We evaluate our financial performance utilizing various accounting principles generally accepted in
the United States of America("GAAP") and non-GAAP financial measures, including Adjusted CASM and Adjusted CASM ex-fuel. These non-GAAP financial measures are provided as supplemental information to the financial information presented in this quarterly report that is calculated and presented in accordance with GAAP and these non-GAAP financial measures are presented because management believes that they supplement or enhance management's, analysts' and investors' overall understanding of our underlying financial performance and trends and facilitate comparisons among current, past and future periods. Because the non-GAAP financial measures are not calculated in accordance with GAAP, they should not be considered superior to and are not intended to be considered in isolation or as a substitute for the related GAAP financial measures presented in this quarterly report and may not be the same as or comparable to similarly titled measures presented by other companies due to possible differences in the method of calculation and in the items being adjusted. We encourage investors to review our financial statements and other filings with the Securities and Exchange Commissionin their entirety and not to rely on any single financial measure. The information below provides an explanation of certain adjustments reflected in the non-GAAP financial measures and shows a reconciliation of non-GAAP financial measures reported in this quarterly report to the most directly comparable GAAP financial measures. Within the financial tables presented, certain columns and rows may not add due to the use of rounded numbers. Per unit amounts presented are calculated from the underlying amounts. Operating expenses per available seat mile ("CASM") is a common metric used in the airline industry to measure an airline's cost structure and efficiency. We exclude loss on disposal of assets, special charges (credits) and accelerated depreciation to determine Adjusted CASM. We believe that also excluding aircraft fuel and related taxes ("Adjusted CASM ex-fuel") from certain measures is useful to investors because it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence and increases comparability with other airlines that also provide a similar metric. In prior periods, we excluded supplemental rent adjustments related to the modification of aircraft or engine leases from Adjusted CASM and Adjusted CASM ex-fuel. However, we no longer exclude supplemental rent adjustments from our non-GAAP measures. Therefore, 2021 non-GAAP measures have been revised to reflect this change and no longer exclude previously reported supplemental rent adjustments.
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are subject to the "safe harbor" created by those sections. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. All statements other than statements of historical factors are "forward-looking statements" for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "project," "predict," "potential," and similar expressions intended to identify forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" in this report and in Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2021and subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Spirit Airlines, headquartered in Miramar, Florida, offers affordable travel to value-conscious customers. Our all-Airbus fleet is one of the youngest and most fuel efficient in the United States. We serve destinations throughout the United States, Latin Americaand the Caribbean, and are dedicated to giving back and improving those communities. Our stock trades under the symbol "SAVE" on the New York Stock Exchange("NYSE"). We focus on value-conscious travelers who pay for their own travel, and our business model is designed to deliver what our Guests want: low fares and a great experience. We compete based on total price. We allow our Guests to see all available options and their respective prices prior to purchasing a ticket, and this full transparency illustrates that our total price, including 21 -------------------------------------------------------------------------------- options selected, is lower on average than other airlines. By offering Guests unbundled base fares, we give them the power to save by paying only for the À La Smarte® options they choose, such as checked and carry-on bags and advance seat assignments. We record revenue related to these options as non-fare passenger revenue, which is recorded within passenger revenues in our statement of operations. We use low fares to address underserved markets, which helps us to increase passenger volume, load factors and non-ticket revenue. We also have high-density seating configurations on our fuel-efficient, all-Airbus fleet and a simplified onboard product designed to lower costs. High passenger volumes and load factors help us sell more ancillary products and services, which in turn allows us to reduce our fares even further. We are committed to delivering the best value in the sky while providing an exceptional Guest experience. Our optimized mobile-friendly website makes booking easier. Our updated mobile app allows Guests to search for the lowest fares, book and check in while on the go, and our airport kiosks and self-bag tagging help our Guests move through the airport more quickly.
