Spirit Airlines Replaces CEO After Carrier's Stock Tumblesby
Appointment of former AirTran chief renews merger speculation
Expansion in Dallas may have been a mistake, analyst says
Spirit Airlines Inc. replaced Chief Executive Officer Ben Baldanza following a year in which the low-cost carrier’s expansion on larger rivals’ turf sparked a plunge in the company’s shares.
Robert L. Fornaro was named president and CEO, effective immediately, the Miramar, Florida-based airline said in statement Tuesday. Fornaro, 62, has been a Spirit director since May 2014 and was AirTran’s CEO for more than three years until May 2011. He also has been an executive at US Airways and Northwest Airlines.
Investors had soured on Baldanza recently as the carrier continued to miss analysts’ financial estimates and its stock fell behind the industry generally, said Adam Hackel, an associate analyst at Sterne Agee CRT. Spirit fell 47 percent last year, compared with a 4.6 percent decline for the Bloomberg U.S. Airlines Index.
The shares climbed 5.9 percent to close at $41.50 on Tuesday in New York. It was the biggest gain in two months as analysts speculated that Fornaro’s appointment could position Spirit for a merger with Frontier Airlines Holdings Inc., another ultra-low-cost carrier.
“On a personal level it is sad to see him go,” wrote Wolfe Research analyst Hunter Keay. “But we guess his replacement, Bob Fornaro, may have been brought in to do two things: (1) near term, steady the ship on messaging and growth prospects, and (2) longer term, merge with Frontier.”
Baldanza had repeatedly denied any interest in consolidating, yet Fornaro was involved in AirTran’s sale to Southwest Airlines Co., Cowen & Co. analyst Helane Becker said in a note to investors.
Spirit’s expansion in the Dallas-Fort Worth market, where American Airlines Group Inc. has a dominant hub, flummoxed Rob Pickels, a portfolio manager at investment firm Manning & Napier. American moved to match Spirit’s low fares, a major reason its stock faltered. Had Spirit focused more on, say, Phoenix, the airline might not have attracted as much attention from its rival, he said.
“If you were to ask American what’s its most important hub, I’m pretty sure they would say Dallas,” said Pickels, whose firm holds more than 912,000 Spirit shares.
Baldanza succeeded over the long term, Pickels said, adding that he was surprised to hear that the CEO had stepped down. Spirit last year had an operating margin of 18.4 percent, near the top of the airline industry.
Baldanza, 53, had deep connections to Washington, D.C., where he and his family recently moved. He was an executive in the area with US Airways, noted industry consultant Robert Mann. Baldanza’s wife took a consulting job in the Washington area last summer, according to her LinkedIn account.
He joined Spirit in 2005 and became president and CEO the following year. An airline spokesman said he had no additional information on Baldanza’s departure.
Spirit has expanded rapidly in recently years as an ultra-low-cost carrier, advertising “bare-bones” fares and collecting much of its revenue through fees for extra legroom, bags, refreshments and printed boarding passes.