I’ve railed against Miami International Airport and its absurdly pricey airport projects in the past. All this drunken spending gave Ft Lauderdale a huge boost as the low cost alternative while Miami lost all of its low cost carrier service. But now, Frontier is moving into Miami with flights to Chicago/O’Hare, Denver, New York/LaGuardia, and Philly. Spirit has been sniffing around Miami as well.
This sounds insane. Why would an ultra low cost carrier want to fly to one of the most expensive airports in the US? In a strange way, it’s exactly Miami’s high costs that have created this opportunity.
When Miami decided to start spending like an airline dork in a model shop, it failed to really grasp that Ft Lauderdale was such a good alternative. Today, Southwest, JetBlue, and Spirit all have very significant operations at Ft Lauderdale while no low cost carriers (except for Interjet to Mexico City) serve Miami. The last disappeared when Southwest bought AirTran and cut the airline’s already reduced flight schedule in 2012.
With Ft Lauderdale as the low cost carrier center of South Florida, Miami was left to cater solely to full service airlines. What does this do to fares? I’m sure you know the answer, but take a look at the spread in the markets which Frontier will be entering.
Those are some really big differences. With low cost carriers gone from Miami, American was able to dominate with more than 80 percent of the domestic market. And with the help of its oneworld partners (Air Berlin, British Airways, Finnair, Iberia, LAN/TAM, and Qatar), American also dominates the international market. It’s a very powerful hub.
The combination of a dominant hub carrier at an expensive airport and a convenient low cost alternative on the other side of town meant that fares were bound to stay high in Miami. This isn’t a surprise. But it’s also not a surprise to see an ultra low cost carrier thinking it can find a niche.
Frontier looked at Miami and must have figured it was worth taking a chance. Yes, the airport is too expensive. It costs more than $20 per enplaned passenger to fly there. To compare, even with increases at Ft Lauderdale, that airport is still only around $6 per passenger. Even with Miami waiving the first 12 months of landing fees for Frontier (shaving a couple bucks off per passenger), for an ultra low cost carrier, Miami’s costs sound like a huge problem.
So what is Frontier thinking? Well, part of this could be the Frontier vs Spirit spat. Spirit has been looking at Miami because it knows that there is a market there. Frontier, under Spirit’s previous ownership, beat Spirit to the bunch. That must be pretty satisfying, but I’d hope this fight wasn’t a real consideration when deciding to serve Miami. There are better reasons to give this a shot than trying to one-up a competitor.
Ft Lauderdale has a ton of low cost carriers, as we know, but there are a lot of people who would prefer to fly out of Miami if the price were right. The right price for Ft Lauderdale can’t be the same price for Miami or the airlines will bleed red ink. But with so many people preferring Miami and the current fares there being so high, Frontier wants to try to squeeze in with fares that undercut American in Miami but still stay higher than what the airline could get at Ft Lauderdale.
That’s a real challenge, especially now that Frontier has to compete with an American Airlines team that is much more interested in challenging ultra low cost carriers. (That’s a US Airways specialty.) But with no other low cost carrier service in Miami, it’s worth a try. Besides, it’s not a huge investment on Frontier’s part. The airline just gets to experiment. If it doesn’t work, Frontier can pull out. If, however, this does work, we’ll see more from Frontier (and others) in Miami. What do you think? Will Frontier still be there in a year?
The other part of being a successful LCC is that they’re very fast to cut bait if something isn’t working. It allows them to try new ideas and not worry about huge long-term investments. If these few cities work from Miami, they’ll build up (a la Trenton). If they don’t work, they’ll be gone and on to the next thing. It’s the beauty of that model – while it annoys cities like Allentown when Allegiant blows in with their 2 flights a week, only to cancel them 2 months later, it’s great for shareholders…
I’m inclined to think that frontier will stay longer than a year. If the airline’s and demand are segmented into legacy (AA), low cost (SW), and ULCC (frontier) then these move may work. As you point out, the airport itself has little competition in terms of lcc or ulcc. If aa stays within its band then frontier could stimulate and take-away traffic from FLL. For the longest southwest entered only alternative airports and people claimed, rightly so, that it was partly due to the higher airport operating costs. However, at some point, and we are now there, the cost of not operating there outweigh the higher airport costs so that now southwest is at den, lga, sfo etc. The traffic volume and related revenue generated will at some point outweigh the higher airport costs.
Glad an LCC/ULCC is finally taking a chance on Miami. It is a huge market without low cost service and its international destinations are growing while its domestic side is underserved (although AA is finally replacing its 50 seat jets with larger ones to places such as Pittsburgh and Indianapolis). I always thought jetBlue would do well in Miami with a couple of flights to Boston and New York. Maybe Frontier’s entry will prompt other carriers to jump into the MIA fray.
The usual will happen, AA will match Frontier fares on some seats in those markets and even add some flights just to push out Frontier. Knowing it has a high number of mileage members in the area they will think those people will stick with AA. Then if Frontier leaves MIA, the matching low fares will vanish and so would any added flights. It happens all the time with the biggies defending their turf. I takes the local people who need lower fares to travel, to stick with Frontier (or any other low cost carrier) so they stay in the market to help keep those costs down.
That hasn’t been happening at the Delta and United hubs that both Frontier and Spirit have been invading.
Delta used to be the most ferocious turf defender and was able to kick Frontier out of MCI in retaliation for one route – MCI-MSP. But that was when Frontier was LCC.
Now, Delta seems to think ULCC’s are different and hasn’t said “boo” to Frontier’s expansions at MSP and DTW and – especially – ATL where Frontier now has seven routes with an eighth, PHL, to come in April.
Some think the legacies simply aren’t interested in the bottom feeding market of the ULCC”s and that not having to chase that market is a relief – the legacy can concentrate on the higher yielding pax.
