Rooting for Frontier's survival
Rocky Mountain News
Published April 12, 2008 at 12:05 a.m.
The news that Frontier Airlines had filed under Chapter 11 of the federal bankruptcy code late Thursday may not send the Denver carrier on a white-knuckle ride, but there certainly are choppy skies ahead.
Considering the sour state of the airline industry, however, the move by Denver's hometown airline may be the sort of aggressive step that can keep the carrier vital as it weathers dramatic surges in operating costs - mainly jet fuel, which has nearly doubled in price over the past 12 months.
We hope so, for at least three reasons. First, for the sake of its 6,000 employees, who have worked hard to create a distinctive brand with a high-quality experience for travelers.
Second, for the sake of future fares at Denver International Airport. Historically, competition among airlines has helped to keep downward pressure on fares, which in turn has been a boon to average consumers.
And third, because Frontier has been a solid corporate citizen and an admirable ambassador for Denver.
Indeed, for those reasons and others we hope Frontier emerges an even stronger and healthier company.
The announcement surprised some analysts. Even though three smaller carriers had declared bankruptcy and ceased operations in recent weeks, Frontier was apparently doing many things right. In March, passenger traffic was up 10.1 percent and passenger miles increased by 14.7 percent over the same month last year. Passenger revenue per mile was also up 10.5 percent.
On the other hand, the airline lost a record $32.5 million in the final quarter of 2007, the most recent reporting period.
Fuel costs did not directly trigger the bankruptcy filing. Instead, First Data, Frontier's primary credit card processor, said it would start withholding advance payments to the airline on Friday.
Such a move would choke off a major source of cash flow. Credit card companies typically forward a portion of their ticket sales in cash to airlines at the time a customer books a flight. Airlines use this money to cover operating costs.
Since its founding in 1993, Frontier has occupied a middle tier between bare-bones operators like Southwest and "legacy" carriers like United.
Unlike Southwest, Frontier offers every passenger assigned seating and personal entertainment from seatback monitors. These amenities are available at a cost that's often competitive with Southwest and typically less than United and other "full-service" carriers.
Moreover, when Southwest returned to Denver in 2006, Frontier did not retrench; it expanded service, and added new destinations. This healthy competition has led to record passenger counts at Denver International Airport and enhanced DIA as an economic engine for the Front Range.
Frontier officials say passengers shouldn't notice any changes in service during the expected nine to 18 months required to emerge from Chapter 11. The carrier says it will maintain flight schedules and honor its frequent-flier program.
Let's hope, then, that the Chapter 11 filing is a mere blip on the radar, and that this reorganization will allow Frontier to return to financial vitality.
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April 12, 2008
9:24 a.m.
Suggest removal
dilligaf writes:
As I read this fine editorial I have been thinking how loyal the RMN is being to our local airline. This pleased me until I got to the bottom of the page and saw a United Ad on the left. What Idiot thhought of that.
April 12, 2008
12:54 p.m.
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peterpi writes:
United's been here a long time also, number 1.
Number 2, the RMN practices what the newspaper industry somewhat calls "separation of church and state". That is, the RMN separates advertising side of the business from the editorial side. The editorial writers probably didn't even know that there was going to be a United ad, and vice versa, and why should it matter?
April 12, 2008
7:35 p.m.
Suggest removal
jhous1490 writes:
Frnntier's problems are another sign of how well our econcomy is going...bankrupt.
Remember how competition was supposed to lower prices, and grease the wheels? Pretty soon everything will be in the pockets of four people in this country. We will see how much choice consumers get in the future...pretend choices..
I hope we can make it to January.
April 13, 2008
10:07 a.m.
Suggest removal
BJG writes:
Name me an airline that hasn't filed chapter 11 in the past 10 years. Aren't we flying more than before 9/11? It seems to me that the cost of a ticket to anywhere has shot up in price. Maybe Frontier should look at the bonuses given to its upper management and see if it can't trim some greenbacks off until the company is again stable. I think the Prez of this company should not take a salary until the company shows a profit. But we all know who's going to take the brunt of the cost of this one, don't we. Employees and customers.
April 13, 2008
7:26 p.m.
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glowrock writes:
What a shock, ticket prices have shot up? Well, given that the price of jet fuel is several times as expensive as it was only 10 years ago or less (I'd say about 4-5x as expensive as 10 years ago), the airlines MUST raise fare prices to make any profit whatsoever!
Let's face it, when the costs of one of your largest expenditures rises through the roof, you'd better find ways of raising additional revenue. In airlines' cases, that means raise fares.
And you know what? Airfares will continue to rise, probably quite substantially. Nothing anyone can do, when most airlines are now fairly lean-running machines at this point. Sure, CEO salaries and bonuses can be obscene, but those represent a mere pittance of the overall revenue and expenditure streams in total.
April 14, 2008
9:16 p.m.
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jarbac writes:
This was a very well written article. Who was the author?