Spirit Airlines , Inc. (NYSE:SAVE) today reported first quarter 2022 financial results.
Ended the first quarter 2022 with $1.6 billion of unrestricted cash, cash equivalents, short-term investment securities and liquidity available under the Company's revolving credit facility.
As Reported | |||||
(unaudited) | |||||
First Quarter 2022 | First Quarter 2021 | First Quarter 2019 | |||
Total operating revenues | $967.3 million | $461.3 million | $855.8 million | ||
Pre-tax income (loss) | $(244.0) million | $(138.2) million | $72.1 million | ||
Net income (loss) | $(194.7) million | $(112.3) million | $56.1 million | ||
Diluted earnings (loss) per share | $(1.79) | $(1.15) | $0.82 | ||
Adjusted1 | |||||
First Quarter 2022 | First Quarter 2021 | First Quarter 2019 | |||
Adjusted EBITDA | $(108.2) million | $(204.0) million | $140.4 million | ||
Adjusted EBITDA margin | (11.2)% | (44.2)% | 16.4% | ||
Adjusted Pre-tax income (loss) | $(216.9) million | $(312.2) million | $74.0 million | ||
Adjusted Net income (loss) | $(173.5) million | $(245.9) million | $57.5 million | ||
Adjusted Net income (loss) per share, diluted | $(1.60) | $(2.51) | $0.84 | ||
"Since mid-February 2022, we've seen a dramatic improvement in demand trends, with March total revenue per passenger segment up nearly 10 percent compared to March 2019. Our non-ticket production has been very strong driven by enhanced revenue management and merchandising of products that allow our Guests to customize their travel experience. As a result, we achieved record-high non-ticket revenue per passenger segment of $64.53 for the first quarter 2022, an increase of 14.8 percent compared to first quarter 2019, and we anticipate beating that record again in the second quarter 2022," said Ted Christie, Spirit's President and Chief Executive Officer. "In addition, based on our current booking trends, we expect second quarter 2022 ticket revenue per segment to be significantly higher than it was in the second quarter 2019."
"I also want to acknowledge and thank the entire Spirit team for their continued efforts to care for our Guests and each other. Late last year, we cut our planned capacity growth for 2022 in light of various staffing challenges and felt very good about our ability to operate the revised summer schedule. However, the airline industry has been impacted by an increase in Air Traffic Control ("ATC") programs and restrictions in Florida, largely driven by ATC staffing shortages. This has had an outsized impact on our operations given our large concentration in Florida. As a result, in mid-April, we made the decision to decrease some flying in Florida and increase the buffers in our schedule, which drove additional capacity reductions. We expect to resume our planned capacity levels in the fourth quarter this year due to already-planned crew network changes set to deploy this summer and increased pilot hiring that has been happening throughout the year."
The Company believes that providing analysis of financial and operational performance compared to first quarter 2019 is a more relevant measure of performance than comparing to first quarter 2021 due to the severe impacts from the COVID-19 pandemic on the Company's financial results and operational performance for 2021.
First Quarter 2022 ResultsFor the first quarter 2022, Spirit Airlines reported a net loss of $194.7 million, or a net loss of $1.79 per diluted share. Excluding special items, adjusted net loss for the first quarter 2022 was $173.5 million1, or an adjusted net loss of $1.60 per diluted share1.
Adjusted EBITDA for the first quarter 2022 was negative $108.2 million and adjusted EBITDA margin was negative 11.2 percent.
Capacity and Load FactorCapacity, or available seat miles ("ASMs"), in the first quarter 2022 increased 19.2 percent compared to the same period in 2019. Load factor for the first quarter 2022 was 77.2 percent, down 5.5 percentage points compared to the first quarter 2019. Load factors improved sequentially throughout the quarter such that the exit rate for March load factor was in line with the Company's historical averages.
Aircraft utilization in the first quarter 2022 was 10.8 hours, down 11.5 percent compared to the 12.2 hours in the same period of 2019.
Revenue Performance Total operating revenues for the first quarter 2022 were $967.3 million, an increase of 13.0 percent versus first quarter 2019 due to increased flight volume and higher operating yields. Total revenue per ASM ("TRASM") was down 5.3 percent compared to first quarter 2019. However, TRASM for March 2022 was higher than March 2019 and this was accomplished while growing capacity 17.1 percent in March 2022 compared to March 2019.
On a per passenger flight segment basis, for the first quarter 2022 total revenue per passenger flight segment ("segment") increased 3.9 percent compared to the same period in 2019 to $113.72. Compared to first quarter 2019, fare revenue per segment decreased 7.6 percent to $49.19 and non-ticket revenue per segment increased 14.8 percent to $64.532.
Cost PerformanceCompared to the first quarter 2019, total GAAP operating expenses for the first quarter 2022 increased 53.5 percent to $1,178.8 million. Adjusted operating expenses for the first quarter 2022 increased 50.3 percent compared to the first quarter 2019 to $1,151.7 million3. In addition to increased flight volume, these increases were primarily driven by pressure on labor rates and higher fuel prices.
Spirit continues to experience labor cost inflation throughout much of the organization, including for contracted ground service workers (recorded within other operating expense in the Company's condensed consolidated statement of operations). In addition, as a result of the Omicron variant's impact on the Company's staffing levels in early January 2022, the Company offered various incentive pay programs during this period in order to maintain sufficient staffing to minimize flight cancellations, leading to additional wage pressures.
