Frontier Q&A: CEO talks about what went wrong and how he hopes to fix it

By Chris Walsh, Rocky Mountain News (Contact)

Published April 17, 2008 at 2:49 p.m.

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Photo by Javier Manzano / The Rocky

Sean Menke, Frontier Airlines' CEO

Photo by Javier Manzano / The Rocky

Sean Menke, Frontier Airlines' CEO, says the airline has hit a "bump in the road" relative to what's going on in the industry.

Sean Menke had it all planned out when he took the reins of Frontier Airlines last fall.

Spend a few months talking to employees and delving into the intricacies of the company's operations, then implement a strategy to firm up the balance sheet and bring the carrier to consistent profitability.

But a toxic mix of soaring fuel prices, heavy competition, rampant speculation and a tightening credit market significantly altered Menke's priorities.

Frontier's 39- year-old chief executive officer is now simply focused on the company's survival.

The Denver-based company abruptly filed for Chapter 11 bankruptcy last week after its credit-card processor demanded a substantial increase in collateral.

But the airline continues to fly, and Menke expresses little doubt about its future.

"I'm still as upbeat as I've ever been about this organization," Menke said Thursday during an interview with the Rocky Mountain News. "We've just had a bump in the road relative to what's taking place" in the industry.

During the hourlong discussion, Menke touched on everything from the events that led to Frontier's bankruptcy to the importance of its Denver hub to his strategy going forward. Following are excerpts:

* On how fuel costs contributed to Frontier's predicament:

When I joined the organization, oil was at $70 a barrel. It was trading at $115 a barrel Wednesday. That is a $45 increase relative to when I joined. When you do the math, a $1 change on an annual basis is $5 million for our bottom line. You can see that we're talking a $200 million increase in operating expenses. You can't drive price increases quickly enough to offset what's taking place.

* On other factors that played a role in the bankruptcy:

The other interesting thing that has really transpired in the last two to three months is the credit market. It is more or less closed. Even though we have quite a bit of equity in aircraft, it has been really difficult to tap into that because of the uneasiness in the marketplace.

* On the increase in collateral demanded by its credit-card processor, Greenwood Village-based First Data:

It was a business decision on their part. I understand it, but it forced me to make a business decision. I had to look at the potential loss in cash that takes place. The increase in collateral would have had a pretty big impact. We are now in discussions (with First Data). My focus is to come to some resolution that can be a win-win situation for both of us.

* On whether Frontier had explored the possibility of bankruptcy before the First Data dispute:

We had discussions with a number of groups about a number of things. You need to be prepared for every situation. I can tell you that every CEO in a number of organizations right now is looking at all their options. You never know what's going to trip you up.

* On the possibility Frontier would merge with another carrier:

If somebody comes knocking on the door I have a responsibility to listen, but I do believe that consolidation causes a lot of problems. If you can find ways of working with other carriers through joint ventures and through code shares, I think you're a lot better off, and that continues to be my focus.

* On airline booking levels since the bankruptcy filing:

We definitely saw a hit early on, but I've been quite surprised with how quickly it's come back. We're very close to (normal) levels.

* On how Denver fits into Frontier's future:

I want all my chess pieces in Denver. And the reason I want it is because it's a hub, it's a heart. It allows you to connect a lot of traffic. It allows me to drive demand into the marketplace. It allows me to manage revenue for higher fares.

* On his goals in bankruptcy:

There are certain opportunities now that we are in Chapter 11. We can look at certain contracts, look at how we can renegotiate them or find better opportunities. There are a lot of rocks that can be kicked. There are a lot of ways of looking at driving more efficiency, more productivity in the organization.

* On whether the bankruptcy affects Menke's plans to cement code shares and other alliances:

I would be foolish to say it wouldn't. I wouldn't argue that this may slow down the process.

* On the possibility of layoffs:

I am very cognizant of how important employees are to this organization and how important customer service is in this marketplace. You can't shrink your way back into this game. I have not taken anything off the table, but (any decisions) will be in the course of understanding the economics of the situation.

walshc@RockyMountainNews.com or 303-954-2744

• April 17, 2008

  4:46 p.m.

  Suggest removal

  Dude writes:

  Thank good 'ol George W. Bush for the outrageous gas prices.

• April 17, 2008

  6:40 p.m.

  Suggest removal

  Cabermon writes:

  Hey "Dude," don't be so sad,
  Find some Kool-Aid, and drink it down.

  Remember, the liberal, tree-hugging nuts,
  Made all the cuts,
  In where we drill for oil.

  (Refrain)
  Just remember you're a fool,
  Who plays the tool,
  for all the Lefties.

  So sod off.

• April 17, 2008

  8:05 p.m.

  Suggest removal

  Schaffes writes:

  I forgot...it's George Bush's fault for high oil prices. It's George Bush's fault for high food prices. It's George Bush's fault for the 5% foreclosure rate. It's George Bush's fault that Skybus, ATA, and Aloha Airlines folded. It's George Bush's fault that Frontier filed for re-organization. When will the liberals in this society own up to the fact that not everything is George Bush's fault and when will they assume repsonsibility for their own actions and ineptness. But then I forgot - we are talking about liberals.

• April 17, 2008

  8:54 p.m.

  Suggest removal

  cdoyle1013 writes:

  go back to the meeting that Dick Cheney had within 10 days of Bush taking office..with the oil execs..including plans of Iraqi oil fields...Cheney claims exec privilege but news has leaked out over time....c'mon, why did we not learn our lessons from the late 70's and OPEC...certainly you remember OPEC and no gas and long lines and oh yea, inflation, stagnation...what do we have today? We never learn...Bush and Oil go together...he surrounded himself with oil people...Remember James Baker in Bush's first administration..oh yea...he represented oil companies, defense contractors and....the Saudi family (wonder why we will never capture a guy by the name of bin Laden)..Most people I know who voted for Bush, including me, hate his policies and DO PLACE THE BLAME DIRECTLY ON HIS STUPIDITY AND HANDS IN THE POT FRIENDS..Heck of job, Brownie!

• April 17, 2008

  10:37 p.m.

  Suggest removal

  mstar71 writes:

  I know I speak for a lot of people in Denver. FRONTIER CANNOT GO UNDER! They are too good at what they do. Everybody you talk to loves them. Good luck Scott, I will continue to fly Frontier and am hopeful other Denverites do the same.

• April 18, 2008

  7:07 a.m.

  Suggest removal

  jetstu writes:

  Frontier is DENVERS hometown airline. Southwest is coming in to take the hometown airline out and make thousands unemployed. SWA is a selfish airline. People of DENVER, keep us alive otherwise you will be under the spelll of UAL and SWA

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