Spirit Airlines reports $992 million in operating revenue during its third quarter, a 10% increase compared with the same quarter during 2018, delivering an $83.5 million profit as the ultra-low-cost carrier plans to build a new headquarters in Fort Lauderdale and expand its Airbus fleet.
Third quarter net profit dipped by $30 million compared with $114 million net profit during the second quarter ending 30 June. The airline at the end of the second quarter forecast higher costs and more cancelled flights for the rest of 2019. Heavy weather including Hurricane Dorian added year-on-year operating costs for the Florida-based airline during the third quarter ending 30 September, Spirit chief executive Ted Christie says during a 24 October earnings call.
"We got hit pretty hard by Hurricane Dorian on Labor Day weekend, which is the last great weekend of the quarter," Christie says.
Net profit shrank by 14% from $97.5 million to $83.5 million year-over-year as operating expenses increased 14% to $867 million in part due to costs related to re-accommodating passengers during heavy weather.
Cost per available seat mile excluding fuel (CASM-ex) rose by 8% from the third quarter of 2018 to 5.6 cents, while revenue per available seat mile (RASM) decreased by 2% year-over-year. For the remainder of 2019, Spirit forecasts RASM to decrease between 4.5% and 6.5% during the final quarter, while CASM-ex is projected to rise 3.5-4.5%.
FLEET EXPANSION
Despite a lackluster revenue forecast, the airline has big expansion plans and will increase capacity by 16% during the fourth quarter as new aircraft are delivered.
On 24 October, the ultra-low-cost carrier announced a memorandum of understanding (MoU) to buy 100 Airbus A320neo family aircraft, planned for delivery from the airframer through 2027. The MoU covers a mix of A320neo, A321neo and A319neo jets, including options to purchase 50 additional aircraft for the carrier's all-Airbus fleet.
Spirit Airlines chief financial officer Scott Haralson says during the earnings call that the airline chose the A320neo family because its "the best option to support our continued growth as we expand our network" due to its fuel efficiency.
The carrier plans to supplement its fleet with additional leased aircraft as needed to maintain its target growth rate as it awaits deliveries of the A320neos. The airline has nine firm orders through mid-summer 2020.
While the Trump administration says it will impose tariffs on Airbus aircraft as part of its broader plan for tariffs on UK and European goods, Spirit expects to be unaffected. "It is our understanding that deliveries assembled in Mobile Alabama will not be subject to a tariff," Haralson says, adding the carrier remains in contact with Airbus about tariff concerns.
Spirit has not disclosed an engine selection for the Airbus order, but the airline has a purchase history with International Aero Engines and its in service A320neo fleet is powered by Pratt & Whitney PW1000Gs.
The airline had 42 A320neos on order prior to the 23 October disclosure, seven of which are scheduled to deliver from Airbus's Mobile plant by the end of 2019. The remaining 35 A320neos already on order will be delivered throughout 2020 and 2021, according to Cirium fleets data.
“The additional aircraft will be used to support Spirit’s growth as we add new destinations and expand our network across the US, Latin America and the Caribbean," Christie stated on 23 October. Earlier in October, Spirit announced new and expanded services between US cities and connect Puerto Rico and Cancun, Mexico, in its latest steps to grow its network in the Caribbean and Central America.
As part of its expansion plans, the ultra-low-cost carrier based in Miramar, Florida, is committing up to $250 million to build a new global headquarters near Fort Lauderdale-Hollywood International airport by 2022.
