06 August 2009

Southwest - Frontier! What an Opportunity!

It is amusing to read the financial analysts take on the proposed buyout of Frontier Airlines by Southwest Airlines Co.. Even the pundits in the industry are hampered by the same lack of vision that the traditional carriers hold.

When I heard the news, my reaction was 'about time'. Partly selfishly of course with Southwest being my preferred US carrier and Frontier being a key link from my home to Denver. But there's more to this than meets the eye.

Southwest has never bought airlines to gain market share - they create their own market and always have. The closest to a me-too was the Morris Air acquisition. And would Southwest like to topple United? I'm not sure they care, so long as there is growth in their business model. They certainly won't want to fly Denver Tokyo, and quite frankly may eliminate Frontiers few international routes in favor of a Mexican low-cost carrier with whom they could partner (like the Westjet model in Canada).

You can look at this financially of course - the cost to access key gates at major airports that Frontier has is probably more than the entire cost of buying Frontier. They will get good prices for the A319 and A318s in Frontier's fleet. I would not be surprised if established carriers at current Frontier cities might be concerned - Atlanta perhaps?

When Frontier restarted a few years back, they were great. I became a top flier quickly and enjoyed their can do attitude. In the last four years they've gone so far downhill that I avoid them - even flying to Denver on United.

Overall, great business strategy for Southwest, great for travellers in and out of Denver. It just means that a few more of my trips will now operate on time.