Global Economics

Furloughs In the Future for Spirit Airlines

On Monday, Reuters reported that discount air carrier Spirit Airlines (SAVE) is planning to announce to unions an anticipated 20-30% employee furlough rate for this October. This move is significant because while other discount airlines have made efforts to stave off layoffs and furloughs, Spirit Airlines is the first in its category to move forward in that direction.

In the memo detailing Spirit’s intentions for furloughing employees, CEO Ted Christie indicated that they expected “the downward trend will continue.” Prior to the downward slip, the CEO mentions in the company memo that there was an increased demand seen in June. Unfortunately, the $100 million daily cash burn that Spirit Airlines sees each month isn’t something that the airline will be able to continue supporting.

Earlier this year, Spirit accepted a federal bailout offer to deter any potential employee layoffs through the end of September. Now, as the package set to expire in a little over two months, Spirit is the first planning scheduled furloughs. However, United Airlines (UAL) and American Airlines (AAL) have also stated that 60,000 jobs could potentially be at risk by the fall. For the time being, JetBlue (JBLU) and Southwest (LUV) have noted that furloughs may be avoided for the moment.

The airline industry has been one of the hardest hit due to the coronavirus pandemic this year. Airlines have been¬†reporting substantial Q2 sales losses, and some experts believe that the airline industry as a whole won’t top $1.3 billion in sales.

Spirit Airlines closed the market on Tuesday up by 2.41% to $16.54.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Trader Buzz). I have no business relationship with any company whose stock is mentioned in this article.


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