Jimmy Dempsey runs the biggest U.S. budget airline still standing. The Frontier Airlines boss says the company's future relies on features like first-class seats and in-flight Wi-Fi.
Dempsey, who took the helm last year, is charged with improving the Denver-based airline's operations and making it profitable again. To do so, the 51-year-old Dempsey has to figure out how to maintain the airline's low-cost edge while embracing amenities that would have once been unthinkable for a budget carrier.
Budget airlines had been under pressure from mounting competition and changing consumer taste. Then a surge in fuel prices brought additional turbulence to their business. Spirit Airlines became the poster child of the problems facing discount carriers after it shut down earlier this year.
Now Frontier is trying to find a balance between the cheap flights that originally made budget airlines popular and the premium amenities consumers increasingly want.
WSJ: What is the future of the budget airline business model?
DEMPSEY: I think we have a really good future ahead of us. And we're going to adapt to the environment we're in. Customers are seeking more premium products.
We think the introduction of first-class seats and more premium seating on the aircraft, I think that's a real positive into adapting to the new environment post-Covid. And then the introduction of Starlink into the airline in the early part of next year, I think is a real game-changer for Frontier. Today we're not in the decision set for a lot of customers who need connectivity. And that will change next year.
WSJ: Is there still a customer out there who is getting left behind as everyone climbs the premium ladder?
DEMPSEY: Our business model continues to grow the addressable market, and encourages people to travel who wouldn't normally travel. All those components of our business model haven't changed.
Then we're adding premium products in order to improve the overall revenue base of the airline. We think that we've got the right balance coming over the next year.
WSJ: How do you balance the need to keep costs really low so you can offer those much lower fares with first class, Starlink and all the things that people expect?
DEMPSEY: Our cost differential is about 40% versus the rest of the industry.
We're really focused on some of the core attributes of the airline, which is to run a better operation, create reliability for the customer base and maintain efficiency and productivity so that you have an opportunity to provide real value to the customers.
WSJ: It's been a super eventful year already, with Spirit liquidating. Is that a benefit for Frontier?
DEMPSEY: It does give us an opportunity. There's no doubt about it. We positioned the airline where we overlapped on about 100 routes, that both Frontier and Spirit operated on.
We continue to deploy the model pretty successfully across that route network. We'll see what other opportunities present themselves over the next year or two to adapt our network based on the new premium products that we're bringing in.
WSJ: Do you know yet whether Starlink is going to be free or if there's going to be a fee for it?
DEMPSEY: We haven't finalized the commercial model. We're really focused at the moment on actually getting it installed.
WSJ: Where are things now with fuel prices?
DEMPSEY: It's very unpredictable at the moment. I think you've got to plan for managing higher oil prices for the foreseeable future. We're doing that. It's certainly a challenge to manage in a higher oil price environment, but we're seeing real positive demand for our business at the moment.
WSJ: Let's talk about first class. What does a Frontier first class look like compared with another airline?
DEMPSEY: Yeah, so we put Upfront Plus on the airline two and a half years ago, which is the blocked middle seat in the first two rows of the aircraft. And we saw a meaningful improvement in the revenue generated for that real estate. And that drove us to move from Upfront Plus to buy first-class seats.
So what you'll see is effectively two-by-two in the first two rows of the aircraft. And then you'll likely see in the row behind that some continuation of Upfront Plus.
WSJ: What do you see as the role for the [Frontier credit] card?
DEMPSEY: The cash flows and revenues that are generated by the big guys, I mean, that would be great if we achieved that, but it's not realistic for Frontier. Our program is pretty immature in comparison to their programs. So that creates a huge opportunity for us to invest in the loyalty program.
Interview responses were edited for clarity and length.
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