Flights might seem to cost an arm and a leg nowadays but cheap airfare may be coming to another airline. Taking on the ultra-low cost Spirit Airlines model, Frontier Airlines may become the next go to airline for cheap airfares.
According to the Los Angeles Times, airline industry insiders say that Indigo Partners may be taking on Frontier Airlines. The Phoenix-based private equity firm invested in Spirit Airlines in 2006 and convinced the chief executive, Ben Baldanza to charge low airfare while having additional fees. Now Indigo may be doing the same for Frontier.
Indigo is in talks to buy Denver-based Frontier Airlines from Republic Airways Holdings. While the company tries to take on a new airline, it is getting further away from Spirit as Indigo owner William Franke and Indigo principal John Wilson resigned from the Spirit board of directors.
"They really are taking the Spirit Airlines playbook from Florida to Denver," Henry Harteveldt, a travel analyst with New York-based Hudson Crossing told the Times.
Indigo won't comment on the alleged deal. Republic Airways representatives did hint that they are expecting to sell Frontier Airlines to a third party sometime in the fall, but they would not specify if it was indeed Indigo.
Frontier is already a low-cost airline, but some expert believe the airline could benefit from becoming an ultra-cheap airline since Spirit has been so successful. Fred Lowrance, vice president and senior research analyst at Nashville-based Avondale Partners told the Times that he believes Spirit has a smart business plan.
Spirit charges very low airfares, but the airline brings in a lot of revenue by charging high fees, like $100 for a carry-on bag. The airline had a profit margin of 8.5 percent in a three-month period until June 30. That rate is more than double that of many other airlines and shares have increased in value by
75 percent since 2011.
"That business model has proven successful," Lowrance said.
This article is copyrighted by Travelers Today, the travel news leader