Comparative operating statistics:
The following tables present our operating statistics for the three-month periods ended
Three Months Ended March 31, 2022 2021 Percent Change Operating Statistics (unaudited) (A): Average aircraft 174.9 157.3 11.2 % Aircraft at end of period 176 159 10.7 % Average daily aircraft utilization (hours) 10.8 7.6 42.1 % Average stage length (miles) 1,048 1,040 0.8 % Departures 60,958 40,002 52.4 % Passenger flight segments (PFSs) (thousands) 8,506 5,474 55.4 % Revenue passenger miles (RPMs) (thousands) 9,050,034 5,747,555 57.5 % Available seat miles (ASMs) (thousands) 11,718,896 7,976,158 46.9 % Load factor (%) 77.2 % 72.1 % 5.1 pts Fare revenue per passenger flight segment ($) 49.19 31.84 54.5 % Non-ticket revenue per passenger flight segment ($) 64.53 52.43 23.1 % Total revenue per passenger flight segment ($) 113.72 84.27 34.9 % Average yield (cents) 10.69 8.03 33.1 % TRASM (cents) 8.25 5.78 42.7 % CASM (cents) 10.06 7.07 42.3 % Adjusted CASM (cents) 9.83 9.25 6.3 % Adjusted CASM ex-fuel (cents) 6.68 7.46 (10.5) % Fuel gallons consumed (thousands) 124,916 80,546 55.1 % Average economic fuel cost per gallon ($) 2.95 1.77 66.7 %
(A) See “Glossary of Airline Terms” elsewhere in this quarterly report for definitions used in this table.
As a result of the COVID-19 pandemic, we experienced sharp declines in passenger demand and bookings beginning in
March 2020that lasted throughout 2020, and to a lesser extent throughout 2021. During the first quarter of 2022, we have seen continued improvement in our passenger demand and bookings, which we expect to continue throughout the remainder of 2022. However, during the first quarter of 2022 and ongoing, the airline industry has experienced a number of adverse weather events, which combined with increases in Air Traffic Control (ATC) programs and restrictions, have led to a significant number 22 -------------------------------------------------------------------------------- of flight delays and cancellations. We will continue to monitor the impact of these operational challenges and to adjust our mitigation and operational strategies accordingly. The situation continues to be fluid and demand and our resulting capacity may be different than what we currently expect. Load factor for the first quarter of 2022 was 77.2% as compared to 72.1% for the same period in the prior year. We experienced an increase in capacity of 46.9%, period over period, as air travel demand continued to increase compared to the same period in the prior year. As the COVID-19 pandemic continues to evolve, our financial and operational outlook remains subject to change.
February 5, 2022, Spirit Airlinesentered into a Merger Agreement with Frontier Group Holdings, Inc., a Delawarecorporation, and Top Gun Acquisition Corp., a Delawarecorporation and a direct, wholly owned subsidiary of Frontier, pursuant to which and subject to the terms and conditions therein, Merger Sub will merge with and into Spirit Airlines, with Spirit Airlinescontinuing as the surviving entity. As a result of the Merger, each existing share of Spirit Airlines'common stock will be converted into the right to receive (i) $2.13in cash, without interest and (ii) 1.9126 shares of Frontier Common Stock, par value $0.001per share. Upon consummation of the Merger, existing shareholders of Spirit Airlineswill own approximately 48.5% of the outstanding shares of Frontier on a fully diluted basis. Completion of the Merger is subject to the satisfaction or waiver of certain closing conditions, including, among other things, (1) approval of the Merger Agreement by Spirit Airlines'stockholders, (2) receipt of applicable regulatory approvals, including approvals from the FCC, FAAand the DOT and the expiration or early termination of the statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other required regulatory approvals; (3) the absence of any law or order prohibiting the consummation of the transactions; (4) the effectiveness of the registration statement to be filed by Frontierand Spirit Airlineswith the SECpursuant to the Merger Agreement; (5) the authorization and approval for listing on NASDAQ of the shares of Frontier Common Stock to be issued to holders of Spirit Airlines'common stock in the Merger; and (6) the absence of any material adverse effect (as defined in the Merger Agreement) on either Spirit Airlinesor Frontier. The Merger Agreement contains certain customary termination rights for Spirit Airlinesand Frontier, including, without limitation, a right for either party to terminate if the Merger is not consummated on or before February 5, 2023, subject to certain extensions if needed to obtain regulatory approvals. Upon the termination of the Merger Agreement under specified circumstances, Spirit Airlineswill be required to pay Frontier a breakup fee of $94.2 million. The Merger Agreement also provides the methodology by which certain expenses will be borne. On April 5, 2022, we announced that we received an unsolicited proposal from JetBlue to acquire all of the outstanding shares of Spirit Airlines'scommon stock in an all-cash transaction for $33.00per share. After consulting with financial and legal advisors, our Board of Directors determined that JetBlue's proposal could reasonably be likely to lead to a "Superior Proposal" as defined in our merger agreement with Frontier and evaluated the proposal in accordance with the terms of the merger agreement. On May 2, 2022, we announced that our Board of Directors, in consultation with outside financial and legal advisors, unanimously determined that the unsolicited proposal received from JetBlue does not constitute a "Superior Proposal" due to an unacceptable level of deal completion risk. We will continue to advance toward completing the transaction with Frontier, which is expected to close in the second half of 2022. The transaction is subject to customary closing conditions, including completion of the ongoing regulatory review process and approval of our stockholders.
