Spirit Airlines Reports Third Quarter 2018 Results

MIRAMAR, Fla., Oct. 24, 2018 (GLOBE NEWSWIRE) -- Spirit Airlines, Inc. (NYSE: SAVE) today reported third quarter 2018 financial results.

• GAAP net income for the third quarter 2018 was $97.5 million ($1.42 per diluted share), or $100.5 million ($1.47 per diluted share)¹ excluding special items.
   
• GAAP operating margin for the third quarter 2018 was 16.0 percent, or 16.1 percent excluding special items¹.
   
• Spirit ended the third quarter 2018 with unrestricted cash, cash equivalents, and short-term investments of $875.9 million.

“As our third quarter results show, we are beginning to realize the benefits of the investments we’ve made to improve our business.  Our passenger revenue initiatives are allowing us to better optimize yields throughout the booking curve, our ancillary revenue initiatives continue to drive improved results, and we are consistently delivering operational reliability.  In fact, year-to-date, we are among the top airlines for on-time performance as measured by the D.O.T.,” said Robert Fornaro, Spirit’s Chief Executive Officer.  “In addition, over the last three years we have diversified our network, increased density in several key markets to allow for increased connectivity, and culled many of our underperforming routes.  We are just beginning to reap the benefit of all these changes and are excited about the potential to leverage them further.”

“Consistently delivering operational reliability is just the beginning in our quest to improve the overall guest experience.  We’ve invested in Spirit Signature Service training for our flight attendants, airport personnel, and other team members, we’ve made enhancements at our airports to lessen queue times, we’ve broadened and diversified our network, and we are adding guest amenities such as the option for inflight Wi-Fi.  These, and more, are part of our Invest in the Guest pledge.  Improving our Guests’ experience, together with our initiatives to drive revenue and our continued determination to maintain our industry-leading low-cost structure, positions us well to deliver strong returns for our shareholders," said Ted Christie, Spirit's President.

Revenue Performance
For the third quarter 2018, Spirit's total operating revenue was $904.3 million, an increase of 31.6 percent compared to the third quarter 2017, driven by a 24.6 percent increase in passenger segments and a 3.0 percent increase in operating yields.

Total operating revenue per available seat mile ("TRASM") for the third quarter 2018 increased 5.5 percent compared to the same period last year.  During the third quarter 2018, the Company's results benefited from its strategic network re-orientation, improved yield management processes, non-ticket revenue initiatives, and a strong operating environment.

On a per passenger flight segment basis, total revenue for the third quarter 2018 increased 5.6 percent year over year to $115.11 with fare revenue per passenger flight segment increasing 7.6 percent to $60.67 and non-ticket revenue per passenger flight segment increasing 3.5 percent to $54.44².

Cost Performance
For the third quarter 2018, total GAAP operating expenses, increased 30.1 percent year over year to $759.2 million.  Adjusted operating expenses for the third quarter 2018 increased 32.0 percent year over year to $758.8 million³.  These changes were primarily driven by increases in flight volume, fuel rates, and salaries, wages and benefits.

Aircraft fuel expense increased in the third quarter 2018 by 63.5 percent year over year, largely due to a 34.9 percent increase in the cost of fuel per gallon.  Economic fuel cost per gallon in the third quarter 2018 was $2.36 compared to $1.75 for the same period last year.

Spirit reported third quarter 2018 cost per available seat mile ("ASM"), excluding special items and fuel (“Adjusted CASM ex-fuel”), of 5.22 cents³, a decrease of 3.7 percent compared to the same period last year, primarily driven by lower aircraft rent per ASM and better operational performance, partially offset by higher salaries, wages and benefits per ASM.

“Network optimization and improved yield management combined with the team's continued focus to drive ex-fuel costs down, produced an operating margin excluding special items for the third quarter 2018 of 16.1 percent, about flat year over year, despite a significant increase in the cost of fuel and higher pilot rates in connection with our new pilot agreement approved in the first quarter 2018,” said Ted Christie, Spirit's President.

Fleet
Spirit took delivery of two new A320ceo aircraft during the third quarter 2018, ending the quarter with 121 aircraft in its fleet.

