Spirit Airlines Incorporated (SAVE) Wants to Keep Growing

Page 1 of 2

Spirit Airlines Incorporated (NASDAQ:SAVE)Ultra-low-cost carrier Spirit Airlines Incorporated (NASDAQ:SAVE) has been one of the fastest-growing airlines in the U.S. for the past several years. The company’s revenue has shot up from just $781 million in 2010 to $1.32 billion last year, and analysts expect Spirit Airlines Incorporated (NASDAQ:SAVE)’s revenue to reach $1.88 billion in 2014. That would represent a compound annual growth rate of approximately 25%.

Despite this rapid growth, Spirit has also been one of the most profitable airlines in the country; the company has actually been improving its already-stellar pre-tax margin recently. Last month, Consumer Reports ranked Spirit at the bottom of the airline industry in terms of customer service, but passengers continue to flock to the airline because of its rock-bottom fares.

With revenue and earnings consistently increasing, Spirit Airlines Incorporated (NASDAQ:SAVE) ordered 20 new Airbus A321 aircraft at last week’s Paris Air Show to meet the significant untapped demand for its services. The company also upgraded 10 of its Airbus A320 aircraft on order to the larger A321 model. This order signals that management intends for Spirit to continue its rapid growth for the foreseeable future. As the company expands, it could become an increasingly potent threat to higher-priced competitors.

Rapid growth to continue
Spirit Airlines Incorporated (NASDAQ:SAVE) currently operates a fleet of 50 Airbus aircraft, consisting of 29 A319s seating 145 passengers, 19 A320s seating 178 passengers, and two A321s seating 218 passengers. All three models are part of the A320 aircraft “family,” which means that they have a similar design and a common cockpit. This allows Spirit to deploy planes based on the level of demand in each market while avoiding much of the crew scheduling and maintenance complexity that comes from flying different types of aircraft.

A Spirit Airlines A320 (courtesy of Spirit Airlines).

As of the end of 2012, Spirit Airlines Incorporated (NASDAQ:SAVE) operated 45 airplanes and planned to grow its fleet to 78 planes by the end of 2016. However, the company was scheduled to see fleet growth taper off to just two aircraft per year in 2017 and 2018 before accelerating again at the end of the decade.

Last week’s order allows Spirit to grow capacity by 15% or more per year (on average) for the next five years. Spirit executives have frequently stated that they see ample growth opportunities ahead, with more than 400 potentially viable markets today. Even with all of these aircraft on order, the company will be able to satisfy just a small portion of that demand.

The choice of A321 aircraft is also a testament to management’s confidence in the robust demand for Spirit’s low-fare, no-frills product. Whereas the majority of Spirit’s planes today are A319s seating 145 passengers, the A321s are 50% larger, with 218 seats. Clearly, Spirit executives think that they could fill more seats in many markets if the company had additional capacity.

A competitive threat
For the most part, Spirit Airlines Incorporated (NASDAQ:SAVE) has been successful by flying under the radar of the major carriers. It is still a very small carrier compared to the major airlines: AMR Corp (OTCBB:AAMRQ)Delta Air Lines, Inc. (NYSE:DAL)Southwest Airlines Co. (NYSE:LUV), and United Continental Holdings Inc (NYSE:UA). Moreover, it generally appeals to a different type of customer than those carriers: one who is extremely price-sensitive.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!