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
“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 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
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
Biffle said that Frontier hasn’t encountered that as a
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.”