New Routes
Asheville - Tampa (09/06/2018)
Houston - San Salvador, El Salvador (09/06/2018)
Newark - Atlanta (09/06/2018)
Greensboro - Tampa (09/06/2018)
Greensboro - Fort Lauderdale (09/06/2018)
Asheville - Fort Lauderdale (09/07/2018)
Asheville - Orlando (09/07/2018)
Houston - Guatemala City, Guatemala (09/07/2018)
Greensboro - Orlando (09/07/2018)

Conference Call/Webcast Detail
Spirit will conduct a conference call to discuss these results tomorrow, October 25, 2018, at 9:30 a.m. ET.  A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.spirit.com.  An archive of the webcast will be available under Webcasts & Presentations for 60 days.

About Spirit Airlines:
Spirit Airlines (NYSE: SAVE) is committed to delivering the best value in the sky while providing an exceptional Guest experience.  We are the leader in providing customizable travel options starting with an unbundled fare.  This allows every Guest 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, travel more often, and discover more than ever before.  Our Fit Fleet® is one of the youngest and most fuel-efficient in the U.S.  We operate more than 500 daily flights to 69 destinations in the U.S., Latin America, and the Caribbean, and are dedicated to giving back and improving the communities we serve.  Come save with us at www.spirit.com.  At Spirit Airlines, we go.  We go for you.

Investors are encouraged to read the Company's periodic and current reports filed with or furnished to the Securities and Exchange Commission, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, for additional information regarding the Company.

End Notes
(1) See "Reconciliation of Adjusted Net Income, Adjusted Pre-tax Income, and Adjusted Operating Income to GAAP Net Income" table below for more details.
(2)  See "Calculation of Total Non-ticket Revenue per Passenger Segment" table below for more details.
(3) See "Reconciliation of Adjusted Operating Expense to GAAP Operating Expense" table below for more details.

Forward-Looking Statements
Statements in this release and certain oral statements made from time to time by representatives of the Company contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions intended to identify forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Furthermore, such forward-looking statements speak only as of the date of this release. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Risks or uncertainties (i) that are not currently known to us, (ii) that we currently deem to be immaterial, or (iii) that could apply to any company, could also materially adversely affect our business, financial condition, or future results. References in this report to “Spirit,” “we,” “us,” “our,” or the “Company” shall mean Spirit Airlines, Inc., unless the context indicates otherwise.  Additional information concerning certain factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

The Company is providing a reconciliation of GAAP financial information to non-GAAP financial information as it believes that non-GAAP financial measures provide management and investors the ability to measure the performance of the Company on a consistent basis.  These non-GAAP financial measures have limitations as analytical tools.  Because of these limitations, determinations of the Company's operating performance excluding unrealized gains and losses or special items should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

The Company tracks a non-GAAP calculation of Return on Invested Capital ("ROIC"), as a way of measuring our efficiency in delivering returns and in allocating capital.  We calculate ROIC as Adjusted Operating Income (non-GAAP), divided by Total Invested Capital (non-GAAP), on a pre-tax and after-tax basis, expressed as a percentage.

Because a substantial portion of our aircraft fleet is held under operating leases, which do not appear on the balance sheet, a GAAP-based calculation of our total capital deployed may be considered understated (which would have the effect of overstating ROIC, if calculated solely using GAAP line items).  Accordingly, we adjust our total capital, the denominator of the ROIC measurement, by capitalizing operating leases at a multiple of seven times our aircraft rent expense, a measure used commonly in the airline industry and by analysts.

To calculate Adjusted Operating Income (non-GAAP), we add back aircraft rent to GAAP operating income, consistent with the adjustment to total capital discussed above.  In order to remove the effects of non-recurring gains and losses that may affect GAAP operating income, we also exclude special items from Adjusted Operating Income (non-GAAP). We present Adjusted Operating Income (non-GAAP) on a pre-tax basis and present Adjusted Operating Income (non-GAAP) on an after-tax basis, using our year-to-date 2018 non-GAAP effective tax rate.

Investor Relations Contact: 
DeAnne Gabel 
InvestorRelations@spirit.com   
(954) 447-7920

Media Contact:
Stephen Schuler
Stephen.Schuler@spirit.com 
(954) 364-0231