Airlines are looking to cut costs in just about every way imaginable. For Frontier airlines a major focus on that front has been encouraging customers to book on their website rather than through 3rd party sites (OTAs). The OTA bookings cost the airlines a lot of money and saving those margins can be significant, particularly for a smaller airline which is struggling as it is.
Last September Frontier cut mileage earning on OTA tickets to 50%. At that time they also increased most fees by $50 for fares not booked directly. It was hoped that would help increase direct bookings. In March of this year Frontier pulled their inventory from Expedia, cutting distribution costs but also reducing the potential bookings. And, this week, they’ve taken this a step further, announcing that they have "Enhance[d] Services for Customers Using FlyFrontier.com." Yes, they used the word "enhance" in the ironic form.
The latest changes see more cuts for customers booking OTA-issued tickets. Carry-on bags will now come with a fee – up to $100 at the gate – for the cheapest fares booked through 3rd party sites. "With this change, we are ensuring that our most loyal customers – Ascent and Summit level members of EarlyReturns®, those who book Economy, Classic and Classic Plus tickets, including all customers who book through FlyFrontier.com, will have more space onboard the aircraft for their carry-on bags,” said David Siegel, Frontier’s chief executive officer. The effective date for the carry-on charges has not yet been set.
Charges are also coming for in-flight beverages. Effective July 1, 2013, customers who purchase Economy or Basic fares will be charged $1.99 for coffee, tea, soda and juice. On the plus side, that $2 will entitle customers to the whole can of soda or to unlimited refills on coffee. No word on if they’ll charge again if you want more hot water for your tea. Customers who purchase a higher fare or who have elite status will need to show their boarding pass or elite card to have the beverage fees waived.
And, on the mileage front, the fares which were earning only 50% when purchased through an OTA will see that number further reduced, down to 25%.
There’s a whole lot of hurt in this latest round of changes. It is hard to believe that things will end well for Frontier out of these moves. Maybe it will shift the consumer behavior but I get the feeling more customers are going to buy their tickets through an OTA, get annoyed at the lower service levels and then choose a different carrier on the OTA rather than change their buying habits. I suppose we’ll see soon enough.
Wilmington, Delaware has a rather inconsistent history with commercial air service. Denver-based Frontier Airlines will start service during the first week of July to five destinations. The airport last saw service in 2008 from SkyBus and from Delta in 2007.
None of the service in question will be particularly frequent; Denver gets the most flights at four weekly. That sort of schedule can be performed with relatively low aircraft requirements but it also means virtually no business travelers thanks to the not-so-often flights. That fact isn’t lost on Daniel Shurz, Frontier’s senior vice president, commercial. Shurz notes that Frontier is "[T]argeting primarily leisure customers… It makes access to these great destinations more convenient and certainly more affordable."
The new service from Wilmington is in addition to service to 10 destinations from Trenton (TTN), less than 60 miles up the road. Admittedly the two are split by Philadelphia and cover different cachement areas but they are still mighty close together and will serve many of the same cities. Still, quite interesting to see the build-up of service at smaller airports on the east coast.
If nothing else, these routes represent some great opportunities to collect fun lines and dots on my flight map.
A few months back Frontier Airlines made a major change to the way it handles bookings made through 3rd party sites, cutting benefits like advanced seat assignments and frequent flier points earnings. Apparently those changes weren’t enough to get the partnership costs down enough to make all the OTA relationships viable. As of this week Frontier has pulled their inventory off of Expedia.com. The information was announced in a press release titled, "Now Even More Reason to Book on FlyFrontier.com" and accompanied by a sale for direct bookings.
Frontier Airlines today announced that, effective immediately, its schedules and fares will no longer be available on Expedia. As always, Frontier’s best fares continue to be found on its website at FlyFrontier.com. When you book at FlyFrontier.com, Frontier guarantees you’ll get the best travel value with its Best Fare Guarantee. Additionally, Frontier fares will continue to be distributed through a number of other online travel sites.
Clearly OTA distribution costs are a big deal for airlines. I just wonder if they really are happy losing the business which comes along with dropping the OTAs. American Airlines was the most recent carrier to go through similar battles. After lawsuits and lots of negotiations they’re mostly back online, but not fully settled with everything. Seems these battles take time.
Reading through some random news bits today I came across a story about Delta choosing to cancel service to Columbia, Missouri. Service cuts to a mid-size market are nothing new. Neither is the reason cited: the operations were losing money according to Delta officials. But there’s a catch to this story, one that raises the question which is the title of this post.
