Spirit Airlines Stock Is Taking Off Monday: Here's Why

Spirit Airlines Inc SAVE shares are flying Monday after the company entered into an agreement with International Aero Engines to provide Spirit with a monthly credit through the end of 2024.

What Happened: Last year, Pratt & Whitney announced that it had determined that a rare condition in the powdered metal used to manufacture certain engine parts would require accelerated inspection of the geared turbo fan (GTF) fleet.

Pratt & Whitney notified Spirit that nearly all GTF engines in its fleet would be subject to the removal and inspection, or replacement, of the powdered metal impacted parts. As a result, Spirit removed related engines from service and grounded some of its aircraft for inspection requirements.

On March 26, Spirit entered into an agreement with International Aero Engines, an affiliate of Pratt & Whitney, in which IAW will provide Spirit with a monthly credit through the end of 2024 as compensation for each Spirit aircraft unavailable for operational service due to GTF engine issues.

The estimated impact of the agreement on Spirit's liquidity is currently expected to be between $150 million and $200 million.

Pursuant to the agreement, Spirit agreed to release IAE from claims related to the impacted engines prior to the end of the year. Spirit intends to discuss appropriate arrangements with Pratt & Whitney for any Spirit aircraft that remain unavailable for operational service beyond 2024.

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SAVE Price Action: Spirit Airlines shares were up 5.25% at $5.08 at the time of publication, according to Benzinga Pro.

Photo: via Wikimedia Commons.