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IT'S WAR: United Airlines president slams Frontier after $39 ticket announcement and vows 'United will win'
(United Airlines Boeing 767 and 787 jets.REUTERS/Louis Nastro)
On Wednesday, United Airlines president Scott Kirby weighed in on Frontier Airlines' plan to double the number of its routes and return to a network business model.
(Frontier also included a limited time offer for $39 tickets in its announcement.)
During United's Q2 earnings call, Kirby called the ultra-low-cost carrier's decision "the best news I've heard in 10 years."
That's because Kirby sees Frontier's move as a sign that its point-to-point model has failed to hold up when exposed to price competition from large network carriers through products like basic economy fares.
"I've believed for many years that the ultra-low-cost carrier business model can't work when a network carrier decides to compete on price," Kirby said in response to a question by Wolfe Research analyst Hunter Keay. "This is the first public validation that one of the ULCCs has thrown in the towel on the point-to-point business model."
However, Frontier Airlines disagrees with the United executive's assessment.
"Kirby's statement simply isn't true," the airline said in a statement in response. "Frontier currently offers connections over Denver, and always has, so this isn't a change in the business."
Frontier's current point-to-point model is focused purely on flying passengers from point A to point B.
However, a network model also takes on connecting traffic going from point A to point C through point B.
(Frontier Airlines Airbus takingFrontier Airlines)
As part of its expansion plans, Frontier CEO Barry Biffle noted that his airline's growing network will provide more than 1,000 new connecting routes for passengers, many of which will be through its home hub at Denver International Airport.
And that's what triggered Kirby's strong reply. Denver might be home base for Frontier, but it's also United's most profitable hub.
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As Frontier ratchets up the competition in Denver, United is expecting pricing pressure in the short to medium term but expects to declare victory in the long-run.
"I can promise you that they are now competing on our turf as a network carrier in Denver," Kirby said. "That is a battle I guarantee United will win."
One reason for Kirby's confidence is the understanding that a network model is exponentially more complex to run than a point-to-point.
The United Airlines president used a delayed flight as an example. In a point to point model, if a Frontier flight is delayed two hours, then the passengers and their luggage, while displeased, will simply arrive at their destination two hours late. However, when half of the plane is connecting passengers things get a whole lot trickier.
(United Airlines president Scott Kirby.REUTERS/Yuri Gripas)
Now Frontier has to figure out what to do with the connecting passengers and their checked luggage. Do they delay the connecting flights to wait for the passengers? Do they let the flights go ahead and buy the stranded passengers hotel rooms for the night? Or do they book them tickets on another airline?
Kirby, generally regarded as one of the elite strategists in the airline industry, pointed out that these are just some of the operational complexities with which Frontier currently do not have to contend.
In a final jab, Kirby noted that it was unusual for a company to pivot towards a different business model in the middle of an IPO, for which Frontier filed paper work in March.
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