Frontier Airlines will shift the battle for Colorado travelers to the south next month when it launches nonstop flights between Colorado Springs and Los Angeles, Phoenix, Portland and Seattle. And that’s just the first volley in Frontier’s bid to seek opportunities beyond its Denver hub.
For Colorado Springs travelers, that should mean lower fares.
The Denver-based low-fare carrier is using Colorado Springs as a test market for “focus cities,” or tiny hubs in smaller cities where no other airline operates a hub or dominates the market. With a focus city, Frontier hopes to attract passengers by offering nonstop flights to popular destinations on full-size jets.
Competing airlines serving Colorado Springs and other smaller airports mostly offer flights on smaller regional jets to large hub airports where travelers must catch a connecting flight to the destinations Frontier will be serving nonstop from the Springs.
“We believe Colorado Springs is the ideal market to test our strategy. It is close by and we know that market. We can become involved in the community and we are a known brand there,” said Daniel Shurz, Frontier’s senior vice president of commercial.
“We are Colorado’s hometown airline, and there is a very good opportunity with the population growth in the Colorado Springs area to test this strategy in a market where most of the service is provided on regional jets and we will be providing a better product at a lower fare.”
Frontier’s strategy of flying larger aircraft less frequently is exactly the opposite of the strategies the airline industry’s three largest players — American, Delta and United — have used in the Springs, which is flying smaller aircraft more frequently. If Frontier’s strategy fills its planes, it will have an advantage over its larger competitors because larger aircraft are more fuel-efficient than smaller regional jet.
Scott Hamilton, a Seattle area-based airline industry consultant, believes Frontier’s strategy in the Springs will work.
“There clearly is a market for the extremely price-sensitive consumer that will go to an alternate airport, but it is probably a limited market,” Hamilton said. “You have an airline like Frontier that is based in Colorado and has significant resources. It is squeezed in Denver by both United and Southwest, so they have to find ways to get out of being squeezed and I think that is through diversification. They were headed for oblivion with their previous strategy and this could be a way for them to avoid that fate.”
Frontier hopes to persuade local travelers to book its flights from the Springs rather than buy tickets on its flights or those of its competitors from Denver, where they will face a drive of an hour or more, Shurz said. If Frontier can attract enough passengers to its first four destinations, he said the carrier is studying adding Chicago’s Midway Airport, Dallas-Fort Worth and Orlando, Fla., to its Colorado Springs schedule. Frontier also is seeking federal approval for flights to Ronald Reagan Washington National Airport.
The Reagan National flight would start and end in San Diego, providing nonstop service between the Springs and that city for the first time since 2008. Frontier is seeking two of eight takeoff and landing slots at Reagan National being made available under legislation signed into law this year by President Barack Obama that also reauthorizes the Federal Aviation Administration. Six other airlines are seeking takeoff and landing slots for flights from Reagan National to eight other cities; a decision is expected May 13 with flights beginning within two months.
“If these initial flights are well-supported, I believe Frontier will feel more confident about serving eastbound destinations from Colorado Springs,” said Mark Earle, aviation director for the city of Colorado Springs. “The initial sales on those flights are strong, but any further expansion will take time.”
More than 200 community organizations and individuals submitted letters supporting Frontier’s Reagan National proposal, including eight of the nine members of Colorado’s Congressional delegation and eight retired generals, and more than 2,300 people supported the flight on the U.S. Transportation Department website.
“We are pleased with the response we have seen from the Colorado Springs market so far, but there are only a handful of markets that have the potential to be added to our schedule there. You are not going to see 25 flights a day from there,” Shurz said. “We have to get the behavior in the market changed by persuading people from Colorado Springs, El Paso County and southern Colorado to Pueblo to look first at what is available out of Colorado Springs” instead of automatically booking flights from Denver International Airport.
Shurz believes Frontier will stimulate passenger traffic from the Springs by offering lower fares than are available to the same destination from Denver, a strategy he said Allegiant Air has successfully used to attract passengers to its flights between the Springs and Las Vegas. Frontier’s $170 round-trip fare for flights on May 23 and 28 between the Springs to Los Angeles, for example, is slightly less than its fare from Denver, $28 lower than United’s from Colorado Springs and $50 less than United’s fare from Denver.
Washington, D.C., Los Angeles, Dallas and Phoenix are all among the top five air travel destinations for Colorado Springs passengers, regardless of which airport they fly through, according to data from Frontier’s application for the Reagan National slots. Chicago, Orlando and Seattle rank sixth,11th and 17th, respectively, while Portland doesn’t rank in the top 20 destinations for local travelers. Nonstop service to New York would be difficult because takeoff and landing slots are restricted at all three New York area airports.
