As the big ultra low cost carriers (ULCCs) continue to bleed money, many have asked questions about how things went so wrong so quickly. The thing is, it didn’t happen all that fast. The ULCCs, specifically Frontier and Spirit, were heading in this direction for some time. It’s just after COVID settled that the problems came into focus. There are a lot of things that have gone wrong, and today I want to put some numbers to it, using Cirium data. Specifically, I’m looking at Frontier today, but much of this applies to Spirit as well.
Let’s take a trip back to 2014. Frontier had been bought by Indigo Partners at the end of 2013, and the airline had sped up its already-started move to a ULCC model. Our story will start in the first quarter of 2014 when some change had been made, but there was much left to do.
Below you will see how the airline’s routes broke down based on total route size for all carriers (based on DB1B, so it’s domestic-only).
Frontier Domestic Routes by Local Market Size
Data via Cirium, market size based on DB1B PDEW
The airline at that time had only about 7 percent of flights in the top 50 markets in the US. On the other hand, nearly 50 percent were in the markets ranked 1,000 or smaller. Some of those were actually small markets, and they relied on connectivity through the Denver hub. Others were new secondary airports like Trenton which had no historical demand to speak of before Frontier arrived.
Frontier’s previous strategy was as a higher-frequency hub-and-spoke carrier. This is the airline that flew A318s and A319s with seatback TVs. The airline was moving to a ULCC strategy, and that meant it needed to drive its unit costs down dramatically. Those aircraft were not the right ones for that, and Frontier had to go bigger. That fundamentally changed the markets that would work for the airline.
If we fast forward five years to Q1 2019, you’ll find a completely different airline.
Frontier Domestic Routes by Local Market Size
Data via Cirium, market size based on DB1B PDEW
This airline looks to be massively larger than the one five years earlier. It had grown, but not nearly as much as you’d think. The airline had departures increase only about 56 percent, but it was using bigger airplanes. Seats doubled. Still, the biggest reason for the way this looks is Frontier went to a much lower frequency.
In Q1 2014, Frontier ran 2.96 departures per route per day. By Q1 2019, that number had plunged to 1.32 departures per day. Bigger airplanes and fewer flights on more routes with less competition. This was the plan, and it appeared to be working.
Frontier had reduced the percent of markets ranked 1,000 or smaller from half to a third, but the big growth was in the 251 to 1,000 range. The big markets, those ranked from 1 to 250, had actually dropped from 32 percent of routes to only 24 percent.
The airline had really shied away from big airports. Sure, there was a lot of demand there, but there was also a ton of competition. That’s not only from the legacy carriers and Southwest but also from Spirit which had gotten to bigger markets well before Frontier adopted the ULCC model.
Now, if we fast forward another five years to Q1 2024, however, the story has changed again.
Frontier Domestic Routes by Local Market Size
Data via Cirium, market size based on DB1B PDEW
Those markets ranked 1,000 and smaller now account for a puny 13.5 percent. Meanwhile, 101-500 ranked markets are up to about half of the routes the airline flies. Top 100 markets have climbed from 12.3 percent of all routes in 2019 to 18.1 percent in 2024.
The airline has shifted into bigger markets, the ones it avoided for years. But why? Well, it’s pretty obvious, but I’ll let this chart do the talking.
Frontier Average Seats per Departure by Year
Data via Cirium
Frontier has done nothing but grow, grow, grow its fleet. For the first time as scheduled in 2024, Frontier has topped 200 seats on average per departure. It’s been a never-ending increase as the airline has shed smaller airplanes. First it got rid of the Embraer 190s that were operating when Republic owned the airline. Then the A318s disappeared and the A319s followed.
Today, it’s only A320s and A321s, both ceo and neo versions, that fly for Frontier. And the A321neo carries a remarkable 240 people, or at least it did before Frontier started trying to go upmarket and block middle seats in the first couple rows. Now it’s at 236, I suppose.
