Frontier Airlines, Inc.

Frontier Airlines, Inc.

12015 East 46th Ave.
Denver, Colorado 80239-3116
U.S.A.
(303) 371-7400
Fax: (303) 371-9669
Web site: http://www.flyfrontier.com

Public Company
Incorporated: 1946 as Monarch Air Lines
Employees: 800
Sales: $70.4 million (1996)
Stock Exchanges: NASDAQ
SICs: 4512 Air Transportation, Scheduled

Frontier Airlines, Inc. was reborn in 1993, borrowing the name of the carrier that had previously served the Rockies and Midwest for nearly 50 years. The name was not merely a superficial brand: several of the new Frontier’s executives and 75 percent of its starting work force had been associated with the original carrier. Frontier operated about a dozen 737s, competing as a low-fare carrier on several high-volume routes.

A Flock of Postwar Start-Ups

A merger of three small postwar carriers created the original Frontier Airlines on June 1, 1950. All three flew war surplus Douglas DC-3s (known as C-47s in the U.S. military) in their struggle to eke a living carrying whatever mail and passengers they could across the western sky. Monarch Air Lines began flying out of Denver in 1947. Future partner Challenger Airlines began serving Denver from its Salt Lake City base the next year, when the last of the three, Arizona Airways, began its flights to the Mexican border. Frontier’s territory spanned 40 cities along the Rocky Mountains from Montana to the Mexican border. Challenger Airlines, which would merge with Frontier in 1967, was of the same generation, beginning operations in 1949. Monarch supplied Frontier’s first president, Hal S. Darr.

Rapid Growth in the 1960s

Mines, dams, and national parks, and other developments diverted increasing streams of passengers through Frontier Airlines. By 1960, more than 30 new cities had been added, extending its routes east into the Dakotas and Missouri.

New low-cost fare plans spurred still more passengers to fly Frontier in the 1960s, making it the country’s fastest growing regional carrier. The Vacationland Fare effectively gave passengers a 30-day pass for $100. The Standby Plan offered last-minute available seats for half price.

The company began flying the Convair 340, a popular replacement for the smaller DC-3, in 1959. These were replaced by still larger, faster Convair 580 turbojet aircraft within a few years. As impressive as the Convair 580 was, the five Boeing 727-100 airliners Frontier bought in 1965 for $55 million propelled the company into the age of modern jet travel. General Tire and Rubber Company bought a controlling interest in the airline through its subsidiary RKO General, Inc. The company’s 1966 revenues were $1.74 million, resulting in its highest ever profits. Frontier’s fleet included 20 planes, two of them 727s.

The company proved continuously successful in winning new routes from the Civil Aeronautics Board. After its merger with Fort Worth’s Central Airlines in October 1967, Frontier served 114 cities with 56 planes.

A Bit of Turbulence Entering the 1970s

The entry into Kansas City and St. Louis brought Frontier into direct competition—vigorous competition—with Trans World Airlines. In 1969, Frontier replaced its first five 727s with Boeing 737s. It also opened its combination headquarters and maintenance center in Denver. In spite of the optimistic additions, the airline failed to turn a profit in 1970. Al Feldman had assumed the company’s leadership in 1971, and instituted a quick turnaround.

Frontier continued to offer new routes and set new records, serving its highest number of paying passengers in 1973 while receiving fewer complaints than any other regional airline. Its first international flight landed in Winnipeg in 1974. Four years later, Frontier crossed the border into Mexico.

A Dip in the 1980s

Although fuel costs rose and traffic fell, 1980 gave Frontier its highest profit to date: $23.2 million. The company had grown to employ 5,800 people and operated 60 aircraft, serving 86 cities. In 1982, the company phased out its turboprops and added the state-of-the-art McDonnell-Douglas MD-80. Reflecting its enormous strides, the company was reorganized, becoming a subsidiary of Frontier Holdings, Inc. on May 6, 1982.

A blizzard closed the Denver airport for two days around Christmas 1982, helping to smother the company’s profits. After a terrific decade, Frontier lost about $45 million the next two years, placing the company in its most serious crisis.

After proposals to sell the company’s shares to its employees and a bid by corporate raider Frank Lorenzo, People Express Airlines bought it in 1985. However, Frontier continued to falter and filed for bankruptcy in 1986. Its assets were sold off and many of its routes were taken over by Lorenzo’s Continental Airlines.

The 1990s: A New Frontier

A $7.6 million initial public offering in May plus other venture capital funded the launch of a new Denver-based carrier in 1993. Unlike another new airline which had purchased the venerable name of a bankrupt carrier, Pan Am, at an auction, the new Frontier bore real resemblance to its former self. Its first CEO, Hank Lund, had been an executive at the original airline, and seven other former executives would join him. Samuel D. Addoms would become Frontier’s CEO in January 1995. In addition, after digesting 5,000 resumes, the company filled 150 of 200 available slots with former Frontier employees.

On July 5, 1994, the reborn airline began flying between Denver and a handful of cities in North Dakota. Soon airports in Montana, Nebraska, New Mexico, Nevada, and Texas again began receiving requests to land from jets with a name they had not heard in several years. Ironically, the carrier’s old rival, Continental, helped provide space for Frontier when it scaled back its operations at the new $4 billion Denver International Airport. Frontier’s rebirth had originally been conceived as a charter operation.

The company’s early strategy paralleled that of the original: providing flights on underserved routes rather than striving for the low-prices of some of its contemporaries. However, just as with the original, price competition in major markets became part of Frontier’s game plan.