It’s an open question as to whether American/US feels the same way. It has matched, and even undercut, some Frontier fares, but not all, so it becomes a question of staying power, I suppose.
AA really hasn’t taken such a scorched earth approach at DFW, which Spirit has invaded pretty heavily over the last couple of years. They seem to regard NK as a nuisance, but not really a threat to profitability, and therefore have largely ignored them – which makes sense when you think about it, since I’m sure AA is more than happy to let NK fight over the cheapskates who want $79 fares to Florida. The business travelers AA makes money from aren’t going to be bothered with Spirit (or Frontier) anyway. So while I would have said that your scenario was a given during the Bob Crandall days, I don’t really see AA putting up much of a stink at MIA.
MeanMeosh – The old American certainly felt that way, but the US team has generally fought like crazy. I wouldn’t be surprised to see AA get more and more aggressive.
I think the odds are extraordinarily high that Frontier will fail in their efforts at MIA. Take the PHL-MIA route — a double hub for AA. Between the AA and US flights, AA is flying a zillion seats on this route, many of them on cost efficient A321s. How much lower are Frontier’s costs likely to be? Not enough to off-set the crazy-lower RASM they’re going to get. Parker and Kirby are truly experts at dealing with low fare competition — they needed to be, when Southwest tried to drive their America West out of business in Phoenix a number of years ago. The playbook isn’t difficult: offer cheap seats at Frontier’s flight times. Nobody will fly Frontier (and they shouldn’t, especially given that Frontier charges for carry-ons). Frontier will quickly move on — just like everyone else who tries low fare service at PHL.
However clever Mr Parker may be, not to forget that he was trained to be America West’s CEO by Mr Franke – who now owns Frontier.
Frontier and Spirit have been able to build up at legacy strongholds like ORD and LGA, I think F9 can make it work at MIA. AA will probably match fares but what Frontier is doing is small potatoes anyway. They’re running just a few frequencies to cherry pick leisure traffic, it’s a small scale operation. I’m not sure AA-even under US management- is going to be too concerned with trying to run them off. There’s plenty of opportunity for the ULCC’s to stimulate traffic and siphon off some of the low-yield traffic at legacy dominated airports without really making a significant dent into the legacy’s bottom line. Both business models can coexist and frankly that’s how the US airline industry is going to turn into over the next decade or so.
I look forward to the NK move to MIA if it happens. Now there’s a thesis just waiting to be written.
The America West / US Airways / American management team may know how to compete with low cost carriers, but the merged airline now has a major hurdle: higher costs than its hybrid predecessors.
How will it compete? Be different.
America West (and, later, US Airways) competed with Southwest in Phoenix by emphasizing its differences. If past is prologue, I think American will do the same in Miami.
All of this gives Frontier and Spirit a nice niche to exploit; one which American probably won’t mind ceding to its low cost rivals.
well easyjet in europe is doind this by flying in and out of major european airports unlike ryanair which is using almost entirely secondary airports. Easyjet is also creating more revenues/profit in contrast with ryanair.
So i guess frontier wants to become “the easyjet” of US and leave the “ryanair part” for spirit
Frontier must be a blogger’s dream. Everything, anything! What isn’t there to talk about?
I see Frontier’ website invites you to check out their, I believe today’s count is, 92 origins. Of course, for most routes, service will begin sometime a couple of months down the road, which I think is defined as ” just as soon as we have discontinued service to/from (insert city-pair here).”
But, whatever. Frontier is trending on social and not-so-social media right up there with the lunar eclipse and today’s contrail display spectacular (Mid-Atlantic down to Northa Carolina). The stock market today (like everyday) is bit much so I’ll go back to re-reading Frontiers’ guide to bag fees–carry-on, checked, and “we’re still thinking about that! “
Old airline adage: If you have to have competition at your fortress hub, then let it be weak competition. Imagine AA’s reaction if DL or UA announced a major expansion in MIA.
MIA is an hour closer to the Keys and very close to the MIA cruise docks. Even if the fares end up slightly more than FLL there is a major conveniece for certain destinations in South Florida
“. . .Frontier has to compete with an American Airlines team that is much more interested in challenging ultra low cost carriers. (That’s a US Airways specialty.)” As I recall, MetroJet was not so successful in BWI against WN in the 90s (WN was low cost then)
PF – Yeah, MetroJet was a terrible idea. But it’s really the team that took over US Airways in 2005 from America West that has done a great job of fighting low cost carriers.
As a driver for SuperShuttle in Miami, there are many passengers who live southwest of MIA and have figured out that the money they may save by flying in/out of FLL is offset by the costs of transportation to get to FLL. This includes personal in time and gas or commercial by using a shuttle or taxi. I have many passengers who have commented they would fly Spirit if they were in MIA instead of any of the legacies that are here. I believe the same will occur for Frontier. MIA has even placed on the new Marquee sign entering the airport a huge welcome to Frontier. I wonder what gates they will use here as Concourses F and G still are scheduled for renovation and the others are controlled by the Alliances. I am looking forward to the increased business that may come especially as the cruise season starts next week.
I totally agree with you and I think it is a point a lot of people that have a broad view of the market don’t understand. The $30 I save by flying to LGA from FLL is nothing compared to the $60 cab and 45 minute drive up I95 to FLL. Also, FLL has become the go to airport for heartland American while MIA is used by businessmen, international passengers, and the vast majority of people in Miami-Dade county.
True, to some extant, but I just booked a business flight to Miami from BWI and I flying through FLL because it is whopping $300 less RT. My meeting is right next to MIA! Even accounting for the cost of a rental car, it is much cheaper. The point being that FLL is used by business travelers too. Having said that, I really like MIA – one of my favorite US airports. I’d love to see low cost options there.