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Spirit Post Q4 Profit; Record 2012 Results  
User currently offlineLAXintl From United States of America, joined May 2000, 26017 posts, RR: 50
Posted (1 year 9 months 1 week 21 hours ago) and read 4329 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.

Story:
http://finance.yahoo.com/news/spirit...rts-4th-consecutive-111827764.html

=


From the desert to the sea, to all of Southern California
48 replies: All unread, showing first 25:
 
User currently offlinepoint2point From United States of America, joined Mar 2010, 2766 posts, RR: 1
Reply 1, posted (1 year 9 months 1 week 20 hours ago) and read 4244 times:

When O&D accounts for some 90% of a carrier's traffic, like it does with NK, I guess at that point it seems pretty easy to reel in those profits, eh?

Congrats to NK and all stakeholders on their success here.......

 


User currently offlineUALWN From Andorra, joined Jun 2009, 2890 posts, RR: 2
Reply 2, posted (1 year 9 months 1 week 20 hours ago) and read 4220 times:

Quoting LAXintl (Thread starter):
o Return on invested capital was 26.5 percent

This is remarkable. ROI is typically in the single digits for most legacy carriers. That is, when they don't lose money...



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinestlgph From United States of America, joined Oct 2004, 9496 posts, RR: 26
Reply 3, posted (1 year 9 months 1 week 18 hours ago) and read 4044 times:

Mark my words, by 2020, this airline will be the size of Southwest Airlines today.


if assumptions could fly, airliners.net would be the world's busiest airport
User currently onlineSocalApproach From United States of America, joined Feb 2013, 123 posts, RR: 0
Reply 4, posted (1 year 9 months 1 week 18 hours ago) and read 4013 times:

Quoting stlgph (Reply 3):
Mark my words, by 2020, this airline will be the size of Southwest Airlines today.

So should I (omg yes I am saying it) Invest in this airline??


User currently offlinestlgph From United States of America, joined Oct 2004, 9496 posts, RR: 26
Reply 5, posted (1 year 9 months 1 week 18 hours ago) and read 3922 times:

Quoting SocalApproach (Reply 4):

i can't give *my* personal recommendations here, but ... of the top 15 analysts who cover Spirit, this is what it looks like ...

peerperform
buy
market outperform
outperform
overweight
overweight
overweight
outperform
buy
buy
buy
buy
outperform
buy
overweight

current price right now is ~$20.22, average target price is ~$28



if assumptions could fly, airliners.net would be the world's busiest airport
User currently offlinenkops From United States of America, joined Jun 2005, 2688 posts, RR: 6
Reply 6, posted (1 year 9 months 1 week 18 hours ago) and read 3873 times:

Good job NK, now put more flights in ACY please!!!   


I have no association with Spirit Airlines
User currently offlinePolot From United States of America, joined Jul 2011, 2313 posts, RR: 1
Reply 7, posted (1 year 9 months 1 week 17 hours ago) and read 3774 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.


User currently offlineMaverickM11 From United States of America, joined Apr 2000, 17778 posts, RR: 46
Reply 8, posted (1 year 9 months 1 week 17 hours ago) and read 3753 times:

Quoting Polot (Reply 7):

Will Spirit be much larger? Yes. The size of Southwest Airlines today though? Not even close

They have so much market churn on their current fleet size, I can't imagine how many markets they'd have to churn through with 2-300+ planes 



E pur si muove -Galileo
User currently offlineouboy79 From United States of America, joined Nov 2001, 4611 posts, RR: 23
Reply 9, posted (1 year 9 months 1 week 16 hours ago) and read 3650 times:

Quoting LAXintl (Thread starter):
CASM ex-fuel for the fourth quarter 2012 decreased 2.1% to 5.93 cents

Am I the only one that gets annoyed when they report CASM minus some of the critical expenses?


User currently offlineroswell41 From United States of America, joined Aug 2001, 803 posts, RR: 1
Reply 10, posted (1 year 9 months 1 week 16 hours ago) and read 3624 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.


User currently offlineflyinryan99 From United States of America, joined Feb 2001, 2025 posts, RR: 13
Reply 11, posted (1 year 9 months 1 week 16 hours ago) and read 3605 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?


User currently offlineroswell41 From United States of America, joined Aug 2001, 803 posts, RR: 1
Reply 12, posted (1 year 9 months 1 week 16 hours ago) and read 3598 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.

