Low-cost airline king Bill Franke keen on premium upgrades

SCOTTSDALE, Ariz. — For decades, William Augustus Franke frontier airlines‘ chairman and a serial investor in airlines, he made a fortune selling cheap airline tickets and charging fees for everything from baggage checks to seat assignments. Now, he says, at least in the U.S., there are first-class seats and other traveler comforts.

Frontier plans to introduce first class seats on its Airbus planes next year. The company also joins a growing list of airlines. space xaims to return to stable profitability and is equipped with Starlink Wi-Fi.

“We’re not trying to have Singapore Airlines first class,” Mr. Franke, 89, told CNBC in late June from the model-plane-lined office of Indigo Partners, the private equity firm he founded. “What we’re trying to do is give consumers a choice,” he said, calling it upscale and competitive at the same time.

The ultra-low-cost airline model pioneered by Mr. Franke (also known as Bill) has faced criticism in recent years. Rising pilot salaries, maintenance costs and operating costs, along with a boom in premium travel, are hitting low-cost airlines, which have long been profitable and fast-growing. Sustaining strong growth and keeping costs low has long been sacrosanct for the sector.

Another pillar was not to give things away for free. At the 2017 Dubai Air Show, where Franke placed a record order for Airbus planes for his airline empire, he compared some consumers to teenagers and “spoiled brats” who expect to get lower fares and what are now surcharges without paying, CNBC reported at the time.

“They’ve always been on planes with all the amenities and think that’s what they should get,” Franke said at the time.

But since then, bigger and more powerful rivals united airlines and delta airlines I copied the cheapest ticket model. They started offering minimal fare options and added fees for everything else. This year, the company rolled out its pricing strategy to first class and luxury long-haul suites to boost revenue, removing restrictions such as unreserved seat selection from customers who choose that option.

Franke has owned, operated or invested in low-cost airlines around the world, from Chile to Hungary to the Philippines to the United States. He was an early investor in European low-cost airline Ryanair.

His legacy extends throughout the aviation industry. united airlines and american airlinesworked for him early in his career.

Mr. Franke also ran Spirit Airlines until 2013, when he became chairman of Frontier at the end of the same year.

He sought to merge the carriers in 2022, but Spirit shareholders voted for another all-cash proposal. jet blue airlines. The agreement collapsed in January 2024 when a federal court ruled that it violated antitrust laws.

Struggling on its own, Spirit collapsed in May, the biggest bankruptcy for a U.S. airline in decades, leaving Frontier as the nation’s largest discounter.

Franke said he is not leaving the game and remains a major shareholder in Frontier.

“We see maybe one startup idea a month,” he said.

Franke began flying frequently at an early age, as her father worked for the State Department and was based in Paraguay.

A lot has changed since then, he said. “Today’s consumers are much smarter than ever before, equipped with new data and tools such as artificial intelligence to help them better compare fares and options,” he noted.

“None of the airlines fully understand how AI…will impact their booking decisions,” he said.

But “price and schedule are still the best,” Franke added.

“For many consumers, whether the ticket price is $200 or $125 is not the decision maker, but for many it is still the decision maker,” he continued. “Middle-class and young people are still price-conscious.”

However, the ultra-low-cost, low-fare model is struggling in the United States. It is based on minimizing costs and maintaining rapid growth, both of which have become more difficult since the pandemic. A further challenge is the rise in fuel prices since the start of the Iran war.

Spirit is an obvious casualty, with its CEO saying it has “run out of runway” in the face of mounting challenges, but Frontier has only been profitable for a year since 2019, and JetBlue hasn’t been profitable since that year either.

“While we do not have a forecast for next year, we are certain that the airline is on the right track to return to sustainable profitability,” Frontier CEO Jimmy Dempsey said on a July 29 earnings call. He became the airline’s chief executive officer in December, replacing Barry Biffle, who led the airline for nearly a decade.

Airlines including Frontier are raising fares to cover costs. Airfares rose more than 23% in August from a year earlier, according to federal data released Sept. 11.

Frontier isn’t the only company looking to add more expensive and wider seats. allegiant air It recently announced that it would be adding first class to its currently single-cabin planes. jet blue airlines Add domestic first class. Meanwhile, major competitors are also expanding their luxury cabins.

Mr. Franke said the new luxury orientation doesn’t fit everywhere and efficiency remains important.

“In the U.S. market, where large, mature airlines like Delta, United and American Airlines regularly change the interiors of their aircraft, there is a good chance that low-cost and low-cost carriers will need to adjust their business models to compete properly,” he said. “That doesn’t mean you have to do it in emerging markets like Hungary or Peru.”

Franke’s heritage extends beyond its low-priced models. Many of today’s U.S. aviation industry leaders can trace their roots to Franke and Tempe, Arizona. It was home to America West, which through a mega-merger evolved into today’s American Airlines.

Franke, who studied law and worked as a lawyer, entered the aviation industry more than 30 years ago. When the American West teetered on the brink of bankruptcy in the early 1990s, the governor of Arizona at the time appointed him to rescue the company, and he became CEO in 1993.

His proteges include American Airlines CEO Robert Isom. Isom’s predecessor was former US CEO Doug Parker. and United Airlines CEO Scott Kirby.

Former employees of Mr. Franke told CNBC that they were in regular contact with Mr. Franke.

Isom said in an interview with CNBC in late June that Franke is “pretty good with the jab.” For years, they bet on college football, especially games between Stanford, where Franke studied, and Notre Dame, where Isom studied.

“His rule was that fast paychecks made fast friends,” Isom recalled to CNBC while showing some of his winnings. Franke’s business card was clipped to a Chilean peso, and in another victory by Isom, a euro coin taped to a piece of paper that read “paid in full” by his former boss.

Mr. Kirby told CNBC at an industry conference in Rio de Janeiro in June that after the Wall Street Journal profiled him this spring, Mr. Franke told him that “when I opened the paper, I threw up in my coffee.” Mr. Franke did not comment on it, but said he recalled the exchange.

Still, Kirby called Franke a “mentor” and declared him a “tough leader.”

“All of us have worked for Bill in our formative years and been yelled at by Bill. … He deserves more credit for that,” he said. (Mr. Franke said he did not yell. “That’s not me.”)

Alumni said Mr. Franke was demanding, especially when it mattered.

Steve Johnson, vice chairman and chief strategy officer at American Airlines and another Franke America West alumnus, likened Franke to a second father.

Mr. Johnson was a partner at Indigo from 2003 to 2009, when it owned Spirit. When fuel prices soared in the summer of 2008, sending prices above $147 per barrel (more than $200 in today’s dollars), Spirit was short on cash, but it had a portfolio of fuel hedges, a series of contracts that lock in future prices.

That summer, Johnson was about to board a plane to California when Franke called him about fuel and said, “Sell it to me now,” Johnson recalled. They did it and generated about $30 million. After that, oil prices collapsed.

“It turned out to be exactly what Spirit needed,” Johnson said.