Rising fuel prices were also a primary contributor to increased costs. Fuel price per gallon in the first quarter 2022 was 41.1 percent higher than for the same period in 2019.
"Our strong non-ticket production plus the forward booking curve strength gives us confidence we will see strong yields this summer. However, operational disruptions and limits on utilization are causing delays in our return to profitability. The decision to further limit our capacity this summer does make profitability more challenging in the short run. With constrained capacity levels through the summer, we will be carrying the cost of additional crews and our utilization will be lower than we like, but this does not change the plan to exit the year at close to full utilization and be on our way to a return to a more normalized run rate in 2023. In fact, at these demand levels, even with fuel at more than $100 a barrel, we would have expected to be profitable in the second quarter with around 90 percent of our pre-covid utilization," said Scott Haralson, Spirit's Chief Financial Officer.
FleetSpirit took delivery of three new A320neo aircraft during the first quarter 2022. The Company ended the quarter with 176 aircraft in its fleet.
Liquidity and Capital DeploymentSpirit ended first quarter 2022 with unrestricted cash, cash equivalents, short-term investment securities and liquidity available under the Company's revolving credit facility of $1.6 billion.
Total capital expenditures, including net pre-delivery purchase deposits for the three months ended March 31, 2022 were $53.2 million, primarily related to the purchase of spare parts, including one spare engine.
Tax RateOn a GAAP basis, the Company's effective tax rate for the first quarter 2022 was 20.2 percent. The Company's non-GAAP tax rate for the first quarter 2022 was 20.0 percent.
Forward Looking GuidanceThe second quarter and full year 2022 guidance items provided below are based on the Company's current estimates and are not a guarantee of future performance. There could be significant risks and uncertainties that could cause actual results to differ materially, including the risk factors discussed in the Company's reports on file with the Securities and Exchange Commission. Spirit undertakes no duty to update any forward-looking statements or estimates.
Adjusted operating expenses and adjusted pre-tax margin are non-GAAP financial measures, which are provided on a forward-looking basis. The Company does not provide a reconciliation of non-GAAP forward-looking measures on a forward-looking basis where the Company believes such reconciliation would imply a degree of precision and certainty that could be confusing to investors and is unable to reasonably predict certain items included in/excluded from the GAAP financial measures without unreasonable efforts. This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred and are out of the Company's control or cannot be reasonably predicted. For the same reasons, the Company is unable to address the probable significance of the unavailable information. Non-GAAP forward-looking measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures.
Second Quarter 2022E | |
Adjusted operating expenses ($Millions)(1)(2) | $1,355 to $1,365 |
Adjusted Pre-tax margin (%)(1) | (3)% to (5)% |
Fuel cost per gallon ($)(2) | $3.85 to $3.90 |
Fuel gallons (Millions) | 130.7 |
Interest expense net of capitalized interest ($Millions) | $30 |
Effective tax rate(1) | 21% |
Diluted share count (Millions) | 108.6 |
Full Year 2022E | |
Total capital expenditures ($Millions)(3) | |
Pre-delivery deposits, net of refunds | $(20) |
Aircraft and engine purchases | $30 |
Other capital expenditures | $240 |
1Q2022A | 2Q2022E | 3Q2022E | 4Q2022E | ||||
Available Seat Miles % Change vs. 2019 | 19.2% | ~10.5% | ~14.0% | ~35% | |||
(1) | Excludes special items which may include loss on disposal of assets, special charges and credits, and other items which are not estimable at this time. |
(2) | Includes fuel taxes and into-plane fuel cost. |
(3) | Total Capital Expenditures assumes all new aircraft deliveries are either delivered under direct leases or financed through Sale-leaseback transactions. Includes approximately $100 million of capital expenditures related to the building of Spirit's new facilities in Dania Pointe, FL. |
First Quarter 2022 Highlights
- In February 2022, for the fourth year in a row, Spirit was awarded the FAA's highest award for Technical Training, the Diamond Award of Excellence. This award is only achieved if 100% of technicians receive the FAA's Aircraft Maintenance Technician ("AMT") Certificate of Training
- Launched its partnership with the nation's largest flight school, Jacksonville-based ATP Flight School. This new program will expand the carrier's pipeline of highly skilled, professional pilots. It also provides graduates with the fastest track to a successful career as a Spirit pilot
- Announced the addition of new Pilot and Flight Attendant bases at Miami International Airport (MIA) and Hartsfield-Jackson Atlanta International Airport (ATL)
- Completed its terminal move at LaGuardia Airport (LGA) to the historic Marine Air Terminal
- Hosted the Spirit Open with Team Members, aviation industry professionals and community leaders joining together to help The Spirit Charitable Foundation raise more than $1.5 million for nonprofit organizations
Conference Call/Webcast DetailSpirit will conduct a conference call to discuss these results tomorrow, May 5, 2022, at 10:00 a.m. Eastern US Time. A live audio webcast of the conference call will be available to the public on a listen-only basis at https://ir.spirit.com. An archive of the webcast will be available under "Events & Presentations" for 60 days.
Merger Agreement with FrontierAs previously announced, Spirit Airlines, Inc. entered into a merger agreement with Frontier Group Holdings, Inc. on February 5, 2022. The merger is expected to close in the second half of 2022, subject to satisfaction of customary closing conditions, including completion of the regulatory review process and approval by Spirit stockholders.