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PacoMartin
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What's up with Frontier Airlines and Latin America?

Tue Sep 17, 2019 11:55 pm

What's up with Frontier Airlines and Latin America? They have been flying there for over 14 years (57 quarters) where they reported a loss for 21 of those quarters.

Now Frontier is reporting record breaking back to back quarters with net income over $10 million and a 50% increase in operating revenue! In only 6 months they have come within 1.2% of their best annual (fiscal year) of net income.

There was an increase of 4% in available seat miles to Latin America over the first three months compared to last year.
There was an increase of 8% in revenue passenger miles to Latin America over the first three months compared to last year.

Net income for Frontier Airlines (domestic + Latin America)
2018 1 $24,888 $1,957
2018 2 $68,009 -$784
2018 3 $32,568 -$2,026
2018 4 -$41,099 -$986
2019 1 $16,088 $10,965
2019 2 $69,809 $10,725

Operating revenue for Frontier Airlines (domestic + Latin America)
2018 1 $464,436 $36,938
2018 2 $525,510 $30,506
2018 3 $521,943 $22,808
2018 4 $530,601 $23,116
2019 1 $500,739 $45,844
2019 2 $593,451 $44,213
 
MIflyer12
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Re: What's up with Frontier Airlines and Latin America?

Wed Sep 18, 2019 12:17 am

Why do you want to conflate Frontier's domestic performance with its performance in Latin America? U.S. Bureau of Transportation Statistics data show that international flights (not just Latin America) represented 5.5% of Frontier's Revenue Passenger Miles in 2018.
 
MalevTU134
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Re: What's up with Frontier Airlines and Latin America?

Wed Sep 18, 2019 12:41 am

PacoMartin wrote:
What's up with Frontier Airlines and Latin America? They have been flying there for over 14 years (57 quarters) where they reported a loss for 21 of those quarters.

Now Frontier is reporting record breaking back to back quarters with net income over $10 million and a 50% increase in operating revenue! In only 6 months they have come within 1.2% of their best annual (fiscal year) of net income.

There was an increase of 4% in available seat miles to Latin America over the first three months compared to last year.
There was an increase of 8% in revenue passenger miles to Latin America over the first three months compared to last year.

Net income for Frontier Airlines (domestic + Latin America)
2018 1 $24,888 $1,957
2018 2 $68,009 -$784
2018 3 $32,568 -$2,026
2018 4 -$41,099 -$986
2019 1 $16,088 $10,965
2019 2 $69,809 $10,725

Operating revenue for Frontier Airlines (domestic + Latin America)
2018 1 $464,436 $36,938
2018 2 $525,510 $30,506
2018 3 $521,943 $22,808
2018 4 $530,601 $23,116
2019 1 $500,739 $45,844
2019 2 $593,451 $44,213

So, what is your question, after throwing all those numbers at us?
What's up? Hopefully the same as what's down, once they landed.
 
alasizon
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Re: What's up with Frontier Airlines and Latin America?

Wed Sep 18, 2019 1:08 am

PacoMartin wrote:
What's up with Frontier Airlines and Latin America?


They are flying there and making money? I'm confused what your questions exactly are here. F9 has expanded more into LatAm over the past couple years as their network has developed and from your figures it shows that their route planning folks did a decent job at finding routes that would return a good yield.
Manager on Duty & Tower Planner
 
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PacoMartin
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Re: What's up with Frontier Airlines and Latin America?

Wed Sep 18, 2019 2:52 am

MalevTU134 wrote:
So, what is your question, after throwing all those numbers at us?
What's up? Hopefully the same as what's down, once they landed.


On average over the last 13 years Frontier (based on it's Latin American flights) has had a net income of
$1.249 million in first quarter , now it earned $10.965 million in 2019
$1.120 million in first quarter , now it earned $10.725 million in 2019

Latin America has suddenly become extremely profitable for Frontier. I conflated the domestic numbers with Latin American numbers to show that net income is 7.85% of operating revenue for domestic flights, while net income is 24.08% of operating revenue for LA operations.

Another way to say it is that while the Latin American passengers are just 5.5% of the Revenue Passenger Miles in 2018, and 7.5% in first quarter of 2019, they earned 20.2% of net income for Frontier.

