Topic of the Week: Will Frontier Succeed?

You’ve see two in-depth posts talking about Frontier’s future this week, and Indigo has now confirmed that the purchase will go through. So now it’s your turn. Is Frontier going to succeed as the next successful ultra low-cost carrier?


33 Responses to Topic of the Week: Will Frontier Succeed?

  1. JRS says:

    Allegiant and Spirit have been a success, is there room enough for a third ultra low-cost carrier? I think there is and hope so, my local small (Lansing, Mich.) airport will have Frontier flying for Apple Vacations starting in January.

  2. I think they will. Their business model is still kinda wacky – almost like different companies on the east and west coasts. TTN and ILG seem like they are working well, and maybe they can add some similar type airports (I was thinking maybe Newport News would be better off hitching their wagon to F9 rather than the peoplExpress reincarnation). Frontier has a better reputation than Spirit or Allegiant. I think they could be succesful. I hope they are… They have to get costs to where Spirit is, so let’s see if they can do it in such a way that is fair…

  3. I did see something yesterday that was positive about their Trenton and Wilmington operations, so if they keep it up, they could do ok. As long as they don’t sink to operations like Skybus which was doomed from the start, they have a chance.

  4. Len says:

    I was impressed with the level of candor and detail of the answers to Cranky’s questions. Sounds to me there are some brains behind the operation. I’ve never had a bad experience on Frontier, and personally wish them well. From a marketing perspective, I see ways Frontier can set itself apart from the Allegiants and the Spirits of the world. If they can do that and make a buck, I think they’ll be fine. Look at the near-term future of jet fuel prices -I hope they use a smart hedging strategy. There is money to be saved in the fuel arena if smart/lucky.

  5. Frontier has the advantage of being ULCC 2.0. The new owners have the benefit of all of the wrong things Spirit did and hopefully will adjust the business model to avoid the animosity those steps created while maintaining the profitibility.

  6. I see no reason why Frontier can’t be quite successful. Bill Franke and Indigo Partners seemed to do quite well with Spirit, so there’s no logical reason to believe they can’t duplicate that success.

  7. How well F9 can make DEN work, provided F9 is serious about that, is a key factor.

    F9’s brand loyalty was always primarily restricted to DEN, and now even that is not what is was pre-Republic. With further changes to its business model, F9 will tend to lose some of its most loyal and lucrative customers. With whom will F9 replace them, and on what basis will it appeal to them?

    DEN does not have the destination appeal of LAS, so there are not as many small market opportunities for F9 in DEN as there are for G4 in LAS. How will F9 compensate for that?

    How aggressive will WN and UA be in DEN? Long term, we feel it’s likely that WN will tend to have higher local O&D content at DEN than UA, so it’s not as if the local market is being ignored. With a low cost position, what profitable niche can F9 claim decisively enough to make DEN work if, as we expect, much of their existing customers’ loyalty is jeopardized by their ULCC shift? Because unless I’m missing something, F9 does not have a sufficiently large cash cow anywhere else on its system to allow it to subsidize an unprofitable DEN indefinitely.

    Net of it all, it’s not unreasonable to think that the odds of F9’s succeeding long term, while not negligible, will tend to be inversely proportional to the strength of its commitment to DEN.

    • davywavy says:

      90% of Frontier’s business is at DEN and Frontier made a $30 million contribution to Republic’s earnings in the just announced Q3 results.

      So I guess DEN is working pretty well for Frontier – despite the Conventional Wisdom that it cannot succeed at DEN up against United and Southwest.

      It is also hard for me to to imagine how Southwest can be any more aggressive. Ever since its failed bid for Frontier at the 20089 auction, the Southwest attitude to Frontier, at DEN, has been pretty much scorched earth.

      Indigo, the new owner, has confirmed the commitment to DEN and intends to inject more capital into Frontier, thus solving what has been one of the airline’s biggest issues.

      • Davywavy – The question is, when F9 changes its business model, what else (including its DEN profitability) will change? Our assumption is that the new brand will no longer be as relevant to a large percentage of F9’s most profitable DEN customers, calling into question its viability at DEN unless it can replace them effectively with new, profitable customers. We’re not saying they can’t – we’re just unclear on who they’ll be or where they’ll get them. Of course, if F9’s most profitable DEN customers remain loyal to the brand even after the evolution to ULCC, then these questions are moot (a fancy way of saying I’ll have been wrong). ESW…

        • davywavy says:

          But the business model is already changed. From a passenger perspective, Frontier is already – and has been for some time – a ULCC, and in 2012 was full-year profitable for the first time since 2003.

          nb: it was not cash positive that year – forward payments on the Airbus Neo ordered sucked out about $30 million.

