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Demand Propels Spirit Airlines Q4 Earnings (revised)

Zacks Equity Research

U.S. low cost carrier Spirit Airlines Co. (SAVE) reported strong fourth quarter and full-year 2013 results, owing to solid demand for its low-cost ultra-low fare model.

The company reported record fourth quarter earnings of 56 cents per share that surpassed the Zacks Consensus Estimate of 50 cents. The results were way above the prior-year quarter earnings of 27 cents.

Quarterly revenues moved up 27.9% year over year to $420.0 million and were ahead of the Zacks Consensus Estimate of $415.0 million. On an annualized basis, Passenger revenues increased 30.6% while Non-Ticket revenues increased 24.3%. Continuous demand and growth in capacity aided the strong performance.

For full-year 2013, Spirit posted earnings of $2.43 per share (surpassing our projection of $2.37 and increasing 70.0% year over year) on revenues of $1,654.4 million (up 25.5% from the prior year and marginally ahead of our projection of $1,653.0 million).

Operating Statistics

Revenue passenger miles moved up 25.7% year over year to 3.17 billion in the fourth quarter. Capacity or available seat miles increased 24.3% year over year to 3.67 billion, while load factor (percentage of seats filled with passengers) leaped 100 basis points year over year to 86.2%. Revenue per available seat mile (:RASM) increased 3.0% year over year to 11.43 cents.

Operating Expenses & Operating Income

For the fourth quarter, operating income increased to $68.1 million from $31.9 million in the year-ago quarter. Total operating expenses increased 18.8% year over year to $351.9 million in the fourth quarter. Average fuel price (economic) was $3.21 per gallon, down 2.7% from $3.30 in the year-ago quarter. Consolidated unit cost or cost per available seat mile (CASM), excluding fuel and special items, increased 2.5%.


At the end of 2013, Spirit had $530.6 million in unrestricted cash and cash equivalents and no debt in its balance sheet. In 2013, Spirit generated operating cash flow of $195.4 million and capital expenditures were $19.8 million. In the fourth quarter, the company took delivery of 4 new Airbus A-320 aircrafts having a total of 54 aircraft in its fleet.

In 2013, return on invested capital (before taxes and excluding special items) was 31.8%.

Other Airline Stocks

Delta Air Lines Inc. (DAL) reported fourth-quarter 2013 adjusted earnings of 65 cents while United Continental Holdings Inc. (UAL) adjusted earnings came in at 78 cents. Both stocks managed to beat their Zacks Consensus Estimate.

Our Take

We believe that the company will benefit from service launch in several markets along with its focus on delivering low fares to its valued customers. Additionally, the company has ordered new aircraft from Airbus, which will enhance customer comfort.

Spirit Airlines currently holds a Zacks Rank #2, implying a Buy rating. Better ranked stocks like American Airlines Group Inc. (AAL) is worth considering within the sector.

(We are reissuing this article to correct a mistake. The original article, issued earlier today, February 19, 2014, erroneously cited Southwest Airlines [LUV] by mistake, and should no longer be relied upon.)

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