South of the border

Frontier leads way as airlines beat a path to Mexico

Chris Walsh, Rocky Mountain News

Published August 19, 2006 at midnight

Text size

More Airlines & Aerospace

More stories »

CANCÚN - Joe and Lori Olvera have visited this popular vacation resort annually since the late 1990s, seduced by its idyllic coastlines, laid-back culture and warm blue water.

Initially, the Aurora residents booked tickets on whichever airline offered the lowest fare, sometimes opting for a flight with a layover on a large carrier such as Mexicana, other times choosing a charter.

Now they fly here exclusively on Denver-based Frontier Airlines, which added nonstop service to Cancún in late 2002.

"They're just cheaper and seem to have more flights than everyone else," Lori Olvera said last month on her ninth trip to Cancún. "The fact that we can fly nonstop is really important for us, too."

With Cancún as its focus, Frontier is blazing a trail south of the border, becoming one of the largest U.S. low-cost carriers in Mexico and developing a solid niche in what's become a red-hot destination.

Domestic routes will always be Frontier's bread and butter. But Mexico service now represents up to 13 percent of the airline's capacity during peak travel times to the country. Frontier also has managed to carve out its first successful routes that don't involve piloting passengers through Denver, gaining federal approval to fly nonstop to Mexico from a half-dozen other U.S. cities.

The carrier is far from done: It will increase flights to Mexico this winter by 30 percent over last year and add several new routes.

For consumers such as the Olveras, Frontier's increasing presence in Mexico means more flight options and, in many cases, cheaper fares.

For Frontier, it's the cornerstone of a strategy to diversify away from Denver, a move some experts say is essential to the carrier's long-term survival as it faces increasing competition at home. It also provides the Mile High City's second-largest airline with a blueprint for further international expansion in Canada and perhaps beyond.

"The situation in Denver has intensified this year with Southwest Airlines entering the market and United Airlines rebuilding some of its capacity there," said Jim Parker, an Atlanta-based analyst with Raymond James & Associates. "Frontier is looking to find alternatives, and Mexico has presented them with one."

It's an encouraging development for Denver, as well, strengthening a locally based company that employs 4,500 in town.

But Frontier also faces new competitive pressures down south. Other U.S. airlines are focusing on Mexico as well in what one industry insider described as a "massive land grab."

"We were kind of on the leading edge of this in recent years," said Jeff Potter, Frontier's chief executive officer. "But over the last 12 to 24 months you've seen a lot of interest in Mexico from all kinds of airlines."

Four short years

On a recent July evening, Frontier Airlines flight 0042 taxied to its gate at Denver International Airport after a flight from Cancún, pulling up next to a massive British Airways jet.

Another Frontier flight from Mexico pulled up shortly after, flanking the other side of the British Airways plane.

A fitting scene.

In four short years, Frontier has become the second-largest international carrier at DIA, behind just United.

Consider:

• Frontier now flies more passengers internationally from Denver than British Airways and Mexicana combined and has recently edged past Lufthansa, according to DIA traffic reports.

• Last year, the carrier flew roughly 243,000 passengers between Denver and Mexico - 50 percent more than United Airlines.

• On a national basis, Frontier provides service to more Mexican cities than any other large low-cost carrier aside from US Airways. It now offers service to Acapulco, Cancún, Cozumel, Ixtapa, Los Cabos, Mazatlán, Puerto Vallarta and, starting in December, Guadalajara.

Frontier is tapping into a hugely popular market. About 20 million travelers visit Mexico annually, 83 percent of them from the U.S. and Canada. Those visitors pump $12 billion into the country's economy and are the lifeblood of its resort destinations. Additionally, more than 4 million Mexican nationals visit the U.S. each year for business and pleasure, according to tourism officials.

"There's not a community in the U.S. that doesn't have social or business ties with Mexico," said Stuart Klaskin, a Florida-based aviation consultant. "It's a lucrative market."

Mexico often ranks as one of the top international destinations for U.S. travelers. This summer, Cancún came in third behind London and Rome in the number of international air bookings made on travel giant Orbitz.

Colorado travelers in particular can't seem to get enough of the country.

"Demand is just huge," said Chris Russo, president of the Rocky Mountain arm of the American Society of Travel Agents. "If you contacted most of the agencies in our area, I'd guess many would probably tell you that Mexico is responsible for at least 50 percent of their business."

Most of Frontier's customers to Mexico are leisure travelers lured by the country's pristine beaches and abundant outdoor activities. But you can also find business travelers and those visiting family on Frontier's flights.

The crown jewel of Frontier's Mexico service is Cancún - located in the Mexican state of Quintana Roo on the Yucatan Peninsula, which attracts more than half of Mexico's yearly visitors.

