Frontier Airlines
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Case Code: BSTR441 Case Length: 18 Pages Period: 2005-2006 Pub Date: 2013 Teaching Note: Available |
Price: Rs.400 Organization: Frontier Airlines Industry: Aviation Countries: US Themes: Competitive Strategy, Strategic Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
Greeted by erupting water cannons and cheering employees, a Southwest Airlines plane rolled up to Denver International Airport on January 3, 2006, as the low-fare carrier prepared to resume service to the Mile High City, Denver, Colorado, after a 20-year absence. Southwest's first passenger flights from Denver started on January 10, 2006, with one-way fares as low as $59 to Las Vegas, Phoenix, and Chicago. Southwest had shunned Denver International Airport ("DIA") for so long due to its high costs. With declining airport fees, however, Southwest reconsidered and decided to compete head-to-head against not only United Airlines, but also against Denver's own Frontier Airlines ("Frontier").
Just a few weeks later, as the end of the 2006 fiscal year (April 1 to March 31) approached, Frontier's Board of Directors planned to meet to discuss the airline's future and strategic decisions. Net losses were significant in 2003 and in 2005. Another loss was forecast for 2006. In the late 1990s, when Western Pacific, a discount airline based in Colorado Springs, entered the Denver market to compete against United and Frontier, Board members remembered competition between Frontier and Western Pacific had brought both to the brink of bankruptcy. Fortunately for Frontier, it had the resources to last a little longer; it barely survived when Western Pacific finally had to declare bankruptcy. In the years immediately following Western Pacific's exit from the Denver market, Frontier returned to profitability. However, the lesson learned then was that the Denver market was too small for two discount airlines to coexist. Was this still true more than a decade later? What were the options available to Frontier?
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