This is Not Your Father’s Frontier Airlines

Frontier is in the middle of making huge changes to its business model, and that is not easy to do. Anytime you make a big shift, you anger those who liked the way things were before. Frontier is learning this firsthand right now as some Denver loyalists from years past are grumbling.

Just a few years ago, Frontier was a traditional type of airline with a little Rocky Mountain flavor to it. The airline had a traditional hub-and-spoke system, but it offered great amenities like in-seat television (which it still has for a fee) and extra legroom for all seats. The operation was centered around Denver and locals treated it like the hometown airline. Frontier looks different these days and the transition isn’t done.

I wrote about this last August and pointed to Frontier’s transformation. Here’s how the route map looks today:

Frontier Route Map May 2013

What’s changed? Well, Trenton is now the airline’s second largest airport and Wilmington is starting up on the other side of Philly as well. Meanwhile, the Denver operation continues to shift toward smaller cities with less frequency and less competition. For example, Frontier was running a multi-daily schedule to Sacramento, but now it’s no longer there. Nearby, however, there are now 3 weekly flights to Fresno.

Naturally, sub-daily flights to a small city serve a very different purpose than multi-daily flights to a big city. They appeal much more to the leisure traveler than to the business traveler. So Frontier is changing how it operates, and part of that starts with how it sells tickets.

It’s clear that a lot of the airline’s traffic still comes from third party online and offline travel agents, and that is expensive for the airline. For that reason, Frontier is now making a huge push to change that. It has come up with a creative way to penalize those who book through third parties. Those who book direct get free carry-ons, full mileage credit, and free advanced seat assignment. Those who book through online travel agents don’t. It’s even painting its website on the side of its airplanes to get the point across – book direct with the airline.

Now technically, traditional travel agents can still book all the various fare families but it is clunky and requires forcing the fare in the global distribution system. People used to the old way of working with Frontier aren’t happy about that, and they’re really not happy that Frontier is telling people that booking with travel agents will get the fewer amenities than booking direct. You see a lot of talk like this from the article linked above:

“It is the biggest slap in the face to me,” said Donna Evans, another Andavo Travel affiliate based in Denver who booked an economy ticket and selected a seat for a client on Frontier using her GDS this week.

But what these travel agents don’t realize is that this is not your father’s Frontier. (Or, well, even your older brother’s Frontier for that matter.) The airline is going to continue to push more toward fewer flights to smaller cities. Even in bigger cities, it doesn’t have nearly as many flights as it used to. Look at Denver to LA, for example. Five years ago, it flew up to 7 flights a day. Now it has 4 flights on the busiest days, the same number as American. United has 7.

The bottom line is that Frontier is moving away from the business traveler’s schedule and is going to let United and Southwest fight for that in Denver. Instead, it will focus on a more profitable niche opportunity. The tricky part is that while the airline transitions, it still needs support of the travel agents in Denver. But those travel agents have to see the writing on the wall.

The biggest changes may be yet to come. Current owner Republic expects to sell the airline very soon. In the last earnings call, it was said the sale was expected to happen by July. Last we heard, the two most interested parties were also behind Spirit’s rise to ultra low cost carrier status – Indigo Partners and Anchorage Capital.

Remember when Spirit was a dinky little airline based in Detroit losing money? My how that has changed. If this change in ownership happens, more capital would flow into the airline and that will fund more rapid change. I bet we see more of the traditional Denver flying disappear in favor of other less frequent, more unique opportunities. And it’s not just flying that Denver could lose.

It wouldn’t surprise me if the airline even considered moving its headquarters elsewhere. After all, Denver is no longer the center of the universe for the airline. The mindset at the airline now is that low costs matter. And if management can find a cheaper place to base, I bet they would move. That’s the kind of airline Frontier is now.

In a couple years, I’d bet the Frontier that people remember from years past will be mostly just a memory. The Frontier of the future is one that focuses on keeping costs low in every way possible. At the same time, the airline will move into more alternate airports and smaller markets where it can be successful. Denver will be a part of it, but not in the same way people might still expect today.


