Frontier Airlines has gained a following in Denver as a hometown airline with friendly service, competitive prices and endearing animal commercials.
But beneath that veneer, the company is battling for survival.
Sean Menke, Frontier’s new chief executive, jettisoned 100 jobs in December and has put four multimillion-dollar airplanes up for sale to generate cash. The company reported a record $32.5 million loss for the quarter ended in December. The stock price is at $2.93, down from around $12 less than three years ago.
The company’s aircraft-fuel bills spiked 44 percent from $81.6 million to $117.5 million in the quarter ended in December, compared with the same quarter a year earlier.
In January, low-cost competitor Southwest Airlines said it is adding 18 nonstop flights from Denver International Airport.
Some analysts consider Frontier a buyout target.
“It’s largely survived by being Denver’s hometown low- cost carrier and having just extraordinarily good leadership,” said Stuart Klaskin, a Florida- based aviation consultant.
A lift from Lynx
Menke hopes the launch of new Rocky Mountain region destinations on turboprop subsidiary Lynx Aviation in April and May will give Frontier some lift. Eight new short-haul routes announced in February will serve cities including Aspen, Durango and Jackson, Wyo., but they come after numerous delays and the missed opportunity of winter ski traffic.
Menke, who took over in September, called the announcement of the new routes and other schedule changes a “pivotal point” of his first five months at the company.
“We finally have a route structure exactly where we want it to be,” he said. “We’re finally getting the aircraft where they need to be.”
Menke said one goal is to bring in bigger returns because fares can be relatively high. The move also diversifies Frontier’s route map and feeds Frontier’s Denver hub, which helps fill planes with passengers from other cities.
Frontier pilot Larry Lutz said he believes Menke is moving in the right direction.
“Once this Lynx thing kicks into full blast, I think it’s really going to help us,” he said.
Along with the Lynx rollout, Menke is dismantling many routes Frontier had been flying, including flights from Denver to Ixtapa/Zihuatanejo in Mexico; Calgary, Alberta, in Canada; Baton Rouge, La.; and West Palm Beach, Fla.
“In today’s environment where oil is trading at $90 a barrel, you don’t have the leeway that you used to have,” Menke said in February. Oil prices have since crept higher.
Menke is also working on the ability to roll out a “branded fare” system later this year, with options to charge more for tickets that include services such as checked baggage and advance seat assignments. Frontier is also working on plans to sell food on board.
Menke oversaw a branded- fare structure in his previous positions as chief commercial officer and vice president of commercial strategy at Air Canada.
But he acknowledged he doesn’t know how the changes would affect Frontier’s brand.
“That’s why I haven’t made a decision yet,” he said.
Loveland resident Gerald Goodale said he flies Frontier as often as he can.
“They’re generally on time, (have) good fares, and I like the DirecTV,” Goodale said. “I was a longtime United flier, and I felt like I got burned on their frequent-flier miles.”
Making new fliers
Sharon Blackstock from Ohio flew Frontier for the first time last month. She usually flies Delta.
“I was impressed,” said Blackstock, who got wheelchair help from Frontier because she recently injured herself in a skiing accident.
She said she told the Frontier flight attendant, “I’ve never flown your airline before, but I will again.”
Klaskin said he believes Menke is doing “an admirable job under the circumstances.”
Frontier “has always sort of labored under some level of adversity,” he said. “The question is, how do you lead Frontier out of kind of being stuck between Southwest and United?
“This is an airline that is going to have long periods of losses, probably not terribly substantial losses, but long periods interrupted by spurts of profitability.”
Carriers such as JetBlue and Southwest have been posed as airlines that might be interested in acquiring Frontier. Klaskin said a larger legacy carrier that wants a presence in the Denver market might also be a possible partner. American has been rumored as a possibility.
Menke said he doesn’t see many synergies for low-cost- carrier mergers.
If United merges with another major airline such as Continental, Frontier, like other airlines, plans to eye the spoils.
“It opens up opportunities for ourselves and other carriers … to look at things that a merged carrier would have to get rid of,” Menke said.
Menke’s motto listed under his executive bio on Frontier’s website is “Things may come to those that wait … but only the things left by those who hustle.”
Employees like Lutz remain upbeat. He said Menke is holding workers’ feet to the fire when it comes to job performance. “It’s nice to see,” he said.
Yongping Duan, one of Frontier’s largest investors, with more than 5 percent of Frontier shares, said he feels “more confident” about Frontier with Menke leading it. “I can see what he’s doing,” he said.
Other investors are waiting to see what his efforts will yield.
The stock price is “well below what I consider it should be,” Menke said. “I’m not happy with it.
“What else can I say? I mean, people are looking to invest in profitable companies. It goes back to why I’m so focused on profitability.”
Kelly Yamanouchi: 303-954-1488 or kyamanouchi@denverpost.com
