Frontier to Cool Capacity Hikes

May 30, 2007
Carrier will target service to smaller cities and resorts

Frontier Airlines, which expanded at a breakneck clip during the past decade, will slow its capacity growth next year as it adds service to smaller cities using smaller planes.

The Denver-based carrier has increased the number of seats it flies by an average of 27 percent annually since 1996, according to Rocky Mountain News calculations. That includes a 36 percent spike in the fiscal year that ended in March 2005 and a 31 percent increase for the 12-month period that ended in March 2003.

Next year, though, it expects capacity growth to "drop down to the mid- to high single digits," Jeff Potter, Frontier's chief executive officer, said during a conference call with analysts Friday.

That's significantly less than its average, and is lower than the 14 percent growth it expects during its current fiscal year, which ends March 31, 2008.

After years of unrestrained growth, U.S. low-cost carriers are tempering capacity increases. While it's harder for an airline to post huge growth gains the larger it gets, low-cost carriers also are facing rising competition and costs, and fewer growth prospects on traditional domestic routes. Many, such as Frontier, are altering their strategies to confront the new challenges.

It's a situation that larger, older carriers have faced for years. Those carriers have been cutting back domestic capacity since 2000 and continue to do so. United Airlines, for instance, recently said it would trim domestic capacity by 3 percent this year.

"You're still seeing contraction by most larger carriers, and it's a trend now extending to lower-cost and even regional carriers, which aren't growing as quickly," said Robert Mann, an airline industry consultant.

Frontier has increased capacity by 20 percent or more in eight of the past 10 years. Much of that was fueled by new mainline service utilizing large Airbus planes that can seat up to 132 passengers.

But Frontier is looking to diversify and grow beyond its Denver roots, and much of its future expansion is tied to smaller planes that seat fewer than 100 passengers. The carrier is bolstering regional flying and will soon start turboprop service to nearby mountain and resort towns such as Aspen, where it won't face competition from low-cost carriers.

The moves also allow it to feed more passengers into its system, which will boost its mainline operations.

Frontier plans to bring on 10 Q400 turboprop planes by December for its new Lynx Aviation subsidiary. It also will add several additional regional jets this fiscal year and six more the following year.

In contrast, it will take deliveries of three Airbus planes by March and just one during the next fiscal year.

"If (for example) you're adding 10 new planes that seat 60 people vs. five new planes at 150 people, the overall capacity increase isn't as great," said Frontier spokesman Joe Hodas. "But we're still adding flights and routes."


Record of growth

* Frontier Airlines has grown rapidly since the mid-1990s, posting double-digit capacity gains in all but two years.

Available seat miles, by fiscal year*

2007 12.1 billion +13 percent

2006 10.7 billion +9 percent

2005 9.9 billion +36 percent

2004 7.3 billion +21 percent

2003 6 billion +31 percent

2002 4.6 billion +7 percent

2001 4.3 billion +20 percent

2000 3.6 billion +40 percent

1999 2.5 billion +27 percent

1998 2 billion +40 percent

1997 1.4 billion +68 percent

*Fiscal Years End March 31. Numbers And Percentages Rounded Source: Frontier Airlines

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