355 - Scott McCartney with Jimmy Dempsey, CEO, Frontier Airlines - From Denver, CO

0:03Airlines Confidential with Scott McCartney is made possible with support from RTX. RTX has the vision, expertise, and scale to see the future of flight and build it. RTX.com. Infinity Flight, the leader in cadet academy flight training programs. InfinityFlight.com. Ontario International Airport in Southern California. SoCal, so easy. FlyOntario.com. The Executive MBA in Aviation at the University of Colorado, Denver. Business.ucDenver.edu. And by Cerium, the world's most trusted source of aviation analytics. Cerium.com. We also welcome your business's support. Contact us at airlinesconfidential.com.

1:00Welcome to Airlines Confidential. I'm Scott McCartney, hoping everyone will take a moment to celebrate the 113th anniversary of the first successful flight across the Mediterranean. Frenchman Roland Garros flew 450 miles from the French Riviera to Tunisia. It took him eight hours, and no, it was not that long because of an air traffic control equipment failure. He landed with only minutes of fuel remaining, and he became one of the most famous aviators of the time. Like Roland Garros, I'm flying solo this week. That's because most of this podcast will be an in-depth fireside chat I had with Frontier Airlines CEO Jimmy Dempsey at the American Bar Association Aviation and Space Forum.

1:48Jimmy's been in the CEO job less than a year, and he is one of the bright, dare I say, younger leaders in the airline industry. Perhaps not well known to many of you, but you need to get to know more about him and you need to hear from him. He is dramatically reshaping Frontier in what seems like record time, and it's exciting to see. We'll talk about where Frontier is in its transformation, what's ahead for the low-cost carrier, what kind of future there is for low-cost airlines in the U.S., and so much more. The session included questions from a room full of aviation lawyers, and I think you'll enjoy that as well.

2:26Before we get to that, some news of the past week. I happen to live in Dallas, Texas, where we haven't seen rain clouds in more than 60 days, but there are storm clouds forming around the airline industry, and some of the news this week points to a possible stormy winter for some airlines because of high fuel prices. Meteorologists tell us a Super El Nino has formed in the Pacific affecting actual weather. I'd say this is starting to look like a Super El Fuel Low for weaker airlines. Case in point, Air Baltic filed for Chapter 11 bankruptcy reorganization in New York. Air Baltic is majority owned by the Latvian government.

3:08Lufthansa has a 10 % minority state. It voluntarily went to bankruptcy court in the U.S. to shed some debt, get rid of 20 of its 54 Airbus A220-300 airplanes, and lower costs because of the financial pressure of high fuel prices caused by the war with Iran. Air Baltic, by the way, had fuel hedges but sold them in March to raise cash. The airline has secured about 350 million euros in debtor and possession financing. Flights continue. Why file in the U.S.? Few other countries allow a company to restructure while it continues to operate. In bankruptcy courts in most of the rest of the world, if you can't pay your bills, you're done.

3:51Not here. It'll be tough for Air Baltic. The interest rate on the debtor and possession financing is currently 12%, according to Bloomberg. Ouch. Rival airline Ryanair almost immediately proposed doubling its Latvian base over the next five years and significantly building up air service there. What's more, this may be a warning shot for weaker airlines around the world. AirAsia posted a large second quarter loss, and Tony Fernandez has been dismissing doom and gloom, while the company's stock has lost more than 60 % of its value this year. That story will be repeated over and over. For most airlines, as this period of high fuel prices stretches longer and longer, we will likely see capacity cuts, scrapping routes that can't make money when fuel is twice as expensive as it was a year ago.

4:46This past week, several airlines presenting at the Morgan Stanley Conference in California talked about reducing capacity this winter if prices stay high. American, United, and Southwest all said pretty much the same thing. Sharply higher fuel prices are prompting them to reduce or reconsider planned flying, particularly marginal routes later this year and in 2027. American estimates that its fourth quarter fuel bill will be roughly a billion dollars higher because of the higher fuel prices. United has already removed some December flights. That doesn't mean demand isn't strong and further fare increases aren't possible.

5:25It was interesting to note that airfares in August, measured by the consumer price index, were 23 % higher than August 2025. That's a big increase. Also interesting to note that changes such as increased premium buy-up opportunities continue to work. Southwest said 60 % of its customers are paying add-on fees. And by the way, business travel on Southwest is way up. Changes such as seat assignments and extra legroom rows have made Southwest more attractive to business travelers. And spoiler alert, you'll hear Jimmy Dempsey talk in just a minute about what Frontier is seeing in terms of passengers paying for more room.

6:05Yes, premium is working at Frontier as well. Speaking of money troubles, the Government Accountability Office says the FAA's air traffic control overhaul needs billions more and still lacks a firm master schedule. The FAA now says the first phase of air traffic control modernization will cost about$16 billion versus$12.5 billion provided by Congress. Administrator Brian Bedford is seeking another$10 billion for phase two. Meanwhile, the GAO says the FAA underestimated costs and has yet to produce a comprehensive schedule covering more than 11 ,000 projects. The telecommunications replacement alone has risen from an estimated $4.75 billion to$5.91 billion.

6:53The FAA wants obsolete copper communications lines replaced by September 2027. Look, it's no surprise this is going to cost more than originally planned, right? And that's how this works. But we have to get this done, and Congress has to step up with the money. There should be no pushback on, well, you said it was going to cost this, but it's costing more. Yes, it's going to cost more, but you haven't fully funded phase one. You haven't funded any of phase two, and you got to get on with it. It's got to happen. Okay, time now to thank our sponsors for making this podcast possible. Thanks to Ontario International Airport.

