Image source: Benjamin Beyers/The Motley Fool. 

Shares of Spirit Airlines (NASDAQ:SAVE) closed down nearly 8.5% on Tuesday after reporting decelerating revenue growth in the third quarter.

The results stand in sharp contrast to discount peer Southwest Airlines (NYSE:LUV), which improved revenue growth sequentially and year over year, S&P Capital IQ reports. Mixing in cost controls pushed adjusted operating income up 61% over last year's Q3, nearly double Spirit's performance: 

MetricQ3 2015 ActualsQ3 2014 ActualsYOY Growth
Revenue  $574.84 million  $519.77 million  10.6%
Non-GAAP income from operations  $97.3 million  $73.94 million  31.6%
Adjusted EPS  $1.35  $1.01  33.7%
Cash from operations (trailing 9 months)  $366.28 million $206.29 million   77.6%

Sources: S&P Capital IQ and Spirit Airlines press release. 

Commenting on the results, CEO Ben Baldanza said in a press release: "I thank our team members for their contributions to our record third-quarter results, driven by both lower ex-fuel unit costs and lower fuel prices. We remain focused on building long-term shareholder value by leveraging our ultra-low cost competitive advantage to continue to grow successfully, even in the midst of a volatile pricing environment."

What went right: Spirit's expansion continues to go well, with total capacity up 34.1% in the quarter. Passenger revenue miles jumped 30.4% over the same period, as the carrier opened five new routes, including three in Atlanta. Spirit also took delivery of three roomy new A321 aircraft, bringing its fleet to 76 total aircraft. More seats means a wider base for Spirit to spread costs, which, in theory, should lead to higher margins. We're already seeing some gains in this area; Q3 gross margin improved to 44.2%, up from 38% in the second quarter and 31.4% in last year's third quarter, S&P Capital IQ reports. 

What went wrong: Year-over-year revenue growth declined for the sixth consecutive quarter. Revenue per available seat mile fell 17.5% as load factor -- a measure of the available seats sold -- declined 2.4 percentage points. Fortunately, Spirit managed expenses well enough that the cost per available seat mile fell 25.8%. Luck also played a factor, as per-gallon fuel prices fell by 45.4% during the third quarter. By contrast, Southwest has spent huge sums hedging against fuel price increases and suffered losses as a result.

What's next: Spirit declined to offer guidance in its press release. Nevertheless, analysts tracked by S&P Capital IQ had the company generating $506.04 million in revenue and $0.74 a share in adjusted earnings. That compares with $474.49 million and $0.80 a share in last year's Q4. Longer term, analysts have Spirit Airlines growing earnings by an average of 17.08% annually during the next three to five years. 

In the meantime, investors should focus on load factor and RASM increases outpacing capacity gains. We may not see that soon; Spirit is too busy challenging Southwest and its other discount peers in high-traffic markets such as Atlanta, and every new route increases capacity. Yet there needs to come a point when Spirit is filling all the new aircraft it's pressing into service. Revenue growth could reaccelerate when we finally hit that mark.

Tim Beyers hasn't seen many friendly skies lately. He's also a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission but didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool.

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