Frontier Airlines has just announced some major changes to its business model. These aren’t just minor tweaks, but rather I’d view them more as a complete transformation. The airline is even calling this the start of “The New Frontier.” This is bold, and I’m not sure whether to think that this is brilliant or kind of stupid.
In this post:
Frontier Airlines is trying to get out of a rut
Before we discuss the changes being made, I think it’s worth talking briefly about how ultra low cost carriers in the United States have been struggling since the start of the pandemic. While the legacy airlines are largely reporting record results, the same can’t be said for ultra low cost carriers.
Airlines like American, Delta, and United, make most of their profits from their long haul flying and from their loyalty programs. Those aren’t things that primarily domestic ultra low cost carriers can tap into in the same way. They can’t operate long haul flights, and they don’t have a customer base that’s as engaged in the airline.
Ultra low cost carriers have also dealt with some other changes. Labor costs are way up compared to pre-pandemic, which isn’t great for running an ultra low cost carrier. Furthermore, the legacy carriers are increasingly competing head-on with ultra low cost carriers, in terms of the routes they operate, selling cheap basic economy fares, etc.
Frontier has been making all kinds of changes to its operations, in hopes of returning to profitability. We’re seeing the airline changing how it schedules flights, increasingly operate to hubs of legacy airlines, and even introduce a premium product with blocked middle seats. Now the airline has revealed its biggest change yet (and I imagine this might also be in preparation for the government requiring more fare transparency)…
Frontier Airlines overhauls pricing with new fare bundles
Historically, the ultra low cost carrier business model has been all about a la carte pricing. The idea is that you see a low upfront fare, and then throughout the booking process you’re charged for everything individually, from a checked bag, to a seat assignment. While legacy airlines have largely eliminated change fees, the same hasn’t consistently been the case at ultra low cost carriers.
Frontier has now updated its pricing, to be more in line with how the legacy airlines price. Now the airline has four fare bundles, which you’ll see when you book your ticket:
- The Basic Fare is what you’re used to with Frontier, and it just includes a personal item
- The Economy Bundle includes a carry-on bag, the ability to assign a standard seat, and no change or cancelation fees
- The Premium Bundle includes a personal item, a carry-on bag, the ability to assign a premium seat, no change or cancelation fees, and the ability to board first
- The Business Bundle includes a personal item, a carry-on bag, the ability to assign an UpFront Plus seat, no change or cancelation fees, the ability to board first, and two checked bags weighing up to 50 pounds
I’ve gotta say, at least for now, the pricing for the fare bundles seems really reasonable. I’m finding that the bundles are often costing $30 extra for the Economy Bundle, $50 extra for the Premium Bundle, or $100 extra for the Business Bundle. That’s more than fair.
As you can tell, perhaps the biggest change here is that Frontier is eliminating change fees on three of its fare bundles. This is completely unheard of for ultra low cost carriers in the United States. The credits issued with this will be valid for 12 months.
Frontier Airlines improves customer experience
Beyond the new fare bundles, Frontier is improving the customer experience in a few ways.
For one, historically Frontier vouchers have just been valid for three months, while with the new system, they’re valid for 12 months, so that’s considerably more flexibility.
Next, Frontier eliminated phone support a couple of years ago in order to cut costs, but is bringing it back. Phone support is once again available for customers traveling within 24 hours, as well as for elite members traveling at any time.
Frontier also promises improved communication and technology, with an updated website and mobile app, that’s supposed to make it easier to plan travel, and to receive alerts about the status of your trip.
What’s not changing, at least for now, is the core of Frontier’s passenger experience. Everything onboard is still available for purchase, so unlike on legacy carriers, you don’t get free drinks and snacks.
Is Frontier Airlines’ pivot brilliant or stupid?
I have to give Frontier huge credit for actually making major changes. The airline is in a rough spot, and executives aren’t just sitting around hoping the airline will just suddenly become profitable. That being said, I’m not sure whether to think that these changes make sense, or will only put the airline in a worse spot.
Essentially we’ve seen the legacy airlines do a much better job of competing with ultra low cost carriers on price, by offering basic economy and flying in leisure point-to-point markets. Now we’re seeing ultra low cost carriers attack the legacy airlines head-on, increasingly flying hub-to-hub routes that are dominated by legacies, and now largely matching their fare structures.
