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Old Nov 8, 11, 7:17 pm   #1
 
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Frontier on the block - RJET wants out

http://www.jsonline.com/business/rep...133477233.html
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Old Nov 8, 11, 7:37 pm   #2
 
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This has been known for some time and its not surprising they 'announce' it when the restructuring is basically done. I'm not sure how much a private equity firm would be interested in buying the majority of Frontier.

The only carrier I can see purchasing Frontier is Spirit. They are mostly private (not sure how much the public offering was for) but one that can expand pretty quickly with the purchase of Frontier. They seem to have financing available as well. It may seem out of left field but crazier things have happened. I don't know much about Spirit but it seems as though they are the only ones that are not intimidated by other carriers and can take on Denver.
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Old Nov 8, 11, 8:13 pm   #3
 
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AS might be an interesting partner.
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Old Nov 8, 11, 8:23 pm   #4
 
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Words like "Ultra LCC" have been mentioned as a goal for Frontier Airlines. That is a clue to me that Spirit might be interested in Frontier. In any case, MKE is toast when it comes to commitment from Frontier. Next year MCI will be a bigger station than MKE.
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Old Nov 8, 11, 8:40 pm   #5
 
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You know, after reading through the comments that were posted on that article it seems to indicate that the YX "loyalty" hasn't really transferred over to F9.
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Old Nov 8, 11, 8:45 pm   #6
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It won't be Alaska Airlines.

JetBlue or Virgin America most likely candidates on the Frontier route.

I was looking at a cheap fare myself that frontier had one time and the problem with Frontier was the size of the route network.

Virgin America or JetBlue will be the acquisition here. Spirit will be the least likely and I wish Spirit would sell out to someone else quite frankly who can install larger seating on those planes and run it better. I wouldn't fly Spirit.

Last edited by adamj023; Nov 8, 11 at 9:21 pm.
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Old Nov 8, 11, 9:44 pm   #7
 
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Frontier has to differentiate itself in Denver more than it has already, or else it'll end up dead in the water unfortunately. It's fighting vs. United on the high end (with a much larger route network) and Southwest, who can throw planes at Frontier until they cry Uncle...the only reason Frontier has survived this long is they have the lowest cost structure of anyone at DEN.

JetBlue also has a lowish cost structure, and there's some fleet commonality there. JetBlue could integrate F9 relatively easily (F9 already has LiveTV, so JetBlue just has to take out some seats and repaint the planes, right? ) and there is little to no route network overlap (MCI and DEN for F9 vs. BOS, JFK and LGB/LAX for JetBlue). As far as differentiation goes, JetBlue can do that, with free TV and generous seat pitch, though Frontier's locations near the middle of the continent mean that seat pitch won't garner as much of a premium versus, say, on transcons.

Virgin America would be a bit bigger shock, what with an F cabin and generally beefier hard product. Plus, they aren't making money...still. I doubt that would work, though VX would certainly be able to differentiate itself from the crowd (they're competing against United in Denver, not Delta, whose hard product is actually, you know, modern).

But if F9 is throwing around the ULCC moniker, which means they might do something drastic and sell out to Spirit. I personally wouldn't mind this, so long as a ticket with a carry-on ends up at the same price as F9 charges now for tickets (which would mean that a ticket with a checked bag would be slightly cheaper). Most people won't agree, but if that's what differentiates what-was-Frontier from its competitors, so be it. If people want freebies and legroom, they can fly Southwest until Spirit wakes up and realizes that their customer base has gone elsewhere. Then again, I've taken too many business trategy courses

Personally, Frontier is my favorite airline (of the ones I've tried, namely United/GoJet, AA, WN, US and F9) and I don't want their operations to get any thinner than they already are. But I'm not about to bail them out, so business is business...
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Old Nov 8, 11, 10:07 pm   #8
 
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Another hard hitting piece of journalism by the Milwaukee Journal Sentinel.

Jay Sorensen is a real piece of work. I remember him writing editorials in the newspaper about how Midwest failed Milwaukee in part because they never developed a true hub and an LCC like AirTran would do just that. Now he argues that the only reason Milwaukee had a hub was because Midwest decided to carve out a small niche and expand in Wisconsin. I guess his consulting contract with AirTran is over, lol.

