Frontier's First Class Opportunity
Installing comfy seats is a good idea for the budget carrier, but half of the gains in their forecasts come from fleet expansion rather than the new cabin per se
Low cost airlines are not necessarily low fare. They have bargains, for sure, but like all airlines use the techniques of pricing and revenue management to try and extract maximum willingness to pay from travel buyers. A well-managed airline will simultaneously be among the cheapest and the most expensive in the market.
So when I heard that Colorado-based budget carrier Frontier will be installing first class seats in the first two rows of it’s Airbus fleet, I was not surprised. At the same time, apparently it’s top tier frequent flyers will enjoy extra perks.
No-frills airline Spirit filed for bankruptcy just last month. Analysts noted that full-service carriers like the “big three” United States carriers (American Airlines, Delta and United Airlines) offer cut-price seats topped up with ancillary services to compete with the budget lot, so it is harder for airlines like Spirit (and also Frontier) to capture market share.
Frontier’s CEO Barry Biffle apparently reckons that first class will earn his airline $250m (£197m) in 2026 and more than $500m in 2028, according to remarks quoted in the American news platform NBC (source). I expect that this also means that the roll-out will be roughly half-way there by 2026 and complete by 2028.
Do Mr Biffle’s numbers stack up? I decided to find out…
This article was written with the help of OAG Schedules Analyser data – visit oag.com. Thanks OAG!
Frontier’s financial statements for Q1 2024, available on their website, state that their Revenue per Available Seat Mile (RASM) was 9.16 US cents.
I used OAG data to look at a “normal” day’s operations, choosing Wed-12-Mar-2025. This date is not a public holiday, close enough to be representative and far away enough to be indicative of the future.
On Wed-12-Mar Frontier will have 96,929,066 Available Seat Miles (ASM) on 487 flights. At 9.16 cents per ASM their daily revenue will be USD 8.88 million.
Annualised, that adds up to USD 3.24 billion, which seems sensible since their reported revenue in the whole of 2022 was USD 3.33 billion.
Frontier say in their financial statements that RASM is slightly down on previous years due to slightly diminished seat factor. That is a good reason to try installing FC seats at the front.
They will be installing two rows of First Class (FC) seats, so eight FC seats per flight and 3,746,024 ASM per day will be added to the network.
FC seats take up a little more space than economy (EY) seats, so I assume that Frontier will lose three rows of EY and 18 EY seats per flight to make room for FC. Accordingly 8,428,554 ASM will be taken away from their network.
Thanks to the Law of Demand, the last rows of EY are often worth peanuts. Sometimes they are empty, other times they are given to staff.
When the seats that Frontier is removing are sold to paying passengers, they are by definition sold to low fare payers. This because whizzy revenue management algorithms ensure that seats are reserved for the highest fare payers first.
Meanwhile FC seats can sell at a decent premium. My rule of thumb is that US domestic first, which uses seats that are often designated business class in the rest of the world, should sell at roughly two to three times the economy fare.
Scenario modelling
I defined 25 simple scenarios based on the RASM of EY seats removed and FC seats added.
For EY, I assumed that the RASM of the 18 seats that Frontier will most likely remove to accommodate FC is 5%, 10%, 15%, 20% or 25% of the average.
For FC, I assumed that the new seats will sell at 200%, 300%, 400%, 500% or 600% of the network average.
Five scenarios for EY mapped against five scenarios for FC gives 25 scenarios in total.
These assume that all flights are configured with FC by 2028, which is my assumption of what Mr Biffle means when he speaks of the 2028 time horizon.
The table below shows that to get within USD 50 million of his 2028 numbers (cells highlighted), CEO Barry Biffle will need to be selling FC at four times the network average RASM and lose EY revenue at 5%, 10% or 15% of the network average RASM.
If Mr Biffle is losing seats at 25% of the network average RASM his new FC seats will need a five times uplift.
This seems optimistic given my rule of thumb. USD 200m to USD 300m are more likely outcomes. Well worth having of course, just not quite as good as Frontier’s optimistic forecast. Until we extend the analysis…
Barry Biffle also says that Frontier’s longer cross country flights are a focus.
Frontier’s ten longest flights are shown in the map below, produced using the excellent Great Circle Mapper.