The carrier has established a type of "secondary hub" in Cancún, a city that boasts about 3 million tourists annually and is the heart of Mexico's tourism industry. Frontier sells nonstop tickets between the resort from six U.S. cities outside Denver. Not bad for a carrier that until recently offered nonstop flights only from DIA.

"It's a little unusual to have a minihub in Mexico and to have it be mostly leisure travelers, but it's worked well for us," said John Happ, Frontier's senior vice president of marketing and planning.

More than a third of Frontier's Mexico capacity last year was to Cancún. And that's even after traffic to the city plunged in the wake of Hurricane Wilma in October, which forced Frontier to temporarily scale back its flights to Cancún and nearby Cozumel.

Like the city itself, though, demand has recovered and so has Frontier's service to the resort. The carrier's capacity to Cancún this summer was up nearly 30 percent over last year.

On a recent Saturday, Frontier represented nearly 5 percent of the international arrivals and departures at Cancún International Airport.

"Frontier is helping us create a link with U.S. cities that we otherwise wouldn't have access to," said Artemio Santos Santos, director general of the Cancún Convention and Visitors Bureau. "And getting any kind of new low-cost service is always good for us because people have more money to spend when they're here."

Important part of business

To get an idea of how important Mexico is to Frontier's business, look to the carrier's elaborate advertising campaign in January.

Frontier blanketed Denver with billboards, radio and TV spots featuring one of the carrier's computer-generated animal representatives - a dolphin - who pleaded with company officials to send him to Mexico. Frontier even set up a Web site to make the campaign more interactive.

It culminated with a commercial that ran locally during the Super Bowl, in which Frontier held a mock news conference to announce it would send the dolphin to Mexico.

The ads ran as newcomer Southwest Airlines launched its first flights in Denver. United Airlines, the city's largest carrier, responded to Southwest's arrival with advertisements taking shots at various aspects of the discount airline's service. But Frontier focused on its own Mexico flights, something Southwest simply doesn't offer.

An interesting tack, some industry watchers said, but one that emphasized how big Mexico has become for Frontier.

From a financial standpoint, the carrier says its Mexico service is "performing very well," although it won't provide specifics. Analysts say the routes are profitable, although the overall impact on revenue is hard to determine because much of the service is seasonal and offered only on certain days of the week.

But international routes in general usually make more money than domestic service. That's part of the reason many airlines, including United, are looking to grow internationally amid heavy competition on routes within the U.S.

"All the airlines are trying to reallocate capacity to more promising markets, and that means a lot are looking internationally," said Philip Baggaley, an analyst who follows the airline industry for Standard & Poor's in New York.

Airlines often face less competition on the routes, and the same is certainly true for Frontier. Aside from charter- type operations such as Allegiant Air and Champion Air, United and Mexicana are the only other large commercial carriers that fly nonstop between Denver and Mexico.

In addition to adding international service, Frontier has diversified outside of its hub in Denver. In the past two years, Frontier has launched flights to Mexico from Kansas City, Indianapolis, Nashville, Tenn., Salt Lake City, St. Louis and, starting this winter, San Diego.

Last year, the carrier flew more than 54,000 seats from those cities to Mexico, representing 25 percent of its capacity to the country.

That's a significant departure from its longtime strategy of routing all planes through Denver. In fact, travelers in Frontier's hometown might even find themselves connecting through, say, Kansas City, on a Frontier flight to Cancún if all the nonstops from Denver are full.

Tough decision

The decision to enter Mexico in 2002 wasn't easy.

Frontier, for one, flew only domestic routes, and executives were wary of complicating the business. Flying internationally includes a host of new hurdles - government regulations, added security measures, more staff training.

But there also was pent-up demand resulting from a dearth of nonstop flights between Denver and Mexico at the time. In most cases, consumers either had to use a charter by booking a flight and hotel package or fly a major airline and deal with a layover in another city.

"We saw that there used to be scheduled service that actually had pretty much gone away and had been replaced by charters flying for vacation companies," Potter said.

Officials also figured that adding Mexico flights would be a nice perk for the company's loyal frequent fliers, who could use their miles to book free travel to the resort destinations.

Confident that the benefits outweighed the risks, Frontier started its first flight Dec. 20, 2002, to Cancún, following it up with the launch of service to Mazatlán the next day.

"What we found in this case - and it doesn't happen too often - is that if you fly it they will come," Potter said.

Fast-forward four years, and Frontier is further broadening its strategy in Mexico, not only adding service from more U.S. cities but also expanding beyond resort destinations.

