Frontier Airlines Launches Direct Corp. Web Booking

<B>Frontier Airlines Launches Direct Corp. Web Booking</B>

By David Jonas

<I>Denver - </I>Proving yet again that technology in the corporate travel market is not confined to the realm of the largest air carriers, Frontier Airlines has launched direct corporate booking functionality through its Web site.

Smaller companies already can book online and earn credit toward future travel, while larger accounts will gain access to negotiated fares later this year. These developments follow rollouts of Web-based corporate travel applications at fellow low-fare carriers JetBlue Airways (BTN, Oct. 2, 2000) and Southwest Airlines (BTN, July 10, 2000).

Still, financially stable Frontier has been signing many new corporate accounts, partially attributable to service problems at arch rival United Airlines. It also is prepared to take delivery of new planes, begin deployments of technological customer service enhancements and rapidly expand a new frequent flyer program.

The carrier in November made direct Web bookings available for small- and medium-size clients which now count toward 5 percent travel credits earned on each ticket purchased. "Increased online booking capacity is a nice thing to offer the clientele we are trying to bring in," said Sean Menke, vice president of planning and revenue management. He voiced surprise that Delta was the only large carrier to make widespread direct corporate bookings available (BTN, Jan. 29). "You would think a lot of people would be rushing to get this development finished."

The availability of direct bookings, combined with the ability to enroll online in the carrier's corporate program, has helped to boost the overall number of corporate accounts to nearly 6,300, of which a majority are smaller, Denver-based accounts. The carrier reported that two of every three new enrollments now are completed via the Web.

For larger accounts--now numbering nearly 300 and including 14 of Business Travel News' Corporate Travel 100 (BTN, Aug. 28, 2000)--direct booking of discounted fares still is a few months off.

Though the system could mirror what now is available for smaller companies, other options are under consideration. "We may try to give our customers with the big contracts more of an extranet route, where native connectivity into our res system would enable immediate seat assignments and other aspects that give them control," said Jeff Truax, IT director at Frontier. "Ideally, we would like to tie in to their corporate intranets."

The carrier also must decide if it is willing to share in distribution savings. Larger contracted accounts already receive a 7 percent discount on lower-price buckets and 15 percent on the higher-price ones. Discount levels increase based on revenue generated.

"We are not sure if we'll share the savings," said Tom Allee, national director of sales and distribution. "But eventually there will be negotiations with large companies that have clout. Down the road, maybe there will be rebates, for example."

Frontier's direct corporate booking is made possible by the Versatile Internet Booking Engine hosted by EDS, which also provides the carrier's main reservation system. An Oracle database captures data from all bookings and facilitates both internal tracking and online monitoring capabilities for travel managers.

Meanwhile, Frontier this month announced that fares quoted on its Web site are guaranteed to be the lowest fare available anywhere for a given flight. In the past, travelers would hunt around for cheaper fares through Web-based wholesalers or consolidators, a process Frontier claims is no longer necessary. "We have been concerned with letting the lowest fare leak out of the system," said Frontier chief Sam Addoms. "But value at the beginning of the distribution chain is important."

Internet capabilities for travelers already has yielded cost savings for Frontier, including a reduction in reservations staff stemming from fewer phone calls per passengers and electronic ticketing penetration above 70 percent.

In conjunction with the launch of online booking, Frontier rolled out wireless connectivity for travelers using cell phones, Palm Pilots and other handheld devices. Travelers now can remotely download scheduling and flight information. Also, a flight status paging system provides real-time updates to a cellular or wireless device, while third-party notifications allow customers to direct their itineraries to as many as three other e-mail addresses.

Since the launch, Frontier reported more than 10,000 downloads from the Web to wireless devices.

Moving forward, the carrier will continue to explore wireless access to seat assignments, checkin and even booking. Converting the Web site to an Extensible Markup Language format--an idea it now is considering--would facilitate wireless development.

Frontier also has sent out an RFP for airport kiosk development. Testing is expected to begin next month, followed by an initial rollout in Denver by the end of the summer.

Frontier also recently shifted meetings and conventions business from the reservations department to the purview of revenue management/yield management. "I wanted to be able to provide an on-the-spot turnaround so we could land that group sale right away and be more aggressive," Menke said, adding that increased frequencies will help the group sales effort.

