While analysts at Susquehanna are optimistic about some of the larger airlines, they're not jazzed about struggling budget airline Spirit Airlines (SAVE 6.21%). Susquehanna maintained its negative rating on the stock on Tuesday while dropping its price target from $5 to $4. The new price target represents a potential downside of nearly 18% over the next 12 months from the current price.

Strong travel demand is not enough

Susquehanna's channel checks revealed that demand for travel in the spring and summer is shaping up to be strong, but industrywide concerns remain. Susquehanna's analysts are worried about capacity issues related to aircraft delivery delays and quality control.

Spirit notably doesn't fly any Boeing planes, instead opting for an all-Airbus fleet. While this insulates the budget airline from the ongoing problems with Boeing's latest Max planes, the company still faces engine availability issues that have resulted in the grounding of some planes.

After the scuttling of JetBlue's proposed acquisition of Spirit, Spirit is now in cost-cutting mode as it scrambles to preserve cash. The company announced on Monday that it was deferring the delivery of all aircraft on order that were originally set to be delivered between the second quarter of 2025 and the end of 2026. These aircraft will now be delivered in 2030 and 2031.

As a result of the deferrals and the aircraft groundings, Spirit is furloughing 260 pilots. These moves are expected to boost Spirit's liquidity by $340 million over the next two years. However, they will also hinder Spirit's ability to tap into strong travel demand.

Is Spirit a buy or sell?

Spirit is a complicated stock. The company has little choice but to strengthen its balance sheet as it attempts to go it alone, which ultimately means limiting its near-term growth prospects.

While there's immense uncertainty surrounding Spirit, the stock is trading at depressed levels not seen since the start of the pandemic, as measured by the price-to-book value. If you can stomach that uncertainty, Spirit might be an interesting turnaround stock.