A Comparison Of American Airlines And Spirit Airlines

The objective of this research report is to provide a thorough analysis of Alaska Airlines. In order to do this we chose to compare a similar company against them. The company in comparison is Spirit Airlines. Both companies compete in the same type of business through airline transportation. Many of their services include; security, safety, transportation of passengers as well as luggage, ensuring vehicle safety while in transit, concierge services, providing entertainment aboard plane, checking weather conditions prior to flight, and much more. All of the data gathered for this report was obtained from the company’s 10-k filings with the SEC.
We compared the two companies in a variety of ways. To start, we will give a brief background

on both companies. Then go over the competitive environment that both firms compete in, their economic climate and outlook, and other factors. We will then go over the companies balance sheet analysis, both common-size analysis and horizontal analysis. The cash flow statement is analyzed and large changes are noted then an explanation is given based off the notes to financial statements. Ratio calculations are then provided to provide information on the companies liquidity ratios, asset ratios, leverage ratios, profitability ratios, and market ratios.

Summary of Findings

Alaska Airlines is a well-known travel airline company.

They provide guests with a virtual network of more than 900 destinations worldwide. Alaska Airlines has been the leader in the industry for on-time performance among major airlines for the past seven years. They earned record financial results in 2016, marking the 13th consecutive annual profit on an adjusted basis. Spirit Airlines is an ultra-low cost, low fare airline. Compared to Alaska Airlines, Spirit Airlines pricing is much lower. Both Spirit Airlines and Alaska Airlines have steady financials in both favorable and more difficult economic times.

2. Firm, Industry, and

Environment

Alaska Airlines Description and Management

Alaska Airlines is a major air carrier having been ranked by J.D. Power and Associates as the highest customer satisfaction of the traditional airlines for ten consecutive years. The company was founded in 1932 in Anchorage, Alaska. Alaska Airlines is fixed into the roots of the locations it serves in the harsh, breathtaking state of Alaska. Alaska Airlines serves seventy-one different destination in the lower forty-eight states. Alaska Airlines is able to offer multiple services including; security, safety, transportation of passengers as well as luggage, ensuring vehicle safety while in transit, concierge services, providing entertainment aboard plane, checking weather conditions prior to flight. They provide their services to millions of people across the world.
Bradley Tilden is Chief Executive Officer of Alaska Air Group Inc., and Chairman of Alaska Airlines Inc. Tilden joined Alaska Airlines in 1991, he was named President of Alaska Airlines in December 2008, and in May 2012, he was elected President and CEO of Alaska Air Group and Alaska Airlines.

Spirit Airlines Description and Management
Spirit Airlines is an ultra-low cost airline providing consumers with the absolute lowest pricing in airfare.

The company was founded in Michigan in 1964, first known as Clippert Trucking and in 1974 changed its name to Ground Air Transfer, Inc. In 1983, the company began doing business as Charter One, a Detroit-based charter tour operator. Charter One provides travel packages to entertainment destinations such as Atlantic City, Las Vegas and the Bahamas. In 1992, Charter One changed its name to Spirit Airlines. The airline bought jet equipment into the fleet and then began booking passenger travel service to destinations such as Fort Lauderdale, Detroit, Myrtle Beach, Los Angeles and New York. Spirit relocated its headquarters to Miramar, Florida in December 1999. Expansion continued with the addition of the Chicago market, as well as coast-to-coast service to Los Angeles. In November 2001, Spirit invested service to San Juan, Puerto Rico. In fall of 2003 boughtt Spirit to Washington, DC’s Reagan National Airport and Cancun, Mexico. In fall 2004, Spirit introduced service to Santo Domingo, Dominican Republic. They now travel all across the world while still providing passengers with low

rates.
Robert L. Fornaro is the Chief Executive Officer of Spirit Airlines. Robert was the chairman, subsidiary, president, and CEO of AirTran Holdings Inc. AirTran Airways began in Orlando, Florida until AirTran merged with Southwest Airlines in May 2011. On January 5, 2016 Fornaro was appointed the CEO of Spirit Airlines, replacing Ben B Baldanza.

Competitive Environment
The airline industry is highly a competitive field and subject to various uncertainties. Some of these uncertainties include economic conditions, volatile fuel prices, and industry instability, new competition, a largely unionized work force, the need to finance large capital expenditures, and the related availability of capital. A minor fault in expected revenue levels could cause a major negative impact on the financial results. Passenger demand and ticket prices are influenced by the general state of the economy, competition of other airline companies, and total available seat capacity.
The airline business and financial results are highly affected by the price and the availability of aircraft fuel. The cost of aircraft fuel is unstable and uncontrollable. Over the past five years, aircraft fuel expense ranged from 18% to 35% of operating expenses. Fuel prices are impacted by changes in both the price of crude oil and refining margins and can vary by region in the U.S.
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Economic Climate and Outlook

The future of Alaska Airlines includes merging Virgin America with Alaska Air Group, while continuing to work towards obtaining a Single Operating Certificate ("SOC"). The number one priority throughout the integration process is to run two airlines and maintain a safe operation. They intend to minimize any disruption to our guests during our integration efforts by being transparent about the progress and how the changes may affect them. Employee engagement throughout the integration will remain a top priority as well, ensuring that employees remain engaged, informed and excited about the new Alaska Air Group. Plans are to bring the team of employees together through workshops and trainings delivered throughout 2017. The additional Airline will allow Alaska Air Group to grow even more rapid than ever before.
Current schedules indicate the competitive capacity will be five points higher in the first quarter of 2017. Alaska Airlines believes that their product, operation, engaged employees, award-winning service, and competitive Mileage Plan and Elevate programs, combined with their strong balance sheet, give them the ability to compete vigorously in all markets.

Other Factors

The airline industry is subject to frequent governmental regulations regarding environmental matters, employee safety, and health in the United States as well as other countries. There are many particular laws, bills, and acts on airport regulation. In addition to the federal actions, various states have been assigned certain authorities under these federal statutes. Alaska Airlines maintains safety, health and environmental programs in order to meet or exceed these requirements.
It is expected that there may be local or federal legislation in the future to reduce carbon and other greenhouse gas emissions. Over the course of several years, they have slowly transitioned to more fuel-efficient aircraft fleets and reduced the emissions with the goal of continuing that trend for a better environment.
Alaska Airlines recorded special items of $117 million for merger-related costs associated with our acquisition of Virgin America. These costs consisted primarily of legal expenses, investment banking fees and severance costs. It is expected to continue incuring merger-related costs in 2017. Our 2015 special items of $32 million consisted of a non-cash pension settlement expense and costs related to ongoing litigation.

Reference

Cohen, P. (1970, January 01). Charter Flights. Retrieved July 12, 2017, from http://charterflightstodays.blogspot.ru/2011/01/charter-flights-boston-to-dominican.html

Harmon, P. (1970, January 01). Charter Flights. Retrieved July 12, 2017, from http://charterflightstoday.blogspot.ru/2011/07/charter-flights-dc-to-cancun.html

Spirit Airlines. (n.d.). Retrieved July 12, 2017, from http://en.academic.ru/dic.nsf/enwiki/250476/2347938

Spirit Airlines. (n.d.). Retrieved July 12, 2017, from http://en.academic.ru/dic.nsf/enwiki/250476