Additional frequencies, as well as a new market or two, will be made possible with the infusion of new Airbus aircraft into the carrier's fleet. Up to 45 new A318s and A319s will be delivered over the next four years--including the first in May and a total of five by year-end--and eventually will replace the carrier's entire leased Boeing 737 fleet. The new planes will feature a 33-inch pitch for all seats, as well as an additional inch between each seat, and a new livery.

A large aircraft order, on the surface, seems to be a questionable strategy in a softening economy--one that has crippled carriers in the past. But Frontier modeled scenarios beforehand to assure the Airbus purchase was appropriate.

"We looked at recessionary models, United expansion and other stressful scenarios to see how big this airline could be, even in those circumstances," Menke said. "When we made the order, we were profitable, had cash on hand and decided that as a maturing company, it was time to own our airplanes."

The aircraft order includes a mix of firm orders, options and leases allowing for "an accelerated or decelerated delivery schedule," depending on market conditions. Overall, Frontier plans to grow capacity 23 percent during its fiscal year ended March 31, 2002.

Meanwhile, Frontier's new frequent flyer program, launched earlier this month and dubbed EarlyReturns, grants a free roundtrip flight after accruing just 15,000 miles. On average, that's less than nine roundtrips since Frontier's average length of haul is 840 miles.

A 10 percent mileage accrual bonus kicks in at 15,000 miles. The bonus jumps to 25 percent at the 25,000 mile level. Additional benefits for elite level passengers include priority checkin and boarding, extra allowance for checked baggage and guaranteed reservations. Additionally, the program has only 10 blackout dates, significantly less than most airline loyalty programs. Mileage can be earned with Alamo, Citicorp Diners Club, Continental Airlines, Hertz, Midwest Express, National Car Rental, Payless Car Rental, Virgin Atlantic Airways and others.

Not everything is rosy for Denver's little carrier that could. It recently decided to drop unprofitable flying to Bloomington-Normal, Ill., and still stands alone while other carriers join alliance groupings. "There may be smaller opportunities to code share with smaller carriers, but we offer Denver, that's it," Menke acknowledged. "Even so, there will be a point when we need to look at possible alliance partners."

One potential codeshare partner is Great Lakes Aviation, which recently was freed from its obligations as a United Express carrier. Great Lakes, which will continue sharing codes with United, serves 58 cities throughout the Plains.

The U.S. Department of Transportation's decision not to issue competition guidelines (BTN, Jan. 29) also did not sit well with Frontier. "I was a little concerned initially," Addoms said. "For them to say, 'we have seen ill deeds and weren't doing anything about them and now we really know what the bad deeds are and we will watch carefully to assess them in the future,' is a bit short of where we hoped to be."

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Not Hedging Fuel Bet</B>

Meanwhile, Frontier has no fuel hedging in place, though Addoms doesn't think that will cause much of problem in the year ahead. "What you see is an airline that has performed not based on hedging, but the ability to raise and lower fares in this marketplace, which isn't necessarily true of everyone else," he said. "If that weren't true for us, I think I'd be a hedger."

Nevertheless, a softer economy could hurt Frontier less than its larger competitors, as its client base--the value-oriented consumer--grows rapidly (see story, page 4). "Our salesforce is overjoyed with the number of businesses calling us up to ask about our business programs," Addoms said. "Where they had met resistance for years, suddenly the door is open."

A Raymond James & Associates report prepared for a conference last month on growth airlines said business traffic is "migrating to Frontier, particularly as economic growth slows and more companies put their employees on travel budgets." The report further cited business travelers' increasing resistance to high fares at United and other major carriers as a reason behind Frontier's steadily improving load factors.

Despite the economy and skyrocketing costs stemming, in part, from fuel prices, Frontier currently is on solid financial footing, with a balance sheet "clean as a whistle," according to the Raymond James report.

For its fiscal third quarter, ended Dec. 31, 2000, the carrier reported net income of $10.3 million, up from $3.1 million a year earlier. Operating revenues rose 54.4 percent, passenger yield jumped 6 percent and load factor--boosted by a 46 percent increase in revenue passenger miles--grew 11.7 points, to 64 percent. Wall Street analysts expect Frontier to post year-over-year earnings growth this quarter and next.