7:34Ontario International Airport is wrapping up major upgrades in both terminals with additional TSA screening lanes, welcoming exit corridors, and modern family restrooms to make your journey smoother and more accessible than ever. Getting from parking to your gate quickly and back again at the end of your journey is part of what makes ONT SoCal so easy. And by the way, for the second year in a row, Ontario International Airport ranked number two among all medium-sized airports in the J.D. Power 2026 North American Airport Satisfaction Study. Congrats to ONT on that. Visit flyontario.com to learn how the airport is keeping wait times low and creating a better travel experience, even as more passengers choose to fly through ONT.

8:22Thanks as well to the Executive MBA in Aviation at the University of Colorado, Denver. The Executive MBA in Aviation at CU Denver is the first degree of its kind in the world, taught by industry experts and designed for ambitious leaders from across the aviation ecosystem. With classes located at Denver International Airport and week-long residencies in Washington, D.C. and at airports around the world, students experience a hybrid, flexible course structure that balances in-person and online classes without career interruption. Go to business.ucdenver.edu to learn more. We also want to thank RTX for its support of Airlines Confidential.

9:02At RTX, a century of aerospace and defense innovation shapes a unique perspective. It takes more than technology alone to rapidly advance the future of flight and strengthen global security. It takes the vision to see what's next, adapting expertise and scaling manufacturing capability to deliver where and when it matters most. Perspective is everything RTX. Visit rtx.com to learn more. Okay, let's turn to my conversation with Frontier Airlines CEO Jimmy Dempsey. Good morning, everybody. It is my pleasure to introduce Scott McCartney, one of the most respected voices in aviation journalism, for a live episode of the Airlines Confidential Podcast.

9:48Joining Scott on stage is Jimmy Dempsey, President and CEO of Frontier Airlines. Please join me in welcoming Scott and Jimmy.

9:59Thank you, Chris. It is great to be here with all of you. I used to somewhat regularly go to this meeting 20, 30 years ago when no one partied like airline lawyers. So I assume nothing's changed, but it's great to see some familiar faces and make new friends. And it's just been wonderful to be here with you. Thank you, Chris, very much. Thanks to Hush Blackwell for making this happen. We really appreciate it. And thank you, Jimmy, for being here. Jimmy Dempsey, as I think everyone probably knows, became CEO of Frontier Airlines in December. He had already been president of Frontier, the largest low-cost carrier in the U.S., and before that spent nine and a half years as Frontier's chief financial officer.

10:51Jimmy had been at Ryanair in Ireland for 11 years before that. His to-do list is extensive, and we're going to talk about that. Improve the operation, find ways to thrive in a consolidated airline world where low-cost carriers have struggled and returned Frontier to profitability. So it is a pleasure to have you join us today at the ABA's Forum on Air and Space Law. Well, it's a real honor to join you on your podcast, and I appreciate everybody listening to us today. Hopefully, we make it interesting for you guys and tell the story of Frontier and how we're adapting the airline to today's environment.

11:29So, Jimmy, before we get that, we always start with what I affectionately call the Ben Baldanza a question because Ben taught me it was usually an interesting question. And I don't think you knew Ben. Brilliant guy, very committed to making travel affordable and building profitable airlines and co-founder along with Charlie Shapiro, who is here of Airlines Confidential Podcast. And the simple question he always loved to start with was, how'd you get into this crazy business? Well, I'll answer that in a second. I never actually met Ben, but Barry talked about him a lot to me. And obviously, he had a big involvement in the Indigo Airlines and Spirit Airlines when Indigo was involved in it.

12:11So it's a pity our paths never crossed. But I heard many, many stories about him and what a great guy that he was. And it's a terrible shame that he's no longer with us. How did I get into the industry? I really fell into it. My background, I'm obviously Irish. My brother actually is an aeronautical engineer. He was big into aviation and aerospace and works in aerospace and defense today. But I had no real interest in aviation. I became a chartered accountant in Ireland, which is one of the paths that you would follow as a student and progressing your professional career in Ireland. And I ended up in PricewaterhouseCoopers.

12:54And I was pretty bored. In accounting? Quite frankly. And I was looking for an exit. I was a manager in PwC at the time, doing audits and some transaction services. And I had two jobs that I was applying for. One was with an advertisement in a broadsheet newspaper called the Irish Times in Ireland, and a quarter-page ad for the head of investor relations in Ireland. And the other one was in sort of a small venture capital firm in Dublin. And so I had two jobs on the go that I took interest in. I really didn't know what working in an airline was, what working in the airline industry was, and I certainly didn't know what the head of investor relations did in an airline.

13:38And so I applied for that job, eventually got it, chose that over the venture capital role, and then fell into the industry. And literally, I think I was in the job for two days, and I was like, I said to my, she was my girlfriend at the time, but my wife now, you know, this is a crazy place to work. I mean, Ryanair worked in this building that they call the White House in Dublin Airport. Everybody was crammed in. It was like a trading floor you see in an investment bank in New York where there's constant noise and activity. And I stayed there for nearly 11 years and really, really enjoyed it and learned a hell of a lot in the industry.

14:15So I kind of fell into the industry as opposed to a desire to go straight into the airline business. Yeah, interesting, interesting. Okay, Frontier and Spirit spent years proving that there was a large market for ultra low cost model in the US. But Spirit's collapse has raised questions about that model. What does Frontier understand about the business today that Spirit got wrong? I mean, it's not that Spirit got something wrong, per se. I mean, the environment has changed. If you looked at the airline business in the United States pre-COVID, both Frontier and Spirit were very successful and very profitable airlines, among the most profitable airlines in the world.

15:00And COVID changed that. What you saw post-COVID was the ability of the big airlines to take advantage of their loyalty programs and grow two things. One was basic economy in great scale and subsidized that through the cash flows generated from customer loyalty and the use of their credit card programs. And the second thing was the two ULCCs grew quite quickly post-COVID. And so Frontier's case, we grew from, I think we had like 94, 95 aircraft coming into COVID. To the end of last year, we had 175 aircraft in the fleet. So we grew really rapidly and nearly doubled in size in the airline, actually more than doubled in the context of passenger volume and growth in the business.

