Moderators: jsumali2, richierich, ua900, PanAm_DC10, hOMSaR

 
User avatar
LAXintl
Topic Author
Posts: 24822
Joined: Wed May 24, 2000 12:12 pm

Spirit Post Q3 Profit - $97.3mil Net

Tue Oct 27, 2015 6:01 pm

Another record profit. Operating margin was a whopping 26.9%!

Spirit Airlines Reports Third Quarter 2015
http://finance.yahoo.com/news/spirit...ports-third-quarter-100000380.html

=

I'll have earnings call notes later.
From the desert to the sea, to all of Southern California
 
tortugamon
Posts: 6795
Joined: Tue Apr 09, 2013 11:14 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Tue Oct 27, 2015 6:29 pm

Sounds like a company that should be at its two-year low today...

tortugamon
 
User avatar
LAXintl
Topic Author
Posts: 24822
Joined: Wed May 24, 2000 12:12 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Tue Oct 27, 2015 10:13 pm

Some notes from earnings call.


FINANCIAL
o Net profit record $97.3mil vs $67.0 in 2014
o CASM ex fuel 5.39cents down 9.0% yoy "cost are lower than ever"
o RASM 10.27 down 28.4%
o Op margin 26.9% up from 19.3%
o 12-month ROIC 28.8%
o With industry seeing weaker pricing environment, possible 2016 margins might be compressed
o Unrestricted cash $748.9mil

TRAFFIC / NETWORK
o Load factor 85.2%
o Ticket vs non-ticket revenues 56-44%. Could reach 50-50 mix.
o See ancillary "largely stable" segment of revenue stream while the ticket prices are volatile
o Will offer lowest fares in market regardless of competitors, can still earn high margins with 5 cent cost base.
o Does not risk holding seats for last minute high prices like legacies. Model is drive high LF with low pricing.
o 38 new routes in 2015, have about 20 lined up so far for 2016
o Plan to grow 15-20% ASM annually continues - vast majority new markets
o No interest in high frequency service between cities. 1x daily or at most 2-3x makes most sense.
o Work to provide more reliable operation - has 'halo" effect benefit through out cost structure
o South Florida(FLL) largest market and produces "very high margins"
o In markets like DFW, ORD, IAH, LAX building for long term. All provide good returns

FLEET
o 3 A321s received in Q3. Total fleet to 76
o 3 A321s due Q4. 12 A320/A321 due 2016. 3 A319 leases end 2016
o Keep pushing up utilization - average 12.8hrs
o NEO about 10% more efficient than its CEO predecessor

OTHER
o With all the PR (bad or good), its helped customers understand and accept ULCC business model better.
o In Europe ULCCs are 20% of flying. In US not even 5%.
o Discretionary traveler who chooses to fly or not based only on price represents bulk of Americans. Still lots of room for stimulation.
o Airports like Spirit. With no free meals/drinks onboard, that means higher sales at terminal stores. Airports aggressively courting Spirit.
o There is too much capacity flying in some parts of the industry with current economy. Its a basic supply demand issue with not enough stimulation even as majors seek to defend marketshare.
o The crystal ball for 2016 is "really cloudy"

=
From the desert to the sea, to all of Southern California
 
PlanesNTrains
Posts: 9524
Joined: Tue Feb 01, 2005 4:19 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 4:08 am

Quoting LAXintl (Reply 2):
o RASM 10.27 down 28.4%

Yowza.

BTW, LAXintl I always look forward to your quarterly earnings posts. Something about those bold headings and bullet points makes it all the more enjoyable to read. T H A N K Y O U !

-Dave
-Dave


MAX’d out on MAX threads. If you are starting a thread, and it’s about the MAX - stop. There’s already a thread that covers it.
 
User avatar
deltadawg
Posts: 1014
Joined: Sat May 13, 2006 2:56 am

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 4:30 am

Question at this point is how will they use this to court/merge/rape F9? I am not that familiar with NK's structure and financials but as many of the rumors state they supposedly are looking to merge/buyout F9. I have no fact to base this on except the rumor mill. However, if true then do they have a stockpile of cash to move into this merger? There stock is half of what it was a year ago but their financials look good according to Morningstar so could they use this increased cash from profits as a starting off point for merging with F9?