This is an incredible number of seats. How can Frontier fill them? Well it sure can’t do it in tiny markets, so it needed to go bigger. But those big markets are the very same ones that the legacies and Southwest dominate. They don’t like Frontier going big, but they have learned that they can use bigger airplanes and profitably price match the ULCCs with a Basic Economy fare. As total capacity rises and the legacies can snag more of Frontier’s business, it just makes it even harder for Frontier to fill its airplanes with a workable fare. How tough?
Frontier Load Factor by Market Rank by Quarter
Data via Cirium, market size based on DB1B PDEW
The smaller markets were already well below the bigger ones, but now those fell off a cliff in Q1 of this year. With such big airplanes, those small markets just don’t work. So, Frontier continues to go for bigger ones. Just look at last week’s announcement of 11 new routes:
- Atlanta – Austin, Newark, Washington/Dulles
- Burbank – Denver, Phoenix, San Francisco
- Cincinnati – Sarasota
- New York/JFK – Orlando, Tampa
- Salt Lake City – Seattle
- Washington/Dulles – Orlando
Some of these markets are huge, like JFK to Orlando, while others are smaller unless you consider the broader metro. For example, Burbank to Denver may not be big, but if you think about Frontier’s opportunity to steal passengers that fly out of LAX or Ontario, the market becomes much bigger. That’s the kind of thing that Frontier hopes will help it get back to profit.
This won’t be easy, because as we know, fares have fallen in the domestic market especially thanks to too much capacity. The end result is a mess of red ink.
But Frontier isn’t relying solely on trying to find better routes to solve its problems. It’s now trying to boost its fare in a tough environment. It doesn’t think it can get big enough volumes with the fares it’s been getting, so it’s trying these bundled products including blocked middle seats, bags, etc that make it easier for people to spend more money with the airline. Spirit is doing the same thing.
A higher fare with the same number of passengers is better, but there’s still not enough of a market to support all those big airplanes that were scheduled to come in. That’s why both Spirit and Frontier have deferred aircraft orders. They are just trying to figure out how to make money with the airplanes they have today.
None of this paints a particularly rosy picture for the ULCCs. If I’m at the legacy airlines, I smell blood and will try to sit on top of these airlines until they disappear. If Spirit or Frontier were to fail — and Spirit is currently in worse financial shape — then that would boost the other airline’s prospects for survival. But the current environment doesn’t seem like it’ll be sustainable unless there’s a dramatic turn in demand. Even then, it’ll be temporary. It always is.
60 comments on “A Closer Look at the Problems that Face Frontier, Other ULCCs”
I thought after ATA disappeared, DL-NW, UA-CO, AA-US and AS-Virgin all merged, people said it meant airlines would be profitable forever ?
Or was Warren Buffett just cleverer than people gave him credit for ?
Captain obvious suggests the airlines need to convince people to fly the airline, which will boost load factors and fares.
But no one wants to fly an unreliable airline.
There is no such thing as a successful airline with poor OTP. They don’t exist
Network and fleet changes can come second
Ryanair come up with endless extra charges… but their reliability and punctuality is pretty good, and Ryanair have been shouting for decades about how good they are at OTP. Why can’t Frontier and Spirit adopt the same tactic ? Realise that despite verbal protests that people will pay extra for things like baggage, but they won’t accept flights being consistently cancelled or regularly delayed for several hours.
There is no correlation between reliability and cost at least from my experience. I was stranded by Southwest in Dec 22 and United in July 23. Had to book on a different airline both times since flights were full for the next few days. Flew Spirit half a dozen times this year already and no issues.
Why can Ryanair make billions in profit yet ULCCs in North America can’t ? It seems too simplistic to say it’s just because Americans get less vacation time – that argument should lead to ULCCs in the USA having a smaller market, not going bankrupt. I don’t believe that IAG, LH or AFKL are significantly less competent compared to the big 3 in the USA. Labour costs in North America and Europe are roughly comparable.
The airline business is a bit different in Europe. The big European airlines don’t have huge domestic markets to feed mega hubs. They’ve ceded most of Europe’s short-haul flying to low fare airlines and concentrated on long haul routes. I also don’t think Ryanair’s service would be particularly appealing to Americans, but Ryanair does do a better job running their business than Frontier or Spirit does.
