AP – Frontier Airlines is betting that the budding recovery in leisure travel is for real.
Shares of the discount carrier began public trading on Thursday, edging lower in mid-day trading. The Denver-based airline and its private owners sought to raise USD570 million before costs from the IPO after pricing 30 million shares at USD19, the low end of a USD19 to USD21 target. The stock opened at USD18.61, then bumped up to USD19.06 before dipping back down to USD18.54.
Chief Executive Officer (CEO) Barry Biffle said Frontier will remain focussed on the leisure-travel market, unlike bigger airlines that depend on high-paying business travellers.
“It’s not going to change how we run the business,” Biffle said in an interview. “The strategy is the same.”
The IPO timing is interesting, coming just as Americans are starting to fly in numbers not seen since the coronavirus pandemic hit. United Airlines CEO Scott Kirby said this week that demand for domestic leisure travel “has almost entirely recovered”, while business and international travel remain deeply depressed.
Biffle said after a year of lockdowns, there are “lots of people with a lot of money in their pockets and with a burning desire to get out of their house and get back to living. I think there will be plenty of demand. It’s a great time”.
Frontier faces obstacles. Despite the growing crowds at airports, air travel is still down nearly half from this time in 2019. There is tough and growing competition for leisure travellers.
And Frontier has its own reputation issues — it had the highest complaint rate of any US airline last year, mostly over refunds, according to government figures. Some customers are surprised to get hit with a fee for carry-on bags that go in the overhead bin.
Frontier, along with fellow budget brands Spirit and Allegiant, have ruffled the US airline industry by offering cut-rate fares aimed at leisure travellers. The larger airlines, which depend more on business travellers, countered with their own no-frills tickets called Basic Economy rather than surrender a chunk of the market.
Last year, as the pandemic crushed travel, Frontier’s revenue was cut in half and it lost USD225 million after earning USD251 million in 2019. The IPO is designed to shore up a battered balance sheet.
The company is targetting annual growth of 10 per cent to 15 per cent, with orders for 156 Airbus jets on top of the current 106-plane fleet.