Spirit Air Surges Most in Four Years After Curbing Growth Plans
(Bloomberg) -- Spirit Airlines Inc. is pulling back on the torrid expansion that helped place them at the center of an industry fare war in recent months, sending the discount carrier’s shares surging the most in four years.
Spirit will limit its growth of flights and seats to as little as 10 percent in 2019, executives said Thursday. As part of the slowdown, the airline is holding off deciding whether to order new Airbus SE aircraft to fuel future flying, Chief Financial Officer Ted Christie said Thursday.
The carrier is also studying whether to extend the leases of some planes in its fleet as it works to keep growth to the “low to mid double-digit” range, he said. Spirit plans to expand by 22 percent to 25 percent in 2018.
Capacity growth -- the ability to carry more passengers -- is a critical part of how a low-fare airline like Spirit keeps expenses low, with costs spread across more seats. Christie said Spirit is confident that slowing expansion won’t hurt its cost structure much. “Aircraft growth is not the only knob that the airline has available to it,” he said.
The slower expansion, coupled with an apparent easing of low-fare skirmishing among airlines, sent Spirit up as much as 14 percent, the most since October 2013. Shares rose 8.7 percent to $36.68 at 12:36 p.m. in New York. The discounter fell 42 percent this year through Wednesday.
Christie said Spirit’s 2017 capacity growth of 16 percent was “artificially depressed” by about three percentage points because of disruptions from hurricanes and a pilot labor action in the spring, and problems with the Pratt & Whitney engines on its new Airbus A320neo family aircraft that limited their use.
Spirit has been flying only three of its five new aircraft with the Pratt engines. The airline will end the year with 112 Airbus planes and take another 10 next year.
Adding less capacity to the market would help ease pressure on rivals that were sucked into a fare war this summer between Spirit and United Continental Holdings Inc. that hurt industry revenue.
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