Business
Budget airline king Bill Franke warms to premium upgrades
Bill Franke, co-founder of Indigo Partners and chairman of Frontier Airlines Inc., speaks during an interview in New York, Oct. 28, 2022.
Jeenah Moon | Bloomberg | Getty Images
SCOTTSDALE, Ariz. — For decades, William Augustus Franke, Frontier Airlines‘ chairman and a serial airline investor, made a killing selling cheap plane tickets and charging fees to check bags, to pick seats and for everything else. Now, he says first-class seats and other traveler comforts are in order — at least in the United States.
Frontier is planning to roll out first-class seats next year on its Airbus fleet. It’s also joined a growing list of airlines adding SpaceX‘s Starlink Wi-Fi on board as it seeks to return to steady profitability.
“We’re not trying to have a Singapore Airlines first class,” Franke, 89, told CNBC in late June at the model airplane-filled offices of Indigo Partners, the private equity firm he founded. “What we’re trying to do is give the consumer an option,” he said, calling it at once upscale and competitive.
The ultra-low-cost airline model that Franke, who goes by Bill, pioneered has faced a reckoning in recent years. A jump in pilot salaries, maintenance costs and operating expenses, along with a boom in premium travel, have hit long-profitable and fast-growing budget carriers. Maintaining strong growth and keeping costs low were sacrosanct for that sector for years.
Another pillar was not giving things away for free. At the 2017 Dubai Air Show, where he made a record Airbus aircraft order for the empire of airlines he invested in, Franke likened some consumers to teenagers and “spoiled brats,” saying they expected to get low fares and what are now add-ons without paying for them, CNBC reported at the time.
“They had been flying with all the amenities for ever and ever and that’s what they think they ought to get,” Franke said at the time.
But since then, larger, more powerful rivals like United Airlines and Delta Air Lines have copied the model for their cheapest tickets. They’ve started offering bare-bones fare options and adding fees for everything else. This year, they even brought that pricing strategy to their first classes and plush, long-haul suites to increase revenue, stripping customers who choose that option of a free seat choice, among other restrictions.
Franke has owned, operated or invested in budget airlines around the world, from Chile to Hungary to the Philippines to the U.S. He was an early investor in European budget carrier Ryanair.
His legacy stretches across the airline industry: Many top airline executives, including the CEOs of United Airlines and American Airlines, worked under him earlier in their careers.
Franke also ran Spirit Airlines until 2013, before becoming the chairman at Frontier at the end of that year.
He tried to merge the two carriers in 2022 but Spirit shareholders voted for another offer, all cash, from JetBlue Airways. That deal fell apart after a federal court ruled it violated antitrust laws in January 2024.
Struggling on its own, Spirit collapsed in May, the biggest U.S. airline failure in decades, leaving Frontier as the largest discounter in the country.
Franke said he’s far from out of the game and remains a major Frontier shareholder.
“We see startup ideas probably one a month,” he said.
‘They still focus on price’
A Frontier Airlines airplane taxis past a Spirit Airlines aircraft at Indianapolis International Airport in Indianapolis, Indiana.
Luke Sharrett | Bloomberg | Getty Images
Franke started flying frequently when he was a little kid because his father worked for the State Department and was based in Paraguay.
He said a lot has changed since. “Consumers are much smarter today” than they used to be, armed with new data and tools like artificial intelligence that help them better compare fares and options, he noted.
“None of the airlines are quite sure what AI … is going to do to your decision to book,” he said.
But “price and schedule are still at the top,” Franke added.
“For a lot of consumers, whether the ticket costs $200 or $125 is not going to be the decision-maker, but for a lot of people it is still,” he continued. “Middle class, younger flyers, they still focus on price.”
But the ultra-low-cost and low-fare model has struggled in the United States. It’s based on keeping costs minimal and maintaining rapid growth, both of which have been more difficult since the pandemic. Higher fuel prices since the start of the Iran war have been an added challenge.
Spirit is the obvious casualty, with its CEO saying it “ran out of runway” after facing increasing challenges, but Frontier has only been profitable one year since 2019 and JetBlue hasn’t been profitable since that year.
“We’re not forecasting next year, but the airline is certainly on the right trajectory to return to sustainable profitability,” Frontier CEO Jimmy Dempsey said on a July 29 earnings call. He became the carrier’s chief executive in December, succeeding Barry Biffle who headed the airline for close to a decade.
Airlines, including Frontier, have been jacking up fares to cover costs. August airfares were up more than 23% over last year, according to federal data released Sept. 11.
Frontier isn’t alone in wanting to add pricier and roomier seats. Allegiant Air recently announced it would add a first class to its currently single-cabin planes, and JetBlue Airways is adding a domestic first class. Meanwhile, larger competitors are growing their premium cabins.
Franke said the new upscale moves don’t fit everywhere, and that efficiency remains key.
“In the U.S. market where you have mature large airlines — Delta, United, American — who are changing the interior of their aircraft on a regular basis, it could well be that a low-cost or a lower-cost airline, in order to properly compete, needs to make adjustments to its business model,” he said. “That doesn’t mean you have to do that in an emerging market like Hungary or Peru.”
All roads lead to Tempe
Franke’s legacy extends beyond the low-cost model. Many of the leaders of the modern U.S. airline industry can trace their roots back to Franke and to Tempe, Arizona, where America West — which through mega-mergers evolved into modern-day American Airlines — was based.
Franke, who had studied and practiced law, got into the airline business more than 30 years ago. The then governor of Arizona tapped him to save America West when it was mired in bankruptcy in the early 1990s and he became chief executive in 1993.
His proteges include American Airlines CEO Robert Isom; Isom’s predecessor, former American Chief Executive Doug Parker; and United Airlines CEO Scott Kirby.
Franke’s former employees told CNBC that they keep up with him regularly.
Isom told CNBC in an interview in late June that Franke is “pretty good at giving jabs.” For many years, they would bet on college football, specifically, games between Stanford University, where Franke studied, and Notre Dame, where Isom studied.
“His rule was fast pay makes fast friends,” Isom recalled, showing CNBC some of his winnings: Chilean pesos with Franke’s business card attached by paperclip and, in another win by Isom, euro coins taped to a sheet of paper with “PAID IN FULL” written out by his former boss.
Kirby told CNBC at an industry conference in Rio de Janeiro in June that after The Wall Street Journal profiled him this spring, Franke told him it made him “throw up in his coffee when he opened his newspaper.” Franke didn’t comment on that, but said he recalled the exchange.
Even still, Kirby called Franke a mentor, and clarified that he was “a hard-ass mentor.”
“All of us, our formative years were working for Bill, getting screamed at by Bill. … He should take more credit for that,” he said. (Franke said he didn’t yell at him. “That’s just not me.”)
Franke was demanding, especially when it counted, his alumni said.
Steve Johnson, American Airlines vice chair and chief strategy officer, and another Franke America West alum, likened Franke to a second father.
Johnson was a partner from 2003 to 2009 at Indigo when it owned Spirit. During the summer 2008 fuel spike that saw prices hit more than $147 a barrel (more than $200 in today’s dollars), Spirit was running out of money but had a portfolio of fuel hedges, a series of contracts that locks in future pricing.
He was about to head to a California-bound plane that summer when Franke called him about the fuel and told him to “sell it now,” Johnson recalled. They did and generated about $30 million. Oil prices later crashed.
“It turned out to be just exactly what Spirit needed,” Johnson said.
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