Republic CEO Bryan Bedford on Fees, Competition in the Hubs, and More (Across the Aisle)

I’m back with part two of my conversation with Bryan Bedford, CEO of Republic (which owns Frontier, among others). In part one, we talked about the strategy that led the company to buy Frontier and Midwest. Today, we get a little more into the weeds with everything from inflight entertainment to competition in Milwaukee and Denver, fees, and more. (Part 3 on religion)

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ON INFLIGHT ENTERTAINMENT

Bryan: The LiveTV take rate on sub 2Across the Aisle from Republic Airways hour flights is low single digits. People really like it. We tried to get in on the [Embraer] 190s but when we looked at the mission of the 190s, which was thinner, shorter haul markets, we just couldn’t cost justify it. So the next thing was wifi and we’re rolling that out this summer.

Cranky: One of my concerns along those lines is you mix the fleets on routes. I know, out of Long Beach for example, there’s an A318 and an Embraer 190. That’s pretty common. So are you concerned about having the different product?
Bryan: A lot of it comes down to the message. There will be people on the Airbus who want wifi but we’re not planning on that this year. We’re going to see how it does on the E-Jets. So the brand promise is some form of inflight entertainment. Not necessarily LiveTV or wifi but some form will be available on the fleet.

Cranky: 70 seats and up
Bryan: Yeah. There is a connectivity option for wifi for small jets. The small jet brand will be differentiated whether it’s Lynx or Connect. There will be some marketing differentiation so people understand. It’ll be very clear when you’re on an E-Jet flight, this is what you’ll get. The only difference will be LiveTV on the Airbus and wifi on the E-jet. There’s a lot of value in the Ejet, but what it really does is that in a place like Milwaukee, 100 seaters are just too many seats for some of these long, thin markets and 137 seats is WAY too much. [laughs]

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ON HUB COMPETITION

Cranky: Looking at the route network as it stands today, you have your two main hubs in the two most competitive cities in the country right now.
Bryan: Yeah, well, we didn’t start that fight.

Cranky: I think others expected you not to be around at this point, so that’s why this fight is going on. What are you seeing right now? Are you at a place where things are going well? Do you see a place where all these airlines can exist at their current levels?
Bryan: Well, first I would say that we were disappointed by our Q1 revenue results. How much of that would be brand confusion, our poor execution on managing technology systems, codeshare process . . . . We learned a lot of hard questions in Q1, took a lot of chances in Q1. We learned another hard lesson that it’s a competitive marketplace and if we aren’t prepared to compete on price, we aren’t going to get the business. We’ve absorbed all those lessons and we’ve hit the cover off the ball in March. We’ve hit the cover off the ball in April. Advance booking numbers into the summer are off the charts. So, it feels really good right now, actually.

We’re less interested today in what the competition is doing. We’re really just into what we’re doing. We’re running a really good airline – 99.9% completion factor, 87% on time rates so we’re putting out a great product in the second quarter and in the first quarter as well but we all suffered from weather events. I think you stay the course right now.

We still have a lot of integration work to do. The brand decision was hard for us to make and it was hard for Midwest, but it was also liberating because now it allows the commercial people to really focus on this is the brand. This is the brand promise. We don’t have to worry about messaging in different ways. That’s good for the employees. We now know that we are one and we are delivering this product. We’ve just gotta execute and the competition will take care of itself.

I do not see the competition exiting Milwaukee. We’re taking traffic from northern Illinois, and we’re paying a pretty price for it. Unfortunately, the discounted pricepoint is something like $60 off to get people to go up to Milwaukee. When they get there, they have a great experience. It’s just a smaller, better ease of use airport that’s more reliable.

It’s taken a lot of discounting to get people to come up there to try us but we hope once they try us, they’ll come back.

Cranky: This sort of goes back to what you were talking about before about people buying on price. What can you do to get people to buy on product or on service?
Bryan: If that’s what I said, I wasn’t clear. I think price is clearly #1, #2 is product.