I would argue that LH and IAG in particular do have large domestic markets. LH has hubs not just in Frankfurt and Munich, they have hubs additionally in Brussels, Zurich, Vienna and soon Rome. IAG has hubs in London, Dublin and Madrid. Add in the likes of Eurowings or Vueling and they both have a few additional focus cities. The domestic market for LH is not Germany – their domestic market is the EU.
Want to fly within the EU between 2 cities ? LH and IAG can do it 1-stop between a choice of different hubs
Iahphx – not having a go at you personally… I just don’t understand why ULCCs in North America cannot make good profits.
Driving is also a much bigger competitor on shorter flights in the US. For a sub-500 mile trip, many Americans are very willing to drive, while in Europe flying is more of a default unless there’s good high speed train service.
Cranky mentioned this in a recent podcast episode (‘The ULCC cycle of death’, I believe), but a big part of the role filled by ULCCs in Europe is done by Southwest in the States, not the ULCCs. Of course, a lot of European ULCC revenue still comes from typical ULCC activities like sun flying, but these airlines also effectively offer point-to-point connectivity between mid-sized markets instead of connecting over hubs for so many markets.
Look at any non-hub European airport, and you’ll typically see like 1-4 flights to different big hubs by legacy carriers and likely one of many ULCCs offering a bunch of direct flights. Sure, they do a lot of Spain/Greece flying, but they also keep the equivalents of the idk, Nashvilles, Baltimores and Kansas Cities of Europe connected.
Yes, and talked about this on last week’s mailbag episode. The Ryanairs of the world own a lot of routes that legacies don’t touch. That’s just not the case in the US for Frontier and Spirit. It’s a totally different world they’re playing in.
I perfectly outlined above why.
Spirit and Frontier are unreliable airlines, and no one will fly them as a result. Revenue and cost suffers heavily as a result.
Other factors include a much higher avg gauge, tendency to compete head on with the legacies, lack of flying from smaller and less competitive airports, focus on leisure rather than business routes, typically longer stage lengths, lack of credit card penetration which competitors use to cross subsidise certain routes, the Railway Labor Act (pushes up labor costs), higher airport fees, the fact that the European market is divvied up and is hence less competitive, etc.
Have ULCCs ever considered not constantly chasing growth? If they keep growing (both plane size and fleet size) then of course they are going to need more and more larger markets to serve to fill those seats.
The 3 major US carriers seemed to be able to grow at a much slower pace relative to their size or even stop at certain times, focusing more on fleet replacement to improve efficiency and comfort to some extent rather than just bigger airplanes everywhere.
Jason H,
The problem with this line of thinking is that if you’re not chasing growth for growth sake, you are going to fall behind. Or at least that is how a lot of business people think. They believe growth is infinite on a finite planet.
Jason – They are just so focused on lowering unit costs, and growth is the way to do that. But they are no longer focused on that, as evidenced by the aircraft order deferrals. Let’s see if this is a world where they can compete.
The LCCs that embrace who they are in the industry and have had less ambitious growth plans (Allegiant and Sun Country) are still making money. B6, NK, and F9 have all tried to grow to a level that disrupts the legacies and that has proven to be a bad business plan. Now they are all trying to shrink back to profitability. Just be who you are. There is nothing wrong with being a nimble 100-150 aircraft airline that consistently makes money.
I think you’re right about Frontier’s switch to big aircraft. There may be a business for a small-ish ULCC airline flying FREQUENT flights in mega markets — at least if they had a good reputation for reliability, simplicity and (basic) service. But flying 240 seats around INfrequently — where you’re basically competing against yourself, attracting mostly the most price-sensitive travelers who don’t value convenience, and making it easy for the big airlines to counter-schedule against you — well, we see the results.
