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Spirit Airlines Grapples With Pilot Dispute: Time to Dump?
Spirit Airlines, Inc. (SAVE - Free Report) has lost 4.51% in a year, significantly underperforming its industry’s 32.85% gain in the period.
This downside was primarily due to the airline’s dispute with its pilots. Consequently, the carrier had to cancel multiple flights resulting in customer dissatisfaction. As a result of the disruption in services, the company had to incur heavy costs to the tune of $45 million, pertaining to passenger re-accommodation and other factors.
As a matter of concern, this pilot dispute even hurt Spirit Airlines’ second-quarter results. The carrier reported lower-than-expected revenues in the quarter. Also, cost per available seat miles, excluding fuel (CASM) climbed 10% in the second quarter. Adding further to its woes, the tiff is anticipated to be a drag on the company’s third-quarter results too. Plus, the decline in load factor (percentage of seats filled by customers) in July due to capacity overexpansion is a cause for worry.
The company has issued a disappointing guidance with respect to total revenue per available seat miles (TRASM: a key measure of unit revenue) for the third quarter due to pricing and competitive pressures. The metric is expected to decline in the band of 2-4% in the third quarter of 2017 on a year-over-year basis.
Considering such a gloomy scenario, we believe investors would do well to dump this Zacks Rank #5 (Strong Sell) stock from their portfolios at the moment.
Zacks Rank & Key Picks
Some better-ranked stocks in the airline space are Air France-KLM SA (AFLYY - Free Report) , Delta Air Lines, Inc. (DAL - Free Report) and Deutsche Lufthansa AG (DLAKY - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Air France-KLM, Delta Air Lines and Deutsche Lufthansa have gained over 51%, 5% and 32%, respectively, in the last three months.
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