qxpilot27
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- Nov 11, 2004
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I guess we know now...
Horizon decides to redeploy Denver-based CRJ-700s
Sept. 20, 2006 Previous coverage
After Frontier announced its new plans, but before it released an RFP, additional background and perspective was provided in two Q&As: one with Pat Zachwieja (9/15), and another with Jeff Pinneo, Rudi Schmidt and Zachwieja (9/6).
Horizon Air and Frontier Airlines are in agreement. A changing competitive landscape for Frontier in Denver and pressing needs and emerging opportunities for Horizon call for new strategies. It’s time to amicably part ways, after nearly three years of successful Frontier JetExpress operations.
RFP requirements made choice clear
Horizon and several other regional airlines received Frontier’s request for proposal (RFP) late last week.
“Before we saw the RFP, we had hoped we’d identify more alignment between Horizon’s and Frontier’s interests, particularly because we knew that bringing back the CRJs would mean a significant adjustment for some of our Denver-based folks,” says Jeff Pinneo, president and CEO.
After much review of the RFP and analysis of alternative approaches, Horizon decided to transition the nine CRJ-700s currently based in Denver back into our mainline fleet.
“Frontier is clearly pursuing what it believes it needs to do to defend its territory and to profitably expand,” Pinneo says. “And while we would have liked to participate in that growth, it’s also clear that the 21 aircraft they require would represent about a $500 million commitment on our part. That’s a huge investment that, in order to be justified in the eyes of our shareholders, would have to outperform any alternative use for aircraft and capital within the Alaska Air Group network. Our needs for added lift on the native network, coupled with the financial returns associated with addressing them, were simply more compelling.”
Jobs available for all Denver team members
Currently, there are 216 Horizon employees based in Denver. Slightly more than half of them, the great majority of them pilots and flight attendants, commute from out of Colorado. Marne McCluskey, vice president, Employee Resources, emphasizes that there are jobs elsewhere at Horizon for all our employees in Denver.
“Our team members in Denver have done a great job, and we’d like nothing more than to see every one of them stay with the company,” McCluskey says. “But we also realize that this is a choice each individual must make based on his or her own circumstances. Employee Resources will work with leadership teams to keep these folks informed and help them make as smooth a transition as possible.”
Pinneo adds that he’s very proud of the excellent operational performance and quality service that Horizon’s Denver-based team continues to deliver under the JetExpress banner.
“Through this program, we’ve learned a great deal and grown in ways that would not otherwise have been possible,” Pinneo says. “We’ve clearly demonstrated how capable we are of providing high-quality contract flying services for other airline partners. And while we regret that we won’t be expanding on this good story, we look forward to what this move will allow us to do: improve service levels and reinforce our commitment to our traditional markets.”
Specifics of transition being finalized
Division leaders will be visiting Denver this week to field questions about the transition. Some of the answers are still being worked out. For example, when will the CRJ-700s return to Horizon’s mainline fleet? That timeline will be finalized in about three more weeks. What’s known now is that the first aircraft will return no earlier than sometime in the first quarter of next year and the complete transition is likely to take about a year.
“While the contract provides guidance on these matters, both companies are committed to developing a plan that is in the best mutual interest of our companies and our people,” Pinneo says. “From the very beginning, we couldn’t have asked for better partners than the people at Frontier as we worked together to build this program. The routines and relationships we’ve established will serve us well as we work together to plan the transition.”
Perspective from the Frontier side
The feeling is mutual, according to Jeff Potter, Frontier’s president and CEO.
“Over the course of the past three years, Horizon has proven to be a partner of the highest quality, both operationally and culturally,” Potter says. “While we are certainly disappointed that Horizon will not be participating in the bid process, we understand their need for organic growth under the Horizon Air banner. On behalf of our employees and customers, we thank Horizon for three years of great service as Frontier JetExpress. We look forward to working together over the next year toward a smooth transition.”
Frontier’s expansion of the JetExpress operation to 21 regional jets will allow it to lower costs by gaining economies of scale, spreading overhead costs over a larger number of aircraft. In addition, Frontier is forming a subsidiary airline to fly Q400s in order to feed additional traffic into its Denver hub.
These moves, Frontier hopes, will position it more favorably against competitors aggressively trying to gain a larger share of the Denver market – namely, United Airlines and Southwest Airlines.
More contract flying in our future?
Horizon has responded to several other airline RFPs since the Frontier deal, but we’ve yet to win additional contract flying.
“Oftentimes, operating cost is foremost in an airline’s choice of a contract partner, and the fact is we’re not the lowest-cost provider of this service,” Pinneo says. “Our unit costs are higher than most other regional airlines, for several reasons. Our chosen business model, unlike our competitors’, includes all the costs of running an independent airline, like reservations and marketing. And then there’s the scale of our operation, the number of fleet types we operate, and some of our labor rates. Being competitive for this kind of business in the future will hinge on the degree to which we can identify new avenues for reducing costs and improving our operating efficiencies.”
Change equals opportunity
“As difficult as change is to swallow, it’s the nature of our industry and our world, and much of our success hinges on being able to adapt,” Pinneo says. “Fortunately, this change is particularly well aligned with what we’re currently facing. It’s a very different world today than it was three years ago when we negotiated the contract with Frontier. The opportunities we see in our own network simply weren’t there before. As we know from own life experiences, when one door closes, another opens.”
