Love it or hate it, Spirit Airlines has built a well-established identity as a low-cost carrier. CEO Ben Baldanza speaks directly to Peter about the airline’s policies, its role in the industry and his overall strategy.
Peter Greenberg: The most important question of the day, Ben. Give us your full name and your title.
Ben Baldanza: My name’s Ben Baldanza. And I’m the Chief Executive Officer of Spirit Airlines.
PG: For those people who just woke up today and had no idea that you existed, can you describe Spirit Air?
BB: At Spirit Air, we are an airline that is focused first on the lowest-price way to get from A to B. So we’ve built our airline so we can have the lowest possible prices. And with that, we want to have an on-time flight, a really friendly travel experience, but at the lowest price possible, and to that end, we sorta create an option versus what the rest of the industry’s doing.
PG: Let’s talk about what the rest of the industry is doing. If you take a look at all the mergers and acquisitions, some failures out there, we’re getting fewer and fewer airlines out there, aren’t we?
BB: That’s a result of an industry that historically has been financially really unstable. And if you look at the industry really since deregulation in 1978, there have been years of boom and lots of years of bust. And part of that was because there were many different carriers all competing for a lot of the same space.
And what’s happened over the last few years is the consolidations have done two things. They’ve stabilized the industry financially in some ways. But the result of that has been higher fares and some fewer service options. Which is where Spirit comes in. Because we create, again, that alternative low-price option.
PG: Well, there’s that famous Richard Branson quote that if you want to be a millionaire, start with $1 billion and start an airline. So why would anybody want to start an airline, then?
BB: When I came to Spirit in 2005, we said, “Let’s look at the airlines that make money all the time and those that don’t.” And there were two buckets. One was Southwest, Ryanair, Emirates Air, Singapore Airlines– all really were extreme in what they did.
We looked at Southwest and Ryanair and Air Asia’s and we said, “So let’s be an airline that can make money in good times and in bad times, high-fuel prices, low-fuel prices– economic recession or economic boom.” And so we’re going to build our airline to look like Ryan in Europe.
PG: People might say you’re dreaming.
BB: Yes but since 2007, since we’ve turned the airline to that kind of airline, we’ve made money. When oil went to $147 in 2008, we still made money. In 2008, our CFO at the time used to joke that we outperformed the industry by $10.1 billion. Because the industry lost $10 billion and we made .1.
The reality is through high fuel prices, through economic recession, through even some internal issues (the pilot strike in 2010 when didn’t run the airline for five days) we’ve made money in every year since then because we built a sustainable– resilient business model that a big chunk of customers really like.
Not every customer. We don’t cater to corporate business travelers. If somebody else is buying your ticket, you’re probably not going to buy a ticket on Spirit Airlines. But if you’re paying for the ticket, you have a good chance of seeing our value as what you’re looking for.
PG: Because you’re driven by price?
BB: That’s exactly right. Everything we do at the airline is to create a low entry price point or a low ticket price point. Sometimes we get called a no-frills airline. That’s wrong. We’re a very high-frills airline. We just charge incrementally for each of the frills. And the advantage of that to the consumer is they pay for what they care about and they save on what they don’t use. So they only pay for what they want.