Spirit (SAVE) Stock Up On Q3 Earnings Beat, Airbus Deal

Spirit Airlines’ (NYSE:SAVE) third-quarter 2019 earnings per share (excluding 10 cents from non-recurring items) of $1.32 surpassed the Zacks Consensus Estimate by 5 cents. However, the bottom line declined 10.2% on a year-over-year basis due to higher costs.

Additionally, in line with its fleet modernization efforts, this low-cost carrier announced that it has inked of a memorandum of understanding (MOU) with Airbus to buy 100 new Airbus A320neo Family jets. Moreover, Spirit has the option to purchase up to 50 more planes under the MOU, which includes Airbus A319, A320 and A321 models. The airline intends to take delivery of these fuel-efficient jets through 2027.

Both earnings beat and the Airbus order pleased investors. Evidently, the stock gained 5.8% in after-hours trading on Oct 23.

Other Q3 Details

Operating revenues of $992 million edged past the Zacks Consensus Estimate of $989 million. The top line also improved 9.7% year over year on the back of a 17.7% expansion in flight volume. Passenger revenues, accounting for bulk (98.1%) of the top line, improved 9.6% year over year as well. Additionally, revenues from other sources increased 13.7%.

Total operating revenue per available seat mile (TRASM) dipped 1.7% in the reported quarter due to the 120-basis point contraction in load factor (% of seats filled by passengers) to 84.8% as traffic growth (9.9%) lagged capacity expansion (11.6%), unfavorable passenger yields (down 0.2%) and the Hurricane Dorian-related adversity. However, excluding Hurricane Dorian’s negative impact, this metric slid roughly 1% in third-quarter 2019.

Adjusted operating expenses increased 13.1% to $858.2 million, mainly due to higher expenses on salaries, wages and benefits plus costs related to passenger re-accommodation. Moreover, cost per available seat miles (CASM) inched up 2.4% in the reported quarter.

Average economic fuel cost per gallon in the reported quarter decreased 11.9% year over year to $2.08. However, CASM excluding operating special items and fuel (adjusted CASM ex-fuel) increased 8.4% year over year. Factors like increased flight cancellations due to foul weather, additional crew costs and expenses related to passenger re-accommodation caused higher adjusted CASM ex-fuel.