Category: SAVE

SAVE – What's Causing Spirit Airlines' Massive Flight Cancellations?

Spirit Airlines Incorporated (NYSE: SAVE) is facing a nightmare scenario as the budget carrier canceled more than 1,700 flights since the beginning of this week and will continue to cancel flights through the weekend.

What Happened: Spirit’s crisis began to overheat on Tuesday and Wednesday with more than 60% of its flights being canceled, according to USA Today, while on Thursday it canceled 56% of its flights. As of Friday morning, one in three Spirit flights were canceled.

The Miramar, Florida-headquartered carrier blamed its problems on “operational challenges” and staffing issues. President and CEO Ted Christie pleaded for patience as the carrier attempted to address its problems.

“When we reach this level of disruption, being able to recover does require a lot of resources, we’re not built to deal with this level of disruption and I think there’s some learning in there about how we might create variability in staffing so that we can deal with it,” he said in an ABC News interview.

“When we started canceling, our crews got dislocated throughout the system. They were in the wrong places at the wrong time, and we needed to start to build that puzzle back together again. And, unfortunately, that takes our group a lot of time to do. So, we started canceling deeper and deeper into the operation to give them that time.”

Christie added that the airline is “starting to turn the tide here and get our operation moving again,” although he admitted cancellations would still occur over the next few days.

The U.S. Department of Transportation stated that travelers whose flights have been canceled are due a refund — and when Christie was asked what the massive cancellations would cost the airline, he responded, “The math will come when the math comes.”

Related Link: United Airlines Demands Employees Get COVID-19 Vaccinations Or Risk Being Fired

What Else Is Happening: According to the online resource FlightAware.com, which tracks flight delay and cancellation statistics, Spirit has the third highest level of cancellations among the world’s carriers for Friday morning, with 273 cancellations — or 35% of its scheduled flights — as of 10:45 a.m. EDT.

Only China Eastern Airlines Corp. Ltd. ADR (NYSE: CEA) and Air China Ltd. (OTC: AIRYY) recorded more cancellations for Friday morning, with 828 and 334, respectively. The closest that a U.S. carrier comes to Spirit’s percentage is American Airlines Group Inc (NASDAQ: AAL) with 22 canceled flights.

Photo: Victor / Flickr Creative Commons.

© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

SAVE – Spirit of Texas (STXB) Surpasses Q2 Earnings and Revenue Estimates

Spirit of Texas (STXB Free Report) came out with quarterly earnings of $0.70 per share, beating the Zacks Consensus Estimate of $0.55 per share. This compares to earnings of $0.44 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 27.27%. A quarter ago, it was expected that this company would post earnings of $0.47 per share when it actually produced earnings of $0.58, delivering a surprise of 23.40%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Spirit of Texas, which belongs to the Zacks Banks – Southeast industry, posted revenues of $33.56 million for the quarter ended June 2021, surpassing the Zacks Consensus Estimate by 4.22%. This compares to year-ago revenues of $28.62 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Spirit of Texas shares have added about 29.9% since the beginning of the year versus the S&P 500’s gain of 15.1%.

What’s Next for Spirit of Texas?

While Spirit of Texas has outperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Spirit of Texas was mixed. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.58 on $33.3 million in revenues for the coming quarter and $2.17 on $129 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Banks – Southeast is currently in the top 23% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

SAVE – Spirit (SAVE) Upgraded to Buy: Here's What You Should Know

Spirit (SAVE Free Report) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #2 (Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates — one of the most powerful forces impacting stock prices.

A company’s changing earnings picture is at the core of the Zacks rating. The system tracks the Zacks Consensus Estimate — the consensus measure of EPS estimates from the sell-side analysts covering the stock — for the current and following years.

Individual investors often find it hard to make decisions based on rating upgrades by Wall Street analysts, since these are mostly driven by subjective factors that are hard to see and measure in real time. In these situations, the Zacks rating system comes in handy because of the power of a changing earnings picture in determining near-term stock price movements.

As such, the Zacks rating upgrade for Spirit is essentially a positive comment on its earnings outlook that could have a favorable impact on its stock price.

Most Powerful Force Impacting Stock Prices

The change in a company’s future earnings potential, as reflected in earnings estimate revisions, and the near-term price movement of its stock are proven to be strongly correlated. That’s partly because of the influence of institutional investors that use earnings and earnings estimates for calculating the fair value of a company’s shares. An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their transaction of large amounts of shares then leads to price movement for the stock.

