I found myself paying close attention to Frontier’s Q3 earnings report last week. This isn’t something that I’d normally do, but I was particularly interested in seeing how the “New Frontier” bundled offerings were playing out. So far, there’s a lot of promising that better days are coming, but Q3 surely didn’t show it.
The whole new bundling effort was rolled out in May, so Q3 (July, August, September) would have been the first month that travelers could have realistically purchased a bundle for a significant chunk of the total passenger count. That being said, there’s no doubt that a good bit of July travel would have been booked before the bundles came out. So this is certainly not displaying the full power of the new model.
Let’s start with the bad news.
In Q3 2024, the airline’s total revenue per passenger declined to $105.83 versus $114.71 in last year’s Q3. Load factor also dropped from 80 percent to a particularly-weak 78 percent. This is despite all of the network changes, especially those at the end of summer when off-peak flights were slashed. That, by the way, led aircraft utilization to drop from 11.3 to 10.2 hours per aircraft per day. These numbers are not good, and it resulted in an adjusted pre-tax loss of 1.1 percent.
Again, this isn’t good, but there are some things to consider. First, Frontier’s average stage length absolutely plunged 14 percent from 996 miles to 856 miles. If you’re flying 14 percent less, you don’t mind the 8 percent decline in fare quite as much. Still, unit revenue adjusted to account for that difference in stage length still dropped 5 points vs last year.
Cost performance, however, improved. The adjusted unit costs excluding fuel went down 4 points. Fuel prices also dropped 13 percent, giving the airline some additional cover. Still, this is not a result that anyone should consider ok.
Despite the numbers for Q3, CEO Barry Biffle still said that the airline will be producing double digit margins by next summer. So, how is that going to happen?
Barry talked a great deal about maturing markets, and how the enormous upheaval in the airline’s network has hurt revenues in the near term. The change is pretty staggering. I looked at September over September, and according to Cirium data, a full third of the airline’s more than 300 markets this year did not operate last September. There were more than 60 markets from last year that did not operate this year. That is, indeed, a lot of change.
According to Barry, a full 20 percent of total capacity was considered “outsized redeployment,” meaning a significant shift. He expects a 20 to 30 percent bump on revenue as those markets mature in 2025. And he seems bullish on nearly every network change the airline made with one exception. Apparently, New Orleans performed terribly. Go figure.
He also says that more broadly, capacity didn’t really start to fall off enough from an industry perspective until the middle of Q3. In fact, he repeatedly mentioned how this was a tale of two halves. The second half was much better, but we don’t have any details to corroborate that. The only thing we do know thanks to T100 data is that Frontier’s load factor in July (the last month released) was just above 81 percent. So things got worse after that.
Overall, Barry struck a very positive tone on the call, as you’d expect. This man can sell his airline, and it’s not just the part that flies airplanes. He has high hopes for making more money on the airline’s loyalty program. Today the airline makes closer to $2 per passenger, far below what other airlines can generate. He thinks Frontier can be at $5 to $7 per passenger within a few years. That would still be well below the network carriers, but it would add a nice revenue bump.
Barry also crowed about the operation, saying “excluding the impact from the hurricane and the Microsoft CrowdStrike outage, our operation delivered year-over-year improvements across nearly every operational metric.”
Improvement? I’ll give the airline that. But listen, we aren’t talking about a very high bar here.
Frontier Operational Performance Metrics by Month
Data via Anuvu
This is still not acceptable performance, but it is indeed better that last year. And really, we could say that for the airline’s financial performance as well. There’s still a lot in here that concerns me, including the low load factor and big drop in aircraft utilization. I know the latter was by design, but it isn’t sustainable with all those new, expensive airplanes.
The airline continues to be a work in progress.
31 comments on “Frontier’s Promise for Future Glory Remains a Question Mark”
Love how you cut through the spin. What do you think, does combining with Spirit help F9 navigate this mess or not?
That’s a real question mark as well. Remember what was said when Sears merged with Kmart, you can’t create a good company by merging two struggling ones & that is the case here.