Summary of results
For the first quarter of 2022, we had a negative operating margin of 21.9%, an increase of 0.3 percentage points compared to a negative operating margin of 22.2% in the prior year period. We generated a pre-tax loss of
$244.0 millionand a net loss of $194.7 millionon operating revenues of $967.3 million. For the first quarter of 2021, we generated a pre-tax loss of $138.2 millionand a net loss of $112.3 millionon operating revenues of $461.3 million. Our Adjusted CASM ex-fuel for the first quarter of 2022 was 6.68 centscompared to 7.46 centsin the same period in the prior year. The decrease on a per-ASM basis was primarily due to improved air travel demand, as compared to the prior year period, which drove a significant increase of 46.9% in ASMs, period over period. This increase in ASMs drove a decrease in operating expenses on a per-ASM basis with the greatest impact noted on primarily fixed costs such as salaries, wages, and benefits expense, depreciation and amortization expense, landing fees and other rents expense and aircraft rent expense. 23 -------------------------------------------------------------------------------- As of March 31, 2022, we had 176 Airbus A320-family aircraft in our fleet comprised of 31 A319s, 64 A320s, 30 A321s, and 51 A320neos. With the scheduled delivery of 21 aircraft during the remainder of 2022, we expect to end 2022 with 197 aircraft in our fleet.
Comparison of three months ended
Operating Revenues Operating revenues increased
$506.0 million, or 109.7%, to $967.3 millionfor the first quarter of 2022, as compared to the first quarter of 2021, primarily due to an increase in traffic of 57.5%, an increase in average yield of 33.1% and an increase in load factor of 5.1 pts, year over year, driven by increased air travel demand as compared to prior year period. Total revenue per passenger flight segment increased 34.9%, year over year. The increase in total revenue per passenger flight segment was primarily driven by a 33.1% increase in average yield, period over period. Fare revenue per passenger flight segment increased 54.5% and non-ticket revenue per passenger flight segment increased 23.1%. The increase in non-ticket revenue per passenger flight segment was primarily attributable to increases in change fee revenue, passenger usage fee, boost-it and bundle-it revenue, seat revenue and bag revenue per passenger flight segment, as compared to the prior year.
Operating expenses increased
$615.0 million, or 109.1%, to $1,178.8 millionfor the first quarter of 2022 compared to $563.8 millionfor the first quarter of 2021, primarily due to an increase in operations as reflected by a 57.5% increase in traffic and 46.9% increase in capacity. We also had a 66.7% increase in average economic fuel cost per gallon and a 55.1% increase in fuel gallons consumed, both of which contributed to a $225.7 millionincrease in aircraft fuel expense, period over period. In addition, we had $15.6 millionin special charges in the first quarter of 2022 compared to $176.9 millionin special credits during the first quarter of 2021. For additional information, refer to "Notes to Condensed Consolidated Financial Statements-5. Special Charges (Credits)." Aircraft fuel expense includes into-plane fuel expense (defined below) and realized and unrealized gains and losses associated with our fuel derivative contracts, if any. Into-plane fuel expense is defined as the price that we generally pay at the airport, including taxes and fees. Into-plane fuel prices are affected by the global oil market, refining costs, taxes and fees, which can vary by region in the United Statesand other countries where we operate. Into-plane fuel expense approximates cash paid to the supplier and does not reflect the effect of any fuel derivatives. We had no activity related to fuel derivative instruments during the three months ended March 31, 2022and 2021. Aircraft fuel expense increased by $225.7 million, or 157.9%, from $142.9 millionin the first quarter of 2021 to $368.6 millionin the first quarter of 2022. This higher fuel expense, period over period, was due to a 66.7% increase in average economic fuel cost per gallon and a 55.1% increase in fuel gallons consumed.
The elements of the evolution of aircraft fuel costs are illustrated in the following table:
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