15:47And so that rapid growth with an environment where basic economy had developed quite strongly from the legacy airlines and the loyalty programs and the strength of the loyalty programs across the rest of the industry really became prevalent. And so your environment changed. And so, you know, we ended up in a situation where our loyalty program was quite immature, needs to mature. And the airline itself, you know, because of the competitive environment that existed, needed to change for that environment. And so that's where I got appointed earlier this year. And I set about a plan, which was like literally a four-point plan.

16:26Let's right-size the fleet. The airline got larger in terms of aircraft numbers than the actual assets that existed in the airline, like pilots, flight attendants, and fundamentally customers. And so we had about 175 aircraft. We had enough pilots to fly about 140 aircrafts if you flattened the week. And so we set about right-sizing the fleet. And obviously, we're very focused on costs. We wanted to take some costs out of the business and make the airline much more productive. And so by right-sizing the fleet, it enabled us to flatten the week in terms of the flying during the week and make the airline a lot more productive.

17:03And so those two things have been progressing really, really well. The other two parts of the plan that we developed was fixing the operation, making the airline more reliable in the customer's eyes. And that's a multi-year project. And we've made some progress on it this year, but that will take time. And so when I say reliable, I mean, you know, fix the completion factor issues in the airline. Fix the on-time performance of the airline. And these things will take time. And there's a huge amount of projects going on in the background to put the airline in a condition that the customer sees us as reliable.

17:38And so that's really, really important. And then that feeds our desire to drive loyalty and improve the loyalty program and drive credit card cash flows into the business where customers are coming back for repeat traffic flows and creating a much more stable revenue base. And so that's progressing very well. Like if you look across this year, our revenue base has improved quite dramatically this year, which is really healthy. I want to ask a little more about operation, fixing the operation, because I always find this fascinating. I think a lot of people think you can do that by throwing money at it.

18:17You throw block time at it. You increase the number of spare airplanes. It gets expensive. But you're talking about a multi-year project. What's involved in fixing the airline? Well, it's all across the operations of the airline. You know, like for the flying public, they see the aircraft throughout the day when they fly, and they have little patience for delays or cancellations, which we understand. But what happens overnight with that aircraft is you do a variety of maintenance checks and other things that happen in the airline. What I'm trying to establish and what we're pushing very strongly internally is getting the airline in a position where you have your spare aircraft available at the beginning of the day.

19:03You actually have your on-time departures on time at the beginning of the day so that the rest of the day tends to flow very successfully if you do that. If you're delayed getting the aircraft out of maintenance, it tends to cause a cascade effect across the airline for that day. And that has an impact on the following day and the day after. And so getting the coordination of those tasks right is very, very important. And so it may sound simple to do, but if you look at an airline, you have a substantial amount of tasks that you have to perform every day for the airline. The tasks themselves are not that complicated to do.

19:38Coordinating those tasks across 175 aircraft in 13 bases, that's where there's a substantial amount of complication that we need to fix. And that's what we're working on. What's the biggest assumption that Frontiers Management is making today about Frontier, about the industry, that could turn out to be wrong? What do you worry about the most? Well, I think we'll be wrong on many things, right? I mean, I think we have to accept that there's things that we'll do that will be wrong. If we get the vast majority of things, like if you follow the 80-20 rule, if we get 80 % of the things right and recognize the things that we're doing wrong and adapt to that, I think that's very, very important.

20:16And so, look, if you follow our plan that we're doing at the moment, right-sizing the fleet has been very successful. We're largely complete on that. We've got some tinkering with our fleet that we're doing at the moment, but we're largely complete. We have the cost and productivity on a good track. Clearly, the Iranian conflict has led us not to bring as much productivity back, and we've trimmed some capacity across the summer to manage the exposure to oil. but in terms of the path on our 200 million cost saving plan, we're in really, really good shape. And the productivity is coming back into the airline, which is very, very healthy.

20:54But we're a little bit behind on that. So we need to work on that going through 26 and 27. You know, one of the things that I've been very focused on is keeping the number of aircraft units flat over 2026 and 2027 so that the airline, because it grew so fast post-COVID, needs to grow into itself and stabilize its revenue base, but also stabilize the operational footprint of the airline before we start growing again from an aircraft unit's perspective in 28 and 29. I had talked about this before on the podcast. I think at one point, your aircraft utilization was like eight hours a day. And it seemed really hard to be a low-cost airline if the plane's only flying eight hours a day.

21:41Has that improved? Yeah, that's like one of the core parts of introducing or reintroducing productivity in the airline. Yeah. We, like if you think we're in September, this time last year, on Tuesdays and Wednesdays we were flying about 200 flights a day, but on the other Thursday, Friday, Sunday, Monday, we're flying over 700 flights a day. And so that disconnect between that day of week flying puts the airline in a very unproductive place. We've brought that back. And so we're probably, as opposed to being 200 flights a day, we're somewhere between 500 and 600 flights a day in September. So we've brought that productivity back.

22:21And what's really encouraging for our business is it's really working. And so the cash flow and revenue generation, in spite of high oil prices, is actually pretty positive on those days of the week. So we feel really good about the strategy to bring productivity back into the airline and get us back to, like, we have a stated goal of somewhere between 11 and 11 and a half hours utilization in the airline every day. Last year, I think the low point was just under nine hours. This year, we're going to be close to 10 hours across the full year. And then next year, in the year after, we'll be moving towards 11 to 11 and a half hours.

