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
Excerpts
The History of Frontier Airlines
After serving over 87 million customers for about four decades, the old Frontier Airlines ceased to operate in 1986. The old Frontier Airlines had once dominated the Denver hub until it started having financial troubles as a result of the increased competition in the deregulated aviation industry. The troubles due to deregulation were first apparent in 1982, when the old Frontier Airlines reported a $6 million loss, which was its first in 10 years. Over the next four years, the airline made several attempts to get in the black by lowering the salaries of all employees, ending service to unprofitable cities, and rescheduling flights to more productive markets...
Frontier: A Whole Different Animal
As Frontier became more established in the airline industry, its management began to be affected by the economic and competitive pressures in the industry. The airline sector was an intensely competitive marketplace, especially for young companies like Frontier.
At the age of 62 and after 8 years as president, chief executive officer and co-founder, Samuel Addoms, was ready to step down from everyday management responsibilities. Addoms was considered the spiritual and emotional leader of Frontier, and employees loved him...
Culture and People: The Spirit of the West
One employee, Steve Biondi, a veteran of the old Frontier and with the new Frontier since its start-up, summarized the potential for Frontier's success when he stated, "It is the people and the culture at Frontier that will continue to make us successful. This is a tough industry and we will produce innovations so that we will be around twenty years from now!" Clearly, part of Frontier's success depended on its dedicated personnel and unique culture. Frontier and its management strove to achieve good employee relations. In fact, CEO Potter believed the keys to his management style “were respecting employees' contributions as equal to his own, and empowering employees to take responsibility to do what is right."...
Frontier's Financials
Frontier's revenues were derived from four main sources: mainline passenger revenues, regional partner passenger revenues, cargo revenues, and other revenues. In 2005, mainline passenger revenues totaled $731.8 million, an increase of 18.9% from the previous year. In addition to normal fare revenue, mainline passenger revenues also included items such as reduced rate standby passengers, administrative fees, revenue recognized for tickets not used within one year from their issue dates, and revenue recognized from Frontier's co-branded credit card agreement. Regional partner revenues for 2005 totaled $84.3 million, compared to $11.2 million for the year ended 2004...
The Future and Strategis Decisions
As Frontier looked to the future, management reviewed its cost controls and current business strategies to evaluate what had made the airline successful in the past. Could Frontier continue to come up with strategic encores every time it faced stiff market competition? Or was it time for a new strategy? Incorporating the ideals of his predecessor Addoms, CEO and President Jeff Potter outlined his vision for the future of Frontier. According to Potter, Frontier's philosophy was, "To build on our core strengths of affordable fares, a low-cost structure, and outstanding personalized service, coupled with the superior comfort and technology of our new fleet and expanded route base." ...
Exhibits
Exhibit I: Denver International Airport (DIA)
Exhibit I(A): Landing Fees and Costs at DIA
Exhibit II: Frontier Airlines, Inc.: Statements of Operations
Exhibit III: Frontier Airlines, Inc.: Balance Sheet
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