Spirit Airlines Reports First Quarter 2016 Adjusted Pre-Tax Margin of 21.3 Percent (1)

• Adjusted net income for the first quarter 2016 was $72.3 million ($1.01 per diluted share)1. GAAP net income for the first quarter 2016 was $61.9 million ($0.86 per diluted share).
• Adjusted pre-tax margin for the first quarter 2016 was 21.3 percent1. On a GAAP basis, pre-tax margin for the first quarter 2016 was 18.2 percent.
• Unrestricted cash and cash equivalents as of March 31, 2016 was $902.8 million.
• Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended March 31, 2016 was 28.3 percent2.

"I want to thank our Spirit team members for their contributions in achieving these solid first quarter results. The pricing environment remains very competitive, but we aren't just sitting passively by. We have upgraded our pricing systems, made modest revisions to our schedules, and adjusted our approach to inventory management, all of which have produced improvements to our revenue results," said Bob Fornaro, Spirit's Chief Executive Officer. "As we head into the peak summer travel months, we are focused on continued cost and revenue execution, improving our operational reliability and providing friendly customer service."

Revenue Performance

For the first quarter 2016, Spirit's total operating revenue was $538.1 million, an increase of 9.1 percent compared to the first quarter 2015, driven by an increase in flight volume, partially offset by a decrease in operating yields.

Total revenue per passenger flight segment ("PFS") for the first quarter 2016 decreased 13.0 percent, or $16.08, year over year to $107.88, primarily driven by a 20.5 percent decrease, or $14.06, in ticket revenue per PFS. Non-ticket revenue declined 3.7 percent, or $2.02, year over year on a per flight segment basis to $53.23. Although non-ticket revenue per passenger segment remains relatively stable, the Company has experienced modest pressure on take rates for certain ancillary items which it believes is correlated to low fare levels in its markets.

Cost Performance

Adjusted operating expense for the first quarter 2016 increased 10.2 percent, or $39.0 million, to $420.4 million3 on a capacity increase of 26.5 percent year over year. During the first quarter 2016, the Company purchased two A319 aircraft it formerly financed under operating lease agreements which resulted in lease termination charges. GAAP total operating expenses, including special items of $16.4 million4 that are primarily driven by lease termination charges, increased 13.7 percent, or $52.7 million, year over year to $436.8 million.

Economic fuel expense decreased 23.5 percent, or $24.7 million, year over year on a 24.4 percent increase in fuel volume. This decrease was driven by a 37.4 percent decrease in the average economic fuel cost per gallon compared to the same period last year.

Spirit reported first quarter 2016 cost per available seat mile ("ASM") excluding special items and fuel ("Adjusted CASM ex-fuel")3 of 5.59 cents, a decrease of 2.3 percent compared to the same period last year, driven primarily by lower aircraft rent per ASM. The decrease in aircraft rent per ASM was driven by a change in the mix of leased (rent recorded under aircraft rent) and purchased (depreciation recorded under depreciation and amortization) aircraft. This benefit was partially offset by higher other operating expense related to increased passenger re-accommodation expense, and higher depreciation and amortization expense related to the depreciation of aircraft. Additionally, during the first quarter 2016, the Company and its flight attendants, represented by the Association of Flight Attendants - CWA (AFA), reached a tentative agreement for a five-year contract. During the first quarter 2016, labor expense per ASM was higher year over year due to the accrual of a one-time ratification incentive payment of $8.4 million related to this tentative agreement.

"Our greatest competitive strength is our relative cost advantage. We are focused on getting better all the time and doing so while maintaining, or improving upon, our relative cost advantage," said Ted Christie, Spirit's Chief Financial Officer. "After adjusting for the economic impact of our tentative flight attendant agreement, including the $8.4 million ratification incentive accrual, we are confident we can hold the line on costs and now estimate our full year 2016 adjusted CASM ex-fuel will be about flat year over year."

Fleet

During the first quarter 2016, Spirit took delivery of 4 new aircraft (2 A320ceo and 2 A321ceo aircraft), ending the quarter with 83 aircraft in its fleet.