iahphx

I'm probably the only "airline analyst" who actually flies Frontier (thanks to their generous status match last year), and I must admit that I'm fascinated by their business model. Frankly, it doesn't look like a good model, as their product is so bad that most American travellers (and almost all higher-paying travellers) studiously avoid it. Their revenue per available seat mile shows this, as they're earning little more than half as much as the major airlines are now earning. Still, they're marginally profitable (about half the margins as the big carriers), and that is achieved by the fact that they get $82 in ancillary revenue per passenger. Frontier doesn't break out how this number is calculated: I don't even know if it differentiates between pax who buy roundtrip tickets and those who buy oneway tickets. $82 seems awfully high to me. I see very little onboard sales of drinks and snacks. So it must all be seat assignments and luggage (maybe change fees, too?). Oneway bag fees have climbed to almost $50 oneway for carry-ons. I find it hard to believe that most passengers are buying this. If they are, they're fools, and I would think their customer base would wise up to this fact.
https://ir.flyfrontier.com/news-rele...strong-revenue

JayhawkCO

I just booked a DEN-LAS RT on Frontier since it was $125 in total, with anything other than Spirit being in the $280 range. Carry-on fees were $65 each way, which I declined since I'm only going to be there for about a day and a half and can stuff one change of clothes into a personal item. The cheapest seat assignment was $36 each way, which I declined because it's only about 75 minutes in the air, and I can suffer if I do happen to get stuck with a middle seat. I feel like F9 might be able to raise fares a bit and lower the fees, since I can't imagine a ton of people feel great about spending more on a carry-on than the ticket. I could UPS a bag for $20-$25 each way.

jebr

This doesn't surprise me. Sure, a lot of people will be fine with a personal item, but if you're going somewhere for a week most people will need more than that. Add in the strict enforcement of the personal item size that's been happening, and the occasional assigned seat and change fee, and it's easy to see why they can get $82 per passenger in ancillary fees on average (particularly if it's per round-trip; I'm not sure of that either.)

I also don't think passengers are "fools" for paying that - if ticket price + ancillary fees are still substantially below that of other options, I'd say that those passengers are actually being rational. I wouldn't be surprised if that's often the case, between high airfares on legacy carriers over the past couple of years, Frontier often flying into/out of secondary markets where legacy carriers aren't as competitive, or being the only direct option available. I wouldn't necessarily make that same decision, but I can see why people do and I don't think people are fools for flying Frontier when the math works out for them.

jjbiv

They do have a fascinating business model.

I'm guessing they categorize the carrier interface charge revenue as ancillary revenue. If so, at $16/segment that gives them a nice headstart toward $82/pax in ancillary revenue. I don't see a lot of people paying for carryon bags on Frontier but they do seem to do a brisk checked luggage business at the ticket counter which definitely helps. Add in some seat assignment revenue and miscellaneous services revenue and I can see how they get to that number. It would be much more difficult to hit without the head start from the CIC.

JayhawkCO

Not fools, but I could fly Southwest for $280 for my trip to Vegas (instead of the $125 that I paid). With that purchase, I wouldn't likely get stuck in the middle (since I set my alarm for T-24), could bring a carry-on or check a bag, and have more legroom with a seat that reclines.

Had I gotten that exact same thing from Frontier, needing now to also pay for an exit row to get some legroom, I would have to pay $365. Given the lack of network options in case of irrops (and, yeah, we know WN has their thing too, but that's normally weather-related), there is no financially sound reason to book Frontier. I know one data point isn't everything, but I think there are some folks who see the cheap ticket, don't do any of the math to compare to other carriers, and end up spending more than they should. That is, indeed, foolish.

That's only because checked bags are cheaper than carry-ons. Which I think it one of the wiser things they do since they can flip their planes more quickly.

donotblink

There's subscriptions like Discount Den and the Go Wild Pass. Also aren't their yields and PRASM higher than legacy? They also have cobrand cc revenue from Barclays.

iahphx

No. Frontier unit revenue is -- as would be expected -- quite bad compared to the "majors." Affluent travellers shun the airline like the plague -- if you've flown Frontier, you can easily observe this -- so they're pretty much left as the friends-and-family airline for the lower and middle class (who also sometimes fly for pure vacation on the airline). Their unit revenue is little more than half that of, say, American, and their profit margin is now about half. In fact, Frontier expects to lose money this quarter (it's a seasonally weak quarter) while the major airlines will all likely eke out a small profit. Frontier has lower costs than the majors, but the difference is now much smaller than their revenue loss.

Frontier's fundamental problem is that the market for their services is naturally limited. It only works well in places where there is substantial lower income friends and family travel -- think mainland USA to Puerto Rico -- or extremely popular leisure markets (think Orlando).. I don't see an obvious solution to this problem long term, unless they can convince higher-income travellers to fly them (which seems improbable).

JayhawkCO

I think the one exception is Denver flyers just because of non-stop connectivity and often better timing, which is the reason I fly them occasionally. I'm certainly not wealthy, but I'm probably better off than most of my fellow F9ers. My Vegas trip will be my 16th and 17th flights on Frontier.

iahphx

Yeah, I see more of their East Coast network. Denver is kind of their "legacy" market from the old Frontier. I'm sure their unit revenue in DEN is way below that of United -- and even far below Southwest's -- but far less friends-and-family driven. I've only flown through DEN on Frontier once is the last year and it was around 1 am, and I was half asleep. Do their passengers look anyting like the passengers on the other airlines at DEN? In the East, it's almost as big a gap as Walmart customers vs. Whole Foods customers.

JayhawkCO

Well, I shop occasionally at both Whole Foods and Walmart, so maybe I'm not the best judge . But I'd say the clientele is similar to Southwest. Obviously less business travel, but definitely a different socioeconomic demographic than Spirit or Allegiant.

iahphx

Interesting that their DEN customers would be different from, say, Sprit. in the East, they would be identical (although I haven't flown Spirit in years, so my observations are more limited).

donotblink

I’m a group product manager at big tech company making good money and I shop at Walmart and Whole Foods. I’ve been American Airlines Executive Platinum since 2018 but I was enticed by the go wild pass and have spent nearly $20,000 on their credit card to get elite status. 🤷🏻‍♂️

iahphx

Have you liked your Frontier experience?
Do you seem like the typical Frontier customer?

donotblink

No and no.

hobo13

I'm excited for the new Capital One lounge to open in the A concourse at DEN. Why? Because it'll be way way closer to the Frontier gates than the Amex lounge!

(I'm guessing there won't be many of us that leave the lounge and head to the Frontier gates, lol.)