The carrier has received tentative federal approval to fly from Los Angeles to Cabo San Lucas - which would make Los Angeles its eighth U.S. city with nonstop Mexico service. Frontier recently received approval to offer flights from San Diego to Cancún and from Kansas City to Cabo.

It also will start flying between Denver and Guadalajara in December, representing its first nonresort market in Mexico. Frontier hopes to lure more Mexican nationals and business travelers on the Guadalajara route rather than primarily leisure travelers.

Safe, cheap, close

Observers say there's likely enough demand for the new service.

With increased terrorism concerns - including those related to last week's foiled plot in London - consumers are increasingly looking to Mexico as an alternative to transcontinental travel.

Although some cities in Mexico have experienced an upswing in political unrest and drug violence, the country's resort areas typically are crime-free.

"We don't have the current events and turmoil going on worldwide; that's part of the reason we've seen much new air service from Frontier and other airlines," said Eduardo Nunez, a spokesman for Cancún International Airport. "It's peaceful here, and you don't have to fly across the ocean."

Another big draw: Mexico is still relatively cheap, providing consumers with an exotic getaway for less than it costs to visit major U.S. cities such as New York and Chicago.

That's the main reason Florida residents Jose and Brenda Liriano decided to spend their July honeymoon in Cancún. The trip cost about the same as the other location they were considering: Las Vegas.

"We thought this felt like more of an exotic, international vacation," said Jose Liriano during a cab ride to Cancún International Airport on the tail end of his weeklong honeymoon. "With the price the same, this made more sense."

The newlyweds scored flights on US Airways and a room in the high-end Gran Melia hotel for $1,500, slightly more than if they flew to Vegas and stayed at a lower-quality hotel.

From Denver, travelers can find round-trip tickets to Mexico on Frontier for as low as $300 after taxes and fees, and there are plenty of hotels in Cancún priced in the high $90s and low $100s.

And most destinations in Mexico are relatively close to home. From Denver, you can be in Puerto Vallarta, Mazatlán or San Jose del Cabo in about three hours. Ixtapa, Cozumel and Cancún take almost four hours, which is just a little bit longer than a flight to New York.

More getting in on game

But Frontier's not the only airline eyeing Mexico.

While the carrier has faced little competition on the routes, particularly from other low-cost airlines, that's changing. United has rapidly been adding flights from Denver to Mexico on its discount arm, Ted, starting service to Puerto Vallarta, San Jose del Cabo, Cancún and Ixtapa in the past few years.

And a recent agreement between the U.S. and Mexico is fueling a renewed interest industrywide. The agreement essentially increased the number of carriers that can serve any one route between U.S. and Mexican cities. Three, instead of two, airlines from each country can now fly many of the most popular routes.

"There's been a flurry of action stemming from that, particularly to those routes that can now have another U.S. carrier," said Bill Mosley, a spokesman for the Department of Transportation, which authorizes new routes.

Big carriers have been particularly aggressive, applying for approval on numerous routes since the agreement. Delta, for instance, will start nine new nonstop flights to Mexico from Los Angeles starting in mid-December. The carrier plans to add about 30 new routes from 2005 through 2007.

Low-cost airlines also are taking a close look. Southwest Airlines, for instance, has said publicly that entering Mexico is not a matter of if but when.

And JetBlue is gearing up to make its first foray into the country. The New York-based discount carrier has already built a successful niche in the Caribbean, serving a half-dozen destinations, including Puerto Rico, the Bahamas and, starting in September, Aruba.

It recently received tentative approval to launch flights from Newark International Airport to Cancún, a service it hopes to start this year.

"Our big selling point in trying to get approval was that we can be the first low-cost carrier on this particular route and, hopefully, increase demand," said Bryan Baldwin, a JetBlue spokesman.

Several airlines are vying for open slots on numerous routes, each trying to convince the DOT that it's service would be of the greatest benefit to consumers.

On top of that, several upstart Mexican low-cost airlines are considering service to the U.S., which could present another competitive challenge.

That's one reason why it's important, analysts say, for Frontier to further diversify it's service internationally beyond Mexico. And that's just what the company has done, launching its first flights to Canada this year.

Frontier executives say they eventually might push farther south into Central America if the right opportunities develop.

But the carrier sees plenty of room to expand in Mexico in what likely will be a growth story for the carrier for years to come. And if Guadalajara proves successful, expect Frontier to start more service to non-resort destinations such as Mexico City.

"I don't think by any means we've seen the last of Frontier's expansion into Mexico," said analyst Mike Shonstrom of Emerging Growth Equities in Denver. "They have a niche in the market, and they're obviously taking advantage of what they see as an opportunity to (capitalize) on travel activity down there."

walshc@RockyMountainNews.com or 303-954-2744

Subscribe to the Rocky Mountain News