# Is Frontier Airlines the New Spirit?

May 2014

Frontier Airlines has announced a new price unbundling strategy.  Does that make the firm the new Spirit Airlines?    David Siegel, Frontier’s CEO, says no, Spirit is a Dollar Tree and Frontier is a Target (http://www.bizjournals.com/baltimore/news/2014/04/29/frontier-airlines-passengers-will-pay-up-to-50-for.html).  But is unbundling really the best pricing strategy for Frontier?  The airline recently announced that it will be unbundling, meaning a carry-on bag and on-board beverage are now a-la-carte items when you fly with them.  This strategy is also used by low-cost competitor, Spirit Airlines, but what does it mean for Frontier’s passengers—and will the strategy actually work?

### New Cost to Carry-On

Frontier Airlines will begin charging economy customers a fee for carry-on luggage that doesn’t fit under the seat.  If you pay the fee when booking online it will be $20 for you to travel with your carry-on. Perhaps you overlooked this check box when booking your flight? Well, at the ticket counter you will be charged$35 to bring that same carry-on with you, a 75% price increase!  For those of you who have somehow completely missed the boat and made it all the way to the gate without paying, your fee for a carry-on bag is now a whopping $50, a 150% increase over the$20 fee you would have paid had you done so when booking your flight online.  This seems a bit ridiculous, but it works for Spirit, so why not let Frontier give this pricing method a go.

In defense of the price increase, Frontier’s claim is that they are trying to reduce the number of passengers using the overhead bins, as this is the most common cause for flight delays.  Charging people a fee for carry-ons may encourage more people to check bags if the checked bag fee is less expensive (or free), but according to flyfrontier.com the fee paid at time of booking is \$20 for economy flight passengers, the same as the new carry-on bag fee.  Historically, most people choose to carry on instead of check because it saves them time, not because it is less expensive.  People tend to place a high value on their time and if it costs the same price to check your bag as it does to carry it on, I do not anticipate this resulting in fewer passengers using those overhead bins.

Along with the price increase for baggage comes a price decrease for the actual flight.  By unbundling, Frontier can charge an average of 12% less on airfare.  So if you are traveling without any luggage, you may actually end up saving money in this new pricing structure.  I am unsure of how many passengers travel that lightly, but based off of my own experiences and what I have witnessed while traveling I would assume bagless passengers to be the minority, meaning most passengers experience either no difference in price or an increase in price.

### Does Frontier have a little more Spirit?

Although Spirit is occasionally still cheaper than other airlines even after bag fees, time is money and those few dollars are generally worth me flying a different airline.  In my experience, Spirit is not very timely.  I have not flown Frontier, but Google flights gives the same warning as they do for Spirit: “Often delayed by 30+ minutes”.  So although Frontier offers a bit more legroom, 30” as opposed to Spirit’s 28”, I don’t know if that will be enough to stop people from considering both airlines to be Dollar Trees.