Does Spirit Really Have the Best Operating Margin in the US?

Second quarter DOT numbers are out, and I was extremely surprised to see that the airline with the best operating margin in the US during the quarter was . . . Spirit? The airline’s 13.5% margin is stellar, and while sources like ATW are taking it at face value, it just doesn’t sound right. Let’s dig in.

In Q2, Spirit’s operating revenues were $206 million, just slightly above the $204.5 million in Q1. So nothing surprising there, but now take a look at operating expenses. In Q2, expenses were $178 million, WAY down from the $206.5 million in Q1. Further down in Schedule B-12, we can see that the decrease came from flight operations - $107 million in Q2 vs $134 million in Q1. So where did that come from?

This required heading over to Schedule P-6, where we can see that the big decrease was in fuel costs. How weird. They paid about $59 million for fuel in Q2 and more than $86 million in Q1, according to the financial filings, but that doesn’t jive with the numbers in the Airline Fuel Cost and Consumption chart. Over there, it says they paid more than $106 million in Q2 vs around $83 million in Q1. So what gives?

Clearly, they reduced their fuel costs somehow via one time reductions that were rolled into the fuel line item, but it doesn’t reflect how the operation itself was performing. It we double up fuel costs, we can see that the airline lost money, just like many of its peers.