Considerations for Spirit Airlines Pilots
Are you feeling uneasy about your financial flight path, wondering whether you should stay or go — or whether you should hold or sell your shares? These are just a couple of questions you might be pondering after the ruling earlier this week barring JetBlue from acquiring Spirit Airlines.
Bankruptcies, mergers and acquisitions are all familiar scenarios in the industry, and every one of them can severely impact your seniority and quality of life. It’s difficult to anticipate exactly how a single pilot can be affected over a career, but these events can often lead to the need to move, commute and/or change airlines. Changes in pay and benefits are also likely consequences. And unlike in many other careers, there are few lateral moves in airline flying.
Dealing With Financial Uncertainty
With the health of the Spirit Airlines in question, we know this is likely a very stressful time for you and your family. In uncertain times like these, as you figure out your next steps, we urge you to follow these useful tips.
Create or update your financial plan.
One of the best ways to overcome financial uncertainty is to establish a comprehensive financial plan, because it puts you in control of your finances. Your plan should account for all aspects of your financial life and address the particular challenges and stressors keeping you up at night.
A solid financial plan can help you gain the confidence that comes from knowing you have accounted for the major factors that may impact your financial life and that you’re prepared to handle whatever the future may have in store. Ultimately, a financial plan can help ease your financial anxiety by allowing you to feel more secure in your financial future.
Don’t make any large purchases.
Maybe you’ve been considering a new boat, or perhaps you’ve been dreaming of cruising the town in a new automobile. Whatever large purchase you may have your eye on, we advise you to hold off just a bit longer until your vision of the future becomes clearer.
Add additional funds to your emergency savings.
Cash isn’t king, but peace of mind might be. Focusing on your short-term savings/emergency fund is another way of overcoming stress of the unknown, and pilots ought to have enough in their emergency fund to cover the unexpected. Although doing so won’t eliminate your stress entirely, a proper emergency fund can help make unexpected life changes easier to manage.
Make (and stick to) a budget.
When it comes to taking charge of your financial life, budgeting is one of your more powerful tools at your disposal. Once you gain an idea of how your money is spent, you can set new monthly spending goals and cut back on unnecessary expenses. A budget doesn’t necessarily need to be restrictive, but it can help you realign your spending with your priorities and values. Once you’ve established a monthly budget, keep a running record of your monthly income and expenses to assess how well you’re sticking to your goals.
Don’t make any rash moves on limited information — but have a back-up plan.
While you shouldn’t take any drastic measures, such as leaving your job, before having all the facts, it may not hurt to put feelers out to your contacts at other airlines just in case the worst-case scenario plays out.
Have open discussions with your spouse about your options.
Communication is key in a partnership of any kind, and there’s no time like the present to ensure you and your spouse are on the same page. By bringing your spouse into the conversation now, you’ll have a better idea of what options your spouse is or isn’t on board with should a change in airline become necessary down the road.
Holding vs. Selling Company Shares
This is a decision many of you are contemplating, given your company stock’s recent drop in price. We know many of you have shares in your Personal Choice Retirement Account (PCRA) or brokerage accounts and are searching for answers. Unfortunately, there’s not a one-size-fits-all answer, and there are many variables to consider.
Your first option is to hold onto your shares in hopes the stock will be worth more at a future time. Many stocks drop only to roar back stronger later, and this could be the case for Spirit Airlines. However, in the event you hold your stock it’s important to ensure your portfolio is properly diversified, as holding a concentrated stock position can put your portfolio at greater risk of loss.
Alternatively, you can sell your stock today, effectively locking in your losses. If you decide to sell — and your shares are held in a taxable account — then you’ll want to take advantage of tax-loss harvesting.
Tax-Loss Harvesting
Tax-loss harvesting is the strategy of selling an investment that has declined in value in the short term and replacing the investment with a highly correlated alternative. When done correctly, the risk profile and expected return of your portfolio remain unchanged, but up to $3,000 per year in investment losses can be used to offset ordinary income. And if you realize more than $3,000 of losses in a single year, you can carry over the excess amount to offset capital gains in future years. By realizing an investment loss within your portfolio, you can access a tax deduction then reinvest your tax savings to stay invested in the market.
The Bottom Line
A qualified financial investor can help you establish a comprehensive financial plan and aid you in determining whether selling all, some or none of your shares makes the most sense for you in light of your unique goals and current financial situation.
At Creative Planning, our aviation specialty practice is composed of experienced professionals who focus on helping pilots navigate the unique financial challenges of their personal and professional lives. To learn more about your options and discuss your specific questions, or for assistance with any other financial matter, please schedule a call with a member of our team.