Local airport officials had been courting Frontier last June to expand its Colorado Springs service, which began in 2008 with flights to Denver, but the discussions heated up in December and January. Shurz said Frontier in part was attracted by financial incentives offered by airport management. The new flights are forecast to boost passenger traffic 8 percent this year and 10 percent next year after declining four consecutive years.
“We have been pitching Colorado Springs to airlines as a focus city since 2006, but it took awhile for the airline industry to be in a position to respond” amid soaring fuel prices and then a deep recession, said Gisela Shanahan, the airport’s assistant director for finance and administration. “A focus city is not a hub and it must have low fares and be designed to meet the demand of the local market (and not Denver). We believe low fares to destinations that have not previously been available from Colorado Springs will stimulate local demand by attracting the price-sensitive traveler.”
The four flights that begin in May are the largest expansion of air service in the Springs by any carrier since the short-lived boom that came with the founding and growth of Western Pacific Airlines, a Colorado Springs-based low-fare carrier that operated a hub at the Springs airport from 1996 until mid-1997 and later went bankrupt. Shurz cautioned that Frontier’s business model is far different from WestPac’s, which he said was a good idea but grew to quickly and relied on passengers driving from Denver from the Springs for much of its traffic.
“We have not built our business plan on people driving from Denver to Colorado Springs. Between 1995 and today, the Colorado Springs market has grown by 35 percent. That is one of the reasons the Denver market has been doing so well — it is attracting passengers from Colorado Springs,” said Shurz, who began his airline career as a planning analyst for United in Denver at the time WestPac was in the Springs. “There are growth opportunities here, but we would rather underestimate than overestimate the market. If it doesn’t work for us, another carrier is not likely to try.”
Setting up focus cities is part of Frontier’s overall strategy to become an “ultra-low-cost” carrier similar to Allegiant and Florida-based Spirit Airlines, which both focus on providing low-fare flights to resort destinations but include a variety of fees for everything from carry-on baggage to advance seat assignments.
Frontier is not scaling down its Denver hub; the carrier is adding six new cities to its Denver schedule this summer, the largest schedule there in its history.
Another part of Frontier’s strategy is to persuade more passengers to book flights through its website rather than major travel websites like Expedia and Travelocity, which charge airlines a fee for those bookings, Shurz said. Colorado Springs travelers have booked on the company’s website to a much greater extent than those from other cities, he said. The carrier hopes to cut its $60 million annual ticketing cost in half.
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HOW THE AIRPORT LANDED FRONTIER AIRLINES
A timeline of meetings between management of the Colorado Springs Airport and Frontier Airlines officials on the carrier’s decision to expand its Colorado Springs schedule with nonstop flights to Los Angeles, Phoenix, Portland and Seattle:
• 2004: Airport officials meet with Frontier.
• 2007: Airport officials propose Frontier move its maintenance hangar to Colorado Springs.
• April 2008: Frontier begins nonstop flights between Colorado Springs and Denver International Airport; company seeks U.S. Bankruptcy Court protection and later shelves plans for moving the hangar.
• 2009: Republic Airways acquires Frontier out of bankruptcy.
• June 2011: Mark Earle, aviation director for the city of Colorado Springs, and Gisela Shanahan, assistant aviation director for finance and administration, meet with Frontier officials at JumpStart conference in Cleveland and propose nonstop flights from the Springs to new destinations. JumpStart is an annual conference where airlines and airports discuss new air service.
• December 2011: Airport staff members follow up on the proposal in a meeting at Frontier’s Denver headquarters.
• Jan. 9: Frontier contacts airport officials to discuss its proposal for expanding service in the Springs and exchanges data with those officials.
• Jan. 18: Frontier meets with Earle and Shanahan at the airport to discuss its focus city strategy and asks whether they can accommodate a May startup.
• Jan. 31: Frontier agrees to launch the new flights May 18.
• Feb. 9: Frontier announces plans for flights to the four cities.
Source: Colorado Springs Airport
FRONTIER AIRLINES AT A GLANCE
Headquarters: Denver
Began operations: 1994
Owner: Republic Airways Holdings Inc.; Republic has announced plans to sell Frontier or spin it off to Republic’s stockholders late this year.
CEO: David Siegel (named in January)
Employees: More than 5,000
Operations: More than 350 daily flights to more than 70 cities in the U.S., Mexico and Costa Rica
Passengers: 14.9 million in 2011
Fleet: Four Airbus A318 (120 seats), 40 Airbus A319 (138 seats), 15 Airbus A320 (168 seats); four Bombardier Q400 (74 seats), six Embraer ERJ (37-50 seats) and 17 Embraer E190 (99 seats)
Source: Frontier Airlines
