Who the F*&@ is NewFrontier Airlines?

If you haven’t seen this, get ready for a treat. Air Gumbo may not have worked out (yet…), but now we have a new plan from those crazy Cajuns down in New Orleans. Ready for it? They’re giving a bunch of tax breaks in order to get an investment group to buy Frontier and create a big new hub in New Orleans. Sounds like a great plan, right? Riiiiiiiight.

NewFrontier

Let’s just be blunt. Is this a good idea? No, it’s not a good idea. I’m not quite sure how long this plan has been around, but the NewFrontierAirlines.com website seems new. The Memorandum of Understanding with Ponchartrain Capital to bring an airline to New Orleans has been around for a couple years, but it seems like the focus on making that airline Frontier has bubbled up recently.

The plan is this. The money-people will buy Frontier from Republic (since Republic has said it wants to sell). They will keep the Denver hub but then also establish a new hub in New Orleans with a minimum of 125 daily flights and 180 daily flights within 5 years. Then these guys will get a bunch of tax breaks from the local government and everyone is happy.

Oh wait, nobody will be happy because Frontier will fail miserably and go out of business. Do you really want to do that to all those cute little animals? I don’t think so. (Ok, maybe Polly the Parrot. She’s just asking to get axed.)

Enough talk about how bad this is. What exactly is being proposed? Basically, the plan is to build up a major airline hub operating from a new, $2 billion terminal (red flag!) in New Orleans. This hub will connect all corners of the US as well as several points in Latin America. Part of this includes connecting New Orleans with the six other commercial airports in Louisiana three times a day. This will all be low fare service with no bag fees or change fees.

It seems to me that just about any airline (let alone this one) is going to have a mighty hard time surviving without that fee revenue, especially in a high fuel environment where costs are already elevated. But wait, there’s a plan for that.

…an increase in fuel prices will be passed on to the customer by NewFrontier.

Of course! Why didn’t I and every other airline on Earth think of that? Just pass on fuel costs. Piece of cake. That brings me to another quote from the Q&A section.

The reason that most airlines fail is that they never attain the scale necessary to succeed – or their business plan is flawed.

I’m going to go out on a limb here and say that the latter is by far the big reason for airline failures. And this to me does not sound like a sound business plan. Apparently Michael Boyd and OAGback consulting disagree with me, at least according to the website. [Update: I've received a note from Mike Boyd saying that he did a study in 2005 for a very different concept, and he states his position best. "They dishonestly are using my good name to imply that I support this project. To be clear, I do not."] And maybe they’re right. After all, the Q&A shows some shining examples of how this has worked before.

11. Are there comparable sized markets to New Orleans that have been successful as hubs?

a. Yes. Memphis, Salt Lake City, Nashville, and Cincinnati.

Hmm, well Nashville hasn’t been a hub in many years though they seem to be counting Southwest’s roughly 75 daily flights as a hub. (Nashville’s metro area is also 35 percent larger than that of New Orleans.) I would hardly call Cincinnati and Memphis successful with their ever-dwindling operations. (They also have 80 and 11 percent larger metro areas respectively.) But what about Salt Lake? They have similar populations with Salt Lake even being a bit smaller, and Salt Lake seems to work as a hub. So New Orleans can do it!

No it can’t.

Salt Lake has the good fortune of being the only real alternative to the best hub in the mountain west, Denver. There are a lot of cities in that region that don’t have connectivity to the rest of the world without Salt Lake and Denver so Salt Lake plays an important role.

New Orleans does not have that. New Orleans is a mere 300 miles east of Houston and 450 miles southeast of Dallas. Both of those are huge markets that are much better hubs. And Atlanta is only 425 miles east. Memphis (or what’s left of it) is also just 350 miles north. New Orleans is surrounded by better markets that are hubs today.

Does that means New Orleans can’t support more service? I won’t say that. I would imagine that the city could probably support more a little more service than it actually has. Still, it can’t support a hub. If anything, this plan would kill what is quickly becoming a newly-viable Frontier.

[Original photo via Flickr user redlegsfan21/ CC 2.0]


47 Responses to Who the F*&@ is NewFrontier Airlines?

  1. Ted says:

    Cranky,
    Don’t count out AirGumbo. They “is working” on making business travellers happy.

    From their twitter feed yesterday:
    Air Gumbo, Inc. ?@AirGumbo
    We know what stress business travelers and is working diligently to not cause any stress to them. http://goo.gl/HvqGh

    Boyd also said on twitter that their quotes were a bunch of crap, but now it looks like that tweet has been deleted, so you’re right, Mike must think this is a great idea. Not sure I’d be pinning my credibility to this. Maybe he got tired of talking about the death of the 50 seat RJ and needed a new line.

