The Remaking of Frontier Shows Positive Results


When you think of Frontier, what comes to mind? You probably think of an airline flying mostly out of its Denver hub. Maybe you remember its brief fling with Milwaukee after the merger with Midwest. But chances are that what you think of Frontier isn’t what Frontier actually looks like today. So what is Frontier? It’s an airline taking advantage of a growing opportunity for low cost carriers. I talked about Frontier’s decision to become an ultra low cost carrier back in January, and the makeover continues. The change appears to be paying off.

There’s no question that Frontier is a work in progress. Its previous plan to be a more traditional hub and spoke low cost carrier wasn’t working. Milwaukee had tremendous over-capacity and Denver was a bloodbath with United and Southwest all fighting it out with Frontier. So what did the airline do? It started to remake its network. There seems to be a three (or three and a half) part strategy to this network shift.

Frontier Route Map

1) The Beach
Frontier has actually long dabbled in serving sun destinations from several places throughout the Midwest. There was a surprising amount of service to places like Cancun. But Frontier has stepped this up further. Much of this has been through its agreement with Apple Vacations. Apple Vacations used to operate its own airline, USA3000. But the airline was wound down and now Frontier is doing a lot of flying for Apple. That is good money to keep the fleet flying, particularly during the winter.

2) The Ghost of AirTran
When Southwest decided it didn’t want to take anything from AirTran’s small city network in the US, it opened up a big opportunity for someone with lower costs to step right in. Frontier has certainly taken advantage with a host of flights in smaller cities, particularly from its burgeoning Orlando operation which now serves about a dozen cities. But Frontier hasn’t stopped with just AirTran cities like Knoxville or Harrisburg. It has announced interesting choices like Greensboro and Trenton, both of which might have been on AirTran’s map at some point had Southwest not taken over.

3) Ducking Meaningful Competition in Denver
The third prong to the strategy seems to be to look for cities from the Denver hub where either nobody else flies today or there is limited, high fare service. We saw this start awhile ago with cities like Branson and Provo (Utah) coming on the map. Then we saw places like Newport News, Knoxville, and South Bend. Just recently, the airline announced it would start flying Denver to Phoenix-Mesa Airport (about a 30 mile drive southeast of Phoenix Sky Harbor Airport where most airlines fly). Frontier is also going into cities like Fargo (again). But instead of trying to run a business schedule, it will operate three times a week. This gives a good, lower cost alternative to United’s expensive 50 seat regional jets.

There is also a “third and a half” strategy of just picking off random routes that seem to possibly support demand. Things like Vegas to Durango in the winter. Or a few routes out of Colorado Springs. The idea is that with so few low cost carriers really serving the US market these days, there is great opportunity and Frontier isn’t limiting itself. Think about it. Southwest isn’t really low cost these days. JetBlue really runs mostly up and down the east coast (with few exceptions). Allegiant does small city to big city almost exclusively. And of course, Spirit has been trying to capitalize as well with rapid expansion. But for a country the size of the US, that means there is still plenty of opportunity to be had.

The result of all this is a Frontier route map that looks a lot different and will continue to look different. With many of these cities coming online with service only a couple times of week and others being seasonal, Frontier now has quite the expansive route map. But will this work?

Proof is in the Profit
So far, the results look very good. In the second quarter of this year, revenues were up more than 11 percent to $370.7 million. Aircraft were packed with a 90.1 percent load factor, and unit revenues climbed 8.3 percent. Revenues are doing well, but what about costs? After all, if you want to be an ultra low cost carrier, you need to actually have low costs.

Frontier actually made great progress. Excluding fuel, unit costs dropped 5.7 percent. That’s a mix of lower costs and higher seating density on the A320 aircraft, which helps to lower the cost per seat. Most importantly, the airline posted an operating profit of $15.5 million. That roughly 4 percent operating margin may not be as good as it needs to be in the long run, but considering the airline lost over $30 million in the same quarter last year, that’s a great improvement and certainly shows real, tangible progress.

