Spirit Airlines reaches deal with Carlyle, reduces lease payments for 5 A320ceos
Airbus delivered the five A320s to Spirit Airlines in 2012 and 2013.
Spirit Airlines has reached an agreement with another lessor, Carlyle Aviation Partners, with the two sides agreeing to lower lease payments and for the leasing company to inject liquidity into the airline as it continues going through its Chapter 11 bankruptcy case. The deal has to be approved by the United States Bankruptcy Court for the Southern District of New York.
In its Chapter 11 bankruptcy case filings, Spirit Airlines detailed that it had reached an agreement with Carlyle Aviation Partners, a United States-based aircraft leasing company, to receive additional liquidity and adjust lease terms for five Airbus A320ceo aircraft, powered by the International Aero Engines (IAE) V2500 aircraft engines.
The agreement is two-fold: one, Carlyle Aviation Partners would contribute a confidential amount per engine during the next forecasted Performance Restoration Shop Visit (PRSV), which, according to Fred Cromer, the Chief Financial Officer (CFO) of Spirit Airlines, “will make a significant difference in decreasing Spirit’s liabilities and enable it to operate effectively post-emergence.”
Two, the lease agreements for the five A320ceo aircraft will be amended to “provide Spirit considerable additional flexibility concerning certain commercial terms, including lease duration, rentals, security deposits, and maintenance obligations.”
The court documents showed that lease agreements for at least some of the aircraft were extended by a confidential number of months, while the monthly lease payments, which were reduced, were also given the confidentiality treatment.
When the airline revealed to the court that it had reached an agreement with AerCap, Spirit Airlines, citing information potentially leaking to its competition and other lessors with whom the carrier has been negotiating, it also asked the bankruptcy court to keep some of the deal’s details confidential.
Rytis Beresnevicius
Cromer explained that the lower monthly payments will also help the airline with its liquidity, and the amended leases for the five aircraft have “commercially reasonable and beneficial terms” for the quintet that will continue to fly for the airline.
“Importantly, however, the [deal with Carlyle Aviation Partners] provides Spirit with the flexibility to make, and does nothing to restrict or impair Spirit from making, a determination whether to assume or reject the amended Leases by the Assumption Effective Date if a Material Change Condition occurs before that time.”
The CFO also noted that the two companies settled any potential claims as part of the deal, which allows the airline to avoid “costly litigation” with Carlyle Aviation Partners.
“I believe that the [agreement with Carlyle Aviation Partners] will enable Spirit to meet its goals of achieving considerable cost savings and aligning its fleet to match capacity with profitable demand.”
Ch-aviation records showed that Spirit Airlines leases five A320ceo aircraft from the lessor, which manages the quintet via an investment vehicle called Maverick Aviation Partnership: N616NK, N618NK, N622NK, N623NK, and N624NK. Airbus delivered the five aircraft to the US low-cost carrier between November 2012 and December 2013.
As mentioned previously, Spirit Airlines had also managed to strike a deal with AerCap, which the bankruptcy court approved on October 10. AerCap would inject $150 million of liquidity into the airline, while it would reject 27 leases and restructure its Airbus order book from 37 aircraft to 30, also amending the to-be-delivered aircraft delivery dates.
The same day, the court gave a nod to a multi-tranche debtor-in-possession (DIP) facility of up to $475 million.
Spirit Airlines has also sought the court’s approval of a motion to reject at least 87 aircraft leases, which would, essentially, encourage lessors to pick up their aircraft as-is from Phoenix Goodyear Airport (GYR). Carlyle Aviation Partners’ five A320ceos were not among the 87 aircraft.
The list included 19 A320ceo, 65 A320neo, and three A321neo aircraft, which Spirit Airlines deemed were “excess equipment.” Cromer explained that by approving the motion, the court would “relieve Spirit of the burden of unprofitable Leases and of the costs of maintaining and storing several Aircraft that are already out of service.”
Spirit Airlines filed for its second Chapter 11 bankruptcy protection on August 29, after having exited its previous court-protected restructuring on March 12. Unlike during the previous case, the company would focus on, essentially, reducing its fleet size to “match capacity with profitable demand in line with [its] redesigned network.”
Rytis Beresnevicius
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