  2. Alpha Bravo says:

    Cranky, Boyd Group’s website said the study was done for a different carrier many years ago and the wording in his quotes were changes to match NewFrontier.

    Here is the news article. The mayor and airport are not convinced either. http://www.nola.com/politics/index.ssf/2012/10/start-up_airline_hub_proposed.html

    • Bravenav says:

      The comments by the airport director in that nola.com article seem wise. “The airport suffers from a demand problem, not a supply one.”

  3. From his website under HotFlash:

    Clearing The Air…

    Boyd Group International wants to thank the folks who brought to our attention a recently-posted website containing alleged promotional quotes from The Boyd Group regarding a proposed airline called ?New Frontier.?

    The truth is that such quotes were altered (with the name “New Frontier” inserted) from a study of a different airline, accomplished more than seven years ago, in 2005. Boyd Group International has made no endorsement for the airline structure and plan as outlined on the website in question.

    Our attorneys have demanded that the entity behind the website remove these altered quotes.

  4. New Orleans does have a big O/D market, but it’s mostly tourists who don’t like paying high prices which most hub markets seem to have. While it would make for a good east/west connection point and maybe have a following to Central/South America, one of it’s biggest problems would be a complete shut down when a hurrican enters the gulf since so many like to head towards the N.O. area.

    Is someone really willing to put a lot of assets at an airport that can face major huricane damage a few times each year?

    Pride Air didn’t last long with a MSY hub, and while that was at a different time and you can’t judge one airline with another sometimes, isn’t there a reason some one or some major carrier hasn’t done this before?

    • CF says:

      David – Hurricanes aren’t the problem. After all, American has a large and successful hub in Miami. The problem is lack of demand to fill this operation.

  5. Bravenav says:

    How can anyone say with a straight face that an airport served by 10 carriers led by low-fare giant Southwest to destinations from coast to coast is either high-priced or under-served?

    Cites of similar size or even larger would be envious of the current service available at MSY. The New Orleans metro area ranks just 46th in population in the US. The four cities ahead of it–Hartford, Richmond, Oklahoma City, and Louisville-don’t have near the service that MSY currently enjoys. MSY’s service is similar to the much larger Milwaukee, which Frontier just left. Why wreck a good thing?

  6. james says:

    I’ve been to MSY a few times and the terminal is “cozy” in my opinion. I can’t imagine there are resources to construct a terminal for an airline that would be tenuous as best.

    I also agree with David SF’s first thought: Hurricanes.

    On a related “hubworthy” note, the WSJ had an article last week about Delta using LGA as a second connecting hub. Obviously the traffic is there, but curious what opinions are from an infrastructure point (or lack thereof…)

  7. EricInChi says:

    I agree that the NewFrontier proposal is an exercise in cognitive dissonance, rife with questionable assumptions and talking points, it is a very well written narrative. It is much better than anything from the folks at PeoplExpress 2.0 :)

  8. Sanjeev M says:

    $2 billion terminal…not worth it. Why does it cost $2 billion in America to build a terminal, esp. in an area like New Orleans where land is relatively cheap?

    As you mentioned, the hubs are all nearby. Maybe what New Orleans needs is…Megabus.

  9. john says:

    Air Gumbo – luv it!

    Slightly OT – Any update on Family Airlines or LV Air?

    • CF says:

      john – Well it’s called Avatar Airlines now, but no, no movement. That thing will never fly but it’s certainly fun to keep talking about it!

  10. Robbie says:

    they must have been playing too much airline mogul.

  11. MikeM says:

    Bottom line: no airline is building a U.S. hub now, they are dismantling them. If you think MSY can compete as a hub with IAH, DFW/DAL and ATL, then I’ve got a bridge in Alaska to sell you.

  12. A says:

    When I was growing up in Houston we used to tell Arkansas and Louisiana jokes. They were funny. This is even more funny.

  13. eric says:

    You left out the best quote – apparently from OAGback (but from a 2008 report) – “It is OAGbacks opinion that the proposed fare structure is considerably low enough that it is unlikely incumbant carriers will be able to price below NewFrontiers’s fare structure long enough to damage NewFrontier.” Want to bet? 200 flights a day and no reaction? Right.

    • CF says:

      eric – Heck, if the fares are so low that other airlines won’t respond, I’m far more curious to know how they’ll generate enough revenue to survive! Low fares, no bag fees, no change fees. Riiiight.

  14. Steve says:

    If anyone wants to get anywhere near Frontier, they only need to look at what happened to MKE. Big promises, no performance. I will still respect you in the
    morning.

    • CF says:

      Steve – Remember, Frontier didn’t go after Milwaukee. Republic bought both airlines and then merged them together. Milwaukee was an overserved airport that really couldn’t support all the service it had, so something had to give. Frontier did the right thing considering the hand it was dealt.

    • davywavy says:

      That cuts two ways.