User currently offlineLAXintl From United States of America, joined May 2000, 26017 posts, RR: 50
Reply 13, posted (1 year 9 months 1 week 13 hours ago) and read 3406 times:

Some notes from the earnings call.


FINANCIAL

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.


FLEET

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.

OTHER

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
User currently offlineseatback From United States of America, joined Mar 2002, 778 posts, RR: 0
Reply 14, posted (1 year 9 months 1 week 11 hours ago) and read 3279 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.


User currently offlinestlgph From United States of America, joined Oct 2004, 9496 posts, RR: 26
Reply 15, posted (1 year 9 months 1 week 10 hours ago) and read 3234 times:

Quoting seatback (Reply 14):

That is becoming more and more of a myth.



if assumptions could fly, airliners.net would be the world's busiest airport
User currently offlinekcrwflyer From United States of America, joined May 2004, 3845 posts, RR: 7
Reply 16, posted (1 year 9 months 1 week 10 hours ago) and read 3180 times:

Quoting stlgph (Reply 15):
That is becoming more and more of a myth.

Why is that a myth? Explain your statement.


User currently offlineUALWN From Andorra, joined Jun 2009, 2890 posts, RR: 2
Reply 17, posted (1 year 9 months 1 week 10 hours ago) and read 3142 times:

Quoting LAXintl (Reply 13):
Some notes from the earnings call.

NK is looking more and more like FR... minus MOL...



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlineseatback From United States of America, joined Mar 2002, 778 posts, RR: 0
Reply 18, posted (1 year 9 months 1 week 8 hours ago) and read 3026 times:

Quoting stlgph (Reply 15):
That is becoming more and more of a myth.

Care to explain?

If it was a myth, you would have seen AA open a can of whoop all over NK in Dallas.


User currently offlineJONC777 From United States of America, joined Jun 2012, 126 posts, RR: 0
Reply 19, posted (1 year 9 months 1 week 7 hours ago) and read 2967 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.

User currently offlineouboy79 From United States of America, joined Nov 2001, 4611 posts, RR: 23
Reply 20, posted (1 year 9 months 1 week 7 hours ago) and read 2954 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.


User currently offlineSCQ83 From United States of America, joined Oct 2012, 1096 posts, RR: 0
Reply 21, posted (1 year 9 months 1 week 7 hours ago) and read 2903 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.


User currently offlineLAXintl From United States of America, joined May 2000, 26017 posts, RR: 50
Reply 22, posted (1 year 9 months 1 week 6 hours ago) and read 2855 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
User currently offlineRyanairGuru From Australia, joined Oct 2006, 5903 posts, RR: 5
Reply 23, posted (1 year 9 months 1 week 6 hours ago) and read 2794 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.



Worked Hard, Flew Right
User currently offlinestlgph From United States of America, joined Oct 2004, 9496 posts, RR: 26
Reply 24, posted (1 year 9 months 1 week 3 hours ago) and read 2671 times:

Quoting kcrwflyer (Reply 16):
Quoting seatback (Reply 18):
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.



if assumptions could fly, airliners.net would be the world's busiest airport
User currently offlineUALWN From Andorra, joined Jun 2009, 2890 posts, RR: 2
Reply 25, posted (1 year 9 months 1 week 1 hour ago) and read 2688 times:

Quoting RyanairGuru (Reply 23):
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.

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 price, but the fact that FR had the only non-stop flight between Santander and London. This happens more and more.

[Edited 2013-02-20 00:12:21]


AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinesurfdog75 From United States of America, joined Nov 2005, 335 posts, RR: 0
Reply 26, posted (1 year 9 months 1 week 1 hour ago) and read 2684 times:

Quoting stlgph (Reply 24):
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.

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 being nickled and dimed to death. $5 because you didn't print your own boarding pass? After a while they felt like fools......then their return flight was cancelled. The road warrior that's the bread and butter of the legacies won't put up with that level of service IMO. They'll grow until the big carriers don't like it. At that point they'll have to take on carriers making a billion or two a year.


User currently offlinePe@rson From United Kingdom, joined Jan 2001, 19244 posts, RR: 52
Reply 27, posted (1 year 9 months 1 week ago) and read 2713 times:

Quoting stlgph (Reply 24):
Spirit Airlines is not purely there for the "poor folk," kids.
Quoting surfdog75 (Reply 26):
Most of the people Spirit attracts, the big carriers don't really care about

I am reminded of a Powerpoint presentation by NK to drum-up interest in advertising with the carrier. In this, it provided "basic audience demographics". In terms of income, 28.6% of its customers have an income of $60,000-$74,000 per year, with over 53% earning $60,000+ a year. Only 20% of its customers earn less than $24,999 a year, with 16.9% earning more than $125,000 a year. With this in mind, it's not surprising that 82% of its customers own their own homes.

