Sky's The Limit Ever thought of starting your own airline? Now that's an entrepreneur.

The unlikely roots of Ned Homfeld's success story can betraced back further than any of his entrepreneurial ventures.Although the ultimate result has been a multimillion-dollarcompany, Homfeld has traveled a long road and faced the challengesof starting and outgrowing a number of businesses since he honedhis survival skills in the competitive arena of sailboat racing asa teen. "The competition in sailing is much like thecompetition in many of the businesses I've been in," saysHomfeld. "If there are 40 boats that are exactly the same--thesame sails, the same hulls, the same weight--they ideally have thesame speed. It's how you sail your boat that determines whetheryou win or lose a race."

As Homfeld studied to earn his degree in naval architecture, hisgoal had been to design America's Cup racing yachts. But afunny thing happened on the way to the Cup: A string of businesses,beginning with a trucking company he started while in college, keptHomfeld's beloved hobby just that.

At the end of that string is Spirit Airlines, which offerslow-fare jet service to 14 popular leisure and businessdestinations, including Myrtle Beach, South Carolina; AtlanticCity, New Jersey and several Florida locations. The FortLauderdale, Florida-based company grossed more than $135 million insales last year and boasts the highest load factor (proportion ofseats filled) in the industry. And the addition of five new MD-80slast year increased seating capacity by 20 percent; as a result,1999 sales are projected at $230 million-plus.

But the flight to success wasn't a smooth one: Homfeld hadto learn to roll with the punches--to go back to the drawing boardquickly and pursue change wherever necessary. Perhaps the key tohis achievements has been not being afraid to re-evaluate and thenhead in a different direction.

Prepare for Takeoff

The Detroit-based trucking service Homfeld founded while he wasin college in 1969 delivered parts to auto plants in Detroit andCleveland. His biggest client was Chrysler. "And as Chryslerwent, so went we," says Homfeld. Unfortunately for hisbusiness, auto production slowed dramatically during the OPEC oilcrisis of 1976. "Suddenly, there was very little need for ourservices. Within a week's time, our whole business was broughtto its knees. There was no cushion, nothing gradual about it,"he says. "I was just a 23-year-old guy, and I had no idea thatcould happen."

Instead of giving up, however, Homfeld converted his businessinto a factoring company. He began to purchase accounts receivablefrom commuter airlines, small airfreight forwarders and othertrucking companies. Homfeld reasoned that if he was able to collecthis own bills, why wouldn't he be able to expand to help othercompanies? Thus he set the stage for a life of entrepreneurialendeavors that has served him well. "We changed who we were toaccommodate the times," Homfeld, 46, says. "My lessonfrom the OPEC crisis was never to put all my eggs in onebasket."

In 1981, as Homfeld's profits soared, a company seekingfinancing to expand its air-charter operations approached him forhelp. He passed on providing financing--but liked the idea of anair-charter service and started his own operations, flying intoAtlantic City using airplanes owned by other companies. He calledhis service Charter One.

Charter One provided public charter day trips from Chicago toAtlantic City, geared to the needs of the casino-bound. In 1986,Homfeld added trips from Boston to Atlantic City twice a month. By1989, the company was operating that route daily.

In 1990, Charter One received its FAA certification as ascheduled service carrier and that same year, Homfeld made hisfirst jet purchase: two Convair 580s. Making use of the customerbase Charter One had established, Spirit Airlines was born in 1992.In 1993, Spirit initiated flights from Atlantic City and Detroit toOrlando, Tampa, Fort Lauderdale and Fort Myers, Florida. This year,service from Newark, New Jersey, to Orlando was introduced.

Spirit is not really a niche carrier, however. "We're a`niches' carrier," Homfeld says. "The object is todevelop a multitude of niches. That way, if a bigger, deeper,stronger competitor comes into [a given market], they can only hurtthat particular market. We have roughly half a dozen niches now,and we're steadily trying to develop more." Emphasis onsteadily. Homfeld's one-step-at-a-time approach is thedominant factor in the success of a man whose business has rendereda profit in all but two quarters of the past decade.

As a company that's always looking for a vacuum to fill, thepoint isn't to be the biggest and baddest. "It's aboutmaking a profit," says Homfeld. "[We're] filling inthe cracks where there's no service or where more service isneeded. Our low prices encourage short vacations and multipletrips. Spirit's passengers [tend to] fly with greatfrequency."

