Frontier struggles with rivals Southwest, United in Denver

Frontier Airlines frnt fended off a skittish creditor by seeking bankruptcy-court protection last week, but its future could depend on how successfully it battles two muscular rivals in a city that may not have room for all three.

The scrappy discount airline is now a strong No. 2 carrier in its Denver hometown, behind United Airlines uaua, and well ahead of No. 3 Southwest Airlines luv.

But Southwest is growing rapidly in Denver, a city it didn't even serve until 2006.

By next month, Southwest will be flying non-stop to 13 destinations that weren't on its Denver route map last May.

Some — such as Albuquerque, Los Angeles and San Diego — are among Frontier's top 15 in seat capacity out of Denver, according to a USA TODAY analysis of airline schedule data from OAGback Aviation Solutions.

Southwest also is beefing up frequencies on other routes, such as to Chicago Midway, Nashville and Salt Lake City.

"We do not see a future for Frontier as it faces tough competition in Denver from United on the network side and Southwest on the low-cost side," Calyon Securities airline analyst Ray Neidl said Friday.

Vaughn Cordle, an analyst at AirlineForecasts in Washington, D.C., says Frontier lacks enough cash to survive a prolonged economic downturn. He expects it to lose about $80 million this year.

"As a stand-alone airline, it's hard to make the business case that they're viable," Cordle says.

Unlike recent airline bankruptcies at Aloha, ATA and Skybus, which sprang from high fuel prices, Frontier says a creditor's action forced it into bankruptcy court.

First Data, a credit card processor, planned to hold back significantly more proceeds of Frontier's ticket sales from credit cards. That would protect credit card issuers, which must give refunds to customers with unused tickets when a carrier goes bust.

With Frontier's Chapter 11 filing, creditors' demands for payments now will require a bankruptcy judge's approval while Frontier keeps flying and reorganizes.

Frontier lost $32.5 million in last year's fourth quarter — more than double its loss in the same period the year before — and its fuel costs rose 22% from late 2006, according to a document filed with the U.S. Bankruptcy Court.

Late last year, Frontier laid off 86 employees, ended service to Mexico from some non-Denver markets and dropped flights to Florida and Nevada from Memphis.

Michael Boyd, a Denver-based aviation consultant, says Frontier also has strengths as it focuses on Denver expansion.

In eight Denver markets where it competes against Southwest, Frontier in recent months filled a higher percentage of its seats and drew a higher average fare, he says.

"When you look at how well Frontier did, it clearly shows they're not a weak competitor," Boyd says.

Join the Discussion
blog comments powered by Disqus
 
You Might Also Like...