Horizon decides to redeploy Denver-based CRJ-700s
Sept. 20, 2006 Previous coverage
After Frontier announced its new plans, but before it released an RFP, additional background and perspective was provided in two Q&As: one with Pat Zachwieja (9/15), and another with Jeff Pinneo, Rudi Schmidt and Zachwieja (9/6).
Horizon Air and Frontier Airlines are in agreement. A changing competitive landscape for Frontier in Denver and pressing needs and emerging opportunities for Horizon call for new strategies. It’s time to amicably part ways, after nearly three years of successful Frontier JetExpress operations.
RFP requirements made choice clear
Horizon and several other regional airlines received Frontier’s request for proposal (RFP) late last week.
“Before we saw the RFP, we had hoped we’d identify more alignment between Horizon’s and Frontier’s interests, particularly because we knew that bringing back the CRJs would mean a significant adjustment for some of our Denver-based folks,” says Jeff Pinneo, president and CEO.
After much review of the RFP and analysis of alternative approaches, Horizon decided to transition the nine CRJ-700s currently based in Denver back into our mainline fleet.
“Frontier is clearly pursuing what it believes it needs to do to defend its territory and to profitably expand,” Pinneo says. “And while we would have liked to participate in that growth, it’s also clear that the 21 aircraft they require would represent about a $500 million commitment on our part. That’s a huge investment that, in order to be justified in the eyes of our shareholders, would have to outperform any alternative use for aircraft and capital within the Alaska Air Group network. Our needs for added lift on the native network, coupled with the financial returns associated with addressing them, were simply more compelling.”
Jobs available for all Denver team members
Currently, there are 216 Horizon employees based in Denver. Slightly more than half of them, the great majority of them pilots and flight attendants, commute from out of Colorado. Marne McCluskey, vice president, Employee Resources, emphasizes that there are jobs elsewhere at Horizon for all our employees in Denver.
“Our team members in Denver have done a great job, and we’d like nothing more than to see every one of them stay with the company,” McCluskey says. “But we also realize that this is a choice each individual must make based on his or her own circumstances. Employee Resources will work with leadership teams to keep these folks informed and help them make as smooth a transition as possible.”
Pinneo adds that he’s very proud of the excellent operational performance and quality service that Horizon’s Denver-based team continues to deliver under the JetExpress banner.
“Through this program, we’ve learned a great deal and grown in ways that would not otherwise have been possible,” Pinneo says. “We’ve clearly demonstrated how capable we are of providing high-quality contract flying services for other airline partners. And while we regret that we won’t be expanding on this good story, we look forward to what this move will allow us to do: improve service levels and reinforce our commitment to our traditional markets.”
Specifics of transition being finalized
Division leaders will be visiting Denver this week to field questions about the transition. Some of the answers are still being worked out. For example, when will the CRJ-700s return to Horizon’s mainline fleet? That timeline will be finalized in about three more weeks. What’s known now is that the first aircraft will return no earlier than sometime in the first quarter of next year and the complete transition is likely to take about a year.
“While the contract provides guidance on these matters, both companies are committed to developing a plan that is in the best mutual interest of our companies and our people,” Pinneo says. “From the very beginning, we couldn’t have asked for better partners than the people at Frontier as we worked together to build this program. The routines and relationships we’ve established will serve us well as we work together to plan the transition.”
Perspective from the Frontier side
The feeling is mutual, according to Jeff Potter, Frontier’s president and CEO.
“Over the course of the past three years, Horizon has proven to be a partner of the highest quality, both operationally and culturally,” Potter says. “While we are certainly disappointed that Horizon will not be participating in the bid process, we understand their need for organic growth under the Horizon Air banner. On behalf of our employees and customers, we thank Horizon for three years of great service as Frontier JetExpress. We look forward to working together over the next year toward a smooth transition.”
Frontier’s expansion of the JetExpress operation to 21 regional jets will allow it to lower costs by gaining economies of scale, spreading overhead costs over a larger number of aircraft. In addition, Frontier is forming a subsidiary airline to fly Q400s in order to feed additional traffic into its Denver hub.
These moves, Frontier hopes, will position it more favorably against competitors aggressively trying to gain a larger share of the Denver market – namely, United Airlines and Southwest Airlines.
More contract flying in our future?
Horizon has responded to several other airline RFPs since the Frontier deal, but we’ve yet to win additional contract flying.
“Oftentimes, operating cost is foremost in an airline’s choice of a contract partner, and the fact is we’re not the lowest-cost provider of this service,” Pinneo says. “Our unit costs are higher than most other regional airlines, for several reasons. Our chosen business model, unlike our competitors’, includes all the costs of running an independent airline, like reservations and marketing. And then there’s the scale of our operation, the number of fleet types we operate, and some of our labor rates. Being competitive for this kind of business in the future will hinge on the degree to which we can identify new avenues for reducing costs and improving our operating efficiencies.”
Change equals opportunity
“As difficult as change is to swallow, it’s the nature of our industry and our world, and much of our success hinges on being able to adapt,” Pinneo says. “Fortunately, this change is particularly well aligned with what we’re currently facing. It’s a very different world today than it was three years ago when we negotiated the contract with Frontier. The opportunities we see in our own network simply weren’t there before. As we know from own life experiences, when one door closes, another opens.”
