Fitch Ratings has revised the Rating Outlook for Spirit Airlines to Negative from Stable and affirmed Spirit's Long-term Issuer Default Rating at 'B+'.

Fitch has also affirmed Spirit IP Cayman Ltd.'s and Spirit Loyalty Cayman Ltd.'s senior secured debt at 'BB+'/'RR1'.

The Outlook revision incorporates Fitch's view that various headwinds may drive profitability and leverage metrics to remain outside of Fitch's negative sensitivities through YE 2024 or longer. Aircraft availability and air traffic control issues are having a greater impact on Spirit relative to some competitors, limiting the company's post-pandemic margin recovery. Longer-term, Fitch believes that Spirit's low-cost structure and its ability to stimulate demand will drive margins closer to pre-pandemic levels. However, the timeline for improvement is uncertain given various industry headwinds. Should Spirit exhibit improving aircraft utilization and margin trends over the next 6-12 months, the Outlook may be revised to Stable, whereas continued underperformance may drive a downgrade.

Spirit's rating is independent of its pending acquisition by JetBlue. Should the acquisition close, Fitch will likely equalize the two ratings. JetBlue is currently rated 'BB-'/Negative. The Spirit acquisition may drive a downgrade of JetBlue's rating, likely by one notch.

EETC Ratings:

Fitch has affirmed the 2017-1 class AA and class A certificates and the 2015-1 class A certificates. Fitch has affirmed Spirit's 2015-1 and 2017-1 class B certificates at 'BBB-'.

The class AA and class A certificates are derived through Fitch's top-down approach, while the class B certificates are notched off of the underlying airline rating. The class AA and A certificates continue to be supported by healthy levels of overcollateralization. Loan-to-values for both the 2017-1 and 2015-1 transactions improved slightly, and base values for the A321s and A320s in these portfolios have performed in line with Fitch's standard depreciation assumptions over the last year. The debt has continued to amortize, leading to slightly improved collateral coverage.

Key Rating Drivers

Delayed Improvement in Profitability: Ongoing operating inefficiencies and softer than expected domestic fares are driving weaker than expected margins in 2023. Fitch expects Spirit's EBIT margins to trend back towards the upper single digits over time, but the timeframe for improvement faces some unknowns. Pilot availability, which had been a constraint earlier in 2023, has improved, but issues with Pratt & Whitney engine availability and air traffic control constraints (ATC) are largely out of Spirit's control. Spirit's aircraft utilization has suffered from poor availability of its Pratt & Whitney powered A320 NEOs. Pratt engines continue to experience more frequent maintenance events relative to prior generation engines, leaving aircraft out of service.

RTX, the maker of the Pratt engines, recently announced a new maintenance issue that will require more than 1,000 engines globally to be taken out of service and inspected. Spirit is the largest operator of the Pratt Geared Turbofan (GTF) engine in the US, and reports that it will pull seven NEO aircraft from service for inspections after Labor Day. These issues will have a material impact on Q3 earnings and are likely to persist well into 2024. Fitch expects RTX to compensate airlines for the most recent issues, but the timing and magnitude of such reimbursements is unknown at this time.

Improving Utilization: Improving profitability largely rests on the airline's ability to fully utilize its assets. Spirit's average daily aircraft utilization for Q2 2023 was 11.3 hours/day, which represents an improvement over results in 2022, but remains below pre-pandemic levels that were consistently over 12 hours. Utilization should rise as pilot availability issues wane, but engine maintenance may continue to present a drag. Fitch expects Spirit to generate modestly negative EBIT margins in 2023 and low-to-mid single digit margins in 2024 compared to low-to-mid teens margins generated prior to the pandemic.

Unit Cost Pressures: Cost pressures have hit Spirit harder than most U.S. carriers. This was driven in part by pilot constraints earlier this year but continues based on Pratt & Whitney engine issues, investments in operational reliability and ATC constraints. Spirit's non-fuel unit costs remain more than 30% above 2019 levels, versus competitors whose costs are up in the teens over the same period. Fitch expects CASM trajectory to improve in 2024 as aircraft utilization levels improve, contributing to rebounding margins, though the pace of improvement remains uncertain. Headwinds include the contract ratified by Spirit's pilot union in January 2023, which includes pay increases of more than 30% over two years. Despite pressures, Spirit's low cost structure remains a competitive advantage. Cost Per Available Seat Mile excluding fuel (CASM-ex) remains more than 30% below its closest competitor, allowing the company to stimulate demand with low fares.

Weaker Near-term Domestic Leisure Demand: Domestic and short haul international leisure demand has shown some softness relative to Fitch's prior expectations. Airlines are reporting exceptionally strong long-haul international demand over the summer. With many travelers prioritizing overseas trips, domestic fares have come down, particularly when compared to unusually high levels seen in the summer of 2022. Fitch expects the balance of demand to shift back towards the domestic market after the peak summer travel season once pent-up demand wanes. However, travel patterns have been difficult to predict coming out of the pandemic, creating some uncertainty. Spirit reported total revenue per flight segment (including ancillaries) down 8.9% yoy in the second quarter. These levels are still 13% above the same quarter in 2019, but the gains are almost entirely driven by ancillary revenues, while Spirit's base fares are nearly flat over the four-year period.

