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Higher Revenue and Lower Costs Drove Spirit Airlines’ Q1 Earnings

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First-quarter results

Spirit Airlines (SAVE) reported robust first-quarter results on April 24. Its top and bottom lines both increased significantly on a YoY basis. Moreover, the airline’s quarterly earnings and revenues were almost in line with analysts’ estimates. Spirit Airlines’ first-quarter adjusted EPS of $0.84 matched analysts’ expectations and increased ~91% YoY. Strong top-line growth and efficient cost management mainly drove the airline’s first-quarter earnings.

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The company’s first-quarter revenues increased 21.5% YoY to $855.8 million, almost in line with analysts’ expectations of $856.1 million. An increase in the unit revenue and strong growth in non-ticket sources drove Spirit Airlines’ first-quarter revenues higher. Spirit Airlines’ unit revenues for the quarter rose 4.1% due to improvement in ticket and non-ticket revenues, network realignment, and a better yield.

Spirit Airlines’ dynamic pricing strategy on non-ticket items like bags and bundled service offerings has been driving higher non-ticket revenues. Moreover, the company’s capacity matching and route re-alignment initiatives have resulted in improved load factors. During the first quarter, the company’s load factor improved 170 basis points to 82.7%.

Spirit Airlines’ adjusted ex-fuel CASM (cost per available seat mile) increased by 2.4% YoY to 5.46 cents due to higher salaries and wages. Aircraft fuel expenses grew 12.2% due to a 15.6% increase in fuel gallons consumed partially offset by a 2.8% decline in average economic fuel cost per gallon.

Strong revenue growth and efficient cost management drove Spirit Airlines’ first-quarter pre-tax income and margin. The company’s adjusted pre-tax income grew 87% YoY to $74 million. The margin expanded by 300 basis points to 8.6%.

Peers’ performance

Various US air carriers (IYT) have reported their first-quarter results. Delta Air Lines (DAL) and United Airlines (UAL) have registered a 28% and 130% YoY increase in their respective adjusted EPS. On the other hand, JetBlue Airways (JBLU) and Hawaiian Airlines (HA) have reported a YoY decline of 40.7% and 38.5% in their respective first-quarter adjusted EPS.

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