But I think there’s also another less mathematical reason for Frontier and Spirit’s problems. Customers just don’t like their product. Americans love to complain about the big US airlines, but they now do a decent job giving their customers what they want. Most people just want convenient, reliable, and affordable transportation from Point A to Point B on an airline that seems to know what it’s doing and is easy to do business with. The elimination of most nasty change fees has made these big airlines “more pleasant” to deal with. And the big airlines have recongnized the trend of many leisure-traveling Americans being willing to spend more money for a little more comfort: obviously these are the higher margin customers you want, and it’s very hard for ULCCs to attract them. The big airlines also have all the advantages that “big businesses” typically have, including the airline-specific advantages of being better able to seasonally move airplanes around and to successfully partner with the big credit card companies.
I’m not exactly sure how this shakes out. I’m about 95% sure the new ULCC “bundling” strategy is not going to work, because it won’t adequately boost yields and most air travelers will keep avoiding the ULCC airlines. I’m also pretty sure we’re not going to have both Spirit and Frontier flying around in a few years. I would think Spirit may go Chap 11, but then what? History would say that Frontier would then try to buy them (as they did before), but how would a bigger Frontier help it? It kind of feels like Spirit’s capacity just needs to go away, and Frontier needs to see if it can evolve its business into something American travellers want, with adequate yields to keep a single large ULCC in business.
Which suggests Breeze’s fleet/gauge strategy has positioned it well to take on these small and medium sized markets F9 and NK (and maybe G4?) have too many seats p/departure to operate.
Only if F9 and NK actually pull out entirely. If F9 or NK just cut frequency and keep operating these routes ~2-3x/week, then that likely slices off enough demand that Breeze can’t fill an A220 with what’s left. If they have the market to themselves it’s a great strategy, but there are very few markets like that.
My local airport LAN (Lansing, Mich.) will have Breeze flights to Orlando and Ft. Myers starting in early October, LAN fits in with the small to medium market category, will be interesting to see if they can make this work.
So much for the notion that lower CASM automatically produces greater profitability.
The less than daily frequency without an alternative if things go wrong? No thank you.
They are also running into the headwinds of less disposable income created by inflationary pressures due to economic policies over the last 3.5 years. I know that gives CF indigestion to even think of mentioning but it is simply undeniable. The ‘typical ‘ Spirit/Frontier flyer is having to make choices now they weren’t making 3 years ago.
Frontier is indeed getting a bit desperate. Was pricing.ojt flights yesterday and their premium fare on a few routes was comparable to a Saver fare on Alaska. They had at least daily on both routes so flying them actually made sense, particularly now that switching to an out-and-bacm schedule has increased reliability.
I do think Frontier and Spirit will need to merge to rationalize things, and they have a *lot* of big planes that will need to find something to do, but a merger plus sale of e.g. A320ceos to Allegiant might help.
Southwest fighting with corporate raiders might also give F9 an opportunity as WN might have to take their eye off the ball. TBD.
Seems unlikely that a Harris administration would allow a Frontier/Spirit merger without a significant fight. Trump administration would be a wildcard.
The Harris administration may not need to put up a fight when NK goes under (likely due to B6/NK merger being stopped). In this case, F9 and B6 could share the scraps.
I have priced multiple trips between SEA-PHX over the coming months, and F9 wasn’t even close to competitive from a price. I actually would have booked them based on the time of day, but their base fare was $240 and Alaska was $99. I’m flying that route next week southbound on Alaska for $69 and northbound on Delta for $69. Frontier and Southwest were significantly more expensive. AA was astronomical too, but that’s because they are priced for connections and aren’t interested in taking my local fare.
In other words, one of them has to go, but the question is which will be the first to disappear, and if that happens, who picks up their leftovers or assets? JetBlue?
I think a lot of people have the assumption that bankruptcy will mean a carrier entirely disappears. I think that’s unlikely in most case. It’s much more likely that they file Chapter 11 to reorganize the business, shed some debt, and renegotiate some of their fixed costs, rather than filing Chapter 7 to liquidate. For all of these airlines there is likely a profitable core business that would be valuable if they could shed costs associated with their larger operation. That’s particularly true for JetBlue, which has an asset (slots at JFK) that is essentially not available in the market.
