aircraft or seat, who is then replaced by someone no longer senior enough to hold his aircraft or seat, etc., etc, etc...

You could very easily generate requirements for a half dozen type rating trainings from a single furlough because no way is the seniority going to neatly line up with the aircraft still flying. And then the seat changes as junior captains default to FO in aircraft that they actually may never have flown before.

it isn’t like everybody has the same type rating and every aircraft is that type and each person is nearly interchangeable.

Southwest said it will "soon" reduce flight schedules, which will reduce capacity by at least 20% from April 14 to June 5, and will continue to evaluate further flight schedule cuts, it said. Southwest is implementing a hiring freeze and offering voluntary leave, "aggressively evaluating all capital spending, discretionary spending, and all non-essential costs for near-term cost reductions or deferrals," it said.

Additionally, today they borrowed $1.0B to improve liquidity, even though they already had around 3B on hand.

If SWA cuts “at least” 20% capacity, I wouldn’t expect us to do any better....

SAVE will sail through this if we manage no worse than 20-30% loss of capacity over 2-3 months IMOHO.

I suspect we might see 50%, but the real question is how much capacity do we need to realize to dog paddle and hang on until sanity returns?

This article sheds some light on things.

https://leehamnews.com/2020/03/16/us...-SonUrOmgB3Pq4

this is exactly why SAVE is getting hammered

I can see the benefit of halting all flights along with a nationwide lockdown for 2-4 weeks. Now, suspending all flights with no lockdown won’t stop the virus (=fear) and only hurt the industry.

Our monthly employee pay and benefits it’s under 100M. If the company can defer other financial obligations (maybe backed by a government loan), we could reasonably manage in case of a full month shutdown and limp out of it on a 20-30% reduced schedule for 2-3 months.

https://i.ibb.co/F0WVbDH/9-A7-CE327-...DB9574-C98.jpg