Spirit Airlines is preparing for a bumper year of growth in 2015, and will start off by raising capacity by 26% in the first quarter.
The Miramar, Florida-based carrier is still finalising its 2015 plan but chief financial officer Ted Christie says in an earnings call today the airline is comfortable with releasing guidance of 26% growth in available seat miles for the first quarter while planning to drop first quarter unit cost excluding fuel by 4%.
Spirit is aiming for a 20% operating margin in the first quarter, assuming that fuel stays at $2.60 per gallon, says chief executive officer Ben Baldanza. The airline plans to share more on its 2015 plan when it releases its full-year 2014 financial results in February, he adds.
For the fourth quarter this year, Spirit is targetting 19% year-on year growth in capacity while it expects fourth quarter unit cost excluding fuel to stay flat or to grow by up to 1%. Pressure on unit costs will come from higher landing fees and higher flight volumes at higher cost airports among other factors, says Christie. The carrier forecasts that its fourth quarter operating margin will be in the 18.5% to 19.5% range.
Baldanza says the airline aims to grow capacity in 2015 by about 30%. In January, Spirit will begin service to Cleveland Hopkins International airport, launching service to eight destinations from the city in Ohio through April. It will also add new routes at Chicago and Denver next year.
The airline had been negotiating with "some cities in that area" around Cleveland and launched Cleveland when it made sense, says Baldanza. He was responding to questions on whether Spirit's move in Cleveland was prompted by rival Frontier Airlines' recent expansion at the airport.
"We are not driven by what anyone else was doing," says Baldanza. Asked if the launch from Cleveland will affect talks with other airports, he would only say: "I'm sure you can appreciate airports are generally thirsty for more volume right now."
The carrier will make announcements "shortly" on more new routes, he adds.
Spirit's new flights come as the carrier prepares to take delivery of 15 new aircraft next year, including its first Airbus A320neo from a lessor in the fourth quarter of 2015. The airline has taken delivery of one new aircraft so far this quarter and will accept delivery of another six by the end of 2014. Six of the 15 deliveries in 2015 will be the larger A321, an aircraft that Baldanza says Spirit is "very excited about".
The A321s will arrive in the back half of the year, so the impact on 2015 will be relatively small, says Baldanza. Most of the capacity growth in 2015 will be from new non-stop city pairs, he adds.
Baldanza plays down comparisons with Denver-based Frontier, which has recently announced new routes from several cities. Frontier has publicly said it aims to match Spirit's costs.
"We don't really see any meaningful competition in the low-cost carrier space other than Allegiant," says Baldanza. He adds that even Allegiant is serving smaller cities than Spirit is, and thus the Las Vegas-carrier is not a real threat to the airline.
Source: Cirium Dashboard
