Topic of the Week: The Money-Making Machine That is Frontier

Frontier

For those who pay attention to government data, it’s no surprise to hear that Frontier is now wildly profitable. Its transformation has been swift, and certainly makes it look like Indigo Partners got a smoking deal when it bought what Republic assumed was a carcass of an airline. For those who don’t look at the data, this might be a surprise. So, are you shocked? And what does this say about the state of the airline industry?

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43 comments on “Topic of the Week: The Money-Making Machine That is Frontier

  1. I flew Frontier for the first time 2 weeks ago ORD-MCO-MCO. I can see how they are profitable because they nickel and dime you for everything. I purchased 3 tickets for about $200. Which was amazing, but spent $180 on baggage fees with 3 checked bags and 1 carry on which I checked a week before our flight and was 1/2 inch to long which I heard they were size nazis on so I used it as a carry on. Sodas on flight were a dollar and snacks a little more. They must used the cheapest ground crew because bags too forever to come out. Even strollers to the jetway over half the plane was empty. Also their flight crew all looked like they were just out of High School or College. Then the new seats where they get more poeople in there without Direct TV or WiFi :( otherwise It was a pretty good experience and would fly them again.

  2. They are what they are. I did ATL-DEN last year on Thanksgiving since the tix was so cheap ($250 RT) I couldn’t say no. They prey on the stupid with the not pre-paying baggage fees and the like. If you know what to expect they are fine — if you don’t read the fine print, well, good luck. Lots of rookie flyers through were disgusted by the fees and a lot of grumbling in line. It will be interested to see where they are in a year. Having flown Ryan Air in Europe for vacation the similarities were striking.

  3. It may say that the only way, or the best way to start up an airline in this consolidated environment is to go the ULCC route in one form or another. There just don’t seem to be enough people who are really willing to pay what it costs to provide full service.

    It’s not unlike gas stations. When I was a kid, virtually all gas stations provided full service. An attendant even pumped the gas (as well as checking fluid levels, etc.). As prices rose, the idea of saving a few pennies per gallon by pumping one’s own gas took off (no pun intended – at least originally). Now the full service gas station is a dinosaur.

      1. And those Oregon stations hate when Californians stop for gas and just jump out to start pumping their own. They will yell at you for doing that.

            1. No, but apparently “I thought I was in Washington/California” is a valid excuse to tell the judge for those who get tickets for pumping their own gas close to the WA/CA borders.

    1. Frontier tried being a “real” airline (whatever that is) and lost money consistently for about ten years.

      Indigo took over in January 2014, and in 2Q 2014, Frontier made $35 million with a 15% operating margin. A year later, 2Q 2015, Frontier made $54 million with a 21% operating margin.

      There are people who will lays hate the ULCC concept (even though they may use it to save a buck) but for those people there are more than enough “real” airlines.

      It is called choice.

  4. In some ways, I’m surprised that it took the airlines this long to get to an ala-carte model. As a 6’1″ dude, 29″-30″ of pitch just doesn’t cut it. After the first time sitting in a bulkhead/exit row seat many years ago, I was BEGGING for some airline to let me pay a few $ to sit there at time of booking. Back then, those were only reserved for elites.

    I like the ala-carte model, in general. As a former airline employee, I learned how to “carry on.” So for short domestic trips, I don’t bother with a checked bag. If the airline is going to tell me that I could pay more for something that I don’t need, well, I’d rather pay less and the guy who has to check a bag can pay for it.

    Not everybody checks bags either. Back in the day, our IAD-LGA RJ runs would go out so full in the cabin and so light on the bags that we’d have to get ballast for the cargo hold.

  5. So, the lesson here is that jamming people into planes, treating them like crap, and charging them for everything is wildly profitable? We live in an interesting society.