Fundamentally speaking, rising earnings estimates and the consequent rating upgrade for Spirit imply an improvement in the company’s underlying business. Investors should show their appreciation for this improving business trend by pushing the stock higher.

Harnessing the Power of Earnings Estimate Revisions

As empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock movements, tracking such revisions for making an investment decision could be truly rewarding. Here is where the tried-and-tested Zacks Rank stock-rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.

The Zacks Rank stock-rating system, which uses four factors related to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here >>>>.

Earnings Estimate Revisions for Spirit

This airline is expected to earn -$3.15 per share for the fiscal year ending December 2021, which represents a year-over-year change of 62.9%.

Analysts have been steadily raising their estimates for Spirit. Over the past three months, the Zacks Consensus Estimate for the company has increased 5.6%.

Bottom Line

Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations, the Zacks rating system maintains an equal proportion of ‘buy’ and ‘sell’ ratings for its entire universe of more than 4000 stocks at any point in time. Irrespective of market conditions, only the top 5% of the Zacks-covered stocks get a ‘Strong Buy’ rating and the next 15% get a ‘Buy’ rating. So, the placement of a stock in the top 20% of the Zacks-covered stocks indicates its superior earnings estimate revision feature, making it a solid candidate for producing market-beating returns in the near term.

You can learn more about the Zacks Rank here >>>

The upgrade of Spirit to a Zacks Rank #2 positions it in the top 20% of the Zacks-covered stocks in terms of estimate revisions, implying that the stock might move higher in the near term.

SAVE – New Hampshire Welcomes New Service from Spirit Airlines with Nonstop Deals Between Manchester and Four Florida Cities

MANCHESTER, N.H., June 16, 2021 /PRNewswire/ — Spirit Airlines (NYSE: SAVE) is about to land in New Hampshire to connect the summits of the Granite State with the sandy beaches and theme parks of the Sunshine State. Today the airline announced plans to give Manchester-Boston Regional Airport (MHT) More Go with convenient, nonstop flights to Fort Lauderdale, Fort Myers, Orlando & Tampa starting Oct. 7. Photos and video available here.

“We can’t wait to welcome Guests from around Manchester onboard and show them why Spirit is the best value in the sky,” said Matt Klein, Executive Vice President & Chief Commercial Officer for Spirit Airlines. “We looked closely at what New Hampshire travelers want, and we saw a great opportunity to give them easy access to some great vacation destinations. We look forward to partnering with the community to kick off service, strengthening our local ties and adding more flights in the years to come.”

Flights from Manchester (MHT)

Destination:  

Flights Available:  

Launch Date:  

Fort Lauderdale (FLL) 

Daily 

Oct. 7, 2021 

Orlando (MCO) 

Daily 

Oct. 7, 2021 

Fort Myers (RSW)

4X Weekly

Nov. 17, 2021 

Tampa (TPA)

3X Weekly 

Nov. 18, 2021 

Manchester is the eleventh new city added to Spirit’s network in the past year. The airline continues to seize opportunities to bring affordable, high value fares to new markets as the demand for air travel increases. This year, 16 new fuel-efficient Airbus A320neo planes will join the airline’s Fit Fleet™, which is among the youngest in the industry. Next year, Spirit plans to accept another 21 new planes to continue adding new and exciting travel options for Spirit Guests.

“The residents of New Hampshire have been patiently waiting for a new airline, and we’re excited to announce that Spirit Airlines is coming to Manchester-Boston Regional Airport,” said New Hampshire Governor Chris Sununu. “Now’s our time to take advantage of these new routes and low fares and keep New Hampshire dollars in New Hampshire. We look forward to a successful launch and seeing Spirit grow their options from MHT in the future. So shop local—and fly local from MHT!”

“We are thrilled to welcome Spirit Airlines to Manchester this fall,” said Manchester Mayor Joyce Craig. “As a leading low-cost carrier, Spirit’s investment in our community will open new destinations for Granite Staters and allow more travelers to experience all Manchester and New Hampshire has to offer.”

“We are incredibly excited to welcome Spirit Airlines to Manchester-Boston Regional Airport,” said Airport Director Ted Kitchens, A.A.E. “Residents of New Hampshire have stated time and time again they wanted lower fares and more flights out of MHT, and Spirit has delivered! The low fares to popular vacation destinations in Florida and beyond that Spirit provides are exactly what the community is looking for as they take to the skies.”

