Frontier CEO details unlimited travel pass, holiday demand, and price hikes

Frontier CEO Barry Biffle joins Yahoo Finance Live to discuss the all-you-can-fly pass, the demand for travel ahead of the holidays, consumer spending, U.S. inflation, and the U.S. Department of Transportation's proposed ruling on airline ticket refunds.

Video transcript

BRAD SMITH: Welcome back, everyone. Shares of Frontier are on the move following yesterday's investor day where, among other things, it announced an unlimited flight pass. Joining us now for an outlook on the sector and future after the merger attempt with Spirit-- we know how that went-- Barry Biffle, who is the CEO of Frontier joins us now. We are also going into a big holiday travel season, Barry, and you just unveiled an unlimited all-you-can-fly pass. So give us the details of that, because I'm trying to figure out what this is going to cost me-- I think around $600-- and how often I can fly.

BARRY BIFFLE: Well, that's right. Thanks for having us on. And, yes, we've got an exciting product that we just announced called the Go Wild pass, and it really kind of targets that new work-from-home crowd as well as kind of active retirees. But for $599, that's what we're offering today and tomorrow, you can travel for a year unlimited.

And you'll be able to confirm that one to two days in advance. And again, it's unlimited travel-- kind of gives you freedom to get out and see your friends and family and kind of trade your flexibility for unlimited travel.

JULIE HYMAN: And I know, Barry-- hey, it's Julie, it's good to see you-- I know a lot of people are itching to get out there still, because we are still seeing a lot of volume. Talk to me about what you guys are seeing right now, particularly as we head towards the holiday season in terms of anticipated traffic.

BARRY BIFFLE: What's fascinating to us is we just completed a survey where we surveyed our customers and we found that customers that flew Frontier five or more times in a year is now double what it was just before the pandemic. And so this is now a third of our customers are traveling not just in total, but on Frontier, five or more times.

So it's just kind of a step function change in kind of the work-from-home flexibility creating the work-from-anywhere. And so we're just seeing a lot more leisure travel. I mean, we're a country that just didn't have a lot of vacation time.

And so we're seeing that now unleashed. And so the demand for travel is unbridled. And the holiday season is no exception.

And what we're seeing is that, look, Thanksgiving, if you haven't booked it, you better. And you better start thinking about your Christmas travel as well. But we're seeing the travel season elongate, right?

It used to be that the Wednesday before Thanksgiving and the Sunday after were the peak days, and they still are. But we're seeing the outbound, for example, start to creep up as early as today and tomorrow. So it's a much longer travel season for the holidays.

BRAD SMITH: When we think about that demand, it really just comes at the price point that consumers are seeing right now. Are you continuing to have to pass through any price increases to customers right now?

BARRY BIFFLE: So, look, we're not immune to inflation. We have had to raise prices. But I think relative to what we've seen in incomes, on a relative basis, we're actually seeing that travel, at least four Frontier, is more affordable for leisure customers than it used to be because there's just so much higher income. And you've got over a trillion dollars in people's bank accounts-- more cash than they had prior to the pandemic.

So they have the interest, the ability to travel, and they have the money to travel. So I think the small inflation they see is actually not as much as they're making more in their paychecks.

BRIAN SOZZI: Barry, some new fines this week were handed out to several airlines. Frontier was on that list. Now, yesterday, I talked to Transportation Secretary Pete Buttigieg. Take a listen to this. I'd love to get your reaction on the other side.

PETE BUTTIGIEG: We have announced around of enforcement actions and penalties. These are contributing to about $600 million in refunds going to hundreds of thousands of passengers, as well as penalties that we're ordering in order to signal that airlines should not make it hard-- they shouldn't get to where it requires an enforcement action by our department to give people the money that they're owed. It should be quick and easy to get that refund.

BRIAN SOZZI: So, Barry, what happened here? And what safeguards have you put in place so it doesn't happen again?

BARRY BIFFLE: Yes. Look, there were some errors made during the heat of COVID. And we corrected that and the refunds were actually taking place a long time ago, actually. And we refunded over $200 million. So we regret that it happened.

But we actually welcome the effort-- actually, the DOT and actually giving good guidance at what the requirements are for schedule changes, as an example, which wasn't as clear. But it was an error and, like I said, we regret it. But it's in the past now.

BRAD SMITH: When you think about what the airline industry looks like right now, of course, there was the entire-- almost the entirety of 2022 that played out in trying to get through a major deal with Spirit. That doesn't happen. You also still have alliances that are moving forward between JetBlue and American Airlines.

On the alliance front, even though those are not particularly huge or massive deals, per se, or mergers and acquisitions, there still is a consideration, even that Capitol Hill is thinking through with regard to those alliances. Should those alliances be allowed to still move forward?

BARRY BIFFLE: Well, look, I'm not part of the Department of Justice so I can't say what should or shouldn't be allowed.

BRAD SMITH: From a competitive perspective, though.

BARRY BIFFLE: Well, from a competitive perspective, I find it curious that the largest airline in the world is partnering with another airline to control airspace up in the Northeast United States. But again, that's not for me to weigh in on. And we wish them luck.

I mean, the truth is, those companies are largely in a much different business than we're in. We're almost exclusively leisure travel. And they focus more on the business customer. So I think it's actually more of a question, probably, for Delta or United than us.

But, look, I would say on the merger with Spirit, we wish them luck. I've got to assume at this point that it goes through. And we'll do everything we can to save consumers money. I know there'll be a lot of consumers that will be priced out, as they've said that they'll raise prices because their costs are going to go up with the merged airline.

But we'll grow as fast as we can to save those consumers. And I think from an investor point of view, this probably creates the greatest situation for Frontier in that we'll be the ULCC for the United States with over 95% of the capacity having costs 40% higher.

So it could be a great day for Frontier. We wanted to be the nationwide ULCC, but we just may get there in a different path.

BRIAN SOZZI: Barry, in the slide deck for the investor day that you put out, it mentioned that you were trying to get $100 extra in ancillary revenue per passenger-- just extra money from passengers. How will you go about doing this? Does that mean more fees for various things to get onto the plane?

BARRY BIFFLE: So I don't know that necessarily new fees, but a lot of new products. We're going to have-- for example, we just launched our Go Wild pass today. We're going to have a travel site that we launch next year offering hotels, cars, cruise lines, that sort of thing.

And so what we're looking to do is add more value for the overall travel experience and sell them more and more options. And that just enables us to further lower our fares and enable more people to travel. And I think what we have to remember is that a third of customers in Frontier don't have any options. They just choose a basic fare and travel.

And so what we can do is continue to provide other valuable services and products so that we can kind of offset that and so we can enable more and more people to fly. So we're really excited about getting to $100. We're already number one at $78 in the world. We've said we'll be $85 by this time next year. And, yes, our long-term target will be to be over $100.