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Spirit Post Pre-Tax Loss of $128.5 Million, But Says Future is Very Bright

Spirit Post Pre-Tax Loss of $128.5 Million, But Says Future is Very Bright
Joe Cortez

Spirit Airlines is still optimistic about their future once the COVID-19 pandemic comes to an end, despite posting their second consecutive quarterly loss. The airline reported a 2020 third quarter pre-tax loss of $128.5 million, but estimates their capacity will only be down 25 percent for the final three months of the year.

Spirit Airlines leadership says their future is “very bright,” even though they posted their second consecutive quarterly loss in 2020. In their third quarter report, the airline reported a pre-tax loss of $128.5 million for the period ending Sept. 30, 2020, for a diluted loss per share of $1.07.

Spirit Predicts Becoming the “First to Reach Sustained Profitability”

The COVID-19 pandemic is clearly hurting the entire aviation industry, but Spirit says that as a whole, they may be the best positioned to get back to profitability. Because of their unbundled fare structure and on-time arrival metrics, the airline says their overall profile gives them a competitive advantage over their competitors.

“While the pandemic continues to affect demand for air travel, we do not believe it changes our competitive position,” Ted Christie, president and CEO of Spirit, said in a press release. “Our excellent operational performance, strong Guest satisfaction metrics, and industry-leading cost structure, position us well to be among the first to reach sustained profitability.”

Illustrating their argument is their total revenue per passenger flight segment. In the third quarter of 2020, the total revenue per segment only dropped by 21 percent compared to the same time period in 2019, collecting $86.94 per flyer.

Inside that number, the airline earned $35.57 in revenue per segment on fares, while collecting $51.37 in revenue per segment on non-ticket expenses. This metric suggests that even on an unbundled fare, flyers are okay paying more to get the amenities they want during the flying experience.

Looking forward to the 2020 holiday season, the airline says they only anticipate a 25 percent drop in capacity compared to 2019. While October will be down by just over one-third, the remaining holiday months will see Spirit add more capacity to cater to the “visiting friends and relatives” crowd. This suggests load factor could improve from the reported 68.1 percent in the third quarter of 2020.

At the end of the third quarter, Spirit says they have $2.1 billion in liquidity available. Their average daily cash burn was $2.1 million, which was lower than their expected burn of $3 million per day.

Earnings Come as Airline Relaunches Free Spirit Loyalty Program  

The optimism from the earnings comes as Spirit announced a relaunch of their loyalty program, Free Spirit. The new program will offer frequent flyers two levels of elite status, each with their own benefits, while reintroducing the $9 Fare Club as the Spirit Saver$ club. While the new program will officially relaunch on Jan. 21, 2021, new credit card benefits are expected before the end of December 2020.

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