Milwaukee is simply too small of a market to be anything other than a focus city for an airline in today's environment. The amount of capacity offered by Frontier, AirTran, and Southwest in recent years was simply unsustainable. The idea that Milwaukee could support a hub of 200 + flights per day (the AirTran proposal) is laughable. The traffic and yields just aren't there. It took a long time to get to this point but I'm glad the situation in Milwaukee is starting to finally get resolved.
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Old Nov 8, 11, 11:42 pm   #9
 
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It won't be Alaska Airlines.

JetBlue or Virgin America most likely candidates on the Frontier route.

I was looking at a cheap fare myself that frontier had one time and the problem with Frontier was the size of the route network.

Virgin America or JetBlue will be the acquisition here. Spirit will be the least likely and I wish Spirit would sell out to someone else quite frankly who can install larger seating on those planes and run it better. I wouldn't fly Spirit.
I agree it won't be Alaska. Their CASM is actually a fair bit higher than Frontier's (though they make up for it). A purchase by Alaska would make Frontier even less profitable.

Virgin is out. They just don't have the cash (and they would be fools to go borrow it).

JetBlue ... meh. The CASM is about the same. Similar fleet (including IFE, which is a major expense to install), fills a large hole in their route network. The downside is JetBlue has never used regionals to feed their operations, and Frontier does, and that brings in a new level of complexity (that JB might not want. Why fix what isn't broken?). Then there is, of course SWA. Costs aren't Frontier's problem, yields are, so why would B6 want to toss a lot of money into a yield sinkhole? If F9 can't get better yields than SWA (when I believe F9 has the better product) in Denver, I doubt B6 can.

UA, DL, and AA are out. Already too big, already too big, and broke.

US ... another meh. More for the planes than anything else. Unless UA draws down DEN and US "replaces" them, since US can better compete with SWA on a strictly CASM basis (as they have in PHX for years, and recently "won" a rare victory in PHL against SWA).

Spirit? I could see it. While you may not fly Spirit (and I probably wouldn't either) many people do. $9 fares are hard to resist, even with all the add-ons.

Last edited by redheadtempe33; Nov 8, 11 at 11:57 pm.
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Old Nov 9, 11, 12:11 am   #10
 
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Sorensen is off the mark when he suggests that the business community suck up to Southwest which has a terrible route network for business. Even Frontier itself is a better option. As for Milwaukee not embracing Frontier, remember Bedford hasn't exactly been helpful to either the community or his own cause with some remarks he made. Frontier could make it work. And don't think WN is low fare...hardly.
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Old Nov 9, 11, 3:29 am   #11
 
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In any case, MKE is toast when it comes to commitment from Frontier. Next year MCI will be a bigger station than MKE.
It's not a lack of commitment but rather economic reality.

Frontier is putting planes on routes that have the potential to make money. MKE has been a huge money pit for the airlines. Frontier has lost millions in Milwaukee over the past two years.

More right sizing of capacity is still needed in MKE.
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Old Nov 9, 11, 5:35 am   #12
 
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This story is all over local and national media, including WSJ...http://online.wsj.com/article/SB1000...Tabs%3Darticle.

The reader comments are interesting.
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Old Nov 9, 11, 11:23 am   #13
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I agree it won't be Alaska. Their CASM is actually a fair bit higher than Frontier's (though they make up for it). A purchase by Alaska would make Frontier even less profitable.

Virgin is out. They just don't have the cash (and they would be fools to go borrow it).

JetBlue ... meh. The CASM is about the same. Similar fleet (including IFE, which is a major expense to install), fills a large hole in their route network. The downside is JetBlue has never used regionals to feed their operations, and Frontier does, and that brings in a new level of complexity (that JB might not want. Why fix what isn't broken?). Then there is, of course SWA. Costs aren't Frontier's problem, yields are, so why would B6 want to toss a lot of money into a yield sinkhole? If F9 can't get better yields than SWA (when I believe F9 has the better product) in Denver, I doubt B6 can.

UA, DL, and AA are out. Already too big, already too big, and broke.

US ... another meh. More for the planes than anything else. Unless UA draws down DEN and US "replaces" them, since US can better compete with SWA on a strictly CASM basis (as they have in PHX for years, and recently "won" a rare victory in PHL against SWA).

