Republic Airways announced a small first quarter loss the other day, but really, it was a tale of two airlines. Its Frontier subsidiary lost a bunch of money while the “Express” flying it does for other airlines made money. How is Frontier looking to fix things? By shuffling its fleet.

Frontier has long had a preference for smaller airplanes, which seems kind of strange. Larger airplanes allow for lower seat costs, and that helps low cost airlines in particular. The bulk of its fleet was made of adequately-sized A319s with 136 (soon to be 138) seats but it also had an 11-strong fleet of the smaller A318 aircraft. That airplane has been a terrible seller, primarily because there are other airplanes (the Embraer 190/195 comes to mind) that are much more efficient. Airplanes that shrink significantly from a larger model rarely do well.

Over time, Frontier realized this wasn’t the best plan and it started to go bigger. It ordered some A320s and it started retiring the A318s. Those airplanes were so undesirable that at least one has been turned into beer cans. Now, however, it has a different airplane problem, thanks to its owner, Republic.

When Republic bought Frontier (and folded the carcass of Midwest into the Frontier brand), it brought a bunch of small airplanes with it. Somes of these airplanes did not have a home flying “Express” with another airline so they went into the Frontier fleet. The Embraer 190 has become a mainstay of the fleet, but the Embraer 170 and smaller Embraer 135/145s were more awkward fits.

In the first quarter of this year, Republic lost $600,000 before tax. The Frontier operation, however, lost a whopping $55.2 million. You math majors know that the rest of the Republic operation must have been profitable. To be fair, that was an improvement for Frontier, but it’s not good enough. So what’s the plan?

The remaining four A318s will be gone by the end of the summer. Republic is also working hard to get all the Embraer 170s placed with other airlines. Delta has committed to take 14 of them and if there are any others left, they’ll be going out of the Frontier fleet as well.

That move, however, isn’t all great news. There are 50 seat ERJ-145s coming off contract with Continental that will go into the Frontier fleet instead. This will help serve some of the cities that were being served by Embraer 170s, but those aren’t exactly the most cost-effective airplanes around either. Still, if there’s not enough demand to fill a 70 seater, then it’s better to fly it with 50. These will now be flown under the “Frontier Express” moniker. So Republic is now flying as an Express carrier for itself. I believe that may cause a rip in the space-time continuum.

By the way, just playing the shell game with airplanes isn’t all that Frontier is doing. It’s also axing some routes. Milwaukee to San Francisco and LA are gone. These were always low fare markets, but when fuel spiked, it had to have made them really ugly. Longer haul, low fare routes are most at risk when fuel spikes, because they see the biggest impact.

So where does this all leave Frontier? Like every other airline, it’s struggling to adapt to fuel prices, and it’s not winning the battle. But its situation is improving in the big picture, so that’s important. At this point, it’s just a matter of whether or not Republic can right the ship before shareholders start getting angry. At least Frontier is being proactive and not sitting on its hands.

Frontier rolled out a slew of changes last week, and most of them are very customer-friendly. In fact, these moves make it seem like Frontier has decided that its niche is going to be actually taking care of customers. If it can use that as a differentiator, more power to the airline. So far, I love the moves as a traveler. Let’s see if it brings more business to the airline.

Before we get started on the changes, it’s important to remember how Frontier sets up its pricing. The airline has its base Economy fare, a buy-up to Classic, and then the top level Classic Plus. The idea has been to bundle various fees into the higher levels to encourage people to buy up to higher packages. This announcement will help build more value into the higher levels. Here’s a chart with some of the benefits (click it to enlarge). See the Frontier website for the full list of what’s included in each type.

Now, let’s talk about what’s new here.

Change Fees Dropping
At one point, Frontier had matched the big guys with a $150 change fee. That was quietly reduced to $100 and now it’s going down to $50. But that’s only for Economy. Classic and Classic Plus fares will have no change fee at all. You have to imagine some of this is to deal with Southwest and its lack of change fee with its increasingly overlapping presence in Denver.

Bag Fees Dropping
The first bag is $20 on Frontier, but if you check-in online, you’ll now save $5. This tells me that a lot of people aren’t bothering to check-in online, so Frontier needs to use an incentive to help change that behavior.

Bike Fees Dropping
Before, there was a flat fee for checking your bike. Now it will just count as a regular bag. So if you pay the bag fee (or you’re on a ticket with no bag fees), then you can just check a bike instead of a suitcase. In outdoorsy-Colorado, Frontier’s home, this should be a big selling point. This also matches the Southwest policy while United still charges an extra fee.

Name Changes Now Allowed
Most airlines shudder at the thought of allowing name changes, but Frontier is jumping right in . . . with a catch. If you have an Economy or Classic ticket, you can give your ticket to someone else for a $50 fee. Classic Plus customers pay nothing. But there is one more thing. The name change will also require paying the difference between the original ticket and the fare available on the day of the change. So it’s like any other ticket change.

There are a couple times where this could be advantageous for the new customer. If the original ticket is in a booking class that’s currently sold out, then this will be cheaper than just buying a new ticket directly. If the flight is completely sold out, then this becomes even more important. In those cases, then it’s a big value to both side of the equation, but in more normal circumstances, it will benefit the original customer and not really anyone else. Still, it’s a great benefit because now for no more than $50 (assuming the new customer pays for the total fare), the original customer can get rid of a ticket instead of having to sit on a credit that might never get used.