Covering the Bases

Despite Spirit's early success, the ride wasn't always asmooth one. "In the period of time following the ValuJetaccident in 1996, we got hammered [and lost customers]," saysHomfeld.

With smaller carriers hurt by the fallout of the ValuJetdisaster, Homfeld says the major airlines set out to exploit theirweakness. "The homicidal tendencies of competing airlinesdrove us to a point where a considerable portion of our retainedearnings evaporated in a very short time," he says. Airlinesincreased capacity in the routes they shared with Spirit, Homfeldsays, and reduced their prices to beat Spirit's. "And theybegan giving extra frequent-flier miles to passengers flying onroutes we were flying in order to move passengers off our flightsand onto theirs. In some markets, they were verysuccessful."

But Homfeld didn't waste a minute regaining his footing."Small airlines are unique in that they can move quickly. [So]we dropped markets, changed markets and moved more aircraft intocharters," he says. Spirit also dove into advertising thatstressed brand rather than prices. To get passengers to identify ona personal level with the airline, Spirit's pilots, flightattendants and mechanics were featured in its TV commercials.

This was a change from the company's early strategy. Upuntil the 1996 air war, Spirit Airlines had purposely been movingslowly and staying in the shadows. "We kept a low profile socompetitors wouldn't jump on us. If we were invisible to them,then we could exist without them attacking us too much,"explains Homfeld. "Travel agents were [largely unfamiliar]with us. We were not available in [their reservations systems]. Wedidn't do press releases or have parties for travel agents orgo to a lot of travel shows; we did most of our marketing by directmail. And we were successful without doing all that. But once itbecame obvious that we were being aimed at, we changed our wholemethod. If we were going to be shot at anyway, we wanted to makesure as many people knew about us as possible."

One of Homfeld's changes was to seek more business fromtravel agents, who are now responsible for 40 percent ofSpirit's bookings. "After all," Homfeld says,"it's like having an [automatic] referral in themarketplace. One travel agent can talk to 100 people in a week. Ican't." And while larger airlines are cutting backagents' commission amounts--and alienating them in theprocess--Spirit Airlines is engaging their support with a focus onsales incentives, including a moderately priced golf vacationprogram that comes with a 10 percent commission.

Flight Plan

Although Homfeld knows how to fight it out with his competitors,he places a premium on using the velvet-glove approach with hisemployees, whom he refers to as his "family"--soundingnot unlike another airline entrepreneur who went from smallstart-up to huge success. "You have to be caring toward thepeople that work for you, and you have to be gentle," he says."You have to realize that when people don't work out in aparticular job position, some of the blame is your own, whetherit's for not properly training, not properly managing or notproperly directing management. You have to look at [the situation]through everybody else's eyes as well as your own. Loyaltyshould flow in both directions."

And Homfeld gives a lot of credit for his success to those loyalstaffers. "I supply people's motivation and overalldirection," he says, "but making it work--I've got1,600 people in my family that do it far better than Icould."

If there's such a thing as a natural entrepreneur, thatphrase describes Ned Homfeld. The world, it seems, is truly hisoyster--so many untapped markets and so little time. "Theairline business changes day by day," he says. "You haveto flex and bend. You have to respond."

And Homfeld is doing just that, with the intention ofintroducing flights to the Caribbean and Central America."We're also interested in routes that go east to west soas to utilize time zones to our advantage," he says. And lookfor Spirit's Web site to offer online booking later thisyear.

Homfeld is counting on baby boomer economics to usher in anothersizable market in the future. "Baby boomers are going to startretiring pretty soon," he says. "We anticipate having[even] more flights to Florida and other warm climates so theirfamilies can visit them."

As Spirit's determined founder keeps a watchful eye on anever-evolving market, the sky is truly the limit. Homfeld turnsagain to the joys of sailboat racing: "Knowing the rules,playing the game right, knowing the wind, knowing the boat and howto make it turn faster and lose less speed than the nextperson--it's your knowledge of your machine that makes you winor lose."

Contact Sources

Spirit Airlines, (800) 772-7117, http://www.spiritair.com