The Remaking of Frontier Shows Positive Results

When you think of Frontier, what comes to mind? You probably think of an airline flying mostly out of its Denver hub. Maybe you remember its brief fling with Milwaukee after the merger with Midwest. But chances are that what you think of Frontier isn’t what Frontier actually looks like today. So what is Frontier? It’s an airline taking advantage of a growing opportunity for low cost carriers. I talked about Frontier’s decision to become an ultra low cost carrier back in January, and the makeover continues. The change appears to be paying off.

There’s no question that Frontier is a work in progress. Its previous plan to be a more traditional hub and spoke low cost carrier wasn’t working. Milwaukee had tremendous over-capacity and Denver was a bloodbath with United and Southwest all fighting it out with Frontier. So what did the airline do? It started to remake its network. There seems to be a three (or three and a half) part strategy to this network shift.

Frontier Route Map

1) The Beach
Frontier has actually long dabbled in serving sun destinations from several places throughout the Midwest. There was a surprising amount of service to places like Cancun. But Frontier has stepped this up further. Much of this has been through its agreement with Apple Vacations. Apple Vacations used to operate its own airline, USA3000. But the airline was wound down and now Frontier is doing a lot of flying for Apple. That is good money to keep the fleet flying, particularly during the winter.

2) The Ghost of AirTran
When Southwest decided it didn’t want to take anything from AirTran’s small city network in the US, it opened up a big opportunity for someone with lower costs to step right in. Frontier has certainly taken advantage with a host of flights in smaller cities, particularly from its burgeoning Orlando operation which now serves about a dozen cities. But Frontier hasn’t stopped with just AirTran cities like Knoxville or Harrisburg. It has announced interesting choices like Greensboro and Trenton, both of which might have been on AirTran’s map at some point had Southwest not taken over.

3) Ducking Meaningful Competition in Denver
The third prong to the strategy seems to be to look for cities from the Denver hub where either nobody else flies today or there is limited, high fare service. We saw this start awhile ago with cities like Branson and Provo (Utah) coming on the map. Then we saw places like Newport News, Knoxville, and South Bend. Just recently, the airline announced it would start flying Denver to Phoenix-Mesa Airport (about a 30 mile drive southeast of Phoenix Sky Harbor Airport where most airlines fly). Frontier is also going into cities like Fargo (again). But instead of trying to run a business schedule, it will operate three times a week. This gives a good, lower cost alternative to United’s expensive 50 seat regional jets.

There is also a “third and a half” strategy of just picking off random routes that seem to possibly support demand. Things like Vegas to Durango in the winter. Or a few routes out of Colorado Springs. The idea is that with so few low cost carriers really serving the US market these days, there is great opportunity and Frontier isn’t limiting itself. Think about it. Southwest isn’t really low cost these days. JetBlue really runs mostly up and down the east coast (with few exceptions). Allegiant does small city to big city almost exclusively. And of course, Spirit has been trying to capitalize as well with rapid expansion. But for a country the size of the US, that means there is still plenty of opportunity to be had.

The result of all this is a Frontier route map that looks a lot different and will continue to look different. With many of these cities coming online with service only a couple times of week and others being seasonal, Frontier now has quite the expansive route map. But will this work?

Proof is in the Profit
So far, the results look very good. In the second quarter of this year, revenues were up more than 11 percent to $370.7 million. Aircraft were packed with a 90.1 percent load factor, and unit revenues climbed 8.3 percent. Revenues are doing well, but what about costs? After all, if you want to be an ultra low cost carrier, you need to actually have low costs.

Frontier actually made great progress. Excluding fuel, unit costs dropped 5.7 percent. That’s a mix of lower costs and higher seating density on the A320 aircraft, which helps to lower the cost per seat. Most importantly, the airline posted an operating profit of $15.5 million. That roughly 4 percent operating margin may not be as good as it needs to be in the long run, but considering the airline lost over $30 million in the same quarter last year, that’s a great improvement and certainly shows real, tangible progress.

As a traveler, I’m actually quite excited about the prospect of a thriving Frontier, assuming things don’t change too much. Why? Part of it is that Frontier is trying to be a more customer-friendly version of an ultra low cost carrier (as compared to Allegiant and Spirit), and that should be a welcome development. But it’s really something else that has me interested. Frontier is the only ultra low cost carrier that may very well end up bringing small cities into the global airline network.

