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

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!