22:56Let's talk about the premium push. You've introduced first-class product, blocked middle seats, extra leg room rows, and like everyone else, lots of things to get people to buy up, pay more. I'm curious if the idea here is get frontier customers to pay more or win back customers from American, Southwest, United, Delta. And also with that, is it a hard sell for a discount airline to pivot to selling premium? Do people understand that logic? Well, we introduced a product called Upfront Plus nearly two and a half years ago, which is effectively like European business class. It blocks the middle seat in the first two rows of the aircraft.

23:48What we've seen as we've learned how to optimize it and sell it and what our customers like, we've seen a significant increase in the revenue that comes for that real estate at the front of the aircraft. And so that encourages you to have more premium offerings. And so that was really the reason why we've moved to add and replace those two rows with first-class seats at the front of the aircraft. We'll retain Upfront Plus behind first-class seats because it resonates really well with our customer base. And it's very profitable for the airline. And one of the things that we're doing at the moment is trying to figure out the Lopa for the rest of the aircraft.

24:28And it's interesting. The 321neo, we delivered it at 240 seats, but the interior cabin is a little bit bigger than the 320, and it gives you a lot of utility to play with the interior cabin to add more premium offerings in the airline without disturbing the average seats per departure of the airline. And so we're working on something at the moment. We think that that will be helpful if we add more space into the cabin over the coming months. And so we're doing a retrofit or a modification of the airline to add those first-class seats across this winter. And then we're also adding Starlink. And in my opinion, Starlink is going to be a game changer for us in terms of its offering on the airline.

25:12Like if you look at across the industry, most of their airlines have connectivity. you can argue whether it works all the time or is it really good or not pretty clear it doesn't work all the time right but they're moving from having connectivity to having you know high speed connectivity via Starlink or Amazon or whoever we're going from no connectivity to having high speed connectivity and so that will widen the aperture for the customer base for the airline or the addressable market that we're looking at because we're not in people's decision set today if they need connectivity Like if you look across this room, I don't know, there's about 150 lawyers in the room, how many of you guys need to travel with connectivity?

25:54Like put your hands up, right? It's unanimous. So if you look at that, you think about it, you say, okay, well, would you fly Frontier? Probably not because we have no connectivity, right? And so we do enter into the decision set. And we've got to do other things to ensure that they make a positive decision towards us, which is be reliable for them, be on time, complete the journey, make every flight count for the customer. I think that's very, very important. And then have a product offering because we provide real value at the fare levels that we operate at. We're always the lowest fare in each of the markets that we operate.

26:34What we need to do is to drive loyalty and repeat traffic flows, is to add premium products that people want and also do that in a reliable fashion. And we think that that's a really good formula for the airline going forward. So with Starlink, are you going to sell it? Your previous employer, Ryanair, has rejected it. Is it going to make money for you or is it going to be a cost? I genuinely think it's a game changer for Frontier. We haven't fixed the commercial program yet, so we're still working on that. We're actually working on trying to get as many of the aircraft installed with Starlink across this winter.

27:09as we modify the aircraft for first-class seats, we'd like to install Starlink at the same time. So when you roll into next summer, you have a really high proportion of the fleet with Starlink and first-class seats and more premium offerings in the airline. All right. Since we are here with a room full of lawyers and regulators, I'm curious if there's one area of airline regulation in the U.S. that you think needs changing. You've got both a long tenure in Europe and the U.S., so an interesting broad perspective. What needs fixing? I mean, competition within the airport community, I think, is very important.

27:52You have access or gatehogging or significant airlines who dominate major airports across the country. I think it's very important to introduce competition or private investment into the airport's world. I think that would be very healthy for the industry in the United States. I mean, Europe is a bit different. You have a lot of post-World War II runways that were on former U.S. air bases that were converted into airports. And so you have a significant amount of secondary airports to cities. The same level of secondary airports doesn't exist. You have regional airports that exist around the United States.

28:28But I think introducing some private investment into the airport world would be very healthy and create competition within the airport world. as opposed to competition within the airline community. So it sounds like you're talking about privately funded new airports as opposed to public-private partnerships to build a new terminal or that kind of thing. Both. Both, okay. Both, but that increases access to airports throughout the United States for growth airlines like this. Where in particular would you like to have access that you can't get today? I mean, look at any major, look at all the major population densities across the United States, they all have pretty full airports.

29:10So pick any city. I mean, this isn't a specific city issue that you have. You have accessibility issues across the United States that exist. So I wanted to talk about markets. You found a lot of new opportunities after the Spirit shutdown, right, filling in behind that. So I'm curious how that's working for you. And also curious, how long do you try a market before you pivot and decide it's not working? Yeah, I mean, look, we positioned the airline about this time last year, rolling into last winter, to take advantage of reducing capacity and spirit. We didn't anticipate that they would cease operations in May.

29:57But the airline was positioned to take advantage of as they reduced capacity. And so we've seen that across the U.S. If you look at Spirit's capacity, about half of it has been replaced by airlines. We've replaced about half of that capacity. There's probably another 25 % of their capacity that we would look at in terms of replacing over time and pivot into. What we've chosen to do is slow the growth in the airline overall in order to create a more stable revenue base. If you're growing the airline by, say, 20%, 25 % a year, and then the following year you grow again by 20%, 25%, you're redeploying probably about 30 % to 35 % of the capacity that doesn't work and diligently redeploying that.

30:42That puts you in a position where you've immature capacity of over 30%. We've decided to take the airline down to a growth rate of less than 10 % in order to minimize that redeployment issue that you have in the industry. Because you do try a lot of new route development and stuff like that. Some of it works, some of it doesn't work. And then you've got to redeploy. And so trying to keep that down so that you have a more stable overall revenue base is really important for the airline over the coming years. Do you typically want to give a route six months, nine months? What does it take? I mean, you can tell certain routes before you even start operating that it's going to work.