Recognition

Spirit continues to garner awards and recognition in 2021. Spirit is one of only three U.S. airlines listed on FORTUNE’s 2021 list of World’s Most Admired® Companies, which measures companies with the strongest reputation within their industries. The carrier is a Gold Stevie® Award winner for its groundbreaking self-bag drop system with biometric photo matching, which speeds the check-in process and reduces face-to-face contact. Spirit also earned “Platinum” status in the Airline Passenger Experience Association (APEX) Health Safety initiative powered by SimpliFlying. Additionally, WalletHub recently named Spirit “Most Affordable Airline” in their 2021 Best Airlines awards and ranked Spirit third out of 11 in the overall rankings.

Guest Safety   

Spirit’s commitment to Safe Travels includes enhanced cleaning, advanced air filtration and a health acknowledgement at check-in. Airlines and airports remain subject to federal law requiring Guests to wear an appropriate face covering at airports and on flights. Please visit Spirit’s COVID-19 Information Center for more information on safety enhancements.

About Spirit Airlines: 

Spirit Airlines (NYSE: SAVE) is committed to delivering the best value in the sky. We are the leader in providing customizable travel options starting with an unbundled fare. This allows our Guests to pay only for the options they choose — like bags, seat assignments and refreshments — something we call Á La Smarte. We make it possible for our Guests to venture further and discover more than ever before. Our Fit Fleet® is one of the youngest and most fuel-efficient in the U.S. We serve destinations throughout the U.S., Latin America and the Caribbean, and are dedicated to giving back and improving those communities. Come save with us at spirit.com.

About Manchester-Boston Regional Airport

Strategically situated in the heart of New England, Manchester-Boston Regional Airport is located less than fifty miles north of Boston, Massachusetts, and less than an hour’s drive from the region’s most popular ski areas, scenic seacoast beaches and peaceful lakefront resorts. Having not closed for winter weather in over 30 years, MHT provides operational certainty and is the premier aviation gateway for the region. For more information, visit www.flymanchester.com.

SOURCE Spirit Airlines, Inc.

Related Links

https://www.spirit.com

SAVE – Why 2 Spirit Airlines Analysts Are No Longer Bullish After Q4 Results

Spirit Airlines Incorporated (NYSE: SAVE) shares were trading lower Thursday after the airline landed two Wall Street analyst downgrades.

The Analysts: Vertical Research analyst Darryl Genovesi downgraded Spirit from Buy to Hold and set a $34 price target.

Seaport Global analyst Daniel McKenzie also downgraded Spirit from Buy to Neutral and removed a $31 price target.

Related Link: 7 Stocks That Could Benefit From China’s ‘Urban Air Mobility’ Investment

The Thesis: After Spirit shares gained more than 360% off their 52-week lows, there was little indication in the company’s fourth-quarter earnings report that the stock had significant upside from current levels in the near future, Seaport’s McKenzie said in a downgrade note. 

“We’re walking away from SAVE’s 4Q20 earnings release concluding that while 4Q results and a 1Q21 revenue outlook are as we expected, risk/reward is balanced at this point,” the analyst said.

Spirit reported an $8.48 EPS loss in 2020, yet the stock is up from as low as $7 in March 2020 to as high as $33 this month.

Even after projecting in a steep recovery for Spirit in the next two years, McKenzie said the stock is still trading at around 13 times Seaport’s 2022 EPS estimate of $2.50 — the high end of its historic valuation range.

Spirit is better-positioned than other major U.S. airlines given its focus on domestic leisure traffic, McKenzie said, adding that he believes it will recover more quickly than international and business travel.

SAVE Price Action: Spirit shares were trading down 8.54% to $29.89 at last check Thursday. 

Benzinga’s Take: All of the airline stocks have bounced back tremendously from their March 2020 lows as investors anticipate a sharp recovery in 2021 and beyond.

The biggest question marks at this point are just how long will it take for airlines to recovery the majority of their 2019 business and how much of that recovery is already priced into the stocks.

Benzinga file photo by Dustin Blitchok.

Latest Ratings for SAVE

Date Firm Action From To
Feb 2021 Credit Suisse Maintains Underperform
Feb 2021 Seaport Global Downgrades Buy Neutral
Feb 2021 Vertical Research Downgrades Buy Hold

View More Analyst Ratings for SAVE
View the Latest Analyst Ratings

© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

SAVE – Spirit (SAVE) Reports Q4 Loss, Misses Revenue Estimates

Spirit (SAVE Free Report) came out with a quarterly loss of $1.61 per share versus the Zacks Consensus Estimate of a loss of $1.44. This compares to earnings of $1.24 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -11.81%. A quarter ago, it was expected that this airline would post a loss of $2.63 per share when it actually produced a loss of $2.32, delivering a surprise of 11.79%.

