|
A Fledgling Airline
In 1993, Continental Airlines gave up several of its routes out of Denver because it couldn't make money flying to small cities in the hinterland. A group of entrepreneurs saw an opportunity. Picking up the name of a defunct local airline called Frontier, these executives started a low-cost carrier. Leasing two Boeing 737s, the new Frontier started flying to four cities in North Dakota the next year. That first year, the company carried almost 400,000 passengers and had 400 employees.
In a decade, Frontier went from a regional startup flying two planes on obscure routes to a nearly billion-dollar company and a major player in the low-cost category. Frontier offers service to more than 50 cities in the U.S., Canada and Mexico from its hub in Denver, where it's the No. 2 carrier after United Airlines, carrying 7.5 million passengers a year. The airline did $994 million in revenue during its last fiscal year and employs almost 5,000 people.
Yet when Bob Rapp joined the company two years ago as its first CIO, he found an IT shop more suited to a mom-and-pop business than one of the country's dozen or so biggest airlines. The data center, for example, was overstuffed. Roughly 150 servers were crammed into a room meant for 100. When the weather got hot, the air conditioning often broke. IT had to bring in fans and rent portable cooling units. "It was pretty scary, actually," Carolan says. "The technology and staffing hadn't grown at the pace the business had grown."
"This was a typical, very small shop," Rapp says. "The company was using EDS' Shares system; all the other support systems were designed for a small-office environment. The airline's technical infrastructure was not good. The airline was increasingly dependent on a well-performing IT infrastructure. We required a total overhaul of our network infrastructure. We're still going through that overhaul. A notion of architecture was absent, any idea of the end-to-end business processes. There's still plenty of architecture work to do."
For Frontier, Rapp was an ideal hire. He had spent five years working in IT at Southwest Airlines, which wrote the book on being a low-cost carrier. As vice president of systems at Southwest, Rapp was involved with rolling out ticketless travel and Internet booking. "Frontier reminded me of what Southwest Airlines must have been like when it was 10 years old," says Rapp. "Flying to Denver and experiencing the product and talking to CEO Jeff Potter, it seemed Frontier had the same kind of nucleus as Southwest. The growth potential is very large."
And so is the potential for technology. "Pace is the hardest thing," says Rapp. "We have been a laggard in the use of technology at Frontier compared to our peers. We want to be an innovator. You can't do that overnight. You can talk about the pace of investment, but there's internal process pace, performing on an individual level and institutionalizing best practices. All those elements involve pace. Growing intelligently is one of our biggest challenges -- not losing control of that growth and winding up in chaos."
While Rapp was beefing up the company's infrastructure, the airline hit some rough weather. In October 2005, the cost of jet aviation fuel jumped within weeks by nearly a buck a gallon. For Frontier, every penny increase per gallon translates into $1.7 million more in operating expenses a year -- costs that are hard to pass on to customers shopping for cheap airfares. Since 2004, fuel costs skyrocketed from 18% of the carrier's operating expenses to 31%. That turned into two years of annual loses, although when Frontier reported its fiscal year-end results in May, CEO Potter announced that the airline expected to return to profitability this summer.
At the same time, Frontier is suddenly facing competition from Southwest, which started flying out of Denver in January. Frontier has about 20% of the Denver airport market share, compared to United's 56% and Southwest's 3%. "It's a tough industry," Rapp says.
|
 |
|
|
