AirTran, Frontier Eye Bigger U.S. Role

The top executives from AirTran Holdings (AAI) and Frontier Airlines (FRNT) say they envision a day when their low-cost carriers will provide domestic feeds for legacy operators, whose primary role will be international flying.

"I believe that a really good role for AirTran to play in the domestic industry will be ... as a domestic partner," the company's CEO Joe Leonard said at the J.P. Morgan aviation conference on Thursday. "These legacy carriers will not be everything to everybody."

Leonard said he didn't expect industry consolidation this year, but noted that 2007 and 2008 "will be very active years." He said he isn't sure that mergers between legacy carriers and low-cost carriers will take place in the current cycle of airline financial losses or in the next one.

Meanwhile, Frontier CEO Jeff Potter said he has had discussions with various carriers about a variety of potential relationships, including code shares and marketing agreements. He didn't name the carriers.

"You will see an LCC [low-cost carrier] work in some form or fashion with a legacy airline, much in the context that Joe Leonard described," Potter said. "I am somewhat surprised it hasn't been done at this point, but I do believe it's going to happen."

"Do I believe Frontier could play a role in that?" he continued. "Yes I do. We've had discussions on and off, [but] for a variety of reasons they haven't come to fruition."

In the meantime, both executives said they are following strategies that will ensure their survival despite competition with far bigger carriers in their principal hubs -- Atlanta for AirTran and Denver for Frontier.

Leonard said that because Delta Air Lines (DALRQ) has such a big hub in Atlanta, people don't realize that AirTran also has a substantial hub there with about 250 daily departures. He said he hopes that Delta successfully restructures in bankruptcy court and that it then follows a strategy designed to ensure profitability.