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Published: Friday, 8/9/2013 - Updated: 1 year ago

Spirit Airlines’ cost-cutting moves send carrier on fast-track to growth

Frugal mind-set makes passengers pay multiple fees

LOS ANGELES TIMES
Ben Baldanza, Spirit Airlines chief executive, defends the airline’s business model, saying one-third to one-half of his customers could not afford to fly without the cheap fares Spirit offers. Ben Baldanza, Spirit Airlines chief executive, defends the airline’s business model, saying one-third to one-half of his customers could not afford to fly without the cheap fares Spirit offers.
(FORT LAUDERDALE) SUN SENTINEL Enlarge

MIRAMAR, Fla. — At the headquarters for Spirit Airlines Inc., the word “cheap” is not an insult. It’s a business philosophy championed by the airline’s chief executive, Ben Baldanza.

He demonstrates his frugal ways by switching on the lights to his office. Only a third of the light tubes are screwed into the fixtures to save on electricity.

Mr. Baldanza then pulls a vacuum out of his office closet, which he uses to help save on janitorial costs.

“We don’t overspend on that kind of stuff,” the 51-year-old executive said with a chuckle. “It’s not part of our culture.”

His tightfisted mind-set runs throughout the airline, right down to cramming in more seats per plane than most other carriers and charging passengers $3 for water and $10 to print out boarding passes. The airline even dumped its toll-free phone number to save a few bucks.

Spirit was the first U.S. airline to introduce a fee for carry-on bags and one of the first to install seats that don’t adjust. But don’t expect an apology from Mr. Baldanza if your airline seat was cramped.

“Don’t buy our low fare and complain that we don’t have legroom,” he said.

Such cost-cutting moves have made Spirit one of the nation’s fastest-growing carriers, and with one of the highest profit margins in the industry. But the tight seats and extensive menu of passenger fees are a big reason, according to critics, that Spirit rated dead last among airlines in customer satisfaction.

“I had no idea that when booking I should have paid for a carry-on bag,” said Chris Ellis, an Occidental College student whose recent Spirit flight from Houston to Los Angeles was delayed for two hours. “Nor did I realize before I got on my flight that I would be expected to pay $3 for water. It was just ridiculous.”

Mr. Baldanza boldly defends the business model, saying one-third to one-half of his customers could not afford to fly without Spirit’s cheap fares.

“As long as they keep fares low, there is room for a Greyhound-type airline in the industry,” said Ray Neidl, a New York airline analyst.

The carrier’s business plan has been so successful that it is now poised to spread its unique brand of ultracheap service across the country.

In the first half of 2013, the airline reported a more than 20 percent increase in total passenger miles traveled. Spirit now has a fleet of 50 planes but has put in enough orders for new jets to expand the airline by about 15 percent to 20 percent a year for the next eight years.

Most major carriers target business travelers, who are quick to charge a first-class or business-class seat to their company’s travel account. Spirit, instead, aims for leisure travelers who save all year for a family vacation and don’t care about comfy seats and onboard entertainment systems.

Spirit can keep fares ultra low, the CEO said, by putting a price tag on everything else on the plane, including snacks, drinks, pillows, and blankets.

“We manage the onboard like it’s a little store,” he said.

The flaw in Spirit’s business plan has been the carrier’s widespread reputation for poor service. Social media sites are littered with angry posts about flying on Spirit.

Mr. Baldanza said he is bothered when flight delays anger passengers, but he doesn’t fret about the gripes over fees.

“When people are complaining about the structure of the business model, to me that is akin to someone walking into Chick-fil-A and screaming, ‘Why don’t you sell hamburgers?’ ” he said.



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