Lets use Fargo as an example. Today, Fargo has traditional high fare service on United to Chicago and Denver, American to Chicago, and Delta to Minneapolis. American and United fly 50-seat regional jets while Delta uses some larger aircraft. But fares are still pretty high. Now, Allegiant serves the market, but Allegiant will only get people to LA, Orlando, Vegas, or Phoenix. It won’t sell connections and it certainly won’t work with other airlines. Don’t get me wrong. The service Allegiant provides is great, but it has limited utility.

But Frontier is coming in with 3 flights a week that will connect in Denver to the rest of the airline’s network. More interestingly, Frontier does work with other airlines, and it has ticketing and baggage agreements so that travelers from Fargo can connect into the larger global network if they so choose. That is something that smaller cities have been begging for. Of course, Frontier might decide that it’s too expensive to maintain these kinds of relationships, but I really hope not. I’d like to think there’s a model here that works. At this point, it seems like Frontier is trying a lot of different things. And the results are encouraging.

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40 Comments on "The Remaking of Frontier Shows Positive Results"

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Paul
Guest

I have had to opportunity to fly them recently and I have to say the service was terrific! I had to get to Denver from DFW at the last minute and I just went to the airport. The ticket agent found me a fare after looking for several minutes that was actually lower than the website. I thanked her for all her help and she said…just remember next time fly Frontier. With that kind of service I certainly will!

David SF eastbay
Member
That map shows a lot of dots and lines east of Denver, but west of Denver still looks like just service to cities other carriers using Denver fly to. Is that their east/west plan, just to use DEN to feed to/from the bigger markets in the west to smaller markets in the east? I wish them well and a friendly low cost carriers that you don’t always have to hear bad things about like Spirit. Off top (in away), Brett are we going to hear from you about Allegiant dropping some cities from LAX because they say they don’t have… Read more »
JRS
Guest

Gerald R. Ford Airport in Grand Rapids, MI sadly has seen service from Frontier
dwindle to just one flight a week to Denver. In the past few months they
lost daily flights to Milwaukee and three weekly flights to Washington D.C.
No surprise that they are not happy with Frontier these days. Thats the way
it goes sometimes.

james
Guest

Is that correct? I just looked at F9’s DEN-GRR schedule and show a daily flight (and return) through 9/2.

I’ve taken this non-stop often to GRR, so that comment came as a surprise…

Gina
Guest

Not true, your statement is half truth, check the facts

A
Guest
I agree that if you are in Fargo and want to get to MSP, DEN or ORD the flight can be pricey on the legacy carriers, but if you’re just connecting you likely won’t notice much difference. Recent example, I was meeting friends in Fargo and one was flying in from PDX. I offered to pick him up at MSP and carpool, however there was no difference in his fare if the destination was MSP or FAR, so he made the connection and I picked him up at FAR. (after I drove 3+ hours in lieu of paying $500 for… Read more »
DesertGhost
Guest

Frontier’s less-than-daily business model may be worth exploring as an alternative to EAS.

JRS
Guest

I checked the GRR website, it does indeed say one daily flight to Denver so it looks
like I misread or misunderstood something in the local newspaper website talking
about Frontier cutbacks for Grand Rapids. Sorry about that.

BusDriverBrian
Guest
Nice article Brett. The new Frontier management team is making great strides (using technology/analysis rather than a dartboard) in determining how to restructure the route network into one that can consistently generate profits while continuing to provide an excellent product. Amazingly, they have determined that a money losing city pair can be made profitably simply by removing a specific daily departure from the schedule or going to a less frequent 3x weekly, etc. schedule. No sense losing money trying to make everyone happy when you can be profitable making some people happy. We often overlook the fact that airlines do… Read more »
rmkline83704
Member

Why did Frontier leave Boise?

Michael
Guest

I was glad to see this post on Frontier – I think they’re a great airline with solid service and amenities, and I’m happy to see them doing well.

Now, if only they could spend some of their profit on technology upgrades…

Felix
Guest

I guess this begs the question can Frontier survive if DEN completely fall apart for them. You can only cut so much before the hub falls apart and starts burning money like its doused in gasoline. If anything WN may turn the DEN screws even more.

Nick Barnard
Member

Actually pretty awesome.. I thought Frontier used to be an albatross around Republic’s neck.. But it appears that they’re actually doing better than Republic..

Jim
Guest

Excellent article, Brett. You should write similar articles for other small airlines.

Chicago Chris
Member

I welcome Frontier giving Allegiant a run for its money. I’ve often done a jerry-rigged connection with two Allegiant flights or Allegiant and another carrier and it is a (cheap) pain. I also +1 the other opinions for more articles on these smaller carriers.

gabeandino
Member

Isn’t Republic going to spin off/sell Frontier at some point next year?

