(Reuters) -Spirit Airlines said on Friday it will receive a monthly credit from International Aero Engines until the end of 2024 as compensation for not being able to use planes with engine problems.
The airline said in a filing with the U.S. Securities and Exchange Commission that the deal would increase liquidity by $150 million to $200 million. The engine maker is a subsidiary of RTX Corp.'s Pratt & Whitney.
The impact on Spirit's liquidity will be determined by the number of days in 2024 that Spirit aircraft are unavailable due to engine issues, according to the document.
Under the settlement, Spirit agreed to release IAE and its affiliates from claims related to the affected engines that have accrued or may accrue before December 31, 2024.
Spirit intends to discuss agreements with Pratt & Whitney for any Spirit aircraft that remain unavailable after the end of the year, the company said in the filing. Spirit removed the engines from service and grounded some of its A320neo planes for inspection after being notified by Pratt & Whitney. of a rare condition in the powder metal used to manufacture certain engine parts in July of last year that would require removal, replacement or additional inspection.
Rising operating costs and persistent supply chain issues have the ultra-low-cost airline grappling with liquidity issues and struggling to return to sustainable profitability. This has raised concerns about the company's ability to pay debt due next year. Spirit's survival was threatened after regulators ruled out a $3.8 billion merger deal with JetBlue Airways (NASDAQ:) that would have created the fifth-largest U.S. airline could have ensured Spirit's survival while The carrier burns through cash and struggles with debt.
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