As a traveler, I’m actually quite excited about the prospect of a thriving Frontier, assuming things don’t change too much. Why? Part of it is that Frontier is trying to be a more customer-friendly version of an ultra low cost carrier (as compared to Allegiant and Spirit), and that should be a welcome development. But it’s really something else that has me interested. Frontier is the only ultra low cost carrier that may very well end up bringing small cities into the global airline network.

Lets use Fargo as an example. Today, Fargo has traditional high fare service on United to Chicago and Denver, American to Chicago, and Delta to Minneapolis. American and United fly 50-seat regional jets while Delta uses some larger aircraft. But fares are still pretty high. Now, Allegiant serves the market, but Allegiant will only get people to LA, Orlando, Vegas, or Phoenix. It won’t sell connections and it certainly won’t work with other airlines. Don’t get me wrong. The service Allegiant provides is great, but it has limited utility.

But Frontier is coming in with 3 flights a week that will connect in Denver to the rest of the airline’s network. More interestingly, Frontier does work with other airlines, and it has ticketing and baggage agreements so that travelers from Fargo can connect into the larger global network if they so choose. That is something that smaller cities have been begging for. Of course, Frontier might decide that it’s too expensive to maintain these kinds of relationships, but I really hope not. I’d like to think there’s a model here that works. At this point, it seems like Frontier is trying a lot of different things. And the results are encouraging.

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40 comments on “The Remaking of Frontier Shows Positive Results

  1. I have had to opportunity to fly them recently and I have to say the service was terrific! I had to get to Denver from DFW at the last minute and I just went to the airport. The ticket agent found me a fare after looking for several minutes that was actually lower than the website. I thanked her for all her help and she said…just remember next time fly Frontier. With that kind of service I certainly will!

  2. That map shows a lot of dots and lines east of Denver, but west of Denver still looks like just service to cities other carriers using Denver fly to. Is that their east/west plan, just to use DEN to feed to/from the bigger markets in the west to smaller markets in the east?

    I wish them well and a friendly low cost carriers that you don’t always have to hear bad things about like Spirit.

    Off top (in away), Brett are we going to hear from you about Allegiant dropping some cities from LAX because they say they don’t have gate space or ticket counter space to keep flying the markets? Sound like bull to me and more like they were not making any money so are just dropping them.

    1. David – I don’t think that’s the case. There are probably just more opportunities heading east so far. But you do see Frontier in Provo (Utah) and now Phoenix-Mesa. Also the Vegas-Durango flight is an interesting add. So I would expect we’ll see more of it in the west.

      As for Allegiant at LAX, I actually have been working on that one. It was scheduled for Thursday but I need more time to work on the one I wanted for tomorrow. So you’ll read about Allegiant in the morning. It doesn’t appear to be bull. Allegiant drops routes all the time and never needs an excuse.

      1. Hmm, I hadn’t heard an Allegiant announcement about LAX, but a few weeks ago I was looking to fly to Billings and noticed that the last flights in the schedule were on Veterans Day weekend so I was wondering what was up with that. Now I see that their website is not selling any flights after Labor Day! Flights are still in OAG until Nov 12, nonetheless I’m happy I didn’t make a booking :-)

        As for gates, I believe this is an issue for Allegiant: they had gate problems in 3 of the 4 segments I took in and out of LAX. It appears they typically get the worst gates in Terminal 6 (the ones that happen to be non-functioning at the moment).

  3. Gerald R. Ford Airport in Grand Rapids, MI sadly has seen service from Frontier
    dwindle to just one flight a week to Denver. In the past few months they
    lost daily flights to Milwaukee and three weekly flights to Washington D.C.
    No surprise that they are not happy with Frontier these days. Thats the way
    it goes sometimes.

    1. Is that correct? I just looked at F9’s DEN-GRR schedule and show a daily flight (and return) through 9/2.

      I’ve taken this non-stop often to GRR, so that comment came as a surprise…

  4. I agree that if you are in Fargo and want to get to MSP, DEN or ORD the flight can be pricey on the legacy carriers, but if you’re just connecting you likely won’t notice much difference. Recent example, I was meeting friends in Fargo and one was flying in from PDX. I offered to pick him up at MSP and carpool, however there was no difference in his fare if the destination was MSP or FAR, so he made the connection and I picked him up at FAR. (after I drove 3+ hours in lieu of paying $500 for a 1hr flight.)

