Faster than covered wagons, Frontier Airlines' planes part the clouds and fly the skies above the Rockies and beyond. The company operates as a scheduled passenger air carrier from hubs at Denver International and Milwaukee's General Mitchell International Airport. The airline maintains a fleet of about 60 Airbus 318/319/320 jets with onboard amenities that include satellite, and roughly 20 Embraer E170/190 jet aircraft. Along with subsidiary Lynx Aviation, it serves about 80 destinations in the US west of the Mississippi, and, less so, Mexico and Costa Rica. In 2008 Frontier Airlines entered Chapter 11 bankruptcy protection. It emerged in 2009 after it was acquired by Republic Airways for about $109 million.
Republic's bid beat out a $170 million offer from Southwest Airlines. The offer was rejected due to Southwest's insistence that the two airlines' pilot unions agree to certain terms before the auction deadline. Southwest's plan would have also phased out the Frontier brand. Republic has kept the Frontier brand alive, making the carrier a wholly owned subsidiary upon emerging from bankruptcy. In November 2011, however, Republic announced that it would sell or spin off Frontier Airlines, which has been struggling with high fuel costs, and focus on feeder flights for major airlines.
Since its acquisition, Frontier Airlines' hangar has become a little more crowded. In fall 2010 it added the operations of Republic's Midwest Air Group to its fold. Midwest Air, also acquired in 2009 by Republic, now flies under Frontier's branded network, bolting on hubs in Milwaukee and Kansas City, and services to 30 destinations. Frontier's market share, which comprised the second largest stake in Denver, expanded to hold the largest share in the Milwaukee market.
Frontier's operations, however, have faced a number of challenges in achieving lift-off. Among them, giving Republic second thoughts, is its vulnerability to high fuel prices, which in 2010 represented almost 25% of its total operating expenses. The economic and competitive landscape creates a natural barrier for passing these increases on to passengers.
Moreover, Frontier's business relies upon providing a low-fare alternative to United Airlines, the #1 carrier in the Denver market, coupled with maintaining its status with Milwaukee passengers. Some 95% of its flights start or end from hubs in Denver and Milwaukee. Leading low-fare carrier Southwest Airlines has also set its sights on Denver. In an effort to capture additional regional traffic, it has expanded its presence there. Competition from other carriers flying out of Milwaukee includes Delta Air Lines, as well as AirTran and Southwest Airlines, which merged in 2011. Frontier continues to respond to the encroachment by adding nonstop seasonal service to vacation spots in Florida from cities in the Midwest.
In addition, unlike other branded airlines Frontier's network of marketing alliances is limited to a code-sharing agreement with Great Lakes Aviation, constraining its ability to attract passenger traffic. (Code-sharing enables airlines to sell tickets on one another's flights and thus offer passengers service to more destinations.) Frontier's partnership with low-cost carrier AirTran ended in mid-2011. Their arrangement, dating back to late 2006, allowed frequent flyer members of both airlines to earn and use their miles on each other's carriers. The partnership was touted as a first between low-cost airlines. Frontier has since integrated the Midwest Miles program into its own.
Liquidity, which was a significant factor in driving Frontier to seek bankruptcy protection, is another challenge. Under certain circumstances, its credit card processor can increase its "holdback" of payments by airline customers, hamstringing Frontier's ability to meet immediate needs. (Credit card processors generally pass along payments shortly after tickets are purchased, but their contracts allow them to withhold part of the money -- in Frontier's case 95% -- between the time a ticket is purchased and the time passengers actually take their flights.) Nonetheless, Frontier is among the more aggressive carriers in retrenching fares. During the stalemate in Congress over funding for the Federal Aviation Administration, which resulted in suspending federal taxes on tickets, Frontier joined other major airlines in raising fares by an amount equal to the taxes and pocketed the difference. It rolled back fare increases after federal taxes were put back in place. – less