Pratt & Whitney engine issues result in Spirit Airlines receiving compensation (NYSE: SAVE)

U.S. based low-cost carrier, Spirit Airlines, recently made an announcement regarding the compensation they are expecting to receive due to the grounding of some of their planes.

The grounding was a result of a defect found in Pratt & Whitney engines, a unit of RTX. Spirit disclosed that they had reached an agreement with International Aero Engines on March 26th, which will result in a monthly credit until the end of 2024 for each of their grounded aircraft. The issue first came to light in July when Pratt & Whitney identified a "rare condition" in certain engine parts made from powdered metal.

This discovery led to an expedited inspection of the PW1100G-JM geared turbo fan (GTF) fleet that powers Airbus A320neo aircraft, including those operated by Spirit Airlines. In October of the previous year, Spirit had already anticipated that around 26 of their A320neo aircraft would be affected by this issue throughout 2024. In a regulatory filing, Spirit Airlines mentioned that the agreement with Pratt & Whitney is expected to have a significant impact on their liquidity, estimating it to be in the range of $150M to $200M.

This figure is dependent on the number of days in 2024 that Spirit's aircraft are unable to operate due to the GTF engine problem. Additionally, Spirit Airlines stated that they intend to hold discussions with Pratt & Whitney about further arrangements for any aircraft that remain grounded beyond December 31, 2024. The compensation agreement provides some relief for Spirit Airlines, as the loss of operational aircraft can lead to a decrease in revenue and potential disruptions to their flight schedules.

By securing monthly credits until the end of 2024, Spirit can mitigate some of the financial impact caused by these unexpected grounding events. Spirit Airlines has been proactive in addressing the engine issues affecting their fleet and has been working closely with Pratt & Whitney to find solutions. The airline is committed to ensuring the safety and reliability of their aircraft while also minimizing the disruption to their operations.

This proactive approach has been praised by industry experts for its focus on passenger safety and operational efficiency. Overall, the compensation agreement between Spirit Airlines and Pratt & Whitney is a positive development for the budget carrier. It not only provides financial relief but also underscores the importance of strong partnerships and proactive problem-solving in the aviation industry.

Spirit Airlines can now look ahead with more certainty, knowing that they have a plan in place to address any future challenges related to their grounded aircraft.