43 Responses to This is Not Your Father’s Frontier Airlines

  1. ChuckMO says:

    Its like the 80’s all over again with the original Frontier between a rock (United) and a hard place (Continental) at DEN. Flash forward to today and replace Continental (ironically part of UA) with Southwest. As we know, that Frontier ended up being purchased by People Express, was shut down and many of the aircraft ending up at CO when they bought PE.

    THIS time, Frontier is fighting back by moving away from the dogfight and opening up it’s unique niche flying. They have a fighting chance this time and the numbers are showing positive results. New ownership will only accelerate the transition, hopefully for the better. There are a few markets out there that can probably sustain Frontier’s new vision: GYY when the runway work is done, PHF comes to mind with WN/FL dropping it, CAK if WN consolidates in CLE down the road, ORH if they avoid B6, a return to PIE perhaps, TOL if the fares are lower than DTW etc…

    It will certainly be an interesting transition to watch.

    • Good analogy Chuck. My thinking is that F9 might as well try something different because sticking to the model of being a full service DEN hub and spoke airline was going to send it careening down the same garbage chute as Republic’s other (former) airline, Midwest.

      Declaring war on travel agents might not be the smartest thing in the short run but it at least has the potential to pay longer term dividends if they get a substantial percentage of pxs to switch to this direct purchasing model (as per WN and Spirit). And, since the routing is increasingly skewed toward leisure travelers, that seems possible as they are the ones most likely to purchase directly (as opposed to business travelers with contracts, agencies, etc.)

      Regardless, it’s a better idea for F9 than resisting being sold to an airline that actually wants it (when the save the cookie wackos in MKE fought off the FL merger) in favor of being sold to an airline that essentially liquidated it as quickly as possible (Republic). Especially since Republic is the airline that currently owns Frontier!

      Tangent – another interesting graph or two would be average fares and daily departures in MKE since the save the cookie crew “won” their battle and lost the war. Although I’m guessing I know what those would look like!

      • @Bill AFAIK there was a while between the Airtran takover attempt and the purchase by Republic where Midwest was owned by some private equity firms and Northwest and flew under their own banner. Republic bought them for a brand and that was it..

  2. CF, I’m curious how much of this transition would’ve happened if it wasn’t for First Data moving to a full holdback on their credit card transactions? AFAIK thats what precipitated the Chapter 11 filing a while ago.

    • CF says:

      Nick – I don’t think the increase to a full holdback caused the change. That was the result of an airline running an unprofitable business. It wasn’t going to work. So that problem led to both the holdback and the change in business plan.

      • Wasn’t Frontier at least marginally profitable when First Data increased the holdback?

        Obviously the airline market has changed a huge amount since then.

        • CF says:

          Nick – I don’t remember whether Frontier was profitable at the time, but if the holdback was increased, it was for a reason. So even if the airline was marginally profitable, there could have been serious concern about its ability to pay going forward. Now, if that hadn’t happened, could Frontier have avoided Chapter 11? I assume it could have for some time, but without a drastic change it probably would have just postponed the inevitable.

  3. The few times a week schedules can be annoying, but there are people who are flexible and will alter their travel dates for the lowest fare. If Frontier can keep the fare low, they could make it work in the secondary city markets.

  4. This kind of transformation is preferable to the kind of transformation that would likely occur with a Chapter 11 filing.

  5. Arcanum says:

    Hasn’t the traditional brick-and-mortar travel agent become largely irrelevant? Now that my 65-year-old computer-illiterate father has started booking his travel online I thought they’d lost their last customer!

    Seriously though, aside from corporate clients and niche markets like ultra-luxury, who still uses a travel agent?

  6. Ron says:

    How do you do connections with less than daily service? I guess you can connect small market to big market (e.g. Wilmington to Denver to L.A., where you can hop on a later flight if you misconnect), but what about the other direction? You’d need to allow insane margins, because it’s not reasonable to leave a person stranded for 2–3 days if they miss a connection.

