One of the most prominent investors in the low cost aviation sector says he expects to see consolidation of budget carriers in the US market.
Mirroring the transformation of the traditional market into the big four legacy carriers, Bill Franke expects to see carrier consolidation cascade down into the low cost sector.
"If you want to see how the international aviation landscape is going to evolve, just look to the United States, where consolidation has left just four major legacy carriers to compete with the low-cost airlines that serve the rest of the market," said Franke, partner of private equity firm Indigo Partners which owns Frontier Airlines.
"As an aside, don’t we all wonder just how long it will take before the three to five lower-cost airlines in the States will consolidate?" Franke said during an address at an airline conference in Dublin.
Indigo Partners also has stakes in Hungary’s Wizzair and Mexico’s Volaris.
Franke cited the struggles of Southwest Airlines to rein in high operating costs and the move by Virgin America and JetBlue towards a legacy airline-style business model.
"As we see it that leaves the market under-served by the ultra-low cost model, which explains why we are in the business of moving Frontier in that direction," Franke said.
That sector is dominated by Spirit, Allegiant and Frontier.
"From where we stand, the future rests with low-cost short haul carriers or a measured product with a lower fare for the longer haul," he said.