Henry Harteveldt
Guest

Brett, I think F9’s strategy of offering three “classes” of service with tangible benefits (legroom, priority security and boarding, on-board amenities, etc.) helps the airline, along with keeping the price points between the different “classes” fairly reasonable (for example, ~20 trade-up from standard economy to “Classic” for an SFO-DEN mid-week round-trip in November). The airline also merchandises the product benefits in the booking path. Frontier claims the “Classic” fare offers “up to” $100 in additional benefits. That’s smart.

mstengel
Member

Frontier is certainly doing well, but the parent company, Republic, is a different story: http://stengelangle.com/2012/08/14/u-s-regional-carriers-feeling-the-pinch/

Of course, besides being a subsidiary of Republic, Frontier should be more or less immune to regional airline swings.

Ian L
Member
Flew Frontier lat night on one of its longest flights: an A319 from Fairbanks to Denver (flew a PMCO 737-800 up there…those coarse blankets are handy). The flight was quite full, the FAs were tired but reasonable, the Izze was tasty and the cheese/fruit plate was fine. Oh, and tickets were very reasonably priced: $210 OW for four tickets, $2.50 plus 12,500 miles for the fifth. Hence my willingness to pay $8 for a small soda and a fruit/cheese plate. As someone who has been in Denver for the past five years, F9 is my favorite airline, and I hope… Read more »
Paul
Guest
Bret I have a soft spot for Frontier, nice analysis. The global airline network for small cities is an important factor that is generally not discussed and I hope Frontier will support the connections. I checked on the Frontier web site for connections from Trenton and Harriburg. It appears at this point Harrisburg will have full network connections but Trenton will only offer MCO flights with no connections. I wonder if F9 has considered Worcester MA (ORH) flights. Jetblue management has visited Worcester twice since Direct Air left. It may just be a Massport quid pro quo but F9 may… Read more »
Hunter
Guest

I wonder if they’ll make a run for the $550K grant SGU just scored to get service to DEN. Selfishly, I’d like SkyWest to get it as UAX so I can stop driving to LAS for flights, but I can see it being similar to Provo for F9…especially with all the national park access down this way.

Ozark
Guest

What’s going on with all those unused F9 Gates, plus empty Hangers at MKE?

chbrown03
Guest

Great analysis Cranky and the changed route map is striking. Frontier has had some experience in serving some smaller markets (i.e. Akron/Canton) and making it work. As someone who lives in New Jersey I’ll be interested to see how Trenton does. You would think it would have the catchment being in the central portion of the state and able to attract customers from both north and south, plus Bucks County, PA which is right across the river. TTN is a great little airport…small, convenient, similar in ways to Key West. We’ll see…

bsf436
Guest

Frontier announced today they will be serving Columbia, MO twice weekly to Orlando. The service will be on A319 aircraft. This is a somewhat surprising move because until approximately one year ago it only had EAS service. Delta has since dropped the subsidy and now offers daily flights to Atlanta. Not sure how much demand there is to Orlando, but they know more than I do.

Ozark
Guest

I recall the good old days when the Original Ozark served Columbia/Jefferson City with DC9 A/C.

Tracy
Guest

I’d like to see better service out in and out of GJC. It’s well located, and a great airport in the Winter, when everything East of the Continental divide gets bad weather. Frontier/Republic was flying the Q-400s in and out of Aspen. Don’t know why they stopped the service.

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[…] in this market, a technique that has worked well for Allegiant Airlines. The Cranky Flier, commenting on Frontier’s recent route decisions, pointed out that the airline appears to be looking at […]

Jet Pilot
Guest

I’m sad to hear that after more than 4 years of what appeared to be successful service in Wichita, Frontier is pulling out in November. We’ve used their flights to Denver countless times at a far cheaper fare than United, and we’ve heard that Frontier’s load factors have been consistently high. I guess lots of passengers just doesn’t mean profitable in their world.

Davywavy
Member
There is a widely held view that Frontier is “aping Allegiant” in its present model, but I wonder if that is true. If the strategy is defined as “less than daily to a resort city” then that goes back ten years or more, at Frontier, to the early days of Mexico. DEN-CUN was originally less than daily and most of the other Mexican routes still are. If PHF is a gateway to Virginia Beach, then that began as less than daily and we know that BMI (less than daily) was profitable in its first month, because the airport was said… Read more »
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[…] wrote about this last August and pointed to Frontier’s transformation. Here’s how the route map looks […]