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LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
LONG Spirit airlines
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LONG Spirit airlines

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  • 1. Spirit Airlines (SAVE) Presentation by: Witisada Wattananimitgul February 16, 2014
  • 2. About Spirit Airlines  Began air charter operations in 1990  Bill Frank, investor of RyanAir, was an early investor  Ultra low-cost, low-fare airline based in Miramar, FL  More than 200 daily flights to over 50 destinations in US, Caribbean, Latin America  Fare tickets are based on the “unbundled” base fare
  • 3. Thesis - Why Spirit? Consistent non-ticket and passenger growth will help company maintain consistent revenue growth Position: Long SAVE
  • 4.  Their model is simple  Uses one airline type, making it easier to train pilots and mechanics  Fleet of aircraft grew by 21.5% by the end of 2013 and fleet will triple by 2021  Growth opportunities
  • 5. Growth highlights  Passenger volume in 2013 Q2 jumped 19.1% from 2012  Total revenue rose 17.6% to $407.3 million (attributed to add’l 8 new aircraft, 12 new markets and access to 5 new airports)  Earnings grew 29% to 63 cents a share  Analysts estimate earnings will grow 54% this year and another 19% in each of the next two years
  • 6. Airbus Fleet Growth
  • 7. Financial Highlights  Routes  Unionized (3 union-represented employee groups ~54% of employee)  June 2010-5 day strike operations shut down  Aug 1, 2010 – 5 year collective bargaining agreement stable labor costs
  • 8. Financial Highlights Average EV/Revenue EV/EBIT EV/EBITDA EV/FCF 2.45 x 18.56 x 17.07 x 56.12 x 0.78 x 10.81 x 6.44 x 13.01 x 0.93 x 6.08 x 4.75 x 6.36 x 0.86 x 8.44 x 5.60 x 9.69 x
  • 9. Income Statement Operating Revenues: Passenger Non-ticket Total Operating Revenue Historical 12/31/2011 12/31/2010 $ 537,969 243,296 781,265 $ 689,650 381,536 1,071,186 Expected 12/31/2013 12/31/2012 $ 782,792 535,596 1,318,388 $ 986,020 659,848 1,645,868 Operating Expenses: Aircraft fuel 248,206 388,046 471,763 549,204 Salaries, wages and benefits Aircraft rent 156,443 101,345 181,742 116,485 218,919 143,572 257,011 166,828 Landing fees and other rents Distribution 48,118 41,179 52,794 51,349 68,368 56,668 82,011 67,832 Maintenance, materials and repairs 27,035 34,017 49,460 58,520 Depreciation and amortization Other operating 5,620 83,748 7,760 91,172 15,256 127,886 29,871 147,732 77 255 956 568 621 712,392 3,184 926,804 (8,450) 1,144,398 651 1,360,227 Loss on disposal of assets Special charges (credits) Total Operating Expenses Operating Income Margin % 68,873 144,382 9% 173,990 13% 285,641 13% 17% Other (Income) Expense: Interest expense 50,313 24,781 1,350 187 Capitalized interest (1,491) (2,890) (1,350) (187) Interest income (328) (575) (925) (411) Other expense 194 235 331 336 48,688 21,551 (594) (75) Income Before Income Taxes 20,185 122,831 174,584 285,716 Provision for income taxes (52,296) 46,383 66,124 107,416 Net Income 72,481 76,448 108,460 178,300 Total Other (Income) Expense
  • 10. Balance Sheet 12/31/2011 12/31/2012 Assets Current assets: Cash and cash equivalents Accounts receivable, net Deferred income taxes Other current assets Total Current Assets $ 194,399 15,425 20,738 63,217 293,779 $ 159,427 22,740 12,591 95,210 289,968 Long Term Assets: Property and Equipment: Flight equipment Ground and other equipment Less accumulated depreciation Total Property and Equipment Deposits on flight equipment purchase contracts Aircraft maintenance deposits Deferred heavy maintenance and other long-term assets Total Assets Liabilities and Shareholders’ Equity Current Liabilities: Accounts payable Air traffic liability Other current liabilities Total Current Liabilities 15,928 112,280 98,856 227,064 24,166 131,414 121,314 276,894 12,108 33,216 39,935 27,239 279,107 337,349 6 6 1 496,136 1 504,527 (129) (29,308) (1,151) 79,152 Total Shareholders’ Equity 466,706 582,535 Total Liabilities and Shareholders’ Equity 745,813 919,884 Long-term deferred income taxes Deferred credits and other long-term liabilities Total Liabilities 4,182 46,608 2,648 43,580 (27,580) 23,210 (17,825) 28,403 91,450 120,615 96,692 122,379 67,830 125,053 596,884 Shareholders’ Equity: Common stock: Please see note 1 Common stock: Non-Voting common stock: see note 2 Additional paid-in-capital Treasury stock, at cost: 60,040 and 8,215 as of December 31, 2012 and 2011, respectively Retained earnings (deficit) 662,495
