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What: Shares of discount airline Spirit Airlines Incorporated (NASDAQ:SAVE) dropped as much as 11% after the company reported earnings.
So what: First-quarter revenue was up 12.6% to $493.4 million and net income jumped 83% to $69.0 million, or $0.94 per share. Results were just short of analyst estimates for $494.6 million in revenue and $0.96 per share in earnings, but it's a guidance warning that had the stock selling off today.
Revenue per seat mile declined 9.9% to 10.43 cents in the quarter, and management said they expect a 14%-15% decline in the second quarter. Customers aren't spending nearly as much on non-ticket items as they adjust to Spirit's pricing schemes.
Now what: Spirit Airlines is trying to expand and that is helping grow revenue, but the cost of that expansion is lower revenue per flight. It's the ying and yang that airlines constantly grapple with, because as the supply of seats increases the cost for each seat goes down for customers.
I don't think the trends facing Spirit are positive right now, and I think customers are beginning to move away from budget airlines that nickel-and-dime you. Therefore, this isn't a stock I'll be buying today.
Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Spirit Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.