    • David M says:

      I’m not sure what Frontier is doing with their less than daily markets, but Allegiant doesn’t do connections at all; they target the markets they want to serve with nonstop flights. Typically, it’s small cities connecting to their bases at popular destinations. Take people directly from small cities to the places they want to go. If they need to connect to go somewhere else, Allegiant isn’t really interested in their business.

    • CF says:

      So far it’s just something that Frontier deals with, I guess. They do offer connections to smaller destinations, but I would imagine it does create a headache when someone misconnects on to the last flight for 3 days.

  7. Bobsmith says:

    Cranky, unless there is enough untapped demand, which maybe is what Frontier is looking for, does it really make economic sense to fly to destinations 3x a week rather than add an incremental flight to a busier airport? Aren’t there a number of fixed costs associated with each airport an airline serves? Or are these smaller cities, Fresno, Rockford IL, etc. giving Frontier sweetheart deals. I know there are variable costs that can be minimized with this setup (namely labor), however I’m still a bit confused. Don’t get me wrong, I like the smaller cities getting mainline service personally but I guess I don’t completely understand the economics of it. I know Allegiance has a similar model as well, but could you enlighten me?

    • CF says:

      Bobsmith – There are only fixed costs at an airport if you have your own people. Instead, you can just outsource your ground handling and customer service to a group that’s operating at that airport. Then your fixed costs are tiny. And I would assume that these smaller airports are also giving great deals on costs anyway. The model works pretty well from a cost perspective, as long as you don’t care about having your own people on the ground.

  8. Any chance Frontier looks at establishing its HQ in OKC? Cheap space and plenty of expansion real estate.

    • ChuckMO says:

      HQ? No way. Outside of Florida, and Vegas I don’t see much opportunity out of OKC or TUL for anyone except WN.

      • CF says:

        I doubt OKC would be on the short list, but I think about a place like Phoenix as being a real possibility. There will be a lot of hunger to attract a headquarters when US Airways leaves town for Dallas/Ft Worth. Plus, a lot of people won’t make the move so you’ll have a good base of airline knowledge to hire if you wanted.

        Oh, and Indigo Partners is based there too.

    • Arcanum says:

      Is that a tornado joke?

      • Rob Gallavan says:

        No, it was a serious question. United Airlines had OKC on the short list for its HQ years ago. Will Rogers has undergone a remodel of its terminal building and there is enough real estate to add on to it. There is also enough real estate for runway expansion. Plus, real estate is still relatively cheap compared to other large cities. With more corporations moving to downtown OKC, I thought that maybe a smaller operation like Frontier might give OKC a second look.

  9. Frontier is doing what SWA used to do, i.e. blanketing the major ‘hub’ airports.

  10. davywavy says:

    It has long been the Conventional Wisdom that DEN cannot support three hubbing airlines, and perhaps it can’t – if all three airlines are flying to the same places, carbon-copying each other. But what if they are not all flying to the same places?

    Throughout the MKE/MCI Follies, DEN was the glue that held Frontier (as opposed to rump Midwest) together). The Airbus fleet at DEN was profitable when nothing else was and that is core on which this new Frontier is based. The smartest (and bravest) thing Siegel/Shurz did was to remove Frontier, as far as possible, from the Southwest/United fray at DEN.

    Still, as Sean Menke said, long ago, there has to be more to Frontier than DEN and – at last – they’ve found a way to make that happen.

    TTN may an indication of the the future. From nothing six months ago, Frontier is carrying between 9,000 and 10,000 pax per week at TTN on 37 flights per week -and that it all O&D traffic:

    http://www.nj.com/mercer/index.ssf/2013/05/mercer_county_freeholder_board.html

    “Between 9,000 and 10,000 passengers have been traveling in and out of Trenton-Mercer each week since Frontier Airlines began service there last year and recently expanded its flights to serve 10 destinations.”

    I’ll leave you to do the math, but it has been said that over 80% of the TTN pax already book online – and there are no realistic connecting opportunities at TTN. The runway at TTN is too short and the terminal is too small for it to be “a connecting hub” and while those physical properties can be changed, the concept of TTN is O&D.