Emac – Frontier just needs Spirit to go away. If that’s through failure or merger, it’ll work. Frontier just needs less competitive capacity and then it’ll be in better shape than it is now.
Cranky,
One of the real issues with Fronteer & the other ULCC’s right now is what Alex wrote below. There just isn’t any more room for thin point to point routes with demand without bumping into at least one of the big carriers hubs.
American 7
Delta 8
United 7
Southwest 13 (that maybe a bit of a stretch as most of the cities aren’t meant for connections even though you could do so)
Underperformance in New Orleans is not all that surprising – there is significant nonstop competition on every route:
– MSY-ATL: Delta, Southwest, Spirit
– MSY-DEN: Southwest, United
– MSY-MCO: Breeze, Southwest, Spirit
– MSY-PHL: American
– MSY-RDU: Breeze, Frontier
That’s a ton of capacity chasing a finite set of price-sensitive passengers. Also – Louisiana isn’t a huge tourist draw in the summer. Winter and spring would be the peak time for leisure travelers.
It’s the same issue everywhere for the LCCs: Almost all viable “hub bypass” routes have been claimed. Almost any city pair you can come up with will fall into one of three buckets:
1. Has a legacy airline hub on at least one end, so you’ll be competing with AA/DL/UA. They can offer better connectivity and often higher frequency (on small regional aircraft), so you end up stuck competing purely on price. Not great.
2. Already claimed by at least one LCC (often Southwest). If there is enough demand for higher frequency, the main question is “Why hasn’t the incumbent carrier increased their frequency to match demand?” More typically, there is not enough demand for 2 carriers to run a schedule with reasonable frequency, so you end up in a price war with the incumbent carrier, playing “chicken” until one of you taps out. Not a fun or profitable situation. And even once you “win” and can capture higher yields by being the only carrier in the market, that might only last until yet another LCC decides to take a stab at entering the market. Rinse and repeat.
3. None of the other LCCs is flying it, because they’ve looked at it and decided there wasn’t enough demand to be worth it. If you’re lucky, they were wrong, and you’ve noticed a unique niche of passengers you can sell to. More often, though, they were right – there is not enough demand to regularly fill planes at a reasonable yield.
For a long time, there were a lot of city pairs that were only served by connecting through hubs, and there was a wide-open map full of viable hub-bypass routes to add. That was a lot of fun while it lasted. At this point, though, that space is really crowded, and it’s hard to grow without running into overlap with other LCCs.
There are still special situations that are interesting. Maybe you can bring service to an airport that hasn’t had real commercial service, like Avelo has done in HVN and LAL. Or (more speculatively) maybe you have capabilities to serve “long, thin” routes more efficiently than existing aircraft, like Breeze claims they can do with their A220-300. But it’s not clear that these special situations are common enough to enable you to build out a full business.
Aircraft-enabled routes do provide an opening. If you’re flying 220s somewhere that doesn’t have a Delta hub or focus city on one end, there’s potentially opportunity there. Catch is the 220-300 and 737-700 are comparably sized so if WN is at one endpoint and can’t make your route work you might have a problem. And if WN is already there you’re competing against them. So you have to go with routes where WN decided that neither endpoint was sufficiently interesting to them.
If you just have 320-series aircraft though, you have to pick routes where your cost advantage turns into a fare advantage, inducing demand that wouldn’t have flown at all. And there are a limited number of those that aren’t valuable enough for loyalty reasons for existing carriers not to sit on top of until the ULCC taps out. If the route is fat enough maybe you can carve out spill but that doesn’t seem to work consistently enough to build a business model around.
I think the jury is still out on how many unique routes the A220-300 really enables. It definitely offers a unique combination of fuel efficiency, range, and capacity. At the same time, you need pretty niche conditions for the route not to be viable on other aircraft. We’ll see – I’d be interested if anyone can point to a high-yielding route that Breeze really couldn’t have served with another aircraft.
How cute. You’re counting Breeze as being competition for someone. Breeze isn’t competition for Fred’s Airline and Bait Shop.