          The profit centre is DEN, at least for most of the year, Q1 is still a drag. I’ve no idea if they are Frontier loyalists who have stuck with the airline thru’ thick and thin, because a very great number of those had no compunction in hurtling to Southwest. So it may be what Indigo says – that ULCC unlocks that part of the market that feels disenfranchised, as with both Spirit and Allegiant. I dunno, but Frontier has been having record load factors for months now and 91% load factor in September is a high number, besting Southwest by some 13 points.

          The biggest problem at Frontier is costs, which are still too high and Indigo has already said that aircraft utilisation will be increased as part of that. More importantly, Indigo has said it will increase Frontier’s capitalisation, meaning the airline will – at last – have cash reserves so that not every new city will need to be profitable from Day 1 (or potentially so) thus removing the p.r. nastiness of starting cities and closing them. For Frontier, the pressure will be off, for the first time since Southwest came to DEN.

          I have no doubt there will be changes and to the route map. Being DEN-centric was always Frontier’s best strength and its greatest liability, because it made the airline vulnerable to attack – all the eggs in one basket – which is exactly what happened.

          Frontier says that DEN is “crucial” and Franke/Indigo has agreed. DEN is in Frontier’s DNA, but it can’t be only DEN. The move to TTN and ILG was to solve one of the greatest weaknesses, winter, Q1, with the north south snowbird flying – the north-east to Florida. I shall fall over in shock if TTN does not get a fourth aircraft this summer, and I assume a further expansion at ILG.

          I’m guessing that future Frontier map will have one bigger dot at DEN and any number of satellite, but slightly smaller, dots around the country. I would include both CUN and PUJ in those smaller and, given Mr. Franke’s intense involvement in south-of-the-border enterprises, there may be others.

          I do not expect Frontier to be immediately stand-alone net profitable every quarter from Day 1 but as a privately held company it doesn’t need to be. Another pressure removed.

  8. A says:

    ULCC’s are for the leisure traveler, i.e. the most price sensitive customer. I go back to the comment I made the other day. For them to succeed they have to be the cheapest option – bar none – including the fees that level the field against the legacies. If you can constantly count on F9 being $100 or $50 cheaper than the DL, UA, AA guys than you’ve got something with traction. The closer that fare difference gets to par the less of a future you’ve got because you aren’t going to beat the legacies at their own game.

    • But part of aiming at the leisure traveler is that they’re not as aggressive at comparing all the options.

      ULCCs will have a bit of a struggle if the online sellers ever figure out how to show 3 people+2 bags+5 drinks in their pricing grids online.

  9. JayB says:

    Will Frontier succeed? It’s branding, coding itself F9, is a huge turnoff for me. How many people know that F9 is Frontier? I’ll bet many, many travel agents have no idea what F9 is.

    Now, branding on its planes, that’s well done. How could you possibly not know which is a Froniter plane. But, honestly, why would any airline want to have F9 as a code to describe its company?

    Alllegiant, G4, is also a joke. What, pray tell, makes one think of an airline, Allegiant when seeing G4. Of course, Allegiant flights don’t get listed in the Pocket Guide of OAG, so for many of us, they really don’t exist. [Maybe if I looked in a guide for travel companies I'd find Allegiant, but I'm looking for airlines.]

    Sadly, use of B6 doesn’t help me think of Jet Blue. Darn good airline, but B6?

    NK, Spirit. Let me think, maybe Knucklehead Airlines? Maybe some Japanese airline? Does nothing for me.

    True, questionable codes (to me) are not something that cannot be overcome. Southwest, WN, seems to have been able to work through this. But than again, Southwest can do anything. But, can you, Frontier, you crazy F9-line?.

    • james says:

      I really don’t think the average traveling public knows or cares.

      It’s like having the original area code in your city. It’s more desirable, but no normal person would think less of you without it.