Maybe it’s the win or tie strategy. As long as we’re price competitive, we believe that we can beat the other guys. We don’t believe our brand is strong enough today, I hate to say it, but the facts are the facts, to get a price premium.

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ON WEB BOOKING AND DISTRIBUTION

Cranky: Is there anything in the way people buy that can change to help that?
Bryan: Certainly the other LCCs do a much better job of driving customres to their website.

There’s a huge gap in terms of distribution on our own, whether its via the call center or the IBE [internet booking engine], but that’s an opportunity for us to start selling products in ways where you’re going to find the best deals on frontier.com, we’re going to bundle some things that you can buy online.

Cranky: And that’s already there to some extent. I know for our flight home, we bought the Classic product. It shows it to you, but if someone books through a travel agent or online agent, they’re not even going to see if it’s an option.
Bryan: That’s true. We have a workaround on that but we’ve debated whether we want to roll it out or do we want to make Classic fares available on the GDS. It’s a debate that happens internally, but there is one side of the market that would drive us to make it available.

For example, all of our corporate accounts work through a corporate travel agent. [Classic Plus] is a product that they want. They want refundability, flexibility. They want one way pricing. They want seat assignments. They want free bags. That Classic [Plus] product is what they want, and the only way they can buy is through the GDS. We do have to make that product available to that segment of the market.

Cranky: It’s not today?
Bryan: No, not today. It should be by the summer. . . . Then do we take it out even further? Do we roll it out to all the GDS? But put distribution aside for a second.

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ON FEES

Bryan: What we’re really trying to do is give customers choice. A lot of people talk about, “don’t charge me bag fees.” We’ll give you that option. We’ll give you the option to buy a la carte or to buy a bundle. You’re in control. If you really are offended by those fees, then by all means, we want you to buy the bundled product. We obviously want people to buy that.

It’s interesting. On our website we’re getting less than 40% of our sales there. But of that 40% that’s buying, almost 40% of those are buying the bundled product. So the take rate’s pretty high.

Cranky: It’s a huge revenue opportunity.
Bryan: Yeah, I think so. And certainly rolling that out to the Midwest network will help as well. There are lots of opportunities to gain share.

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ON CODESHARING

Cranky: Is this something, ya know, you see people interested in codesharing like JetBlue going to SABRE to open up that opportunity. Is that something you’re interested in?
Bryan: Well, we’re SABRE-hosted.

Cranky: But are you looking to pursue codeshares?
Bryan: Well, of course we’re interested. You were in Phoenix so you heard the whole collaboration speech that was given. Just looking at companies that cover huge regions of geography that we don’t touch and the reverse is true. Looking at how we could expand the network. There were discussions pre-bankruptcy with Frontier but of course it takes a lot of time and energy.

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I’ll have the final chapter in the next couple of days.


24 Responses to Republic CEO Bryan Bedford on Fees, Competition in the Hubs, and More (Across the Aisle)

  1. Nimitz says:

    interesting. nice job.

  2. I think for now they will get some bad feed back from the mixed fleet onboard options of LiveTV or Wi-Fi. Those business people who want or need to stay in touch with the office will not be happy if they find themselves on a flight with out wifi.

  3. DGS says:

    “Bryan: The LiveTV take rate on sub 2 hour flights is low single digits. People really like it.”

    Am I reading this wrong? That doesn’t sound like a good thing.

    • CF says:

      I see how that was confusing. It was really two points. People love LiveTV on longer flights but they don’t use it much on the flights that are less than 2 hours.

  4. Sanjeev M says:

    Really refreshing that Bryan is frank and not all press BS.

    -Did he mention anything about expansion away from DEN and MKE, in places like Kansas City and Omaha?

    -I live in suburban Washington, and barely anyone knows Frontier. I would guess a couple more people know Midwest, but very little brand name despite 4 destinations from DCA.

  5. Fees: It’s the customer’s choice. I think people are getting upset about the fees, but it’s important to realize that the fees only apply to the people who use the service. So in the end, this is a better way of doing things as you only pay for what you use.

