ULCC Spirit Airlines faces pricing pressure from lower fuel prices, refines 4Q guidance

Despite pledges by some US airlines that they have no plans to lower fares in response to falling fuel prices, the country's largest ultra low-cost airline Spirit has refined its 4Q2014 margin guidance due to what it deems as fare compression for close-in bookings.

The ULCC also concludes dilutionary pricing is occurring in Dallas, its second largest market by seat deployment and a particularly dynamic market due to the lifting of restrictions on certain long-haul flights from Dallas Love Field that has fuelled overall capacity growth in the market.

Spirit's trimming of its projected 4Q2014 margins could lead to larger questions about its planned growth and ambitious margin targets. At that point it is tough to determine if Dallas is just an anomaly in Spirit's business logic, or if major airlines are examining how to respond to the new breed of ultra low-cost carriers.