It's not enough that Doug Parker and Scott Kirby are ultimately responsible for American Airlines'
(AAL) share price.

Now the top two American executives seem to be in control of Spirit's (SAVE - Get Report) share price as well.

Spirit shares rose 19% last week, closing Friday at $43.01. The gains came as two analyst reports suggested American may be cutting back on its aggressive response to Spirit's incursions into American routes.

Even with last week's gains, Spirit shares are still down 43% year to date, worst among the major airlines, in response to the American pressure.

Must Read: Spirit CEO: 'We're Frustrated' by Share Price Plunge But We'll Keep Growing'

At a Credit Suisse investor conference last week, "a few carriers suggested American has recently started experimenting with less aggressive ultra-low cost carrier price matching in certain markets," Credit Suisse analyst Julie Yates wrote in a report issued Friday.

"While still intense, perhaps this means the worst of the AAL-ULCC price war is in the rearview," she wrote. "American denied any change in its competitive strategy, but did admit to taking advantage of strong demand and getting more 'granular' in revenue management and pricing.

"Combined with Spirit's generally more positive commentary, this drove optimism and jumpstarted a rally in Spirit," Yates wrote.

At the investor conference, Spirit CEO Ben Baldanza guided toward a more modest-than-expected decline in Spirit's fourth- quarter total revenue per available seat mile, Yates wrote. Baldanza said current quarter total revenue per available seat mile should look similar to the 17.5% third-quarter decline, better than the implied TRASM guide of minus 19.5% which Spirit provided in October.

Baldanza doesn't buy the concept that American controls Spirit's fate. "Interestingly, he attributed {the projected improvement} to Spirit's own capacity/pricing/revenue management actions, not to easing competitive pressures," Yates wrote. "He firmly stated that the market's perception that Spirit has 'lost control' is misplaced."

Also last week, Raymond James analyst Savanthi Syth wrote a report on Spirittitled "Potential Break in the Clouds" after meeting with Spirit executives.

"While we still believe that revenue per available seat mile declines are likely to continue in the near term, the darkest days of industry pricing may be behind us, which we believe has contributed to the uptick in shares this week," Syth wrote on Wednesday.


"Per Spirit's management, American's 'chainsaw' approach of slashing all fares on markets (i.e., routes) that overlap with Spirit seems to have more recently morphed into a 'handsaw' approach," she wrote. "American appears to have begun bracketing low fares around Spirit's flight times rather than slashing the entire day's fares."

Spirit's growth produced share price returns of 156% in 2013 and 66% in 2014, with the 2013 performance way ahead of the industry average and the 2014 performance about par.

But American responded aggressively to Spirit's rapid growth at Dallas Fort Worth International Airport, American's largest hub, where Spirit is the No. 2 competitor, and at Chicago O'Hare, American's third-largest hub, where Spirit is the No. 3 competitor after United. On American's third-quarter earnings call, American President Kirby and CEO Parker talked extensively about that response.

"In Chicago, they've grown to 24 markets with over 60 flights per day," Kirby said. Moreover, he said, American has non-stop competition with Spirit on 28% of its domestic capacity, more than its domestic overlap with Delta or United.

While American today bears the name of a once-arrogant legacy airline, in fact it is headed by exactly the same America West management team that honed an expertise in price competition while heading up a small, struggling airline based in Phoenix, which is only barely a hub.

As a result, Parker said, "We're perfectly comfortable telling you that the same people that have gotten us this far -- who are the best pricing yield management people in the business -- are managing pricing yield management in American right now and are not constrained by systems and have not suddenly changed the way they look at analyses.

"We are not constrained by systems, we are not constrained by intellect," he said. "And indeed, we know what we're doing and we're extremely comfortable with what we're doing."

 

 

 

 

 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.