Rocky Mountain Ultra Low: Can Frontier Airlines replicate the great success of other ultra-LCCs?

Rocky Mountain Ultra LowIf Southwest is the godfather of low-cost aviation, then Spirit Airlines is its present manifestation, a symbol of what has come to be known as the ultra-low-cost carrier. Put another way, Spirit is low-cost aviation’s new frontier, one so profitable that another U.S. airline is now unsurprisingly trying to cross that frontier as well. That airline, appropriately enough: Frontier.

In the early 1990s, executives that had once run a defunct carrier called Frontier, which flew from 1950 until 1986, saw an opportunity to reincarnate the carrier. Troubled Continental Airlines was tearing down its Denver hub. So in 1994, a new Frontier took to the skies with what travelers today might call a JetBlue-like service offering: “superb leg room,” for example, and eventually inflight satellite TV. It didn’t hurt that Frontier’s chief rival, giant United, fell into bankruptcy after 9/11 and slashed its Denver footprint. In the meantime, Frontier endeared itself to Denver’s growing and increasingly wealthy population with a hugely popular ad campaign featuring talking animals on aircraft tails.

But then came January 3, 2006. That was the day mighty Southwest came to town, beginning a rapid expansion that would soon overlap many of Frontier’s markets. About the same time, United was fighting back with a new low-fare unit called Ted, and oil prices were soaring. On April 10, 2008, Frontier filed for bankruptcy. But it wasn’t going away. Emerging as a white knight was none other than Southwest itself, which offered to buy Frontier. Until, that is, Frontier’s pilots rejected the idea of being stapled to the bottom of Southwest’s seniority list. In the end, Frontier was instead purchased by Republic Airways, a regional airline, during the thick of the U.S. economic meltdown.

But Frontier never really gave Republic what it needed: a consistent source of profits to offset erosion of its core fixed-fee flying revenues. Instead, it proved more of a distraction, giving Republic more direct exposure to fuel prices and extremely tough competition, highlighted by a three-way battle against Southwest and AirTran in Milwaukee (where Republic bought Midwest and merged it with Frontier). Denver too became more and more exposed to Southwest with each passing year. In 2010, according to Boyd Group International Aviation DataMiner, Frontier suffered a $20m net loss…
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