Spirit Airlines, in a race to turn around results while its liquidity lasts, expects second-quarter results to be worse than previously anticipated.
In a regulatory filing, Spirit said it now expects an adjusted operating loss of between $160 million and $173 million, worse than its early May guidance of $121 million to $145 million.
The carrier expects an operating margin of between minus-12.5% and minus-13.5%, compared to May guidance of between minus-9% and minus-11%.
The worsening expectations are due to reduced ancillary revenue per passenger. Spirit in mid-May did away with change and cancellation fees in response to a similar move from Frontier.
In early June, Spirit also extended the life of its travel vouchers from 90 days to a year and increased the weight allowance for checked bags from 40 to 50 pounds.
In its filing, Spirit said it had expected downward pressure on ticket prices during the second quarter and into the third quarter due to excess capacity in the marketplace. Anticipated Q2 ticket revenue remains in line with the company's early May expectations.
However, Spirit said ancillary revenue per passenger will be approximately $64 for the second quarter, several dollars lower than expected.
In a Wednesday analysis, Michael Linenberg of Deutsche Bank Research wrote that $64 per passenger would be down 9% year over year and down approximately $6 per passenger. That conforms with Spirit's downward revision of anticipated second quarter total revenue from a guidance midpoint of $1.33 billion to $1.28 billion.
Spirit had $1.2 billion in liquidity as of March 31 and is in a race to turn things around while negotiating the refinancing of $1.1 billion in loyalty program-backed debt that will come due in September 2025 and another $500 million in convertible bonds that matures next May.
The airline has said that it will make additional changes geared toward better serving higher-end flyers, with announcements expected in August.
"Spirit has begun to execute on its transformation plan to better align with the current market dynamics," Spirit said in the filing. "As the company progresses on its transformation strategy, it anticipates that over time it will be able to drive improvement in total revenue per passenger segment."
Spirit is expected to report Q2 earnings in early August.