MIAMI — Spirit Airlines posted a $37.7 million (51 cents per diluted share) net profit in the first quarter of 2014; an 18% increase over 2013’s $30.6 million net profit.

Operating revenues for the quarter totaled $437.9 million, jumping 18.2% year-over-year (YOY). Passenger revenue grew 16.0% YOY to $253 million on 21.0% YOY growth in capacity as measured in available seat miles (ASM) and a 1.8% increase in load factor to an impressive 86.9%. Ancillary revenue, which includes everything from bag fees to meals to drinks, rose 21.5% YOY to $184.1 million, helping to force a drop in average base fare price to $77.79: 1.6% lower than in 2013. Spirit is of course known for its unbundled pricing model, which makes it heavily dependent on ancillary revenue.

Average revenue per passenger grew a modest 0.3% to $134.20, whereas operating revenue per ASM (RASM) declined 2.4% YOY to 11.57 cents. Yields also declined 4.3% to 13.32 cents. These various factors were driven in part by a 2.6% increase in stage length to 1159.5 miles. Longer flights naturally have lower yields, which helped drive some of the downward pressure on Spirit’s fares. It is also interesting to note that Spirit’s per-passenger revenue trends were the opposite of those of rival ultra-low cost carrier (ULCC) Allegiant Air, who recorded an increase in base fares and a decline in ancillary revenues during the quarter.

Operating expenses grew on every line major item, expanding 17.2% YOY to $378.0 million, though many line items were down on a per-ASM basis, (which is the best way to evaluate cost performance for an airline in a rapid growth phase). Fuel cost rose 12.8% YOY to $148.4 million, but fell 6.8% on a per-ASM basis. Salaries rose 24% to $76.2 million, jumping 2.5% per ASM, while landing fees grew 33% to $24.0 million (up 9.9% per ASM). Overall, operating cost per ASM fell 2.6% to 9.99 cents, largely a product of the overall system-wide capacity increase. Excluding fuel, CASM rose a 0.3% YOY to 6.06 cents.

Spirit ended the quarter with $544.0 million in unrestricted cash and cash equivalents and zero debt on its balance sheets. During the first quarter Spirit incurred capital expenditures of $4.1 million, and paid $73.2 million in pre-delivery deposits for future aircraft deliveries. The only new planes it took into its fleet were 2 Airbus A320s. Operating cash flow grew a healthy 6.4% to $90.6 million, while operating profit jumped 20.7% to $59.95 million, yielding an operating margin of 13.7%, second only to Allegiant in the industry as a whole (and Allegiant was less exposed to weather effects as its operations are more focused on the western United States). Pre-tax return on invested capital came it at an extremely healthy 31.2%, with post-tax ROIC of 19.6%.

Spirit Airlines continues to enjoy massive financial success and steady growth in the spread of its business model. The carrier has pretty clearly proven that its business model works, and that it can retain business over time in competitive major markets (many of its routes in Dallas/Fort Worth, Las Vegas, and Chicago O’Hare are now nearing 2+ years of age). With just 3.26 million passengers flown this quarter, Spirit has also just scratched the surface of its growth potential. It’s not inconceivable for Spirit to eventually reach 3 to 4 times that size, both through market stimulation, and by stealing price sensitive customers away from Southwest and JetBlue, who remaining unwilling to fully unbundle their product (and are instead moving towards more bundled, premium product lines) and drive down base fares.

Allegiant Air largely stays away from major markets, and even with Frontier making overtures towards full-fledged ULCC status under former Spirit owners Indigo Partners (for example with the recently announced charges for carry-on bags and assigned seating), it will be some time before Frontier is fully competitive with Spirit as a true LCC. At the same time, the model that Frontier has built in Trenton and in building in Cleveland is very interesting (and successful in its own right). If you think about Frontier in the framework of say, a poor man’s Spirit, the output is rather compelling. Denver for Frontier can be Spirit’s Fort Lauderdale (Miami?); the anchor of the network. Trenton can represent one model for serving large markets (namely using secondary airports in the vein of Ryanair), while Cleveland (and similar mid-tier markets) can represent another for Frontier. And perhaps the most interesting question will be which carrier becomes the first to “colonize” the former legacy hubs like Pittsburgh (hint: it won’t be PeopleExpress), Columbus, Memphis, and the like.