Budget airline carrier Spirit Airlines Inc. (NYSE: SAVE) recently revealed that it has finally received the U.S. Department of Transportation’s (DOT) green light to operate flights at Newark Liberty International Airport during the peak hours of the day.
While awarding rights to Spirit Airlines, the DOT said that a budget carrier like Spirit will allow passengers to avail the services of a low-cost flight while also improving competition. Meanwhile, the department has asked Spirit to report additional data on disruptions and its ability to accommodate customers when problems arise.
Spirit Airlines wanted to capture this space after Southwest Airlines (LUV) exited the airport almost three years ago, citing unprofitability.
A Spirit spokesman had then said that “Spirit is very interested in growing its modest operation in Newark.”
United Airlines (UAL), the dominant airline at the airport, had raised objections by remarking that the already congested Newark airport would face more troubles and delays if another airline was allowed to function during the busy afternoon and evening hours.
Stock Rating
Overall, the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on two Buys and four Holds. SAVE’s average price target of $26.50 implies that the stock has upside potential of 9.8% from current levels. Shares have declined 20.3% over the past year.
Hedge Funds Are Positive
The TipRanks’ Hedge Fund Trading Activity tool shows that the confidence signal is currently Very Positive on SAVE, as the cumulative change in holdings across all six hedge funds that were active in the last quarter was an increase of 4.2 million shares.
Conclusion
With transportation department’s go-ahead, Spirit will now be able to operate smoothly at Liberty International Airport. However, congestion and delays, which plague the airport, can be a headwind for the company.
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