Holy smokes -- Spirit Air (SAVE) guides down!
The airlines have been a battleground like none other this year. For several years now, with the great consolidation, they seemed like the best stories ever told.
Then the price of oil collapsed and they were the greatest stories ever told. After last night, they feel like the greatest stories ever to fold. That's because last night's Spirit preannouncement, which started as if it were just a bad weather report over Texas, devolved into something horrifying -- "competitor pricing actions" in the peak summer periods have softened their own pricing for the month of June.
Many people thought that June was the month were rationality could return to pricing but that's clearly not the case, and this is all BEFORE we heard about additions to the various fleets of airlines.
Now, someone might argue that this shortfall was "in the stock," given how much it has fallen already -- 16% for the year. Others might think things could have gotten better in July because of the decline in oil costs.
I say, hold it. What matters is expectations leading up into this news, and Spirit CEO Ben Baldanza had been pretty bullish of late, in part because of the bargain model that his company maintains and in part because he still said his planes were packed with people.
They may be packed, but something's caused them to not pay as much, and it isn't the storms cited at the beginning of the statement the company put out last night.
I think therefore it's not going to be pretty, and I was surprised it was only down a few bucks in the afterhours. I thought three to four points seems more reasonable, unless there is a huge airline rally off of the Iran deal for oil.
We are seeing pretty much a wholesale decline in a group that had been a darling, and I don't know if things can turn when Delta (DAL) reports tomorrow, given this severe shortfall. It seemed to be stabilizing after some chatter about a scale-back of new routes that has been the talk of July.
Now though, I find it jarring, just jarring, given management's level of confidence just a very short time ago.
