A new frontier in fare wars
Frontier Airlines takes on Northwest on flights heading west.
BY MARTIN J. MOYLAN
Pioneer Press
Its ads, featuring loquacious foxes, rabbits and other critters, are funny. Its planes, most of which are less than 2 years old, offer 24 channels of DirecTV. Its seats are wider and offer more legroom than those of most other carriers.
But it's Frontier Airlines' fares that have been especially enticing. Consider: Five people flying round-trip between the Twin Cities and Los Angeles for $810.
That's the deal Pauline Devney's family got when they came to Minnesota to visit relatives.
"They do a lot of advertising in L.A.," Devney said last week. "And when it came time to buy tickets, we checked the fare on the Net against Northwest, and Frontier was cheaper and it had newer planes."
But can Frontier, which launched nonstop service between the Twin Cities and Los Angeles two months ago, make enough money on the route to keep flying it?
Fares between the Twin Cities and Los Angeles are probably 50 percent lower than they were a year ago in many cases, said travel expert Terry Trippler, president of Minneapolis-based Trippler and Associates.
He dubbed the route the "blood bath" market.
"They're nuts," Trippler said of the low fares on the route. "Two-thousand dollars round-trip is obscene. So is $98."
Denver-based Frontier now offers two direct flights to Los Angeles and four, up from three, to Denver, where travelers can catch a Frontier flight to L.A.
Devney's flight, only about one-third full, had to be a money-loser for Frontier. But the airline says it's not about to abandon the circuit.
"Minneapolis-L.A. will do fine this summer," said Greg Aretakis, Frontier's vice president of planning. "We have no intention of leaving the route."
So far, load factors — the percentage of filled seats — on Frontier's nonstop flights between the Twin Cities and Los Angeles have been generally "poor," Aretakis said.
"But we're working hard, advertising aggressively, making all the right sales calls," he said. "Bookings are coming up steadily."
With six daily connections from the Twin Cities to Los Angeles and a maximum fare of $299 one-way, Frontier is well positioned to win over cost-conscious business travelers, Aretakis said.
By the end of this month, Frontier expects its load factors on the route will be in the high 60 percent range.
For the quarter and fiscal year ending March 31, Frontier had break-even load factors of 75.8 percent and 69.6 percent respectively. In other words, on average, it had to fill that percentage of seats on a flight before it could start making money.
What about the fares — which have dipped at times to under $100 round-trip —- but usually run about $150 to $200 each way?
"We know that if we charge a reasonable price and people fly us, they will like us," Aretakis said. "We would never think to charge … $599."
The airline's target fare is in the range of $100 each way. In the past, some Northwest fares between the Twin Cities and Los Angeles have topped $1,000 each, Aretakis said.
Frontier and other low-fare carriers such as AirTran, ATA, Spirit and Independence are giving Northwest real battles at its Twin Cities and Detroit hubs, he said.
"For the first time, Northwest has some real low-fare competition," Trippler said.
Eagan-based Northwest has lost about $2.1 billion on its operations since the start of 2001. But it has a history of combating and often vanquishing challengers by adding seats, cutting fares and mounting other counterattacks.
"Northwest is fighting harder than you'd expect," Tippler said. "Northwest has so many weapons in their arsenal — the frequent flier program, the international routes, the flight frequencies. … My gut feeling is that Northwest will win this battle."
When Frontier introduced its two direct flights to Los Angeles, Northwest added two, giving it seven daily nonstop flights from the Twin Cities to L.A. It also started nonstop service between Denver and Los Angeles, with two daily flights.
Northwest also dropped fares to compete with Frontier. Between Denver and Los Angeles, Northwest, for instance, has been offering $150 round-trip fares, undercutting Frontier on that route.
"We price our product competitively," said Northwest spokesman Kurt Ebenhoch.
Only Northwest, Sun Country and Frontier offer nonstop service between the Twin Cities and Los Angeles.
Last year, when it only served Denver nonstop from the Twin Cities, Frontier carried about 230,000 passengers in or out of the Twin Cities.
For years, Sun Country, in its present and former incarnations, has been the low-fare champion on the route.
From January through September 2003, it carried about 38,000 passengers on the circuit, with its quarterly average fares ranging from $139 to $148 each way, according to data from the U.S. Department of Transportation.
During the same period, Northwest carried some 156,000 passengers whose journeys originated and terminated in the Twin Cities and Los Angeles. That equaled a 56 percent share of the route, measured in passengers.
Sun Country now flies one flight a day to Los Angeles from the Twin Cities and one the other way. They're both red-eyes, leaving the Twin Cities about 9 p.m. and Los Angeles about midnight. Fares usually are about $160 round-trip.
"We will make money," said Sun Country CFO Shaun Nugent. "We're using aircraft that otherwise would be in the hangar."
To be sure, Sun Country has no intention of getting mixed up in the fight between Frontier and Northwest.
"They're both trying to establish market share and having to cut prices to stimulate demand," Nugent said. "Our business model is predicated on profit generation and not market share. We can't afford to get involved in a big fare war. One-hundred-dollar fares to L.A. are great for consumers. They're not great for us."
