Spirit Airlines recorded a net loss of $112 million for the first quarter of 2021. As the ultra-low-cost carrier (ULCC) charts a growth strategy and improvements in March, the airline is looking ahead to the summer. Its team managed capacity successfully and achieved a load factor of 72.1%, which is the highest it has been for the airline since the first quarter of 2020.
Spirit’s first-quarter results
The $112 million net loss came after a mixed quarter. Early on, in January and into the first part of February, post-winter holiday demand softened, and the revenue and demand environment seemed like a continuation of the fourth quarter.
However, come March, amid an improved vaccine rollout, declining case counts, and emboldened travelers seeking to take a much-anticipated vacation situations combined to produce favorable tailwinds for Spirit. This led to a strong rebound on the domestic and international front.
In the first quarter, the airline’s total revenue per passenger flight segment decreased 16.4% year-over-year to $84.27. Fare revenue decreased 24.2% to $31.84, while non-ticket revenue (ancillary spend) decreased by 10.8% to $52.43. Spirit attributed some of the decrease in ancillary revenue to the suspension of certain booking-related fees.
Spirit recorded total passenger revenues of $450.335 million. Of that, $276 million came in the form of ancillary spending. This is over 60% of the airline’s operating revenue. Total fare revenue totaled $174.3 million for the quarter.
Adding in other revenue, then Spirit’s total operating revenue was $461.3 million in the first quarter. Of that, $408.7 million was from domestic travel, while $52.6 million came from Latin America, using geographic regions defined by the Department of Transportation.
Capacity and load factors
Spirit recorded a load factor for the first quarter of 72.1%. This was the highest load factor the airline has seen since the first quarter of 2020. In the second quarter, Spirit’s load factor was a dismal 49.4%. This increased impressively to 68.1% in the third quarter of 2020, before hitting 71.5% in the fourth quarter.
This load factor was on a year-over-year capacity decrease of 26.9%. Spirit was successfully able to increase its load factor while facing headwinds during the quarter. The first headwind was testing requirements to reenter the US, which dampened demand for inbound international travel, affecting 12% of Spirit’s first-quarter capacity.
Additional requirements in other countries and increased jurisdictional restrictions due to spikes in case counts led to dampened demand in other markets. However, in March, things started to change as the vaccine began to roll out and restrictions eased. In fact, March’s ancillary revenue strengthened with average non-ticket revenue per segment improving to over $55 for the month.
Spirit plots a better summer
Compared to the same quarter in 2019, Spirit expects its second-quarter capacity to be down only about 5.5%. This includes the launch of several highly-anticipated services, including a new transcontinental flight from New York’s LaGuardia Airport (LGA) to Los Angeles International Airport (LAX).
Spirit took two new Airbus A320neo aircraft in the first quarter and decided to keep the Airbus A319ceos. It bought two of that aircraft off-lease, indicating that the carrier believes it will need those planes to expand its network and leverage them to turn a profit. It currently has 14 additional aircraft scheduled for delivery during the remainder of 2021.
Spirit will be plotting an aggressive ramp-up of capacity, as it hopes pent-up demand will lead people to book with the airline. Crucial metrics for the airline will be if it can increase its average fare and non-fare revenue while also increasing load factors on higher capacity. This would imply that more passengers are coming back, and they are willing to spend more and choose to fly Spirit.
While there will be plenty of fierce competition this summer, Spirit believes it can benefit from the rebound in leisure traffic, which is coming back much stronger and faster than business travel.