Hello, Frontier Express
The turboprops and sub-50 seat regional jets are now going to be branded as Frontier Express to show that the onboard product is different. That’s great, but there’s no difference noted between the larger EMB-170/190 airplanes with no TV and the Airbus airplanes with TV.

Beyond these announcements, Frontier is making changes to its Guest Commitment which created some unparalleled benefits. I’m not entirely sure which of these are new and which are old, but here are some of the points that grabbed me.

Pay for Delays
If your flight is delayed 2 to 4 hours and it’s Frontier’s fault (not weather, etc), you get a $50 certificate for future use on Frontier. If it’s 4 to 6 hours, you get $100 certificate and a meal voucher. If it’s more than six hours, you can double that to $200.

Bag Fees
As we discussed yesterday, if your bag doesn’t travel with you, you get the fees refunded. Even if you check a bag and didn’t have to pay a fee, they’ll still give you a voucher worth the amount of what the fee would have been had it not been waived.

Stretch Seating Refunds
If you paid for Stretch seating (extra legroom) and didn’t get to sit in it for one reason or another, you’ll get a refund.

Rebooking If It’s Not Frontier’s Fault
Let’s say you’re delayed and it’s not Frontier’s fault. The weather’s bad, air traffic control, etc. Frontier will actually put you on another airline with which it has agreements if it can’t get you on Frontier within 3 hours, unlike other airlines. Unfortunately, Delta stubbornly doesn’t have one, but American, United, and Continental do. Southwest doesn’t, of course, since it doesn’t play nice with anyone.

I like what I’m seeing here. Frontier is trying to make policies more customer friendly. I’m sure some of this is related to the increasing competition from Southwest, but it can’t all be for that reason. Now it’s up to the traveling public to actually shift business to the airline so these changes can be justified.

Anyone who thinks that the days of airline schedule retaliation are over clearly hasn’t been watching Delta. The airline is royally pissed that Frontier had the gall to enter the Minneapolis to Kansas City market and now it’s unleashing its own response to try to change the airline’s mind. What a waste of a good airplane.

On March 2, Frontier said it would begin two daily flights between its mini-hub in Kansas City and Minneapolis on June 6. Before these flights, Delta was the only one operating that route. It was big enough that there were even some mainline Delta flights out there. So you would expect hard price competition between the two and maybe a little beefing up/tweaking of Delta’s schedule to best position itself against Frontier. But the reaction was far stronger than that.

Delta has quietly added new flights that sit right on top of Frontier coincidentally (yeah right), also beginning on June 6. You will now get two daily flights from Kansas City to Boston, two to Columbus, one to New Orleans, and one from Omaha to Washington/National. Why do I say this is retaliation? Because there’s no other way to look at this.

The only nonstop from Kansas City to Boston, Columbus, and New Orleans right now is on Frontier. Apparently Delta forgot to look at the tapes, however, because the Columbus flight will end on June 3. But these are also the only nonstops from Kansas City on Frontier that have no direct competition except for Austin, Seattle, and the newly-announced San Antonio flight. There’s no way Delta is going to want to waste that much aircraft time to bother with Seattle if it’s just retaliation. And Austin and San Antonio really aren’t Delta’s domain. They can leave that to the Texan airlines.

But possibly the biggest smack is that Omaha to Washington route. That’s one of the legacy Midwest Express (now part of Frontier) routes that has been operated for years. Right now, Frontier flies it twice daily but Delta is coming in to spoil the party.

Though I doubt this is the main catalyst, this move might also be a little kick in the pants for Frontier’s decision to fly to Provo, an alternate for Delta’s big Salt Lake City hub. Never a dull moment in this business.

So what’s the bottom line here? This is an attempt by Delta to convince Frontier not to bother starting Minneapolis. The hope is that if the collateral damage is too much, Frontier will walk away with its tail between its legs (sticking with the Frontier animal theme). But Frontier isn’t likely to budge on this, I wouldn’t think. Instead, both airlines may just suffer losses for awhile as they compete hard against each other. At some point, someone at Delta will realize that it’s a waste of time and pull out.

It always amazes me that airlines continue to try these types of tactics that so rarely seem to succeed. And since it’s nearly impossible to prove anti-competitive behavior, there’s nothing really stopping Delta from doing this other than someone on the inside looking at the balance sheet and saying that it’s a huge waste of money. At a time when fuel is spiking, decisions based on spite instead of actual commercial viability really are a waste.

But hey, there is a silver lining. Cheap fares for Kansas City-folk for awhile! Enjoy it while you can.

Frontier announced its summer plans this week, and we have some interesting surprises as well as a big disappointment. The bad news (for me) is that Frontier is pulling out of Long Beach. Bummer. But there are some interesting new routes coming instead.

• Provo (50 miles south of Salt Lake City) will be served once daily from Denver with an Embraer 190
• Knoxville will be served four times a week from Denver with an Airbus A319
• Sioux Falls will be served once daily from Denver with an Embraer 190
• Minneapolis will be served twice daily (once on Sunday) from Kansas City with an Embraer 170 and 190
• San Antonio will be served five times a week from Kansas City with an Embraer 190

What do you think?

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