    Connections may be more possible at ILG – eventually – or where else this new Frontier sets up shop, but the concept remains O&D with possible connections at DEN, the heart and soul of the airline. It is almost impossible for me to imagine Frontier not at DEN.

  11. Name says:

    Boy were we excited when Frontier came to Bellingham, WA. We’ve got lots of flights to Hawaii and Calif., Nevada, Arizona, but nothing to the East since Delta pulled out. The prospect of being able to connect into a national network and fly to the East Coast without stopping at SeaTac is pretty cool. And, for our friends in Denver, it’s mighty convenient for them to hop a quick BLI-SEA flight. But, I discovered last night that Frontier is no help for getting my cousins in Raliegh-Durham out to Bellingham for a wedding this summer. Frontier only flies to Trenton from RDU, and I don’t think the schedules would work to go RDU-TTN-DEN-BLI.

    Although it is wonderful that you can connect to cities like DCA from BLI via DEN, I was frustrated to learn that in some cases, as they say in Maine, “You can’t get there from here.” It almost reminds me of Allegiant. They almost have these dual networks: East Coast and West Coast, that don’t necessarily connect. I know that Allegiant doesn’t sell connecting flights anyway, but that’s just what it brings to mind.

    • Elliott says:

      Above comment was from me, name got deleted somehow

    • davywavy says:

      Allegiant is one of the models, as Frontier moves to become ULCC. Spirit is another.

      It is a pity about your cousins, but Frontier does not fly non-stop TTN-DEN anyway because, as above, the runway length at TTN cannot support such long flights.

  12. David M says:

    If the investors backing Spirit acquire Frontier, and with Frontier already remaking itself in Spirit’s image, and with Spirit and Frontier both operating Airbus fleets, is there any reason for Frontier and Spirit to not be eventually merged together?

    • CF says:

      David M – Well, these guys have pulled back from Spirit a great deal since it went public. If Spirit wanted to acquire Frontier, then Spirit would do it on its own, I’d expect. The two do seem to have different route planning strategies – Spirit likes big cities better while Frontier likes nearby airports in big cities. But that doesn’t mean it wouldn’t be a potential fit.

      • David M says:

        That’s what I couldn’t figure out, how much involvement Indigo and Anchorage still have in Spirit. It does look like Spirit has a board member or two with connections to Indigo, but I didn’t see any mention of Anchorage.

    • davywavy says:

      Yes – Republic and the often under-estimated Brian Bedford.

      The word “sale” is freely bandied about but BB has usually (not always) called it separation, and in the best interests of RJET shareholders.

      So the original plan, as defined by him after the FAPA agreement in early 2011 holds, and I have seen nothing to change it – that by the end of 2014, Republic will become a minority shareholder in Frontier, and will make its money, real money, from an IPO. This implies that Frontier has to be a standalone, not a merged airline.

      And, assuming they stick to signed agreements, two of the new (tiny minority) shareholders are already known – the Frontier pilots and the Frontier f/a’s.

  13. PF says:

    This far from the Frontier in the late 70s; the meals were memorable, including and a bottle of (not so memorable) Mateus Rose and a wine glass on the trays.

    • ChuckMO says:

      Two different companies, vastly different market these days. No premier carrier survived the bloodbath: Air1, MGM Grand, Regent, McClain, UltrAir all gone. Midwest lasted the longest, and we know how that turned out. WHY they introduced that Saver Service on an entire MD80 without keeping a segment of the aircraft for their Signature Service was really the beginning of the end for YX IMHO. The longest flights in the system without Biz Class. STUPID!

  14. Ed Kelty says:

    The model for smaller airlines to serve smaller cities may be a good niche. It’s not just leisure travelers who fly, but business people who can adjust their schedules to the days the airlines fly.

    A fond memory: Some years ago I flew Frontier, and the elderly gent ahead of me got a farewell kiss from the stewardess as he debarked. I complained, and she gave me equal treatment. Always liked Frontier.