    1. And the interesting part is that people put up with it to save a buck so the airlines can get away with it.

  6. Whatever became of the legal issues surrounding the Frontier breakout from Republic? A federal arbiter declared an integrated pilot seniority list, meaning Teamsters were the only legal bargaining agent, and there was no such group as Frontier pilots, only Republic pilots currently operating Airbus. Nevertheless Frontier negotiated with a bargaining entity that had no legal authority to negotiate, and then removed pilots from their union and employer without authorization.

  7. question about ulcc, will they be replacing the regional model in the future as they seem to be highly profitable and regionals have a lot of outdated planes..

    1. Doubt it would work there. Part of what makes the regional model work is it fills out the mainline airlines’ network.

      Sure on a per seat basis I’m sure the ULCC airplane is more cheaper to operate than a regional a regional airplane, but if you only sell a few seats on a ULCC airplane that per seat cost goes through the roof.

      Besides, this is sort of what Allegiant already does.

  8. Surprised? No. Americans have demonstrated time and time again that they’ll put up with pretty much anything to save $5, or to at least think they’ve saved $5. Yeah, they might complain about the seat pitch, delayed flights, crappy customer service, etc., but they’ll be back for more the next time Frontier or Spirit offers a fare to [insert vacation destination here] for $37 each way. I think it’s only a matter of time before one of the majors starts copying the ULCC model in a big way; DL has already dipped its toe in the water with “Basic Economy”, which I suspect is only going to spread over time.

    1. The problem the majors are going to have with that line of thinking is managing the brand expectations appropriately. It they go tighter in seat pitch, there is the potential on an elite heavy flight for elites to be stuck in the really cozy space in back.

  9. The question is, when will growth tap out for ULCC’s? Their model runs off poaching occasional travelers off of legacy’s or stimulating cheap leisure destinations. Eventually they will run out of routes to raid and will have to actually come up with some alternative means of raising revenue or lowering costs to expand their networks. Despite the constant talk of innovation, to be honest, nothing about offering things ala carte is necessarily innovative. There are no real new revenue streams being generated besides taking services that airlines once provided for free and charging for them. As silly as Skybus was, the idea of plastering advertisements everywhere to lower costs was atlas an interesting way of subsidizing costs, and I know some european ULCC’s allow for gambling electronically on board. I’m awaiting the day that tickets and services are not merely alacarte, but “freemium” in the true sense by having all services provided for nominal costs but being subsidized by all the offerings on board.

    1. Didn’t Ryanair say at one point that eventually the seat would be free, it’d just be subsidized by gambling onboard?

      Sent from my computer that moonlights as a phone.

  10. Flew with them once from Denver to Akron. Excellent flight with jovial cabin staff, – but my wife and I would not have wanted to be one of the 50 over-booked people they left behind! On arrival at CAK, our bags were missing and their baggage attendant could not figure out their computerised reporting system to report the loss. When I tried to get her to at least hand write some sort of acknowledgement for me, she was nearly illiterate.

    I have always wondered why Frontier moved their Ohio flights from Akron to Cleveland. That would make sense now that CLE is no longer a Continental hub, but Frontier made their change first, didn’t they?

  11. Please note that F-9 has dropped Cle-Den starting in a few weeks. You can not count on an airline that adds and drops routes every week.

    Am a Cle flyer and will stick with United to get me most anywhere in the world
    with frequent service

  12. I can tell you exactly how they became this “money making machine…”

    Look at the number of ACTUAL full time employees they have. They eliminated SO many jobs throughout the company which means not only does F9 not have to pay salaries, they don’t have medical, dental, vision, 401K match, etc. When you have less employees, you have less salaries to pay, less insurance you have to pay, less 401K matching – it’s MUCH easier to earn a profit that way than to treat people well.

    Having worked there for more than a decade I know Indigo is much less interested in customer service than the company I worked for. Customer comments used to make it up the ladder which would initiate policy changes. Now? Yeah, there’s a Customer Relations Department…but the feedback is entered into a database and never seems to go anywhere.
    Not even employee feedback mattered. I TRIED giving my feedback on more than one occasion on issues that STILL need to be fixed (ever flown into Trenton in the winter?) – it never went anywhere. WHY? Who knows? I could never get a straight answer.

