Investors have favored Spirit Airlines Incorporated (NASDAQ:SAVE) this year, with the stock up more than 50% year-to-date. Spirit Airlines is a low-fare airline that operates flights throughout the U.S., Latin America and the Caribbean. Spirit has recently reported its first quarter earnings, and the results were warmly welcomed by the market. The stock gained 5.3% on the day of the report.
Spirit Airlines Incorporated (NASDAQ:SAVE) reported adjusted net income of $0.45 per share while analysts were estimating that the company would earn $0.42 per share. Total operating revenue rose 22.9% in comparison with the first quarter of 2012. Spirit has two main sources of revenue: revenue from tickets and revenue from optional services. Average base fare per passenger segment in the first quarter of 2013 was $79.09. Although this is a low fare, revenue from tickets rose 21.6% in comparison with the first quarter of 2012. Non-ticket revenue grew even faster, gaining 24.8% in comparison with the first quarter 2012. Non-ticket revenue is almost as important as ticket revenue for Spirit Airlines Incorporated (NASDAQ:SAVE); it accounts for 40.9% of total operating revenue.
Spirit Airlines has shown good revenue dynamics while maintaining attractive passenger fees, and the company does not plan to slow down. It expects its passenger capacity to increase 21.1% for the full year. Spirit is also working on growing its flight network–a more concentrated web route network would help the company gain scale benefits.
Spirit has a strong balance sheet. At the end of the first quarter 2013, Spirit Airlines Incorporated (NASDAQ:SAVE) had $483.5 million in unrestricted cash and no debt on the balance sheet. Being debt-free is a distinguishing sign in the airline industry. For example, US Airways Group, Inc. (NYSE:LCC) has $4.89 billion in debt, while United Continental Holdings Inc (NYSE:UAL) hold $13.17 billion in debt.
Spirit Airlines has not yet achieved the size of its peers and has more room to grow. This is one of the reasons why it has been outperforming other major airlines. US Airways is up 28% this year, United grew 42%, and Delta Air Lines, Inc. (NYSE:DAL) enjoyed a 49% rise. Spirit Airlines Incorporated (NASDAQ:SAVE) has an operating margin that is twice as big as the operating margin of its bigger competitors, and Spirit’s business model provides more flexibility, both to the customers and the company.
Spirit operates at a 13.37% margin, and its competitors’ margins are substantially lower. US Airways Group, Inc. (NYSE:LCC) has a 6.99% operating margin, Delta Air Lines, Inc. (NYSE:DAL) has a 6.95% operating margin, and United Continental Holdings Inc (NYSE:UAL) operates at a 3.48% margin. The bigger the operating margin, the bigger share of company’s revenue is left after paying for various costs of delivering the service. Spirit Airlines is a leader on costs too. Spirit’s cost per available seat mile (CASM) is 10.26 cents. Compare this to Delta Air Lines, Inc. (NYSE:DAL)’s 15.61 cents, US Airways’ 13.82 cents and United’s 14.90 cents. Spirit Airlines spends less than its competitors to get their customers from point A to point B, and Spirit Airlines Incorporated (NASDAQ:SAVE) flights are more packed with passengers. Load factor measures the amount of utilization of the company’s aircraft. The load factor for Spirit is 85.1%, while it is 81.2% for Delta Air Lines, Inc. (NYSE:DAL), 81.7% for US Airways, and 81.1% for United.