Frontier Airlines takes on Northwest on flights heading west.
BY MARTIN J. MOYLAN
Pioneer Press
Its ads, featuring loquacious foxes, rabbits and other critters, are funny. Its planes, most of which are less than 2 years old, offer 24 channels of DirecTV. Its seats are wider and offer more legroom than those of most other carriers.
But it's Frontier Airlines' fares that have been especially enticing. Consider: Five people flying round-trip between the Twin Cities and Los Angeles for $810.
That's the deal Pauline Devney's family got when they came to Minnesota to visit relatives.
"They do a lot of advertising in L.A.," Devney said last week. "And when it came time to buy tickets, we checked the fare on the Net against Northwest, and Frontier was cheaper and it had newer planes."
But can Frontier, which launched nonstop service between the Twin Cities and Los Angeles two months ago, make enough money on the route to keep flying it?
Fares between the Twin Cities and Los Angeles are probably 50 percent lower than they were a year ago in many cases, said travel expert Terry Trippler, president of Minneapolis-based Trippler and Associates.
He dubbed the route the "blood bath" market.
"They're nuts," Trippler said of the low fares on the route. "Two-thousand dollars round-trip is obscene. So is $98."
Denver-based Frontier now offers two direct flights to Los Angeles and four, up from three, to Denver, where travelers can catch a Frontier flight to L.A.
Devney's flight, only about one-third full, had to be a money-loser for Frontier. But the airline says it's not about to abandon the circuit.
"Minneapolis-L.A. will do fine this summer," said Greg Aretakis, Frontier's vice president of planning. "We have no intention of leaving the route."
So far, load factors — the percentage of filled seats — on Frontier's nonstop flights between the Twin Cities and Los Angeles have been generally "poor," Aretakis said.
"But we're working hard, advertising aggressively, making all the right sales calls," he said. "Bookings are coming up steadily."
With six daily connections from the Twin Cities to Los Angeles and a maximum fare of $299 one-way, Frontier is well positioned to win over cost-conscious business travelers, Aretakis said.
By the end of this month, Frontier expects its load factors on the route will be in the high 60 percent range.
For the quarter and fiscal year ending March 31, Frontier had break-even load factors of 75.8 percent and 69.6 percent respectively. In other words, on average, it had to fill that percentage of seats on a flight before it could start making money.
What about the fares — which have dipped at times to under $100 round-trip —- but usually run about $150 to $200 each way?
"We know that if we charge a reasonable price and people fly us, they will like us," Aretakis said. "We would never think to charge … $599."
The airline's target fare is in the range of $100 each way. In the past, some Northwest fares between the Twin Cities and Los Angeles have topped $1,000 each, Aretakis said.
Frontier and other low-fare carriers such as AirTran, ATA, Spirit and Independence are giving Northwest real battles at its Twin Cities and Detroit hubs, he said.
"For the first time, Northwest has some real low-fare competition," Trippler said.
Eagan-based Northwest has lost about $2.1 billion on its operations since the start of 2001. But it has a history of combating and often vanquishing challengers by adding seats, cutting fares and mounting other counterattacks.
"Northwest is fighting harder than you'd expect," Tippler said. "Northwest has so many weapons in their arsenal — the frequent flier program, the international routes, the flight frequencies. … My gut feeling is that Northwest will win this battle."
When Frontier introduced its two direct flights to Los Angeles, Northwest added two, giving it seven daily nonstop flights from the Twin Cities to L.A. It also started nonstop service between Denver and Los Angeles, with two daily flights.
Northwest also dropped fares to compete with Frontier. Between Denver and Los Angeles, Northwest, for instance, has been offering $150 round-trip fares, undercutting Frontier on that route.
"We price our product competitively," said Northwest spokesman Kurt Ebenhoch.
Only Northwest, Sun Country and Frontier offer nonstop service between the Twin Cities and Los Angeles.
Last year, when it only served Denver nonstop from the Twin Cities, Frontier carried about 230,000 passengers in or out of the Twin Cities.
For years, Sun Country, in its present and former incarnations, has been the low-fare champion on the route.
From January through September 2003, it carried about 38,000 passengers on the circuit, with its quarterly average fares ranging from $139 to $148 each way, according to data from the U.S. Department of Transportation.
During the same period, Northwest carried some 156,000 passengers whose journeys originated and terminated in the Twin Cities and Los Angeles. That equaled a 56 percent share of the route, measured in passengers.
Sun Country now flies one flight a day to Los Angeles from the Twin Cities and one the other way. They're both red-eyes, leaving the Twin Cities about 9 p.m. and Los Angeles about midnight. Fares usually are about $160 round-trip.
"We will make money," said Sun Country CFO Shaun Nugent. "We're using aircraft that otherwise would be in the hangar."
To be sure, Sun Country has no intention of getting mixed up in the fight between Frontier and Northwest.
"They're both trying to establish market share and having to cut prices to stimulate demand," Nugent said. "Our business model is predicated on profit generation and not market share. We can't afford to get involved in a big fare war. One-hundred-dollar fares to L.A. are great for consumers. They're not great for us."
