United Continental Torpedoed Spirit Airlines' Unit Revenue Outlook: Should Investors Worry?

United Continental Torpedoed Spirit Airlines' Unit Revenue Outlook: Should Investors Worry?

Despite the damage from a management-pilot dispute that spiraled out of control in May, Spirit Airlines (NASDAQ: SAVE) seemed to be in fairly good shape a month ago. After all, unit revenue had returned to growth, following more than two years of declines.

However, beginning in late June, industry fare competition became much more cutthroat. This change was instigated primarily by United Continental (NYSE: UAL), which is becoming very aggressive on pricing under its new leadership team. United's pricing actions have severely undermined Spirit's unit revenue outlook for the second half of 2017.

Last quarter, Spirit Airlines grew its revenue 20.1% year over year to $701.7 million, driven by a combination of double-digit capacity growth and a 5.7% increase in revenue per available seat mile (RASM). The timing of Easter certainly played a role in this strong result, but it wasn't the only reason why RASM returned to growth.

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Source: Fool.com