Spirit Airlines Incorporated (SAVE) Wants to Keep Growing

Many of Spirit’s customers would not fly at all if they didn’t have access to Spirit’s low fares. Thus, to some extent Spirit is not competing directly with other airlines for customers. Still, at the margins, there are obviously some fliers who choose Spirit because it is available but would pay more for a ticket on one of the major airlines if it were the only option.

As Spirit continues to expand rapidly, this indirect competition will increasingly put pressure on the major carriers. Even network airlines like American, United Continental Holdings Inc (NYSE:UA), and Delta Air Lines, Inc. (NYSE:DAL) — which primarily focus on serving business travelers — need to fill the “back of the plane” with price-sensitive leisure customers. For most of these airlines, losing just two or three customers on each flight could be the difference between earning more than the cost of capital or not.

Foolish bottom line
Spirit Airlines Incorporated (NASDAQ:SAVE)’s order last week signals that the company intends to grow rapidly for the foreseeable future. Not only will the carrier add planes to its fleet, but the new planes will also have more seats than the A319s and A320s that make up the backbone of Spirit’s current fleet. Given Spirit’s solid profitability, investors should be happy to see that the company will keep growing rapidly.

So far, Spirit has not presented a severe threat to established carriers because it still has a very small market share and primarily targets customers who could not otherwise afford to fly a traditional carrier. However, if Spirit Airlines Incorporated (NASDAQ:SAVE) continues to grow rapidly, it could start to siphon a significant amount of business away from other airlines due to its very low fares. All airline sector investors should keep their eyes on Spirit, as this little company could become increasingly disruptive within its industry.

The article Spirit Airlines Wants to Keep Growing originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Adam Levine-Weinberg is short shares of United Continental Holdings (NYSE:UAL) and is long Sept. 2013 $33 puts on United Continental Holdings. The Motley Fool recommends Southwest Airlines and owns shares of Spirit Airlines.

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