Back in December
2013, when Indigo Partners purchased Frontier Airlines, the company inherited a
struggling, heavily Denver-centric carrier.
In fact, Frontier's senior vice president – commercial, Daniel Shurz, characterized the carrier then as “90% Denver-focused.”
Two years later,
Indigo, which is owned by veteran budget-carrier investor William Franke, has
transformed Frontier into a profitable, ultralow-cost carrier embracing the
Spirit model. And Denver, while still Frontier’s hub, only figures into about
45% of its routes.
Today, with that
rebalancing act well underway, the carrier is set to expand. This year,
Frontier will see its fleet grow from 56 to 65 planes as it takes delivery of
18 new aircraft while retiring just nine.
carrier has announced 56 new routes to commence between April and June of this
year. They’ll mainly connect mid-size markets, such as Cincinnati, Charlotte
and Portland, Ore., to major destinations like Chicago, Orlando and Phoenix.
Denver, too, will
figure into the expansion, with the addition of service between the Mile High
City and San Antonio; Columbus, Ohio; and Pittsburgh.
“We see this as a
great opportunity,” Shurz said. “We are targeting markets that are
overpriced and generally underserved.”
To people in some
markets around the country, it might seem as if Frontier has already expanded
service over the past two years. The carrier now flies to 12 locations from Las
Vegas, up from the lone Denver-Las Vegas route at the time of the Indigo
Frontier has expanded its number of routes serving Orlando from six to 15 and
has increased from three to 11 the number of destinations it serves from
Chicago O’Hare. But what Frontier has really done until now is to reshuffle,
not expand, its network. And it’s not just Denver that has seen a reduction in
service. The carrier flew nine routes out of Trenton, N.J., two years ago, for
example, and has dropped that number to four.
All told, in
fact, Frontier serves just 46 destinations today, down from 69 two years ago.
Its total number of weekly departures has remained more or less flat, at just
Shurz said the
reorganizing has improved Frontier’s cost structure and positioned the carrier
for its planned 2016 expansion. Meanwhile, the changes have not been limited to
the route network.
In April 2014,
Frontier changed its business model from that of a low-cost carrier to an
ultra-low-cost carrier, charging extra for everything from carry-on bags to
assigned seats to boarding passes printed at the airport. Last August, the
airline rebranded what had been its discontinued Classic Plus bundled-fare
package as the Works, which offers refundable fares, priority boarding, seat
choice, a checked bag and a carry-on bag for an additional $49 to $69 each way.
accomplished the changes while staying in the black. Net income for the first
three quarters of this year was $113.7 million, according to the company’s
Department of Transportation filings, up from $103.5 million for the same
period in 2014.
Analysts say that
Frontier’s quick transformation over the past two years has been unsurprising.
Franke served as chairman of Spirit before bolting from the airline ahead of
Indigo’s Frontier purchase. Indigo is also a major investor in the Mexico
ultralow-cost carrier Volaris and the Hungarian ultra-low-cost carrier Wizz. In
addition, Franke brought former Spirit marketing director Barry Biffle to
Frontier to serve as CEO.
“It’s not like
they have to spend a lot of time figuring out what they have,” said Henry
Harteveldt, a travel industry analyst with Atmosphere Research Group. "Barry Biffle simply said, ‘This is what we
did with Spirit; let’s copy it.'"
that Biffle has sought to avoid Spirit’s worst pitfalls by pursuing measured
growth and working to maintain a good reputation for customer service despite
its ultralow-cost model.
transformation hasn’t been all clear sailing.
during each of the first seven months of 2015, as the carrier decentralized its
route network, Frontier came in behind the on-time average for U.S. discount
carriers, according to Flight Tracker.
performance picked up substantially from August through September, exceeding
the discount carrier average once, coming in below the average once and
performing almost exactly at the average during the other three months.
block times as we learn,” Shurz said, referencing the industry term for the
amount of time a carrier leaves itself to complete a flight, gate to gate. “And on top of that we have block times that
are [shorter than] the industry norms of low-cost carriers.”
Bob Mann of
airline analyst R.W. Mann and Co. called Frontier’s approach to expansion and
the ultralow-cost model, “informed trial and error.”
“They look for
markets that are hindered by higher-fare competitors, then they come in and
expand that marketplace by entering with their low cost structure and their
fares,” he said.
transformation into the second-largest ultralow-cost carrier in the U.S. has
fueled speculation of a merger with Spirit or another discount carrier, such as
JetBlue or Allegiant.
Of those three,
Spirit has garnered the most talk, in part because of the familiarity the
management teams of the companies have with each other and in part because
their route networks rarely butt heads.
In fact, Franke
fueled such speculation a year ago at an airline conference in Dublin, when he
said that he anticipated mergers among the U.S. budget carriers. But Frontier
executives have since downplayed talk of a merger with Spirit.
Asked about the
prospect earlier this month, Shurz responded, “No comment.”
Correction: Frontier's senior VP - commercial is Daniel Shurz. A previous version of this report had the wrong last name.