Suddenly this year, these five destinations became massively profitable for Frontier
Dominican Republic Punta Cana
Jamaica Montego Bay
Mexico Cancún
Mexico Puerto Vallarta
Mexico San José del Cabo

My question is what changed? The competition for passengers flying to these resorts is just as severe as ever. Leisure flyers do not normally pay top dollars for flights.

alasizon wrote:
They are flying there and making money? I'm confused what your questions exactly are here. F9 has expanded more into LatAm over the past couple years as their network has developed and from your figures it shows that their route planning folks did a decent job at finding routes that would return a good yield.


They fly to five popular resorts in Latin America. So does a dozen other airlines. How did Frontier manage to increase their profit margin by that much compared to last year? In comparison Southwest Airlines net income increased by only 5.5% in 2019 flying to Latin America to many of the same resorts.
 
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PacoMartin
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Re: What's up with Frontier Airlines and Latin America?

Wed Sep 18, 2019 6:11 am

Just to give you an idea how high the Frontier numbers are, I listed all 11 USA mainline airlines, and the amount of net income per $100 in operating revenue for the first 6 months of 2019 for both the Domestic market and the Latin American market. Hawaiian and Allegiant do not fly to Latin America.

Domestic | Latin A. | Airline
$4.08 | $15.11 | American
$7.77 | $11.16 | Delta
$6.54 | $4.42 | United
$10.20 | $10.09 | Southwest
$9.13 | $9.14 | Spirit
$10.23 | $10.54 | Sun Country
$6.14 | $3.43 | Jet Blue
$6.83 | $0.62 | Alaska
$7.85 | $24.08 | Frontier
$10.66 | n/a | Hawaiian
$18.77 | n/a | Allegiant
 
LAXBUR
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Re: What's up with Frontier Airlines and Latin America?

Wed Sep 18, 2019 6:25 am

This poster has a habit of writing tediously long posts with lots of numbers where they seem to answer their own posts with even more numbers. Truly bizarre.
 
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PacoMartin
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Re: What's up with Frontier Airlines and Latin America?

Wed Sep 18, 2019 10:48 am

LAXBUR wrote:
This poster has a habit of writing tediously long posts with lots of numbers where they seem to answer their own posts with even more numbers. Truly bizarre.


Apple Corporation has margins of profit/revenue of 22%. Airlines usually have very low margins. Southwest is normally one of the most profitable airlines with profit/revenue of 11%.
Frontier runs low margins even among airlines with a 20 year average of 3%. Their Latin American operations lost money last year and now suddenly this year are at record levels.

I was under the impression that analysis required numbers. Do you say this airline seems very friendly and they have pretty jets so I bet they are profitable. Don't show me numbers as they are tedious.
 
FRNT787
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Re: What's up with Frontier Airlines and Latin America?

Wed Sep 18, 2019 1:08 pm

PacoMartin wrote:
Frontier runs low margins even among airlines with a 20 year average of 3%. Their Latin American operations lost money last year and now suddenly this year are at record levels.


Comparing Frontier's margin history over the last 20 years (as with most of its financial data) will lead to a lot of confusion of stats. Frontier is run/operated very different from 2000, 2005, 2010, 2015. In 2000, Samuel Addoms was ordering new aircraft to complete roll the fleet over into the Airbus fleet and trying to grow from the small Denver airline flying old used 737s. In 2005, Jeff Potter was trying to grow it into a mainline carrier, signing up Mesa, Horizon, then Republic to operate RJs and even creating a subsidiary to fly Q400s. In 2010, their new post-bankruptcy owners, Republic, were merging Frontier with Midwest. In 2015, new owners Indigo Partners were fully entrenched converting Frontier fully to an ULCC. The point being Frontier's numbers, as a measure of strategy, should only really be compared over the past couple of years.

Within the Latin American market you specified, I would suggest looking at where all of the flights are starting from. Frontier positions a not-insignificant portion of their fleet on east coast flying in the winter from the northeast/midwest down to Florida, Mexico, and limited Caribbean. Latin America also receives a large number of A320 and A321 aircraft in this market, which Frontier did not have in 2010. This compares to previously when their Latin American operations were largely founded in partnership with Apple Vacations operating large scale charter and Denver-focused Latin American flights.

