These Low-Cost Airlines Are Getting Hundreds Of New Passenger Jets
Discount carrier Frontier Airlines is set to get a whole bunch of new jets that could give it more options as it skirmishes with United Airlines (UAL) over cheap fares.
XAutoplay: On | OffBoeing (BA) rival Airbus (EADSY) on Wednesday announced a deal to sell 430 jets to Frontier Airlines and three other partner airlines of Bill Franke’s Indigo Partners, a big investor in discount airlines, in a deal valued at as much as $49.5 billion.
The memorandum-of-understanding agreement, which Airbus said was its “largest single announcement ever,” was announced at the Dubai Airshow. It would hand Frontier 100 A320neo jets — a narrow-body jet that usually seats around 150 people — and 34 A321neos, which typically seat around 185 people.
The remaining A320s and A321s would go to other ultra discounters when the agreements with each are finalized: Wizz Air in Hungary, JetSmart in Chile, and Volaris in Mexico.
“This significant commitment for 430 additional aircraft underscores our optimistic view of the growth potential of our family of low-cost airlines, as well as our confidence in the A320neo Family as a platform for that growth,” Franke, managing partner of Indigo, said in a statement on Wednesday.
United Airlines closed up 0.5% on the stock market today, Delta Air Lines (DAL) rose 0.9%, while American Airlines (AAL) climbed 3%, and Southwest (LUV) added 1.6%. Ultra low-cost carrier Spirit Airlines (SAVE) rallied 2.7%, and Alaska Air (ALK) jumped 4.5%.
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The deal comes as new types of jets give budget carriers more ways to make their business models work.
Frontier, a carrier known for the “National-Geographic”-esque portraits of animals on its tail fins, this year has made more of a push into Denver, a big, profitable United hub. United, which has tried to match Frontier and Spirit on some fares in its biggest markets, this summer said Frontier’s move amounted to a tacit admission that cracks were forming in the ultra-low-cost model.
United President Scott Kirby, during the carrier’s second-quarter earnings call, said that in moving into a hub, Frontier was taking on the much more complicated duties of handling connecting flights. He added the battle was one that “I guarantee United will win.”
But Airbus’ fuel-efficient A321 jets have made low-cost long-haul flights more viable. Such flights have become particularly common between Europe and the U.S. The cheaper airfares offered by the likes of Norwegian Air and WOW air have chipped away at the stronghold Delta, American and United had built up over the Atlantic.
JetBlue (JBLU), which has been considering whether offer flights to Europe, has added A321neos to its fleet and has an option to take delivery of the Airbus A321LR — an alternate version of the A321neo.
On its website, Airbus says the A321LR is “ideally suited to transatlantic routes, and enables airlines to tap into new long-haul markets that were not previously accessible with current single-aisle aircraft.”