Fitch Ratings Downgrades Spirit Airlines Credit Rating

(Reuters) – Fitch Ratings on Friday downgraded the long-term credit rating of Spirit Airlines (NYSE:SAVE) to 'CC' from 'CCC (WA:CCCP)', placing it below its North American peers. A near-term default appears probable.

Earlier this week, the airline announced it was in talks with creditors and exploring strategic alternatives to improve liquidity.

The negotiations, involving a supermajority of noteholders, have been described as productive, with progress made, and resuming soon.

Despite robust travel demand, the Dania Beach, Florida-based airline has faced financial challenges, reporting losses in five of the last six quarters, raising concerns about meeting upcoming debt obligations.

Fitch indicated that Spirit risks losing customers to other carriers due to potential bankruptcy fears, which could accelerate cash burn. The agency projects a $600 million cash outflow in 2024, partly countered by asset sales and compensation from Pratt & Whitney for engine issues.

Fitch also noted Spirit's reduced operations after its decision to sell 23 older Airbus aircraft and furlough 330 pilots in January 2025.

The airline has been impacted by RTX's Pratt & Whitney engine issues, forcing it to ground several aircraft in 2024 and 2025, leading to increased costs.

Fitch added that uncertainty surrounds future engine availability, complicating forecasts regarding Spirit's capacity to utilize its aircraft. In conclusion, Fitch's recovery analysis forecasts that Spirit is more likely to reorganize as a going concern in bankruptcy rather than liquidate.