Seven months into an attempt to expand further beyond Denver with Los Angeles-San Francisco flights, Frontier Airlines chief executive Jeff Potter admits that the route is currently slow.
Frontier started operating five daily flights between San Francisco and Los Angeles last June, amid skepticism that Frontier could succeed in the market after a failed effort to establish Los Angeles as “focus city” about two years ago.
The Los Angeles-San Francisco route “is slow,” but the company expected it to be, Potter said during the company’s earnings conference call this morning following its report yesterday of a record $14.4 million loss in the quarter ended in December.
Frontier is going up against tough competition on the California route, including United and American Airlines out of San Francisco and Southwest Airlines out of Oakland.
“I think it’s been a place that I still believe is going to be successful in the long term,” Potter said, calling the route “a strategic investment” that is different from the Los Angeles “focus city” effort.
Frontier has an advantage in Denver because many travelers are familiar with the airline, while that’s not always true outside of Colorado.
But California is a sort of “focus region” for Frontier, according to Frontier’s senior vice president of marketing and planning John Happ. “It’s a diversification play that we think makes a lot of sense.”
Frontier executives also addressed some of their other challenges, including United Airlines’ growth of about 11 percent in Denver in the last quarter of 2006, startup expenses for Frontier Airlines Holdings’ new subsidiary Lynx Aviation and a transition to a new regional carrier, Republic Airlines.
Frontier’s overlap with Southwest Airlines, which started flying to Denver last year, is now about 23 percent.
As fares have remained relatively low in Denver because of heightened competition from Southwest and United, Frontier and others have been eager to raise fares.
Potter said some recent fare increases have led to higher prices in Denver, whereas previously they hadn’t, but he does not expect a significant increase in fares in the future.
Frontier has made some strategic moves it expects to help in the long term, including a new partnership with fellow low-cost carrier AirTran that it said could bring in $5 million to $10 million more revenue annually. And Potter continues to talk with potential partners, while other airlines talk mergers.
“We are interested in having discussions with particular code-share partners,” Potter said. “At the same time the overhang of potential consolidation in the industry leads us into other options.”
Staff writer Kelly Yamanouchi can be reached at 303-954-1488 or at kyamanouchi@denverpost.com .
