The budget airlines Spirit and Allegiant are betting on sunnier prospects

The budget airlines Spirit and Allegiant are betting on sunnier prospects
The budget airlines Spirit and Allegiant are betting on sunnier prospects
Faced with mounting losses to the aviation industry, despite the recent surge in coronavirus cases, low-cost airline executives are more optimistic and are promoting their leisure-focused networks and fares that appeal to the most price-sensitive consumers.

Spirit, Allegiant, and Southwest, all of which have a common focus on the US market, are the only US carriers this month.

Spirit’s shares rose 8% on Thursday afternoon after the company beat sales estimates, posting a smaller-than-expected loss and less than expected cash burn for the quarter.

Spirit’s revenue of $ 401.9 million for the third quarter was down nearly 60% year over year. The Miramar, Florida-based airline expects fourth quarter revenue to be between 43% and 45% year-over-year when revenue was nearly $ 970 million.

“If we see increased travel restrictions or other disruptions, it could of course change that outlook,” said Matt Klein, Spirit’s chief commercial officer, in an earnings call on Thursday. “We don’t see anything in our bookings to suggest this will happen, but we recognize that the recovery can still be a bit bumpy and there will be some noise as demand recovers to pre-COVID levels. ”

Stocks of Allegiant Travel Company, the parent company of Allegiant Air, rose more than 10% in afternoon trading after the company gave a sunny outlook on a milestone that has eluded most of the industry.

“We’re flirting with cash flow breaking even,” said Gregory Anderson, CFO of Allegiant, on a Wednesday afternoon earnings call, citing bookings in September and October of more than $ 3 million per day. “While the environment remains fluid and bookings are sure to dwindle, our data suggests that these average booking levels will be sustainable in the future.” Allegiants Cash Burn averaged $ 1.3 million per day in the third quarter.

Allegiant’s “Point-to-point focus on domestic leisure should allow them to recover faster than others in the market,” wrote Helane Becker, an analyst for Cowen & Co. airline, raising her price target for Allegiant from $ 130 per share to $ 140. The shares rose to $ 138.50 on Thursday.

While the economy has recovered from a record decline at the start of the coronavirus pandemic, airlines are still swaying. US airlines combined lost more than $ 11 billion in the third quarter, usually during the peak summer travel season.

Discount airlines are not as dependent on international and business travel as large network operators. These two segments were hardest hit by the pandemic and are expected to recover last. In response, US airlines large and small have added services in areas aimed at vacationers in hopes of generating much-needed revenue.

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