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Cheap Oil Lifts All Airlines, but Spirit Gets to Fly Highest

Cheap Oil Lifts All Airlines, but Spirit Gets to Fly Highest
Photograph by Simon Dawson/Bloomberg

The crude oil bear market represents a strong financial tailwind for airlines, which will likely fatten their profit margins over the winter. When jet fuel is cheaper, of course, more money flows “straight to the bottom line,” as American Airlines President Scott Kirby put it last week. Yet a decline in crude oil expense doesn’t help every airline equally. A carrier’s nonfuel spending plays an important role in how much profitability cheaper jet fuel will offer.

Nowhere is that financial shift more pronounced than at Spirit Airlines, which just reported a record pretax profit margin of 21.3 percent in the third quarter. Spirit executives cheered analysts by suggesting they can hit an operating profit margin of about 20 percent in 2015—the same year the Florida-based airline is planning a major growth spurt and hiring 250 new pilots.