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Basic Math Is on Spirit Airlines' Side

10 Nov 2017 15:05:52

fool.com

Five cents may not be a lot of money, but when multiplied by the billions of available seat miles major airlines count as capacity in any given quarter, it starts to add up to some pretty significant dollars.


A differential in unit costs is one of the key advantages ultra-low-cost carrier (ULCC) Spirit Airlines (NASDAQ:SAVE) holds over competitor United Airlines (NYSE:UAL), the legacy airline that has challenged Spirit to a wage battle in 2017. In the third quarter of this year, Spirit reported costs per available seat mile, or CASM, of 7.59 cents, against United's third-quarter CASM of 12.54 cents.


Still, the encroachment and its initial fallout has many investors worried. Spirit reported that total revenue per available seat mile, or TRASM, fell 6.3% in the third quarter due to the competitive pricing pressure of United and other carriers like American Airlines, which are getting drawn into the fare battle.


Read full story: fool.com

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