United Airlines rules out bid for Spirit Airlines’ assets

Audio By Carbonatix

Enlarge

By Doyinsola Oladipo

NEWARK, New Jersey (Reuters) – United Airlines CEO Scott Kirby said on Tuesday his company will not bid for bankrupt Spirit Airlines’ assets if they become available.

Spirit filed for bankruptcy protection last month for the second time in a year after a previous reorganization failed to put it on firmer financial footing. The discount carrier’s restructuring will involve shrinking its network and fleet, which is expected to put a variety of its assets up for grabs.

Kirby, however, told Reuters that Spirit’s airplanes, slots and routes don’t work for the Chicago-based airline. He said it would take two to three years and cost $15 million per airplane to reconfigure the budget airline’s fleet, making it impractical for United.

Similarly, there are not enough gates for United in Spirit’s key markets like Fort Lauderdale in Florida, he added.

“It’s not in our wheelhouse,” Kirby said in an interview. “And so we’re not going to try to do that.”

Earlier this month, however, United started selling tickets for new flights to 15 cities where Spirit operates. The company said its new flights were aimed at giving Spirit’s customers other options if the discount carrier suddenly went out of business.

Kirby has been a vocal critic of the business model of discount airlines and has repeatedly questioned their viability. Last week, he expressed doubts whether Spirit could survive.

Spirit’s financial struggles, as well as a rush among U.S. carriers to chase premium travelers, have raised concerns that the era of cheap flights might be over for price-conscious travelers.

Kirby played down those concerns, saying there are still plenty of airlines offering cheap travel options. “Some of the models aren’t going to work and some will, but there’s always been and always will be lots of low-cost competition in the United States,” he said.

United has partnered with JetBlue Airways to allow customers to earn and spend frequent-flier miles on both airlines. United will also gain access to slots at New York’s JFK, an airport it left in 2022.

The alliance has led to speculation about whether it would eventually culminate with a merger between the two airlines. Kirby said the partnership creates a lot of value for United’s customers, adding he was not sure the company needed to “go through the pain” of a merger.

United also has plans to ramp up pilot hiring, he said. With aircraft deliveries from Boeing picking up, Kirby said the airline aims to hire 2,500 pilots by the end of next year.

He expects to announce the company’s Airbus A350 order later this year. The company currently has an order for 45 A350-900 aircraft, but has repeatedly deferred and changed it.

United executives have indicated that the need to replace the airline’s older Boeing 767s and 777s will drive the decision on the order.

The deferrals have led to industry chatter that the company could cancel or convert the order into other Airbus models, like the A321neos it has been purchasing. United, however, has been maintaining the order on its books.

“We have not decided,” Kirby said. “We’re actively working on it.”

(Writing by Rajesh Kumar Singh; Editing by Chizu Nomiyama and Lisa Shumaker)