Company’s financial health

After serving over 87 million customers for 40 years, the old Frontier Airlines stopped operating in 1986. The old Frontier Airlines had once dominated the Denver hub until it started having financial troubles as a result of the increased competition in the deregulated aviation industry. In July of 1994, however, a group of old Frontier executives brought Frontier Airlines, Inc. (“Frontier”), a Colorado corporation, back to Denver International Airport (“DIA”). In 2006, the new Frontier was the second largest jet service carrier at DIA based on departures. Beginning with two leased Boeing 737-200 jets, Frontier now operated forty-six jets.
Initially serving small, under-serviced cities, the new Frontier grew steadily and flew to many of the popular destinations generally dominated by large airlines, such as Los Angeles, Chicago, New York, and Washington D.C. In addition, Frontier started offering international flights to Canada and many resort towns in Mexico. Due to the demand for Frontier’s product, the company also started Frontier JetExpress, a code sharing partnership focused on providing low-cost regional flights.
Frontier’s overall strategy was to “provide air service at affordable fares to high volume markets from [its] DIA hub and limited point-to-point routes outside of [its] DIA hub.” Targeting price-sensitive passengers in both the leisure and corporate travel markets, Frontier attempted to execute this strategy in several different ways. First, Frontier tried to stimulate demand by offering a combination of low fares, customer-oriented service, and rewards for its frequent flyers. In addition, it expanded its Denver operations by adding additional high volume markets to its current route system, using larger planes on popular routes to maximize economies of scale, and code sharing with a regional airline. However, in 2006, Frontier faced a new direct competitor, Southwest Airlines, on its home turf. With mounting losses and scarce resources, Frontier’s Board of Directors had to decide on the strategic options available to them. The case provides students the opportunity to decide which of those options was the best one for Frontier?
» Identify Frontier Airline’s competitive strategy.
» Conduct an Industry analysis; identify industry key success factors, and develop a SWOT analysis for Frontier Airlines, assuming it has a low-cost, conservative growth strategy focused on providing quality customer service.
» Assess the company’s financial health.
» Evaluate potential strategic directions and recommend the most feasible alternative for the company?

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