Spirit Aviation's woes opens runway for competitors

[Spirit Airlines Airbus A320neo airplane at Fort Lauderdale Airport in the United States]
Boarding1Now/iStock Editorial via Getty Images

Shares of low cost carriers raced higher on Tuesday compliments of more bad news [https://seekingalpha.com/filing/10290720] for Spirit Aviation Holdings (NYSE:FLYY [https://seekingalpha.com/symbol/FLYY]), the parent company of struggling Spirit Airlines.

Shares of Frontier Group Holdings (ULCC [https://seekingalpha.com/symbol/ULCC]) jumped as much as 30% following Spirit Airlines’ (SAVE) announcement that ongoing “adverse market conditions” continue to pressure its operations — a development seen as potentially benefiting competitors like Frontier (ULCC [https://seekingalpha.com/symbol/ULCC]), which targets similar income-level travelers and domestic routes.

Spirit (NYSE:FLYY [https://seekingalpha.com/symbol/FLYY]) warned that without a cash infusion, it won’t be able to comply with its debt obligations, and is unlikely to survive for another year.

Spirit Airlines filed for bankruptcy last November and exited Chapter 11 protection in March. But despite a generous debt restructuring, the carrier continues to struggle with adverse market conditions, weak demand for domestic travel, and increased capacity in the segment from competitors like Frontier (ULCC [https://seekingalpha.com/symbol/ULCC]), JetBlue (JBLU [https://seekingalpha.com/symbol/JBLU]), and even legacy carriers like United (UAL [https://seekingalpha.com/symbol/UAL]), Delta (DAL [https://seekingalpha.com/symbol/DAL]), and American (AAL [https://seekingalpha.com/symbol/AAL]), all of which are muscling in on the low-cost demographic once dominated by Spirit and Frontier (ULCC [https://seekingalpha.com/symbol/ULCC]).

With Spirit (NYSE:FLYY [https://seekingalpha.com/symbol/FLYY]) out of the picture, profitable routes open up for its competitors including flights to Florida and the Caribbean ahead of the lucrative fall/winter travel season.

Tuesday’s gains in the airline sector were also amplified from a 4.0% rise in airline fares reported in Tuesday’s July Consumer Price Index — the first increase after five straight monthly declines, as carriers reduced capacity to safeguard margins.

At the close, Spirit Aviation Holdings (FLYY [https://seekingalpha.com/symbol/FLYY]) limped into the close 40% lower, while Frontier (ULCC [https://seekingalpha.com/symbol/ULCC]) closed almost 30% higher, JetBlue (JBLU [https://seekingalpha.com/symbol/JBLU]) up 12%, Allegiant (ALGT [https://seekingalpha.com/symbol/ALGT]) up 16%, Sun Country (SNCY [https://seekingalpha.com/symbol/SNCY]) higher by 11.5%, Alaska Air Group (ALK [https://seekingalpha.com/symbol/ALK]) up 10%, United Airlines (UAL [https://seekingalpha.com/symbol/UAL]) up 10%, American Airlines (AAL [https://seekingalpha.com/symbol/AAL]) up 12%, Delta Air Lines (DAL [https://seekingalpha.com/symbol/DAL]) up 9% and Southwest Airlines (LUV [https://seekingalpha.com/symbol/LUV]) up 5.7%.

MORE ON SPIRIT AVIATION HOLDINGS, INC.

* Spirit Aviation: New Equity, Same Broken Model [https://seekingalpha.com/article/4806253-spirit-aviation-new-equity-same-broken-model]
* Spirit's 'Fresh Start': Debt, Doubt, And A Dash Of Hope [https://seekingalpha.com/article/4800934-spirits-fresh-start-debt-doubt-and-a-dash-of-hope]
* Closed runway at Newark Liberty International Airport to open ahead of schedule [https://seekingalpha.com/news/4454012-closed-runway-at-newark-liberty-international-airport-to-open-ahead-of-schedule]
* Historical earnings data for Spirit Aviation Holdings, Inc. [https://seekingalpha.com/symbol/FLYY/earnings]
* Financial information for Spirit Aviation Holdings, Inc. [https://seekingalpha.com/symbol/FLYY/income-statement]