Spirit Airlines Reports Second Quarter 2016 Results

• GAAP net income for the second quarter 2016 was $73.1 million ($1.03 per diluted share). Excluding special items, net income for the second quarter 2016 was $78.5 million ($1.11 per diluted share)1.
• On a GAAP basis, operating margin for the second quarter 2016 was 20.9 percent. Adjusted operating margin for the second quarter 2016 was 22.3 percent2.
• Unrestricted cash and cash equivalents as of June 30, 2016 was $1.0 billion.
• Spirit's return on invested capital (before taxes and excluding special items) for the twelve months ended June 30, 2016 was 27.6 percent3.

"While in line with our expectations, our second quarter 2016 financial results were negatively impacted by continued pressure on yields. Looking ahead, we see strong volumes for the peak summer leisure travel period but anticipate yield pressures will persist," said Bob Fornaro, Spirit's Chief Executive Officer. "On the operations front, I'm pleased to report that the changes we're making to improve our on-time performance are beginning to take root. For the second quarter 2016, we achieved our highest second quarter on-time performance in the last five years. We still have a lot of work to do to achieve consistent reliability and improve our customer's overall experience, but I want to thank and congratulate the team for the progress made during the quarter."

Revenue Performance

For the second quarter 2016, Spirit's total operating revenue was $584.1 million, an increase of 5.5 percent compared to the second quarter 2015, driven by an increase in flight volume offset by a decrease in operating yields.

Total revenue per passenger flight segment ("PFS") for the second quarter 2016 decreased 15.0 percent, or $18.40, year over year to $104.19, primarily driven by a 22.6 percent, or $15.48, decrease in ticket revenue per PFS. Non-ticket revenue declined 5.4 percent, or $2.92, year over year on a per flight segment basis to $51.32. 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. The Company has several new initiatives it plans to begin phasing in by year-end that should help mitigate these and other deflationary non-ticket pressures.

Cost Performance

Total GAAP operating expenses, including special items of $8.6 million4 primarily related to lease termination charges, increased 7.2 percent, or $31.2 million, year over year to $462.3 million. Adjusted operating expense for the second quarter 2016 increased 4.5 percent, or $19.7 million, to $453.7 million5 on a capacity increase of 23.1 percent year over year.

Aircraft fuel expense decreased in the second quarter of 2016 by 11.5 percent, or $14.7 million, compared to the same period last year, due primarily to a 29.3 percent decrease in the average economic fuel cost per gallon6, partially offset by a 22.0 percent increase in fuel gallons consumed.

Spirit reported second quarter 2016 cost per available seat mile ("ASM") excluding special items and fuel ("Adjusted CASM ex-fuel")3 of 5.30 cents, a decrease of 8.6 percent compared to the same period last year. The primary drivers of this improvement were lower aircraft rent per ASM this year, primarily driven by a change in the mix of leased and purchased aircraft, as well as higher expense in the second quarter last year related to an unusual number of flight cancellations and delays. Additionally, the Company purchased one A319 aircraft formerly under a lease arrangement and negotiated four A319 aircraft lease extensions during the quarter, which contributed to lower aircraft rent per ASM.

"I am pleased to say that we remain on track to achieve adjusted CASM ex-fuel of about flat for the full year 2016," said Ted Christie, Spirit's Chief Financial Officer. "Maintaining our ultra-low unit costs is core for Spirit, and our investments in operational improvement will yield benefits to the cost structure over the next year. Consistent financial performance in a wide variety of macro environments is a true differentiator for the Spirit story, and one that will prove even more valuable as we head into the latter part of this decade."

Labor

During the second quarter, Spirit's flight attendants, represented by the Association of Flight Attendants - CWA ("AFA-CWA"), ratified an agreement for a five-year contract. Also, during the second quarter, the Company's ramp service team members at Fort Lauderdale-Hollywood International Airport, represented by the International Associations of Machinists ("IAM"), also ratified an agreement for a five-year contract.

Fleet

During the second quarter 2016, Spirit took delivery of 4 new aircraft (1 A320ceo and 3 A321ceo aircraft), ending the quarter with 87 aircraft in its fleet. Also, during the quarter, Spirit purchased one A319 off lease and extended leases on four additional A319 aircraft.

Share Repurchase

Under its current share repurchase authorization, Spirit repurchased approximately 1.2 million shares during the second quarter for $51.3 million.

Recent New Service Announcements

Boston - Orlando (10/7/16)
Philadelphia - Orlando (10/7/16)
Newark - Fort Lauderdale (10/30/16)
Newark - Orlando (10/30/16)
Kansas City - Orlando (11/10/16)
Akron-Canton - Fort Lauderdale (11/10/16)
Akron-Canton - Orlando (11/10/16)
Akron-Canton - Tampa* (11/10/16)
Akron-Canton - Fort Myers* (11/11/16)
Niagara Falls - Orlando (11/17/16)
Plattsburgh - Orlando (11/17/16
Baltimore - Fort Myers (11/10/16)
Baltimore - Tampa (11/10/16)
Newark - Myrtle Beach (3/9/17)
Akron-Canton - Myrtle Beach (4/27/17)*
Fort Lauderdale - Havana, Cuba (TBD)**

*seasonal
**Tentatively awarded by the Department of Transportation (DOT). Final DOT determination is expected during the third quarter 2016.

Refer to full documentation in attachments box, located at the top left, below the headline.