There may be something in what the DOT numbers actually show as well. Im not sure how well they show Ancillary Revenues or other streams outside of ticket revenue. Something to look at. Ive not looked at DOT numbers since I finished my degree.
 
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PacoMartin
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Re: What's up with Frontier Airlines and Latin America?

Wed Sep 18, 2019 1:16 pm

LAXBUR wrote:
This poster has a habit of writing tediously long posts with lots of numbers where they seem to answer their own posts with even more numbers. Truly bizarre.


You've expressed interest in Alaska Airlines in previous posts. You are not even slightly curious why Alaska's operations in Latin America after three decades are barely breaking even, while Frontier is setting record-breaking profits?

Alaska Airlines 
Mexico Served since
Cancun (CUN) 2001
Guadalajara (GDL) 2003
Ixtapa / Zihuatanejo (ZIH) 1996
Los Cabos (SJD) 1989
Loreto (LTO) 2008
Manzanillo / Costa Alegre (ZLO) 1999
Mazatlan (MZT) 1988
Puerto Vallarta (PVR) 1988
Costa Rica Served since
San Jose (SJO) 2015
Liberia (LIR) 2015

Frontier Airlines 
Mexico
Cancun (CUN)
Los Cabos (SJD)
Puerto Vallarta (PVR)
Caribbean
Dominican Republic Punta Cana
Jamaica Montego Bay

FRNT787 wrote:
Comparing Frontier's margin history over the last 20 years (as with most of its financial data) will lead to a lot of confusion of stats. Frontier is run/operated very different from 2000, 2005, 2010, 2015.


Thank you for your intelligent response (the first one posted on this thread).

Frontier lost money in Latin America in the 2nd, 3rd, and 4th Quarter last year, and for the year as a whole. In my initial post, I stated that they lost money more than a third of the quarters in the last 14 years. I was only citing 20 year stats to give people an idea of what is normal.

As stated above, Alaska has over a 30 year history of flying to Latin America and the entire operation is barely breaking even this year. Spirit and Southwest are comparatively more or less steady since they started Latin American flights.

Latin America is a potential growth area for the USA airlines that fly single-aisle jets. For two reasons, the growing middle class Mexicans are being pulled off their luxury buses and taking LCC flights. The new longer range single-aisle jets could open up markets from Florida to the giant cities in temperate zone in South America whereas previously only the tropics were within reach. This opens up whole new markets other than beach resorts like skiing in the North American summer which is the Chilean winter.
 
drdisque
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Re: What's up with Frontier Airlines and Latin America?

Wed Sep 18, 2019 4:21 pm

I suspect it might be due to the seats that they sell on these flights to tour operators could be causing a disruption in the way that the profit is being allocated. Frontier may have began allocating all profit related to their vacations/tour operator sales to the Latin flights (because that income would not exist if those flights didn't exist).
 
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PacoMartin
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Re: What's up with Frontier Airlines and Latin America?

Thu Sep 19, 2019 4:51 am

drdisque wrote:
Frontier may have began allocating all profit related to their vacations/tour operator sales to the Latin flights (because that income would not exist if those flights didn't exist).


It's a good theory, but these are numbers being reported to the DOT. I suspect that most businesses don't do a major change in accounting in reporting numbers to the government because the government is normally suspicious of radical changes that are just accounting procedures.

There certainly are signs of improvement. The ASM for Frontier's Latin America went from 494 million to 513 million and load factor increased from 74.6% to 77.6% in the first quarter.
But Alaska's load factors are over 83% and all Alaska did was to go from losing $7 million to losing $5 million while Frontier went from making $2 million to making $11 million in the first quarter for Latin America
 
Gregd75
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Re: What's up with Frontier Airlines and Latin America?

Thu Sep 19, 2019 2:35 pm

Volaris and Frontier have joined forces. If I buy a ticket on the Volaris website, I get results showing Frontier flights, or even connections.

I imagine its vice versa on Frontiers website too.

How do airlines report revenue generated via their partnerships?

I wonder if this has impacted Frontiers LatAm income? Maybe this could partially explain the jump in money that the post talks about?
 
drdisque
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Re: What's up with Frontier Airlines and Latin America?

