Business | Aviation

New super cheap airline in the offing

Private equity firm Indigo reportedly negotiating to buy Frontier Airlines

  • By Hugo Martin
  • Published: 14:35 August 15, 2013
  • Gulf News

Los Angeles: Get ready for the takeoff of another super-cheap airline offering ultra-low fares with loads of passenger fees.

Industry insiders say the new super discount airline may soon be launched with the help of Indigo Partners, the Phoenix private equity firm that invested in Spirit Airlines in 2006 and helped convince the Florida airline’s chief executive, Ben Baldanza, to adopt dirt-cheap fares and abundant fees.

Indigo is reportedly negotiating to buy Frontier Airlines from the Denver carrier’s parent company, Republic Airways Holdings. Meanwhile, Indigo has started to divest itself from Spirit, with Indigo owner William Franke and Indigo principal John Wilson resigning from the Spirit board of directors Wednesday.

“They really are taking the Spirit Airlines playbook from Florida to Denver,” said Henry Harteveldt, a travel analyst with Hudson Crossing in New York.

Indigo officials did not respond to requests for comment, and Republic Airways representatives would only say that they expect to sell Frontier to a “third party purchaser” by September.

It would make sense for Indigo to transform Frontier from a typical low-cost carrier to an ultra-cheap airline because Spirit has been so profitable, said Fred Lowrance, vice president and senior research analyst at Avondale Partners in Nashville.

The airline reported a profit margin of 8.5 per cent in the three-month period that ended June 30, more than twice the rate of many of its competitors, and shares of Spirit have nearly tripled in value since the company went public in 2011.

“That business model has proven successful,” Lowrance said.

Meanwhile, as lines grow at airport immigration checkpoints, the frustration among international travelers continues to swell.

A trade group for the travel industry is hoping to exploit that frustration to pressure the federal government to hire more US Customs and Border Protection agents to speed up those airport lines, thereby encouraging more foreign visitors.

The US Travel Assn. has been interviewing tired, disheveled travelers who have just cleared lengthy lines at such checkpoints nationwide. Video clips of those interviews have been posted at www.travelersvoice.org.

“International travelers visit our country to conduct business, experience our destinations and sites and, most importantly, contribute billions of dollars to our economy,” said Roger Dow, president of the US Travel Assn.

The lines at airports are only getting longer as air travel climbs.

The number of people traveling by air grew 6 per cent in June from the same month last year, with the biggest growth coming from Africa and the Middle East, according to the International Air Transport Assn., the trade group for airlines worldwide.

— Los Angeles Times

92 percent increase in travel, tourism jobs analysed

Hiring for travel and tourism jobs has surged so much in the last few years that the industry has recovered 92 per cent of the positions lost during the recession while the rest of the economy has recovered only 77 per cent.

But some economists dismiss the swell in hiring, arguing that many travel and tourism jobs are part-time or minimum-wage positions, such as waiters.

To address such disdain, the US Travel Assn., the trade group for the nation’s travel industry, has analyzed data to show that most of those travel and tourism jobs generate a middle-class income.

Of the 7.5-million jobs in travel and tourism in the US, about 3 million are in food service, such as waiters, with a median salary of about $22,000 a year, said David Huether, senior vice president for research for the US Travel Assn.

The other 4.5-million jobs offer salaries that range from a median annual salary of $27,000 for sales positions, such as travel agents, to $80,000 a year for management positions in hotels and restaurants, he said.

“Jobs in travel and tourism run a huge gamut,” Huether said.

— Los Angeles Times

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