Frontier Execs Focus On Gaining Corporate Accounts

By BTN / July 30, 2000

Frontier Execs Focus On Gaining Corporate Accounts

Business Travel News airline editor David Jonas recently spoke with Frontier Airlines president and CEO Sam Addoms about growth plans, Orbitz and the proposed merger between Frontier's chief rival United and US Airways. Tom Allee, Frontier's national director of sales and distribution, joined the conversation to discuss corporate sales efforts.

BTN: Let's start with the most recent news. You recently have added people to your corporate advisory board, which was created a little over a year ago and includes several well-known travel managers. What have you learned already from them?

Sam Addoms: As our company has become more successful, we have an excellent opportunity to get input from people of this caliber. They are observers of Frontier and the entire industry, and have helped give us direction.

Tom Allee: They provide an objective standpoint. We recognize they are leaders who believe in competition and reducing overall travel costs. They have given us insight on how to get our message out to the corporate travel world and one promotional suggestion in particular that netted over $1 million in additional revenue.

BTN: Speaking of travel managers, how many corporate accounts do you now have?

Allee: We have about 4,800. About 350 are what we call large corporate clients, with the biggest contract in the $2 million range. So the remainder are small and medium-size corporations. In a typical month, 70 percent of the total are active.

BTN: Yes, we understand many of your accounts that may not be active at any given time exist simply as a safety valve against United, your chief competitor. Please explain that idea further.

Addoms: People need an anchor to windward in a market like Denver. When we went to corporations in Denver in 1997, we said ours is not a business proposition to simply give you low fares at United, which incidentally we are doing, but to ensure that Frontier as an alternative to United will be around for many years to come. It was not lost on the audience as to what our absence would mean. They responded by giving us some business, and it obviously would not be rational to expect all their business. The overall effect has been profound. It has given us exposure to passengers we otherwise would not see. Of course, our business revenue still is well below that of United, but it is growing steadily as we add more clients.

BTN: What are your thoughts on United's proposed merger with US Airways?

Addoms: I haven't been thinking about it all that much, but I think it is more likely to happen than not. And if it does, it will precipitate further consolidation of the biggest six carriers into just three. United, of course, would be a behemoth in terms of market power, but I do not think it will have a whole lot of effect on us at all. When you think of who we are, we are an alternative to a major carrier and that major carrier is getting bigger and more complex. And complexity breeds its own problems. We will remain simple, straightforward and productive.

BTN: Please tell us more about your small business program.

Allee: We want to have a program for any corporation that wants to do business with us. This one is designed for the smaller companies. They get a 5 percent savings for revenue flown. That savings comes 45 days after the reporting quarter in the form of an MCO for future travel on Frontier.

Addoms: And it is that guy, the entrepreneur, the small businessperson that is really our traveler and where we are focused.

BTN: Overall, what is the business mix of your passengers? Is that trending one way or another?

Allee: Currently, business passengers make up 23-25 percent of all passengers and account for 35-40 percent of the revenue. We will continue to raise our goals by expanding our product. Also, we are benefiting from distilled traffic as the majors are running about 80 percent full and our competitors are struggling.

BTN: In regard to your growth, Frontier recently benefited from the U.S. Department of Transportation's allocation of slots at Washington Reagan National Airport and will begin daily nonstops to your Denver hub in September. What does access to DCA mean for you and your corporate clients?

Addoms: First of all, even the single flight will connect all of our west-east connection traffic and back again, so it is useful for more than just the Denver market. The route will be a showcase for us, no question about it. It will be full and popular and an opportunity to demonstrate who we are to people we otherwise would not have access to. We asked for two daily roundtrip flights, we got one. But we will at least note to DOT that we are interested in a second flight, because we can improve business travel options with a double frequency.

BTN: What are your thoughts on Orbitz, the new Web site founded by five of the majors where they and several other airlines will list their lowest fares?

Addoms: I don't believe we will participate, though we have been invited. To participate, your very lowest fares have to appear there and we are reluctant to do that. I also do not buy in to the complaints about the anticompetitiveness of the site or it cornering that segment of the market. At this point, there are no assurances that anyone will even use it.

BTN: How about your own new distribution options?

Addoms: We have looked at opportunities available through the Web, not just our own, but other Web-related services. There are new ideas for the Web that we are developing, but we won't announce anything before the fall.

Allee: About 12 percent of our sales come through e-commerce channels. That is split evenly between our own site and the combination of Travelocity, PreviewTravel, Expedia and GetThere Inc.

BTN: And electronic ticketing?

Addoms: We are fully enabled with e-tickets, which was not the case a few months ago. Sabre was the last system to go live. E-ticketing is a very interesting technology, but it needs to be built upon by technology at the airport level in terms of enhancing the airport experience. You won't see Frontier taking a leadership role there, but instead be an early adopter of successful technologies.

Allee: E-ticketing came in segments with the four GDSs, but having Sabre was a big boost. Some of our commercial accounts are Sabre users, so the fact that they can take advantage has resulted in a big increase. Currently, e-ticket usage, by percentage, is somewhere in the 60s.

BTN: You recently created the position of vice president of market planning and revenue management. Sean Menke has assumed that role, which also includes strategic alliance initiatives. Exactly what will he be doing and what is the status of your revenue management program?

Addoms: We are a user of the PROS revenue management program. Sean joined us about a year and half ago. He is an excellent planner and already has been helpful in overseeing our pricing. As far as alliances, overall they are moving forward glacially. For us in particular, we have had a lot of discussions and are encouraged with the progress, but do not yet have any announcements to make. In general, we are refreshing the management ranks, since there have been a few retirements and such. We are beginning to see the management transition from founders to future leadership, and it is exciting around here.

BTN: Please tell us about your order for your first Airbus aircraft.

Addoms: There are leases and purchases in place for 27 planes with, of course, options--and options within those options. One-third are A318s and the rest are A319s, and they will replace expiring leases on planes in the current fleet. The key is that they will be able to fly any mission, unlike some of the Boeing planes they will be replacing. In terms of schedule and destinations, the fleet will be completely interchangeable. The first ones begin arriving next June. The transition to Airbus is a priority on my agenda and I want to do it with the care and attention it deserves. It is going well, but there is a long way to go.

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