TRAVELERS STARE INTO UNKNOWN FRONTIER
Questions remain on how merger might benefit passengers
Now that Spirit Airlines has rejected a bid by JetBlue, Frontier is the prime contender to merge with the Florida-based carrier.
If the two budget airlines join forces, how will flyers fare?
“If Spirit and Frontier go forward with the merger, and it’s approved by the Department of Justice, we will have a true coast-to-coast budget airline that will compete not only in smaller cities but importantly in many larger markets,” says veteran travel industry analyst and consultant Henry Harteveldt of Atmosphere Research Group.
For now, it will be business as usual for Spirit and Frontier. Each airline’s board needs to agree to go forward, and the Department of Justice has to approve the deal.
“We won’t really know the shape of a combined Spirit/Frontier – what products it will keep, what products will it add, what routes it will fly – until the DOJ issues its final ruling,” Harteveldt says. “So for the immediate future ... they will operate independently. They will continue to compete against one another. They’ll do their own promotions. They won’t be combining their frequent flyer programs or anything like that.”
For passengers, questions remain. Would the newly combined carrier follow Spirit’s lead, implementing Wi-Fi for passengers, or Frontier’s decision to not offer it? Will the airline keep Spirit’s signature yellow planes or choose Frontier’s pictures of animals splashed
“We won’t really know the shape of a combined Spirit/Frontier – what products it will keep, what products will it add, what routes it will fly – until the DOJ issues its final ruling.”
Henry Harteveldt Veteran travel industry analyst and consultant with Atmosphere Research Group
across the fleet’s tailfins as its logo?
Will fares go up?
Two budget carriers joining forces could mean higher fares for passengers, but John Cox, a retired U.S. Airways captain, says it’s doubtful Spirit and Frontier would give up their ultra-lowcost niche.
“That’s a business model that they’ve had from the beginning,” he says. “I don’t see that changing.”
Harteveldt says that “without the two airlines competing head to head as independent carriers, there’s no question some degree of price competition would go away.”
Their biggest low-cost rival, Allegiant, remains in the marketplace along with other budget carriers such as Avelo, Sun Country and Breeze.
“Breeze, in particular, has a fairly substantial number of new airplanes that are scheduled for delivery in the next five years,” Harteveldt says, “so we’ll just have to really see if those airlines will be large enough to help keep prices down.”
There could be more places to fly
A merger of Spirit and Frontier would create the fifth-largest U.S. carrier based on seat capacity, and the seventh-largest based on revenue.
The airlines’ executives have said their combined carrier would not only keep low-cost tickets in place, they’d be available on far more flights. The two carriers have already identified more than 300 new routes they could fly by blending their networks.
Eugene, Oregon, and Worcester, Massachusetts, are potential new destinations, and Spirit and Frontier may resume service to Washington Dulles Airport and Jackson, Mississippi.
“I would anticipate that with the hundreds of new airplanes the two airlines have on order, not only would they grow their domestic route network, but I would expect them to expand into Canada and potentially across the North Atlantic to Europe,” Harteveldt says.
Spirit or Frontier culture?
Every airline offers its own experience, and passengers often have a preference.
“Each airline in the country, whether ultra low cost or traditional has its own culture ... the way that they interact with the passengers and the way they conduct business,” Cox says. “But they’ll have to realistically set a new, postmerger culture.”
The contrast between the largely nofrills carriers may be limited.
“I don’t know that anyone will shed a tear if Spirit disappears,” Harteveldt says. “Frontier has a slightly cuddlier image because of the various animals that are painted on the tailfins of the planes, but it’s not like Frontier is Pan Am. It’s not an airline that is known for taking good care of its customers or that has been romanticized in movies and books or popular culture.”
“What do they borrow, what products do they keep,” all will depend on which carrier’s culture is the surviving, dominant brand, he says.
Wi-Fi
Spirit installed Wi-Fi on more than half of its fleet, but Frontier doesn’t offer it, saying that helps keep costs down for its passengers.
“Going forward, the merged carrier can only have one Wi-Fi policy,” Cox says. “There’s a slightly higher likelihood they’ll go ahead and bring Wi-Fi into Frontier’s airplanes. It’s expensive to add but in our society. It’s become sort of a mainstay and expectation.”
Would JetBlue be a better deal?
JetBlue may not be out of the running, Harteveldt says. The carrier may appeal directly to some Spirit shareholders to get them to press the airline’s board to reconsider its offer.
JetBlue said that it competes directly with Spirit on fewer routes than Frontier and that other major U.S. airlines are more likely to match JetBlue’s lowest fares than they are the prices charged by budget carriers such as Spirit and Frontier. Harteveldt says the Department of Justice might find those arguments compelling.
“If the DOJ believes or accepts ... a combined JetBlue/Spirit would actually have more impact on lowering fares on more routes that serve more travelers, that could sway the DOJ in favor of a JetBlue Spirit merger,” he says.
Flyers could win out if JetBlue brought its popular customer experience to a new partner.
“Certainly JetBlue has a lot more creature comforts,” Harteveldt says, including more generous legroom, a premium cabinet option for longer flights and free snacks, coffee and soft drinks.
A combined JetBlue/Spirit airline would have roughly 10% of the industry’s capacity, which might lead the new carrier to buy larger planes and fly new routes from the USA into Europe, South America or Asia.
“There are things I see happening with a potential JetBlue/Spirit merger that could be very compelling,” Harteveldt says.
In a letter to JetBlue’s CEO, Spirit’s Chairman of the Board Mac Gardner and CEO Edward Christie said a potential merger was unlikely to be approved by Justice Department officials because of JetBlue’s Northeast Alliance with American Airlines, which Spirit says is anti-competitive.
Harteveldt agrees that the alliance is a potential roadblock, even though JetBlue told Spirit it would be willing to give up takeoff and landing slots and other assets to make relationships work. “We’ll have to see if that’s enough,” he says. “Clearly that wasn’t enough to sway the Spirit board.”
Cox says there are always bumps in the passenger experience as two airlines become one, but the snarls will be ironed out.
“It will have its successes and its challenges as it goes forward,” he says of a potential Spirit and Frontier merger. “But in the end, five years from now, it will be a combined carrier and functioning well. That’s what history has shown us.”
“There’s no question some degree of price competition would go away.”
Henry Harteveldt Veteran travel industry analyst and consultant with Atmosphere Research Group