Frontier Heads for the Hills, er, Mountains

Frontier really is putting a lot of effort into Denver these days. Its new startup regional airline Lynx came out with its next eight cities, and every one will be served from Denver. Not surprising, of course. These new routes are interesting ones, and they’re a departure from the airline’s traditional path made possible by the introduction of the 70 seat Q400 turboprop. I’d say we can divide these routes into two parts, the Rockies and the Heartland.

In the Rockies, you’ll see flights from Denver to Colorado Springs, Aspen, Durango, and Grand Junction. My guess is that you won’t see too many local passengers on these flights. No, these are designed for people who want to connect in Denver to get some skiing done. Actually, they start in the summer, so skiing will have to wait.

The other ones are Fargo, Bozeman, Missoula, and Jackson Hole. These will probably have some more local traffic, but they’ll take strong connecting traffic as well. These are all part of the Heartland that Northwest has ruled over for so many years. Though to be fair, this is probably going to take more away from United and Delta which fly to these cities from Denver and Salt Lake, respectively.

In addition to the Lynx flying, the airline is beefing up the number of mainline flights to several destinations. Yup, keep strengthening that Denver hub . . . . It looks like these new flights will come at the expense of flights to West Palm Beach and Baton Rouge as well as Fort Myers and Jacksonville during the summer months.

Overall, I think these are pretty good moves. The airline is trying to hide from Southwest, and this will help. Until Southwest picks up some smaller aircraft, you won’t see them going to these cities. So for now, Frontier can bring down “really high” fares in most of these cities more toward the “marginally high” fare levels that will still make them money. If there are enough passengers to go around, this will probably work out well for them.


13 Responses to Frontier Heads for the Hills, er, Mountains

  1. Smail says:

    Wow, Frontier survived here in Baton Rouge for all of 6 months. Guess they finally realized that people would rather take a stop along the way than pay $100 more for the nonstop to Denver.

  2. davywavy says:

    You say: “The airline is trying to hide from Southwest”

    Let’s see – they are at 9 x daily DEN-LAS, 10 x daily in Spring Break, a common route with Southwest.

    How is that “hiding”?

    They are going to 6 x daily DEN-SEA, a common route with Southwest. How is that “hiding”?

    I do not know how Frontier can break this Conventional Wisdom that you seem to embrace – that against Southwest, they must lose.

    davy

  3. CF says:

    davywavy – Well, they definitely can’t pull out of major markets if they want to be relevant in Denver, but what you will see is a change of the mix on those airplanes.

    On the DEN-SEA route, for example, you’ll see a lot of connecting traffic coming from places like Fargo and Aspen, and those fares will be a lot higher and have less competition than people traveling on the DEN nonstops. So yes, it is “hiding” in that more of their traffic will come from places that Southwest won’t go.

  4. davywavy says:

    CF – I see that the Conventional Wisdom can’t be broken.

    The DEN-LAS expansion, for example, has been because they had not had enough capacity on the route, prior to these new routes.

    Since Frontier’s market share at DEN has gone up at DEN since Southwest arrived, I still find it a very curious use of the word “hiding”.

  5. CF says:

    davywavy – We’re going to have to agree to disagree. I see an airline that has turned in some pretty dismal numbers and is clearly not happy with its past strategy, because it’s changing it. They’ve shrunk non-Denver flying and put more planes into that hub. That’s why you see more flying in places like Vegas.

    But, they still need more traffic to fill those planes and that’s where Lynx comes into play. This provides higher fare traffic in less competitive markets and that’s a good thing.

    I’m not trying to say that “hiding” from Southwest is bad. I can say it another way if that’s more pleasant-sounding – they’re going into markets that have less competition.

  6. davywavy says:

    CF: “… they still need more traffic to fill those planes…”

    Which is what has been happening, the load factors have been excellent for the past year or so, often a record, and I can’t forget the summer quarter’s profits, double estimates, even with the non-core, non-profitable flying.

    Does Lynx help? Certainly, otherwise – why do it?

    But whatever interpretation you put on “hiding”, surely the Lynx mountain flying is something else – a clear, unequivocal challenge to United. I don’t see how Southwest comes into this particular part of the picture.

  7. CF says:

    davywavy – Time will tell what happens here, and I’m happy to watch. I’d like to hope you’re right. I really enjoy flying Frontier, and I’d hate to see them fail. I’m just more skeptical than you are about the ability to compete against United and Southwest in DEN. I hope to be proven wrong.

  8. Nick B says:

    davywavy: “They are going to 6 x daily DEN-SEA, a common route with Southwest.”

    For Frontier, Seattle is a VERY seasonal market. When the summer comes and the cruise ships start, Sea-Tac becomes a mad house on the weekends as people come and go from all over the country to cruise to Alaska. Trust me, four summers working there made me loath cruise ship traffic and the inevitable 70lb bags people think they needed to take with them.

    This year, Frontier is going from three to six flights, last year it was from four to five, in 2006 they increased it to five daily (not sure if it went from three or four to five, but I think that it was from three), before that, the same thing, add a flight in the summer and take it away after labor day. At one point, Frontier was changing flight schedules into Seattle about every three to five weeks, adding a flight, taking it out, changing from three am departures to two am and one evening departure. It was so bad even the employees in Seattle couldn’t keep track and made more than a few Ascents and Summits unhappy.

    I think a large part of the “doom and gloom” that Frontier is associated with is based on the fact that they have one hub that is being “invaded” by the only airline to be constantly profitable for more than a few years, the fact they have tried unsuccessfully three times now to establish themselves outside of Denver, and the fact that they are increasing loses year over year while not increasing cash on hand. The fact that the airline could be bought for less than $150mil given their stock price doesn’t help either, as at that price, Frontier could somewhat easily be bought then sold off piece by piece (planes, facilities, etc) for a good profit.

    Lynx is probably a start in the right direction, leading both away from markets where there will be low fare competition and going where they can go back to what they used to do, undercut United by a few dollars to show up first when people search by price, but keep prices high enough to make money on the flight. But, given Southwest’s growing Denver presence, Frontier might not be able to sustain itself long enough for Lynx to establish itself as a major contributor to Frontier’s balance sheet.

    Even when I worked there, Frontier always seemed a bit… confused. They wanted to be a low-cost airline, yet ran a hub, flew internationally (something few US based LCCs did much of before jetBlue and Spirit flew to the Carribean), have a tiered Frequent Flier system, brought in-house out-station personel for cities with as few as three daily flights, interlined bags, used regional/express partners (ZK Code Share, YV then Horizon JetExpress, Republic and now Lynx), operated multiple sizes of planes (granted all Airbus but 114, 132, 136 and soon 162 seaters), they even used to have bus service to a few places around Denver.

    I think it might be better stated that instead of hiding from Southwest, Frontier is trying to insulate itself against any potential negative effects Southwest may have on Denver traffic. Yes, Frontier has added flights in Southwest competing markets, but even with higher passengers numbers, yeilds are down and break even load factors are still beyond what is being sold. Every time I see a Frontier press released about how they are still carrying the same, if not more, passengers on routes where they compete with Southwest, I have to wonder how much of that sustained market share is coming at the expense of lower fares. Frontier needs to start making sure that they aren’t sacrificing fare levels and yeilds just to make sure they carry the same percent of traffic on any given route. I would much rather see Frontier carry fewer passengers overall at higher fare levels then fly full planes around without charging enough for tickets to ensure a profit just to be able to claim they aren’t loosing ground to Southwest.

  9. davywavy says:

    The only reason I came here was to take issue with the word “hiding”, but I am mildly astonished by some of the things being said.

    I don’t know anyone who thinks Frontier’s decision to fly to Cancun was a bad idea, most saw it as visionary, and since Mr. Menke came back there has been remarkably little “confusion”.

    Underperforming routes are being ruthlessly cut away, with a few more to come, load factors are up – and yields are up.

    I shrug.

  10. Nick B says:

    Denver to Cancun wasn’t a bad idea, but the Cancun mini-hub with routes to smaller cities where Frontier did not have much of a presense was, at times, ill planned I think. They also tried Mexico out of LA if I recall and that has gone away, thankfully with the rest of the non-Denver flights from LA.

    For 3Q data, load factor, while up to 76.7%, still did not exceed break even load factor, which also increased to 81.4%. Also, yeilds were NOT up. According to Frontier’s Fiscal 3Q 2008 press release, passenger yeild per RPM decreased 1.7% to 11.99cents and passenger yeild per ASM decreased 2.2% to 12.67cents.

  11. davywavy says:

    Nick B: “… but the Cancun mini-hub with routes to smaller cities where Frontier did not have much of a presense was, at times, ill planned I think”

    That may be, but that wasn’t originally what you cited as a criticism “(flew internationally”).

    Nick B: “Also, yeilds were NOT up.”

    Yield was certainly up in January.

    http://biz.yahoo.com/prnews/080205/latu182.html?.v=11

    Moreover, if you are talking about Frontier’s 3Q – everyone else’s 4Q – I can count the (US) airlines that made a profit on the fingers of one hand. It was the Q when oil rose from $72 bbl to just under $100 bbl.

    If you take away the fuel hedges, Southwest did not make a profit that quarter.

  12. Nick B says:

    And in the same press release you quote davywavy, for the fiscal year to date yeilds are down 1.6%.

    And while Southwest might not have made money except for their fuel hedges (nobody knows for sure what would have happened if they didn’t as it’s doubtful they wouldn’t have tried some method of reducing costs or increasing revenues), the fact of the matter is that they have the hedges and are profitable. Then again, so were Continental, Alaska, Allegiant, Republic and Skywest for the quarter.

  13. davywavy says:

    Nick B: Hmmm? I was discussing January. when the changes wrought by Mr. Menke started to make themselves felt. From that release:

    “The airline reported passenger yield of 10.28 cents for the month of January 2008, an increase of 0.3 percent from the same period last year. ”

    And if you remain unconvinced, try December:

    http://news.moneycentral.msn.com/ticker/article.aspx?Feed=PR&Date=20080107&ID=8005005&Symbol=FRNT

    “The airline reported passenger yield of 11.55 cents for the month of December 2007, an increase of 1.5 percent from the same period last year.”

    Nick B: “the fact of the matter is that they have the hedges and are profitable.”

    But not from airline operations – as Southwest CEO Kelly said.

Join the Conversation

*