Frontier Airlines CEO Barry Biffle has predicted that the Denver-based ultralow-cost carrier (ULCC) will be the "last man standing in the low-cost space next year."
Biffle isn't merely counting on the demise of Spirit Airlines, now going through its second bankruptcy restructuring this year, to turn the fortunes of Frontier. He's leaning into Frontier's credit card and loyalty offering and prepping for the introduction of first-class seats.
"We see a real opportunity now on the product and the price side to be America's low-fare airline," Biffle said in a late-August interview. "Today, we are the top carrier in half of the top 20 metros for the ULCC space, and we see there is pretty much a clear path where we could be No. 1 at some point over the next 12 to 24 months in all of them."
During the second quarter, Frontier reported a net loss of $70 million with a painful minus-7.5% operating margin.
Reversing the losses, Biffle acknowledged, will require a shift in industry supply-and-demand dynamics. Depressed demand for domestic economy flying led discount-focused airlines across the U.S. to struggle in the second quarter.
Those dynamics, though, do appear to be improving. On Sept. 4, JetBlue upwardly revised its third-quarter revenue expectations, citing improving demand trends. Meanwhile, U.S. airlines, especially the low-cost carriers, have been reining in capacity. Spirit, attempting to right-size to remain solvent, is leading the way. This month, the airline expects to fly 23% fewer seats than in September 2024, and Spirit will cease operations in 11 airports in early October.
Frontier, which Deutsche Bank investment analysts estimate will overlap with Spirit on approximately 40% of its route network by December, is best positioned to benefit from the Spirit drawback.
Credit card revenue boost
Frontier's second-quarter results had a silver lining: a 19% year-over-year increase in spending among holders of its co-branded Frontier World Mastercard.
Biffle said Frontier plans to lean on credit card revenue, which offers much higher margins than flying, as it plots a return to profitability. He noted that even Delta, the most profitable U.S. airline, would be operating at a loss if not for revenue from American Express co-branded credit cards.
Frontier made $3 in loyalty revenue per passenger in the second quarter and expects to double that figure before the end of next year, a change that would add $120 million per year in revenue. The airline's loyalty revenue target for 2028 is $10 per passenger.
To entice flyers to acquire its card, Frontier has put forth a bevy of credit card and loyalty perks that provide nearly instant gratification. For example, right now all members of the Southwest, JetBlue, Alaska and Spirit loyalty programs can acquire Frontier Miles Elite Gold status, the airline's second status tier, through next year for $69. The airline has also begun offering to match points that new Frontier Miles members hold on another airline if those new members earn the same number of points on Frontier within 12 months.
Meanwhile, credit card holders get 50,000 frequent-flyer points after spending just $500. They also get Gold Status after spending $3,000 within 90 days. And in a new promotion, they earn free companion certificates after spending $3,000 by Jan. 31. The card's annual fee is $99.
Gary Leff, author of the View From the Wing blog, who writes frequently about airline credit cards, said Frontier has to go the extra mile on its loyalty offering to compete with large airlines that have global route networks, large partner networks, lie-flat seats and lounges.
"They are really creative, but they need to be because the program fundamentally isn't going to offer the aspirational things that many of the larger loyalty programs do," Leff said.
Frontier, though, will improve one of those deficiencies late this year when it begins deploying first-class seats. The product won't include the full slate of first-class offerings, such as hot meals, found on full-service carriers. But the wide seats, spaced only two-across and with plenty of legroom, are slated to be outfitted on all Frontier planes by March, offering new opportunities to reward loyal flyers.
Leff said soft demand, concentrated largely in the domestic economy market, has been the perfect storm for a carrier like Frontier.
"Presumably, macro changes alone lift them up, but they're not sitting still," he said.