The story suggests that Delta lost $900,000 last year providing 3 daily flights to Columbia. Cutting a route with that level of loss isn’t particularly surprising. But what if they were offered a $3 million package over 2 years to keep the service? A similar package was offered to American Airlines, guaranteeing $3mm in revenue, in order to entice the Dallas-based carrier to initiate service. Delta was rather upset by that offer; they were operating without any guarantees since federal Essential Air Service funding for the operation ended in 2008. And when the city came back with a similar guarantee offer to Delta the answer was "No, thanks."
To be fair, a $3mm guarantee over two years comes out to just over $4,100 daily on average. And so it is entirely possible that with the revenue guarantee they’d still lose money on the operations. Still, it is interesting to see that, even with guarantees from the local government, Delta is walking away from the market. And American will quite happily take those same guarantees and run their 19 weekly flights.
At least we have some indication now of why Frontier is showing up with twice weekly service to Orlando. I wonder what their revenue guarantee package looks like.
Apparently adding New Orleans as a hub for Frontier is being explored. The move is being reported this week in the Times-Picayune with the suggestion that new investors intend to purchase Frontier, rename it and expand its footprint. The plan apparently involved adding more than 100 daily flights to the market, pending approval from the Mayor.
It isn’t clear exactly what sort of approval is pending. Leasing gates and negotiating landing fees seems a pretty straight-forward process. Then again, the company has already negotiated a $50/passenger bounty from the state for delivering additional passengers to Louisiana. Perhaps they are looking for something similar from the City?
Another view is that the city is worried other airlines will bail on the city in the face of competition and then, should the company fail, the city will be worse off in the end.
It is nice to see that someone is looking at expanding service and growing an airline. That said, if the business model is mostly based on subsidies then the long-term effects of the move are actually pretty bad. Short-term low fares for customers in exchange for future bankruptcies and economic upheaval seems like a questionable trade-off in many ways.
Airlines and online travel agencies (OTAs) continue in their fight over distribution costs and, once again, customers are stuck in the middle. The most recent battle is being waged by Frontier Airlines. They announced this week that they will charge higher fees and reduce benefits for customers who book via OTAs.
Customers flying on Frontier who book through an OTA will receive only 50% credit in the EarlyReturns frequent flyer program. They will also face a $50 premium on fees for flight changes, standby travel and bringing pets on board, among other things. Customers who do not book directly will also not be able to assign seats on the flights until check-in. This move is unlikely to win the carrier many friends, especially given recent overtures from politicians railing against assigned seating fees when it comes to families being split up on planes. Naturally, Frontier recognizes the value of assigned seats. Daniel Shurz, Frontier’s senior vice president, commercial sums it up quite well:
Particularly for families, it provides an incentive to book directly. There is no logical reason for our customers to want to book anywhere else.
And while customers who are committed to flying with Frontier will see benefits from booking directly, there are plenty of logical reasons for starting a search elsewhere. Comparing prices and flight times with other airlines is not something Frontier offers on its site. Nor does it help passengers compare other benefits associated with flights such as legroom, entertainment or in-flight internet service. Naturally the online travel agents are reminding customers of the benefits they offer, including comparing multiple airlines and the ability to mix carriers on itineraries.
Airlines and OTAs have been fighting for a while now over distribution costs. It is no surprise that the airlines balk at paying the $20-ish it costs for an OTA booking when they can handle the same transaction internally for just a couple dollars. Plus most OTAs don’t have the ability to sell ancillary products (extra legroom, upgrades, etc.) which further reduces the revenue for the airlines. Where those features have been incorporated into the process the sales have been impressive, but it requires a significant change in technology infrastructure to support the option, something the OTAs are not inclined to invest in.
This isn’t the first time that an airline has changed the benefits available to customers based on the booking channels; Continental previously offered 50% elite credit on 3rd party discount fares booked through 3rd party sites. And the fight between American and OTAs got so bad recently that American Airlines pulled inventory from Orbitz for a while. It is back now, but there are still legal battles being fought on that front.
Whether through legal challenges or just variable customer service levels, expect the battle to continue. That’s bad news for customers but it is what the market demands these days.