Source: oddly, it appears blank when I include the link. So to get it, go to Google and type "Spirit Air media kit". This should take you to a pdf.



"Everyone writing for the Telegraph knows that the way to grab eyeballs is with Ryanair and/or sex."
User currently offlineRyanairGuru From Australia, joined Oct 2006, 5903 posts, RR: 5
Reply 28, posted (1 year 9 months 1 week ago) and read 2703 times:

Quoting surfdog75 (Reply 26):
The road warrior that's the bread and butter of the legacies won't put up with that level of service IMO

The "road warriors" won't, but increasingly more affluent people will put up with it once a year to take the kids on vacation.

Quoting surfdog75 (Reply 26):
They'll grow until the big carriers don't like it. At that point they'll have to take on carriers making a billion or two a year.

But those airlines aren't making a billion or two a year on the routes that NK serve. The only exception might be AA@MIA on the LatAm routes. The other legacies cannot really compete on price, and probably won't be interested in trying to undercut NK, not - that is - unless they want to loose a fortune on those routes.



Worked Hard, Flew Right
User currently offlineUALWN From Andorra, joined Jun 2009, 2890 posts, RR: 2
Reply 29, posted (1 year 9 months 6 days 23 hours ago) and read 2650 times:

Quoting surfdog75 (Reply 26):
$5 because you didn't print your own boarding pass?

That's nothing: FR charges €60 (!!) for the same. And yet they transported 76 million passengers in fiscal 2012, generating €4.3 billion in revenue, and €500 million in profit...



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinestlgph From United States of America, joined Oct 2004, 9496 posts, RR: 26
Reply 30, posted (1 year 9 months 6 days 20 hours ago) and read 2550 times:

Quoting surfdog75 (Reply 26):
Most of the people Spirit attracts, the big carriers don't really care about so far.

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 whatever, those "types of people" are on all airlines.
Plus, by the time a trip is all said and done, when you add up the a la carte fees, those passengers are still paying the same in total airfare anyway.
Big carriers aren't in a position to be elitist towards any person who has a need or desire to travel.

Quoting surfdog75 (Reply 26):
Just had friends fly them and they were completely turned off by being nickled and dimed to death.

You get nickel and dimed at restaurants. What's the difference?



if assumptions could fly, airliners.net would be the world's busiest airport
User currently offlinenkops From United States of America, joined Jun 2005, 2688 posts, RR: 6
Reply 31, posted (1 year 9 months 6 days 19 hours ago) and read 2534 times:

Quoting surfdog75 (Reply 26):
they were completely turned off by being nickled and dimed to death.

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 that explains the optional fees. Now if they book through Orbitz or Expedia, I don't know if there is a disclaimer or warning at all



I have no association with Spirit Airlines
User currently offlinecommavia From United States of America, joined Apr 2005, 11819 posts, RR: 62
Reply 32, posted (1 year 9 months 6 days 19 hours ago) and read 2541 times:

Quoting SCQ83 (Reply 21):
I never thought that actually WN/NK would stimulate traffic here.

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 with materially lower fares (i.e., the so-called "Southwest effect") are largely gone. The gap in unit cost between Southwest and its legacy peers has narrowed dramatically in the last decade as they have all substantially restructured in bankruptcy and Southwest's fuel hedges ran out while their labor costs skyrocketed.

Spirit, on the other hand, does have that ability as its costs are substantially lower than Southwest - and certainly the network carriers - and it stimulates demand that would otherwise, in many cases, simply not have flown at all.

Quoting stlgph (Reply 30):
Big carriers aren't in a position to be elitist towards any person who has a need or desire to travel.

Sure they are. In fact, a large reason why the finances of the network airlines have so dramatically turned around in the last few years is precisely because of this intentional market discrimination. The network airlines have consciously avoided selling tickets to certain segments of the population who are unwilling to pay a fare commensurate with the cost to a network airline providing the service. And the network airlines are more profitable for it.

This effective and economically logical discrimination has, in turn, opened an opportunity for an ultra-low-fare carrier like Spirit who, thanks to dramatically lower costs, is capable of offering fares low enough to cater to this ultra-price-sensitive market segment and yet still make a profit. As such, they are stimulating demand without dramatically altering the economics for the network carriers, as they are capturing traffic the network airlines simply don't want. Thus the reason why Spirit has been able to enter lots of network-airline-dominated markets and coexist with them with little drama or response - they are simply going after two entirely different markets.


