Spirit Airlines (SAVE 56.97, -0.13, -0.23%) is a name that has been holding up well
even as the overall market has been weak. SAVE's status as an ultra low-cost
carrier (ULCC) with a focus on price-sensitive leisure travelers seems to be a
good model in this environment.
SAVE's model is to charge a very low base fare, and then charge fees for everything else: carry-on bags, seat assignments, water, snacks, etc. SAVE also derives ancillary revenue from hotel/rental car partnerships, onboard advertising, etc. Another way Spirit saves money is by packing more seats per plane so there is less legroom.
SAVE began largely as a North-South carrier, but in recent years has grown by expanding West and now it is aggressively targeting the Caribbean/Latin America market where the ultra-low fare market is less developed. SAVE has focused more on this region from its home base and largest market in Fort Lauderdale. Now, it's going a step further.
In early October, SAVE launched service from Orlando to seven destinations in Latin America and the Caribbean, with four more in early November. Overall, SAVE now operates more than 500 daily flights (up from 350 a few years ago) to 69 destinations in the US, Latin America, and the Caribbean.
SAVE has made a lot of improvements over the past few years. It has improved operational reliability and has made great strides in improving service metrics. SAVE now has an industry-leading cost structure and a cost gap relative to its competitors which SAVE believes will continue to widen.
In addition, over the last three years, SAVE has diversified its network, culled many of its underperforming routes, and increased density in several key markets to allow for increased connectivity (SAVE now has 10 key cities with 20+ daily departures.) The company believes it's just beginning to reap the benefit of all these changes.
SAVE is a name to keep on the radar in 2019. Looking ahead, it already has one of the youngest, most fuel efficient fleets in the industry. Over the next year, its fuel efficiency should get even better as it adds more new aircraft, most of which are Airbus neos, which consume 15-20% less fuel. All of this has led to improved financial results and a stock price that has been generally trending higher although it has pulled back in December.
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