  15. Momus says:

    I’m still trying to figure out how Fresno is “nearby” to Sacramento??

  16. Trent880 says:

    I don’t know that F9 was ever really supported as the “hometown” carrier, by the city and airport. It seemed to be tolerated as the hometown carrier at best, until the hometown got what they really wanted, WN.

  17. Jason says:

    What do you think of Frontier’s chances at Delta’s CVG fortress? I think if they can hold out until Delta’s leases on concourse B expire in 2015 they’ll make it. DL is down 500 flights a day from the peak but we still have a lot of directs. I think those evaporate in 2015 when DL doesn’t have a whole concourse to fill. I hope Frontier hangs on and my fellow residents help them do it.

    • CF says:

      Jason – I think there’s plenty of opportunity for Frontier to make things work in Cincinnati on a small scale.

  18. Tom Martin says:

    If you look at RJET’s contract route map and Frontier’s route map, several routes overlap. It seems to me, they end up competing with themselves since they fly for UA in DEN.

    I think they have the right idea, moving to the smaller cities. I would love to see them in LGB again. They will claim the service did not do well. Should they consider the schedule the flew at LGB?? An RON (XSAT)/Kickoff (XSUN), and a morning turn that operated only two days a week. Really??

    RJET also made a HUGE blunder by keeping planes painted MIDWEST. Frontier has great brand recognition, they lost it by having half their planes say Midwest – Nobody was quite sure who they were flying.

    Seems like they are making better decisions now, though. But I think Frontier definitely needs to get out of the RJET system. Would love to see a Virgin/Frontier match up!

  19. Yossi says:

    Dear Arcanum,
    Many people use Travel agents and not just for Luxury Travel.
    We have groups, weddings and just folks who want to arrange their cruise or all inclusive tours and safari. No they don’t call for a ticket from Denver to Omaha. The professional travel agents are live and well making good money too. Customers who appreciate personal service without the extra cost use us on a regular bases. :-)

  20. Eric R. says:

    I live fairly close to TTN, and I have seen the difference Frontier has made; people are even using for business trips – a couple of people I know have used it for business to RDU, since that is (almost) daily.

    As far as the strategy goes, I am wondering what Frontier will do at TTN after the fall closure. Supposedly, they are revamping the terminal to provide a second gate by moving the baggage handling outside (and um, adding bathrooms…). The problem is that there is still only so much seating, so it is hard to see them having more than 6, maybe 7 flights per day. And a new terminal would be several years off. They can’t go to the A 320 due to runway length (enter ILG), so they are likely limited to perhaps 50 flights per week out of TTN, which is 6,900 seats on their A 319s. That is only about 350,000 enplanements per year.

    Also, how would this strategy work for Frontier elsewhere? They have no flights at all to New England. What would be good airports for them? Worcester, perhaps, but Jet Blue is already there. Hanscom? The locals protest there very loudly. Portsmouth/Pease? I think that’s perhaps too far from Boston. Bridgeport and New Haven have the population, but Tweed’s runway is only 5,600 sq. ft. long – you might be able to get short flights with an A 318, but that’s about it.

    • CF says:

      Eric R – I think the strategy will work elsewhere if it works in Trenton. I would think Frontier would expand beyond what they have now if they can find a niche that works out well. I’m not so sure about New England, but you would think that there would be airports with opportunity. Even Southwest has really pulled down Manchester and Providence when compared to Boston these days, so it doesn’t even have to be a small alternate airport for there to be opportunity.

      (BTW, Frontier has ditched the A318s. I think the last one has left the fleet, but if not, it will soon.)

      • Eric R. says:

        CF,

        One other thing that occurs to me – if Indigo Partners buys Frontier and merges it with Spirit, this could present big problems for Trenton. It’s not that the service at ACY and TTN can’t co-exist; I think they can. But Spirit is terminating its A319 leases to go to an all A320 fleet; unless they keep some Frontier A319s, they cannot continue service in Trenton.

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