A competitor that is dumping unprofitable capacity into your market is even worse than a profitable competitor! It’s pretty hard to make money if others are selling the same product below cost.
Breeze is not competition. Breeze is a joke created by the demon prince Neelzebub. The sooner it ceases to exist, the better.
MSY-DEN: Southwest, United is a million dollars one way on each airline.
WN hasn’t been an LCC for years.
Flew DEN-MSY-DEN a couple of weeks ago. I get free bags on UA, couple that went with us does not, they always fly WN. Figured we’d take UA and meet them there when WN arrived 1/2 hour later. We’ve done that sort of arrangement before.
WN was so expensive that they chose UA and paying for their bags was still cheaper on UA than taking WN.
Flying out of DEN, I typically compare fares, have not found a better deal on WN in years. When you take frequencies into consideration it really tips the scale, especially if you can fly nonstop almost everywhere on UA versus having to do “bank shots” a lot of times on WN.
Does anyone make money in New Orleans? Looking at the mobile analytics data, total visitation to the City is down versus pre-Pandemic levels – by a lot. Me thinks Charleston is the new New Orleans, which is why MX has found a niche there.
Do you know just how much visitation has fallen there? I think part of the problem with New Orleans is outside of the superdome all the tourism is concentrated in one area, the French quarter. Put it another way, imagine Times Square being the only tourist draw in NYC & then nothing else to see while there.
New Orleans has been on my list of places to visit for many years, but I’ll prioritize trips to Charleston and Savannah first.
I’ve heard nothing but positive things from those who have spent long weekends in Charleston or Savannah recently, and I’ve learned that I prefer cities that feel more “small/medium” than “big”.
The MAJOR problem with Frontier is it’s lack of customer service. The airport workers are NOT Frontier employees, they work through a temp agency. They have NO training on Airline/Airport procedures. They don’t have a clue on what they’re doing! The next thing is the horrible reps they have on chat, which for a while was the only means of communication. They did add a phone number back again this year but either way you are getting foreigners who are also clueless and are of no assistance. There is NO customer service with Frontier which is a direct link to lost customers.
I agree with you to an extent. Frontier is absolutely missing out on connecting with the customer. It’s ridiculous that even in Denver you can’t find a CSR that works for Frontier.
To be clear, I’m not opposed to contractors. It makes sense at out stations, especially for foreign carriers, but at least you can get a hold of someone who works for the airline through the phone and is empowered to use their brain to help the customer.
At my airport, the Frontier workers couldn’t care less about the passenger experience and it feels like every time I pass by their counter there’s someone new working there.
United recognized the importance of touch points when it handed out wipes at the plane door. Those add up. When all Frontier customers remember is long check-in lines because of untrained staff, unempowered workers during IROPS and gate agents barking at you to pay for a carry-on because they have a financial incentive to charge you it doesn’t make for return customers.
Frontier needs to invest in its workforce if it wants to earn more revenue from customers, but it won’t.
There is no way I’d ever fly F9, the service and experience appear horrible!
I fly from DEN, UA has expanded into the western 40% of the A Gates, to get to the new, bright, modern UA gates, you get to walk through a few old, tired (30-year-old) F9 gates that they just vacated for even more outside plane boarding areas (great plan – cold and snowy for 4-5 months and hot as can be for 3-4 months). You really get a sense of the care and commitment of F9 when you go through this dumpy part of the terminal. Fortunately, the fact that they vacated means that someone else will take those prime gates and renovate them into something decent.
There is simply little or no growth left for ULCCs yet they keep trying to grow like crazy until very recently. Trying to bottom feed on hub routes is an obvious sign of desperation but that’s basically all that are left with and have nothing else to do with their planes.
In their reckless quest for unsustainable growth, Spirit and Frontier ceded what should be the primary focus of a ULCC – unserved tertiary markets – to Breeze, Avelo and the Godfather of these routes, Allegiant.
The next focus, nonstop service to secondary cities (many that lost hubs) that does not currently exist, is pretty much tapped out now and will always have a ceiling because if a route does too well, one of the majors will notice.