    Not saying FAR is a bad move as North Dakota is doing unusually well in this economy, but those high fares are probably more disguised than your analysis implies.

    1. A – I’d say that mine was less analysis or more generalization! But let’s look at that Portland market. Fares can be similar depending upon when you book. But they can be very expensive as well.

      The cheapest filed fare for October in Portland to Minneapolis right now is $199 one way with a 7 day advance purchase. That’s on US Airways and Frontier. Meanwhile, the lowest fare in Portland to Fargo is $420 roundtrip with a 21 day advance purchase and a Saturday night stay required. Please keep in mind that these are base fare plus 7.5 percent excise tax. It doesn’t include other taxes and fees so this isn’t a fare you can buy. (That’s my new DOT disclaimer.)

      So let’s look at this another way. If you need to buy a ticket 10 days in advance with a Saturday stay, you can do it for $398 roundtrip to Minneapolis or $630 roundtrip to Fargo. Not staying over a Sunday, the best you can do into Fargo is $990 roundtrip. So it is still a very expensive market in some sense.

  5. I checked the GRR website, it does indeed say one daily flight to Denver so it looks
    like I misread or misunderstood something in the local newspaper website talking
    about Frontier cutbacks for Grand Rapids. Sorry about that.

  6. Nice article Brett. The new Frontier management team is making great strides (using technology/analysis rather than a dartboard) in determining how to restructure the route network into one that can consistently generate profits while continuing to provide an excellent product.

    Amazingly, they have determined that a money losing city pair can be made profitably simply by removing a specific daily departure from the schedule or going to a less frequent 3x weekly, etc. schedule. No sense losing money trying to make everyone happy when you can be profitable making some people happy.

    We often overlook the fact that airlines do not operate as a charity, but like most businesses, exist with the primary goal of turning a profit. Otherwise, they tend to go away. Frontier just about did a few years ago, but is slowly putting the pieces back together that will hopefully provide continued profitable route growth so that more passengers can have an opportunity to experience the airline that we affectionately call “a whole different animal.”

    Disclaimer: just the personal comments of a Frontier Airlines pilot.

    1. Ron – My guess is with 2 daily flights on Southwest and 5 on United (including three on mainline jets), there was a lot of capacity and not enough demand for Frontier to make it work.

  7. I was glad to see this post on Frontier – I think they’re a great airline with solid service and amenities, and I’m happy to see them doing well.

    Now, if only they could spend some of their profit on technology upgrades…

  8. I guess this begs the question can Frontier survive if DEN completely fall apart for them. You can only cut so much before the hub falls apart and starts burning money like its doused in gasoline. If anything WN may turn the DEN screws even more.

    1. Felix – I think the point of this is to be much less dependent on that Denver hub, which wasn’t producing great returns anyway. There’s a lot more diversity than there used to be in the network. And where it is in Denver, it now has more small cities to help it succeed.

  9. I welcome Frontier giving Allegiant a run for its money. I’ve often done a jerry-rigged connection with two Allegiant flights or Allegiant and another carrier and it is a (cheap) pain. I also +1 the other opinions for more articles on these smaller carriers.

    1. Yes, the plan is to sell off Frontier. But maybe that will change now that Frontier performing well. I’m not sure.

      1. Ah – not quite.

        The plan has always been to “separate” Frontier, with a sale as only one of three options.

        From the git-go (the FAPA) agreement last year) it was said that Republic would take a minority holding in Frontier and one suggestion was that RJET shareholders might participate.

        It’s has always been odd to me that Mr. Bedford said “separate” and all everyone heard was “sell.” :-)

  10. Brett, I think F9’s strategy of offering three “classes” of service with tangible benefits (legroom, priority security and boarding, on-board amenities, etc.) helps the airline, along with keeping the price points between the different “classes” fairly reasonable (for example, ~20 trade-up from standard economy to “Classic” for an SFO-DEN mid-week round-trip in November). The airline also merchandises the product benefits in the booking path. Frontier claims the “Classic” fare offers “up to” $100 in additional benefits. That’s smart.

