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Spirit Airlines’ August Traffic Increases, Load Factor Slips

Zacks

Spirit Airlines SAVE posted a significant rise in air traffic for the month of August. Traffic – measured in revenue passenger miles (RPMs) – came in at 2.34 billion, up 20.6% on a year-over-year basis. Consolidated capacity (or available seat miles/ASMs) also expanded 21.9% to 2.71 billion.

However, load factor or percentage of seats filled by passengers decreased to 86.2% from 87.1% recorded in August 2016. The decline was due to traffic growth, which was outpaced by capacity expansion.

In fact, this low-cost carrier registered a completion factor (system wide) of 96.6% for the month with 76.9% flights on schedule. Notably, for the first eight months of 2017, Spirit Airlines registered a 13.5% increase in RPMs to 16.52 billion and a 16.4% rise in ASMs to 19.6 billion, both on a year-over-year basis. But load factor fell 210 basis points to 84.3% in the period.

Earlier in September, the carrier trimmed its current-quarter outlook for total revenue per available seat miles (TRASM: a key measure of unit revenue). Currently, this Miramar, FL-based company anticipates TRASM to decline between 7% and 8.5% (the previous guidance had called for a decline in the band of 2% to 4%).


Per Spirit Airlines, 100 basis points of the trimmed guidance can be attributed to the negative impact of Harvey. Also, aggressive competitive pricing in its key markets contributed to the company’s bleak forecast.

We note that apart from Spirit Airlines, the likes of United Continental Holdings UAL and Southwest Airlines Co. LUV also lowered their unit revenue views for the third quarter.

Zacks Rank & Stock to Consider

Spirit Airlines carries a Zacks Rank #5 (Strong Sell).

A better-ranked stock in the airline space includes SkyWest Inc. SKYW holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SkyWest witnessed the Zacks Consensus Estimate for current-year earnings being revised 1.9% upward over the last 60 days.

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