LAXintl From United States of America, joined May 2000, 23456 posts, RR: 50 Posted (9 months 2 weeks 4 days 12 hours ago) and read 3726 times:
These guys certainly have developed a model that works by producing strong margins leading to another strong quarter and record full year results.
o Net income for the fourth quarter 2012 was $19.5 million
o Hurricane Sandy impact $25 million
o Net income for the full year 2012 was a record $103.8 million
o CASM ex-fuel for the fourth quarter 2012 decreased 2.1% to 5.93 cents
o Return on invested capital was 26.5 percent
o Spirit ended 2012 with $416.8 million in unrestricted cash
o No debt on balance sheet
o Ended year with 45 aircraft in its fleet - 9 due in 2013.
Polot From United States of America, joined Jul 2011, 1851 posts, RR: 0 Reply 7, posted (9 months 2 weeks 4 days 8 hours ago) and read 3171 times:
Quoting stlgph (Reply 3): Mark my words, by 2020, this airline will be the size of Southwest Airlines today.
Will Spirit be much larger? Yes. The size of Southwest Airlines today though? Not even close. Southwest today has about ~570 planes according to wikipedia (not sure if that includes Airtran or not). Spirit has 45 with 9 more coming this year. I can't see them getting 500 more planes in 7 years- even taking into account mergers.
roswell41 From United States of America, joined Aug 2001, 633 posts, RR: 1 Reply 10, posted (9 months 2 weeks 4 days 7 hours ago) and read 3021 times:
Quoting ouboy79 (Reply 9): Am I the only one that gets annoyed when they report CASM minus some of the critical expenses?
That is because fuel is assumed to be purchased at market prices which should be the same for all carriers. Obviously with Delta owning a refinery and SWA with previous hedging success could influence fuel prices. Largely, CASM ex fuel is a good metric to compare cost performance.
flyinryan99 From United States of America, joined Feb 2001, 1948 posts, RR: 10 Reply 11, posted (9 months 2 weeks 4 days 7 hours ago) and read 3002 times:
Quoting roswell41 (Reply 10): That is because fuel is assumed to be purchased at market prices which should be the same for all carriers. Obviously with Delta owning a refinery and SWA with previous hedging success could influence fuel prices. Largely, CASM ex fuel is a good metric to compare cost performance.
So the fuel CASM is the same for an ERJ 145 as it is for a Boeing 737?
roswell41 From United States of America, joined Aug 2001, 633 posts, RR: 1 Reply 12, posted (9 months 2 weeks 4 days 7 hours ago) and read 2995 times:
I find it interesting that NK's growth thus far has gone unchallenged by any of the large incumbent carriers. How long will it be until they respond to NK and what form will it take? Could NK be bought out to rid the market of their presence? Will NK continue to focus on domestic and near international destinations or could their model be scaled up into transatlantic/deep South America flying? It will be interesting to watch their growth and their strong financial performance - a rarity in the airline business.
LAXintl From United States of America, joined May 2000, 23456 posts, RR: 50 Reply 13, posted (9 months 2 weeks 4 days 4 hours ago) and read 2803 times:
Some notes from the earnings call.
o 2012 record year earnings - $103.8 million
o Revenue up 23.1%, while cost up 20.5% year over year.
o Even with $25mil hit from hurricane Sandy, beat market estimates
o 2012 CASM down 2.1%, expect 2013 CASM down further 1%. - Unit cost advantage will continue to broaden compared to peers
o Pristine balance sheet. Zero debt
o 2012 average ticket base fare $75, down 7.2%. Will continue to seek to push this down further in coming years
o Non ticket revenue per passenger now $51 up 14.7% year over year.
o Fuel remains concern. Best hedge is a new efficient fleet. So far 20% 2013 fuel hedged
o Keen focus on unit cost. Plan to maintain flat or down next few years.
o Strong cash - $416.8mil. Up $73mil y-o-y
o Raised 2013 projected EBITAR margin target to 25-27%.