I don’t see the business case for a reorganization of Spirit. Setting aside their upcoming debt obligations likely to push them over the edge, the airline has not proven that they can make money with their business model. Fuel/labor costs which are high across the industry and can’t be renegotiated. Spirit’s problem is revenue and that can’t be solved without butts in seats. Many people will gladly pay $50+ premium to fly on a legacy, so it’s become difficult for NK to even undercut them on fare. It is already doing everything it can to bring in ancillary revenue: new bundles, improved FF scheme/credit card, and actual premium seating. The argument could be made that a bankrupt NK’s scraps have more value than a reborn Spirit.
I could see a situation where they identify which specific routes are consistently profitable, then slash everything else. Reorganization provides a framework to cut capacity via assets sales, lease terminations, and layoffs, all of which are difficult to achieve outside of bankruptcy. So the fundamental bet is that there is a “profitable core” dragged down by unprofitable over-expansion. That may or may not be true.
Core issue is too many different airlines chasing the same pools of demand. Southwest and Allegiant had a long run of strong financial returns from pursuing niche strategies (Southwest connecting mid-sized cities with nonstop flights, and Allegiant providing tiny communities with infrequent service to Florida). But those strong returns pulled in too many airlines pursuing those exact same strategies. At a minimum, we have Allegiant, Avelo, Breeze, Frontier, Southwest, and Spirit. All 6 of those airlines are essentially screening for the same opportunities, using the same data.
On top of that, all of the network carriers (American, Delta, United) and “regional hub carrier” (Alaska, JetBlue, Sun Country) will opportunistically grab the same opportunities if they have a hub on one end. American isn’t going to fly e.g. CHS-RSW, even if there is demand, because it doesn’t match their operating model. But they’ll obviously fly CLT-RSW to fill as many planes as they can sell seats for. And DL is a little more adventurous on flying from focus cities, so they’ll sell CVG-RSW and BOS-RSW.
Once you account for all this, there are really very few “underserved routes” that have demand in excess of current supply. If you can’t find that, then instead you end up in a zero-sum market share war for demand that was already being met by existing carriers, and that’s obviously a much tougher environment to create value in.
In some ways, slicing a pool of demand between this many carriers is a negative for passengers. If a given destination is served by multiple carriers at sub-daily frequencies, then you might reasonably prefer a single carrier operating with higher frequency, so that you had options to reschedule if necessary.
Folks like to dump on the less than daily schedules, but there’s an interesting demographic fact that not many are aware of – it’s largely baby boomers that are floating air travel demand these days. They have a significantly larger share of the nation’s discretionary spend potential than their population share, due in large part to the fact that they’re equity wealthy and many maintain pensions and long term fixed payouts. They’re also the consumer most able to adjust their travel to when flights/fares make it optimal.
I have significant concerns about overall consumer demand when this segment gets too old to travel regularly, and phases out. The Gen X, Y, Z, etc. consumers behind them won’t be so well positioned.
They are also the group that will not be tolerant of 29 inch pitch, a canceled flight with no alternative for 3 days etc.
That is true David C, but Kenneth’s point is also valid as it was done by design. Now you can add the decreasing birthrate to the overall equation. Last I saw the US replacement rate was at 1.7 & decreasing, but it’s not as bad as China, Japan or Italy. Those countries are around 1.2 or 1.3 each.
Allegiant, the only successful US ULCC, wouldn’t be caught dead flying daily flights on routes between top 50 markets that already have 5, 10 or more flights daily. Why is this so hard to figure out?
The misguided constant growth strategy, both in size of plane and size of fleet, is killing these airlines. That’s why JetBlue trying to buy Spirit was so ridiculous. JetBlue, Frontier and Spirit are running out of places to profitably fly their planes.
Example – JetBlue just lowered their winter schedule at DCA from 26 to 20 flights to “increase profitablity.” Other than a Boston frequency, all flights were to Florida. If you can’t make money flying from DCA to Florida in the winter, you’re in BIG trouble!
The United States can realistically support five carriers. Therefore, everyone from sixth down should die, especially B6. That includes all of the ULCCs. If you can’t afford to fly, you shouldn’t. Chasing after people with no money is why ULCCs fail. Go where the money is.
“If you can’t afford to fly, you shouldn’t. Chasing after people with no money is why ULCCs fail. Go where the money is.”
The problem with your logic is that would eliminate a huge portion of the aviation market & not just those portions that as you say have no money. There would be a cascading effect through the entire system as routes & cities are cut & getting to another airport becomes evermore time consuming. Also don’t forget about the economic effect to an area once service is cut or lost all together.
Then there will be those primary routes that will be lost both domestically as well as internationally as their feeder flights get cut as reaching the big hub becomes difficult. Think of CLT, ATL, IAH, DFW, ORD, DEN, MSP & DTW as all of them have huge feeds of flights that go to little cities & towns across the country that feed the broader network. Even JFK, EWR & PHL do that to a lesser degree.
Good. Eliminate a large part of the aviation market. We call those that will be eliminated trailer trash for a reason. I never really got to experience pre-dereg and want to do so. The middle of Covid came close. And doing all of my flying out of ORD, much of which is to small destinations, the destruction of the ULCC sector wouldn’t affect me one bit.
Actually it might. As I said above there would be a cascading effect.
No one can underestimate how the competitive environment in the US changed with respect to ultra low fare carriers. As CF’s data notes, for years ULCCs filled much more of a niche role in smaller markets.
But because they had to keep pushing CASM down as labor costs grew – esp. post covid – ULCCs were forced into larger markets where the big 4 were no longer content to let pieces of their markets be ceded to other carriers.
Add in that the big 3 have benefitted from a shift to premium and international travel – neither of which are in the wheelhouse of the ULCCs or Southwest, and the big 3 have the financial strength to make ULCC life hard.
Elliott has announced that it has enough shares to force a shareholder vote on LUV’s board structure so there is a large portion of domestic air travel that is not in the hands of strategically stable airlines right now between the ULCCs, WN and B6. the big 3 to the extent possible are not about to let up on the pressure.
Tim,
The problem with this is that you can only add so much pressure before it comes back around & hits one up the backside. Unfortunately numerous airlines haven’t learned this concept & some haven’t learned it after being the victim of it.
I would be curious as to how you think the current situation at least with respect to competitive pressure will fall apart.
DL and UA are financially capable of adding capacity and keeping their margins in the top tier of the industry. AA is harder to put in that category. WN is fighting bigger battles than competitors right now.
Market conditions could change so that international becomes much less profitable; it has rarely been as profitable as domestic since US airlines were deregulated domestically in 1978. The pendulum could swing to a focus on discounting and value in travel again – but I don’t think any of those trends are likely to happen any time soon.
All of the big 4 have figured out how to compete with smaller airlines without getting into trouble with the feds – at least that the feds can do anything about under current laws.
The sheer size of the big 4 gives them staying power in this current battle with the smaller airlines that could dramatically shape the future of US airlines.
“Right now” the legacies are in good shape, but who is to say what will be five or ten years from now. Tim, with your knowledge of the industry you of all people should be aware of the famous investor line about past performance not guaranteeing future returns.
You also know that CEO’s are always trying to get infinite growth in a finite world & in the end the world will always win.
yes, I am very well aware of that adage.
Btw, crude oil is below $70/bbl based on weakening demand from China and increased production by a number of oil producers.
combined w/ interest rates that are expected to start coming down when the Fed meets, airlines could see a nice financial benefit from macroeconomic factors.
and the benefit will be for all stripes of airlines.
I always thought the logic of a a321 is that it isn’t much more expensive to buy or operate than a319 so you don’t need to fill it necessarily. Just fill a few more seats than on the smaller bus to make it work. I know the markets like LF l, but isn’t this just poor yield management or fear!
I just recently bought tickets for my family to fly from RDU to DTW on frontier, by the time they got done with all the baggage fees, including a $69 fee for a carryon bag they could have flown on a real airline. Needless to say we will never fly on frontier ever again !!
Not sure why you bought those tickets because once you added the crazy carry-on bag fee, you should have flown on what you call a “real airline.” Most people were NOT buying those tickets, which is why Frontier is now buddling seat assignments and bags into their fares. If you need those things, it’s usually now a little cheaper to fly them than it was before. But, on the other hand, they usually don’t look so cheap compared to the big airlines., which usually have better schedules, more comfort, better reliability, and better service recovery capabilties. All of these are reasons why live is not good for the ULCCs.
He probably bought them because it initially looks cheap but then gets confusing as hell. My dad flew Frontier for the first time about two weeks ago and had no idea how to check-in online. He ended up paying $75 to checking in at the airport for all three people in the reservation. Just insane.
We need to look back further than 2014 to get a clear picture of long-term airline performance. It’s absolutely ridiculous to me how much credit this article and these comments give to route structure, premium products, etc instead of recognizing that Legacy Airline profitability largely follows the overall health of the US Economy, which repeatedly has been shown to by cyclical. Save for blip in 2020-2021, our economy has been a remarkably long bull run. When the US economy is healthy, REVENUE strategy rules above all, they can fine-tune the product and incur costs driving up their CASM but it provides beautiful RASM numbers. Legacies can even mirror basic fares for a portion of their rear cabins to put pressure on LCCs and ULCCs, because their revenue numbers are strong. United’s last quarterly reflected that even though they had record revenue, their costs associated with flying more passengers under a basic fare drove up their CASM and led to disappointing net profits so they’re probably rethinking that strategy. In a recessionary environment, COST rules strategy, pricing power is held by the airlines with the lowest CASM, which Southwest and Frontier have a significant advantage. Southwest and Spirit grew quickly and profitably in recessions while the legacies burned cash and raced into Chapter 11 to restructure. American was sitting on too much cash post 9/11 and was the last to merge and restructure, and it put them in a worse position than their counterparts to capitalize on the bull run economy starting in the 20-teens. LCCs and ULCCs haven’t been able to test their CASM in a recession for nearly a decade but just wait for legacy CEOs to eat their words when the economy hits a 8-10 year speed bump. What comes next is ugly unless your costs are in check.
The rising tide lifts all boats theory. Macro environments will always have a greater impact than individual performance.
BASICally the legacy airlines finally got one right. Basic economy fares destroyed the ULCCs on competitive routes. Yet they are so completely out of ideas, they are creating more of these routes because they literally have nothing else to do with their planes. Avelo and Breeze have a better chance of surviving in this environment as long as they remember not to compete with the the big four.
You have a point, but as Frontier & Spirit have clearly shown by either force or choice you can only avoid direct competition for so long. There are only so many Dayton – Orlando type routes out there. Once those are exhausted, you are forced to take on at least Southwest at some point. Even if you use a secondary airport like Samford or Burbank, you can’t escape the legacies forever.
True. I should amend to say that taking on WN is preferable to the other 3 because at least it’s more of an apples to apples comparison (little or no international, mid size market to mid size market, no connections, etc.)
A ULCC flying ATL-PHL deserves to fail because it has clearly out of sensible ideas!
Tue. 3 Sept. 2024, 9 pm, Denver time
Fare comparison for SEA to SAN one way on Tue. 24 Sept., 14 day advance purchase.
Source: Google flights
Frontier has 2 flights on this date, departing SEA at 9 am, or 8:20 pm.
Both flights stop in DEN, for no less than 4 hours layover.
The 9 am flight arrives in SAN at 6:40 pm, travel time 9 hours 40 min.
The 8:20 pm flight arrives in SAN , travel time 15 hours, 20 minutes at 11:40 am.
The one way Frontier fare with one carry on bag, and seat selection is $ 85., on the 9 am flight.
The seat pitch is 28 inches.
Comment: if you have never looked at the Frontier website, try it.
Massive bait and switch, lack of transparency, etc.
Alaska has 9 non stop flights on the same date, SEA to SAN.
Flight time: 2 hours, 50 minutes.
Coach fare on 8 of the 9 flights is $ 59.
One carry on bag included, seat pitch 31 inches.
No seat selection included.
Delta has 5 non stops on that day, price now for all 5 is $ 64.
Same rules as Alaska flights, one carry on bag, no seat selection.
United has no non stops, but a bunch of connections.