    Folks, there’s a reason their DOT complaints have spiked. Yes, I know all about DOT metrics, their rankings and how they calculate those rankings. Compare Frontier to itself year over year and WATCH what complaints spiked and when.

    1. Frontier tried to be the airline you want, consistently lost money and eventually went into Chapter 11. Rescued by Republic it continued to lose money, until Republic wanted to wash its hands of Frontier. The Republic Board of Directors were ready to shut the airline down.

      If Indigo had not bought Frontier, it would not have survived – no one else wanted it, there were no other offers.

      Davy

      1. I don’t have time to look it up now, but AFAIK Frontier was cash flow positive and nominally profitable when they filed Chapter 11. The reason they filed is their credit card processor, FirstData advised them that there would be a 100% holdback on credit card charges until the flight was flown. Frontier didn’t have the credit or the cash reserves to manage that.

        1. Even so, Frontier has not made a fuller profit since 2003, which is why their finances were so precarious.

    2. katie
      thank you SOOOO much for all of what u say here oh my gosh I can so relate to what u say here. I worked for frontier for seven years and I have seen mistake after mistake of the awful decision making plans they have made over the years and then some. the biggest one was the creation of there very own regional from the ground up now THAT was totally insane but by VERY little was a ok deal? they did make some good returns but not enough to justify the expense of the creation of the airline, the certification cost and so on. heck
      they could have saved more by just buying independence airlines sold all there 50 seaters exchange them for Q

      1. …cont
        Q-400s established an already hub there take independence airlines airbus orders and never make MKE and hub in the first place.
        (I dont known I’m not sure if that would work too but its better than them being and Denver centric carrier as they were I guess)

  13. Few things surprise me in commercial aviation, but I remain surprised that the Spirit/Frontier model has “legs.” Gordon Bethune famously made the comment that “You could make a pizza so cheap that nobody would want to eat it.” Was Bethune wrong? Logic would suggest that folks would try the Spirit/Frontier model once, rightfully conclude that flying these airlines sucks (especially when you get hit up with all the fees you probably didn’t know about) and never fly them again. It does seem that most people hate flying these airlines — just check out Frontier’s Yelp reviews — but somehow passengers keep showing up. That said, I remain skeptical that you can offer a product that nobody likes and remain successful. Does anyone have an example of such a company in any industry?

      1. But the cell phone/cable companies exist in either monopoly industries or situations where it’s difficult to switch to other providers.

        Nobody needs to fly Frontier.

        I will say there’s some similarities between the two, though, in that pricing is complicated. Like I just signed my family up for Cricket, which was bought by AT&T, uses their network, and is a fraction of the price. Other than ignorance, I don’t know why most customers would pay for AT&T.

    1. I’ve flown Frontier a few times with no issues since they started doing direct from IAD to DTW in 2014. But I read everything I could before the flights.

      I was able to (on multiple occasions) get flights for two passengers from IAD to DTW for about $160 total. Because of their baggage fees, my husband and I shared a single large checked bag and each brought one “personal item/bag” and no carry-ons. So our total for checked baggage was less than $50 round trip. On top of this, I paid for us to be in the front of the plane in the rows with more space, so add $60 ($15/seat each way from IAD to DTW). Our round trip flights are now $270. Still cheaper than a single ticket on any other airline for non-stop, at least at the time I purchased the tickets.

      The amount that it costs to get back to Michigan from DC driving, including tolls, is about $250-$300 depending on which car we take. We had no issues on any of the flights so we kept using them. Though I’m fairly certain they’re stopping their IAD > DTW service after this month. I’m probably the only person who’s annoyed at it. Delta and United offer direct flights now but they pretty much start at $200/ticket on their cheapest days.

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