Spirit? I could see it. While you may not fly Spirit (and I probably wouldn't either) many people do. $9 fares are hard to resist, even with all the add-ons.
I disagree on JetBlue and Virgin America. While I don't know Virgin America's cash on hand since it is a private company and won't IPO till later on, Virgin America and Jetblue both could use the Airbus NEO orders.

Regional routes are going to continued to be served by Republic Airlines which is a Regional carrier that big airlines use.

The only routes that is up for grabs now is the Frontier routes. Quite frankly some slots may be sold off to other airlines if they aren't needed. But Virgin America and JetBlue are both excellent candidates for taking over the fleet with both carriers getting part or one carrier getting a lot of the Frontier routes.

Virgin probably has a lot of cash on hand actually, more than you or I think. And for Virgin, this would allow them to expand on the cheap and just need to reconfigure the airplanes to meet their standards. JetBlue would also make sense and be an excellent fit here to expand.

So I can't say which of JetBlue or Virgin or some combination thereof fits best, but Spirit really doesn't fit here.

Either that or the slots go back to Southwest or other existing carriers and other airlines acquire the fleet of planes like Virgin or JetBlue for expansion since they both need the planes on order.

Frontier reaffirmed the order for 60 A320Neo and 20 A319Neo so it seems as though they likely have a suitor in mind for those planes if I had to guess.

Virgin could use those 20 A319Neo and Jetblue could use those A320Neo or some combination thereof. Frontiers problem is it needs to be part of a larger carrier like JetBlue or Virgin America for it to be more of a success as those carriers are profitable already and have more agreements in place with other carriers and the like.

Without Frontier, Republic can go at it alone or merge with other regional carriers.

And Frontier without regional can be made part of a larger group like JetBlue or Virgin America.

Airlines are going through consolidation right now. We already saw all the other airline mergers like AirTran with Southwest, AmericaWest with USAir, United with Continental, Delta with NorthWest and so on and so forth. So that seems to be the next step for Frontier as well.

When Southwest merged with AirTran it added more routes and expanded its hubs.

Same will happen with Frontier after it is all done. Both Southwest and AirTran were using Boeing while Frontier uses Airbus like JetBlue and Virgin America and yes Spirit however Spirit makes the least sense.

A potential suitor will probably emerge in 2012 sometime.

The Frontier route to Denver is very nice from LGA for instance.

Last edited by adamj023; Nov 9, 11 at 11:37 am.
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Old Nov 9, 11, 11:46 am   #14
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Frontiers problem is it needs to be part of a larger carrier like JetBlue or Virgin America for it to be more of a success as those carriers are profitable already...
Virgin America isn't profitable. 2010 FY operating loss. 1Q2011 operating loss. 2Q2011 operating loss announced <60 days ago. Virgin America hasn't demonstrated it knows how to run a profitable airline with ~40 aircraft, let alone 100.

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Virgin probably has a lot of cash on hand actually, more than you or I think.
Directly from the 2Q11 results press release: •Cash: The airline ended the quarter with $26 million in unrestricted cash and $53 million in total liquidity

Last edited by 3Cforme; Nov 9, 11 at 11:52 am.
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Old Nov 9, 11, 1:16 pm   #15
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Virgin America isn't profitable. 2010 FY operating loss. 1Q2011 operating loss. 2Q2011 operating loss announced <60 days ago. Virgin America hasn't demonstrated it knows how to run a profitable airline with ~40 aircraft, let alone 100.



Directly from the 2Q11 results press release: •Cash: The airline ended the quarter with $26 million in unrestricted cash and $53 million in total liquidity
Virgin is a unique situation because of the structure of the company.

I would not rule out Virgin just yet since even if it has finite cash on the books, it could easily get more for expansion plus Frontier likely has cash on hand as well. Virgin is privately owned and as such any publicly released figures are to be taken with a grain of salt.

Stay tuned. There is always activity in the markets today but airlines in general overall are much healthier today sans a few carriers.

I know USAirways also has Airbus A320 fleet. But I don't know if the Frontier matchup would work for them nor be possible nor plausible.

Possible contenders:

Spirit
USAirways
Virgin America
JetBlue

Don't know who else does the A320s. But it is unlikely Frontier can transistion without merging.

Last edited by adamj023; Nov 9, 11 at 2:30 pm.
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