Frontier Airlines, the US low-cost carrier currently under Chapter 11 bankruptcy protection, is boosting its revenues through a new fares structure that enables travellers to buy one of three classes with varying levels of service and amenities.
"Originally we believed we would see an upsell of about 20-25%," says Jim Young, vice-president, distribution, sales & marketing at Frontier, via its AirFairs scheme launched in mid-December. Two months in, it is "seeing penetration of Classic and Classic Plus that is somewhere between 30-40%. We've been just amazed at its performance", he says.
Frontier has been seeking to improve its performance by revenue raising measures for the past 12 months as it aims to exit Chapter 11 this year. Hiking fares was not possible as it "would have bled traffic to Southwest and United", its main competitors at Denver, says Young. "Over the summer we did strategically try to raise fares on some markets. But the minute we put $5 on the fare we saw demand fall off and the minute we took it off bookings would go back up again," says Young. Like many others, the carrier did boost revenue with ancillary fees such as bag charges and increased change fees.
Chief executive Sean Menke, with his experience unbundling fares in his former role at Air Canada, pushed the concept of fare families as a good option. "While unbundling the product we were also figuring out how to add value to it," says Young, and gain the ability to offer customers more than simply the lowest price without adding a business class. "We needed to give the customer choice no matter where they were in the purchase decision."
Travellers can pay $20 more for its Classic class, offering extras like Frontier's in-seat TV service and seat assignments and another $50 for Classic Plus gets in-flight food and priority boarding.
As its experience with AirFairs grows, Frontier will fine tune the offer, possibly market-by-market, but overall it is running well ahead of the 15-20% upsell it put into the business case for the investment, says Young.
The system that enables Frontier to offer AirFairs on its website was built by Irish firm Datalex and implemented in six months. "Now Frontier has a direct distribution solution that allows them to control how they position their fares in the market," says Datalex chief executive Cormac Whelan. "It puts them back in control of their business model."