NEW YORK (AP) â€"
Spirit Airlines is the frat boy of the airline industry, known for provocative ads and a no-apologies attitude. But its CEO is more like the captain of a marching band.
As a kid, Ben Baldanza practiced his trombone and launched mice into the sky on model rockets. Today, the airline CEO enjoys historical mystery novels and collects board games.
A graduate of Syracuse University with a master's from
Princeton University, Baldanza, 49, has spent his entire career working for airlines. But it is at the no-frills, fee-happy Spirit that he has made his mark. The airline carries less than 1 percent of overall U.S. airline traffic, yet it has significant name recognition thanks to playful advertising campaigns and a policy of charging extra for almost everything, including water. Spirit is the only airline to charge for carry-on bags.
The airline, based in Miramar, Fla., offers 150 daily flights to 49 destinations in the U.S., the Caribbean and Central and South America. It has 35 aircraft and plans to expand to 68 by the end of 2015.
Spirit was losing money until Baldanza took over as CEO in 2006 and transformed it into an "ultra-low cost carrier." The company's new mission: charge cheap base fares, pack more people into planes and add fees for everything else. Spirit has been profitable since, earning $190 million in the last four years, a period in which many airlines struggled to stay in business. In the first quarter, Spirit earned $7.8 million and analysts forecast it will earn $11 million in the second quarter.
The company's initial public offering on May 26 brought in $187.2 million, 40 percent less than its private-equity owners had initially hoped. However, analysts have since been upbeat about the airline. Gary Chase of Barclays Capital says he expects the company to generate "impressive margin and profitability" as it continues to grow, in part due to its high number of fees which are not subject to federal excise taxes.
It is those very fees that frustrate many customers. Baldanza is unapologetic.
"We believe this is the most consumer friendly model in the world because we're giving consumers the option to save money if they are willing to behave in a way that saves us money," he says.
Baldanza recently visited The Associated Press in New York. Below are excerpts of the interview, edited for clarity.
Q: Many Americans perceive flying as a painful experience. Why?
A: Because it is in many cases. (Laughter) There's a reality today that is just different than maybe 10 or 20 years ago. It can be annoying and take a long time to get through security. In many people's minds the industry has nickel and dimed customers and has added fees for a lot of things that used to be included in the base fare. We've helped lead that to some extent, although we like to think that we're a little different than the other guys because in every case we've added fees we've also correspondingly lowered our base fare.
Q: Does Spirit annoy people?
A: I think we do in some cases. But I actually think we annoy people who don't fly us more than we annoy people who fly us.
Q: Did you ever question charging these fees, saying the risk is too high?
A: In 2006, we decided we were going to run Spirit as an airline that competes on the basis of price and price alone. Making that decision made it easier for us to make other decisions about how to run the business that are probably very difficult for other airlines. You start asking yourselves why would I put fewer seats on the airplane than the airplane can hold?
Q: What led to that decision?
A: At some point you've got to get tired of losing money. (Laughter) No, really. That's it. I mean the business wasn't working. We grouped every airline into two buckets: airlines that make money all the time and airlines that make money in good times but give it all back in bad times. The airlines that made money all the time were extremely high premium airlines or extremely low-cost airlines. There was almost no one in the middle.
Q: Spirit recently went public but the 15.6 million shares were priced at the lower end of expectations. What happened?
A: The right price for anything is the price people will pay for it. There are a number of people who question why we would even try to IPO the airline in an environment of high fuel prices. Our view was we have a strong company, we've made money each of the last four years, we made money in the first quarter, we have a resiliency and sustainability that many airlines don't have.
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