Is Frontier Airlines’ Business Model Sustainable?

In its S-1 form filing, Frontier Airlines describes itself as a premier brand compared to other ultra-low-cost carriers like Spirit Airlines (SAVE) and Allegiant Travel (ALGT). It focuses more on customer experience, transparency in fees charged, and retaining some basic free amenities like free water (charged at SAVE). According to the filing, its “Low Fares Done Right” strategy helped the airline attract repeat business and generate higher unit revenues. After verification, this seems to be true. Spirit Airlines’ total revenue per available seat mile was $0.091 in 2016—lower than Frontier Airlines’ unit revenue of $0.093.

However, Frontier’s average yield per passenger mile of $0.06 is below Spirit Airlines’ yield of $0.11. Falling yields and unit revenues plagued Spirit Airlines and Frontier Airlines. The stock price was also impacted.

Frontier Airlines’ unit revenues fell 11.4% in 2016 and 18.5% in 2015. In comparison, Spirit Airlines’ unit revenues fell 9.6% in 2016 and 12.8% in 2015.

View more information: https://marketrealist.com/2017/04/frontier-airlines-business-model-sustainable/

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