The table below estimates their average fare based on the 9.16 cents RASM. It also shows the FC fare required to achieve the four or five times uplift required to meet Mr Biffle’s revenue target.
To be honest I think that Frontier will struggle to achieve these fares if, as Mr Biffle has pledged, he beats his competitors on price rather than onboard service.
At the time of writing, first class flights from New York to Las Vegas departing this Wed, returning this Fri on Delta can be had for USD 836 each way including taxes and airport charges. Mr Biffle needs USD 821 to USD 1,026.
United Airlines is charging USD 884 each way from Atlanta to San Francisco. Mr Biffle needs between USD 782 and USD 977.
I doubt Frontier will achieve their goals by beating the majors on price alone. So what else can they do?
In fact the solution to where the numbers come from might be simple. The airline is scheduled to retire around 30 (20%) of it’s current fleet by 2029 and add around 160 new planes to roughly double the size of the fleet in the same period. All of a sudden Mr Biffle’s USD 500m target starts to make sense. Around USD 250m of the FC revenue uplift comes from upgrading the current fleet and another USD 250m comes from the fleet expansion.
But can Frontier do even better with a few extra tweaks? I reckon they can.
Their credit card looks OK but does not look compelling compared to others out there – The Points Guy, a blog, gives it three out of five stars. However loyalty guru Mark Smith of Loyalty Status Co reckons that this kind of analysis misses the point. He says:
"From my perspective, Frontiers credit card isn't trying to be Delta or United or American. There's a huge market of people who want value when they travel and frankly the big guys rarely offer this unless you're a big time corporate spender on your co-brand credit card.
In my opinion, Frontier is "the peoples card" and it offers excellent value for the vast majority of Americans. I mean, the card is low-cost, just like the airline and if you're flying even 2 or 3 times a year there are exceptional savings."
There is no reason to think that first class travellers are not cost-conscious. The Frontier card should appeal in the front cabin segment just as much as down the back. Frontier should expand the card benefits so that co-brand members enjoy oversized benefits when they spend the extra to travel at the front. With extra incentives to spend, FC demand should rise.
Over here on the other side of the Atlantic, the other plucky US carrier JetBlue, also about to launch FC, is struggling with it’s transatlantic operations. They have replaced London Gatwick to New York JFK with Edinburgh to Boston and Paris to New York with Madrid to Boston.
The plane fact (geddit!!!) is that the low-cost mindset does not often appeal to front cabin travellers.
This does not mean that Frontier’s first class will not be a revenue generator. Far from it, I expect they will make their USD 500m. I even expect them to make the USD 500m while undercutting their competitors by at least a hundred Dollars or two, given the fares tabled above. But they can still do better by creating something genuinely good at low cost to compete at lower fares with the lacklustre products currently in the market.
To push the new FC cabin to the max I propose the following five point plan for Frontier’s first class strategy, which would be genuinely distinctive in the US market. None require the traditional lounge-n-meal concept:
1. Never upgrade frequent flyers for free, instead offering a good price to encourage people who might value a bit of comfort to pay an affordable amount more, then once the market is established (and hooked), price a bit more extravagantly. Persuading current Frontier flyers to upgrade should be more profitable than stealing market share
2. Offer frequent flyers single use upgrade vouchers after achieving set flying targets that are obtainable given a reasonable amount of flying, and make the targets much easier to achieve if they are buying first class fares
3. Bundle an upgrade voucher and some simple form of status, such as a free drink and snack onboard when travelling first class, to improve the co-brand card
4. Ensure the ground experience is smooth, with priority check in and fast track security whenever possible, and although I appreciate that lounge access is unlikely to be in the business model, why not give FC flyers a voucher for a drink at an airport bar (at least at Frontier’s major hubs)
5. Develop a genuine signature product which is very good, has wide appeal, is only available in Frontier FC and nowhere else, and is available on every Frontier FC flight. It need not be free. I would consider a catering product with special flavour and collectible packaging in partnership with a major brand. Maybe (or not!) something that would appeal to children for Mum or Dad to bring home as a surprise after their business trip. For people love their kids and travellers, first class ticket holders or otherwise, are not numbers on a spreadsheet but human beings. Airlines who recognise that essential fact are already ahead of their competitors.
oliver AT ransonpricing DOT com
oliver DOT ranson AT inkaviation DOT com
[IMAGE CREDIT: changes made – cropped from original]