User currently offlineSCQ83 From United States of America, joined Oct 2012, 1096 posts, RR: 0
Reply 33, posted (1 year 9 months 6 days 19 hours ago) and read 2519 times:

Quoting RyanairGuru (Reply 23):
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.

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 served by NK that is not served by anyone else (maybe Myrtle Beach...???). Ryanair in Europe really focus on routes that nobody else serves. So let's take a sample, from Charleroi (Brussels), Ryanair connects the region with plenty of secondary airports in Italy, France, Spain or Eastern Europe that no one serves from BRU or any other airport.

That means that being the only direct option, many people would use those direct routes instead of the annoyance of changing planes (and that if the other airport is served by any legacy at all!). I lived in Brussels for a while, and using FR from CRL, for instance you could see in those "secondary" routes European Comission workers going to missions. Also for those secondary airports, Ryanair is a bless in the sense that connects them directly to London, Milan or Brussels.

Some of those routes really estimulate traffic. I knew quite a few people (that would never set foot in airliners.net and probably do not even know what a B737) that would book a weekend to the likes of Pula, Marrakech, Budapest or Santander because they found cheap tickets in Ryanair... and that is on addition to their holidays in Asia or their job missions in the US. So the socio-economic target is not different.

I don't really know if Spirit really tries to "untap" those non-served markets or just take traffic from legacies (which looking at the routes they serve, looks more likely). Also, to what extent many Americans would do those weekend breaks just because of "cheap" tickets.


User currently offlineseatback From United States of America, joined Mar 2002, 778 posts, RR: 0
Reply 34, posted (1 year 9 months 6 days 19 hours ago) and read 2515 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.



Strategically, this would be a great pre-emptive move.

Quoting stlgph (Reply 24):
American Airlines couldn't afford to take on Spirit



Although in BK, AA has $5B in the bank...they could afford it.


User currently offlinestlgph From United States of America, joined Oct 2004, 9496 posts, RR: 26
Reply 35, posted (1 year 9 months 6 days 18 hours ago) and read 2448 times:

Quoting commavia (Reply 32):

Nice attempt, but still short for all the reasons posted above.

[Edited 2013-02-20 07:14:32]


if assumptions could fly, airliners.net would be the world's busiest airport
User currently offlinestlgph From United States of America, joined Oct 2004, 9496 posts, RR: 26
Reply 36, posted (1 year 9 months 6 days 18 hours ago) and read 2442 times:

Quoting seatback (Reply 34):
Although in BK, AA has $5B in the bank...they could afford it.

No, they couldn't.



if assumptions could fly, airliners.net would be the world's busiest airport
User currently offlineseatback From United States of America, joined Mar 2002, 778 posts, RR: 0
Reply 37, posted (1 year 9 months 6 days 18 hours ago) and read 2416 times:

Quoting stlgph (Reply 36):
No, they couldn't.

Yes, they could...should we do this all day?  

Barring any restrictions from a BK judge, AA could flood the market with super cheap fares which would add considerable pressure to NK. Right now, they are escaping the wrath and drama because of in the scheme of everything, 160 additional seats sold to people who would otherwise choose to drive or not go at all isn't much of a threat.


User currently offlineUALWN From Andorra, joined Jun 2009, 2890 posts, RR: 2
Reply 38, posted (1 year 9 months 6 days 17 hours ago) and read 2364 times:

Quoting seatback (Reply 37):
AA could flood the market with super cheap fares which would add considerable pressure to NK.

The problem is that AA would lose money with those super-cheap fares, while NK would still make a profit with them, since their CASM is miles away from AA's. I don't see how this would help AA or threaten NK. No European legacy has tried this strategy against FR: they knew it wouldn't work, for exactly the same reasons.



AT7/111/146/Avro/CRJ/CR9/EMB/ERJ/E75/F50/100/L15/DC9/D10/M8X/717/727/737/747/757/767/777/AB6/310/319/320/321/330/340/380
User currently offlinecommavia From United States of America, joined Apr 2005, 11819 posts, RR: 62
Reply 39, posted (1 year 9 months 6 days 17 hours ago) and read 2349 times:

Quoting stlgph (Reply 35):
Nice attempt, but still short for all the reasons posted above.

Huh? What of my post are you actually debating?

Quoting stlgph (Reply 36):
No, they couldn't.