31:17Some routes, yes, you'll give it time, 12 months, up to 12 months. And if it's not working, rolling into its second season, we'll probably move on from it. One of the things that I've always been curious about Frontier is significant operations in airports that are big airline hubs. Denver, of course, your home, but also highly competitive with United and Southwest, both running hubs here. Atlanta is right up there in size with Denver in terms of departures for Frontier. And you're growing in Dallas-Fort Worth again, where Frontier in the past has been number two to American. So talk about what it's like operating under the nose of Fortress hub carriers.

32:04Well, we provide value to the customer base. We don't compete with the legacy airlines, their corporate contracts, their road warriors, their frequent travelers. We're typically relatively low frequency in most markets that we operate in. But we do provide real value to the customer base and widen the addressable market in those airports. We typically incentivize people to travel as opposed to take market share from other airlines in the marketplace. And that works very, very well in the major airports. The major airports are located where the big population densities are. And so you have a variety of customer types in those cities.

32:42And so we're largely chasing visiting friends and relatives, leisure traffic flows, empty nesters, all that type of stuff, students traveling. And so we've designed products that are really attractive to those types of people. If you look at Go Wild, which is a product that we've launched in the airline, this is actually something that Barry and one of the guys internally, James Fenner, created about three years ago, which is effectively an all-you-can-fly pass. It's like a ski pass. That's been very, very successful. It's taken us time to learn how to market it very well, but it's effectively an all-you-can-fly pass that you can book a ticket on and you get confirmed on the day before you travel.

33:25I mean, that's quite unique in the industry. Nobody else offers a pass like that in the industry, and we've seen it resonate very, very successfully with our customer base. We think that's something that we're learning how to use as the marketplace changes around us right now. So essentially, you've got the go-wild pass. You're essentially flying standby, right? You confirm 24 hours in advance or whatever. So you're selling otherwise empty capacity, most likely, right? Yeah, you're filling the airplane. Yeah, it's like a flight benefits program that exists for airline employees, but you actually do get confirmed.

34:06It's not that it's positive space, but you get confirmed a day out. Yeah. So is it financially successful for Frontier because of the revenue from the pass itself, itself, or is it more about winning new customers and loyalty to Frontier? Well, it's both, right? Yeah. The past itself is very successful, and the structure of the past. And we're adapting the structure of the past, but we've seen it become extremely successful in our business. Uh-huh. I took a look at schedules upcoming. February 2027, next February compared to this past February. Your biggest city in terms of departures will be Orlando, where you're growing considerably.

34:54Is that part of the post-spirit leisure push or is something else going on there? Yeah, I mean, part of it is. Part of it's seasonal as well. I mean, it's a high season in Florida in February, March next year. And so we are taking advantage, as I said earlier, we've replaced about 25 % of their capacity that we like. Some of that is in Orlando. We've looked at Las Vegas as well. We added capacity into Las Vegas in a meaningful fashion across this winter. And so, yeah, we're adding capacity where we think it makes sense to bring capacity into the airline. Orlando is ideal for Frontier. I mean, it focuses very much on the leisure traveler or people with a destination into Orlando where you're going to all the theme parks and heading to the rest of Florida.

35:44Okay. Let's pivot a bit. I want to ask about labor costs. Labor costs have risen dramatically across the industry. You don't yet have a new pilot contract that will eventually presumably bring you up to more industry standard wages. I think the same for flight attendants and mechanics. So I guess the question is, is there a sustainable cost advantage to be had once you get through the next round of labor negotiations? I mean, we think so. We're in negotiations with the pilots and the flight attendants through the NMB at the moment. That process will play out. We actually have just concluded a mechanics contract, and that's been ratified actually just yesterday.

36:31And so that's really, really good. We'll go through the process with the pilots and flight attendants. I don't see our cost base being disturbed by a new contract. We clearly have to pay more to our pilots and flight attendants, but we've got to get through the negotiating process to do that. But our overall cost base is not just a differentiator just because we don't have a new pilot contract in place. The way we operate the airline, bringing back the productivity in the airline is very important. adding gauge to the fleet with 321 NEOs. That's very, very, very important to the airline to keep the productivity of the overall airline in place.

37:10And so we think we will continue to have a big differentiator in terms of cost for the foreseeable future. I'm curious, too, about there was a whole lot of focus on pilot shortage. All seemed to go away. You know, the high oil prices has led to some capacity cuts around the industry and all. Are you able to hang on to your pilots? Are you able to hire the pilots you need? Is there any kind of shortage still? I mean, it goes in waves. You know, we have pilots that are retiring. You know, the airline is now well over 30 years old. And then we also have pilots who choose a career somewhere else. And that happens.

37:53we're continuing to hire pilots for the growth of the airline that exists like the airline will grow around 10 % in the medium term each year and that requires you to hire a bunch of pilots in order to satisfy that growth and we have a really good hiring machine to do that. I mean you've seen some hiring earlier this year and the Iranian crisis crops up hiring stops in the industry then you You see relief from oil prices, you see some hiring again, and then you've got high oil prices again, and that may cause it to stop. So it's quite cyclical, dependent on what's going on in the wider marketplace.

38:31We feel pretty good about our pilot numbers at the moment. We're actually in a slightly surplus position from a pilot perspective because we've trimmed capacity to manage through the oil price crisis at the moment. And with all of that, transformation plan, everything else, when do you expect the airline will return to consistent profitability? As soon as possible. Look, we have a multi-year plan in place in the airline. I mean, the airline hasn't really made material. We've had some years where we've broken even since COVID. And we haven't had a year where we've made meaningful profit in the airline since COVID.

39:13We're moving the airline back into a much more sustainable place. If you looked at our second quarter earnings, our RASM, our unit revenues, were up 28 % in the quarter. Our focus on discipline around revenue management, if you rolled into March this year, we were actually up close to 20 % in RASM as you're rolling into March before the Iranian conflict erupted and you had higher oil prices. We've seen then oil prices drive an appetite across the industry to pass on the higher oil prices in higher fares to customers. We're performing really, really well in that. And then you also have the change in structural change with Spirit ceasing operations, which has put us in a really good position to take advantage of that.

