Spirit Airlines 2011 Annual Report Download - page 21

ITEM 1A. RISK FACTORS
You should carefully consider the risks described below and the other information in this report. If any of the following risks
materialize, our business could be materially harmed, and our financial condition and results of operations could be materially and adversely
affected. The risks described below are not the only ones facing us. Additional risks not currently known to us or that we currently believe are
immaterial may also impair our business, results of operations, financial condition and liquidity.
Risks Related to Our Industry
We operate in an extremely competitive industry.
We face significant competition with respect to routes, fares and services. Within the airline industry, we compete with traditional network
airlines, other low-
cost airlines and regional airlines on many of our routes. Competition in most of the destinations we presently serve is intense,
due to the large number of carriers in those markets. Furthermore, other airlines may begin service or increase existing service on routes where
we currently face no or little competition. Substantially all of our competitors are larger and have significantly greater financial and other
resources than we do.
The airline industry is particularly susceptible to price discounting because once a flight is scheduled, airlines incur only nominal
additional costs to provide service to passengers occupying otherwise unsold seats. Increased fare or other price competition could adversely
affect our operations. Moreover, many other airlines have begun to unbundle services by charging separate fees for services such as baggage and
advance seat selection. This unbundling and other cost reducing measures could enable competitor airlines to reduce fares on routes that we
serve.
In addition, airlines increase or decrease capacity in markets based on perceived profitability. Decisions by our competitors that increase
overall industry capacity, or capacity dedicated to a particular domestic or foreign region, market or route, especially increased capacity in and
out of South Florida, could have a material adverse impact on our business. If a traditional network airline were to successfully develop a low-
cost structure or if we were to experience increased competition from other low-cost carriers, our business could be materially adversely
affected.
All of the domestic traditional network airlines have on one or more occasions initiated bankruptcy proceedings in attempts to restructure
their debt and other obligations and reduce their operating costs. On November 29, 2011, AMR Corporation and substantially all of its
subsidiaries, including American Airlines, Inc., filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code. We presently compete
with American Airlines in a majority of our markets. We cannot predict the extent to which the pendency of this bankruptcy proceeding will
change our competitive dynamic with American Airlines or the extent to which a successfully reorganized American Airlines, or the acquisition
of American Airlines by another carrier, will result in a more effective competitor to us.
Our growth and the success of our ULCC business model could stimulate competition in our markets through our competitors’
development of their own ULCC strategies or new market entrants. Any such competitor may have greater financial resources and access to
cheaper sources of capital than we do, which could enable them to operate their business with a lower cost structure than we can. If these
competitors adopt and successfully execute a ULCC business model, we could be materially adversely affected.
There have been numerous mergers and acquisitions within the airline industry including, for example, the recent combinations of Delta
Air Lines and Northwest Airlines, United Airlines and Continental Airlines, and Southwest Airlines and AirTran Airways. In the future, there
may be additional mergers and acquisitions in our industry. Any business combination could significantly alter industry conditions and
competition within the airline industry and could cause fares of our competitors to be reduced.
The extremely competitive nature of the airline industry could prevent us from attaining the level of passenger traffic or maintaining the
level of fares or revenues related to ancillary services required to sustain profitable operations in new and existing markets and could impede our
growth strategy, which could harm our operating results. Due to our relatively small size, we are susceptible to a fare war or other competitive
activities in one or more of our key markets, including South Florida, which could have a material adverse effect on our business, results of
operations and financial condition.
Our low-cost structure is one of our primary competitive advantages, and many factors could affect our ability to control our costs.
Our low-cost structure is one of our primary competitive advantages. However, we have limited control over many of our costs. For
example, we have limited control over the price and availability of aircraft fuel, aviation insurance, airport and
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