Sure they could, as evidenced by AA's vigorous response in recent years to incursions by other carriers into their core markets. That they choose not to is further validation that Spirit and AA are targeting two very distinct and different customer sets.


User currently offlineLAXintl From United States of America, joined May 2000, 26017 posts, RR: 50
Reply 40, posted (1 year 9 months 6 days 17 hours ago) and read 2359 times:

Quoting seatback (Reply 37):
Barring any restrictions from a BK judge, AA could flood the market with super cheap fares which would add considerable pressure to NK.

Sure it could, and lose a boatload of money in the process.

To make NK bleed (remember they have zero debt, and $400mil in the bank), AA would likely dig itself a billion plus whole.

NK enjoys a 67% CASM advantage over AA per investor presentation from December. Even LCC's like JetBlue has 23% disadvantage.

If AA even lowered its total ticket revenue by 50% would not undercut NK cost, while it would sink AA.

As I posted in Reply 22, as analyst figured the majors might as well close their eyes and ignore NK as they are unlikely to beat them using traditional market ploys of adjusting capacity or fares without hurting themselves even more in the process.



From the desert to the sea, to all of Southern California
User currently offlinelightsaber From United States of America, joined Jan 2005, 13436 posts, RR: 100
Reply 41, posted (1 year 9 months 6 days 13 hours ago) and read 2225 times:
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The comparison of competition with AA is appropriate. I have a large number of cousins (1st and 2nd cousins) who now fly G4 as that is what they could afford in college. Their parents expected them to switch to AA or UA as they fly... instead, as they became executives, doctors, and lawyers they still fly G4! I'm sure if I lived closer to FLL I would substitute in G4.

Customers are unlikely to switch from AA/UA/DL to NK, but the reverse is also true and many of those 'low brow' customers grow into high end customers...

I'm amazed how well they did in a *bad* quarter (hurricane Sandy).

Quoting LAXintl (Thread starter):
o Return on invested capital was 26.5 percent

What?!? Someone tell them this is an airline and a small negative number is considered good.  
Quoting LAXintl (Thread starter):
o CASM ex-fuel for the fourth quarter 2012 decreased 2.1% to 5.93 cents

Implies good efficiency.

Quoting ouboy79 (Reply 9):
Am I the only one that gets annoyed when they report CASM minus some of the critical expenses?

No. With fuel CASM shows how aggressive PIPs are being implemented as well as fleet strategy. Since it is a trade to *increase* non-fuel CASM to decrease w/fuel CASM, I like to see both. However, NK has a young fleet.

Let's take the example of Sharklets. They cost money (increase non-fuel CASM) but will drop the fuel CASM.

Quoting stlgph (Reply 24):
The only one that really can effectively compete with them right now is Allegiant.

   But in reality they have different but competing models.

Quoting LAXintl (Reply 40):
Even LCC's like JetBlue has 23% disadvantage.

No argument, but then we're getting in the 'value discussion.'

Quoting RyanairGuru (Reply 28):
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 the new 'road warriors' are flying NK and G4. They're working for startups, self-employed, non-profits, or companies where 'lower-costs=higher bonus.' Companies where costs matter.

I'll take my relatives who are surgeons. In the past they would fly to conventions in domestic first. Now they faced with cutting convention trips and (gasp) golf outings... Or flying NK/G4/B6/WN to reduce the expenses.

Quoting seatback (Reply 37):
Right now, they are escaping the wrath and drama because of in the scheme of everything, 160 additional seats sold to people who would otherwise choose to drive or not go at all isn't much of a threat.

   That is too much of an oversimplification. This is like the self-employed that WN built a huge customer base upon. The same thing was said about them. Now, they are a profitable market. I might prefer a LCC over a ULCC, but I at least recognize the market potential. They are escaping the wrath of AA/UA/DL because right now NK and G4 have such low costs it as what LAXintl stated, the major can only ignore them for now.


Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlinelightsaber From United States of America, joined Jan 2005, 13436 posts, RR: 100
Reply 42, posted (1 year 9 months 6 days 12 hours ago) and read 2156 times:
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CASM with fuel: $0.1003
CASM ex-fuel: $0.0593

Thus fuel is 41% of costs. That is extremely good cost management to have fuel such a high portion of narrowbody costs.

This is from the OP's link (reposted for simplicity):
http://finance.yahoo.com/news/spirit...rts-4th-consecutive-111827764.html

With an average stage length of 932 miles (quarter, or 902 for the year), NH is a candidate for sharklets. They should buy new aircraft with them and put them on older aircraft that are ready. For the retrofit, it will depend on their lease terms...


Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineItalianFlyer From United States of America, joined Nov 2007, 1099 posts, RR: 2
Reply 43, posted (1 year 9 months 6 days 12 hours ago) and read 2131 times:

I missed BB's CNBC spot this morning and they have yet to post the clip online. Did he say anything of interest?

User currently offlineroswell41 From United States of America, joined Aug 2001, 803 posts, RR: 1
Reply 44, posted (1 year 9 months 6 days 12 hours ago) and read 2121 times:

Spirit is set to be the U.S. launch customer for the A320 with sharklets. Their first will be delivered in March 2013.

User currently offlineRyanairGuru From Australia, joined Oct 2006, 5903 posts, RR: 5
Reply 45, posted (1 year 9 months 6 days 12 hours ago) and read 2082 times:

Quoting lightsaber (Reply 41):
They're working for startups, self-employed, non-profits, or companies where 'lower-costs=higher bonus.' Companies where costs matter.

Good point, and that was something else I forgot when discussing the ULCC industry in Europe.

To a certain extent FR (especially LON, MAN etc - DUB) and in particular EZY partially built their success on small businesses. I can't remember the exact statistic, but the majority of workers are employed by businesses with under 20 employees. Those sorts of businesses aren't paying F. Rather, they actively seek the lowest cost option.

Right now with a relatively small network and limited schedule NK probably can't pull much SME/non-profit traffic. YET. This could be another interesting development over the next few years.

When we lived in the UK my father (chartered accountant) regularly flew EZY, BE and FR for work. And if you flew MAN-DUB, out in the morning and back in the evening on Ryanair (as he did once a quarter) the flight would be 100% suits.



Worked Hard, Flew Right
User currently offlineCoronado From United States of America, joined Jun 1999, 1202 posts, RR: 2
Reply 46, posted (1 year 9 months 6 days 12 hours ago) and read 2069 times:
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Quoting lightsaber (Reply 42):
CASM with fuel: $0.1003CASM ex-fuel: $0.0593 Thus fuel is 41% of costs.

If oil goes to 150/b and fuel becomes an even greater percentage of total CASM, the total cost advantage of a ULCC and an LCC over a ''full service'' carrier, becomes less and less significant, particularly as the legacy carriers increase their number of seats per departure as the smaller CRJ/ERJ's are retired.

The non fuel CASM of a Spirit (rounded) is 6 cents, the non fuel CASM of a Delta is 9 cents. This 3 cent per difference in non fuel CASM is 50%. As far as total CASM in 2012, Spirit is at 10 cents, and Delta Mainline total CASM is at 14 cents, meaning fuel is 5 cents.

While currently a ULCC is able price their fares at 25% below a comparable fare from a legacy carrier, while still generating a nice profit, if fuel prices jump up this, this pricing advantage gap necessarily will have to come down, as non fuel CASM becomes an overall less significant percentage of total operating costs.

Makes me wonder if the legacy carriers and WN may in fact be counting on higher fuel prices to control these pesky ULCC competitors by eroding their total cost advantage?



The Original Coronado: First CV jet flights RG CV 990 July 1965; DL CV 880 July 1965; Spantax CV990 Feb 1973
User currently offlineseatback From United States of America, joined Mar 2002, 778 posts, RR: 0
Reply 47, posted (1 year 9 months 6 days 11 hours ago) and read 2012 times:

Quoting Coronado (Reply 46):
Makes me wonder if the legacy carriers and WN may in fact be counting on higher fuel prices to control these pesky ULCC competitors by eroding their total cost advantage?

They are. And they're also counting on the fact that their other costs will eventually rise, as did WN's.

I personally think the model is a great one and wish NK much success. The only thing I would do differently is to focus on customer service, much like Southwest did with the whole love theme. Being kind to people doesn't increase costs.


User currently offlineOB1504 From United States of America, joined Jul 2004, 3433 posts, RR: 6
Reply 48, posted (1 year 9 months 6 days 2 hours ago) and read 1822 times:

Quoting seatback (Reply 47):
I personally think the model is a great one and wish NK much success. The only thing I would do differently is to focus on customer service, much like Southwest did with the whole love theme. Being kind to people doesn't increase costs.

But it doesn't decrease costs, either. That being said, I always did my best to serve customers when I was an NK CSA. Truth be told, I enjoyed it more than wearing the AA uniform I have now.

[Edited 2013-02-20 22:41:48]

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