Frontier vs. Expedia and Orbitz: How the Airline Hopes to Lure Travelers Back to Direct Booking

Last Updated Jun 4, 2010 12:01 PM EDT

When I spoke with Republic (RJET) CEO Bryan Bedford last month, he mentioned how Republic subsidiary Frontier was severely lagging in getting people to book directly with the airline instead of via third party sellers. Changes by Frontier announced this week seem to be an effort to address that problem in a few different ways.

Why is this even a problem? A couple of reasons. First, the cost to the airline when people book via third party sites is higher than when people book directly. Also, when people book via third party sites, they're only seeing the cheapest fares, whereas Frontier actually offers a three tier system that provides more value at a slightly higher cost. You can only buy those premium tickets when booking directly. This sort of thing is an issue for all airlines, actually, but Frontier's unique fare structure magnifies the issue.

Frontier is directly addressing the problem by repealing the $25 fee for booking via the call center or at the airport. This makes the company one of the few airlines to not charge for that service, and I imagine officials hope it will encourage people who use third parties to come to the airline directly.

It may seem strange to encourage people to use a higher cost call center, but the gamble is that the revenue will be higher as well. Agents have the ability to upsell into the higher value fares on the phone. Besides, it's still likely cheaper for the airline than booking online via a third party site.

Let's talk more about that fare structure. Frontier offers a three-tier fare system called AirFairs with the lowest being Economy, then Classic, and lastly Classic Plus. The higher fares effectively bundle together some related benefits, such as lower change fees, better seating and higher mileage awards. The problem? While all three fare categories are available directly via Frontier, third party sites only offer economy fares thanks to clunky technological issues, courtesy of the global distribution systems that power the booking engines.

This means that those people who book on third party sites are more likely to buy the cheap economy fares even if they'd prefer Classic or Classic Plus fares. They just don't know that the other options exist, so it's up to Frontier to try to work around that hurdle.

Another change involves luring passengers to higher fares by giving Classic Plus buyers entrance to Frontier's airport lounge in Milwaukee. I imagine that once Frontier has one in Denver, that will be included as well. What does this have to do with encouraging direct booking? Well, offering more attractive products that can only be bought direct from the airline certainly should help bring people over. (Most likely, this is just part of the process of combining the options and benefits programs at Frontier and Midwest. The benefit to the airline is still the same.)

Frontier is also now allowing everyone to reserve a seat in advance without charge. Previously, economy-fare passengers didn't get a seat assignment until they checked in. Although it seems counter-intuitive to add a benefit for all fare classes, it turns out there's a good reason for it.

The way third-party ticket sites like Orbitz or Travelocity run, people who buy a Frontier ticket aren't ever likely to know that they won't get seat assignments in advance. In addition, most customers won't be offered an option to pay more in order to get that seat assignment.

At the same time, people generally assume that they'll be able to reserve a seat in advance unless they're flying Southwest (LUV). So for those people, buying a ticket and then finding out later that they've got no seat assignment probably led to a good deal of anger. This move rectifies that problem.

Ultimately, this is just another step in Republic's efforts to harmonize the Midwest and Frontier products into one. This time, it just happens to be that the changes are all customer-positive. I imagine they won't all be that way, but that's the nature of combining businesses.