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Denver-based Frontier Airlines is an LCC subsidiary of Republic Airways Holdings. Frontier operates a fleet of recognisable Airbus narrowbody aircraft, all of which feature a unique 'spokesanimal' on the tail. From its Denver hub, Frontier operates extensive services across the US as well as to Mexico and Costa Rica.
Location of Frontier Airlines main hub (Denver International Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Frontier Airlines fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
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As Indigo Partners moves closer to finalising its acquisition of Frontier Airlines and heightens the efforts underway to transition the airline into a true ultra low-cost carrier similar to Spirit Airlines, certain nuances to Frontier’s strategy should prove interesting for Indigo to navigate as it works to place Frontier squarely in the US’s growing ultra low-cost business model. Overall, the ultra low-cost business scheme has so far proven fruitful for Spirit in terms of the carrier’s financial performance; but passengers still bristle about being nickel and dimed even though they are paying base fares lower than most other airlines (even so-called low-fare airlines) by a significant margin.
Headed by former Spirit Airlines chairman William Franke, Indigo was a major owner of Spirit as it began the transition to an ultra low-cost carrier in 2006. As is now well documented, he set the wheels in motion to purchase Frontier earlier in 2013 when he resigned as Spirit’s chairman and Indigo sold its stake in Spirit.
The deal is expected to close some time during 4Q2013; but Indigo has no doubt been plotting a strategy specific to Frontier’s network to ensure the successful execution of the business model change. It is a formidable challenge for a long-standing brand that for a long period of time offered at least some medium frills. Indigo’s biggest challenge may lie in avoiding isolating a loyal Frontier passenger base in Denver that has already endured a number of significant changes since its 2009 purchase by Republic Airways Holdings.
After rationalising its own capacity in markets from the US mainland to Hawaii and seeing relief from competitors shrinking their supply, Alaska Airlines is facing pressure on long-haul markets to the state of Alaska alongside the build-up of new US transcontinental markets that crimped its unit revenues during 2Q2013. The carrier is also warning that its unit revenues will fall again year-on-year in 3Q2013.
The carrier previously warned of a tough 2Q2013 as more carriers added capacity from the US mainland to Anchorage during the summer high season. Its predictions crystallised as Alaska reported significant decreases year-on-year in its yields and unit revenues during the quarter.
At the same time Alaska is feeling pressure from some of its own rapid growth – the introduction of roughly 30 new markets within the past three years. With the bulk of that expansion complete, Alaska during the next year plans to digest the rapid expansion, and states it may not introduce any new markets during 2014.
The timing of Frontier Airlines’ parent Republic Airways Holdings disclosing that it had reached a non-binding deal in its long-awaited sale of Frontier followed by an announcement by Spirit Airlines that Indigo Partners was divesting its stake in the carrier, fuelled intense speculation that Indigo’s head Bill Franke was circling around Frontier. Mr Franke also resigned as chairman of Spirit’s board of directors.
It would seem logical for Mr Franke to make a move to purchase Frontier given Indigo’s ties to low-cost carriers Volaris, Wizz Air, Avianova and Tiger Airways. But the unfolding events pose an interesting question as to whether the mature US market really needs another ultra low-cost carrier (ULCC), and if Frontier can successfully transform itself into a true no-frills carrier based in Denver. Mr Franke, a shrewd operator, may think so.
Denver-based Frontier Airlines has experienced a vast upheaval during the last few years. Acquired by US regional operator Republic Airways Holdings in 2009, Republic decided more than a year ago to spin-off or sell Frontier.
Meanwhile, during its time as a subsidiary of Republic, Frontier has successfully executed a cost cutting scheme and network overhaul that has largely produced favourable results. As it worked to achieve cost efficiency Republic management declared its intent to transform Frontier into an ultra low-cost carrier to mimic the cost structure of other US carriers in that genre, namely Allegiant and Spirit.
But as Frontier has worked to improve its fortunes it has not developed a business model that falls strictly into a no-frills offering in the same vein as Spirit Airlines. Its network is a mix of flying from a hub in Denver and point-to-point operations largely from Orlando and its new focus city of Trenton, New Jersey. Frontier lacks the scale to develop into a full-blown hybrid carrier like JetBlue, yet does not strictly adhere to a pure leisure focus.
American and US Airways are pressing full steam ahead to close their merger by 3Q2012, including stressing to US legislators that the combination will improve the overall health of the country’s airline industry and make the merged airline a more viable competitor with legacy and low-cost carriers alike. With just a dozen routes that overlap, the carriers should not encounter any resistance from anti-trust authorities, and given that most the markets are hub to hub pairings, few changes are likely to be made to service patterns once the 18 month integration process is complete.
Some of the arguments made by American and US Airways over increasing competition from low-cost carriers and their potential service expansion into overlap markets might be overblown as those airlines in previous mergers have been selective in grabbing the low hanging fruit created by the tie-ups between Delta-Northwest, United-Continental and Southwest-AirTran.
US ultra low-cost carrier Frontier Airlines has made sweeping changes to its network during the last few weeks as it attempts to find the right mix of profitable routes that act as shields from one of its largest competitors, Southwest Airlines.
The changes include axing a short-lived focus city in Colorado Springs, hopping between airports close in geographical distance and introducing new seasonal flights from its Denver hub. Despite the end to the brief test case of the Colorado Springs focus city, Frontier for now remains committed to building up point-to-point service from Trenton, New Jersey and Orlando, Florida.
While the argument could be made that Frontier’s swift reaction to ever-changing market conditions reflects the nimbleness that its smaller size allows, the constant upheaval could be a turn-off to customers that expect a certain level of network consistency. And as Frontier’s parent Republic Airways Holdings works to secure a sale of Frontier in early 2013, would-be buyers may be scratching their heads over the long-term value Frontier might provide.
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