http://www.freep.com/apps/pbcs.dll/article...ESS05/607140451
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.