    • People don’t like change and paying for something now they used to get as part of the ticket price gets people mad.

      Look how hard it was to get people to pump their own gas. People would drive out of their way for miles to a station that still had an attendant come to your car and fill your tank, wash your windows, check under the hood, and put air in your tires all for price to fill your tank. Now people don’t even give it a second thought and there is a whole generation of drives born in the ‘self serve’ era who won’t even know what I’m talking about…..lol

      In time people will get used to it and not give it a second thought. But even I admit that fees seem to be getting out of hand on what they are for. One day it will get out of hand and short haul flying will vanish as it will not be worth the cost and the time to deal with the security procedures, delays, ground delays, etc. Maybe it’s time to invest in Greyhound stock?

    • Ed Casper says:

      I like the fact that Frontier lets the customer choose between a la carte and full service. It seems this is better than an all-or-nothing approach.

  6. I’d really like to hear his vision on what the GDS systems should do to show the price points more clearly.

  7. Aaron says:

    This is the second time that I’ve heard Bryan Bedford refer to “frontier.com” in an interview or other media event. That’s the wrong URL — it’s frontierairlines.com — probably not an unimportant detail to get right when you’re talking to the media.

    • CF says:

      Yeah, I knew it the second he said it, but I figured I’d print it exactly as he said it. (Is it weird that I still go to flyfrontier.com?)

  8. Ron says:

    David,

    When people were pumping their own gas, was oil at 80$ a barrel? Everything in aviation has gone up except ticket prices since then. RIDE THE BUS and enjoy that experience. The traveling public has got exactly what they wanted. Cheap tickets. The employee’s don’t make a fair wage or get treated well so you are amazed that your service sucks? RIDE THE BUS!

  9. SAN Greg says:

    I recently flew Frontier from SAN to MSN on a Classic Plus fare – the category that offers the most bells and whistles. Some of the benefits I don’t use – like the premium beverage and the checked bags options. Others, like the flexibility, stretch seating (which was basically First Class on the E190 – very nice) and DirecTV I do. A snack is supposed to be offered but wasn’t on either segment, so unfortunately I don’t feel I got my money’s worth. Not a big thing, but the way to this flyer’s heart is through his stomach!

  10. uyghurboy says:

    Airbus will have wireless Internet access who want to?
    We are not here the airport wireless Internet access. .

  11. Steve says:

    Did he mention anything about seat power? Providing wifi as an entertainment option depends upon customers using their own access devices which often suck power when connected. He says it’s for shorter flight lengths but they use Ejets for MKE – LAX and will certainly expand use as appropriate so power will be important.

    • CF says:

      Nope, nothing about power, but I should note that the Ejets aren’t on Milwaukee-LAX. They’re using Frontier 319s on that now. Kansas City-LA does have the Ejets, but that’s an hour shorter.

  12. Nimitz says:

    any talk of a replacment for menke?

  13. AC says:

    The fees are somewhat a la carte pricing. Don’t you wish you could get a la carte pricing on your cable and not pay for the 150 channels you don’t watch?

  14. Pingback: Republic CEO Bryan Bedford On the Branded Strategy (Across the Aisle) - >> The Cranky Flier

  15. Pingback: Frontier vs. Expedia and Orbitz: How the Airline Hopes to Lure Travelers Back to Direct Booking - Just another WordPress weblog - Easy Automobile Insure

  16. Roger Bostdorff says:

    Bryan, I Have attempted to utilized my frequent flyer miles multiple times over the last 3-4 years. I have attempted 12 months in advance and your folks told me that I attempted to book too early. I tried 60 days in advance and was told I booked too late. Tonight once again I attempted to use them with 6 months notice and once again was shut out. I asked for your email address and no one would provide it. I asked for the agent’s id and was given TSH for supervisor Stacey and TPA for Agent Pat. Frankly, I am a bit frustrated with your airline. What good is mileage if you cannot use it. It is like going to the market to buy steak on sale for 30cents a pound and when you get there it is all out. Do you care? Love to hear from you but frankly am not holding my breath.

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