Sun Sentinel Palm Beach Edition
Spirit posts smaller 4Q profit; 2016 gain also off
Spirit Airlines reported less profit in the fourth quarter and for 2016 overall compared to a year ago as it faced pricing competition across its network and some higher operating expenses, the Miramar-based carrier reported Tuesday.
During the quarter ending in December, Spirit’s net income fell 34.8 percent to $48.4 million, or 70 cents per share, compared with $74.4 million, or $1.04 a share, in the same period in 2015.
Spirit’s adjusted quarterly profit, which excludes certain charges, was $53.9 million or 77 cents a share. The 77 cents earnings per share beat analysts’ forecasts of 74 cents from the Zacks Consensus Estimate, according to Zacks Equity Research.
Operating revenue in the quarter rose 11.3 percent to $578 million from $519 million in the 2015 period, buoyed in part by an increase in flight volume, Spirit said. Quarterly revenue, however, fell slightly short of the Zacks Consensus Estimate of $578.5 million.
During the quarter, Spirit added new twice-daily nonstop service between Fort Lauderdale-Hollywood International Airport and Havana’s Jose Marti International Airport in Cuba, among other new routes across its network.
For all of 2016, Spirit posted net income of $264.8 million or $3.76 a share, versus $291 million or $4.13 a share in 2015.
Of note, 2016 was a year of marked customer service and ontime flight improvements for the low-cost carrier, which in the past has racked up high number of consumer complaints.
“Throughout 2016, we made solid progress towards our goal of achieving consistent reliability,” Spirit President Bob Fornaro said during an earnings call with analysts. “We improved our Department of Transportation on-time performance by over 5 percentage points versus 2015, with nearly all that coming in the last seven months of the year. We also made great progress in lowering our number of complaints reported to the DOT.”
Spirit began 2016 with a complaint ratio of more than 11 per 100,000 customers and by year-end it reduced that metric by more than 60 percent to less than 4 per 100,000 customers, Fornaro said.
“We expect the progress to continue in 2017,” he noted.
Over the three-month period ended Dec. 31, the budget carrier still faced some pricing pressure from competitors, which led to a 2.3 percent dip in average ticket revenue per passenger, to $56.19.
Average nonticket revenue, which reflects travelers’ spending on optional fees for checked luggage, large carry-on bags and advance seat assignments, among other paid services, fell 4.3 percent to $51.92.
“The competitive environment has changed dramatically since mid-2015,” said Fornaro, noting Spirit’s competitors didn’t tend to match its pricing. “Today, we’re seeing competition across our entire network.”
Although more carriers such as American and United are planning to offer basic economy fares in 2017 as a way to compete with low-cost carriers such as Spirit, so far it’s too soon to say what impact those fares will have on Spirit’s performance, Fornaro said.
Matt Klein, senior vice president and chief commercial officer, told analysts the first quarter will see some negative impact from the fatal shooting at Fort Lauderdale-Hollywood International in early January.