As longtime readers know, I've been big fan of
for some time. I was a fan of the airline's management long before becoming a fan of the stock -- due to the negative revenue
situation the airline faced with
in 1997 and 1998.
However, with the demise of Western Pacific, the beginning of 1998 and a protective
Department of Transportation
watching big, bad
for anticompetitive activity, Frontier began to experience blue skies and exceptional stock price gains. The stock picked up 144% in 1998 and another 136% in 1999.
But Frontier's stock appreciation now hinges on several factors that bear watching.
There is no doubt that Sam Addoms, the CEO of Frontier, is also the spiritual and emotional leader of this group of employees. Much like
CEO Herb Kelleher or
Gordon Bethune, Addoms' employees simply love the man.
However, Sam has talked to me more than once about retiring. No surprise there, since fly fishing, not killing the competition, is at the top of his to-do list. But I heard rumbles Thursday that the Frontier board is actively looking for a new CEO.
Last summer, Sam and I sat next to each other at an industry dinner and we did not talk about the industry at all. We talked about what he wanted to do after he left Frontier, and he wondered if I was doing too much. He was concerned I was going to "burn out." That is just the kind of person Addoms is.
From what I hear, his desire to move on has stepped up a notch lately.
Addoms' departure would be a major transition for the airline. There is no established heir-apparent at Frontier, nor even a well-formed management team. The airline brought on its first CFO last year and he has no industry experience. Jeff Potter, vice president of marketing, is a sharp guy, but not necessarily CEO material -- yet.
Frontier announced late last year that it would convert to an all-Airbus fleet over the next four years. So at the same time the airline is climbing a pretty hefty growth curve (expanding capacity by 20% a year), it also will be navigating a transition to a new type of aircraft. (The airline plans to shed all
That's asking a lot of this operation. I think the transition will prove to be much more of a struggle and a distraction than Frontier anticipates.
The Darth Vader of Denver
Make no mistake about it. Frontier Airlines exists at the behest of United Airlines. Based out of the
Denver International Airport
, Frontier feeds on the spillover of passengers from United.
Last year, Frontier had a fairly easy time of it. United was preoccupied, building up a presence at
Dulles International Airport
in retaliation for
very unsuccessful market-share takeover attempt.
The war at Dulles has been won. US Airways continues to retreat, bleeding red ink all over the Northern Virginia landscape.
With that fight over, United has the luxury of devoting more time and attention to Denver. And that could make Frontier's life a bit more challenging.
At the recent
SunTrust Equitable Airline Conference
was brazen enough to show a route map with new regional-jet routes out of Denver. I say brazen, because until United pilots agree to allow more flying by the airline's regional code-sharing partners such as SkyWest, this additional flying is on hold.
carriers, will presumably get the right to fly additional regional jets. When the United pilots agree to the additional flights -- which could happen this year -- expect to see a lot of the new flying coming in and out of Denver.
In the meantime, United said Thursday it will replace smaller United Express flights with mainline jets out of Denver. Expect to see more announcements regarding additional capacity in Denver from the boys in Chicago over the next two months.
AirAOL and JetIBM Feedback
Thanks for all the mail on
Wednesday's column. It seems to have hit a chord, or at least a resonant note. One reader suggested we should have listed the cash each airline is sitting on, to make potential corporate raiders get even more excited. Another reader suggested we include debt levels as well. Sounds like a good idea for another column.
Finally, one reader wondered if JetIBM (one of the three ficticious airlines named in the headline) was not just a little too close to
-- although he said it could be an excellent exit strategy for
and his fellow investors if JetBlue were to flounder.
Another reader added that AirAOL planes would no doubt be grounded just when you needed them, and you'd never be able to get the company on the phone.
Personally, I'd expect to hear that obnoxious male voice come over the intercom after you had landed. You know the one. I know you can hear it:
"You have landed!"
Holly Hegeman, based in Barrington, R.I., pilots the Wing Tips column for TheStreet.com. At time of publication, Hegeman held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. You can usually find Hegeman, publisher of PlaneBusiness Banter, buzzing around her airline industry Web site at
www.planebusiness.com. While she cannot provide investment advice or recommendations, she welcomes your feedback at