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Fleet Management

Ben Baldanza
Former CEO at Spirit Airlines

Learning outcomes

  • Decision making criteria for airlines choosing between running older versus new aircraft

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

Let’s talk about the fleet. How would you, as an airline CEO, be looking at changing your fleet today?

Every airline, right now, is re-evaluating its fleet plan. They’re looking at, what do we have? What have we already committed to buy? What do we own? What do we lease? They’re thinking, what is demand going to look like, in the future? I can see a couple of things. I can see some airlines deciding to prematurely retire older equipment. Older equipment might work fine, at a lower fuel price, but it still becomes more maintenance intensive than others. So they say, look, if I’m going to be a smaller airline, I’m going to be the most efficient I can be and that would be newer airplanes. I could also see some saying, I don’t want to take on the commitment of a lot of new capital, right away. Maybe I’m comfortable a few years from now, but not in the next years. Maybe I’m going to defer all my deliveries and, to do that, I’m going to keep some of my airplanes around longer, so I can keep my capacity up.

I think there are two big effects on fleet that we’re going to see. I think we’re going to see older equipment retiring faster than it otherwise may have. I think we’re going to see a reduction in the order book for long-range, widebody airplanes. Again, that travel base is going to be the toughest to bring back. Probably, going to be the most long-term impacted, is the real long-range travel that requires the widebody equipment. I think that the ratio between ordered single-aisle and duel-aisle airplanes is going to move even more in favor of the single-aisle. Airlines already buy more single-aisles than duel-aisles anyway, but as a percentage, they’re going to buy even more. Those will be the two effects that we’ll have in fleet. Fewer long-haul, widebodies and older airplanes retired sooner.

How do you look at the decision as to whether to keep your older aircraft, run it to the ground, wear the higher maintenance costs, but you obviously benefit from cheaper fuel today, versus taking these much more efficient, but also arguably expensive, newer aircraft? How do you weigh it up? I assume the lessors, today, and the OEMs, are going to reduce the prices or the lease rates, as well?

They almost have to. If they have the capacity, they’d rather lease it out at a lower rate than have it just sitting unused. It’s a tough call. Lower fuel prices make it a tougher call. At higher fuel prices, this is a relatively easy decision, because when my fuel and maintenance is going against me, I can relatively quickly justify the higher capital costs of the new airplane.

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