Hello,
What is Save?
Spirit Airlines, Inc. is an American ultra-low-cost carrier headquartered in Miramar, Florida in the Miami metropolitan area. It is the seventh-largest commercial airline in the United States. Spirit operates scheduled flights throughout the United States the Caribbean and Latin America.
Why Spirit Airlines could stage a comeback
Spirit Airlines stock looks very attractive in a "steady recovery" scenario. Las Vegas and Orlando are key markets for the carrier, so as casinos, resorts, and theme parks start to reopen, demand for its flights could increase dramatically. Spirit Airlines could be one of the first airlines to benefit from a demand recovery.
Furthermore, unlike most major U.S. airlines, Spirit doesn't rely on high-fare business travelers to pad its profits. Business travel could remain weak even after a vaccine is deployed (due to growing comfort with videoconferencing tools, the recessionary economic environment, and business failures during the pandemic), but that wouldn't hurt Spirit Airlines. And while some people will have to cut back on leisure travel due to job loss, the budget carrier could more than offset that headwind with market-share gains, as budget-conscious travelers seek out its low fares.
Indeed, due to their dependence on high-fare business travel, American Airlines, Delta Air Lines, and United Airlines must be cautious about restoring capacity as demand recovers. Large swaths of their route networks can't operate profitably based on leisure demand alone.
With some of the largest airlines in the country planning to err on the side of too little capacity over the next year or two, Spirit may be able to return to 2019 capacity levels long before demand recovers fully. That's crucial, because unlike the legacy carriers, Spirit has no good options for shrinking its fleet in the near term.
This isn't a done deal
While air travel is starting to recover and there are hopeful signs on the vaccine-development front, investors shouldn't expect smooth sailing for Spirit Airlines stock. Many Americans are itching to get away from home, but many others have no interest in getting on a plane until they've been vaccinated.
As a result, while getting traffic up to perhaps 30% of 2019 levels may be achievable over the next couple of months, the recovery could slow thereafter. Despite its industry-leading cost structure, Spirit Airlines is unlikely to break even with that level of demand.
Furthermore, delays and setbacks are par for the course in vaccine development. As clinical trials progress over the next several months, some vaccine candidates will likely fail. That could shake investors' confidence, particularly with respect to Spirit Airlines stock and other travel-sensitive shares.
Still, Spirit Airlines has taken necessary (albeit painful) steps to shore up its balance sheet over the past month, including an equity offering and convertible bond issuance. Including federal loans that Spirit can tap if necessary, the airline has ample liquidity to survive even a prolonged downturn. Meanwhile, COVID-19 isn't likely to hurt the airline's long-term growth prospects. As a result, there could be more gains ahead for Spirit Airlines shareholders.
So the question remains, will SAVE Soar as indicated on this chart, or are we watching a dead cat bounce? I will leave this for you to decide!
Good Luck
Cheers!!
What is Save?
Spirit Airlines, Inc. is an American ultra-low-cost carrier headquartered in Miramar, Florida in the Miami metropolitan area. It is the seventh-largest commercial airline in the United States. Spirit operates scheduled flights throughout the United States the Caribbean and Latin America.
Why Spirit Airlines could stage a comeback
Spirit Airlines stock looks very attractive in a "steady recovery" scenario. Las Vegas and Orlando are key markets for the carrier, so as casinos, resorts, and theme parks start to reopen, demand for its flights could increase dramatically. Spirit Airlines could be one of the first airlines to benefit from a demand recovery.
Furthermore, unlike most major U.S. airlines, Spirit doesn't rely on high-fare business travelers to pad its profits. Business travel could remain weak even after a vaccine is deployed (due to growing comfort with videoconferencing tools, the recessionary economic environment, and business failures during the pandemic), but that wouldn't hurt Spirit Airlines. And while some people will have to cut back on leisure travel due to job loss, the budget carrier could more than offset that headwind with market-share gains, as budget-conscious travelers seek out its low fares.
Indeed, due to their dependence on high-fare business travel, American Airlines, Delta Air Lines, and United Airlines must be cautious about restoring capacity as demand recovers. Large swaths of their route networks can't operate profitably based on leisure demand alone.
With some of the largest airlines in the country planning to err on the side of too little capacity over the next year or two, Spirit may be able to return to 2019 capacity levels long before demand recovers fully. That's crucial, because unlike the legacy carriers, Spirit has no good options for shrinking its fleet in the near term.
This isn't a done deal
While air travel is starting to recover and there are hopeful signs on the vaccine-development front, investors shouldn't expect smooth sailing for Spirit Airlines stock. Many Americans are itching to get away from home, but many others have no interest in getting on a plane until they've been vaccinated.
As a result, while getting traffic up to perhaps 30% of 2019 levels may be achievable over the next couple of months, the recovery could slow thereafter. Despite its industry-leading cost structure, Spirit Airlines is unlikely to break even with that level of demand.
Furthermore, delays and setbacks are par for the course in vaccine development. As clinical trials progress over the next several months, some vaccine candidates will likely fail. That could shake investors' confidence, particularly with respect to Spirit Airlines stock and other travel-sensitive shares.
Still, Spirit Airlines has taken necessary (albeit painful) steps to shore up its balance sheet over the past month, including an equity offering and convertible bond issuance. Including federal loans that Spirit can tap if necessary, the airline has ample liquidity to survive even a prolonged downturn. Meanwhile, COVID-19 isn't likely to hurt the airline's long-term growth prospects. As a result, there could be more gains ahead for Spirit Airlines shareholders.
So the question remains, will SAVE Soar as indicated on this chart, or are we watching a dead cat bounce? I will leave this for you to decide!
Good Luck
Cheers!!