      I don’t think anyone could have anticipated the level of antipathy that existed at MKE towards Republic/Frontier as “the Midwest Killer.”

      Conversely and quixotically Airtran – the real Midwest Killer – was perceived as hero.

      Milwaukee may have claimed to love Midwest but they voted with their wallets and hurtled to Airtan’s lower fares.

      In 2008 – before Republic/Frontier took over – Midwest lost half a billion dollars.

  15. SEAN says:

    At one time Contenental had a hub at MsY, but they left & Southwest moved in. Same thing in BWI when Southwest replaced US Air, but the BWI hub works much better.

  16. Fred says:

    How underserved are other airports in Louisiana anyways? One of the main ‘selling points’ for state funding seems to be that it will connect the whole state with the rest of the country. But are there really no other flights from other carriers to other cities in the state?
    If the fact that the rest of the state isn’t connected to New Orleans is a big problem, then they should just start out with buying a few used CRJs (they should be cheap) and just fly those routes then. There won’t be much competition, MSY won’t need to be expanded, and after that is working well, then they can try to expand. (I’m skeptical of even this working though, but it might be worth a shot if they can get subsidies.)

    • I thought this was a really good question so I decided to take a look at existing service and service within Louisiana for the other MSA’s in Louisiana (in order of population).

      1. Baton Rouge (BTR) – AA to DFW, DL to ATL and MEM, UA to IAH and US to CLT. BTR is less than 80 miles northwest of MSY. The MSA is the 66th largest in the US at 802k people in 2010. With 4 airlines flying to 5 hubs and located only 80 miles from an intl airport, I am guessing many other similarly situated cities would kill to have that level of air service.

      2. Shreveport / Bossier City (SHV) – AA to DFW, DL to ATL and MEM, UA to IAH and DEN (that was a bit of a surprise to me) and G4 to SFB and LAS. The MSA is 129th largest with nearly 400k people in 2010. A remote location in the NW corner of the state is somewhat problematic for connection to the population center and state capital as there is no nonstop service to MSY (320 miles) or BTR (250 miles); otherwise, SHV is extremely well situated for air service for a city its size with 3 airlines flying to 5 hub cities and Allegiant to two popular vacation spots.

      3. Lafayette, LA (LFT) – AA to DFW, DL to ATL and UA to IAH. The 167th largest MSA with 275k people seems to have more than adequate service considering it is less than 60 miles from BTR and 140 miles from MSY.

      4. Houma / Thibodaux, LA – no commercial air service, none needed IMO as it is around 50 miles to MSY. This is MSA #205 with 208,000 people.

      5. Lake Charles, LA (LCH) – AA to DFW and UA to IAH. Seems more than reasonable for the 213th largest MSA with just under 200k people. No direct connection to state capitol or MSY (unless you count I-10) but, speaking of which, BTR is only 130 miles east of this isolated SW Louisiana city.

      6. Monroe, LA (MLU) – AA to DFW, DL to ATL and MEM and UA to IAH. Service on 3 airlines to 4 hubs is fantastic for the 229th largest MSA in the US (176k). Again, there is no intrastate service but BTR is a manageable 187 miles away despite being in the NE corner of the state.

      7. Alexandria, LA (AEX) – AA to DFW, DL to ATL and UA to IAH. Again, service from 3 airlines to the 257th largest MSA with just over 150k people is fantastic. No intrastate service but BTR is 130 miles from this central Louisiana town.

      If intrastate connectivity among the state’s population centers is the goal, it seems this can be achieved with (as somebody already pointed out) a couple CRJs running from these cities to BTR and MSY and maybe connecting each other to some extent. It certainly does not require the building up of a 200 flight per day international hub operation. In several cases, these Louisiana cities are actually closer to another existing hub airport than they are to MSY.

      In fact, my back of the envelope calculations tell me that EACH of the SIX regional airports in Louisiana has service that makes it the envy of many similarly situated cities, due in part to their relatively close proximity to mega-hubs at ATL, DFW and IAH. The DL flights to MEM will likely disappear shortly but each of the affected airports already has DL service to ATL. However, airports that serve metro areas of 150k and 175k that have service from THREE different airlines strikes me as nothing short of exceptional!

      The bottom line for me is that none of these airports can be considered underserved relative to their size and locations.

      • Great post!! I agree. No one can say these LA cities have anything less than great air access. Besides, of the few business travelers in SHV or MLU that travel to NOLA, they just drive. It’s a 5 hour drive. I’m not going through the hassle of parking at SHV, TSA, flying, cab ride, etc. I’d rather have my own vehicle and spend the night in a nice hotel.

        • Thanks, I was frankly stunned with my findings of the levels of air service in many of these cities. I agree, all of these jurisdictions should drive to MSY (or connect) and not jeopardize any of their existing air service!

