Has Frontier Airlines Broken America's Low-Cost Curse?

09.02.2024 - 14:50 / skift.com / Delta Air Lines / Barry Biffle / United Airlines / Gordon Smith / Frontier Airlines / Airlines

Times are tough for America’s low-cost carriers, but Frontier says it has a solution. It published a three-point plan Tuesday that it hopes will deliver a huge surge in revenue over the next two years. 

First up is a network overhaul. Squeezed profit margins and oversupply in once-lucrative leisure markets have left the country’s budget airlines scrambling to regain profitability. Frontier cited Las Vegas and Orlando as two prime examples during a call with analysts.

Total domestic capacity (by available seat miles) grew 4.4% last year compared to 2019. Las Vegas and Orlando markets increased by 20% during the same period – and they are still growing. Frontier thinks chasing these over-saturated routes with low margins is a fool’s errand. Instead, the company is pivoting its efforts towards better-yielding destinations. 

This summer, Frontier will cut its Las Vegas and Orlando footprint from 34% of capacity in 2023 to just 23%. The planes and crews will be redeployed elsewhere. The idea is that Frontier will receive a smaller share of a bigger revenue pool with higher fares. 

It believes that routes with strong ‘VFR’ (visiting friends and relatives) traffic will allow the airline to charge more than it can with its current network. During Tuesday’s call, Barry Biffle, Frontier CEO, said these VFR destinations are typically priced at $15-$20 more per ticket than the services they are replacing. 

The new strategy isn’t just about where Frontier flies – it’s about how it gets there too. The company is changing the way it uses its planes to boost efficiency. Instead of complicated multi-city itineraries, an ‘out-and-back’ model is being adopted. 

Put simply, this means the plane and its local crew should start and end the day at their home base airport. This reduces operational complexity and cuts costly hotel spending for thousands of pilots and flight attendants. 

Around one-third of Frontier’s summer 2023 schedule was ‘out-and-back’. By the end of March, this will be two-thirds. Management says they are on track to achieve their target of more than 80% of flights operating in this way by peak summer 2024.

Frontier’s planes are also getting cheaper to run. More than 65% of its remaining order book is for the Airbus A321neo. This is the largest narrowbody aircraft produced by the European firm and can seat up to 240 passengers. With more customers carried with the same set of pilots and airport slots, the average cost comes down.

Frontier took delivery of four A321neos during the fourth quarter of 2023. This helped increase the proportion of its fleet with new-generation, more fuel-efficient engines to 79% – the highest of any major U.S. airline. Expect this figure to rise even higher by the end of next