Spirit Airlines' Nemesis Crashes and Burns: Good News or Bad News?
Over the past year, legacy carrier United Continental (NYSE: UAL) has become a giant thorn in Spirit Airlines' (NASDAQ: SAVE) side. Under the leadership of its new president, Scott Kirby, United has set out to regain share in its hub markets. Among other things, this strategy has involved an aggressive campaign to match the fares of ultra-low-cost carriers like Spirit Airlines and Frontier Airlines.
So far, this strategy has been a giant failure. United Continental reported a steep unit revenue decline for the third quarter, and management expects unit revenue to fall again in Q4. As a result, United's profitability is plunging. Depending on how United responds, this could either be very good news for Spirit Airlines -- or it could point to even more misery ahead.
During its first five years as a public company, Spirit Airlines developed a reputation for posting consistently strong profit margins. Even after Spirit's profitability started to go into reverse last year, the company remained well above its target of mid-teens operating margins.
Source: Fool.com
United Continental Holdings Stock
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