Frontier Airlines CEO Dave Siegel, who took the helm of the Denver-based airline in January 2012, has stepped down and will be replaced by a board-managed team of two.
Frontier president Barry Biffle would not elaborate on Siegel’s departure other than to say that the leadership restructuring is designed to fix myriad operational issues that have dogged the airline as it transitions into an ultra-low-cost carrier.
“This is about completing our strategy. We believe we’ve got the costs on the right track; we believe we’ve got the network on the right track,” he said. “We’ve just got to finish the last part of our promise of ‘Low fares done right,’ which is to run a reliable airline.”
Under Siegel’s leadership, the airline in April 2014 began switching to the ultra-low-cost-carrier, or ULCC, model to save money and increase profits.
In doing so, Frontier lowered fares but began charging for carry-on bags, non-alcoholic beverages and other amenities previously included in the ticket price. It also revamped its popular frequent-flier program.
In the process, customer complaints have skyrocketed and the airline was ranked the worst for on-time performance among the nation’s top 13 airlines in a federal report issued Monday.
Biffle cautioned, however, against confusing the operational issues with the airline’s overall ULCC strategy.
“The complaints were largely related to the call-center transition in the first quarter and the fact that we did not answer the phone,” he said. “On the other hand, operationally, prior to this change in strategy, we had not seen the best on-time performance in several years.”
Major elements of the ULCC strategy, which includes streamlining processes and restructuring its presence in Denver, have been successful, Biffle said.
However, those elements haven’t been without controversy. The airline came under fire from Mayor Michael Hancock with a November announcement of plans to cut flights and jobs at Denver International Airport.
Those cuts have been felt sharply. The latest DIA passenger traffic numbers available show a 31 percent decrease in Frontier’s passenger traffic in March over the same month last year.
Biffle, who aims to win back customer goodwill, will now co-helm the company with board chairman Bill Franke in a newly created office of the chief executive, which will be overseen by the board.
Franke will manage strategy, finances and “key supplier relationships,” while Biffle will head day-to-day airline management — roles not too far removed from their current responsibilities.
The two men have a history: Franke is the managing partner of investment firm Indigo Partners, which formerly was the controlling entity in Spirit Airlines, the ULCC for which Biffle was a vice president and marketing officer. Indigo Partners in August 2013 sold its stake in Spirit Airlines and then, in December 2013, finalized its purchase of Frontier from Republic Airways.
Biffle joined Frontier in July
, three months after the ULCC transition officially began.
A change of leadership after an acquisition — whether it’s immediate, a year or two after the deal closes, or the result of internal turbulence — is not uncommon, said John Challenger, CEO of the global outplacement company Challenger, Gray & Christmas
.
“Sometimes the former CEO can be scapegoated and take the fall for the problems that have arisen,” he said. “The fact that they had a lot of issues … can be laid at the feet of the people running Frontier before, and a new team can come in and say to the various constituents that ‘we are here to fix it, and that’s going to be our top priority.’ “
However, such transitions typically involve a new management team instead of a co-management office.
Turning over management reins to Franke, a former CEO of Circle K convenience stores, could be a gamble, said George Hamlin, president of Hamlin Transportation Consulting.
“Running airlines are a somewhat more complex business — and likely need to be more customer-friendly — than convenience stores,” Hamlin said. “And it’s committee of two. If you have a CEO and a COO, why not call them that?”
Hamlin floated the possibility that Siegel chose to no longer be associated with Frontier because of the intensely public turmoil around the airline. If not, he said, Siegel’s departure is a bad omen.
“When something like this happens, it’s either a significant personal problem or it’s not a very good sign for the company,” he said. “If a personal problem is not the case, and this ULCC plan has been in effect for a year, that’s not a good sign. It means the plan is not working.”
Biffle, however, remains confident that Frontier will weather the turbulence, meet its cost targets by the end of 2015 and make things right for customers again.
“I don’t think people have given up on us,” he said.
“I think that they’re disappointed in us over the last couple of months and maybe over the last couple of years, but I’m telling you that we’re committed and our team is committed. We take pride in this, and we’re going to get it fixed.”
Laura Keeney: 303-954-1337, lkeeney@denverpost.com or twitter.com/LauraKeeney