Will this simplicity in fare bundles cause more people to consider booking Frontier, or will the lack of “gotcha” fees simply reduce revenue for Frontier?
I’m not sure what to think here, because the fundamental problem is that the legacy airline aren’t actually making much money on their domestic, economy flying. They’re making money from long haul flights (particularly across the Atlantic in summer), they’re making massive amounts of money on their loyalty programs, and they’re also able to capitalize on the premium demand that’s out there.
But if you take long haul flights, loyalty programs, and premium cabins out of the equation, even the profitable US airlines aren’t really making much money. Sure, ultra low cost carriers have a cost advantage, but not as big as it used to be, given how labor costs have gone up across the board.
It seems to me like some major macro economic changes have to take place for ultra low cost carriers to be in a position where they can be consistently profitable. Because it’s not that they suck at what they’re doing, they’re just in a really tough business at a really tough time. And the fact that so much of the industry capacity is consolidated with four airlines doesn’t help either (which is all the more reason it made no sense to block the JetBlue and Spirit merger, in my opinion).
Bottom line
Frontier is making some radical changes to its business model. Rather than having very low base fares and charging fees for everything, the airline has now introduced fare bundles more in line with what you’ll find at the legacy carriers.
Frontier has its “basic” fare, which is the same as before, and only includes a personal item. But the airline also has three other fare bundles, which include all kinds of things that travelers would want, including no change fees.
I can’t overstate how major this change is, because this is basically the opposite of how ultra low cost carriers in the US have operated for years. With such a radical change, I have to imagine this will have an impact on Frontier’s bottom line. Whether that’s positive or negative remains to be seen…
What do you make of Frontier’s major changes?
I would rather crawl on broken glass to my destination than ever get on another Frontier flight.
Why and for reasons?
I flew them exclusively before they decided to go cheap. Took my elite status away after claiming to have emailed me about “changes” and I did not respond (since I never saw an email). Several cancelled flights, missing baggage and poor attitude from their staff. No phone support so standing in lines forever to rebook. My final flight I had booked the extended leg room seat up front, boarding pass in hand only to find...
I flew them exclusively before they decided to go cheap. Took my elite status away after claiming to have emailed me about “changes” and I did not respond (since I never saw an email). Several cancelled flights, missing baggage and poor attitude from their staff. No phone support so standing in lines forever to rebook. My final flight I had booked the extended leg room seat up front, boarding pass in hand only to find out I was moved for some reason, and then had to stand in line for a refund.
The fare difference may seem reasonable but I think people need to consider what the costs by themselves are. Sometimes it is cheaper to pay individually for the extras. I think the ultra low cost carriers should consider partnering with legacy carriers. That may get passengers to choose them more often especially as they are flying to/from large hubs - increases connectivity.
Frontier and Spirit need to rebrand themselves as regular airlines. These are different times . There is simply no need for ultra low cost carriers in the U.S. People need to go places.
I think you hit the nail on the head with the comment:” ultra low cost carriers have a cost advantage, but not as big as it used to be, given how labor costs have gone up across the board.”
Also, the airline is hitting it sophomore years and needs to adjust accordingly.
Memo to Southwest: it’s your senior year, it’s time for assigned seating before a fist fight breaks over “reserved” seats!
Memo...
I think you hit the nail on the head with the comment:” ultra low cost carriers have a cost advantage, but not as big as it used to be, given how labor costs have gone up across the board.”
Also, the airline is hitting it sophomore years and needs to adjust accordingly.
Memo to Southwest: it’s your senior year, it’s time for assigned seating before a fist fight breaks over “reserved” seats!
Memo to JetBlue: it’s your junior year, it’s time to install business or 1st class. Cannot rely solely on the East Coast & Caribbean. You need business PAX for premium revenue!!
@Ben - in the conclusion section, "understate" as opposed to "overstate"
I wonder if the bundled fare options will be available to buy at the airport to save the carrier interface fee of $23/flight. That pretty much offsets the “buy-up” from Basic to Economy, and would be a great deal with the free changes / seat / carry-on.
I think it’s really interesting that frontier is making major changes, but I’m not sure if these are the right ones—the fare you showed is 104 for the basic bundle which is far higher than the 19 dollar fares they often have on sale (we’ll obviously have to see if that changes), and although they will probably attract more customers than before, they’ll alienate some of the most price-sensitive consumers while still needing to have...
