The news sounded suspiciously like an expansion. The twin press releases proclaimed “Frontier Airlines Expands at Ontario International Airport” and “Frontier Airlines Announces its Arrival at Hollywood Burbank Airport.” Frontier has indeed been expanding a lot lately, but this change was different. With this expansion comes contraction. The airline has decided to leave the region’s premier airport, LAX, entirely.
The ultra low-cost landscape in the LA area is not overly complicated despite all of the different airports in the region. Strangely enough, it’s the primary airport, LAX, that has had the bulk of the traffic for years. That’s not usually how things work out in low-cost land.
Allegiant established a base at LAX in 2009, and it has had a consistent presence ever since. Excluding a brief foray into Long Beach in 2010/2011, that has been Allegiant’s only SoCal base until this year when it entered Orange County. Sun Country has flown to LAX for ages, and that was it until this year when it went into Orange County as well. Spirit has also been at LAX for many years, but it branched out to Burbank in 2019 and then expanded again this year to Orange County. (Sensing a trend? They all wanted into Orange County but it was full until the pandemic changed things.) And of course, there’s now Avelo which started up at Burbank this year.
Frontier has had a more complex history. Dating back to before it was a ULCC, Frontier served both LAX and Orange County, important business markets. It too had a brief foray into Long Beach in 2010/2011 that was disastrous. It went into Ontario in 2017 and now will go into Burbank as well.
The rationale for using LAX in the past was pretty clear. For these airlines, Los Angeles was more of a destination, and serving LAX was the best way to serve that destination. Avelo, of course, is more focused on the local market so it went to Burbank. And now Frontier is walking away from LAX entirely as it ponders the importance of LAX in the world today.
The new plan is to take the current LAX flights to Las Vegas and Phoenix and move them to Burbank on July 15. Burbank will also get Denver flights. Meanwhile, Ontario will take the LAX flight to Atlanta, along with an increased amount of Denver flying. LAX will continue to have 3x weekly flights to Denver through September, and then it’s all over. The end result is that all of the markets will continue to be served from the LA area, just not from LAX.
Why is this happening? Well, the airline provide this statement to me which gives some clues.
We are pulling back on much of our service from LAX between now and mid-July and will completely wind down our operations from LAX by the end of September. We always review our airport portfolio from a cost and profitability perspective and make adjustments where necessary, especially in the event of significantly increased costs.
Ever since Delta moved out of Terminals 5/6 and into Terminals 2/3, Frontier has operated in Terminal 5. In March of this year, it was revealed that Frontier — along with Aer Lingus, Allegiant, Sun Country, and VivaAerobus — would all be paid to make the move to the new Terminal 1.5.
Terminal 1.5 has no gates. It’s a headhouse with ticketing and baggage claim facilities. When passengers check in and go through security, they are then put on a bus to the midfield satellite concourse (MSC) which lies to the west of the Tom Bradley International Terminal. It’s a treacherous path. Here’s a map.
Does that sound inconvenient? It is. But as a ULCC, Frontier undoubtedly cares less about inconvenience and more about cost. The airport did offer Frontier $177,600 in rental credits to compensate for the move, but that’s a pittance in the scheme of things. It’s the ongoing costs that are more concerning. As these facilities are completed, the debt has to be paid for, and that means airline costs rise. There is a LOT of construction work being completed in the next few years.
In February 2020, Fitch said it now expects cost per enplaned passenger to peak at $33 over the next few years. February 2020 was eons ago, so it’s likely things have changed to some extent. But that’s a rapid rise that’s not necessarily tough for a long-haul international carrier to absorb with its high fares. But for a ULCC like Frontier? That’s a big chunk of money that its fares can’t reasonably support.
Looking at DOT O&D data via Cirium, we can see that in 2019, the average Frontier fare from LAX to Denver was $66. Phoenix was $60 and Las Vegas was, well, it was $16. Atlanta was at $102, but that’s a far more costly flight due to the distance involved. Of course, ancillary fees were on top of that, but it’s still tough to generate enough revenue to overcome the steep costs.
It’s hard to know what Frontier would have had to pay exactly in terms of cost per enplanement, but it is clear that it was too high for Frontier’s tastes. To compare, Ontario was at just over $11 CPE in 2021 though that is expected to rise in the short term before settling back down. Meanwhile, Burbank is at a mere $2. If you’ve been to the airport you know it hasn’t spent much money on anything. And Orange County sits around $10. They aren’t in the same league as LAX, which is amazing since just a few years ago, Ontario actually had higher costs when it was managed by the same group at LAX.
Frontier’s bet is that it can dramatically reduce costs and push fares lower by switching its service to these other airports. Ontario will likely remain the primary airport for the airline, and it will be the main longer-haul location. Burbank will be a niche, as will Orange County. Serving those airports will give Frontier coverage around the LA Basin, but LAX is a big hole.
It’s worth noting that this is the exact opposite strategy that Allegiant and Spirit are taking. Spirit has been growing LAX all year as it looks to grab more gates. Allegiant just announced that it will move to Terminal 1.5 on May 19, and it’s going to add a fourth aircraft to its base at the airport.
How can a hyper-cost-focused airline like Allegiant justify staying at LAX while Frontier can’t? That’s a good question, and it leaves me scratching my head. One thing we do know is that Allegiant sees Los Angeles as a destination. All these people flying in from small towns are looking to fly to LAX, so maybe it thinks it needs to be in that airport. Then again, it has no problem serving Sanford and St Pete instead of Orlando and Tampa. I spoke with Los Angeles World Airports and they gave me this statement:
Frontier Airlines is a valued partner at Los Angeles International (LAX) airport. We are sorry to see them move their Los Angeles service away from LAX later this year, but wish them all the very best and welcome their return to LAX one day very soon. We are fortunate to have a regional network of airports offering a wide range of options to travelers in the LA basin, and are glad that Frontier will maintain its service to the Los Angeles area, to help provide more travel options for Angelenos and visitors as we recover from the pandemic and well into the future.
LAWA has undertaken numerous efforts to maintain competitive rates and charges while we continue to deliver on our long-awaited capital improvements. We are currently in the process of implementing the Airline Cost Stabilization and Recovery Plan, which harmonizes common use rates and charges across the airport and provides airlines and the airport with more certainty regarding rates and charges. In addition, LAWA has utilized CARES Act and other funding to mitigate increases in airline rates and charges as a result of reduced activity during COVID-19.
Getting beyond the fluff, it’s the second paragraph that has the meat of the statement. LAWA say it’s trying to reduce charges, but it seems that the airport can’t do enough to sway Frontier to stay. Regardless of what LAWA is doing to its cost structure, it is clearly higher there than at any of the other LA Basin airports and it’s more than Frontier was willing to pay.