Going out on a wing: 134 jets
On the verge of going out of business less than a decade ago, Denver’s Frontier Airlines is now charting a course to triple its fleet of aircraft within the next 10 years.
On Wednesday, the ultra-lowcost carrier bought 134 fuel-efficient A320neo Family Airbus jets that aviation-industry experts say are well-suited to get it there.
Whether the big buy will pay off in the long run is, however, up for debate.
“It’s state of the art for the type of aircraft for their business model,” airline industry consultant George Hamlin said of the planes that will be joining Frontier’s fleet between 2021 and 2026. “This is a bold stroke. But there is an old saying: There are old pilots and bold pilots, but there are no old, bold pilots.”
Frontier’s big purchase — listing price $15 billion — was a slice of a larger pie. Indigo Partners, the private equity firm that owns Frontier, on Wednesday signed a $49.5 billion deal for 430 A320neo Family planes, Airbus’ biggest deal ever. The twin-engine, single-aisle planes will be split between Frontier and other Indigo carriers, JetSmart of Chile, Volaris of Mexico and Wizz Air of Hungary.The jets are popular with budget airlines because of reduced fuel consumption.
Frontier already had orders out for 67 A320neo aircraft prior to Wednesday’s announcement. The carrier also had ordered 18 A319neo planes that it has converted to the 320neo family, meaning it will be receiving 85 of the jets even before the new order is filled.
The new planes will triple the size of Frontier’s fleet from the 70 today to more than 200 by the time all are delivered and have animal photos slapped on their tails, spokesman Richard Oliver said. After carrying 15 million people to their destinations in 2016, Frontier’s stated goal is to serve 50 million flyers in 2026.
“Most of this is funding growth of the airline,” Oliver said. “Current deliveries end in 2021 with existing orders, so it was time to evaluate the fleet needs looking forward.”
The order comes as the airline is working to expand its service network, eventually increasing its total number of destinations by 30 percent and doubling its number of routes. That expansion, announced at Denver International Airport in July, will be complete in the next six months, Oliver said. The airline currently reaches 80 destinations in the U.S., Canada, Mexico and the Dominican Republic via 300 daily flights.
Hamlin, the president of Fairfax, Va.-based Hamlin Transportation Consulting, said Frontier’s business model — where passengers pay low fares but are charged extra for carry-on bags and for other services that come standard on larger airlines — is basically a commodity in his view. Customers would consider another carrier if the fare was $10 or $15 cheaper. By growing and by adding new, less-experienced flight crews, Frontier can keep costs down, but Hamlin wondered how far the airline can go with that model.
“The fact that you are basically going to triple in size should have a positive impact on operating cost, but can you continue that?” Hamlin said. “This resembles a Ponzi scheme in that you can’t keep it up forever. The airline has got to become and remain profitable consistently for things to work. You will have to put more cash into the business.”
Frontier filed paperwork with the U.S. Securities and Exchange Commission in June in advance of an anticipated public stock offering.
The offering has not happened yet, and company officials decline to comment on the status, but the paperwork does provide insight into Frontier’s recent surge. The company’s net income has risen the past two years, reaching $200 million in 2016. It was $146 million in 2015 and $140 million in 2014. That comes as the airline has spent less on fuel. Frontier paid $343 million to gas up its jets last year, down from $369 million in 2015 and $538 million in 2014. The airline’s revenues for nonticket services, such as baggage fees, nearly doubled to $726 million last year from $401 million in 2015.
Frontier’s pending bigger fleet will mean new jobs. The expansion should create more than 5,000 positions with the airline, including pilots, operations staff and roles at corporate headquarters, Oliver said. Frontier is looking to hire 160 pilots and 500 flight attendants next year alone, he said.
The airline is in the midst of mediation with its pilot union over a new contract. That union, representing about 1,200 pilots, has already vowed to strike if terms cannot be reached.
Capt. Alan Christie, who handles public relations for the Air Line Pilots Association’s Frontier unit, wondered Wednesday how his employer hopes to attract pilots amid a national shortage when it is offering contracts that he says are 40 percent below market rates. He said the airline’s greatly expanded fleet would require at least doubling its number of pilots.
“What (this purchase) tells me is that they found a niche that they are very good at and they see market potential for that type of airplane,” Christie said. “Without getting a marketrate contract in place, we’re frankly questioning how they intend to attract qualified pilots to achieve that growth.”