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Published on : Friday, July 24, 2015
“Our second quarter 2015 performance was negatively impacted by an unusual number of storms and I want to thank our team members and business partners for their hard work and dedication in serving our customers and helping us to restore our operations to normal,” said Ben Baldanza, Spirit’s Chief Executive Officer. “In addition to an unusual number of storms, we’ve recently seen a noticeable change in competitive pricing behavior. But, the fundamentals of our business haven’t changed: we continue to grow our network while maintaining high margins, delivering strong returns, and offering our customers low fares.”
During June, Spirit experienced consecutive storm systems in Dallas, Chicago, New York, and Detroit followed by Tropical Storm Bill that sat over Houston before moving north to Dallas. The timing and location of these storm systems produced a domino effect on the Company’s operation resulting in over 500 flight cancellations and numerous flight delays. Due to the sheer volume of flights affected, the Company was unable to flex up staffing levels enough to mitigate the impact of crews being displaced or being unable to work due to them reaching their contractual or regulatory work hour maximums. These challenges lengthened the span of the irregular operation and the time it took to restore the system to normal. With its high aircraft utilization, low daily flight frequency and point-to-point network, severe irregular operations typically create a unique set of challenges for the Company; however, the Company believes the unusual number and location of storms in June exacerbated the operational difficulty and made this event unlike others. The Company estimates the impact of the cancellations, delays, and other non-recurring expenses during the quarter negatively impacted operating income by $20 million ($5 million lower revenue, $15 million higher costs). Adjusting for these items, the Company estimates it would have reported adjusted net income of $87.5 million ($1.20 per diluted share).
For the second quarter 2015, Spirit’s total operating revenue was $553.4 million, an increase of 10.8 percent compared to the second quarter 2014, driven by an increase in flight volume, partially offset by a decrease in operating yields.
Total revenue per passenger flight segment (“PFS”) for the second quarter 2015 decreased 12.4 percent year over year to $122.59, primarily driven by a 19.4 percent decrease in ticket revenue per PFS. The decline in ticket revenue per PFS was driven by lower fare levels as a result of increased competitive pressures as well as a higher percentage of the Company’s markets being under development compared to the same period last year. Although slightly lower year over year on a per PFS basis, non-ticket revenue continues to provide a stable revenue stream that is increasingly important during periods of lower passenger yields. Non-ticket revenue per PFS only declined 1.7 percent year over year to $54.24. The decrease in non-ticket revenue per PFS was primarily attributable to lower bag revenue per PFS and the outsourcing of the Company’s onboard catering to a third-party provider under a revenue share agreement.
Total revenue per available seat mile (“RASM”) for the second quarter 2015 decreased 14.8 percent compared to the second quarter 2014 on a capacity increase of 30.1 percent. The RASM decrease was driven by lower fare levels as a result of increased competitive pressures as well as the ramp up growth in the Company’s new and mature markets.
Total operating expenses for the second quarter 2015, excluding $2.9 million of credits related to special items, increased 10.4 percent to $434.0 million3. Including special items, total operating expenses increased 9.4 percent year over year to $431.1 million. Operating expenses benefited from economic fuel expense decreasing 14.8 percent, or $22.8 million, on a fuel volume increase of 27.8 percent.
Spirit reported second quarter 2015 cost per available seat mile (“ASM”) excluding special items and fuel (“Adjusted CASM ex-fuel”)3 of 5.80 cents, a decrease of 2.5 percent compared to the same period last year, driven primarily by lower aircraft rent per ASM, lower distribution expense per ASM, and lower labor expense per ASM. These benefits were partially offset by higher passenger re-accommodation expense per ASM. The decrease in aircraft rent per ASM was driven by a change in the mix of leased (rent recorded under aircraft rent) and purchased (depreciation recorded under depreciation and amortization) aircraft. Lower distribution expense per ASM was in part driven by lower credit card rates related to the modification and extension of Spirit’s credit card processor agreement in late 2014. Labor expense per ASM in the second quarter 2015 was lower compared to the same period last year primarily due to scale benefits from overall growth and from larger gauge aircraft, partially offset by higher health care costs. Passenger re-accommodation expense (recorded under other operating expense) per ASM was primarily higher year over year due to the impact from an unusual number of storm systems that disrupted the Company’s operations.
“Due to the financial impact of the unusual number of cancellations, delays, and other non-recurring items during the quarter, as well as higher healthcare costs, we have revised our full year 2015 Adjusted CASM ex-fuel range and now estimate it will be down 5 to 6 percent year over year,” said Ted Christie, Spirit’s Chief Financial Officer. “Despite these adjustments, I am encouraged about how the business is performing, which establishes a solid base for improved cost performance in 2016 and beyond.”
Spirit repurchased approximately 1 million shares during the second quarter, which equated to approximately $67.5 million of the total $100 million authorization.
In the second quarter 2015, Spirit took delivery of 3 new A320 aircraft, ending the quarter with 73 aircraft in its fleet.
Other Second Quarter 2015 Highlights
Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results today, July 24, 2015, at 10:00 a.m. ET. An archive of the webcast will be available under Webcasts & Presentations for 60 days.
Source:- Spirit Airlines
Tags: Spirit Airlines