Spirit Airlines Reports Second Quarter 2018 Results

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Spirit Airlines, Inc. (NYSE:SAVE) today reported second quarter 2018 financial results.

  • GAAP net income for the second quarter 2018 was $11.3 million ($0.16 per diluted share), or $75.7 million ($1.11 per diluted share)1 excluding special items.
  • GAAP operating margin for the second quarter 2018 was 12.7 percent, or 13.3 percent excluding special items1.
  • Spirit ended the second quarter 2018 with unrestricted cash, cash equivalents, and short-term investments of $914.1 million.

“Our team delivered excellent operational performance during the second quarter 2018, achieving a DOT on-time performance of 79.6 percent - the best second quarter performance in our Company’s history.  Despite paying materially higher fuel prices, our second quarter earnings results exceeded our expectations due to strong ancillary revenue production and better-than-expected cost performance,” said Robert Fornaro, Spirit’s Chief Executive Officer.  "Our commitment to grow ancillary revenue, deliver excellent operational reliability, and improving our overall guest experience while maintaining our low cost structure positions us well to drive returns for our shareholders."

“In addition to running a great operation during the quarter and outperforming on our cost expectations, we are excited about our upcoming network additions.  During the quarter, we announced a major international expansion from Orlando to 11 destinations in Latin America and the Caribbean that we believe will nicely complement our existing international services,” said Ted Christie, Spirit’s President and Chief Financial Officer.  "Looking ahead to the third quarter, we expect the trend of year-over-year improvement in non-ticket revenue per passenger segment to continue.  We believe this, together with a continued strong demand environment, will allow us to deliver solid year-over-year TRASM improvement in the third quarter 2018.”

Revenue Performance 
For the second quarter 2018, Spirit's total operating revenue was $851.8 million, an increase of 21.6 percent compared to the second quarter 2017, driven by an 18.9 percent increase in flight volume.

Total revenue per available seat mile ("TRASM") for the second quarter 2018 decreased 6.8 percent compared to the same period last year.  An increase in average stage length and the calendar shift of Easter contributed approximately 520 basis points to the Company's second quarter 2018 TRASM decline.

On a per passenger flight segment basis, total revenue for the second quarter 2018 was $112.76, flat compared to the second quarter last year.  Non-ticket revenue per passenger flight segment increased 3.0 percent to $54.572 and fare revenue per passenger flight segment decreased 2.8 percent to $58.19.

Cost Performance
For the second quarter 2018, total GAAP operating expenses, including special items of $4.8 million3, increased 30.7 percent year over year to $743.3 million.  Adjusted operating expenses for the second quarter 2018 increased 30.1 percent year over year to $738.4 million4.  These changes were primarily driven by increases in flight volume, fuel rates, and salaries, wages and benefits.

Aircraft fuel expense increased in the second quarter 2018 by 73.0 percent, compared to the same period last year, due to a 39.8 percent increase in the cost of fuel per gallon and a 24.1 percent increase in fuel gallons consumed.

Spirit reported second quarter 2018 cost per available seat mile ("ASM"), excluding special items and fuel (“Adjusted CASM ex-fuel”), of 5.17 cents4, a decrease of 11.3 percent compared to the same period last year.  Better operational performance was a large driver of this improvement and resulted in lower passenger re-accommodation expense and lower crew disruption expense per ASM (both recorded within other operating expenses), as well as improved labor productivity and efficiency, which helped to partially offset the impact of higher wage rates.  Additionally, aircraft rent per ASM was lower year over year, primarily due to the elimination of lease expense related to the 14 aircraft the Company purchased off-lease during the quarter.

Spirit took delivery of one new A320ceo aircraft during the second quarter 2018, ending the quarter with 119 aircraft in its fleet.

Aircraft Purchase Agreement
On March 28, 2018, the Company entered into an aircraft purchase agreement to purchase 14 A319 aircraft, which were previously operated by the Company under operating lease agreements.  Upon execution of the agreement, the lease agreements associated with these aircraft were classified as capital leases on the balance sheet at lower of cost or fair value.  The difference between the resulting capital lease obligation and the purchase price was accreted as interest expense in special charges, non-operating in the statement of operations, through the closing of each individual purchase.  All the transactions were completed prior to June 30, 2018.  The amount of special charges, non-operating recognized for the three months ending June 30, 2018related to these agreements was $79.4 million.

New Routes
Seattle - Fort Lauderdale (04/12/2018)*
Seattle - Chicago (04/12/2018)*
Seattle - Dallas (04/12/2018)*
Seattle - Minneapolis (04/12/2018)*
Tampa - Las Vegas (04/12/2018)
Tampa - Los Angeles (04/12/2018)*
Orlando - Las Vegas (04/12/2018)
Minneapolis - Myrtle Beach (04/12/2018)*
Fort Lauderdale - Cap-Haïtien, Haiti (04/12/2018)
Fort Lauderdale - Kingston, Jamaica (04/12/2018)**
Atlantic City - New Orleans (04/13/2018)*
Detroit - San Diego (04/23/2018)*
Fort Lauderdale - St. Maarten, U.S. Virgin Islands (05/05/2018)***
Fort Lauderdale - St. Croix, U.S. Virgin Islands (05/24/2018)

* Indicates seasonal service
** Indicates expanded seasonal daily service
*** Indicates resumed service

This press release was sourced from Spirit Airlines on 25-Jul-2018.