Over the last four quarters, the company has surpassed consensus EPS estimates just once.

Spirit, which belongs to the Zacks Transportation – Airline industry, posted revenues of $498.49 million for the quarter ended December 2020, missing the Zacks Consensus Estimate by 4.47%. This compares to year-ago revenues of $969.82 million. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Spirit shares have added about 30% since the beginning of the year versus the S&P 500’s gain of 4.3%.

What’s Next for Spirit?

While Spirit has outperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Spirit was unfavorable. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is -$1.57 on $518.33 million in revenues for the coming quarter and -$0.96 on $2.95 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Transportation – Airline is currently in the bottom 6% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

SAVE – Why ultra-low cost carrier Spirit Airlines is falling behind

Spirit Airlines, the no-frills carrier known for bright yellow planes, brash style and low fares, has helped revolutionize the way we pay for travel. To offset its bare-bones fares the carrier charges for everything from carry-on bags to bottles of water. 

As of 2019, Spirit Airlines had 13 consecutive years of profitability. Since then, however, the airline has fallen on tough times.

With the coronavirus pandemic causing passenger traffic to plummet, Spirit announced third quarter total operating revenue of $402 million, a 60% drop from a year earlier.

To keep passengers safe and onboard, Spirit requires face coverings for passengers and crew, uses foggers to disinfect the aircraft and has waived some change fees. But is it enough? And will Spirit Airlines be able to bounce back from the economic fallout battering the airline industry?

Watch more:

Why GNC filed for bankruptcy protection despite vitamin sales boom
Why rural hospitals are going bankrupt

SAVE – With Vaccines in Sight, Is it Time to Buy Spirit Airlines Stock?

Airline stocks airline sector news

Deep-diving into the fundamentals behind SAVE for an assessment of stock value

Spirit Airlines, Inc. (NYSE:SAVE) is an American discount airline company. The company is also the eighth largest commercial airline in North America. Spirit Airlines flight destinations include the U.S., Latin America and the Caribbean. Like most travel stocks, Spirit stock has taken its fair share of a beating amidst the COVID-19 pandemic, the widespread travel restrictions, and stay-at-home orders. With the vaccine now on the horizon, let’s take a deep dive into how much damage Spirit stock has taken during the pandemic, and how much upside Spirit Airlines stock potentially has.

Spirit Airlines stock has seen a whopping 33% decrease in 2020. At its 52-week low, Spirit stock reached a price of $7.01, but Spirit Airlines stock has recovered 278% since this bottom. Longer-term, Spirit stock reached its 52-week high of $47.49 early in the year.

DailySAVE

While the next batch of Spirit earnings are too far into the future to consider in this analysis, it’s important to take a look at how the company has performed against Wall Street expectations over the past 12 months. When a company tops expectations and the stock drops, this outcome suggests investor expectations were perhaps unreasonably high ahead of the earnings report release. Conversely, when a stock price increases in the face of weaker-than-expected results, it’s likely because investors (and Wall Street) had their expectations set too low. While earnings reports are certainly more short-term catalysts for stock movement, knowledge of expectations and reality for the past year is critical to a complete fundamental analysis of a stock.

Spirit Airlines stock has beat expectations on half of its most recent quarterly earnings reports. In the fourth quarter of 2019, ahead of the COVID-19 crisis, Spirit stock beat expectations by $0.02, reporting an earnings per share (EPS) of $1.24. In the first quarter of 2020, Spirit Airlines stock reported an EPS that had turned negative. Spirit Airlines reported an EPS of -$0.86 missing expectations by a margin of $0.24. Spirit stock reported another huge decline in EPS for the second quarter of 2020. Spirit reported an axed EPS of -$3.59, missing expectations by an incredible margin of $0.93. In its most recent quarter, Spirit Airlines stock reported an EPS of -$2.32, beating expectation by $0.32. At this time, Wall Street is expecting Spirit stock to report an EPS of -1.40 for the fourth quarter of 2020

Starting off with Spirit Airlines’ balance sheet, the company has definitely experienced a spike in debt that should be expected given the catastrophe that struck the travel sector this year. Spirit’s total debt currently stands at $4.82 billion. On the flip side, however, the airline company is surprisingly in okay standing, with about $2 billion in cash and cash equivalents.

Not surprisingly, Spirit Airlines has taken heavy losses on its revenue in 2020. The company is pacing to end the year generating almost $2 billion less than it did in 2019. So far this year, Spirit has taken over $250 million in net losses. This is almost a $600 million difference from the $335 million in net profits the company achieved in 2019.

