At least Spirit Airlines
The dream hasn’t exactly panned out. Spirit debuted at $12 a share yesterday, well below the $14 to $16 a share it was seeking, and promptly fell to $11.55 and is still falling today.
Between record fuel prices, contentious labor contracts, and bizarre weather that’s already forced AMR Corp.’s
But there’s also more than industry woes at work here. Spirit, which typically flies between Florida, the Caribbean, and Latin America, is an ultra-discount carrier that leaves itself little room for error. Fares average $82 per round trip, Dow Jones reports.
That thin line tends to take a toll on Spirit’s financials. From 2009 to 2010, Operating margin deteriorated and the carrier burned through $23.3 million in cash flow. Only once, in 2009, has Spirit thrown off any amount of free cash flow. Cash from operations has declined in each of the past three fiscal years.
So while I don’t relish the thought of kicking a new stock to the curb so quickly, I can’t find a single reason to own shares of Spirit Airlines. I’d rather short it in my CAPS portfolio.
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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn’t own shares in any of the stocks mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader.
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