That leaves bottom feeding on competitive routes (which is asinine, nobody is choosing to fly on either of these airlines over any other airline unless the price is ridiculously low) and oversaturating vacation markets (first Florida and Vegas, now New Orleans) until they realize that demand to such places is not, in fact, limitless.
Meanwhile the ULCCs who know what they are and do not stray from that, primarily Allegiant and Sun Country, are doing just fine.
Best succinct summary of the ULCC dilemma I have seen. I like many others am a one and done Frontier/Spirit flyer. Flew Spirit LAS to RNO last year since it was direct and hundreds cheaper than Southwest. Got nailed by the 40# gotcha bag weight limit vs. 50# for real airlines. Company paid so no huge deal, but if it was my money I would have stuffed my backpack to get under limit. Everything on my flight was on time and smooth, but if you look at the DOT completion and on-time statistics, calling Frontier/Spirit “Scheduled” airlines seem ludicrous.
I feel the North American ULCC model isn’t working any more. They are attempting to use the legacy carrier formula at underserved airports, but not gaining the necessary yield to support this model. Also, the legacy carriers are the sale “Bare Fare” on select routes.
An Euro model (Easyjet or Ryan Air) may be the salvation. The Euro model selects the second or third level airport of a city as a crew base. From that airport, an assigned fleet makes three or four runs a day; out in the first leg, and returning in the second leg. A second location is served midday with a return, then a third run, then maybe a fourth. Instead of Salt Lake City, Provo is used. Instead of Phoenix, Tuscon is used. In Florida, St Pete is the substitute for Tampa. In the past, Fort Lauderdale was the substitute for MIA, but now it has morphed into a major destination itself.
The above may also help the ULCC with their biggest weakness which is lack of consistently and reliability. That’s why so many refuse to fly with them and will pay the extra dollars for the convenience of the carriers.
The “second or third level airports” are already being ~fully served in every major US metro area. Just to run down the list:
NYC: All 4 commercial airports in the area (EWR, HPN, JFK, LGA) are at or near maximum allowable traffic. ISP is on the edge of what a Euro LCC would call “NYC”, and already has service from 4 different LCCs.
LA: LAX, BUR, ONT, SNA, and LGB all have extensive service
Chicago: Southwest is arguably already running the Euro LCC model at MDW, and Allegiant is doing the same (much) further out at RFD. You’ll periodically here people speculate about trying service at GYY, but the local market in that area is much less favorable than the NW Chicago metro area, and it hasn’t been all that hard for LCCs to get gates at ORD.
Dallas: Same story – Southwest is already running the Euro LCC model at DAL, and it hasn’t been hard for LCCs to get gates at the main airport at DFW.
Houston: Same story – Southwest at HOU, plenty of gates available at IAH.
DC: 4 area airports with extensive service. DCA is constrained, but there are plenty of gates available at BWI and IAD.
The same is true for every major metro area in the US. If there are secondary/tertiary airports with a viable market, they likely already have service. Exceptions to that often turn out to be due to local political opposition, rather than a failure of airlines to exploit the niche.
The “fly to a secondary airport” strategy requires one of three things to be true:
1. The primary airport is capacity constrained such that new entrants can’t get enough gates and slots at useful times to build a decent operation. London and Paris are prime examples. OR
2. There is a significant difference in costs between the secondary airport and primary airport, and the difference in cost is enough to be worth forgoing the fare premium that passengers would pay for the primary airport. My understanding is that this was the historical reason Allegiant flew into SFB instead of MCO, but I’m not sure if it’s still true. FLL has also historically been much cheaper than MIA. OR
3. There is a substantial local market that is closer to the secondary airport than the primary one, and is willing to pay a fare premium for the more convenient airport. Southwest benefits from this at MDW, DAL, HOU, and some of its other stations.
When these conditions exist in the US, airlines have generally noticed and filled the niche. It’s hard to point to specific examples of secondary airports in the US that haven’t been tried and have a solid business case.
I both agree and disagree with your points
However, the point is the current model of the ULCC is failing, and failing miserably.
The legacy carriers can match the Bare Fares with just the click of a mouse and a few lines of code.
