Ultra low-cost airlines are seeing a lot of success in the United States. There's Allegiant Airlines which has been profitable 10 years in a row by focusing on major tourist destinations and Spirit Airlines which saw a 30 percent jump in profits last quarter. Those are good numbers compared to the rest of the airline industry.
And now there could be another ultra low-cost airline to add to the mix. That's because William Franke, Spirit’s former chairman and managing partner of Indigo Partners, is considering acquiring Frontier Airlines (yes, the one with the large animals painted on the jet tails) from Republic Airways Holdings and turning it into another super-cheap airline.
But is there room for another no-frills airline in the U.S.? Bloomberg Businessweek reports:
Still, even amid all the new leisure travel Spirit and Allegiant have stimulated in recent years, there could be a limit to the ultralow-cost model’s U.S. growth, says George Ferguson, an airline analyst with Bloomberg Industries. “I think we like a bit more of a refined flying experience, as we typically get two to three weeks of vacation per year, where Europeans get five or six weeks and need to stretch the vacation dollar a bit more.”
But it could actually come at the expense of Spirit, Bloomberg reports:
“If Indigo were to acquire Frontier, it would be negative for Spirit because Bill Franke and his team at Indigo have intimate hands-on knowledge of the Spirit business model and its market potential,” James Parker, an analyst at Raymond James & Associates Inc., wrote in a note to investors today.
Read more: Bloomberg Businessweek
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