Frontier debut fizzles in its second US airline IPO

Bloomberg

Frontier Group Holdings Inc struggled to gain traction in its trading debut after selling shares at the bottom of a marketed range.
The stock slipped less than 1% to close at $18.85 in New York after an initial public offering at $19 a share. By contrast, rival discounter Sun Country Airlines Holdings Inc opened with a pop after an IPO in mid-March and was up 43% from the offering price through this week.
Frontier is betting that accelerating vaccination efforts and pent-up travel demand will buoy US airline traffic this summer, after last year’s unprecedented collapse in flying because of the coronavirus pandemic. But carriers from giants such as United Airlines Holdings Inc to a pair of startups will be competing fiercely for the leisure travelers that are Frontier’s lifeblood.
“If you think about the coronavirus as being a dam and the customers as the water, the vaccine is just chipping away at that dam and you’re slowly seeing the people flow through,” Frontier CEO Barry Biffle said.
The Denver-based discounter is looking to use its $266 million in IPO proceeds to fuel an aggressive growth plan in the coming years. Frontier’s offering raised a total $570 million, but half the shares sold came from existing stockholders and the company will get nothing from that part of the transaction.
William Franke, Frontier’s 83-year-old chairman and biggest investor, planned to sell 14.2 million shares in the offering, according to securities filings. Franke’s Indigo Partners, which invests in low-cost airlines around the world, acquired Frontier in 2013. The airline’s optimism now stems from the elevated US savings rate and the most recent round of government economic stimulus checks, Biffle said. The accelerated pace of vaccination campaigns is also likely to spur airline travel for summer and beyond.
Frontier has 156 of Airbus SE’s A320neo-family jets on order through 2028 and sees “plenty of white space out there to grow,” Biffle said. The company uses 96% of its capacity domestically and will look to nearby international markets, including Canada, over time. But for now “being domestic is pretty popular” because of Covid-19, Biffle said.
The company will face plenty of competition as airline giants revamp their networks to focus more on vacationers and less on business travellers, their traditional bread and butter.
Frontier features colourful animal portraits on its planes and crams passengers into seats with a 28-inch pitch — distance from a point on one seat to the same point on the seat in front of it.