Combining seats & luggage & boarding will only go so far if the ULCC cannot provide consistent service.
Even Southwest is changing its model, albeit kicking and screaming along the way during its implementation.
With Red Eye sercive and assigned seats, Southwest is morphing into a traditional legacy carrier format.
What is the fourth airport serving the DC area?
I mistyped – should have been 3.
Thanks – I thought some airline may have been using Martin State Airport near
Baltimore
Also add that when your secondary is far enough out, you eliminate business travel as a practical option.
Few businesses that travel much are all that cost sensitive that they want to save a few “LCC dollars” on airfare at the cost of additional time on the road and inconvenience for their staff, and IRROPS recovery for regular travelers is important, when you don’t have frequencies that also drives away regular travelers.
Making frequent travelers less effective and efficient is not a recipe for success.
It becomes much harder to survive only on the once-a-year, price-sensitive leisure market when you eliminate much hope of having some regular business travel to sustain the operation.
There is a crucial difference between European competition and American competition.
In Europe, all of the legacies are tied to a specific country. For example, Lufthansa has hubs in Frankfurt in Munich, but nowhere else. Air France only has CDG.
It would be as if American only connected through DFW, but not Philly or Charlotte or Phoenix. So it’s cumbersome at best to fly from, say, Belfast to Barcelona on anything, but Iberia.
The cheapo guys do nonstops for primarily leisure, and the legacies handle business.
In the US, the legacy can compete on both types of travel.
John g – That’s not really the case anymore. Sure, Lufthansa only flies in German hubs, but it’s the same company (and loyalty programs) as SWISS, Austrian, Brussels, and probably ITA soon. AF/KL is with SAS. BA is with Aer Lingus, Iberia, and some others. So it behaves the same way.
True, although I understand the broader analogy, which is that each European country is functionally a “state” and in many cases population/business/legacy carrier travel may be concentrated towards a single metropolitan area (with busses/trains to take people from there to the rest of that country and then the LCCs serving essentially all air traffic out of those other markets).
There aren’t many potentially profitable under-served travel/business markets in the US by comparison.
Frontier has a management problem, pure and simple. They don’t have clue what they are doing, it really feels like they are just throwing darts in the dark. They seem to want to operate their 150+ aircraft airline the way the same way as when they only had 50 planes; send them to where they can earn a nickel more a ticket. Wait, it’s not working, okay, lets pull out before developing a customer base. They keep doing the same thing and hoping for different results. Then they try to be like Ryan Air in Europe. The US is not Europe, plus American’s ai travel expectations are completely different than Europeans. If Frontier thinks they can change Americans behavior and expectations, they are in for an expensive and rude awakening. I have no idea how their CEO hasn’t been fired by the BOD, he is absolutely clueless. The only thing he focuses on is cost, being the cheapest. Eventually it’s so cheap and unreliable that it’s not even worth the price. Like the article says, Barry sure can sell his airline; his problem is that he can’t sell his seats because no one wants to buy them.
I agree with everyone else’s observations. Their customer service is a nightmare. Their dependability is a coin flip. I flew on them recently to Phoenix, the aircraft was dirty throughout and the lav cleanliness (lack of) nearly made me throw up. There was literal mold growth on the underside of the seat. It is apparent that no one in their C-Suite has any know-how in regard to their airline’s operations; out-of-touch would be an understatement. I would bet most employees leave there as soon as they can. I will say, they seem to spend all their time, energy, and money on marketing to sell a crappy product versus spending time and effort building a better airline. I’ll get an email a day promoting some weird destination for $19. No wonder they can’t make money.
This airline was better when they were smaller and had more focus. How many hubs do they have now 11? 12? 13? more? They aren’t agile enough to spread their resources that thinly. If they continue on their current trajectory, I think they don’t survive. If they had frequency and reliability with their low price (sans the nickel-and-diming they do), I’d fly them more. Unfortunately I can’t count on them; and no low fare is worth it if I can’t get to my destination in a timely manner. I’m just shocked that their management team can’t comprehand this simple traveler need.