Frontier could have some game as an LCC

It’s been said publicly by many that Frontier Airlines will be refocused on Denver again and that it will become an ULCC airline in the spirit of Spirit or Allegiant Airlines.  Many think this is difficult to imagine for Frontier and in some ways, I agree.  However, I think another ULCC isn’t such a bad idea.

The truth is that existing LCC carriers aren’t all that low cost any more.  Even the newest are raising fares right alongside the legacy airlines and that has significantly impacted the consumer and, I think, degraded demand.  Airlines are constricting capacity over and over and over again and while the rising fares do make up for that, it’s noticeable that every quarter we hear about an airline restricting growth or even contracting themselves in light of the market place.

I believe the reason we see Spirit and Allegiant doing as well as they do has a lot to do with the fact that they are the airlines who are able to stimulate and benefit from the incremental demand that appears with a lower air fare.  I’m referring to the Southwest effect, yes.  With the consolidation that has gone on for the past 6 years in this industry, I’ve wondered when new entrants were going to appear and I think the only reason they haven’t is due to the lack of available investment capital.   It’s hard to start a well funded airline right now.

But Frontier isn’t in need of that kind of capital.  Based in Denver, the airline could actually fight back against what are essentially 2 legacy airlines whose air fares are considerably higher today than they were 2 years ago.  There is money to be made there and money elsewhere too.

It requires lower costs and fees on everything, yes.  Frontier will need to add seats, reduce frills and start charging fees for anything it can find while lowering air fares dramatically.  This is real work but isn’t capital intensive work.  They can do this. 

Can they succeed?  I think that depends a great deal on the management team and its willingness to sharply execute a ULCC plan.  There is no need to take too long to implement the ULCC strategies.  Implement them and start undercutting your competition as fast as possible.  Move aggressively into markets where you can show a difference against the legacy carriers including Southwest Airlines.   It really isn’t as far fetched as it might seem at this point. 

The truth is that the airline marketplace has changed dramatically over the past 3 years as a result of the economy, fuel prices and consolidation.  Furthermore, most consumers have accepted the fee structures and despite hating them, they’re paying them.  So why not a ULCC that aggressively plays against the legacy airlines and older LCC carriers?  That model might not have been ready for prime time 5 years ago but a lot can change in 5 years.

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