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.
United Continental Holdings Inc (NYSE:UAL) is still suffering years after the merger. In the first quarter of this year, the company was able to increase its top line by just 1.4%, bringing revenue to $8.72 billion. Revenue growth is great, but the better news is in the decreasing net loss.
The company made serious efforts to reduce its operating costs to lower its total net loss to $417 million. For the same period last year, the total losses were $448 million. The company is on the right track.
The company has seasonal profitability. For the last five years, the company has been in the red three years. This year, the company should see three profitable quarters and just one unprofitable quarter. This is because travel industry revenue and costs are often skewed towards different months of the year.
A company that swings from red to black and back to red isn’t a great investment. Investors should stay away from United Continental Holdings Inc (NYSE:UAL).
Final thoughts
The airline industry has a lot of competition. There are many factors that affect the overall success of a company. Spirit Airlines Incorporated (NASDAQ:SAVE) is on the move trying to take some market share away from the larger airlines. It doesn’t want to be the next Delta Air Lines, Inc. (NYSE:DAL), but it is still seeking strong growth this year. The company can be a great vehicle for the right investor.
The article This Budget Airline Is Going Up Against the Big Players originally appeared on Fool.com and is written by Austin Higgins.
Austin Higgins has no position in any stocks mentioned. The Motley Fool owns shares of SPIRIT AIRLINES INC. Austin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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