  • 11. DCF Model DCF 12/31/2014 FCF 145,886 12/31/2015 187,193 12/31/2016 242,371 319,112 12/31/2018 Discount Rate 431,133 12/31/2017 Future Growth Rate Mid Discount Year 0.5 1.5 2.5 3.5 1 2 3 4 2% FCF Exit Multiple 4.5 Full Discount Year 10% 9.7 x 5 Present Value 139,178 162,543 191,548 229,540 Sum of PV Cash Flows 282,258 1,005,067 Terminal Value Growth 3,658,001.39 Mulitple 2,608,510.48 Growth Method Sensitivity Table Perpetual Growth Enterprise Value Growth 70.79 1.5% 2.0% 2.5% 3.0% 11% 57.52 59.69 62.10 64.79 67.82 10% W A C C 1.0% 63.76 66.54 69.67 73.21 77.26 9% 71.60 75.25 79.43 84.26 89.89 8% 81.70 86.68 92.49 99.36 107.60 7% 95.21 102.31 110.82 121.23 134.24 4,663,069 % Terminal Value 78% Multiple 3,613,578 % Terminal Value 72% Debt Cash 60,455 $ 540,195 Equity Value Growth Exit FCF Multiple 5,142,809 Multiple Multiple Method Sensitivity Table 4,093,318 Shares 72647.167 Price 56.35 9.0 x 10.0 x 11.0 x 12.0 x Growth $ 70.79 11% W A C C 8.0 x 48.22 51.74 55.26 58.78 62.31 Multiple $ 56.35 10% 49.87 53.56 57.24 60.93 64.61 9% 51.61 55.47 59.33 63.18 67.04 8% 53.45 57.49 61.53 65.57 69.60 7% 55.38 59.62 63.85 68.08 72.31
  • 12. FCF Operating Revenues: 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Passenger $ 537,969 $ 689,650 $ 782,792 $ 986,020 $ $ $ $ $ 1,216,411 1,472,212 1,750,847 2,049,079 2,363,209 Non-ticket 243,296 381,536 535,596 659,848 889,464 781,265 1,071,186 1,318,388 1,645,868 2,105,874 2,702,145 3,498,654 4,606,409 6,223,449 Operating Expense 712,392 926,804 1,144,398 1,360,227 1,740,399 2,233,186 2,891,460 3,806,964 5,143,366 Operating Income (EBIT) 68,873 144,382 173,990 285,641 365,476 468,959 607,193 799,445 1,080,083 Tax 26,172 54,865 66,116 108,543.71 138,881 178,204 230,733 303,789 410,432 Capital Expenditure 30,799 67,367 36,397 77,808.00 58,137 74,599 96,588 127,170 171,812 Change in Net Working Capital 37,887 (20,856) 33,507 41,829.95 53,521 68,675 88,919 117,072 158,170 Depreciation and amortization 5,620 7,760 15,256 29,870.67 24,369 31,268 40,485 53,304 72,016 Stock Based Comp 569 530 4,327 5,143.05 8,444 10,933 14,394 19,447 Free Cash Flow (19,795.74) 51,296 57,553 92,473 145,886 187,193 242,371 319,112 431,133 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 Total Operating Revenue Assumptions Revenue Growth Passenger Non-Ticket Operating Expenses as % of Revenue Capital Expenditure % Revenue D&A as % of Revenue Change in New Working Capital % Revenue Stock Based Comp as % of Operating Expense 6,580 1,229,933 1,747,807 2,557,329 3,860,240 91% 4% 1% 5% 28% 57% 87% 6% 1% -2% 14% 40% 87% 3% 1% 3% 26% 23% 83% 3% 1% 3% 23% 21% 83% 3% 1% 3% 21% 19% 83% 3% 1% 3% 19% 17% 83% 3% 1% 3% 17% 15% 83% 3% 1% 3% 15% 14% 83% 3% 1% 3% 0.1% 0.1% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4%
  • 13. Comparison to Competitors Airline Operating Cost Per Available Seat Mile (CASM) in Cents for 2013 Spirit 10.0 Delta Air Lines 13.97 United Air Lines 14.16 US Airways 12.94 Virgin America 10.70 JetBlue 11.47 Southwest 13.03
  • 14. Comparative Analysis Operating Stats Spirit JetBlue Southwest 2012 2011 2012 2011 2012 2011 Revenue passenger miles (RPMs) (millions) 9,664 8,007 33,563 30,698 102,875 97,583 Available seat miles (ASM) (millions) 11,344 9,352 40,075 37,232 128,137 120,579 Load factor (%) 85.2 85.6 83.8 82.4 80.3 80.9
  • 15. Potential Pitfalls  What happens when price of crude oil skyrockets?  Will it be able to maintain lower fares than competitors in the long run?  Is the company overvalued?
  • 16. Action: Long SAVE
  • 17. Questions?

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