On December 9, 2014, Spirit
Airlines (SAVE) fell 12.67% to $73.77. There are a couple of reasons for why
this occurred. First, today Spirit Airlines reported their November Traffic
report. Although they reported gains in revenue passenger miles (15.7%) and
total departures (17.3%), they reported a decrease in load factor (1.6%) which
indicates a decrease in Spirit’s ability to fill seats. Also, according to the
report, Spirit Airlines has noticed a compression in their fare structure for
close-in bookings, especially during off-peak hours. This is likely happening
because lower fuel costs is driving fare cost down. As a result of this and
other factors within the company, Spirit Airlines expects to generate lower
profits in the fourth quarter. Furthermore, they adjusted their expected
operating margin to 18-19%. This resulted in Raymond James Financial, Inc.
downgrading Spirit Airlines from an “Outperform” to a “Market Perform”
Although, Spirit Airlines may not perform as well as the
company thought they would, there is still evidence indicating that there will
be continued growth going into 2015 as Spirit Airlines takes advantage of low
fuel costs. Furthermore, company guidance still estimates that the operating
margin for first quarter 2015 will be 20%. Overall, with this news, it seems
that the plunge in Spirit Airlines’ stock price was an overreaction as a result
of some negative news and with what is going on globally. On December 9th,
other airlines fell in price as well such as American Airlines (-4.94%), Delta
Airlines (-2.13%), and Southwest Airlines (-3.19%). In short, although the
disappointing November Traffic report, Spirit Airlines will continue to see
growth going into 2015