40:06And so we feel really good about the revenue base of the airline. And we got pretty close to break even in Q2 in spite of record high oil prices in the industry. So we think we're on a really good path. We've got to do it through a cycle and through a full year or multiple years. And so our focus on fixing our operational issues and also driving customer loyalty is really, really front and center in terms of the changes we're making in the airline. I think rolling into 2027 and 2028, we want to get the airline back to a sustainable, profitable position, which is very important. So five years from now, what would have to be true for you to say Frontier succeeded under your leadership?

40:52A couple of things. We've got to make the airline sustainable from a profitability perspective, build a balance sheet with strength across the industry, and get the airline back to modest but growing, a growing business. That's very, very important. I think for me and for everybody in the airline, it's actually to have fun and enjoy going to work and be very proud of the airline. We offer a value proposition to the customer, which is quite compelling. We need to do that and be very proud of doing that and have a reliable airline in the customer's eyes. I think if we can do that over the next four or five years and put the airline in a very strong financial position, whilst also actually driving real loyalty from customers, I think that would be a very good place to be.

41:36Nice. All right, questions from the audience? I'm sure this is an inquisitive bunch. You must have questions. Scott, I will start here, and I'll admit that you took most of my best questions. But I did want to ask Jimmy, you know, Frontier is part of the sort of the broader Indigo Partners ecosystem, right? That includes WIS and Velaris. Can you talk about that relationship and how it impacts your operation and how you run Frontier? Yeah, sure. Look, we all, I mean, Indigo has investments in, over the years, five or six airlines at any particular point in time. Today, they have Volaris in Mexico, JetSmart in Chile, Peru, and Argentina.

42:23They have Cebu Pacific, and also Wizz Air in Europe and clearly Frontier. I mean, we meet up every year. We talk all the time. What we've done over the years very successfully is run a joint purchasing program where the Indigo portfolio uses its scale. And so you've over 1 ,000 aircraft in the Indigo portfolio across the world. And so from a purchasing power, you're similar to one of the legacy airlines in the U.S., which are among the biggest fleets in the world in terms of purchasing power. And so we've been actually very good at using that in order to actually garner really good deals with manufacturers and suppliers.

43:07And like the most recent deal we've done with Starlink was a portfolio deal across Indigo Partners, which was really successful, which we're really excited about. I'm curious with that, do you learn from them or do they learn from you? Are there ideas? Among the airlines? Yeah. Yeah, like, I mean, look, you have the same issues that exist in different jurisdictions in the world. You're still turning aircraft as fast as you can. You're trying to get the productivity in the airline up. You're trying to establish a customer base and repeat traffic flows. There's a lot of things that resonate across the airlines in the world.

43:47Every year, we actually go to Montana to Bill Franke's ranch, and we trade information and stories. And so, like, I've been part of Frontier Airlines for 12 years. I've been going to that for 12 years. And you learn a lot, yeah. And people have experiences either here in the U.S. or elsewhere that you can actually bring back that makes sense. And so, like, take some of our commercial initiatives like Go Wild or our Discount End program. The other airlines in the portfolio have tried that in different fashions around the world. And some of it's worked depending on the customer base. Some of it doesn't.

44:24And so, I mean, that happens all the time. Yeah. Cool. All right. What else? Ron Solomon with American Airlines. Scott, first of all, thank you for the show. It's fantastic. And, you know, listen to it regularly. And happy to build it part of my routine. And it's amazing to see you here in Denver. Thank you, Ron. And thank you, James, for joining us today. It's a real honor to have you at the forum and, you know, exploring some of the ideas. I want to follow up on a question that Scott raised or a discussion that you had in terms of, you know, how the marketplace has changed and how the environment's changed.

45:02And I think, as you well noted, in the 2010s, you know, the low cost carrier model was ascendant. And then we had COVID and the dynamic seems to have changed where the premium product is now, you know, a lot of the focus of what's happening. and it seems like you're trying to thread the needle between what you're offering in the cabin, as you discussed in the 8-321 and other things, and then yet, you know, having that low-cost carrier model and those customers you want to continue with, the leisure travel. And I guess you talked about COVID and how that changed things, and I'm curious as to why that change happened and what the nature of that change was, because we did have an air travel rebound that started in about March of 2021.

45:48And we saw that progress and the carriers rushed to grow capacity to kind of capture that. And a lot of that was, you know, as a later term, revenge travel. And of course, I think that's changed a bit. But, you know, what was it about the pandemic or the nature of the consumer that we've seen that's changed since the 2010s to now? Because loyalty programs and other things have existed for a while. So like what, something changed in the American public or what happened? I'm not sure something changed with the American public. I think what happened is that the legacy airlines, the big airlines, learned how to use their loyalty programs to their advantage in a meaningful fashion.

46:29And if you look at the cash flows that have been driven from the loyalty programs of the big guys, they've just exploded in the last four or five years. And just like we educated the industry over many years on basic economy and how you sell basic economy and the adoption of that by Delta, American, United, and elsewhere around the world, you're now seeing us learning from the legacy airlines on how to run a premiumized cabin. And so we're late to the game in terms of putting premium products on board our aircraft, but we're learning from the rest of the industry today in terms of what things resonate with the customer base.

47:08Do you want more space post-COVID? Clearly they do. Do you want connectivity? Absolutely. And so those are products that we haven't typically had in the airline, and we're moving towards it. One of the things that we did with the introduction of Upfront Plus, you saw the revenue for that real estate in the front of the aircraft double with the introduction of that while we optimized it. And that encouraged us to drive for more premium products on our business, something that the rest of the industry was doing very, very successfully. and more successfully post-COVID than we were doing. And so we've learned from that.

