Spirit to change direction?

[lowecur]

Oaktree has bailed due to losses in the last two quarters of close to $40M. In comes investment firm Indigo, run by the former head of America West. My guess is this means a whole new direction for Spirit, possibly away from the leisure market to more of a business carrier. If Ben Baldanza is let go, this will be the signal that a business model change is not too far behind.

imp:

http://www.freep.com/apps/pbcs.dll/article?AID=/20060714/BUSINESS05/607140451/1018/BUSINESS

 

[gatorbird]

lowecur,

Where in the article did you get that Oaktree has bailed? Actually, according to the article, "Part of the transaction includes additional cash from another major Spirit investor, Los Angeles-based Oaktree Capital Management LLC."

I find it hard to believe that a capital management company that has invested $195 million in a two short years is going to be scared away by a $40 million loss, especially given the current price of fuel. I would hope that Oaktree had the foresight to know there would be losses associated with the fleet transition and decrease of productivity. Consider, too, that Spirit relies heavily on leisure travel to the Carib...and we all know what happened there last summer/fall (Hurricane Emily slammed into Cancun just shy of a year ago).

I agree that perhaps a stronger focus on the business traveler could increase Spirit's earning potential, but bail on an entire business model? Doubtful. This new management company liked what they saw in Spirit (mostly in potential, I'm sure) and will more than likely continue with the current model, with possibly a few tweaks here and there.

Just my 2 cents.

gator

 

[lowecur]

lowecur,

Where in the article did you get that Oaktree has bailed? Let me rephrase: Idigo has purchased a controlling interest. Actually, according to the article, "Part of the transaction includes additional cash from another major Spirit investor, Los Angeles-based Oaktree Capital Management LLC."

I find it hard to believe that a capital management company that has invested $195 million in a two short years is going to be scared away by a $40 million loss, especially given the current price of fuel. Actually, it's a $110M loss since 2004. I would hope that Oaktree had the foresight to know there would be losses associated with the fleet transition and decrease of productivity. Consider, too, that Spirit relies heavily on leisure travel to the Carib...and we all know what happened there last summer/fall (Hurricane Emily slammed into Cancun just shy of a year ago).

I agree that perhaps a stronger focus on the business traveler could increase Spirit's earning potential, but bail on an entire business model? Doubtful. This new management company liked what they saw in Spirit (mostly in potential, I'm sure) and will more than likely continue with the current model, with possibly a few tweaks here and there.

Just my 2 cents.

gator

You may be right, but $40M in losses in the last 2 quarters is a ton for an airline the size of Spirit.

imp:

 

[The_Russian]

Correct. And, they cannot get anymore fuel savings than they already are getting out of their new aircraft. I expect the losses to continue, sadly. They are not charging enough for their service.

 

[8vATE]

The beatings continue?

I always thought Spirit had a lot of potential...

They seem to be in a lot of good markets and with the new fleet, should reap the rewards of being very fuel efficient.

If they just could dump their mgt's anti-labor mentality and work to a common goal...???

Neeleman did make a comment one time that he thought the A321 was a bad choice... just too big in his opinion....

???

I hope they can turn things around over there..
I don't think anyone wants more furloughs or CH 11/7 filings.

 

[Lake Alice]

I had flown on them and thought they did a nice job. A buddy who worked there mentioned the company seemed to be satisfied with the markets they were currently in.

 

[PHXFLYR]

If you guys think ex-AWA Chairman Bill Franke is going to be a white night in shining armor riding to the rescue of the Spirit employee group,you might want to think again. This fool dam near ran AWA into the ground. Your only hope is that you have a strong Vice President of Operations who knows what is needed to run an airline properly and is willing to go toe to toe with Franke if need be, because I'm here to tell you that that a$$hole doesn't have a clue as to how to run a successful airline on a day to day basis. Good luck to everyone at Spirit.


PHXFLYR

 

[320AV8R]

Not flaming...... just reporting......

Investor takes control to grow Spirit Airlines

BY JEWEL GOPWANI
FREE PRESS BUSINESS WRITER

July 14, 2006

Spirit Airlines Inc. named a new chairman of the board Thursday as the airline continues to lose money while buying a new fleet of planes.

William A. Franke, former head of America West Airlines, took the helm of Spirit after his Phoenix-based Indigo Partners LLC bought a controlling stake this year in Spirit, a privately owned airline.

Spirit's executives declined to say how much Indigo has invested in the airline, which was founded in Eastpointe before it moved its headquarters to Miramar, Fla., in 1999.

Part of the transaction includes additional cash from another major Spirit investor, Los Angeles-based Oaktree Capital Management LLC. Oaktree has invested a total of $195 million in Spirit since 2004.

Ben Baldanza, who became Spirit's CEO in May, said Indigo's cash and leadership bring the experience the airline needs to expand its hubs in Detroit and Ft. Lauderdale, Fla., and to develop its niche as a low-fare carrier on international routes.

Spirit is the second-largest carrier at Detroit Metro Airport, with 18 daily flights. In March it carried 67,500 passengers out of Metro.

The infusion of cash from Indigo comes at a time when Spirit is losing money as it replaces its fleet of aging MD-80 planes with 26 new Airbus 319 and 321 jets.

In the last three months of 2005, the company lost $27.5 million, and between January and March of 2006, it lost nearly $14 million, Spirit's filings with the U.S. Department of Transportation show.

The airline has lost $110 million since April 2004.

"Spirit has been an airline in transition," Baldanza said. "It's expensive to buy new airplanes."

That transition, Baldanza said, will wind down by Labor Day, when the airline expects to have all its MD-80 planes replaced with new, more fuel-efficient Airbus aircraft. The new planes are part of Spirit's plan to change its image from a ho-hum, no-frills airline to a modern low-cost carrier.

The losses, Baldanza said, stem from diverting pilots from flying to training to fly the new planes and juggling flying schedules and trained crews to accommodate the changing mix of aircraft.

"We have not been able to fly as many hours per day or as many days per year," he said.

That situation was one reason that pilots gave Spirit's management a vote of no confidence last summer. But morale has been improving, said Herbert Law, head of the Spirit unit of the Air Line Pilots Association.

Still, one airline analyst said Spirit is spreading itself too thin as it changes its fleet and expands rapidly into international markets.

"They are forced to play a very conservative hand," said Stuart Klaskin, partner in KKC Aviation Consulting in Coral Gables, Fla. "They're trying to get a maximum utilization with what they've got. They're trying, but they've got a lot of plates in the air, and they've got to keep them all spinning."

Spirit flies to 12 foreign destinations, including seven new spots in the Caribbean and Latin America since November.

Baldanza said the transition has cost the company "many tens of millions of dollars." But he said he expects Spirit to post a profit next year.

Contact JEWEL GOPWANI at [email protected].

Copyright © 2006 Detroit Free Press Inc.

 

[alpine1989]

New fleet. Losses mounting. Sounds a lot like ATA pre-bankruptcy.

Good Luck to all at Spirit.

 

[Beetle007]

I'm surprised no one mentioned the interesting stuff.

 

[SkiFishFly]

I'm surprised no one mentioned the interesting stuff.

OK I'll bite. What is the "interesting stuff"?????

 

[RP 04]

Anyone?

 

[Terrain Terrain]

spirit is a regional airline, why is is being discussed here?

 

[brnstrmr]

That just depends on what the meaning of is is.

 

[SEVEN]

spirit is a regional airline, why is is being discussed here?

.............................:laugh: