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Republic’s Frontier signals interest in partnerships, remains competitive

14-Oct-2010

Between the consolidation of the US airline industry and the dilution of contracts between regionals and their major-carrier counterparts, Republic Airways Holdings possibly signalled it has seen the writing on the wall this week, with Chair and CEO Bryan Bedford telling Bloomberg it may seek a marketing agreement with a major airline.

Analysts suggest that the proposed Southwest/AirTran deal would be negative for Republic’s branded service – Frontier – which is already competing well with Southwest in Denver. But with the merger of the two low-cost carriers, Frontier’s ability to compete has been questioned.

“We do believe there is a low-cost opportunity where, frankly, we think Frontier could help some of our network partners,” Bedford told Bloomberg. “It’s premature to speculate on who and what that would be. It doesn’t have to be consolidation. There are other options we are seeing in terms of collaboration.”

Republic broke out of its codesharing business adding the branded Frontier service and merging it with Midwest Airlines earlier this year. However, the fact it is looking at hooking up with a mainline carrier may mean the branded operation is not working out as expected.

“That’s not a conclusion that results from his comment,” said Spokesperson Carlo Bertolini. “He was referring to the fact that the industry remains fractured, even as we see additional consolidation announcements within it. Bryan pointed out that partnership opportunities can be helpful in extending the reach of an airline’s route network that is marketable to its customers. As examples he mentioned Alaska and Hawaiian Airlines with respect to the arrangements they have with some mainland airlines. Although we saw some delays, which we’ve since overcome, in integrating some of the technology platforms involved in the merger, it is working out and remains the channel to our long-term growth platform.”

Republic told the Centre for Aviation that it is not thinking of transforming Frontier into a fixed-fee operator. Last December, Bedford told analysts its costs at Denver were well below United and Southwest, but would only say not that its costs are “highly competitive, Frontier has ex-fuel CASM that is competitive with Southwest”.

The environment for low-cost/mainline carrier deals is a good one, having already been done with American’s codesharing announcement with JetBlue over Kennedy. That was followed by Hawaiian and Delta and Alaska and American as well as Alaska and American. Indeed, JetBlue’s strategy is to codeshare with all comers at Kennedy where it already has several codeshare partners including Aer Lingus and Lufthansa, the latter of which owns a stake in JetBlue.

As for Frontier, Bertolini said: “We’re focused on our own integration challenges, where we have made lots of significant progress – one booking platform, for example, which simplifies simplifying the reservation and check-in process for Frontier customers.”

The Southwest/AirTran merger means going from two low-cost carriers in Denver to one and, in Milwaukee, from three to two. “That will result in a larger piece of the pie replacing two smaller pieces,” he said.  

Bedford, who appears on the American TV show Undercover Boss on Sunday, told Bloomberg the market dynamics will not change. “Everywhere we fly against those guys, the fares have already been cut,” he said. “Whether we’re competing against two airlines or one bigger Southwest, I don’t really think that changes the market dynamics that much.”


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