TRAFFIC / NETWORK
o 29 new markets in 2012. Very happy with new markets. - Many cash positive in 60-days; expect markets to be fully amortized breakeven in 6-8mos.
o Now serve 110 routes at end of year
o Will not nurse laggard markets (eg Phoenix-Vegas, FLL-NAS) Can play with frequency/seasonality, but will look to move on to generate better return on assets elsewhere.
o Experienced significant and lingering decline in travel following Sandy esp NYC and ACY and feeder Florida markets
o New crew bases in DFW and LAS in 2012.
o Forecast 21.5% growth in 2013. Likely further leverage existing focus cities by adding more concentrated spiderweb network.
o Easily sees 15-20% growth next few years. Big list of markets prime for Spirit. Millions of potential trips not flown today because consumers priced out of market.
o Industry capacity to Carribean/Latam increasing causing weaker yields to South Florida. Spirit will move capacity to maximize return.
o Texas very strong - good demand/yields.
o 9 new planes due in 2013 - 7 new A320's, plus 2 leased A319s on short 40-month agreement
o Will become 1st US operator Sharklet A320 - due March
o Open to pursuing other short term fleet opportunities as bridge until large order book begins delivery.
o See AA-US merger as industry tide. Good for industry stability, but likely opens further opportunities for Spirit.
o Spirit is run as a basic business. Will seek highest return on capital and assets
o Now selling via Expedia. Expect steady added bookings via such popular booking tool.
o Seeing ever more upscale traveller demographics. Texas good example.
o Ever increasing acceptance of the Spirit model. Give consumers the freedom to pay products and services they value and don't pay to subsidize other peoples choice and needless overhead of other airlines.
From the desert to the sea, to all of Southern California
seatback From United States of America, joined Mar 2002, 687 posts, RR: 0 Reply 14, posted (9 months 2 weeks 4 days 2 hours ago) and read 2676 times:
Quoting roswell41 (Reply 12): I find it interesting that NK's growth thus far has gone unchallenged by any of the large incumbent carriers. How long will it be until they respond to NK and what form will it take?
NK tends to stimulate the market instead of competing for the current pool of passengers. Pax who fly NK either would have driven, taken the bus or not gone at all. That's why they are existing fine in DFW/ORD/IAH without much of a response from AA or UA.
JONC777 From United States of America, joined Jun 2012, 125 posts, RR: 0 Reply 19, posted (9 months 2 weeks 3 days 22 hours ago) and read 2364 times:
Or will Southwest buy Spirit while its still at a reasonable size to prevent them from becoming even bigger competition. I wouldnt see it happening until the FL thing is done. . . but. . .I wouldnt say it 'couldnt' happen. If all the aircraft are leased it wouldnt be that big of a deal to take the gate space and lat american routes and just dissolve it.
ouboy79 From United States of America, joined Nov 2001, 4300 posts, RR: 22 Reply 20, posted (9 months 2 weeks 3 days 22 hours ago) and read 2351 times:
Quoting JONC777 (Reply 19): Or will Southwest buy Spirit while its still at a reasonable size to prevent them from becoming even bigger competition. I wouldnt see it happening until the FL thing is done. . . but. . .I wouldnt say it 'couldnt' happen. If all the aircraft are leased it wouldnt be that big of a deal to take the gate space and lat american routes and just dissolve it.
Hmm...FLL would be an interesting focal city to go south, but other than that I don't see much value in it for WN. NK/F9 still make the "most" sense right now...though I'm not sure if BB and Austin Powers would want to work together again.
Any opinion/comment posted is that of my own and not that of Southwest Airlines Co.
SCQ83 From United States of America, joined Oct 2012, 555 posts, RR: 0 Reply 21, posted (9 months 2 weeks 3 days 22 hours ago) and read 2300 times:
Quoting seatback (Reply 14): NK tends to stimulate the market instead of competing for the current pool of passengers. Pax who fly NK either would have driven, taken the bus or not gone at all. That's why they are existing fine in DFW/ORD/IAH without much of a response from AA or UA.
Interesting. Being European and living in the US, I never thought that actually WN/NK would stimulate traffic here. I don't find their prices to be that cheap (at least if you compare to FR in Europe), IMO US legacy carriers have much more competitive pricing policies than in Europe (so the "low" cost advantage is not that much), and Americans tend to have less holiday days to "waste" with these kind of getaways/city breaks typical for low cost stimulating traffic. At least from ppl I know here, I never heard anyone talking about Southwest fares or Spirit new destinations (probably JetBlue and Virgin America yes... but this is not either the ultra low-cost model WN/NK advocate).
I find in Europe, with Ryanair is completely different... O'Leary is so mediatic (he is really a genius creating hilarious and extravagant disputes in the media) and their fares can be so dirty cheap that everybody I know and his dog has flown and flies with Ryanair just for the sake of getting a good deal.
