Tag Archives: Spirit airlines

PlaneBusiness Banter Now Posted!

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Good evening everyone!


Tonight we publish our second issue in four days — as we try and work our way through the recent compressed pile of 3Q airline industry earnings reports.

In this issue we take an in-depth look at the recent earnings calls from Hawaiian Holdings, parent of Hawaiian Airlines; Spirit Airlines; and Allegiant Travel Company, parent of Allegiant Airlines.

All three airlines made money, but all three made profits in very different ways.

In addition, one analyst, Hunter Keay with Wolfe Trahan, brought up a very interesting idea for the folks at Hawaiian Airlines. He thinks, as I do, that the airline’s stock is very undervalued. In fact, the airline has enough cash in the bank today to buy itself, the market cap of the airline is so small. Of course the airline would need more capital than that to pull off an LBO, but I found Hunter’s argument very persuasive.

Aside from that, looking at the airline’s earnings results for the third quarter — while the airline is clearly grappling with some capacity/demand learning curves, the airline’s decision several years ago to look west to Asia for expansion — as opposed to putting more effort in the U.S. trans-Pacific routes looks like it has been, without question, the right decision.

We also talk about the 3Q earnings announced by Spirit Airlines. Spirit had a very nice profitable quarter, but the airline is spending a bit of money these days both to support its current growth spurt, and to make sure its operations run more smoothly.

I have no problem with either of these. The underlying business plan of Spirit is solid.

Our third in-depth earnings report looks at Allegiant. The airline has flopped around a bit the last couple of years as it decided to go with another fleet type, it had to get ETOPS certification for those 757s, the airline’s IT infrastructure had to be totally reconstructed and upgraded, it switched its position on how to deal with engine overhauls. You know — the usual. Growing pains.

But the airline seems to have weathered all of this fairly well. In addition, the airline’s move to put 166 seats in its MD-80s (no, I am not about to fly on one of those airplanes anytime soon!) is moving along and the airline is now getting a better read on the revenue payback from the additional seat installs. The news? Good.

All in all a very good quarter for all three airlines — but in very different ways.

In other news we talk about the latest tidbits from American, although there aren’t many, and we celebrate today — United Airlines 787 Day. Today the airline put its first 787 into regular commercial service. A fun time was had by all — as best we can tell. We had both friends and subscribers onboard at least one, if not more of the inaugural flights. Nothing like some good plane porn to make us all forget about the everyday trials and tribulations of life.

All of this and much more in this week’s issue of PlaneBusiness Banter.

PlaneBusiness Banter Now Posted!

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Good evening everyone.

This week’s issue of PlaneBusiness Banter is now posted.

This week we have another mega-earnings issue, as we take a close look at the recent earnings calls from Hawaiian Airlines, Allegiant Travel Company, Spirit Airlines and Republic Holdings. Republic was the only one of the group not to post a profit for the first quarter.

Of course Spirit was in the news last week for other reasons — namely its decision to hike the charges for carry-on bags and for their initial refusal to refund a $197 ticket to a terminally-ill ex-Marine. By the time the week was over, the bag charge increases were still in place, but the airline’s CEO Ben Baldanza personally refunded the cost of the ticket and the airline contributed $5K to the Wounded Warriors organization.

For once the airline discovered that bad publicity was not better than no publicity.

In other news, Southwest Airlines and United Airlines slugged it out again in Houston Tuesday before an overflow crowd at the Houston City Council chambers.

Southwest wants to fly internationally out of Hobby Airport, and has asked the city for permission to build a new international addition to the current airport at a cost of roughly $100K.

But United is not amused. Especially since it just broke ground in January on a $700 million expansion and improvement of its facilities at IAH, which will include more international gate expansion.

Most interesting factoid from Tuesday’s testimony and questioning — on the day United Airlines broke ground on its new IAH expansion in January, Southwest’s Gary Kelly was talking to the Houston mayor about its desire to fly internationally out of Hobby.

Oh, this is such a cruel dog-eat-dog business.

This week we also have our latest AMR Bankruptcy Follies column. This week we look at the position of the bondholders in the bankruptcy process — why they want to get as much as possible back from the airline and how this return could be maximized as a result of a US Airways merger with American while it is still in bankruptcy protection.

Last week shares of Republic and Spirit were the laggards for the airline sector, but the price of oil plunged. That’s good news. So far this week — oil prices have continued to move downward.

As always — all this and more — in this week’s issue of PlaneBusiness Banter.

Spirit Pilots Go on Strike


The deadline at midnight came and went.

The negotiations continued into the night.

But, at 5 a.m this morning, both sides called it quits and the pilots at Spirit Airlines, who are represented by the Air Line Pilots Association, left the negotiation table. And their cockpits.

Spirt Airlines President and CEO Ben Baldanza said in a statement, “We are frustrated and disappointed that our pilots have turned down an over 30 percent increase at a cost of over $70 million over five years while disrupting thousands of our customers and jeopardizing the livelihoods of our over 2,000 employees.”

Spirit is not publicly traded. It is owned by Indigo Partners LLC and Oaktree Capital Management, LLC.

Indigo is the private investment firm that is headed by former American West CEO Bill Franke. Howard Marks is Chairman of Oaktree, which tends to invest in high risk-high yield investments. To put it another way, Marks is known for being one of the most well-known “vulture investors.”

The strike marks the first time in five years that an employee group has struck a U.S. airline.

Baldanza told the WSJ this morning that his goal is to get the airline flying again as soon as possible, but he said he couldn’t say at this point what will happen, even Sunday. “He said Spirit has some management pilots who could operate flights, but it remains to be seen if some of the striking aviators would cross picket lines and return to work.”

Ah, well, yes, I could see where that might be a problem.

He also admitted that the airline had been trying to get charter carriers to fly on its behalf — in anticipation of a potential strike — but that “ALPA had pressured those companies, even those whose pilots aren’t represented by ALPA, and some dropped out.”

He also told the WSJ that the airline has purposely made sure all of its aircraft were back in the U.S. “where we want them to be” in anticipation of the job action.

As for the airline’s pilots? He said it was “their problem as to how they get home.”

That’s what I love about this industry. It’s just so damn warm and fuzzy. Can’t you just feel the love?

On a serious note — Spirit is not the most cash-flush operation in the world, and if the pilots are as successful in shutting the airline down as I suspect they are going to be, this could get very nasty, very quickly.

Not to be a conspiracy theorist, but I’ve seen managements use a lot less motivation to justify shutting down an airline. And who knows? Maybe someone might like to snap up some of the airline’s assets for a decent price.

I don’t say the pilots were not justified in what they did. It is their right to strike. And, in a weird way, it’s good to see the process still works.

But on the flip side, Spirit is not a major carrier. There is going to be no urgency for the administration to create a PEB. And like I said, the airline is not sitting on a lot of cash, nor do the guys who own this thing feel inclined to throw any more cash at it. In addition, while the airline has posted a profit for the last three years, a big reason that has been the case is because of the rock-bottom labor rates at the airline.

Should be an interesting weekend. Especially at the Ft. Lauderdale -Hollywood International Airport. Spirit handles 20% of the traffic out of there on a daily basis.