‘It’s not going to change how we run the business’: Budget airline Frontier goes public

‘It’s not going to change how we run the business’: Budget airline Frontier goes public

April 1, 2021

Frontier Airlines bets that the budding recovery in leisure travel is for real.

Shares of the discount carrier began public trading Thursday, edging lower at midday. The Denver-based airline and its private owners hope to raise $570 million before costs from the IPO after pricing 30 million shares at $19, the low end of a $19 to $21 target. The stock opened at $18.61, then bumped up to $19.06 before dipping back down to $18.54.

CEO Barry Biffle said Frontier will remain focused on the leisure-travel market, unlike bigger airlines that depend on high-paying business travelers.

“It’s not going to change how we run the business,” Biffle said in an interview. “The strategy is the same.”

Americans are starting to fly in numbers not seen since the coronavirus pandemic hit. United Airlines CEO Scott Kirby said this week that demand for domestic leisure travel “has almost entirely recovered,” though business and international travel remain deeply depressed.

Biffle said that after a year of lockdowns, there are “lots of people with a lot of money in their pockets and with a burning desire to get out of their house and get back to living. I think there will be plenty of demand. It’s a great time.”

Despite the growing crowds at airports, air travel is still down nearly half from this time in 2019. There is tough and growing competition for leisure travelers.

Frontier has reputation issues – it had the highest complaint rate of any U.S. airline last year, mostly over refunds, according to government figures. Some customers were surprised to get hit with a fee for carry-on bags that go in the overhead bin.

Pandemic refund blues: Travelers submit record number of complaints against airlines, travel agencies in 2020

Frontier, along with fellow budget brands Spirit and Allegiant, ruffled the U.S. airline industry by offering cut-rate fares aimed at leisure travelers. The larger airlines, which have traditionally depended more on business travelers, countered with their own no-frills tickets called basic economy rather than surrender a chunk of the market.

Last year, as the pandemic crushed travel, Frontier’s revenue was cut in half, and it lost $225 million after earning $251 million in 2019. The IPO is designed to shore up a battered balance sheet. The company targets annual growth of 10% to 15%,  and ordered 156 Airbus jets to add to its 106-plane fleet.

Frontier Group Holdings is trading on the Nasdaq stock market under the ticker symbol “ULCC,” an acronym for ultra low-cost carrier. The company and its private owners each put up 15 million shares.

Frontier Airlines was founded in 1994. It struggled after Southwest Airlines began service at Frontier’s home, Denver International Airport, in 2006 and filed for bankruptcy protection two years later. After an unsuccessful stint as part of Republic Airways, Frontier was sold to private equity firm Indigo Partners in 2013 and turned into an ultra-low-cost carrier.

Frontier is the second U.S. airline IPO this year. Minneapolis-based Sun Country Airlines went public in March. There could be a new startup airline. Breeze Airways, led by JetBlue founder David Neeleman, plans to begin flights to secondary markets in the USA.

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