ULCC Spirit Airlines' investors wary as short term challenges mount

Premium Analysis

It has been a tough 2019 for Spirit Airlines, which is facing cost pressure from the recent fallout from Hurricane Dorian and from the airline's earlier decision to drive up utilisation. The company’s projected unit revenue performance for 3Q3019 is weaker than those of its US industry peers.

All of those factors are creating obstacles for Spirit in achieving favourable profit for the remainder of the year. 

Those headwinds are occurring as Spirit appears to be pivoting toward becoming a more “value” airline – working to engender a more positive sentiment among customers through improved operations and small changes to its aircraft cabins to create a bit more comfort. 

In the short term, Spirit’s valuation may continue stalling as markets look for signs of improvement beginning in 2020. The company’s preliminary cost guidance for 2020 is not producing a lot of market confidence.   

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