Report Suggests Frontier Airlines Is Going Public

by Josh Lew
Last updated: 11:30 AM ET, Mon March 7, 2016

Photo courtesy of Frontier Airlines

Frontier Airlines could be making preparations to go public. The low cost carrier, which is based in Denver, has been the subject of rumors over the past few months. It has yet to confirm an IPO, but Bloomberg has reported that the airline has hired several banks, including Deutsche Bank, Barclays and JP Morgan Chase, to prepare an IPO.

The sources, however, asked not be named because the airline has yet to officially announce that it will go public. Even though the rumors are gaining steam, it appears that Frontier still wants to keep its stock offering plans under wraps. Neither the airline nor the banks involved offered any comment about the report.

Frontier waiting to announce plans for an IPO

When rumors of a public offering started circulating, Frontier's CEO Barry Biffle was quick to say that it was too early for the airline to enter the stock market. "We want to continue to build on our track record. There may be a time and a place in the future. But right now we are concentrated on improving the airline."

As of right now, Frontier is still a privately held business. It is owned by Indigo Partners, a private equity firm based in Phoenix. The carrier celebrated its second decade in business by turning a profit for the first time in 2014. It has also developed one of the lowest cost-per-seat ratios in the industry, which should help it appear very attractive to investors.

Finding ultra-budget success

Frontier turned itself into an ultra-budget airline after Indigo bought it from now-bankrupt Republic Airways. Its success under Indigo's ownership has fueled speculation that an IPO was on the horizon. It has been a question of when such a move would take place, not if such a move would take place.

If the rumors are indeed true, Frontier will be the first major airline to go public since Virgin America came onto the stock market in 2014. Virgin attracted a lot of interest from investors after touting a financial turnaround that was quite similar to the one that Frontier is currently enjoying. So there is certainly a strong precedent for successful private airlines to go public.

What will going public mean for Frontier's fliers?

Frontier's IPO will certainly be good for Indigo Partners and for the airline, but what will it mean for fliers? Frontier seems to be in a good position as far as its operating costs and business model, so perhaps little will change in terms of the overall flying experience. Other publicly held carriers have been under pressure from shareholders to decrease their operating costs, but Frontier is already ahead in that particular game.

Ideally, going public will allow the airline to expand into new markets. That might not be a good thing for fliers who dislike the ultra-budget flying experience, but it could be good news for smaller markets that budget airlines seem to favor these days. As Frontier expands, it could bring competition to these underserved markets and help to lower prices.

For now, however, Frontier is keeping quiet about its plans, so the only thing to do is wait for an official announcement. It now appears that such an announcement is coming sooner rather than later.