The wait is over. A couple months after carriers applied to provide service for four new slot pairs at Washington’s Reagan National Airport the DoT has announced the winners of the coveted operating permissions. And the winners are exactly what I predicted back when the applications were revealed:
JetBlue won their first choice of routes, adding service to their quickly growing operation in San Juan, Puerto Rico. Alaska Airlines won their first choice as well, with service to Portland, Oregon being approved. Austin, Texas had two different applications for service; both Southwest and JetBlue indicated that they wanted to add the destination. Southwest was awarded that authority. Virgin America won their only application, adding service to their hub in San Francisco. The route to SFO will be the only of the new operations with direct competition on it; United Airlines is also going to be operating on that route. Southwest will face competition on the proposed through-service aspect of their Austin service to San Diego from US Airways which will operate that route with a non-stop flight.
So no real surprises in the route authorities awarded. Probably for the best; the routes picked were the favorites because they made the most sense based on the economics of the markets. Still, every now and then I do wonder if the DoT has a sense of humor and would award something like the Colorado Springs application Frontier put out there.
The recent addition of perimeter exemption routes for Washington, DC‘s National Airport included the provision that the four largest carriers were entitle to slots, assuming they gave up a non-exempt slot. Three of those four routes were announced previously, with Salt Lake City, San Francisco and Los Angeles being chosen. Up until now, however, US Airways has remained silent on their plans. They already hold perimeter exemptions for service to Phoenix and Las Vegas and, as of June 8, 2012 service so San Diego, California.
The new service will start as an evening flight westbound and a redeye eastbound. In mid-July the route switched to a morning flight westbound and a noon departure eastbound, arriving at 8:30pm.
DCA-SAN lv 5:40p ar 8:03p
SAN-DCA lv 11:00p ar 7:00a
DCA-SAN lv 8:55a ar 11:18a
SAN-DCA lv 12:30p ar 8:23p
Neither of the timings seem particularly fantastic for business customers, particularly on the eastbound times, but I guess they have their reasons.
It will also be interesting to see how this announcement affects the pending applications from the other carriers trying to get the slots. Alaska Airlines had applied to operate the same route non-stop while both Frontier and Southwest are hoping to operate it as a one-stop service via Colorado Springs and Austin, respectively. This definitely gives the DoT some interesting things to think about.
Washington, DC‘s National Airport is one of the "lucky few" airports in the country where the government has limited destinations which can be served. The so-called "perimeter rule" keeps the long-haul flights out at Dulles for the most part, but there are a few exceptions to rule and those are coveted by the airlines. As part of the most recent FAA budget authorization bill Congress has added a few perimeter exceptions to the pool at DCA and now airlines are scrambling to grab those slots. The filing deadline was yesterday, and here’s what the proposals look like.
The slots are split into two pools, one for legacy carriers and one for new entrants. In the new entrants category six carriers – JetBlue, Virgin America, Southwest, Air Canada, Frontier and Alaska Airlines have applied.
Alaska Airlines is going big with their application, hoping to offer transcon service from both their Portland, OR hub as well as San Diego. Virgin America is also hoping for hub service from San Francisco. Southwest is aiming to provide service to Austin, TX, with onward connections to San Diego and JetBlue has applied to serve both Austin and San Juan. Air Canada is hoping for Vancouver service and Frontier is looking to serve Colorado Springs.
There is some interesting overlap with the routes being requested and it seems somewhat unlikely that the DoT is going to approve such applications so perhaps the final approval will look something like this:
For the legacy carriers the access to beyond perimeter slots comes with a slightly higher price, as they have to give up service to a destination inside the perimeter to get the new service. On the plus side, the route authorities are more or less guaranteed given that condition so the DoT has less work to do there. Of the eligible carriers, Delta, United Airlines and American Airlines all made their intentions known a couple weeks ago, with service to their Salt Lake City, San Francisco and Los Angeles hubs, respectively. Apparently US Airways has decided to not apply for an additional beyond perimeter slot. They already have service to Phoenix and Las Vegas but it is still somewhat surprising that they haven’t tried for more.
The new routes should be interesting to watch, especially with the potential for competition on the LAX and SFO routes.
It seems lately that all the discussion fees and airlines involves how annoying they are and how there is no end in sight to what the airlines will think of to charge for. While that is mostly true, there is the occasional positive development on the fee front, where things get better rather than worse. Frontier Airlines announced this week that they are reducing a number of their fees.
Fees covering flight changes ($100->$50), checked baggage ($25->$20 if paid online) and name changes ($100->$50) will all be reduced under the new scheme. So will same-day flight changes at the airport ($50->$25, plus fare difference). And excess bag fees will be standardized across the carrier’s route network ($50).
Definitely still a lot of things customers will be paying fees on, even with the new rules, but in a business market that doesn’t seem keen to remove the fees any time soon, lower is a step in the right direction.