47:46And so you have to adapt the airline for the environment that exists at that time. And I think our loyalty program is quite immature, and certainly our premium product offering is quite immature. And so we will radically change that over the course of the next 12 months, and we think that that will be very positive for Frontier. We think it resonates with the customer base. as I said, widening the addressable market that we have as an airline offering, and then doing that at a fair level, that's very attractive to the traveling public. And so we think that that's a really good building block for the airline over the next couple of years.

48:25But we've learned from the legacy airlines. So can I add to that? I'm curious what you think. I've said this before. I think there is a permanent change in the American consumer, and I think it started long before the pandemic, sort of the mid-2010s. I think Glenn Hauenstein and Richard Anderson started seeing this at Delta when they started their premium push five, six years before and started doing things like, okay, we need to be on time to be more reliable. We'll attract premium customers. We need to build a hub at LaGuardia, which I did 2015. I thought that was insanity, but they made it work.

49:08They started seeing that. I think COVID accelerated it, but I think there are generational changes. My kids do not want to buy a new couch or whatever. They want trips. They want experiences. And I think that has resonated. I think COVID really accelerated that. And I think COVID also accelerated the idea that people were more than willing to pay for a better experience on the airplane. And that was something radically different, right? Before, it was cheapest price to get there. And what really pissed you off was when you paid$2 ,000 for a last-minute ticket and the person next to you paid$200 for a ticket bought 60 days in advance.

49:56Now, I think you feel really smug when you got the extra legroom seat and you paid, you know,$100 more than the other person or whatever. People are willing to more readily open the wallets to improve their experience. That was very much accelerated by COVID, but I think it existed before that. So I'm curious, is there a permanent, you know, until the next recession or whatever, change in consumer behavior where travel is just more important in their lives? I mean, I think what you're seeing today in the industry is, you know, you're seeing the high oil prices, airlines trying to pass on higher fares to customers, and customers are not pushing back.

50:46And they can do it. And it's remarkable. And so whether that's premium products or other products that exist, there is certainly a real demand for air travel that exists today. I mean, there's a supply-demand balance that exists in the industry right now, which is really healthy. But we're certainly seeing a demand for premium products. That's encouraging us to do more. And we'll see where this goes. Yeah. Okay. Good. Hi. Tim Pauley with Beverage and Diamond. Also a big fan of the show. great to have you here and thanks for being here. I have a question about the burgeoning loyalty program. It's interesting because that itself is an extremely competitive industry on its own.

51:33So could you talk a little bit about some of the challenges you might have competing with quote the big boys and their loyalty programs and the ability to build a program that's actually going to be able to really build that foundation you talked about building? Yeah, I mean, I think in your question, you kind of answered a little bit of it. You're competing with the big boys, right? We don't have the long haul aspirational travel, and we certainly are not as big as them, right? The scale of those airlines is significant. And so, you know, having a target of chasing where they are from a loyalty perspective is unrealistic.

52:10But there's a lot of things that we can do to add value to our loyalty program and the retention of our customer base that actually will drive an improvement in our performance from a loyalty or from a cash flow or credit card perspective. The credit card program plus Go Wild, I think, will set us apart a little bit from the industry because there's nobody else in the industry in the U.S. that is deploying a Go Wild type product. And that's becoming quite successful within our portfolio of products. And then it's about actually getting our customers to appreciate the reliability that we provide.

52:44And we've got to do more in terms of actually getting the airline in a position operationally where the customers appreciate the reliability we provide. And so there's a lot of work to be done to do that. But my view is if we add Starlink and high-speed connectivity plus premium seating options on board the aircraft and a reliable service and don't disturb the overall cost base of the airline, I think we'll have a very, very attractive fare offering in the marketplace to customers. And I think that's really, really important. And so this will take time. It is not a, hey, in six months, I click my fingers and I can get something done.

53:22This is a multi-year program to develop loyalty within Frontier Airlines that resonates with the customer base across the U.S. We are probably number two, number three in a lot of the airports that we operate in, in terms of market share. and a distant number two or number three in terms of the scale of the airline because of the dominant position of some of the airlines across the U.S. And putting ourselves front and center in people's eyes in terms of value, I think, is very, very important. And doing that reliably. Joanne Young and Scott, first of all, it's great to see you here. And thank you both for coming to the ABA conference.

54:07And, Scott, congratulations especially for how you continue to keep Ben Baldonza involved in the program with AI and, you know, just his will to go on. Yes. Absolutely. And, Joanne, thank you. You all may not know, Joanne was instrumental in nominating Ben for the Wright Brothers Award, which was so special for him and great recognition for all he did to the industry. And so I'm very grateful to you for that. Thank you, Scott. And Mr. Dempsey, I wonder if you could comment on your international markets, how they've been performing and where you see potential growth for Frontier? Yeah, I mean, it's actually doing really, really well.

55:04I mean, international has been a relatively small portion of the business. We actually launched last week, Orlando to three airports in Columbia. So that'll be cool. That starts in December. We've had like, you know, less than 10 % of the business, maybe 6%, 7 % of the business in international markets. So it's been a relatively small portion of the airline. And it's near international, right? It's Caribbean, Mexico, and now Colombia. So we're quite excited about launching into Colombia. We think that'll be a very attractive market for Frontier out of Orlando. We'll see how that develops and whether we expand that across our base network.

55:45We have 13 bases in the United States, so Orlando is one of them. So we'll see how that develops. But we're pretty excited about it. We think it gives a resonance to the loyalty program as well. Dave's got a question. Hi, thank you. Dave Simancic, ALPA, Airline Pilots Association. Long-time listener, first-time caller. Thank you. Excellent podcast. I was hoping that I could draw upon your European experience and contrast your experience in running a low-cost carrier in Europe versus in the U.S., particularly with respect to how the legacy or network airlines are able to compete or not against the LCCs.

