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) --


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didn't raise as much as it expected in its IPO, but the innovative low-fare airline still garnered $187.2 million and began trading on Thursday.


initially sought to raise as much as $320 million with shares priced as high as $16, but ended up selling 15.6 million shares at $12 each. Even that was high for investors, who bid shared down to $11.49 an hour before the close on Thursday. Spirit trades under the symbol SAVE.

Despite the less-than-rousing reception, Avondale Partners analyst Bob McAdoo quickly initiated coverage with a market outperform rating and an $18 price target, calling Spirit "an attractive, profitable small cap growth company," one that has been profitable each year since 2006. McAdoo forecast 2011 net income of $40.2 million on revenue of $988 million.

It is clear that investors do not flock to airlines in the way that they flock to tech companies, especially at a time of high fuel prices and uncertainty about the economy. On the positive side, perhaps, it is worth noting that the supply of airline investments has shrunk in recent years, as





have disappeared in mergers.

Spirit is the principal airline at Fort Lauderdale/Hollywood International Airport, with 18.7% of airport traffic through April. Fort Lauderdale is dominated by low-fare, low-cost carriers:


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have 15.5% of and 15.3%, respectively, while AirTran has 5%. About 25% of Spirit traffic is international passengers to the Caribbean and northern South America.

On most Latin routes, Spirit competes with


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Miami hub, 28 miles to the south. American offers a premium service at generally higher fares. Spirit, for instance, serves most destinations only a few days a week, rather than offering frequent service preferred by business travelers.

In its filing, Spirit called itself an "ultra low-cost, low-fare airline" focused on serving the Caribbean and Latin America from Fort Lauderdale. It flies A320s, with a relatively new fleet limiting maintenance costs. It targets "price-sensitive leisure travelers" and VFR, an airline term for visiting friends and relatives. Its business model is to augment its low fares with fees for everything

including carry-on bags.

In the first six months of 2010, the most recent results available, Spirit lost $2.8 million on revenue of $357.4 million. The carrier attributed $19 million of its costs to a

June pilot strike.

In his report, McAdoo called Spirit "an attractive, profitable small cap growth company" that has been profitable every year since 2007 with operating margins above 8.5% since 2009. "Spirit has been consistently profitable during some of the airline industry's most difficult times," he said. "We look for further profitable growth."

With the offering completed, 71% of Spirit shares are owned by the offering owners, including chairman Bill Franke, an airline veteran who once presided over

America West Airlines.

"We believe Spirit's growth plan will be steady, controlled and driven by profits and not market share," McAdoo wrote.

-- Written by Ted Reed in Charlotte, N.C.

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Ted Reed