United Airlines, which had more than a 70 percent market share at Denver International, refused to use the company for feeder flights. (United’s employees had killed its bid for the old Frontier in the mid-1980s, protesting the absorption of Frontier employees.) Frontier’s planes remained less than half full until late in 1995 when, like its predecessor, it began competing on a price basis in major markets. In fact, operations in its original eight markets were suspended so the planes could be deployed on higher volume routes. Eventually, Frontier would reach cooperative agreements with 65 airlines.

In September 1995, a secondary public offering brought in $7.3 million of needed capital. Additional stock worth $3 million had been sold in May.

Frontier’s fleet was comprised of several used Boeing 737s, one of the industry’s most reliable and most sought-after. The company’s expansion plans were limited by the availability of these planes. Across the tail sections were plastered photographs of western wildlife, such as grazing bison, howling timberwolves, or fox kits. In 1996, Frontier opened a facility in Denver which allowed it to handle its own routine maintenance.

In 1997, Frontier accused “monopolist” United Airlines of dumping—intentionally operating a large number of flights in order to gain market share—and other antitrust violations. These were prompted, according to Frontier, by the company’s second profitable quarter.

As a low-price Colorado airline, Western Pacific was often compared with the new Frontier. They both operated the Boeing 737; WestPac, based 100 miles south of Denver at Colorado Springs, operated 19, which would have made a combined fleet of 34 aircraft.

In June 1997, the two agreed to merge. However, the merger was called off at the end of September. Differences in culture and operating philosophy were cited as the prime factors. The next week, WestPac announced it was seeking Chapter 11 bankruptcy protection but planned to remain in the air. In spite of losses earlier in the year, Frontier seemed to be faring better, posting increases in summer traffic.

Company Perspectives:

Frontier Airlines, Inc. is a low-fare, full-service airline based in Denver, Colorado. Principally serving markets abandoned by Continental Airlines during that carrier’s downsizing of its Denver hub in 1993 and 1994, the Company currently operates routes linking its Denver hub to 14 cities in 11 states covering the western two-thirds of the United States. The Company’s current route system extends from Denver to Los Angeles, San Diego and San Francisco, California; Chicago and Bloomington/Normal, Illinois; Seattle/Tacoma, Washington; Las Vegas, Nevada; Phoenix, Arizona; St. Louis, Missouri; Minneapolis/St. Paul, Minnesota; Salt Lake City, Utah; Omaha, Nebraska; Albuquerque, New Mexico; and El Paso, Texas. At present, the Company utilizes four gates at Denver International Airport for approximately 54 daily flight departures and arrivals.

Besides meeting its ever-present needs for capital, future challenges for Frontier included retrofitting its fleet with hush kits (at $2 million per plane) to meet federal noise regulations; one runway at Denver International had already been closed to certain of its aircraft due to the airport’s noise agreement with the city of Denver.

Although the reincarnated Frontier Airlines seemed to possess just a shadow of the original Frontier’s might, Monarch Air Lines was small and struggling in its first few years as well. If the company could survive its confrontation with the world’s largest airline, who knew what heights the new phoenix would reach?

Further Reading

“Airline Deregulation Poses Policy Puzzle,” Denver Business Journal, February 3, 1997.

“Bandits at Nine O’Clock: Despite a Recent Upturn in the Fortunes of America’s Big Airlines, the Country’s Skies Still Favour the Small and Nimble,” Economist, February 17, 1996.

Dempsey, Paul Stephen, “Fighting Modern-Day Robber Barons,”Denver Business Journal, January 27, 1997.

Dubroff, Henry, “United and the Upstarts Begin Round Two,” Denver Business Journal, November 18, 1996.

“Frontier Set to Double Fleet Size with 737s,” Airfinance Journal, September 1996, p. 17.

“Give Frontier Execs Credit for Air Merger,” Denver Business Journal, July 14, 1997.

“Justice Department Reviews Claims of Airlines’ Price Squeeze,” Los Angeles Times, February 12, 1997, p. Dl.

Lieber, Ronald B., “Dead Airline Names Take Off Again,” Fortune, March 4, 1996.

Moorman, Robert W., “The ’New’ New Frontier,” Air Transport World, August 1996, pp. 86-87.

Rosato, Donna, “Western Pacific Dumps Frontier,” USA Today, September 30, 1997, p. 12B.

Sanders, Michael J. “Strategic Use of Technology: A Blueprint for Implementation,” Journal of Information Management, Spring 1987, pp. 17-26.

Scott, William B., “Western Pacific, Frontier Merger Raises Stakes at Denver Hub,” Aviation Week and Space Technology, July 7, 1997, p. 52.

“Start-Ups Fly into Financial Head Wind,” USA Today, February 11, 1996.

Svaldi, Aldo, “Delta Stalls WestPac’s Name Hunt,” Denver Business Journal, July 21, 1997.

Tammerlin, Drummond, “Losing Altitude: Discount Airlines Are Struggling, Even As the Major Carriers Raise Fares,” Time, July 14, 1997.

Thurston, Scott, “ValuJet, Frontier Cry Foul at Big Airlines’ Pricing Tactics,” Atlanta Journal and Constitution, February 2, 1997, p. F5.

Williamson, Richard, “Western Pacific to Keep Flying,” Rocky Mountain News, October 7, 1997.

—Frederick C. Ingram