Spirit Airlines Reports Third Quarter 2019 Results
Spirit Airlines, Inc. (NYSE: SAVE) today reported third quarter 2019 financial results.
“I want to thank all our team members for their dedication and commitment to provide our Guests a quality travel experience in what was a very busy summer travel period. In addition to record passenger volumes, numerous summer storm systems across our network, including Hurricane Dorian, made for a challenging operating environment. We have made several adjustments to improve our ability to better recover from adverse weather and we are already seeing the effects. Over the past couple of months, our operational performance has rebounded and we have consistently achieved high completion factors along with great on-time performance,” said Ted Christie, Spirit’s President and Chief Executive Officer. “We are committed to continuously drive improvement throughout our business and to deliver strong earnings growth and returns for our shareholders.”
Revenue Performance
For the third quarter 2019, Spirit's total operating revenue was $992.0 million, an increase of 9.7 percent compared to the third quarter 2018, driven by a 17.7 percent increase in flight volume.
Total operating revenue per available seat mile ("TRASM") for the third quarter 2019 decreased 1.7 percent compared to the same period last year, driven by lower load factor, softer passenger yields and the negative impact from Hurricane Dorian. Excluding the impact of Hurricane Dorian, the Company estimates its TRASM for the third quarter 2019 would have been down approximately 1 percent year over year.
Non-ticket revenue per passenger flight segment for the third quarter 2019 increased 1.7 percent to $55.372. Fare revenue per passenger flight segment decreased 9.7 percent to $54.80 and total revenue per passenger segment decreased 4.3 percent year over year to $110.17, driven by shorter average stage length and lower passenger yields as compared to the third quarter 2018.
Cost Performance
For the third quarter 2019, total GAAP operating expenses increased 14.2 percent year over year to $867.3 million. Adjusted operating expenses for the third quarter 2019 increased 13.1 percent year over year to $858.2 million3. In addition to increased flight volume, these changes were primarily driven by salaries, wages and benefits and other operating expense (largely driven by passenger re-accommodation expense).
Aircraft fuel expense decreased in the third quarter 2019 by 1.9 percent year over year, due to an 11.9 percent decrease in fuel rates, largely offset by an 11.5 percent increase in fuel gallons consumed.
Spirit reported third quarter 2019 cost per available seat mile ("ASM"), excluding operating special items and fuel (“Adjusted CASM ex-fuel”), of 5.66 cents3, up 8.4 percent compared to the same period last year. Throughout the quarter, storm systems across its network, including Hurricane Dorian, along with other operational challenges, led to a higher percentage of flight cancellations, additional crew costs, and passenger re-accommodation expense. These additional expenses, loss of ASMs, and a shorter average stage length year over year, were the primary contributors to the increase in the third quarter Adjusted 2019 CASM ex-fuel year over year.
Liquidity
Spirit ended the third quarter 2019 with unrestricted cash, cash equivalents, and short-term investments of $1.0 billion. For the nine months ended September 30, 2019, Spirit generated $358.4 million of operating cash flow. After investing $283.6 million for aircraft purchases and pre-delivery deposits, and receiving $94.7 million of proceeds from issuance of long-term debt, Adjusted free cash flow for the nine months ended September 30, 2019 was $169.5 million4. For the nine months ended September 30, 2019, net cash used in financing activities was $127.4 million.
Fleet
Spirit took delivery of one new A320neo aircraft during the third quarter 2019, ending the quarter with 136 aircraft in its fleet.
“We have reached a memorandum of understanding with Airbus to purchase 100 new Airbus A320neo family aircraft with options to purchase up to 50 additional aircraft. We went through an extensive fleet evaluation process and determined that the fuel-efficient A320neo family of aircraft were the best option to support our continued growth as we expand our network,” said Scott Haralson, Spirit Airlines’ Chief Financial Officer.