This is a wonderful point to raise when you are defending yourself from the fee-obsessed media, but not so good when you are trying to maximize profits -- you get fallout from the new fees and little of the benefit from the new income stream."If you look back over the past five years, the average fare that customers pay to fly our airline has gone up $3 while fuel prices have risen enormously," CEO Ben Baldanza said in a recent interview, where he focused on the fallout. "We offer a very low price to get on the plane, and then a wide series of other products and services that are optional for the consumer, but show up as fees or service charges. Some people may think of that as nickel-and-diming, but we think about fees as creating optionality to the consumer the power of deciding what they value."
CHARLOTTE, N.C. ( TheStreet) -- As airlines prepare to report second-quarter earnings, it is easy to name the two best airline stocks this year, because only two of the nine major carriers have shown share price increases. One is Alaska ( ALK), already a
Wall Street darling: its shares have risen 16% year-to-date. The second is a surprise. Low fare, famous-for- fees Spirit ( SAVE - Get Report), which went public May 26 with its IPO priced at $12 share. On Spirit's first disappointing day of trading, shares closed at $11.55. Since then, they have risen 23%, closing Friday at $14.23. For comparison, since the start of the year, while the Standard & Poor's 500 Stock Index is up about 5%, airline stocks have swooned. American ( AMR) is down about 36% and is expected to be the only carrier to report a second-quarter loss. Delta ( DAL - Get Report) has dropped about 33 % and United ( UAL - Get Report) is down about 13%. The Amex Airlines Index ( XAL) is down 14%. Like the individual stocks, the index is also down significantly since Spirit's first day of trading. Spirit gets credit for guts. It took a chance on an IPO in a depressed market for airlines, at a time when IPO investor love seemed focused entirely on tech. Now Spirit somewhat resembles one-time industry star JetBlue ( JBLU - Get Report) in its early, heady days of flying and trading. JetBlue went public in April 2002 at $27 a share, reached $45 on the first day and completed two stock splits over the next year and a half as the stock soared, fueled by low costs based on rapid expansion, young employees and a fleet of new Airbus A320s. Spirit seems like reincarnation, except that where JetBlue stretched to provide free passenger amenities and lots of legroom, Spirit chose lots of fees and almost no legroom. While JetBlue puts just 150 seats in an A320, Spirit has 178 seats. Like JetBlue, US Airways ( LCC), which flies the biggest Airbus fleet, puts 150 seats in an A320, but 12 are in first, leaving less room for the coach passengers. Spirit will publicly report quarterly earnings for the first time July 28. Six analysts surveyed by Thomson Reuters estimate second quarter earnings of 22 cents, with a range of 15 cents to 33 cents. The full-year consensus estimate is $1.01. In a recent report initiating Spirit coverage, Dahlman Rose analyst Helane Becker anticipated the carrier, with its Fort Lauderdale hub, can take passengers from American's Miami hub. "Given Spirit's operating efficiency and pricing strategy, we believe it will be able to take leisure market share from American," Becker wrote. She has an outperform rating and an $18 price target. In his initiation report, however, Wolfe Trahan analyst Hunter Keay noted that Spirit suffers from an unusual phenomenon: Although known for fees, the carrier tends to lower fares whenever it adds new fees, mitigating its return. In fact, over five years, Spirit's average base fare has dropped from $104 to $77, while fees have risen from $5 to $35.