Spirit Airlines has endured the worst (and most uncertain) part of the pandemic and is now slowly climbing back to profitability. At this time, it is nearly impossible to reliably predict if Spirit Airlines revenue will return to pre-pandemic level any time soon.

However, Spirit Airlines stock should have plenty of room to grow over the next few years if SAVE can just bring its earning per share back up to even half of the $4.90 it reported in 2019. Plus, options traders are pricing in relatively low volatility expectations at the moment, per the security’s Schaeffer’s Volatility Index (SVI) of 77%, which sits in the 14th percentile of all other annual readings. 

SAVE – Spirit Airlines' Q3 Results Prove Its Turnaround Potential

Like other airlines, Spirit Airlines (NYSE:SAVE) lost a lot of money last quarter as air travel demand remained extremely low due to the COVID-19 pandemic. Spirit also continued to burn cash. Nevertheless, its results were far better than what peers reported. Indeed, the company’s third-quarter performance highlighted why Spirit Airlines is likely to return to profitability much sooner than most of its rivals. Let’s take a look.

Travelers return to the skies

In the second quarter, Spirit Airlines generated $138.5 million of revenue, down 86% year over year. For much of the period, the airline ran a bare-bones schedule, recognizing that there was minimal demand even at low fare levels. The plunge in revenue caused Spirit to post a loss of $1.81 per share under generally accepted accounting principles (GAAP) and a non-GAAP loss of $3.59 per share.

Booking activity improved significantly around Memorial Day, as lower new case counts led many consumers to start buying tickets for summer travel. This allowed Spirit to reduce its average daily cash burn from $9.5 million in April to just $1.5 million in June. Unfortunately, COVID-19 case numbers began to rise rapidly again in late June, causing demand to stagnate in July. As of late July, the company projected that daily cash burn would average $3 million to $4 million in the third quarter: significantly worse than its June cash burn.

Demand recovered starting in August, though. This enabled Spirit Airlines to report a strong sequential improvement in quarterly revenue to $401.9 million (down 59.5% year over year) on a 33% year-over-year capacity reduction.

A yellow Spirit Airlines jet parked at an airport gate.

Image source: Spirit Airlines.

Spirit also managed to reduce spending more than management had forecast. This enabled it to reduce its GAAP net loss to $1.07 per share and its non-GAAP loss to $2.32 per share. Moreover, daily cash burn averaged just $2.3 million for the quarter — much better than the carrier’s original guidance, and at the better end of the airline industry range, adjusted for size.

Improvement is continuing

At an industry level, the passenger traffic recovery has slowed over the past couple of weeks compared to the pace of improvement experienced in August and September. That said, in the current environment, Spirit has been able to use its rock-bottom cost structure to stimulate pent-up air travel demand with low fares. As such, it plans to continue restoring capacity to the market this quarter.

For Q4 as a whole, Spirit Airlines expects to reduce capacity by approximately 25% year over year. It’s planning for capacity to be down 36% in October and down 20% in November and December (to support greater flying for the major holiday periods). Management estimates that this will translate to a 43% to 45% revenue decline.

Meanwhile, operating expenses will be roughly similar to the third quarter despite an expected 10% sequential increase in capacity. That should enable Spirit to reduce its adjusted loss yet again. Furthermore, the company expects average daily cash burn to tick down to $2 million this quarter.

Shareholders’ pain will last

Once Spirit Airlines can get fleet utilization back to a reasonable level — perhaps as soon as next spring — cash flow should turn solidly positive. In the meantime, the company has plenty of liquidity, having ended the second quarter with $2.1 billion of cash and investments.

While Spirit’s revenue, earnings, and cash flow will likely recover much faster than most of the industry, that doesn’t mean Spirit Airlines stock will make an equally quick comeback. Having entered the pandemic with a stretched balance sheet due to its rapid growth over the past decade, Spirit Airlines has had to take on high-interest debt and issue new shares to bolster its liquidity.

In fact, Spirit now has nearly 98 million shares of stock outstanding, up from 68.5 million at the beginning of 2020. It could suffer some additional dilution due to convertible debt it issued earlier this year and warrants that the federal government received in exchange for payroll support aid.

This dilution will certainly be painful. However, it’s already reflected in Spirit Airlines’ stock price following a 58% year-to-date decline. As leisure travel demand returns over the next couple of years and Spirit Airlines capitalizes on its recently redesigned loyalty and credit card programs, net income should rebound. It will take several extra years to offset the drag from a higher share count. But as Spirit carries out its promising growth plan, earnings per share could eventually reach record levels, too.

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