Thu Sep 19, 2019 2:55 pm

Gregd75 wrote:
Volaris and Frontier have joined forces. If I buy a ticket on the Volaris website, I get results showing Frontier flights, or even connections.

I imagine its vice versa on Frontiers website too.

How do airlines report revenue generated via their partnerships?

I wonder if this has impacted Frontiers LatAm income? Maybe this could partially explain the jump in money that the post talks about?


If they don't have a Joint-Venture they have to use tariff rules to allocate the revenue.

If they have a JV then they report revenue delivered to their coffers from the JV minus the expense of the flights that they flew covered by the JV.

But yes, the Volaris codeshare may have something to do with it. In fact they may be counting any ticket that involves a connection to Volaris as Latin now. (that is how we treated revenue at my airline, any itinerary that included an international segment, all its revenue/profit was allocated to that region, we didn't prorate some of it to domestic).
 
dcajet
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Re: What's up with Frontier Airlines and Latin America?

Thu Sep 19, 2019 3:15 pm

Title of this thread is misleading. Frontier only serves Mexico, the D.R. and Jamaica. That is a tiny portion of Latin America.
"Unattended children will be given espresso and a free kitten"
 
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PacoMartin
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Re: What's up with Frontier Airlines and Latin America?

Thu Sep 19, 2019 3:31 pm

Indigo partners owns Frontier and also has substantial investment in Chilean LCC ,Wizz Air, and Volaris. The Chilean partner probably explains Frontier's decision to upgrade to A321XLR.
 
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PacoMartin
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Re: What's up with Frontier Airlines and Latin America?

Thu Sep 19, 2019 3:38 pm

dcajet wrote:
Title of this thread is misleading. Frontier only serves Mexico, the D.R. and Jamaica. That is a tiny portion of Latin America.

BTS reports data by Latin America, Atlantic, Pacific, and domestic. Only Hawaiian and Allegiant have no flights to Latin America, but many smaller airlines only have service to a handful of resorts.
 
MalevTU134
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Re: What's up with Frontier Airlines and Latin America?

Thu Sep 19, 2019 3:41 pm

dcajet wrote:
Title of this thread is misleading. Frontier only serves Mexico, the D.R. and Jamaica. That is a tiny portion of Latin America.

Exactly...out of which, Jamaica isn't even Latin America. Also, the title is nonsensical, and the OP has no clear question apart from "what's up?", which is probably why the OPer feels that he is getting no "intelligent" replies, and also why this thread is made up to roughly 50% of the OPer's posts.
 
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PacoMartin
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Re: What's up with Frontier Airlines and Latin America?

Fri Sep 20, 2019 5:18 am

MalevTU134 wrote:
Exactly...out of which, Jamaica isn't even Latin America.

So the Department of Transportation should refer to flights to that "Region south of the United states, with a bunch of countries that speak Spanish, Portuguese, English, French, Dutch, and some Indigineous Languages". I don't make the regions, the DOT does, but I certainly think that calling it Latin America is very conventional (even though not everyone speaks a Latin based language).

MalevTU134 wrote:
the OP has no clear question apart from "what's up?"


I stated the question very clearly in the first thread. Frontier has record breaking profit margin this year in "That Southern Region" nearly 6 times the norm for US carriers. It is unprecedented for Frontier after being in this market since 2005. I opened it up to the forum to ask a slang form of "what are they doing correct?".

I know that Frontier has only 5 destinations, Sun Country has 13 destinations, Alaska has 10 destinations, Southwest has only 14 destinations, Spirit Airlines has only 27 destinations, JetBlue has 34 destinations and Allegiant and Hawaiian have none. I know they speak multiple languages.

I get answers like don't you realize airlines executives want to make money, Frontier has a limited number of destinations, and English is not a Latin based language. BTW, most of the English vocabulary is based on Latin words, often passed through French, even if English grammer is not based on Latin.

I did get some intelligent speculation.
 
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PacoMartin
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Re: What's up with Frontier Airlines and Latin America?

Fri Sep 20, 2019 5:33 am

If reasons for airlines losing money is of interest on this forum, why isn't reasons for making huge profits?

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