  11. Flew Frontier lat night on one of its longest flights: an A319 from Fairbanks to Denver (flew a PMCO 737-800 up there…those coarse blankets are handy). The flight was quite full, the FAs were tired but reasonable, the Izze was tasty and the cheese/fruit plate was fine. Oh, and tickets were very reasonably priced: $210 OW for four tickets, $2.50 plus 12,500 miles for the fifth. Hence my willingness to pay $8 for a small soda and a fruit/cheese plate.

    As someone who has been in Denver for the past five years, F9 is my favorite airline, and I hope they keep on fighting in DEN…their cost structure vis a vis Southwest should allow them to do this without issue. But hey, if they start other routes that prove profitable, that’s awesome…they’re a heck of a lot better than Spirit or Allegient IMO.

  12. Bret I have a soft spot for Frontier, nice analysis. The global airline network for small cities is an important factor that is generally not discussed and I hope Frontier will support the connections. I checked on the Frontier web site for connections from Trenton and Harriburg. It appears at this point Harrisburg will have full network connections but Trenton will only offer MCO flights with no connections. I wonder if F9 has considered Worcester MA (ORH) flights. Jetblue management has visited Worcester twice since Direct Air left. It may just be a Massport quid pro quo but F9 may be able to work a deal too.

  13. I wonder if they’ll make a run for the $550K grant SGU just scored to get service to DEN. Selfishly, I’d like SkyWest to get it as UAX so I can stop driving to LAS for flights, but I can see it being similar to Provo for F9…especially with all the national park access down this way.

      1. I’d move Frontier’s slim MKE “D” Concourse Ops into “C” Concourse, and move United’s (Old Continental’s) “E” Concourse Ops into “C” Concourse with United’s other Ops. Then move Air Tran Ops over to “D” Concourse with Southwest.

        That would leave Delta with all of “E” Concourse and Southwest with all of “D” Concourse. This would make sense!

  14. Great analysis Cranky and the changed route map is striking. Frontier has had some experience in serving some smaller markets (i.e. Akron/Canton) and making it work. As someone who lives in New Jersey I’ll be interested to see how Trenton does. You would think it would have the catchment being in the central portion of the state and able to attract customers from both north and south, plus Bucks County, PA which is right across the river. TTN is a great little airport…small, convenient, similar in ways to Key West. We’ll see…

  15. Frontier announced today they will be serving Columbia, MO twice weekly to Orlando. The service will be on A319 aircraft. This is a somewhat surprising move because until approximately one year ago it only had EAS service. Delta has since dropped the subsidy and now offers daily flights to Atlanta. Not sure how much demand there is to Orlando, but they know more than I do.

  16. I’d like to see better service out in and out of GJC. It’s well located, and a great airport in the Winter, when everything East of the Continental divide gets bad weather. Frontier/Republic was flying the Q-400s in and out of Aspen. Don’t know why they stopped the service.

  17. I’m sad to hear that after more than 4 years of what appeared to be successful service in Wichita, Frontier is pulling out in November. We’ve used their flights to Denver countless times at a far cheaper fare than United, and we’ve heard that Frontier’s load factors have been consistently high. I guess lots of passengers just doesn’t mean profitable in their world.

  18. There is a widely held view that Frontier is “aping Allegiant” in its present model, but I wonder if that is true.

    If the strategy is defined as “less than daily to a resort city” then that goes back ten years or more, at Frontier, to the early days of Mexico. DEN-CUN was originally less than daily and most of the other Mexican routes still are.

    If PHF is a gateway to Virginia Beach, then that began as less than daily and we know that BMI (less than daily) was profitable in its first month, because the airport was said so.

    Certainly, the new additions at MCI are smaller cities, but that is true of DEN as well (MOT) and no one raised the Allegiant comparison with MSN-MCO – it was perceived as natural, that is organic, growth.

    It seems to me that with the (imposed) Midwest Distraction out of the way, Frontier is returning to its core strengths and that the only airline it is copying is itself.

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