  17. Reminds me of Ozark II/Great Plains Airlines and Pro-Air as comparable “success” stories…

  18. Ed Kelty says:

    Those folk with extra change in their pockets might consider buying American Airlines instead. With those loose seats flying around, they probably could get a good discounted price on the “previously owned” airline. Then they could connect their wealthy partners directly with the oil barons of Houston.

    The previously mentioned Megabus proposal makes more sense.

  19. stan says:

    wait, you mean that i might not get my 2020 MSY-PEK nonstop?!?!?!?!? but the web site says i will!!!

  20. I thought this was a joke until I read “2020 ? nonstop service to 80 U.S. cities and 20 international cities (including Paris, London & Beijing) with over 10 million connecting persons projected that make this level of service viable.” Now I know that these people were smoking crack in business class.

  21. Axelsarkis says:

    I’m having trouble distinguishing this fiasco from a bad joke or a 5th grade project.

    Seriously, someone could ask me to come up better idea. Maybe they should call up the experts at Family Airlines/Avatar and see if they can help.

    It seems like Family’s plan was somewhat more reasonable than this. This is simply inane.

    • Shane says:

      They can merge with Family/Avatar as their first order of business and fly a triangle route between Denver, Vegas and New Orleans with 747’s (maybe they’ve upped their ambitions with A380’s). You can make it work with routes like LHR-MSY-LAS-DEN-PEK. Imagine London to Beijing in only 3 days for under $1000 and no fees!

      • Axelsarkis says:

        Sounds like a plan. Double-daily 380s with 800 seats. Maybe they can pick up Air Austral’s order? I’m not sure if they plan on taking them.

  22. Okay, I take a turn at playing devil’s advocate…

    CLT is viable as a hub for US in part because of the connecting traffic which is only served by US, so it prices as if it is O/D traffic. (e.g. The airline has pricing power.)

    If you take away the low fare portion of the plan, could New Frontier have costs lower than US/AA so that they could profitably serve this traffic? Its likely it’ll be in a better location for W/B and S/B traffic, and perhaps not too detrimental for E/B traffic..

    • CF says:

      Nick – Charlotte can price a lot of that connecting traffic because it serves a bunch of small southern cities with little competition that aren’t near low cost carrier service. Often Delta is the only other option. New Orleans doesn’t have that. There is a lot more competition and fewer small cities that can support any level of service. Also, US Airways serves many of those smaller cities with appropriate props whereas these guys want bigger regional jets to do it. The traffic just won’t be there.

  23. yo says:

    Hey, false advertising, technically, this would be the “New New Frontier”, I still remember them F28’s.

    I gotta go, catching a flight on TheCoast airlines, then transferring to Northern Airlines, to catch a flight on Crystal Airways, ending up on Air Gumbo, then I am going to be the inflight entertainment on Family Airlines. Wish me luck!

  24. Chuck says:

    I don’t know, I think “Frontier Gumbo” kind of has a ring to it. Sort of like “Rocky Mountain Oysters” does.

    However, I agree that the business plan sounds doomed to failure.

  25. John says:

    As a resident of S. Louisiana, BTR to be exact, I would welcome an airline that makes it’s home in MSY. Fares from BTR, AEX, LFT, MLU, SHV, LCH are out of reach, and if one does travel to MSY, you still have parking to contend with as there is no shuttle service between cities. If the fares on a home based airline are worth it, then it’s worth it.

  26. Eric says:

    Love how they misspelled JFK in the Q&A under Delta’s hub.

    Pretty flawed business plan, the only remote chance of this working is as a scissor hub to smaller florida airports.

  27. Your assumption that Frontier Airlines will be receiving a tax break is premature. If a person claims that something will happen, do you automatically assume it? Reasonable inference would be that you do.

    Airline proposal for N.O. stalls
    http://theadvocate.com/news/neworleans/4177430-148/airline-proposal-for-no-stalls

    With respect to you referring to New Orleanians as ?those crazy Cajuns down in New Orleans?, New Orleans is not a Cajun City, nor are any of its immediate neighboring parishes/counties Cajun.

    I?m a former New Orleans Area resident.

  28. Lenn says:

    Frontier Airlines is a customer service nightmare. I booked a flight and was unable to complete my flight because their airline had a maintenance delay. I get it. Things happen. As a matter of attempting to appease me because I had to wait almost 7 hours for a flight on a partner airline that meant I would get home the next day at about 9:30am instead of the previous night at 11:44pm they offer me a ticket valued at $300. Since I had no choice I took it. I was suppose to be able to claim the ticket by going to their website and putting in the reservation that I had been given previously. Not only did this not work but, after waiting on the phone for customer service for 45 minutes. They said they had no record of me as a customer. Shortly thereafter my call was disconnected. Oh by the way the 45 minutes wait time was during my 4th call.

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