Frontier Air CEO on Travel Demand, Fares and Refund Rules

Can we just get some insight from you just to have the consumers fairing in America and start the conversation there? Are you seeing a pick up and acceleration come get to summer travel? Thanks for having us. Yes, we are seeing good demand and I think it’s it’s with all this inflation talk, I think it’s important to understand that while airfares may be up slightly overall, there’s still great relative value and I think they’re not not up anywhere near what you’re seeing in Uber prices, McDonald’s prices and so forth. It’s it’s a great value. The consumer still are very resilient and so we’re going to see really good travel to some level. It’s telling to me that you talk about the value as being really important. This is something that we see as a theme in terms of consumers pushing back against price increases. Is that something that you’re seeing that essentially consumers are increasingly searching for value in a way that you haven’t seen for a number of years? We’re seeing that a little bit. We’ve seen it for a while. But again, air airfares overall are not that up that much. And in Frontier’s case, our fares are actually down and our costs are down. You know, we’re bucking the trend on managing costs. I mean we are hell bent to have the lowest cost in the country and we did that in first quarter. You know, our costs on a safe adjusted basis were actually down about 3% year over year. So those consumers are benefiting from our low costs. And so, like, I think it’s probably the best value they’ve ever seen in travel today. There’s a question, especially as a lot of airlines talk about all of their costs going up and how they’re actually maneuvering with bigger margins while also providing an experience that’s competitive. How do you provide something that isn’t just, you know, a seat in a plane that gets you somewhere, but actually is an experience that people aren’t going to hate? Well, it’s funny you mention that. You know we just launched our upfront Front Plus product which is kind of a European business class where we where we block the middle seat on the 1st 2 rows and so great interest in that. We’ve also launched our premium economy seating. So we have everything you can get that may be short of a a first class seat on many of the big guys and and we offer a great experience on a brand new Airbus. The Biden administration issued warnings last week, final rulings about automatically companies like yourself need to provide cash refunds for anything like a delay in a flight. How are you dealing with potentially these much higher costs? So actually, we are very much largely in compliant with what they’re looking for. In fact, if you take the rules of what they’re looking for, we refunded over $300 million in that category last year. So we don’t see a financial impact from this. In fact, what we’re looking to do, we’re going to be launching a new website, new app and other distribution capabilities later this year. And we think that we’ll be even more transparent to the consumer and it’ll be more easy to service and and get refunds as well. Do you think the government’s going too far though, imposing these new requirements across the industry? I I think one of the big challenges is, especially with third parties, the technology is not there to do exactly the way they have written the rules. But I think in spirit, I think the the industry is is prepared and and is in most cases like ourselves already doing what they’re looking for in general. I just think that they need to be a little bit more creative and more accepting of what the technology capabilities, especially if third parties are. There’s also a question around how feasible it is for low cost airlines to really succeed and thrive in an environment where size matters. And there’s been a real question around mergers, acquisitions into the Frontier spirit, one that’s been held up. How much is that going to be crucial for airlines that do provide value to continue to do what they’re doing? Well, I think you know one of the things that that scale gives you is, is the power of your frequent flyer programs. And you know we look at a huge opportunity over the next several years of being able to increase our our loyalty revenues. But in the in the in the size we are now we just have much lower cost and we can kind of overcome if you will that revenue deficit of the frequent flyer programs that the big guys have. But that’s why you have to be low cost if you’re if you’re small and we are continuing to deliver on that with lowest cost and we continue to widen our cost advantage versus the industry. Is this the model going forward that airlines are actually credit card companies with an airline tacked on? Well, I think if you look at the process of some of the of of some of the big guys, I I don’t know that they make money without their credit card. You don’t want to be ACEO of a financial institution, do you, Barry? I don’t know that I would, I would love that either. They’re they’re an industry that has a lot of challenges just like ours.