56:27It seems very different in the U.S. versus in Europe. Thank you. Yeah, I mean, I didn't run an airline in Europe. I was a cog in a wheel of a very successful airline in Europe. Look, Europe is very different. Although the European Union is one big block and there's 650 million people, and multitude of cities and destinations to go to. You have very country-specific airlines that operate across Europe. And so, when you're booking a flight in London to go to Spain, you're unlikely to go through, I don't know, Munich to go to Spain from London. You're likely to take a direct flight. Whereas in the US, the hub and spoke nature of the marketplace and everyone prices everyone's flights is very, very different.

57:20And so the marketplace here is far more open from a competition perspective where everybody prices every flight effectively among the big airlines. And obviously we play our part and role in that. In Europe, it's more isolated by country. And so that's very, very different. If you looked at the evolution of Ryanair, EasyJet, now WizAir, their point to point traffic flows are very different to the way airlines operate here in the United States. So that country specific allowed Ryanair to develop pretty aggressively and EasyJet over the last 25, 30 years. It's just different. The other thing that's different in the United States is you had Southwest doing this 40 years ago, 50 years ago, and developing that marketplace that Ryanair effectively copied in Europe.

58:16Good. Jimmy, thank you so much. This has been grand. I really appreciate it. Thank you very much. And I'll say it, we will be right back with more on Airlines Confidential. Promotional support provided by the ultimate avgeek website, theairchive.net, a vast collection of airline memorabilia, timetables, route maps, rare cabin and airport photos, special flights, and more all at the archive.net, the hub of air transport history. Thanks again to Jimmy. I thought just an enlightening conversation. It really was great to be at the ABA event, terrific event every year and great to get to know Jimmy a little bit more.

59:00I think he's an airline leader. We're going going to hear lots more about in the future. So good luck to him with all that is on his plate. And as you heard, it is a very full plate. One of the things I thought was most interesting was the speed at which he feels like he needs to move. I think that's a good reminder for all of us. I've been thinking a lot about Delta success, United success versus other airlines and the speed at which they have moved really pre-pandemic, but certainly post-pandemic, has really set them apart. And speed is very important in this industry. And it was interesting to hear Jimmy articulate just how quickly, once he got the CEO title, how quickly he wanted to make changes.

59:54All right, before we get to the mailbag, thanks to Infinity Flight Academy. Infinity Flight Academy is helping build the next generation of professional pilots. Airline hiring may move in cycles, but developing skilled professional pilots takes years. Infinity provides structured airline-focused training designed to develop pilots with the skills, discipline, and professionalism needed for today's flight deck. From individual career pilots to large-scale cadet and university programs, Infinity is helping build the aviation workforce of tomorrow. Learn more at infinityflight.com. And thanks to Serium.

1:00:33Serium offers the most accurate and precise data and analytics to enable airlines to optimize planning, operations, and passenger services. The right intelligence drives operational efficiencies, enables you to predict market shifts and helps airlines respond quickly to maximize revenue, manage costs, and seize commercial opportunity. Visit Sirium.com for more. Okay, the mailbag, several items. Gerard from Eldersburg had this idea. In episode 352, you discussed renaming Nashville International Airport to Dolly Parton International Airport and question changing the airport code. How about NTF, 9 to 5.

1:01:16Looks like it's not being used. Well, thanks for that, Gerard. Interesting idea. The airport board in Nashville did approve changing the name. So I think it is definitely happening and will officially change soon. I don't think they're going to look to change BNA as the airport code, but NTF is interesting. And I love the American flight to Nashville. It's 925. Great tributes to Dolly. Okay. Mark from Florida offered this regarding the Miami accident I talked about last week on my soapbox. EMAS is great, but only certified to stop aircraft at 70 knots or slower. Maybe 21 Air wouldn't have made it to the road, but they still would have gone beyond the EMAS.

1:02:10You're still right that EMAS is a low-cost safety measure. However, MIA does have the FAA-mandated 1 ,000-foot safety area after the runway ends. Thanks for the great podcast. Keep it up. Thanks for that, Mark. Good points on that. You know, as you note, it would have slowed the aircraft significantly, even if the aircraft, the 767 ran past the EMAS pad, didn't fully stop there, it certainly would have shortened the journey, lessened the impact, and most likely saved lives. And yes, Miami International has 1 ,000-foot mandated safety area, but that's where it's required. And as I noted, it can be installed as an optional in safety enhancement.

1:03:03You know, I was talking to a friend recently about safety plans, right? Airlines are required to have safety plans, operators, everybody else, what's your safety master plan? Airports are not required. And that's kind of a fascinating aspect to this. I think there needs to be a lot more airport focus on safety. I think sometimes airports have, you know, the FAA controls the airfield and the FAA pays for a lot of improvements on the airfield. But as we've seen, there are issues off the airfield when planes run off the end of runways. There's certainly issues with airport equipment. There are all kinds of safety issues that airport does manage and perhaps we should start looking at requiring airports to put forward their plans so that operators can look at them and know if the fire truck has a transponder on it that can be picked up by the ground radar system in the tower.

1:04:10Or obviously, you can go out and look and see if is there yourself, but it would be great to see more focus on safety at the airport. Okay, I'll be back next week with Oscar Munoz and yet another airline CEO, three weeks in a row for the CEO chair. Next week will be Ben Minacucci, CEO of Alaska Airlines. Ben has brought so much dynamic change to Alaska, the merger with Hawaiian, the long haul international expansion. It's a great time to check in with him on how things are going. Worth noting, he'll be the fourth major U.S. Airlines CEO on Airlines Confidential since Ed Bastian's August 19th appearance and more to come this fall.

1:04:55So thrilled to be able to bring all this to you. Thanks for listening, everyone. Have a great week. This podcast is produced by MassMedia. Info at MassMedia.net.