Frontier posts losses, sells planes to raise cash

Old Jan 26, 08, 11:42 am
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Frontier posts losses, sells planes to raise cash

Story from the Rocky Mountain News:

http://www.rockymountainnews.com/new...-on-liquidity/

Southwest has got to be having a real effect on Frontier.

It sure would be great if Frontier would take some lessons from Southwest, before Southwest puts them out of business!
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Old Jan 26, 08, 12:35 pm
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Originally Posted by FCfree View Post
Story from the Rocky Mountain News:

http://www.rockymountainnews.com/new...-on-liquidity/

Southwest has got to be having a real effect on Frontier.

It sure would be great if Frontier would take some lessons from Southwest, before Southwest puts them out of business!
Wn will be all over F9 as the year progresses, Wn adding all those new flights will be overwhelming out of DEN. Was on a WN flight fron DEN yesterday to ABQ, packed plane for $49.00/seat and with F9 you get a Q400? Makes you wonder doesn't it? WN has enought cash from fuel hedging alone to buy F9 now!
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Old Jan 26, 08, 1:02 pm
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I'm not sure WN is the issue for F9, as F9's loads have continued to increase following WN's entry into the Denver market. WN's presence may limit fare increases for F9--although F9's average fare hasn't decreased, it's likely not seeing the upside that other carriers may be able to put in place elsewhere.

Looking at F9's recent earnings statement, it seems that F9's recent loss is due to:

1. Startup costs for the prop subsidiary, and delays in getting the ability to fly flights with it.

2. Low loads on non-Denver originating flights to Mexico.

3. Cost of Fuel.

F9 has a low ex-fuel CASM, and so far at least, seems to have been competing well with WN out of Denver--perhaps due partly to the good customer service experience F9 offers. As someone who has had good experiences on F9, I hope that the new Q400 fleet helps increase their yield and that fuel drops a bit as they reorganize some of their flying.

Of course, one can also see that WN has the ability to capacity dump in Denver, if they want! I am hopeful we won't see this (a la AA with Legend in Dallas)--F9 provides a comfortable and friendly flying experience, and I hope they stick around for awhile.

-Hayden
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Old Jan 26, 08, 5:19 pm
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Originally Posted by Hayden View Post

F9 provides a comfortable and friendly flying experience, and I hope they stick around for awhile.

-Hayden
I agree! I fly PDX-DFW fairly regularly and will often take F9 through DEN over the AA non-stop... I'd rather take the extra time and plane change (with the associated friendly people and nice planes) than deal with the AA MD80 and all the Tier 1 airline crap.

I don't even consider WN unless I really, really need a dirt cheap flight and don't care what it takes to get there.

RFTraveler
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Old Jan 27, 08, 10:49 am
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Originally Posted by RFTraveler View Post
I agree! I fly PDX-DFW fairly regularly and will often take F9 through DEN over the AA non-stop... I'd rather take the extra time and plane change (with the associated friendly people and nice planes) than deal with the AA MD80 and all the Tier 1 airline crap.

I don't even consider WN unless I really, really need a dirt cheap flight and don't care what it takes to get there.

RFTraveler
I an happy for you that some have choices that allow you to choose F9. It seems those in Denver are the most loyal and some in markets that still have Airbus service reguarly. Living where I choose to live WN is the choice and always has been. 13 Free Round trips last year, Companion pass, free drinks and A-list boarding aren't that bad of perks. F9 is not a option anymore due to no Airbus service anymore from ABQ, F9 matching Wn @$49 to DEN on a Q400 is not an option! 737 vs Q400 for same price? Wn is adding flights here due to Q400 issue, ABQ to DEN flights are packed every trip! Does it make sense to drop jet service and replace it with turbo prop's? I guess if the red ink piles up, yes. But for the road warrior no.
Making connections to F9 is not now an option, customer service is great and I liked the aircraft etc. Have miles to use and I will soon due to my concern that they are in some diffculty. As for a take over target, red ink each qtr will make it happen in my opionon. Wn has targeted DEN for 2 years and will make it even more of a drain to F9. Reality is Wn makes more money hedging fuel than most airlines lose per qtr. Wn has more cash than any nearest airline of capacity, like it or not in '08 the weak get weaker and Wn gets stronger.
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Old Jan 27, 08, 11:29 am
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not optimistic

Unfortunately, things do not look good for Frontier. I do think it will be very hard for them to compete with Frontier. It is not really a matter of whether they can keep up their market share. It is really a matter of what revenue they can get from their seats. Frontier has previously competed by offering a substantial discount to UAL fares. However, their fares were substantially higher than typical SW fares. It does not seem likely at current fuel costs that they can match SW on fares and still turn a profit. If it is war of attrition, SW has big pockets, and will easily win.
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Old Jan 27, 08, 1:16 pm
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Frontier is not going to just disappear tomorrow. Maybe Southwest will be able to knock them out in the future, but at that would be a shame and WN would have officially become the WalMart of airlines.

The last year's Frontier advertising has been geared to the business market. That market will not just move over to Southwest, even with their recent operational changes.

I admit, when it comes to personal travel (short distances), WN is a common choice due to the low prices. But not only can I not easily use WN for my business travel, I have no real want to deal with them when I am on the clock.
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Old Jan 27, 08, 3:15 pm
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Agreed about the business folks... if Frontier is smart and enhances their programs to attract profitable new business travelers, they can loose the price-sensitive infrequent fliers to Southwest, and end up making more money from us than they loose to the "Greyhound of the skies".

