Over Memorial Day weekend, Frontier Airlines put the first two of 45 aircraft it had parked due to the Covid-19 crisis back into service. 

It was the beginning of a process that will see the ultralow-cost carrier (ULCC) return 75% of its fleet to service by July as it operates between 50% and 70% of its originally planned capacity, compared with just 21% in May -- a bullish build-up relative to other U.S. airlines.

The aggressive ramp-up, said CEO Barry Biffle, is facilitated by the carrier’s ULCC business model, which caters heavily to the leisure market, with a particular emphasis on flyers who are visiting friends and family. 

“It’s definitely more advantageous to be a ULCC than any other business type,” Biffle said of the Covid-19 era and in reference to the broader airline industry. 

Still, while he and other leaders in the ULCC sector in the U.S. say they are especially well positioned to weather Covid-19 due to their leisure-market emphasis, low-cost structure and relatively small exposure to international markets, not everyone agrees. Some analysts expect challenges for the discount carriers due to other tenets of their business model, most notably including their densely configured aircraft and their need to be able to undercut full-service competitors.

“Every ULCC should be concerned just because of the business model in general,” said investment analyst Daniel Martins, founder of D.M. Martins Research. 

Martins said that ULCCs such as Frontier, Spirit and Allegiant exist because they are able to offer substantially lower prices than their competitors. But to sustainably offer cheap fares, he said, those airlines must fly mostly full aircraft while also taking advantage of dense seating arrangements. Spirit, for example, squeezes 182 seats into its Airbus A320s, compared with the 162 seats JetBlue has on its densest A320s. 

Right now, said Martins, ULCCs not only are locked into beating their competitors on price, they are also hamstrung on capacity by social distancing expectations. 

Social distancing was also a concern raised by J.P. Morgan analyst Jamie Baker in an April analysis. But he noted that economy cabins on other carriers aren’t exactly spacious. 

Of more concern, Baker wrote, is that the ULCCs could be snuffed out by their much larger legacy competitors.

“When an animal is starving, it will eat anything,” Baker wrote. “Given how starved for revenue we expect the Big 3 to be, their tolerance for letting crumbs fall off the table into the mouths of discounters is expected to be low, in sharp contrast to when Delta spoke of ‘profitable coexistence’ with ULCCs during headier times.” 

Biffle isn’t the only ULCC executive taking the opposite view, however. 

During an earnings call last month, Spirit CEO Ted Christie said that the carrier would emerge from the crisis better positioned than before coronavirus due to its low fares and low-cost structure. 

Bill Franke, managing partner of Indigo Partners, which is the lead investor in Frontier and three other ULCCs around the globe, added that ULCCs have a cost basis that is 30% lower on average than legacy carriers. So, even if airlines continue to block some seats for a while, ULCCs will have more ability than traditional carriers to keep fares low. 

ULCC insiders aren’t the only people who see advantages for the model during these extraordinary times. Industry analyst Seth Kaplan noted that full-service carriers such as United, Delta and American need business travelers to fill their expensive front-of-aircraft seats that are crucial to revenue models. But like many in the global travel industry, he expects business traffic to recover more slowly than leisure traffic. 

In addition, international travel is widely expected to lag behind a domestic buildup. That’s another disadvantage for the Big 3, which rely on networks that are far more global in scope than the three U.S. budget carriers or Southwest, JetBlue or Alaska. 

Still, as the pandemic lingers, ULCCs will have to overcome whatever stigma comes from the fact that they have denser seating than their full-service rivals. 

Biffle said that Frontier hasn’t encountered that as a challenge. 

He noted the high-efficiency HEPA air filters used by Frontier and other airlines. Frontier says its system filters over 99.9% of air contaminants, a similar level of performance to the filters in operating rooms.

In addition, Frontier has become the first U.S. carrier to implement passenger temperature checks. 

Frontier, Biffle said, also enforces its mandatory mask policy for passengers throughout the flight. Some U.S. airlines have instructed flight attendants to provide information but not to intercede on the issue once passengers are boarded. 

“People are going to choose more crowded planes over less crowded planes if there are masks or facial coverings required,” he said. “That’s what stops the spread.”


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