Spirit Airlines Incorporated (SAVE), Delta Air Lines, Inc. (DAL): This Budget Airline Is Going Up Against the Big Players

The airline industry is extremely competitive. Price wars can drive profitability down for many competitors and cause customer service issues. With more people traveling across the country and around the globe, there will always be a demand for airline companies. Spirit Airlines Incorporated (NASDAQ:SAVE) is going up against the big players in the market and making a huge impact. Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL) definitely have some strong competition.

Spirit Airlines Incorporated (NASDAQ:SAVE) has a pretty small fleet of only 49 planes. The company has a small, dedicated pool of flight paths but it has been expanding. It recently added 9 high-volume flight paths and has identified nearly 400 more routes it could potentially add.

Spirit Airlines Incorporated (NASDAQ:SAVE) went public in May 2011 and has seen a 160% increase in stock price since its IPO. Earnings have spurred this growth. EPS for the first quarter have steadily grown for the last two years. This past quarter, Spirit Airlines Incorporated (NASDAQ:SAVE) delivered $0.45 per share. This year, the company should bring in about $1.55 per share in total earnings.

Total revenue has continually grown, as well. Revenue has almost doubled in the last four years. For the first quarter of this year, the company brought in $370 million — 22% higher than the same time last year.

Operating margins are improving, too. They grew from 12.6% to 14.4% from Q1 of 2012 to Q1 of 2013.

The company has a slightly different operating model than its competitors. Roughly 40% of its revenue comes from non-ticket sales. The company charges for just about everything including carry-on luggage, food, and even the printing of a boarding pass. This provides customers with an a-la-carte option for flying. But it can also cause customer service issues. A popular airline rating site has Spirit Airlines Incorporated (NASDAQ:SAVE) rated a 1 on a 10 point scale.

Even though ratings are low, the company is still booming and has a lot of potential to be a strong discount airline provider.

The competition

While Spirit Airlines has been growing, other airlines have been suffering. Delta Air Lines, Inc. (NYSE:DAL) grew its top line by a mere 1% this past quarter. But, its net income dropped over 90%. The company has made smart business decisions in the past. Instead of purchasing new aircraft, it looks for fully functional but used planes for its fleet. This saves the company a lot of money and keeps debt levels from rising.

Investors should be happy with two initiatives Delta Air Lines, Inc. (NYSE:DAL) is launching: dividend payments and stock repurchase. The company will pay a quarterly dividend of $0.06 per share per quarter and has authorized a $500 million share repurchase program. This is a great way to return value to investors.

The company is still expecting growth this year as more people are flying. It will just be a year filled with competition.