Now let's see them start to enhance the business experience even more, starting with adding a new "Pinnacle" EarlyReturns level for 50,000 miles/year that offers perks such as a companion pass, Global-services level personal attention, and a waiver of the few rules they still apply to Summit pax, such as the $35 award-ticket-refund fee, and the within-4-hour window for confirmed standby. I personally have no problems re-qualifying for Summit just a couple months into the year, so some of my business goes to United or JetBlue when there are times that their schedules work better for me. However, if F9 offered a 50k-mile tier, I would sacrifice some personal convenience in order to fly them more often in order to make the top level. Are there others out there who would do the same?
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Old Jan 27, 08, 7:45 pm
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Originally Posted by DenverF9Flier View Post
Agreed about the business folks... if Frontier is smart and enhances their programs to attract profitable new business travelers, they can loose the price-sensitive infrequent fliers to Southwest, and end up making more money from us than they loose to the "Greyhound of the skies".

Now let's see them start to enhance the business experience even more, starting with adding a new "Pinnacle" EarlyReturns level for 50,000 miles/year that offers perks such as a companion pass, Global-services level personal attention, and a waiver of the few rules they still apply to Summit pax, such as the $35 award-ticket-refund fee, and the within-4-hour window for confirmed standby. I personally have no problems re-qualifying for Summit just a couple months into the year, so some of my business goes to United or JetBlue when there are times that their schedules work better for me. However, if F9 offered a 50k-mile tier, I would sacrifice some personal convenience in order to fly them more often in order to make the top level. Are there others out there who would do the same?
makes sense if you live in Denver, must be why Wn is expanding DEN. Many of us travel WN every week for business. And many business travelers don't travel the hub routes line F9 flies. Some of us can't fly F9 as much as we used to due to schedule and Q400 issue. As for the price sensitive in-frequent fliers on WN, they fly full due to them and I as a Frequent flyer spend my companies money as if my own. It all equals profits. As for F9 changing tiers and companion passes, when you bleed you retract not increase benefits.
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Old Jan 27, 08, 9:30 pm
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Originally Posted by oswaldjacoby View Post
If it is war of attrition, SW has big pockets, and will easily win.
This is a good point.

Frontier's most-recent-quarter CASM ex-fuel was 6.29 cents, and F9 is reducing that number. It's CASM incl-fuel was 10 cents.

Southwest's most-recent-quarter CASM ex-fuel was 6.57 cents, and WN stated it expects this number to increase in the current quarter. Southwest's CASM incl-fuel was 9.15 cents. In the most recent quarter, WN realized a gain of $300 million from its fuel hedges in the quarter, as compared to a total profit of $111 million (incl. special items).

So WN's available cash lets it hedge significantly, allowing it to remain profitable (and thus continue hedging), in contrast to pretty much every other airline. Also, it has folks who can do the hedges successfully. In the absence of its hedges, WN would have somewhat higher total costs than F9--but even then, it could absorb losses at Denver through its larger route structure.

Of course, although this has been remarked upon by others elsewhere, it's worth noting that the above suggests that WN is making its profits on its fuel hedges, rather than on its flying, which doesn't say much for current fares across the industry relative to costs. As long as WN can retain this competitive advantage, it would tend to act as a fare ceiling.

-Hayden
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Old Jan 30, 08, 5:54 pm
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Originally Posted by loboclone View Post
As for F9 changing tiers and companion passes, when you bleed you retract not increase benefits.
That's a pretty short-sighted approach. They may not be willing or able to go as far as I've suggested above, but increasing benefits for their elite members can help them make money if it ups their standing in the lucrative business-traveler market.

Looks like they've already spent some money on one major enhancement - see my other thread, Free Clear card for F9 Summit members . Unless they managed to get $1.1 Million worth of Clear memberships for free through their marketing arrangement.
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Old Apr 3, 08, 6:09 pm
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Originally Posted by loboclone View Post
I an happy for you that some have choices that allow you to choose F9. It seems those in Denver are the most loyal and some in markets that still have Airbus service reguarly. Living where I choose to live WN is the choice and always has been. 13 Free Round trips last year, Companion pass, free drinks and A-list boarding aren't that bad of perks. F9 is not a option anymore due to no Airbus service anymore from ABQ, F9 matching Wn @$49 to DEN on a Q400 is not an option! 737 vs Q400 for same price? Wn is adding flights here due to Q400 issue, ABQ to DEN flights are packed every trip! Does it make sense to drop jet service and replace it with turbo prop's? I guess if the red ink piles up, yes. But for the road warrior no.
Making connections to F9 is not now an option, customer service is great and I liked the aircraft etc. Have miles to use and I will soon due to my concern that they are in some diffculty. As for a take over target, red ink each qtr will make it happen in my opionon. Wn has targeted DEN for 2 years and will make it even more of a drain to F9. Reality is Wn makes more money hedging fuel than most airlines lose per qtr. Wn has more cash than any nearest airline of capacity, like it or not in '08 the weak get weaker and Wn gets stronger.

The problem is that nobody (including WN) can make money at $49, even between ABQ and DEN. And the airlines in general have conditioned passengers to buy on price alone - without considering value. Frankly, a Q400 isn't that bad - its more comfortable IMHO than a CRJ - but with airlines falling apart daily (Aloha and ATA this week alone). Maybe we need to re-regulate.
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