    • David M says:

      Are we really thinking that airlines will succeed or fail based on their IATA code? With only two alpha-numerics to work with, there are bound to be plenty of codes that don’t have an obvious relationship to the airline’s name. Most passengers shouldn’t be seeing the codes until after they book anyway. If a travel agent doesn’t recognize a particular code for an airline common to their area, they’re not a really good travel agent, anyway. A Denver agent who doesn’t know who F9 is really ought to be finding another job. A Taipei agent might not, but it’s also pretty unlikely they’ll ever see it, and if they do, they can look it up.

      Plenty of big, international airlines have codes that might not seem obvious. EVA Air is quite nice, even with the IATA code BR. How did Qantas wind up with the F in QF, or Singapore with the Q in SQ?

      And who the heck is CA? Not Continental, they were CO. And you’d best not confuse them with China Airlines (they’re CI, on the other side of the Taiwan Strait). CA is Air China. I guess Air Canada got AC first.

      I don’t think having HP as their code was the reason America West wound up merging with US Airways. And Republic ditched their own RW to take Midwest’s YX.

      Frontier is lucky they at least got a code that starts with F. Many recent airlines take whatever they can get. Volaris is Y4.

    • james says:

      Also, F9 or airline codes are not used as branding. Southwest’s “LUV”, Frontier’s Animals, United’s “Friendly Skies” revival are all branding strategies.

      But, I do agree Spirit’s is completely wrong. Perhaps we could lobby to have it changed to “FU”, would be more apropos.

  10. Robert says:

    I truly miss the so many of the legendary airlines. The last two to go were Northwest and Continental Airlines. What a tragic merger story. What! For the likes of Delta and United! Yikes!! Frontier, Allegiant, and Spirit….truly “garbage” air carriers. No class, style, or substance.

  11. Michael says:

    If Frontier can supply a high level of customer service, I think they can succeed, especially given the Denver market controlled by Southwest and United. Their fares will have to come down, though, since they’re typically on par with Southwest.

    Unfortunately, Frontier’s road to ULCC has negatively impacted their customer service, especially turning off their frequently flyers. Despite being a Summit flyer on Frontier, I started flying Southwest.

  12. pilotaaron1 says:

    I honestly think they will. I often wonder what was said when jetBlue presented their business idea. At the time it was unique and it has worked really well for them. Sure there have been a few hiccups along the way but they have done well. Frontier’s idea is ULCC with a little twist. I like that and think they will do very well. And man did Trenton work out for them and they are still the only ones at the airport. I wish them the best. It shows that there is a place in this industry for innovation and new ideas.

  13. yo says:

    They will do OK. But I pity anyone that has to work with that demon Bill Franke…

  14. Paul says:

    There’s plenty of room in the US for another low fare carrier.
    Living in Philly I’d say Trenton is a good idea if for no other reason than convenience. They just need a reliable link to the nearby Trenton train station which has LOT’S of service. It is a traffic disaster from northern burbs of Philly to PHL. Most would rather avoid Newark.
    I don’t understand Wilmington as the airport isn’t all that convenient. Others have tried there without any luck. When I was a Sales Manager in the Travel Industry the joke with local travel agents used to be your car might not be there when you get back. Plus Wilmington city is a straight shot up 95 to PHL.

  15. astra says:

    Cranky, in DEN, Southwest seems content to match F9’s fares, even when Frontier announces a sale. How can any ULCC compete when you have a gorilla like WN simply equalizing their fares every time F9 tries to gain a discount advantage?

    • ChuckMO says:

      F9 is getting away from direct competition with WN and UA will feel the pain I think, the F9 of right now will be VERY different in two years.

  16. ANCJason says:

    I don’t think the question is whether they will survive under Indigo. I think the real question is what remnants of their former self will be prevalent after being morphed into Spirit’s network in a few years.

  17. Johann Trim says:

    I am a Denver-ite of many years and was Summit level on Frontier for 5 of the last 10 years. In 2011 I made the decision to go with Southwest for my business travel for a number of reasons. First and foremost, Frontier has started to “Play games” like the big boys. Boarding preference, carry on BS, lower fares for shit service. At least with Southwest and my AList Preferred status, I know what I am getting every time. It is consistently a high quality product despite the “cattle call.” Last week I took a DEN->DFW->DEN day trip on Frontier, and was very, very disappointed with it. The level of service, cleanliness, clientele, and level of perks for the money has definitely gone down. If Indigo wants to make this a successful venture, I say they need to emulate Virgin and Jetblue. Higher fares, yes, but premium product as well. Just my 2c, J.

