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Matching Capacity with Demand

Former CEO at Spirit Airlines

IP Interview
Published on May 23, 2020
Spirit Airlines

Why is this interview interesting?

  • How airlines think about bringing routes back to market
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.

Interview Transcript

How did you choose which routes or what capacity to bring back to market first?

That’s all about demand. It’s where demand will be realized and where people really want to go. That sounds so silly and so trivial, but that’s really the case. In some cases, the constraints, in places like London or New York, where there’s slot controls and limited frequency, that traffic tends to come back at full, mostly because people don’t want to lose their positioning there. To many other places, it’s a function of how that traffic builds. I don’t know how many people buy Coca-Cola or a product like that, in vending machines anymore. But in some places, you will see three vending machines, or four or two. I used to wonder, when I was younger, why do they put four here and only one there. I realized what they did was, they put one and when it was selling out, they put a second one. When that one started selling out quickly, they put a third one. It wasn’t really rocket science; they were just watching how quickly the stuff sold. That’s what airline capacity planners do.

If, pre-Covid, they had eight flights a day between two cities, and maybe they’ve had one flight a day now, with this huge demand drop. As they start to bring capacity, maybe they’ll come back with a nice morning, midday, evening pattern, of three flights a day. Once that fills, then they’ll fill in the 10AM and the 2PM slots. Then when that fills, they’ll fill in other times. That’s exactly the way they think of it. They’ll build it back and add capacity as the existing capacity fills, but they’re not going to put all of the capacity back in, overnight. They’re going to start building back up.

They cut it all overnight, basically, in terms of when the virus hit. A lot of traffic just fell off the map, so the airlines just cut lots of traffic right off. But I think it’s going to be a slow build up back. Again, once the airplanes start being full, add another airplane, until we’re out of airplanes. Then we can start pushing the rate.

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