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Spirit (SAVE) Shares Sink 34% YTD: What's Pulling It Down?

Zacks Equity Research

Shares of Spirit Airlines, Inc. SAVE have plunged 33.9% so far this year against the industry’s 7.3% rise. After an impressive first-quarter 2019, a partial setback set in from the second quarter onward as the carrier began witnessing rising non-fuel unit costs from a construction work scheduled at the Ft. Lauderdale airport during the 2019 summer. A severe storm in April also pushed up costs.


Let’s delve deeper into the reasons behind the price drop.

Spirit continued battling increased expenses from factors like construction work at the Ft. Lauderdale airport, lower completion factor and expenses associated with flight disruptions, into the third quarter. The 768 flight cancellations due to Hurricane Dorian in September only worsened matters for the company. This hindrance further weighed on the company’s costs. It now anticipates adjusted cost per available seat mile excluding fuel (CASM, ex-fuel) to augment 9-10% year over year in the current quarter, indicating a 200-basis point increase from the prior estimate. Apart from higher costs, reduced capacity from the impacts of Hurricane Dorian also led to this dismal outlook.

Although total operating revenue per available seat mile (TRASM or unit revenues) increased 5% year over year during the second quarter, the carrier has been struggling with low yields in the off-peak period ever since and had anticipated TRASM to slide in the 1-2% range in the third quarter. In the wake of Hurricane Dorian, the airline has further trimmed its TRASM view. It now estimates the same to decline 2.5-3.5% year over year. Moreover, the carrier expects an approximate $25-million revenue impact due to the effects of the natural calamity.

Persistent rise in non-fuel unit costs and the softness in unit revenue trends over the past few months have primarily contributed to the downtrend in the company’s shares. The effects of Hurricane Dorian have added to its woes, causing a further deterioration in shares.

Zacks Rank & Key Picks

Spirit carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Controladora Vuela Compania de Aviacion, S.A.B. de C.V. VLRS, Copa Holdings, S.A. CPA and Allegiant Travel Company ALGT. While Controladora Vuela and Copa Holdings sport a Zacks Rank #1 (Strong Buy), Allegiant Travel carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Controladora Vuela, Copa Holdings and Allegiant Travel have rallied more than 89%, 21% and 51%, respectively, so far this year.

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Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report
Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (VLRS) : Free Stock Analysis Report
Copa Holdings, S.A. (CPA) : Free Stock Analysis Report
Allegiant Travel Company (ALGT) : Free Stock Analysis Report
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