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Your May 2017 Guide to Spirit Airlines

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Your May 2017 Guide to Spirit Airlines PART 1 OF 5

Spirit Airlines’ Capacity Is Growing the Fastest among Peers

Capacity growth

In May 2017, Spirit Airlines’ (SAVE) capacity grew 9.0% YoY (year-over-year), which was slower than its 12.9% YoY growth in April 2017. In fact, capacity growth at Spirit Airlines has been slowing down since the second half of 2016.

Spirit Airlines&#8217; Capacity Is Growing the Fastest among Peers

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During the first half of 2016, Spirit Airlines grew its capacity at a significant rate of 25% YoY. Sensing the need for capacity discipline, this growth was reduced to 16% YoY in the second half of 2016.

Capacity growth was further reduced to 15% YoY in the first quarter of 2017. As of May 2017, Spirit Airlines capacity had increased by 13.2% YoY, which is slower than the 20% YoY growth it recorded in 2016 and the 30% capacity growth recorded in 2015.

Faster than peers

Despite this slowdown, Spirit Airlines continues to be the fastest-growing airline among peers. The next-highest YoY capacity growth was recorded by Alaska Air (ALK) at 5.1% in May. Southwest Airlines (LUV) recorded a capacity growth of 4.8% YoY, while JetBlue Airways (JBLU) has grown its capacity by 4.6% YoY in the same period.

On the lower end, United Continental (UAL) has grown its capacity by 3.1% YoY, and American Airlines’ (AAL) capacity growth was flat for the period. Delta Air Lines (DAL) is the only carrier to have recorded a capacity decline of 0.4% YoY as of May 2017.

Outlook

For 2Q17, Spirit Airlines (SAVE) has given a capacity growth guidance of 16.7% YoY. As the first two months of the quarter have seen an average capacity growth of just 10.9% YoY, investors can reasonably expect higher growth next month. For fiscal 2017, Spirit Airlines expects its capacity to grow in the range of 17%–17.5%.

Notably, investors can gain exposure to Spirit Airlines by investing in the First Trust Industrials/Producer Durables AlphaDEX Fund (FXR), which invests 1.8% of its total portfolio in Spirit Airlines.

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