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Slots and Alliances

Ben Baldanza
Former CEO at Spirit Airlines

Learning outcomes

  • How governments may think about diversifying gates and slots
  • How airlines think about alliances and JV’s
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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

On the competitive landscape again, do you think these budget airlines or that 20% and the low-cost carriers, do you think they are going to win slots away from the flag carriers, that don’t bring back capacity as quickly?

That’s really a policy question. What does the Heathrow Airport Authority, the New York Port Authority, these agencies who limit those slots, what do they think about their slots? British Airways, I think, has just over 50% of all the slots at Heathrow. Do they want to take slots away from British Airways or do they want to say, we’ll protect those slots, so British Airways can return to what it was, at some point? Or do they want to use this as an opportunity to split up British Airways or to bring a lot more competition into Heathrow? I think it’s much more of a policy question, than it is a Covid question.

When people look at the state of airline competition today, and who controls what resource – whether that’s slots at airports or gates at airports – do people want to use today’s crisis to solve what they may think was a problem before this crisis and they can use this as a reason to help make those changes. I don’t think that there’s a Covid-19 reason that there should be a real big change in slot holdings, around the world. What I think is, governments may choose to say, I will use this to bring in more competition and make sure that when there is a future crisis, I’m more diversified, in terms of the number of carriers I have at every airport.

Do you think the crisis will impact the demand for airlines to join alliances or JVs?

It may. It may also be a way for airlines to offset some of their own capital, by relying on partners. It’s possible that an alliance may recover more quickly, because everybody is sharing in the flying somewhat. Maybe I don’t have to fly my airplanes as much, because my partner is doing some. Conversely, I can do some flying for them, so maybe in total, we don’t fly as much as if we were all competing. I think the right intellectual way to think about alliances is, is there a distribution strategy? I can sell through a call center; I can sell through online travel sites. Or I can count on my partner to sell tickets on my flight, by putting their code on their flight. Airlines who look at alliances economically, as smart, look at their alliance’s distribution costs. They say, how much does it cost me to win a passenger through the Star Alliance or through the Oneworld Alliance, compared to selling a ticket on Expedia or selling a ticket through KAYAK or something like that? I think smaller carriers may decide that the cost of being in the alliance is now too great, with lower demand, so they may exit. I think the anchor players, in the big alliances, will stay anchors in big alliances.

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