Charge for water? You bet!
You might think that Spirit Airlines is one of 2011's IPO disappointments. The low-cost airline was priced at $12 a share when it went public May 26, down from an expected $14 to $16. It's trading at $13.39.
But financial analysts like Spirit and CEO Ben Baldanza. He's unapologetic about charging fees for almost everything from water to carry-on bags. Spirit was losing money until he became CEO in 2006. It has earned $190 million the last four years as many airlines struggled to stay alive. The airline has 150 daily flights to 49 destinations in the U.S., the Caribbean and Latin America. It has 35 planes and plans to expand to 68 by the end of 2015. Baldanza recently spoke with The Associated Press. These are excerpts from the interview: What happened in the initial public offering? The right price for anything is the price people will pay for it. There are a number of people who question why we would even try to IPO the airline in an environment of high fuel prices. Our view was we have a strong company, we've made money each of the last four years, we made money in the first quarter, we have a resiliency and sustainability that many airlines don't have. When will the price of oil make it impossible for Spirit to make money? Our business model works at higher fuel prices. Would it work at any fuel price? Well, I can't say that. Because the density (number of passengers) of our airplanes is so high, we need to raise our ticket prices less than the rest of the industry. Between New York and Florida, for example, both we and JetBlue fly the A320 airplane. They put 150 seats on the plane, we put 178. If oil prices go up such that it costs $100 more in fuel to fly, JetBlue's got to get that over 150 people, we've got to get it over 178. Do you see a merger or acquisition in Spirit's future? It's taken a lot of effort to convert Spirit into a winning model. We don't see a lot of other winning models out there. So right now, we believe we have enormous growth potential to natively grow our airline. What keeps you up at night? Big fuel price shocks, another 9/11 kind of event that changes the way people think about travel. ... I live with the ongoing recognition that you could wake up one morning and the world is just really different. Scott Mayerowitz, Elizabeth Gramling · AP