As to the topic, looks like good news for NK and I guess their ULCC business model is now paying dividends. In all honesty I did not think they would make it at ATL (my home airport) but they are sticking around it seems. I personally do not fly them but people are it seems. Good job NK and good luck.
GO Dawgs, Sic' em, woof woof woof
 
nkops
Posts: 2237
Joined: Fri Jun 03, 2005 10:09 am

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 12:31 pm

I wonder how much AA announcement about matching ULCC fares (I think they specifically mentioned Spirit) has effected NK stock prices.
Turn left heading 080 contact departure
 
User avatar
par13del
Posts: 10406
Joined: Sun Dec 18, 2005 9:14 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 12:34 pm

Quoting nkops (Reply 5):
I wonder how much AA announcement about matching ULCC fares (I think they specifically mentioned Spirit) has effected NK stock prices.

Forget the stock price, based on the billions that AA posted compared to the millions Spirit posted, why the fear, is it rational or irrational, or are they just being pre-emptive?
 
tortugamon
Posts: 6795
Joined: Tue Apr 09, 2013 11:14 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 12:35 pm

Quoting LAXintl (Reply 2):

o RASM 10.27 down 28.4%
o Op margin 26.9% up from 19.3%

Hard to believe both these figures can be true.

Quoting LAXintl (Reply 2):
o 38 new routes in 2015, have about 20 lined up so far for 2016

That is a lot of growth with only 9 net planes coming next year. 8+ flights per day.

Quoting PlanesNTrains (Reply 3):
BTW, LAXintl I always look forward to your quarterly earnings posts. Something about those bold headings and bullet points makes it all the more enjoyable to read. T H A N K Y O U !

Agreed.

Quoting deltadawg (Reply 4):
the rumors state they supposedly are looking to merge/buyout F9.

I think the rumors are driven from F9 investors looking for an exit strategy not really from Spirit looking to buy/merge. At least I have not heard those rumors.

Quoting deltadawg (Reply 4):
I guess their ULCC business model is now paying dividends.

Quite the opposite it seems. In this low fuel environment the legacy carriers are increasingly seeing Spirit as a threat so they (DL and AA publicly at this point) are price matching Spirit fares on non-stop flights, at least that is what they say. The RASM figures above, being down 28% make me think that is indeed happening. No wonder Spirit says 2016 is hazy for them, they are going to face significant competition.

Still plenty of opportunity to go around but I do think we will see declining margins.

tortugamon
 
User avatar
william
Posts: 3350
Joined: Thu Jun 10, 1999 1:31 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 1:01 pm

So lets break it down, $1 out of $4 was pure profit...........................WOW! Just Wow!
 
masseybrown
Posts: 5559
Joined: Wed Dec 11, 2002 2:40 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 4:24 pm

Quoting tortugamon (Reply 7):
Quoting LAXintl (Reply 2):

o RASM 10.27 down 28.4%
o Op margin 26.9% up from 19.3%

Hard to believe both these figures can be true.

The analysts are having trouble believing it also, which accounts for the stock decline since the Q1 conference call. They feel that the kicker from fuel prices is very temporary and that the RASM/PRASM decline will eventually shrink all the airlines' margins as fuel cost and wages rise. Baldanza has been selling the story that what Spirit loses in RASM it will more than make up for in volume. So far he has been right, but the analysts feel it can't last forever; hence, the cratering stock ($84 to $35 in less than a year).
 
tortugamon
Posts: 6795
Joined: Tue Apr 09, 2013 11:14 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 4:42 pm

Quoting MasseyBrown (Reply 9):
The analysts are having trouble believing it also, which accounts for the stock decline since the Q1 conference call. They feel that the kicker from fuel prices is very temporary and that the RASM/PRASM decline will eventually shrink all the airlines' margins as fuel cost and wages rise.

Agreed, that is the concern but it certainly doesn't seem to be working that way yet. The fuel cost decline outstripping RASM decline helps.

The problem I have is if they are concerned about fuel rising and hurting margins, won't Spirit be in a similar position they were before when they did well relative to the legacy carriers when fuel is high? Relative to the legacies they seem to do better when fuel is high so why is that really a concern if they think this low fuel is temporary. I think these analysts aren't seeing the full picture. That being said, Spirit stock has a higher PE than AAL and DAL so it could be viewed as overvalued even with their revenue growth.

Quoting MasseyBrown (Reply 9):
Baldanza has been selling the story that what Spirit loses in RASM it will more than make up for in volume. So far he has been right, but the analysts feel it can't last forever; hence, the cratering stock ($84 to $35 in less than a year).

Hard to go much higher than 85%.  

tortugamon
 
ec99
Posts: 262
Joined: Mon Mar 16, 2015 2:18 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 5:11 pm

Quoting tortugamon (Reply 7):
Quite the opposite it seems. In this low fuel environment the legacy carriers are increasingly seeing Spirit as a threat so they (DL and AA publicly at this point) are price matching Spirit fares on non-stop flights, at least that is what they say. The RASM figures above, being down 28% make me think that is indeed happening. No wonder Spirit says 2016 is hazy for them, they are going to face significant competition.

