Why Spirit Airlines’ Stock is Soaring After Announcing a Sell-Everything Fire Sale

Alright, Spirit Airlines is in full “Tobias Funke fire sale” mode. After a brutal year packed with setbacks, Spirit has just rolled out a new plan to sell off assets and eliminate jobs, and somehow, investors are treating it like a hot new crypto token from 2021 (that’s right, the stock jumped 20% on the news).

The budget airline announced it’s offloading 23 older Airbus planes for a quick $519 million cash injection. To cut costs, it’s also planning on deleting around $80 million from the budget—mostly through job cuts. So, what gives? Why are investors throwing their money at Spirit stock like there’s no tomorrow?

Spirit’s had a rough time since its $6.6 billion merger deal with JetBlue went down in flames earlier this year. With that merger blocked, Spirit’s left dealing with an oversupplied U.S. market and plenty of grounded planes due to ongoing engine recalls. 

The situation’s gotten pretty dire—Spirit’s stock has plunged 80% over the year, putting it at about $2.90 on Friday. For some perspective, this stock was trading at over $84 in 2014 (how the turntables right?). 

But just when things looked especially grim, Spirit’s announcement spurred a 20% stock rally, marking its biggest jump since it tried to join forces with JetBlue.

First on the list to go? Those 23 older Airbus planes. Offloading these will net Spirit $519 million—enough to buy some breathing room, at least for now. Spirit’s got a total fleet of around 210 planes, so parting with over 10% of its assets is a pretty serious move. The cash will help Spirit keep from filing bankruptcy a bit longer. Spirit also managed to get an extension until late December to refinance over $1 billion in debt. They’re getting some wiggle room from their credit card processor, which might give them just enough runway to prevent going under.

Then there’s the $80 million cost-cutting, which translates to layoffs. Spirit has already started furloughing some of its pilots, with about 200 taking leave, but the company hasn’t yet said how many more jobs might be on the line. They did mention that their flight volume will likely decrease by the “mid-teens” percent next year, meaning fewer flights and fewer jobs. While flight attendants are mostly spared, thanks to voluntary leaves, other staff could be facing cuts.

All this sounds like a company in serious trouble, so why the investor optimism? This stock surge seems counterintuitive, especially when Spirit’s basically pawning off assets to avoid bankruptcy. But some investors see these moves as signs of life—Spirit’s onside kick to dodge Chapter 11. There are also rumors of renewed merger talks with Frontier, which has some investors betting Spirit could still end up absorbed by a bigger player.

And let’s face it, Spirit’s cheap model has a solid customer base. For all the groaning over its stripped-down service, the airline’s super-low fares always find buyers.

In the meantime, if Spirit was angling for a DiCaprio-style “I’m Not F*cking Leaving” moment, they’ll need a bit more than this.

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