Spirit Airlines has been doing well of late with steadily rising revenues. However, it looks as though this could be about to slow slightly. According to Skift, the airline on Wednesday reported an increase in cost per available seat mile due to rising operational costs.
This past year, a number of airlines have been suffering from rising costs across the industry. While these have mostly been driven by the price of fuel, the figures quoted by Spirit do not include fuel costs.
Spirit Airlines is a low-cost carrier known for its flamboyant all-yellow A320 livery. The airline was initially founded as a charter airline back in 1983 but now serves 75 destinations. While the airline is headquartered in Florida, it has operations all over the United States, and a number of international routes.
Spirit Airlines follows the typical low-cost carrier model of operating a single aircraft type. For Spirit, this is the A320 family, similar to European low-cost carrier easyJet. In fact, the airline was the launch customer of the Airbus A320neo. To date, the airline has received twelve A320neos, with a further 43 on order.
Cost per available seat mile
Cost per available seat mile (CASM) is used to measure the efficiency of airlines. Essentially, the lower the CASM, the easier it is for the airline to turn a profit. The CASM is calculated by dividing the airline’s direct operating costs by their available seat miles. Essentially, a lot of maths goes into accurately calculating the figure.
Spirit’s operating expenses rose by 3.4% year on year for Q1 of 2019. The airline has pinned this increase on a number of reasons. In fact, these include pilot rate increases, airport rent increases, landing fee increases, and a larger fleet.
Good financial position
Spirit’s fuel expenditure increased by 12.2 per cent over the last year, however, the airline used 15.6 per cent more fuel than the previous year. Despite this increasing fuel expenditure, the airline is in good financial standing. Spirit Airlines currently has a liquidity of $1.2 billion. This means that the airline has $1.2 billion of cash that is unrestricted, cash equivalents, and short-term investments.
While a number of airlines are having problems, largely due to liquidity. As this is a problem which Spirit does not currently have, it looks as though the yellow livery is set to continue gracing the skies for years to come.
Have you flown on Spirit? What do you think of the airline? Let us know in the comments.