Makes you wonder if it's a setup for them to try their hand at a new airline. Maybe Spirit has run its course to the bottom and they think they can duplicate the destruction with Frontier?

"The bottom"? Spirit has some of the highest (airline) profit margins in the country.

And with or without Indigo, Frontier is becoming ULCC. It tried being a regular LCC for the longest time and fairly consistently lost money.

"The bottom" on FT typically refers to the bottom of service provision, which at Spirit is nonexistent.

And if Spirit is so incredibly profitable, why would shareholders bail?

Yet many still fly it and Spirit makes money.

Why would Indigo sell?

Because they're not long term investors, they're being Venture Capitalists and have had a dream run with Spirit. They have more than quadrupled their money in a relatively short space of time. The made a big pile with the IPO, the Initial Public Offering, which is when VC's usually make much of their big money, and made a bunch more with the 2PO, the secondary public offering.

No matter how well Spirit does, it will not achieve the same returns so quickly again, so now it's time to put the money to work somewhere else and see if they can pull the same trick again.

BB has always said that Republic will do the same with the separated Frontier - like a VC, take a minority position and make their bucks with the IPO.

IPO's are like "open sesame" for any smart VC who gets in on the ground floor. It's how the VC's in JetBlue made their real money.

Because current stock price is at a top?

In regards to Spirit, their current profit margins are dependent on very high aircraft utilization rates due to their lease agreements. If demand decreases or fuel spikes again then they are in big trouble as their fixed costs are already very high. Other airlines can cut routes or fly smaller aircraft, Spirit won't be able to do that. They also have the highest adjusted net debt burden in the industry(even though they current aren't carrying any debt on their balance sheet) which is not a good sign for the long term. As others have suggested, I believe that this is a "cashing out" for those in the know.

As it pertains to Frontier going the ULCC route is unfortunate in my opinion. I really liked flying with them despite them not really being business traveler friendly. I think that they could have done better had they paid a little bit more attention to that segment. With their model and routes focusing on the leisure traveler is/was the right move however business travelers also go to these locations and could have brought higher margins(I always purchased classis plus so that I could have a refundable ticket in the event of a schedule change for example) had it been branded better. I would have been happy just having a multi-city ticketing option on their website. I would have given them a lot more business had this simple feature been available.

For a period of time (2003 and the next few years) Frontier was all things you might have wanted it to be, it was business friendly, and earned considerable loyalty among business travellers. It was not unlike Midwest - not as upmarket, but getting there.

But unfortunately, it did not earn not enough loyalty from enough business travellers. Like Midwest, not enough people were ready to pay a fare that ensured profitability.

So Frontier ceased to be full year profitable in 2003 and was not full year profitable again until last year, when it more fully embraced the market that most valued it - the leisure traveller.

Ultimately, the market rules. The alternative is that Frontier "goes away" - as Midwest did - and the primary loyalty of any airline (any company) is to its shareholders, to make money.

With regard to Spirit, I can't predict the future. Yes, things may go wrong, and yes, it may get into trouble. But if, say, oil goes back up to $130 bbl, other airlines will be in trouble as well.

Meanwhile, the analysts are estimating a $40 price target for Spirit by the end of the year. A bit rich for my blood, but then I though Allegiant was a bit rich at $40 a share and it is now $100 a share.

So while I agree that Indigo is "cashing up," that's what venture capitalists do. Oaktree Capital, the original venture capitalists in Spirit, cashed up and got out some time ago, leaving money (the still rising share price) on the table.

In today's Wall Street Journal: Indigo in talks to buy Frontier, and it is the only bidder.

If I did this right:
- Wsj.com - Spirit Chairman in Talks to Buy Frontier

Analyst interviewed does indeed expect Indigo to adopt a Spirit model at Frontier. I hope it doesn't get too close to Spirit. I'd stay home before I'd ever fly Spirit. Before we praise Franke for profits at Spirit, remember that he ran AWA into the ground before his Spirit days.

I guess now the dilemma is do I try to hit my mark for Summit or do I start trying to book flights with the miles I have sitting there? /rhetorical

I can understand the squeezing of more rows, and some of the fees to increase profitability, but Spirit's marketing, like "Government's Cut", and their low fare calendar that instead of showing the values does the $XX Less/More seemed to be much. I think it was just Spirit trying to ensure that business pax don't fly the airline, and that specifically, United, Delta, American, etc. think of the airline not poaching their customers and thus these airlines won't match Spirit fares.

I'm not sure if Frontier will do the same.

I know in one route, LGA-DTW, Spirit has fares that the general public can fly, while Delta and American charge very high fares, probably knowing it'll be footed by companies.

Southwest requires change planes in MDW, which is also a backtrack, and Jetblue doesn't service DTW out of either JFK/LGA. But, that might be a unique situation where it's just ULCC vs. legacy and no LCC option.

For the most part, I don't think Spirit offers any other routes like that. They offer some DFW nonstop as WN still has Wright restrictions, but WN's one stops aren't too out of the way.

Most NK domestic routes are just parallel to what WN/B6 already offers. I'd assume F9 would be the same. It might go flashy/tacky like Spirit just for attention, but hopefully it could be a more upscale ULCC of the two.

Prepare to stay home?

This isn't new. It was announced in January 2012 that Frontier would become ULCC, the Spirit or Allegiant model:

http://www.businesswire.com/news/hom...sident-Interim

"“Dave is an incredible talent with the skills to lead Frontier during its separation process from Republic and continue its transformation into a profitable ultra-low-cost-carrier,” said Bryan Bedford, Chairman, President and CEO of Republic Airways Holdings, Inc."

Since then, as it becomes more and more ULCC, it's load factors have just gone up and up. It is the future.

US is matching some of Spirits fares out of PHL

You're right.

I'm checking now and it seems so for PHL-MYR. US is cheap@ $64 one way next month. US didn't even fly it everyday before NK flew it, as last year US was charging hundreds for PHL-CLT-MYR and offered no nonstop.

PHL-DFW on US is $79! It seems AA is also matching with some return fares at $68. I'm looking at fares a month ahead, but the closer in fares will probably be significantly higher.

I wonder how NK will do in PHL with the fare matching. Maybe it'll retreat back to it's corner at ACY.

Frontier on the block - RJET wants out
 

Looks like Hugo is a little late to the party, this has been known for awhile.