I think it’s really interesting that frontier is making major changes, but I’m not sure if these are the right ones—the fare you showed is 104 for the basic bundle which is far higher than the 19 dollar fares they often have on sale (we’ll obviously have to see if that changes), and although they will probably attract more customers than before, they’ll alienate some of the most price-sensitive consumers while still needing to have lower prices for comparable legacy bundles because they still have tight uncomfortable seats, tiny tray tables, a weak loyalty program, no service. Still, it’s interesting to see this change and what it might mean for their future and the industry as a whole.
The biggest gripe I'm likely to have is that if one wants to /only/ search for fares excluding certain bundles when comparinson shopping, that's often far easier said than done.
As part of the changes, you can get 5k miles for booking a flight in May:
https://www.flyfrontier.com/5000-travel-miles/
Any changes to their loyalty program, too? A decade ago I was pretty loyal to them, pre ULCC days. I'd fly them for business frequently then used the miles to travel to places like Costa Rica. Not the most aspirational redemptions, but the value was there overall.
Their recent changes make me tempted to try them more again, but until they offer a better loyalty program, I think it will be one-off's vs. an actual shift to them overall.
When the Frontier website was updated yesterday morning, it kicked off all of their GoWild Pass/All you can fly pass holders. They can't book flights anymore. Frontier customer service reps are telling those passengers to wait a few days or few weeks until their IT department is able to fix it. Some customer service reps are booking for those passengers, but some are refusing to book for them. That the New Frontier.
My first ever Frontier flight coming up in September. Bare bones - one personal item, no seat selection, etc. But $29 one way from SLC-SFO. Will see how it goes; I can survive the short trip......
That's the issue is that domestic flying is at best break even, likely a loss for the legacies. But at least for now the legacies have other revenue streams with far, far better profit margins.
Frontier (and Spirit) have non of that so they're stuck trying to make a profit on cheap fares and fees. Moreover, they don't have a very good reputation among people that can afford to fly. Just watch the Youtube videos...
That's the issue is that domestic flying is at best break even, likely a loss for the legacies. But at least for now the legacies have other revenue streams with far, far better profit margins.
Frontier (and Spirit) have non of that so they're stuck trying to make a profit on cheap fares and fees. Moreover, they don't have a very good reputation among people that can afford to fly. Just watch the Youtube videos of brawls on flights, often Spirit or Frontier. And that's a difficult perception to shake.
Then their customer base is clobbered with inflation. People on this board would like to think these people don't exist but there's no small number of Americans that have less than ten dollars to their name at payday. In fact, with the explosion in payday lenders many of them can't even make it paycheck to paycheck. With all the COVID goodies gone and credit cards maxed there's no extra 100 dollars to go anywhere.
Any idea how this effects folks who have status and get many of these perks for free?
It would be great to know how they are going to map current bookings to these fare products
the basic fare is still great for elites who already get free bags and seats and changes, as well, unless they added a caveat that elite benefits aren't eligible at that tier like other airlines have done, but I don't think I read that here?
Having flown with Spirit multiple times, I’ve always wanted an ULCC to implement a bundling scheme and Frontier has done exactly that. It definitely simplifies the booking process and provides a more pleasant experience.
I get that that they depend on the gotcha fee, but they can still advertise the base fare and google would also pull up the cheapest fare, so it still attracts me to their website. I don’t have to waste...
Having flown with Spirit multiple times, I’ve always wanted an ULCC to implement a bundling scheme and Frontier has done exactly that. It definitely simplifies the booking process and provides a more pleasant experience.
I get that that they depend on the gotcha fee, but they can still advertise the base fare and google would also pull up the cheapest fare, so it still attracts me to their website. I don’t have to waste time going through 10 steps only to realize my carry on costs $70 which just makes me annoyed. A sale isn’t a sale until I hit purchase. Once I get the total price for my flight, I would still check other airlines if it’s cheaper. Hence I think this increases the user experience in general. This is coming from a price sensitive consumer, so I would love to hear what others feel.
However, having also worked for Spirit, I definitely hope that this isn’t the final price as the difference between fares is wayyy too small/cheap! I hope they still maintain the ala carte portion If I were the decision maker, I would swap out/remove a few things within the bundles.
Excited to see how this plays out! I think it’s a great initiative and prices can be easily adjusted to make profit.
Without WiFi frontier will not get me or any other business travelers no matter how they price it