Moderating Growth Plans: Spirit maintains an aggressive growth strategy, but has dialed back growth plans for the coming years to prioritize margin improvement and cash flow production. Spirit recently announced an agreement with Airbus to reduce its planned 2024 deliveries by 11 aircraft and to smooth out the schedule for remaining deliveries over a longer time period. Fitch believes the change mitigates some level of execution risk and should allow the company to focus on maturing existing markets. However, capacity growth is still expected to remain high relative to competitors. Spirit states that its fleet plans would drive a high teens percentage growth in capacity in 2024 setting aside the recently identified GTF engine issues. Spirit's fleet has grown to 198 aircraft up from 145 prior to the pandemic, and the company has another 133 aircraft to be delivered through the end of 2029 including 104 on order with Airbus and another 29 under direct operating leases.

Limited FCF: Fitch expects FCF to be around break-even in 2023 as operating margins remain below historical averages. Spirit plans to use sale-leaseback financing or direct operating leases the for the bulk of its aircraft deliveries, limiting its upfront capital expenditures, and potentially allowing FCF to turn positive in 2024. However, aircraft lease expenditures are expected to increase materially through the forecast period, keeping pressure on Spirit's lease adjusted leverage. Fitch expects Spirit's total adjusted leverage to remain above levels that support the 'B+' rating through 2024 before trending lower in 2025. Adjusted leverage may approach 4x by the end of Fitch's forecast period in 2026.

EETC Ratings:

Class AA and A certificate Ratings: Stress scenario LTVs have remained roughly in line with our prior review due to relatively stable asset values and continued principal amortization. The 2017-1 class AA certificates hold sufficient headroom to pass our 'AA' stress scenario, which results in a loan-to-value (LTV) ratio of 89.6%, improving from 93% in our prior review. Under the 'A' level stress scenario, the LTV for Spirit's 2015-1 class A certificates is calculated at 85.7%, roughly in line with our last review (86.9%), whereas the 2017-1 class A certificates decreased to 86.0% from 89.2%. Fitch expects both transaction's LTVs to improve over their lifespans due to the pace of their amortization profiles.

Fitch has incorporated updated appraisal data since its prior review. The 2015-1 and 2017-1 transactions are both exposed to 2016-2018 vintage A320 and A321 aircraft, the values for which performed in line with our base expectations. A320 values declined at an annualized rate of 4.8%, while the A321-200 aircraft declined at 5.2%-5.8%, under Fitch's base depreciation rate of 6%/year. Under the 'AA' and 'A' stress scenarios, Fitch assumes a 45% and 25% stress rate for the collateral in the pools, respectively. These represent the mid-points of Fitch's stress ranges for tier 1 aircraft. Fitch utilizes the mid-point of the range for both the A321-200 and A320-200 as both planes have large in-service fleets with a wide variety of users. Positive factors are offset by the growing proportion of the in-service fleet that now consists of new-technology A320 NEOs.

Class B Certificate Ratings: Fitch notches subordinated tranche EETC ratings from the airline's Issuer Default Rating (IDR) based on three primary variables: 1) the affirmation factor (0-3 notches) 2) the presence of a liquidity facility, (0-1 notch) and 3) recovery prospects (0-1 notch). The four-notch uplift from Spirit's 'B+' IDR reflects a moderate-to-high affirmation factor (+2 notches), the benefit of a liquidity facility (+1 notch), and solid recovery prospects in a stress scenario (+1).

Affirmation Factor: Fitch chose not to assign the maximum +3 notch affirmation factor uplift for these two transactions. While we view the likelihood of affirmation in a distress scenario to be high, the uplift is limited by the shrinking proportion of Spirit's total fleet represented by the two transactions as Spirit continues to grow. The collateral aircraft are also becoming marginally less attractive as Spirit takes delivery of more A320 and A321 NEOs, which are more fuel efficient.

Although Spirit's fleet is growing, the two EETCs still make up a sizeable proportion of Spirit's assets, supporting the +2-notch uplift. The Spirit 2015-1 pool contains 15 aircraft, which makes up around 8% of the company's current fleet. The 2017-1 pool contains 12 aircraft, or around 7% of Spirit's fleet. The two pools also contain 17 A321s, which represents more than half of Spirit's (30) owned A321s as of August 2023. The A321's larger size allows Spirit to add capacity on denser routes without necessarily adding additional frequencies. The larger gauge of the A321 also leads to a lower cost per available seat mile compared to its smaller cousins, which is key to Spirit's low-cost strategy

Good Quality Collateral Pools: Spirit's 2015-1 transaction is collateralized by 15 aircraft, consistent of 12 2016-2017 vintage A321s and three 2016 vintage A320s. The 2017-1 transaction consists of 12 aircraft, including seven 2017-2018 vintage A320s and five 2018 vintage A321s. Fitch considers both the A320 and the A321 to be tier 1 aircraft.

