An Airline Fare War Is Brewing Courtesy of Frontier

(Bloomberg) -- Frontier recently jolted the U.S. airline industry by issuing a press release that brimmed with boldness. Given the implications of the scrappy carrier's news, the superlatives were arguably a harbinger of war.

A fare war, to be exact.

The ultra low-cost carrier (ULCC) that sports wild animals on its tails plans to double its footprint by next summer, adding 21 cities and 85 routes for a total of 1,000 routes that will enable it to reach 90 percent of the U.S. population. The expansion has a heavy focus on Florida and Denver, Frontier's home base, and is part of a planned expansion that will see its fleet rise from 75 Airbus SE A320-family aircraft to 120 planes by 2022. By spreading its lower fare flights across most of the country, Frontier crowed, it will save travelers more than $1 billion.

“By taking advantage of our natural share of connecting passengers, we can offer our low fares to even more of America,” Frontier said. “This is particularly important through our largest hub and our home in Denver.”

The July 18 news drew a quick response from United's president, Scott Kirby, who has used the phrase “natural share” to describe his company's growth plans at its main airports. Denver, incidentally, is the most profitable of United Continental Holding Inc.'s seven U.S. hubs.

Kirby, who as president of American Airlines Group Inc. led the industry's first real pricing war against ULCCs, said the Frontier news illustrated a lack of growth opportunities for such carriers. “They're now competing on our turf and trying to be a network carrier in Denver,” Kirby said, throwing down the gauntlet for little Frontier by declaring it “a battle I guarantee United will win.”

Frontier counters that it's merely doing what growth airlines do—namely, begin service into markets where they sense opportunity. Kirby's comments were a “selective interpretation” of its plans, Daniel Shurz, Frontier's senior vice president-commercial, said Friday in a telephone interview. “We are continuing to build a nationwide, low-cost, primarily point-to-point airline,” he said. “We have not suddenly announced a huge change in the core strategy of the business.”

In 2013, before Frontier was purchased by private equity firm Indigo Partners and converted to an ULCC, about 90 percent of its capacity involved Denver. Today, the city represents about 40 percent after Frontier sought to diversify nationally. The new routes will allow it to connect more of its new traffic through Denver, which is the key to United's profitability there. But Shurz says the comparison will continue to be David vs. Goliath, since his carrier's overall Denver service will remain at just 70 daily departures in peak times, while United has more than 400.

Currently, about a quarter of Frontier's passengers transit through Denver, until recently the only city where it sold connections. In the coming months, Frontier plans to offer connections in more than a half-dozen cities, including Austin, Cincinnati, Cleveland, and Orlando, spokesman Richard Oliver said.

“We are not moving all of the assets back to Denver,” Shurz said, arguing that the new routes from there will work at Frontier's current cost structure. “If we were going to just copy what United has done, yes, it would drive up our costs.”

These new connections in Denver are likely to trigger a pointed response from not only United, but also Southwest Airlines Co., which counts Denver as its fourth-largest airport, with almost 200 daily flights. Consider two of the new midsize cities Frontier is adding, Boise, Idaho, and Oklahoma City. This summer, United has four daily flights from Boise to Denver, and five from Oklahoma City. (Southwest has two and three nonstops, respectively.)