As expected, Frontier lost money this summer, with a negative 5% operating margin. It costs them almost 10 cents to fly a customer one mile.

They are selling me $19 for 1000 mile flights to Florida. That's about 2 cents. They're not going to get any ancillary revenue from me. BTW, they don't even collect that 2 cents, because that includes the gov't taxes.

They need to overhaul their business model, or they will be gone. Enjoy gaming their foolishness while you can.

https://www.globenewswire.com/news-r...l-Results.html

I see that their stock is down to $3.88/ share. This is down from $18-ish when they went public 3 years ago.

The thing that surprises me about Frontier, especially as they have a lot of routes that could generally compete with the legacies on schedule (e.g. PHL-RDU/MCO/CLT), is that they don't offer a "main cabin" fare bundle from the get-go, which is what corporate travelers need. They could get more corporate travelers (especially small business owners as well as managers whose bonus is partially based on reduced expenses/budgets) if they would offer a fare with a carryon, seat assignment, and possibly no change fee at booking.

PHL-CLT for a midweek trip next week is $167 r/t on Frontier, $474 r/t in AA Main Cabin. Adding a carry-on, cheapest aisle seat assignment, and flight flexibility a la carte makes F9 $321 r/t. They should offer that as a "Businessperson bundle" or something in a way viewable on 3rd party sites like Main Cabin vs Basic Econ is for AA flights. For this, I'd price it at $249-$299, still cheaper than AA to target budget-conscious businesspeople, but doesn't require the cumbersome aspect of paying extra for certain items and hoping the company will reimburse (my former company would not reimburse for assigned seating, for example, but would reimburse for Main Cabin fares that include it).

Also would get around the fact that many companies simply exclude all Basic Economy bookings from their corporate travel portal, so including flexibility in this product would likely get more companies to at least offer F9 as an option.

I think it's the order of jets on the expense side if things. They added 8 jets in the 3rd quarter. That's a significant expense on the balance sheet. Add to that increased fuel costs, that also lowers profit margins.

They have $600m in cash, so theyshave plenty of liquidity to get through the losses as they grow the fleet and fly more people with the larger planes.

They can go about 10 quarters of current losses before they run into issues with cash reserves, but then there are other ways to get money.

I do think that with this new rewards model, we will start to see higher ticket prices. The industry as a whole has increased prices, but Frontier hasn't really.

It's mainly that total revenue is down YoY despite adding 20% capacity at the same time - while unit costs have also lowered, RASM is down significantly.

They are at this point waiting for Spirit to disappear. If it doesn't happen they are going death spiral. Isn't the airline business all about raising money from idiots in the capital market and then restructure or shut down?

Anyways I just remind people when businesses do irrational things there is only one good response to it. Take their offers and do it quietly.

If you're interested, below is a transcript of today's Frontier earnings call. I didn't really hear a vision to turn things around. There are generalities about serving more "underserved" markets, but you can see that the analysts are politely skeptical about this (underserved markets are underserved for a reason).

The most interesting fact is that they're currently only receiving $39 in fare revenue per passenger (down $19 from last year), and $76 in ancillary revenue. That ancillary number must include the online booking fee which, as we all know, is often way more than the actual fare (which can sometimes be just a few pennies). Frontier is optimistic (over-optimistic, I think) that their revised loyal program will bring in more revenue.

Something is definitely going to have to change here. It wasn't discussed, but I'm sure Frontier is hoping that the JetBlue/Spirit deal gets approved, giving them an open lane in the ULCC field. At the end of the day, though, it seems pretty obvious that the demand for ULCC flying is not unlimited in the USA, largely (I think) because the major airlines are already pretty low cost, and the public just prefers that product. The fact that those guys have way more lucrative credit card tie-ups no doubt also plays a role.

https://seekingalpha.com/article/464...all-transcript

This sounds like how they used to operate. It�s been about 12-15 years since I have flown Frontier, but back then they were worth it. They had first class. They had 3 different fare levels, where the top included checked bags, seat assignment and in seat entertainment. It was a nice model and worked. We used it a few times DFW-DEN for ski trips. The free bags were the main draw for us, and it was still less than AA. I was shocked when they went the bargain basement route a la Spirit. They had a good thing going.

Frontier's previous model was good for customers but it wasn't a sustainable business. They seem to be doing better as an ULCC but perhaps the jury is still out.

Frontier is doing a decent job compared to Spirit and their Q3 earnings + PW engine problems. They're an airline focused on leisure markets, and their target audience is probably going back to worrying about student loan repayments.

If you were to switch to more of a business/corporate route, you would have to offer those bundles on third-party booking services and increase frequencies on routes where the demand likely isn't there from a leisure perspective. Also, last time I checked, domestic corporate travel has not even returned to 2019 levels.

I'm not saying to put a ton of effort into become a business airline but there is more that could be done for practically zero cost to attract some budget-conscious business pax - offer a better bundle through OTAs/corporate portals that target biz pax (seat + carryon + flexibility), and while F9 has routes that are only a few times/week, they also have dozens of routes that are 2-7x daily. Just out of PHL, there's ATL, RDU, CLT, MDW, TPA, RSW, MCO, and SJU. Yes, some are more leisure focused, but all of these destinations have decent business traffic as well. Why not angle for it, especially when they already offer a compelling schedule and price?

I agree F9 need a pivot. Take my experience for example, I was burned on a family vacation Mexico itinerary twice, purchasing Stretch bundled, expensive fares at the opening of the schedule only to have them cancel the flight 30-45 days in advance. As the other parts of the vacation were already locked-in, I had no recourse other than to take a refund and rebook elsewhere at a higher rate, costing me thousands additional, total. Never again.

And their decision to degrade their DEN gate lease to a bus terminal-style and outdoor boarding �experience� makes them a non-starter to return for me and my family. And, since that�s the case, I also will never fly them even sparingly for business to earn points for leisure travel.

What can they do to broaden the customer scope again when so many have been burned and are no longer interested in their customer value proposition�and we�re talking about raising fares here? Tough ask. No wonder they�re looking for �underserved� markets�more like who hasn�t caught on yet!

I will say that the arrival of the 321XLRs -is- an
opportunity, so let�s see what they decide to do with cabin, service, and destinations.

Sure these are easy ideas to implement but are you sure about execution? I'm a rare bird amongst my peers, most wouldn't take Frontier unless it was the absolute last option. The stories are similar to others in here, they screwed me once so it won't happen again. And so ask this person if they care about airfare they aren't paying for.

Our travel system shows Frontier and Spirit fares and if we take someone else we have to write in why. Don't want to fly Frontier or Spirit is a perfectly acceptable answer so it's not going to win the business.

My suggestion is simply to peel some business travel away to improve revenue/loads on routes they are already running rather than trying to chase after a large portion of the market. It doesn't alienate any of their existing customer base and can add new customers for little to no cost (depending entirely on what IT investment may be needed to push these bundle options to the Concurs and Google Flights of the world).

A huge part of my job is building business cases, and unless there is some multi-million dollar blockade to having a biz traveler-friendly bundle, I would struggle to show a negative ROI here.