Spirit Air Pares Amount Sought in Initial Public Offering by 37%

Spirit Pares IPO 22% to 15.6 Million Shares as Price Is Cut
A Spirit Airlines jet takes off at Ronald Reagan National Airport in Arlington, Virginia. Photographer: Andrew Harrer/Bloomberg

Spirit Airlines Inc., the budget carrier owned by Indigo Partners LLC and Oaktree Capital Management LP, cut the amount of money it’s seeking in its initial public offering by 37 percent.

The airline may raise as much as $202.8 million later today selling 15.6 million shares for $12 to $13 each, according to a regulatory filing and data compiled by Bloomberg. Spirit previously planned to offer 20 million shares at $14 to $16.

Spirit joined Freescale Semiconductor Holdings Ltd. in paring its projected proceeds from an IPO being priced today. Demand for dot-com IPOs allowed networking site LinkedIn Corp. and Russian search-engine operator Yandex NV to boost their offering ranges ahead of their IPOs this month.

Spirit, which flies mostly between Florida and the Caribbean, plans to raise funds for future plane purchases and to pay off debt. It is seeking to go public as jet fuel hovers near a three-year high, crimping industry profits and forcing carriers to raise fares.

The shares will trade on the Nasdaq Stock Market under the symbol SAVE. Gulfstream International Group Inc. was the last U.S. passenger airline to hold an IPO, selling shares in 2007 and filing for bankruptcy last year.

Indigo, Oaktree

Private equity firm Indigo Partners bought a majority stake in Spirit in 2006. The firm also invests in airlines with similar low-fare models, including Mexico’s Volaris, Singapore’s Tiger Airways, Russia’s Avianova and Hungary-based Wizz Air. Oaktree Capital is the second-biggest investor. Neither firm plans to sell shares in the IPO, according to the prospectus.

Citigroup Inc. and Morgan Stanley are leading the Spirit offering.

The U.S. commercial aviation landscape is dotted with failures, with 100 carriers filing for bankruptcy or ceasing service since 1989, according to the Air Transport Association, a Washington-based trade group that represents U.S. airlines.

Fuel surpassed labor as most airlines’ biggest cost last year, and accounted for 35 percent of Spirit’s expenses in 2010, according to a company filing.

Spirit’s focus on leisure travelers means it can’t count on demand from higher-fare business passengers to blunt any loss of vacationers who might be deterred by higher ticket prices, according to Bob McAdoo, an analyst at Avondale Partners LLC in Kansas City, Missouri.