Frontier outlines post-bankruptcy hopes
By David Field
Frontier Airlines has been in Chapter 11 bankruptcy protection since last April, but is confident that its reduced fleet and network, as well as its strong focus on its Denver base, will enable it to emerge later this year
Frontier Airlines is different from other carriers in bankruptcy. It may have sought bankruptcy protection at about the same time as a number of other US passenger carriers did, but unlike Aloha, ATA and Skybus it is in business and is as close to thriving as can be expected. The Denver-based airline hopes to emerge from court protection this spring.
Since filing for Chapter 11 in April, Frontier has shrunk its network and fleet, and launched a new approach to pricing. Vice-president of planning and revenue management, Tom Bacon, says: "We had to pull back from a number of cities and we've become much more Denver-focused." The airline, says Bacon, ended all service to Hartford, Connecticut Louisville, Kentucky Tulsa, Oklahoma and a few other cities, and made others, including Vancouver and Anchorage, into seasonal routes.
"We ended a number of the longer-distance routes, and also pulled out of markets that just could not support service at oil prices as high as they were."
As it trimmed 17% of its Denver departures, Frontier took nine aircraft out of its 60-Airbus mainline fleet. At Denver, "we made a stronger hub. We made it easier to connect by adjusting schedules, allowing more time for a lot of connections", says Bacon.
But while Frontier is relying on many of the usual tools to get out of bankruptcy, such as wage cuts, aircraft returns and sales, it is also focusing on a new venture to help it become profitable. That venture is Lynx, a turboprop operation it launched at the end of 2007 and which now operates 10 Bombardier Q400s.
Lynx removed Frontier from the obligation of paying others to fly for it on shorter range or feeder routes, and allowed the carrier to focus on its home region of the Rockies and the Mountain West. While Lynx has brought down fares in many of its markets, it is also bringing in premium fares on some ski resort routes.
While Frontier blames its losses on the cost of fuel, new competition at its Denver base has certainly played a major part. The new rival is of course Southwest, which began service at the new Denver airport in January 2006 it had previously served the city's old Stapleton airport but pulled out in 1986. It has ramped up at Denver International quickly, starting from just 13 initial flights and increasing to some 100 flights, adding new services three times in one month alone.
denver competition
Like other Frontier officials, Bacon insists that the carrier is not so much losing customers to Southwest as Southwest is stimulating new demand. And the big behemoth at Denver, United Airlines, is shifting its focus elsewhere. It shut Ted, its low-fares unit that was based at Denver, and is focusing on international routes.
By late last year, Southwest had established a market share of just under 9%, while United and its affiliates were first and Frontier was second at 22%. This is up since December 2006, when Frontier was 19% and Southwest, just starting out, carried 4% of Denver passengers.
Bacon says "extraordinary customer loyalty" has been a major factor in Frontier's survival. The numbers back him up: the carrier had a slight traffic increase for the year, with mainline passengers up 2% to 10.6 million. Traffic sagged at the end of the year as it did for most carriers, but Frontier's capacity was cut 17% by year-end.
In December, the carrier launched an innovative fare structure, one that bundles up its various ancillary services into three tiers. The tiers differ according to what the passenger pays to get, for instance, movies, checked bags, refundability.
Bacon describes the response as "very strong". But he knows that Frontier will have to do something more if it is to thrive, rather than merely survive, and the carrier is seeking to broaden a co-operative pact it has with AirTran Airways. It may consider setting up a focus city, or a minihub, but would only do so after very careful consideration.
By late last year, Frontier was able to post a small net profit - $2.9 million for November - despite some extraordinary costs including $2.4 million in cash it was forced to post on its fuel hedging agreements. But it showed an operating profit for the month of $2.5 million, following a $16 million operating loss in October. It has asked the bankruptcy court in Denver for a June deadline to file its reorganisation plan, which would postpone a March date set earlier. But Frontier chief executive Sean Menke says the carrier is confident it will be able to emerge from bankruptcy this year.
Frontier has reduced its fleet and network under bankruptcy protection
"We had to pull back from a number of cities and become more Denver-focused"
tom bacon
VP planning, Frontier
© Reed Business Information 2009
