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I started comparing Frontier to some of its competitors today.

For the most part I've seen litterature comparing Frontier to Vanguard and Southwest. Vanguard is actually a flop compared to Frontier. Southwest is significantly larger and very well run. There is no true "same size" comparison, especially based on the rate at which Frontier is growing.

I've also been thinking about some of the challenges facing Frontier. The most obvious is their competition, the biggest of which is United since they compete out of the same airport.

On the whole I'm not terribly worried about United's "power". They are big, but they're also dumb. United is a very slow moving behemoth. They have a tough time adjusting to change and the corporate mentality seems to be "we're bigger than it is". They tired matching Frontier's fares on coresponding routes at coresponding times. The City of Denver mentioned anti-competitive issues and threatened them and that stopped very quickly. On the whole Denver is not happy with United and have been blaming them for many of DIA's failings.

Frontier has spectacular management and they have proven to understand the market better than anyone else. Frontier's size makes it a very nimble "favorite child" and they've milked it as best they could.

What I do fear is that Frontier has profited greatly from all the problems at United. Strikes, work slowdowns, canceled flights. It all added up to a lot of furious customers and they decided to go Frontier instead. United isn't even close to having their act back together again, but if it ever does, I fear the public's loyalty to Frontier may be fleeting and that's where I see the worst problem of all.

I'm a little worried here because they currently only have routes to the most traveled destinations. It seems that as they grow and move into the lesser and lesser-traveled routes, their margins are likely to decrease.

This is something that was addressed very extensivelly at the annual meeting and it was done very well. Sam Addoms and the flight schedule manager (whose name I don't have with me right now) did say they were going after the largest markets only, but they also indicated that right now the bottleneck isn't the number of large markets, but their ability to grow Frontier responsibly.

Keep in mind that right now Frontier is the only debt free airline out there and they have solid cash reserves to withstand a bad market. They said they intend to grow slowly and smartly. And they've been doing that very well.

Fuel prices are the third big concern for any airline, especially small ones since they don't have the deep pockets needed to tide them over when times get tight. Frontier's profits are already showing signs of a fuel pinch and from what I understand, oil costs will continue to go up for a while.

True, but not quite as bad as you may think. Frontier got hit by this eighteen months ago when the prices first went up. Stock was cut from a high of $18/share to a low of $9/share. People were scared that Frontier wouldn't survive the spike, but they did quite well and now that prices leveled out, they are doing quite well in this department.

The bonus item is the new Airbus fleet. The new planes will save 20% on the fuel use and that will be very evident in the bottom line.

I do agree with you that Frontier won't be able to sustain this growth level indefinitely. As all other animals, when you get sufficiently big, you get real slow. They are now handling 12% of DIA's traffic (to United's 80%) and the the uncontested heir to the DIA throne. They're also local, very friendly and quite determined. I've had an oportunity to chat with everyone from gate agents to management to corporate communications and even the lady at the company store. They're all talanted folks and very easy to work with. This is a total contrast to United, which I was forced to fly United in October for work and I have to say, United's best improvement would be to become a "self service" airline. At least when things go wrong then, you know you'll be mad at yourself and not get berated by some oaf. In contrast, United wouldn't let me keep my briefcase under my seat. Frontier went out of their way to help my girlfriend with her backpack on a fully loaded flight. Oh, and I've never seen Frontier bump someone because they sold more tickets than they have seats.

Time will tell us how the future will unfold, but right now Frontier is on my top three list.
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