Spirit Airlines: Airline Crisis Management

Former CEO at Spirit Airlines

Why is this interview interesting?

  • How airlines can make travelers feel safe traveling on planes
  • A travel demand comparison with both 9/11 and 2008 shocks
  • How airlines could approach managing the fleet and fuel costs
  • Potential changes in the airline industry structure between LCC and flag carriers
  • The role of lessors in the airline industry
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Executive Bio

Ben Baldanza

Former CEO at Spirit Airlines

Ben has over 35 years of experience in the airline industry. From 2005 - 16 he was CEO of Spirit Airlines and is known for defining the ultra low cost carrier model after transforming the business to become the 7th largest airline in the US. Ben was previously SVP at both American Airlines and Continental Airlines and also led the restructuring of Avianca Holdings. He now consults with the largest US airlines and is an Adjunct Professor of Economics at George Mason University.Read more

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Interview Transcript

Ben, it’s a pleasure to have you with us, today. Could you start by laying out how you are looking at the potential impact, on travel demand, for both the leisure and business traveler, post-Covid?

Obviously, for both leisure and business travelers, there is going to be a sense of confidence needed that it’s okay to get back on an airplane, without taking undue risk. We all knew that there was some risk, in any sort of gathering, before, but we dealt with that and we understood those. In a post-Covid world, reintroducing flying and more densely packed sessions, is going to be something that people are going to have to get used to again. I think there are a couple of things.

I think leisure demand will rebound quite strongly, largely as a reaction to being cloistered for so long. Many people have probably had cancelled vacations for this summer and by summer 2021, I expect that people will want to get out more almost, as I said, as a reaction to being stuck home with the kids. For others, it will just be, let’s get out more. I think leisure travel will rebound well. It may take a little while, but I think people will. Obviously, they need discretionary income to do that and when you take into account the fact that people, maybe, haven’t been working as much, that may delay some return to the leisure side also.

On the business side, I think there’s two things. I think there’s a certain kind of business travel that will rebound as soon as people are comfortable being on airplanes again. Sales work, for example, will be strong. I think the ability to inspect and audit facilities, plants, things like that, will be good. But I also think that there is a portion of business that will either never come back or take a long, long time to come back. That’s business that has become comfortable with this sort of format, with Zoom, Microsoft Teams, Skype, BlueJeans, name your favorite platform. The people who buy business, so the businesses who pay for their company’s travel, some of them will say, we understand why we need to pay for this trip over here. But why do we need to keep paying for travel, for business that has worked very well, for the last six, eight, 12 months in some cases.

Let me give you an example. I serve on a couple of corporate boards. I don’t know that every board meeting has to be held in person. It’s nice to have them in person and it’s nice to have a dinner and lunch with people. But the reality is, the business of what the board does – for normal companies, the board meets four or five times a year – maybe you could two of these meetings by video or maybe two, in person. But you could choose a mix. In that case, you could cut some expenses out of a company.

There are other things where the video chat is going to be just as effective and it will save a lot of money for a company. Business will say, I’m going to pay for this travel, but I’m not going to pay for that travel. I actually think that business travel, on the one hand, will come back sooner, because businesses will want their people to travel, for the needs they have to. On the other hand, it won’t come back as complete. Whereas, I think leisure travel will take a little longer to spool up, but once it comes back, will be quite strong. That’s my sense.

How would you compare the demand, potential bounce back, for Covid, versus 2008 and also 9/11, between that leisure and business traveler?

9/11 affected everyone, obviously, because there was a sense that it was not safe to be on an airplane because of what might happen on an airplane. Changes in security, changes physically, on the airplane, making the cockpit harder to enter and the attendants putting the cart, when the captain has to use the restroom, all those things, we’ve just got used to them. The fear that something bad is going to happen to me, on board, in terms of somebody taking over the airplane has now gone, but it took years and years for the industry to recover from 9/11, in terms of the US industry, in terms of the amount of traffic coming back.

The 2008 financial crisis affected both business and leisure travel. Business, because obviously, banks travel a lot and a lot of the financial collapse hit a lot of businesses. But interestingly, what people didn’t necessarily realize before that is, a lot of the leisure travel, especially higher-end leisure travel or longer-term packages, like Beaches and Sandals Resorts and things like that, a lot of that travel, the industry realized was funded, based on home-equity loans and when the housing markets collapsed, those loans were no longer available. Some people think of the financial crisis as a business thing, but it really affected the leisure market, as well. People couldn’t finance their vacations anymore, so they took shorter vacations or stayed at home and didn’t fly as much.

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Spirit Airlines: Airline Crisis Management(May 4, 2020)

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