    • davywavy says:

      I guess it takes all sorts. This came out a couple of days ago:

      http://www.latimes.com/travel/deals/la-trb-study-ranks-frontier-no-1-airline-20131106,0,2955931.story#axzz2k59PCLbo

      [i]“Frontier No. 1 in airline ranking

      Frontier, Virgin America and JetBlue came in 1, 2 and 3 respectively in an annual Airfarewatchdog.com ranking that factors in such elements as customer service, on-time arrivals and baggage handling.”[/i]

      • Yeah I saw this too, perplexing to me. Maybe the cheapness of the fares was a bigger influence here? Frontier is *definitely* cheap, consistently cheaper than Southwest on every single segment I fly. Still, the absence of things like Wifi means they are a hard sell for me on anything but a really short flight. I think they need to rip those TVs out and get wifi, maybe go for a premium cabin (I think Jetblue is doing this too) – revamp their rewards program, etc. Myself and a lot of other business travelers pay for the premium experience, and almost no one delivers it anymore.

        • davywavy says:

          The tv’s are eventually going – the new A320 will not have them installed, but I don’t know if they have decided on which Wifi system yet.

          I doubt a premium cabin will happen because Frontier is going for the ULCC model, and I think your issue with the airline is in your comment on your “A List Preferred Status.”

          The ULCC model isn’t designed for people who prize that that status. It is designed for people who want low fares, and that has been the reason for the turnaround in Frontier’s financial fortunes.

          • Yep, no doubt. I could care less about the fare as long as the plane is safe and the seat is comfortable. I actually don’t care about the status either – it just helps get around the open seating at Southwest. I actually think that anyone who is truly espousing the ULCC model as a company should think about open seating as well. Having flown Southwest and the competition over the years, seats are responsible for a lot of delays, hassle, more need for IT and automation, all kinds of bad stuff.

  18. Bill W says:

    I have been flying for over 44 years, and I am not alone in saying Frontier has the WORST performance and customer service of any airline I’ve used. Even Hughes Air Worst in the seventies was orders of magnitude better than Frontier. I for one think Frontier should go bankrupt tomorrow. This “ULCC” concept is very bad news for the consumer. I miss the old days when flying wasn’t about getting charged extra for every little thing, and the airlines actually cared about the passengers. Based on the reviews Frontier is getting from the flying public, they will run out of customers willing to gamble on having a pleasant flying experience in spite of all the evidence to the contrary. I say good riddance, but it really doesn’t matter to me now. I will never ever ever fly on Frontier again. Even the older larger airlines are throwing customer service out the window in favor of profits. Southwest for me!!

  19. davywavy says:

    “This “ULCC” concept is very bad news for the consumer”

    It is very good news for some consumers. The ULCC’s – Ryanair, Allegiant and Spirit – are some of the most profitable airlines in the world, and – happily – Frontier is now making money again. Spirit has some of the highest margins in the business:

    http://www.fool.com/investing/general/2013/11/02/spirit-airlines-profit-soars-shareholders-shrug.aspx

    “On Wednesday, Spirit Airlines (NASDAQ: SAVE ) reported a record quarterly profit, as its already strong margins soared to stratospheric levels.”

    It isn’t for you? Fine – It is called choice, and I wonder what the problem with that is?

  20. DCAfficionado says:

    I’m with Davywavy on this, whatever the profitability of other low-cost carriers, as a former Midwest/Midwest Express customer with more than 80k miles now on Frontier, I have watched exceptional customer service degraded to requiring HOURS (not exaggerated) on the phone waiting for Early Returns customer service, elimination of the route I flew most and a single daily flight to either alternative destination, a terminally clunky website and fees for phone reservations, a broken seat up-front that was mine and gate staff who insisted I sit in row 15 when I asked for the next seat upfront (there were many empty seats closer to the front). When I asked for compensation for not being able to sit in the pay seat up front, the gate staffer said she’d take care of it on-board and, when she arrived on-board, her answer was to give me a card with Frontier’s customer service number on it. (MORE HOURS of holding on the phone–forget it!!!) Then, when calling to ask to have the miles included in my early returns account, I was informed that their records showed I’d taken the return flight but not the flight out—-WHAT???? How did I get there and why wouldn’t the flight manifest interface with their records? MAYBE because they eliminated my seat because it was broken? Who knows? Well they fly planes but I’d hardly call this an airline. Can’t see how an equity firm would improve it–can’t have fewer people doing less than they already have.

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