LAXintl From United States of America, joined May 2000, 23456 posts, RR: 50 Reply 22, posted (9 months 2 weeks 3 days 21 hours ago) and read 2252 times:
One of the analyst last year has a paper on Spirit and its success in markets, and basically said the majors had to close their eyes when Spirit came into town.
In essence there was no way for the majors to compete with Spirit. They simply could never offer the prices Spirit does as the fare structure and revenue models at the majors did not have the add-on's to the degree Spirit had. So Spirit could indeed offer its $9, $19, $29 headline fares and a major would lose tons of more money in the process if they tried to ever match and carry folks at those levels while Spirits does it at a profit.
Also the analyst made the made the point that regardless of what a major did Spirit could win. If they did nothing, Spirit would continue to attract a certain value oriented crowd by either stimulating the market itself, or draw some traffic that could have gone to others, while if a competitor matches the low ball Spirit headline fares then the market would likely be stimulated to such a degree that Spirit would also benefit from all the new clients willing to fly.
Ultimately Spirit with its industry low CASM can do things and make money while others (including LCCs) cant even venture into trying without signing a suicide pact.
From the desert to the sea, to all of Southern California
RyanairGuru From Australia, joined Oct 2006, 4043 posts, RR: 2 Reply 23, posted (9 months 2 weeks 3 days 21 hours ago) and read 2191 times:
Quoting seatback (Reply 14): NK tends to stimulate the market instead of competing for the current pool of passengers
Quoting SCQ83 (Reply 21): everybody I know and his dog has flown and flies with Ryanair just for the sake of getting a good deal.
These are interesting observations. SCQ83, you are right that practically everybody in Europe has now flown FR, and most would do so again if the price was right. In the USA, however, very few people have flown on an ULCC. This, to me, suggests that this market is less "mature" than it is in Europe.
See these items from the earnings call:
Quoting LAXintl (Reply 13): o Seeing ever more upscale traveller demographics. Texas good example.
o Ever increasing acceptance of the Spirit model
They suggest to me that the NK model is starting to gain some traction over here, the same as FR did in Europe in the early 2000s. Remember that back when FR started going down the UULCC model, many people didn't fly them, the same as "regular" travellers don't fly NK. BUT, as time went on and they flew to more and more places at eye-wateringly low fares, they started to carry more and more high-income people. I remember when Tony Blair flew them, and in hindsight that was something of a watershed moment (although it was hardly noticed at the time): it legitimized the concept of flying FR even if you could afford BA, especially for personal/leisure travelling.
It will be interesting to see NK grow over the next few years. As they gain traction and "mature" I would not be surprised to see a similar trend start to happen here.
Quoting seatback (Reply 18): If it was a myth, you would have seen AA open a can of whoop all over NK in Dallas.
The common assumptions here are wrong.
Spirit Airlines is not purely there for the "poor folk," kids.
American Airlines couldn't afford to take on Spirit, as is the case when Spirit does something in another town. Most airlines aren't in a position to compete with them. The only one that really can effectively compete with them right now is Allegiant.
Eternal darkness we all should dread. It's hard to party when you're dead.
25 UALWN: The same can be said about the time in 2009 when the queen of Spain flew FR SDR-STN to visit her ill brother in London. The point there not being the
26 surfdog75: Most of the people Spirit attracts, the big carriers don't really care about so far. Just had friends fly them and they were completely turned off by
27 Pe@rson: I am reminded of a Powerpoint presentation by NK to drum-up interest in advertising with the carrier. In this, it provided "basic audience demographi
28 RyanairGuru: The "road warriors" won't, but increasingly more affluent people will put up with it once a year to take the kids on vacation. But those airlines are
29 UALWN: That's nothing: FR charges €60 (!!) for the same. And yet they transported 76 million passengers in fiscal 2012, generating €4.3 billion in reven
30 stlgph: Again, totally incorrect assumption made by anyone on this board. If you're talking about a certain type of people ... i.e. "trailer trash" or whatev
31 nkops: Not saying your friends did this, but most people who feel nickel and dimed to death didn't do their research... NK has a whole page on their wesite
32 commavia: I wouldn't lump Southwest into that category with Spirit anymore. The days of Southwest being able to enter a market and materially stimulate demand
33 SCQ83: However, I think there is an additional difference among Ryanair and Spirit. At least for instance in BOS, I don't know any destination that is serve
34 seatback: Strategically, this would be a great pre-emptive move. Although in BK, AA has $5B in the bank...they could afford it.
35 stlgph: Nice attempt, but still short for all the reasons posted above.[Edited 2013-02-20 07:14:32]