Derivation Summary

Spirit's 'B+' rating is in line with competitors such as American Airlines and United Airlines and is one notch lower than low-cost competitor JetBlue. Fitch views Spirit as being relatively weaker than the other 'B+' rated airlines due to higher near-term leverage due to a slower rebound in operating margins post-pandemic. Fitch also believes that Spirit's financial flexibility is weaker than either United or American as the larger airlines have more ready access to debt markets and larger bases of unencumbered assets. These weaknesses are partly offset by Spirit's lower cost structure which generally allow the company to generate profits on lower fare levels and to stimulate demand.

Key Assumptions

Fitch's base case incorporates capacity and traffic growing by mid-teens percentages in 2023, and low double digits thereafter.

Fitch expects modestly lower RASM in 2023 compared to 2022 reflecting current trends and difficult year-over-year comparisons after a sharp increase in 2022. RASM is expected to expand modestly beyond 2023.

Jet Fuel is assumed at $2.85/gallon for 2023, declining modestly thereafter.


Factors that could, individually or collectively, lead to positive rating action/upgrade:

Consummation of the acquisition by JetBlue in a credit conscious manner.

Standalone Spirit Airlines Upgrade Sensitivities:

Adjusted debt/EBITDAR sustained below 4.5x;

FFO fixed-charge coverage sustained around 2.5x;

Improving operational stability leading FCF to trend towards neutral or higher and EBITDA trending towards pre-pandemic levels.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Completion of the acquisition by JetBlue in a manner leading credit or operating metrics remaining above levels commensurate with the current rating.

Standalone Spirit Airlines Downgrade Sensitivities:

Adjusted debt/EBITDAR sustained above 5x beyond 2024;

EBITDAR margins sustained in the low double-digit range;

FFO fixed-charged coverage sustained at 1.5x or below;

Liquidity declining toward 10%of LTM revenue.

EETC Sensitivities:

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Class AA and A Certificates:

The class AA and A certificate ratings are primarily based on a top-down analysis based on the value of the collateral. Ratings upgrades may be driven by stable or increasing values for the A321 and A320 along with continued principal amortization leading to improved collateral coverage.

Underlying airline credit quality is a secondary consideration. Positive rating actions could be driven by an upgrade of Spirit's corporate credit rating

Class B certificate ratings: The class B certificates are linked to Spirit's corporate rating. Therefore, if Spirit were upgraded to 'BB-' the class B certificates would be upgraded as well.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Class AA and A certificates:

Negative rating actions could be driven by an unexpected decline in collateral values. Senior tranche ratings could also be affected by a perceived change in the affirmation factor or deterioration in the underlying airline credit. The transaction ratings may be impacted in the future by pressures on A320 CEO family values or changes in value stress rates utilized in Fitch's models as the A320 NEO family becomes a more dominant presence in the global aircraft market

The class B certificates are linked to Spirit's corporate rating. Therefore, if Spirit were downgraded to 'B' the class B certificates would be downgraded as well. Fitch currently views the Affirmation Factor for each Spirit EETC as moderate to high. This could weaken over time as the collateral aircraft age and become a smaller portion of Spirit's total fleet. Negative actions could be driven by lower recovery prospects driven by weaker aircraft values.

Liquidity and Debt Structure

Sufficient Liquidity: As of June 30, 2023, Spirit had cash and cash equivalents of $1,110.7 million plus $109.4 million in short-term investments. The company also has full availability under $300 million revolving credit facility which matures in March 2024. Total liquidity is equal to 27% of LTM revenue at Q2 2023. Spirit's short-term investments consist of U.S. treasury and government agency securities with maturities of less than 12 months.

Spirit's total liquidity (cash + ST investments) as a percentage of revenue is roughly equal to where it stood prior to the pandemic. While we view Spirit's liquidity balance as sufficient in the current environment, the company's financial flexibility is reduced compared to pre-pandemic levels as it has already raised debt against its most valuable assets.

Fitch views Spirit's upcoming debt maturities as manageable given its cash on hand. Spirit also plans to utilize sale-leasebacks for upcoming deliveries, allowing operating cash flow to be directed towards debt payments. Maturities total $336.6 million in 2023 and $222.1 million in 2024. Maturities become material in 2025 when the company's $1,110 million, 8% secured notes come due. Fitch's base case anticipates that the company will build cash through 2024, allowing the 2025 maturity to be at least partly paid down, though Spirit is likely to refinance a portion of the outstanding debt.



The AA, A, and B certificates benefit from dedicated 18-month liquidity facilities which will be provided by Commonwealth Bank of Australia, New York Branch (A+/F1/Sta).


The class A and B certificates feature an 18-month liquidity facility provided by Natixis (A+/F1/Negative).

Issuer Profile

Spirit Airlines, Inc. (Spirit) is a Florida based ultra low cost air carrier. The airline utilizes low base fares to stimulate travel demand. The company has a fleet of 198 Airbus aircraft and serves destinations throughout the U.S., Caribbean and Latin America.


The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit

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