United fares start at $ 103. no carry on bag included, no seat selection.
Carry on bag costs $ 40.
Southwest has no non stops, but a ton of connections, fares start at $228.
Travel time at best, is 5 to 6 hours.
Carry on bag included, pick your own seat, free.
What does this say about Frontier and Southwest. ?
It says SAN is a strange example to make a “typical” airport flight comparison for. Southwest owns the place, albeit at a crummy terminal…for now. Alaska is giving them a run right now, as far a total number of destinations, but they can’t match frequencies. Regarding your specific example, Southwest seems to have ceded SEA, and GEG, to Alaska since Covid. Frontier, or the Big 3 for that matter, are not even under consideration unless you like their hubs. Personally, I’ll take DAL, SEA, or even MDW over DFW, IAD, or EWR any day.
So, if I want to fly out of a crummy terminal at a convenient time, I pick Hot Dog on a Stick. If I want an okay lounge, and an okay terminal experience, I’ll take the Eskimo. Unfortunately for me, they only seem to match their Saver fares to Southwest WGA, so no flexibility or full milage credit.
The new T1 will be a game changer for Southwest. That NS to DCA will be a nice addition for Alaska. But, we’ll still be stuck with the one runway.
International? Yeah, there’s a good chance I’ll just drive to LAX for a cheap non-stop.
I was surprised to see a whooping 14 nonstops a day between SAN and SEA but when the two largest airlines only fly 737s, I guess that’s bound to happen. We look forward to welcoming you on your forthcoming nonstop to our nation’s capitol! Please be aware, however, that it will not be priced cheaply!
I had a similar situation pricing SEA-PHX, another route with 5 airlines operating in it. Frontier was over $100 more expensive than Alaska and Delta, and even Southwest was significantly more expensive. If Alaska and Delta can offer $69 fares in the market on a non-peak weekend (next weekend), why does Frontier think it can get $200?
Anthony – I checked the next two weekends and Frontier is pricing below Alaska and Delta on SEA-PHX (on the weekends, they only fly nonstop on Sundays). I’ve also checked a bunch of weekdays over the next two months and Frontier is consistently priced below the others. It’s possible that a particular flight is fairly full and their revenue management systems have bumped up the fares as a result
Their RMS should never allow it to change more than the lowest fare on a real airline
Imo, in order for spirit and frontier to survive they need to merge, perhaps with allegiant and sun country as well. They need to focus exclusively on mid to small tier markets, with the occasional large hub route. Profitability needs to be predicated on cities outside of legacy hubs. Think PIT, STL, CVG, RDU, BNA, STL, MCI, MKE, SAT, etc.
Yes this does clash with Southwest Airlines, but with Southwest Airlines only, whom are a confused airline, not truly being a LCC nor a true network carrier. Not knowing what they want to be, a large combined ULCC with scale serving small to mid cities against a more expensive Southwest would provide them the chance to survive or even thrive.
Everyone talks about cost convergence burning the ULCC’s, but that cost dynamic may only play out temporarily. Take pilot costs for example. There were shortages from the covid rebound in late 2021 through the beginning of 2024. With many airlines now downsizing and furloughing at the low cost and regional end, and hiring slowing down or stopping at the big 4, all while a huge influx of new pilots entering the marketplace trying to catch the huge hiring wave that they missed out on, the industry is setting up for a huge imbalance in the other direction with too many pilots. The same dynamics may play out with other labor groups. With ch. 11 bankruptcy filings and the ability to renegotiate wages, the regionals and ULCC’s will be able to re-attain their cost advantages in labor as the industry realigns with slowing market demands and increases in capacity / supply.
The market dynamics that immediately played out after Covid is unlikely to play out forever, unless the us government / fed decide to continuously jack up the US economy with continuously low interest rates and QE, inflation be damned. Then Scott Kirby would be right, be premium, upguage and put out all the capacity you want cause travelers would keep traveling when there’s endless discretionary income to travel. But we’re not seeing that, we’re seeing a slowdown in macro economic conditions. Inflation damned as the fed is scared to lower rates too soon too aggressively. Let’s wait and see..