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.
8 comments on “Frontier Shuffles Its Fleet to Cut Losses”
LOVE the Shuffling Crew graphic there, Cranky!
Republic’s moves are an acknowledgement of reality. I believe AirTran is cutting back at MKE also. Frontier’s position is not completely untenable and, I believe, will be helped by the Southwest / AirTran merger. The idea of having both mainline and regional carriers under one roof is nothing new; but Republic’s model is the reverse of the “normal” scenario. It’s nothing if not gutsy.
The idea of having four mega carriers will take a lot of the romance and interest out of the airline industry. It will also bring boring profitability. If you want an example, just look at the railroad industry. It’s not nearly as interesting to watch as it was twenty or thirty years ago.
“The idea of having four mega carriers will take a lot of the romance and interest out of the airline industry.”
Well, that ship has sailed. The airline has sucked for several years now.
Hopefully the shuffle works for them, but whatever they do they need to stick with it. People don’t like when an airline changes things to much or to often. They think that airliine might be in a down hill slide and start booking on other airlines.
Partially I wonder if the F9 loss might not be a function of their inability to get their low fares into top-of-mind of prospective passengers. They have been undercutting WN heavily out of DEN, but people still believe, often wrongly, that WN always has the lowest fares.
I think F9 has good mindshare in DEN. Although what you just said is basically the argument for WN not listing on other internet sites via GDSes.
A bit of clarification on the 51> RJs:
–The RJ’s are only in the Milwaukee operation, primarily flying routes which have always been RJ like Flint, Dayton, Nashville, Green Bay, etc. Most of those are historically high-fare markets…really the only place an RJ has a shot at making money.
–They are also getting rid of three of their six 37-seat E135’s in September, and likely will shed two or three more. Some of the added E145’s coming from Continental will replace the E135s.
–Although they did replace six total Milwaukee E170 round trips with E145 for summer (1x each to Newark and Omaha, 2x each to Minneapolis and Philadelphia) it seems very unlikely it will go much further because pretty much everything left as EJet or Airbus are high-volume markets with exposure to low-cost-carrier competition. The RJ’s are not economically so awful flying to Philadelphia because they competed with other RJ’s in a high-fare environment. Sending an RJ to Washington against AirTran 717’s and 737’s is just not workable.
With more E170 leaving the fleet faster than originally anticipated, they will definitely stretch themselves thin with the remaining fleet — only a few Airbus are planned to arrive yet this year, and the E190’s on order which were supposed to start coming in July are delayed a few months due to Japan earthquake component delays. That means some reductions later this year, especially if fuel continues to be so high. But don’t expect 50-seat RJ’s to take over anything in Denver, nor Kansas City, nor much more (if anything) in Milwaukee. If anything, it wouldn’t surprise me to see Frontier have a few less total small RJ’s in service come fall, especially if fuel is high. That would mean some cuts, but with high fuel it probably makes more sense to park excess RJ’s than fly them at an even bigger loss.
The biggest question is what will happen with the Midwest Arbitration against RP?
It would seem that if RP is forced to bring the Midwest FAs and Pilots back it could be a big battle.