American and Delta’s strategy seems to be the classic response from corporations in a dominant position when challenged by an upstart. Use your size and resources to sell your product for less than the competitor even if it results in a short-term loss. Then once you have knocked the competitor out of the market, you can raise prices again.

As I see it, the problem with this strategy is that the American and Delta waited too long to implement it. NK just had a fantastic quarter with a huge profit, and is sitting on a large pile of cash for an airline of its size. Unless American and Delta are really committed to an expensive drawn out fare war, NK now appears to have the resources to weather this storm.

I do think this fare war reduces the chances of NK making a move for F9 (if it was ever a possibility). If AA and DL really are aggressive, Spirit may need its cash on hand to deal with this new competition.
 
tortugamon
Posts: 6795
Joined: Tue Apr 09, 2013 11:14 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 5:46 pm

Quoting EC99 (Reply 11):
Unless American and Delta are really committed to an expensive drawn out fare war, NK now appears to have the resources to weather this storm.

Based on NK's profitability it appears they have a lot more discounting that they can implement before they really have to eat into their cash balance. They are very profitable even in this RASM declining market. Plus NK only competes with one of these carriers on less than 25% of routes and opportunities abound.

Quoting EC99 (Reply 11):
I do think this fare war reduces the chances of NK making a move for F9 (if it was ever a possibility). If AA and DL really are aggressive, Spirit may need its cash on hand to deal with this new competition.

I am not sure they really are interested in F9 immediately. Mergers in this arena tend to happen when an airline is struggling and F9 seems to be doing reasonably well in the recent couple quarters.

That being said the acquisition shouldn't be that difficult to finance with NK's debt being reasonably low and $750 Mil in cash. NK's market cap is ~$2.5B and very little chance F9 is worth half of that. Shouldn't be that difficult to swing if they saw an opportunity. EI was $1.66B. I don't doubt that NK thinks they can grow organically without purchasing F9. I would if I were them.

However, I do think it would be a good tie up.

tortugamon
 
WaywardMemphian
Posts: 1508
Joined: Sat Dec 13, 2014 9:05 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 5:48 pm

When I read new markets and 1x to 3x weekly I'm thinking they are going to be increasingly stepping on Allegiant's toes as the Legacies go after them at the bigger facilities.
 
User avatar
mariner
Posts: 19473
Joined: Fri Nov 23, 2001 7:29 am

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 6:37 pm

Quoting tortugamon (Reply 7):
I think the rumors are driven from F9 investors looking for an exit strategy not really from Spirit looking to buy/merge. At least I have not heard those rumors.

Frontier has no investors as such - only Indigo, Bill Franke, who owns the whole kit and caboodle. Indigo has (private) financial partners, but they've stuck with Franke through thick and thin, because he's made them a lot of money through its holdings in various airlines. - Ryanair, Wizz Air, Volaris, etc.

Earlier this year, Indigo offered to buy some or all of LOT, through a European partner investor, but the Polish government knocked 'em back.

And, as discussed at some length in another thread, Indigo has its potential exit strategy at Frontier - the IPO - as at Spirit, although it stayed in Spirit with some money until just before Franke bought Frontier.

Whatever anyone thinks (on .net or the wider world) Frontier will be what Franke wants it to be.

mariner

[Edited 2015-10-28 11:46:30]
aeternum nauta
 
tortugamon
Posts: 6795
Joined: Tue Apr 09, 2013 11:14 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 7:07 pm

Quoting mariner (Reply 14):
And, as discussed at some length in another thread, Indigo has its potential exit strategy at Frontier - the IPO - as at Spirit, although it stayed in Spirit with some money until just before Franke bought Frontier.

Whatever anyone thinks (on .net or the wider world) Frontier will be what Franke wants it to be.

Dang, you keep banging that drum. I get it. Franke Franke Franke. Please remove the s from my 'investor' and it doesn't change a thing. Yes they appear to be going toward IPO.

But no, IPO isn't the only exit strategy. Yes they should gauge the IPO market to see what type of returns they can get and investment bankers don't just take companies public. They also find strategic buyers. As there are synergy savings a strategic buyer may be able to rationalize a higher purchase price than the IPO market would. Who knows if NK is interested, that isn't the point. We are talking hypotheticals. Until they register the IPO all options are on the table for Franke, as they should be.

tortugamon
 
masseybrown
Posts: 5559
Joined: Wed Dec 11, 2002 2:40 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 7:08 pm

Quoting mariner (Reply 14):
And, as discussed at some length in another thread, Indigo has its potential exit strategy at Frontier - the IPO - as at Spirit, although it stayed in Spirit with some money until just before Franke bought Frontier.

