Frontier Airlines
Author: Julie Gordon
Frontier Airlines struggled during the first few years of its existence and its future looked grim, but it was able to pull out of the situation and today is succeeding and thriving, Sam Addoms, Frontier's president and CEO, said at Boulder Tomorrow's March 22 luncheon. Now that Frontier is armed with the real estate necessary to operate, it has managed to get into 23 cities, flying to destinations such as Washington National Airport and New York's La Guardia Airport. Frontier is the only airline to provide a flight from Denver into Washington National. Additionally, it has flown test flights over Orange County. "God has been very good to this airline," Addoms said. Initially, Denver-based Frontier didn't do well at all. During its first three years of business, in fact, Frontier never had a sold-out flight. Frontier went to the corporate community for support, but businesses said there was little they could do because they had exclusive contracts with major airlines that couldn't be violated, Addoms explained.
Frontier, which was launched in 1994, shifted its emphasis to going into large cities and charging affordable fares in 1995. "This seemed like a fairly straight-forward proposition," Addoms said. "The idea would be that we would enter a market, lower the airfare by 25, 35 or 40 percent and stimulate traffic by reason of that fare reduction, and cause more people to be able to fly than would be able to afford it otherwise. That's essentially the model we've followed ever since we started." The model is not unique to Frontier; it's not something Frontier initiated on its own, Addoms said. Rather, it's something other airlines have tried in the past, he said.
Addoms described Frontier as an all-approach service provider designed as a value proposition and focused on the back half of the United airplane as its competitor. "We don't even consider the front half as being competition because we can't compete effectively," he said. "We don't have the market power and we don't have the ability to add the complexity to our service."
According to Addoms, 70 percent of airline passengers make their flight reservations by phone through travel agents and the airlines themselves, while 30 percent now buy their airline tickets on the Web. In order for an airline to operate successfully, it needs to have real estate, Addoms said. "You need a gate. You need a presence. You need a ticket counter," he said. "You need the baggage room and lost and found and all of the things you would expect an airline to have."
Addoms said that today's airports are largely oversubscribed in terms of their real estate due to the airline industry having been deregulated. The airline industry is not a business people want to be in today, Addoms said. He said130 airlines have disappeared since deregulation began. America West was the only carrier in the1980s to come out of the first decade of deregulation and survive, Addoms said. "I always thought airlines were kind of vigorously competitive and robust, and they sort of represented the great American way," Addoms said. "But the reality is if you look at airlines through the first 50 years of their operation, they didn't make any money. They were vigorous. They were so vigorous that they took each other's money away from one other, and they generated essentially again a zero sum of money." Airlines have made money during the last seven years, but they haven't made their cost of capital, Addoms said.
In addition to his regular duties for Frontier Airlines, Addoms sits on the board of Communications World in Englewood and Walsh Environmental in Boulder. Prior to becoming president and CEO of Frontier Airlines, Addoms was an instructor at the University of Northern Colorado's business school. He was also in the banking industry. He served as vice president of Continental Illinois National Bank in Chicago, and was later president of Denver National Bank.
Boulder Tomorrow's next luncheon will be held at the A Spice of Life Event Center (Flatirons Golf Course), 5706 Arapahoe Avenue, on May 24. City Councilman Gordon Riggle, Planning Director, Peter Pollock, Planning Board Chair, Mark Ruzzin and Boulder Tomorrow Board Member, Lou DellaCava will discuss the imbalance between population and housing in Boulder, as well as commercial zoning in the city. The cost of the luncheon is $15 for members and $20 for nonmembers.
