Spirit Airlines' Q3 Results Prove Its Turnaround Potential
Like other airlines, Spirit Airlines (NYSE: SAVE) lost a lot of money last quarter as air travel demand remained extremely low due to the COVID-19 pandemic. Spirit also continued to burn cash. Nevertheless, its results were far better than what peers reported. Indeed, the company's third-quarter performance highlighted why Spirit Airlines is likely to return to profitability much sooner than most of its rivals. Let's take a look.
In the second quarter, Spirit Airlines generated $138.5 million of revenue, down 86% year over year. For much of the period, the airline ran a bare-bones schedule, recognizing that there was minimal demand even at low fare levels. The plunge in revenue caused Spirit to post a loss of $1.81 per share under generally accepted accounting principles (GAAP) and a non-GAAP loss of $3.59 per share.
Booking activity improved significantly around Memorial Day, as lower new case counts led many consumers to start buying tickets for summer travel. This allowed Spirit to reduce its average daily cash burn from $9.5 million in April to just $1.5 million in June. Unfortunately, COVID-19 case numbers began to rise rapidly again in late June, causing demand to stagnate in July. As of late July, the company projected that daily cash burn would average $3 million to $4 million in the third quarter: significantly worse than its June cash burn.
Source Fool.com
