Spirit Airlines (SAVE) - Get Spirit Airlines, Inc. Report is prepping to furlough as much as 30% of its workforce in October, making it the first low-cost U.S. carrier to implement job cuts due to the coronavirus pandemic and its economic impact on the airline industry.
According to an internal memo seen by Reuters, the Miramar, Fla.-based carrier will be informing unions of its plans as early as this Friday.
“It’s now clear that the demand increase we saw in June was an outlier, and the downward trend will continue,” CEO Ted Christie said in the memo, adding that the airline’s expected daily cash burn of more than $100 million per month in the coming months “is not sustainable.”
"The health crisis, loss of demand, and corresponding economic impact caused by Covid-19 is unprecedented," Christie said.
Spirit was among the U.S. airlines that received government bailout funds to keep workers employed through September amid the sharp downturn in air travel demand due to virus-related lockdowns and travel bans.
However, the dramatic drop-off in flight demand amid travel restrictions to combat the spread of Covid-19 has left all airlines including Spirit operating at still-limited capacity.
With the stimulus package set to expire in September, several carriers including Spirit are now warning of furloughs, given that demand still has not recovered.
Indeed, American Airlines (AAL) - Get American Airlines Group, Inc. Report and United Airlines (UAL) - Get United Airlines Holdings, Inc. Report have warned that more than 60,000 jobs are potentially at risk, though others airlines including Southwest Airlines (LUV) - Get Southwest Airlines Co. Report and JetBlue Airways (JBLU) - Get JetBlue Airways Corporation Report have so far said they can avoid furloughs.
Shares of Spirit were down 1% at $16.38 in trading on Wednesday.