Spirit CEO says struggling airline will slash flights, braces employees for more job cuts
- Spirit Airlines is planning to reduce capacity 25% in its November schedule, CEO Dave Davis told staff Wednesday.
- Davis hinted at further job cuts or furloughs as the discounter scrambles to cut costs, according to a memo viewed by CNBC.
- Spirit filed for Chapter 11 bankruptcy protection last month for the second time in a year.
Spirit Airlines CEO Dave Davis on Wednesday braced staff for more job cuts and said the carrier plans to slash its schedule in November to reduce costs weeks after declaring its second bankruptcy in less than a year.
The airline is planning its November schedule and Davis told employees in a memo, which was reviewed by CNBC, that they will see a 25% cut in capacity over 2024 "as we optimize our network to focus on our strongest markets."
The carrier's capacity was down a similar degree from when it came out of bankruptcy in March through the end of June, and the new cuts point to how the airline is thinking about its near-term schedule as it seeks to reduce costs. The struggling discount airline is in negotiations with vendors and aircraft lessors, and is evaluating its fleet size, as it tries to shrink itself to find more stable footing, Davis said.
"These evaluations will inevitably affect the size of our teams as we become a more efficient airline," Davis wrote in his note to employees. "Unfortunately, these are the tough calls we must make to emerge stronger. We know this adds uncertainty, and we are committed to keeping you as these decisions are made."
When asked how many of its employees would be affected, Spirit told CNBC in an email: "We have engaged our labor unions to discuss the impacts of the network and fleet adjustments on our Team Members, and we will share more as these discussions progress."
Spirit is seeking to cut $100 million a year from its pilot group and called a meeting with their union, the Air Line Pilots Association, on Wednesday, saying "we are available to continue to negotiate every day thereafter to reach a consensual agreement" by Oct. 1, according to a separate memo, also reviewed by CNBC, from Spirit COO John Bendoraitis.
ALPA warned pilots a day later: "Even at this early stage, one fact is inescapable: our contract will not remain untouched." If a consensual deal isn't reached by Oct. 1, the company said it will seek relief from contractual obligations, under the airline's bankruptcy protection, according to the union.
The airline has already announced furloughs and demotions of hundreds of pilots. Some flights attendants have already taken voluntary unpaid leaves of absence.
"Although management has not yet indicated they will seek to make changes to our [collective bargaining agreement], our bankruptcy attorneys working alongside our AFA legal department are prepared for any next steps management may take," the Association of Flight Attendants-CWA, the union representing Spirit's flight attendants, told staff on Wednesday.
Spirit, known for its bright yellow planes, low fares and myriad fees, had been successful but high costs, shifting travel preferences and increased competition from larger rivals threw the airline off course. A failed acquisition by JetBlue Airways left the carrier on its own.
When Spirit emerged from bankruptcy in March, its leaders were hoping to find more stable financial footing. But the carrier avoided big changes in the process and instead focused on a deal with its bondholders, which exchanged almost $800 million in debt for equity, and it was greeted after bankruptcy with persistently higher costs and weaker-than-expected domestic travel demand.
It reported that it lost nearly $257 million since March 13, after it exited Chapter 11, through the end of June.
Earlier this month, Spirit announced flight cuts to 11 destinations and said it wouldn't start a 12th as planned, while competitors like United Airlines, Frontier Airlines and JetBlue Airways have unveiled plans for new flights to try to win over Spirit customers.