Wall Street has been killing airline stocks lately; he better hurry with his IPO.
 
User avatar
mariner
Posts: 19473
Joined: Fri Nov 23, 2001 7:29 am

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 7:22 pm

Quoting tortugamon (Reply 15):
Dang, you keep banging that drum. I get it. Franke Franke Franke.

Why does it offend you? It's what it is.

Quoting tortugamon (Reply 15):
But no, IPO isn't the only exit strategy. Yes they should gauge the IPO market to see what type of returns they can get and investment bankers don't just take companies public. They also find strategic buyers.

Indeed, it isn't the only strategy, but, Occam's Razor again, it is the most obvious one and the one they're working towards.

Earlier this year, they made another shed load of money with the IPO of Wizz Air.

Quoting MasseyBrown (Reply 16):
Wall Street has been killing airline stocks lately; he better hurry with his IPO.

Or delay it.

I'm guessing it won't happen for another year or eighteen months and it doesn't have to happen then. They're not impatient - they don't actually need the money - LOL. They'll bring Frontier to market when they're ready and when they think the time is right. They were in Wizz Air more than ten years before the IPO.

mariner

[Edited 2015-10-28 12:36:58]
aeternum nauta
 
tortugamon
Posts: 6795
Joined: Tue Apr 09, 2013 11:14 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 8:01 pm

Quoting mariner (Reply 17):
Why does it offend you? It's what it is.

Its just annoying to read the same thing over and over as if its new material. I was responding to another poster's comment about NK looking to merge with F9.

Quoting MasseyBrown (Reply 16):
Wall Street has been killing airline stocks lately; he better hurry with his IPO.

Agreed they have. I personally don't think wall street is valuing airlines appropriately. Its really the only head way

Quoting mariner (Reply 17):
Indeed, it isn't the only strategy, but, Occam's Razor again, it is the most obvious one and the one they're working towards.
Quoting mariner (Reply 17):
Indeed, it isn't the only strategy, but, Occam's Razor again, it is the most obvious one and the one they're working towards.

Where did I say it was the only one they were working toward? Where did I say they weren't working toward IPO? Again, its again annoying to read the same thing over and over and again, investment bankers also find strategic buyers, not just arrange for IPO. Its not fun to repeat yourself and its even less fun to read it over and over. Feel like its showing off but I don't really get it. I usually respect what you have to say.


tortugamon
 
User avatar
mariner
Posts: 19473
Joined: Fri Nov 23, 2001 7:29 am

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 8:15 pm

Quoting tortugamon (Reply 18):
Its just annoying to read the same thing over and over as if its new material. I was responding to another poster's comment about NK looking to merge with F9.

That's true for both of us.

If that poster had not raised the question of the fantasy merger - and it's a much a fantasy as anything at this stage - I wouldn't be in this thread.

Quoting tortugamon (Reply 18):
Again, its again annoying to read the same thing over and over and again, investment bankers also find strategic buyers, not just arrange for IPO.

Well, that's true for both of us (the "annoying" thing) and there are posters here who may not have read the other threads. I think they deserve more than one point of view. If that offends you, I can only shrug, because I see the situation at Frontier rather differently from you, in terms of what Indigo has already achieved - and what their eventual intentions may be.

mariner

[Edited 2015-10-28 13:33:34]
aeternum nauta
 
tortugamon
Posts: 6795
Joined: Tue Apr 09, 2013 11:14 pm

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 8:29 pm

Quoting mariner (Reply 19):
there are posters here who may not have read the other threads. I think they deserve more than one point of view.

Then it would go a long way if you respond to those posters and not me as if you are stating something new and layering 'agains' in there as if you are correcting me. I am sure we both want to move on.

tortugamon
 
User avatar
mariner
Posts: 19473
Joined: Fri Nov 23, 2001 7:29 am

RE: Spirit Post Q3 Profit - $97.3mil Net

Wed Oct 28, 2015 8:39 pm

Quoting tortugamon (Reply 20):
Then it would go a long way if you respond to those posters and not me as if you are stating something new and layering 'agains' in there as if you are correcting me. I am sure we both want to move on.

It's fairly pointless replying to anyone who just makes blanket (or emotive) statements about "the merger."

But if you feel that I am "correcting" you, it's surely not my intention and I have purposely avoided at least one opportunity to do so.

My intention was to show the clear and unambiguous pattern that exists at Indigo.

Quoting tortugamon (Reply 20):
I am sure we both want to move on.

Ain't that the truth.

mariner

[Edited 2015-10-28 14:25:30]
aeternum nauta

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos