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Spirit Airlines Inc. fell after the budget airline cut its forecast for operating margins for the rest of the year as pricing pressure from other carriers weighs on revenue.
Spirit said it expects to report an operating margin of 21 percent to 21.5 percent for the second quarter, compared with an April forecast of 24.5 percent to 26.5 percent. The airline sees margins of 22 percent to 25 percent in the third quarter and 20 percent to 23 percent in the fourth quarter. The shares fell 9.1 percent to $57.77 at 9:30 a.m. in New York.
Competition for domestic travelers has increased as airlines face dwindling demand and try to align their seat capacity with the number of fliers. American Airlines Group Inc. Chief Executive Officer Doug Parker said in a May interview that he would “compete aggressively” against discount carriers.
In early June, domestic prices “softened further, including for travel in the peak summer periods, due to competitor pricing actions,” Spirit said in a filing Monday.
“Spirit is caught in the highly competitive Dallas and Chicago markets, where larger competitors have been jockeying for share,” Helane Becker, a Cowen & Co. analyst, wrote in a note to investors.
The carrier, based in Miramar, Florida, said its second- quarter results were hurt by “numerous cancellations related to adverse weather” in June.
The timing and location of the storms resulted in more than 500 flight cancellations and delays, which will negatively impact operating income by $20 million — $5 million of lower revenue and $15 million in higher costs, Spirit said.
This article was written by Lauren Thomas from Bloomberg and was legally licensed through the NewsCred publisher network.