The Main Squawk: Frontier sees itself as “the last man standing” in the ULCC market
Frontier CEO Barry Biffle made some radical comments during the Company’s Q2 earnings call last week. He said that although its industry peers are struggling, aircraft lessors see the Denver-based carrier as “the last man standing” in the ULCC market.
“[They] know that low costs will win. That’s why they’re betting on Frontier.”
Frontier CEO Barry Biffle
This isn’t interesting only because of what it says about Frontier. It’s equally interesting because of what it says about how (apparently all?) aircraft leasing companies feel about ULCCs.
Delta CEO Ed Bastian has mentioned in the past that the “lower end” of the market is struggling. United CEO Scott Kirby went as far as mentioning that the ULCC carriers are using a “fundamentally flawed business model.”
Admittedly, the Airline does have some of the lowest costs in the industry, with a cost per available seat mile (CASM) excluding fuel averaging $6.24. American, Delta, and United all share CASM values north of $12. Markedly, in a market where you’re competing for what are literally the lowest fares that can be offered, costs matter.
CEO Barry Biffle declared that Frontier would be the “clear low-cost winner in 2025 and beyond.” In lieu of that comment, the Airline’s next Airbus A320 will be delivered with Buzz Lightyear on its tail.
Breeze is adding eighteen routes and several destinations in what appears to be an answer to Avelo’s recently announced expansion. In an effort to defend one of its operation at Hartford, C.T. (BDL), the Company is debuting services at five cities this fall, including:
- New York-Newark
- Daytona Beach
- Erie, P.A.
- South Bend, I.N.
- Wilmington, D.E.
This is an exciting time for point-to-point airlines like Allegiant, Avelo, and Breeze. They’re spotting opportunity in markets where other airlines would struggle to make a profit. A good example is someone who has to fly from Provo, U.T. to San Francisco. Given the choice, which would you choose to fly on: an RJ, or a brand new Airbus A220? Hub-and-spoke airlines simply struggle against smaller carriers who serve small-scale markets, especially when they don’t offer daily service.
(I covered Avelo’s recently announced expansion in my July 29 recap.)
There is a canary in the coal mine, however, and it’s about overlapping service. When overlapping routes amongst these smaller carriers becomes a trend, that’s when they might hit the limits of this strategy. In other words, if everyone keeps launching routes from BDL to nowhere, the gig might be up.
Allegiant is going Extra on its premium product. Unlike Spirit, it’s actually trying to adjust to changing market conditions. (This is a good thing.) On last week’s earnings call, the Chief Revenue Officer mentioned that the Airline will retrofit nearly half its fleet with the Allegiant Extra cabin by year-end.
Like Frontier CEO Barry Biffle, Allegiant’s outgoing CEO Maury Gallagher was singing the same song. He seems to think Allegiant, unlike its competitors, is in a better position on things like cost and reputation alone.
These guys must share the same caddy, because they’re using the same words to describe the same problem that they both have, but are also somehow immune from.
PreCheck and Global Entry are heading to Australia. Starting next year, Australian citizens will be able to take advantage of the programs when traveling to and within the U.S.
Australia’s Department of Foreign Affairs will first launch a trial of about 1,000 Australians in early-2025, and if successful, it will make the programs available to the majority of the Country.
Participation costs 100 USD, but you can waive the fee by bribing the customs agent with a pair of Ugg boots.
Air Canada reported strong earnings.
Allegiant is frustrated with Boeing.
British Airways is suspending service to Beijing.
Cathay Pacific placed an $11 billion order with Airbus.
JetBlue is upset about Delta’s codeshare with SAS.
Star Alliance CEO Theo Panagiotoulias said managing an alliance was a tough job.
Sun Country earned a profit.
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