Frontier now focuses on strategy, hopes to unroll new fare structure

By Chris Walsh, Rocky Mountain News (Contact)

Published October 6, 2008 at 6:45 p.m.

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Frontier Airlines is focusing on its business strategy after spending months dealing primarily with bankruptcy-related issues such as lining up financing and bolstering its cash balance, the carrier's top executive said Monday.

The Denver-based airline hopes to unroll a new fare structure by year's end, and has stepped up talks with other low- cost carriers about potential partnerships, said Sean Menke, Frontier's chief executive officer. He made the comments after speaking at an aviation conference in Aspen.

"We had to spend a lot of time on the bankruptcy process, but we are now refocusing on our overall strategy," Menke said.

Frontier filed for bankruptcy in April and recently hammered out a deal with a group of its creditors for up to $75 million in loans. The company hopes to prove that its revised business model works, and it then will look for additional financing to carry it out of bankruptcy, Menke said.

Frontier's new fare structure will involve offering consumers different price levels for different types of services and amenities, such as seat assignments and frequent-flier miles.

The carrier also could look to hook up with other carriers or even expand its partnership with AirTran Airways. The two companies currently market each others' flights and allow passengers to earn reward miles on either airline.

Low-cost carriers grew rapidly for years, primarily by dominating particular geographic regions within the U.S. But they are now lowering capacity like their larger peers and have struggled to expand outside their primary hubs, which is threatening the whole low-cost model, Menke said.

Frontier expects its capacity in the fourth quarter to be about 15 percent lower than a year earlier.

"I have been very vocal about (low-cost carriers) having to be aligned through some form or fashion," Menke told more than 200 aviation professionals at the conference. "You have to be able to broaden your network . . . and not necessary through mergers."

The conference, hosted by Evergreen-based Boyd Group International, included discussions on everything from the price of oil to the global outlook for airline cargo.

Mike Boyd, president of the Boyd Group, kicked off the conference by highlighting some industry trends. He expects that labor relations will become a significant issue for airlines in coming years.

Many airline workers took significant pay cuts after the 2001 terrorist attacks to help their employers survive. While executives at some of these carriers received huge bonuses and wage increases in recent years as the industry recovered, thousands of workers are still making less than they were roughly 10 years ago.

"After 9/11, it was labor that took it on the chin," Boyd said. "After 9/11, it was labor that had to give up 20 to 30 percent of their compensation. Going forward, labor is not going to sit back" and take more concessions.

Boyd also said that airlines have to change how they operate to survive the new dynamics of the industry, where fuel costs are - and likely will remain - sky high.

"This is not an aviation cycle . . . it's a whole new environment," Boyd said.

Some airlines have looked to the international scene to bolster revenues as demand slips domestically.

Fred Deschamps, vice president of international marketing and sales at Northwest Airlines, said during the conference that the company's service to Europe is booming.

"The Atlantic is the gift that keeps on giving," he said.

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