Can it soar? Frontier's IPO and the Making of the Airline that Charges for Water

Frontier Airlines, the one that charges you for water on flights, has filed for a $100 million initial public offering (IPO) with the Securities and Exchange Commission (SEC). According to Bloomberg, this deal has been in the works for over a year, and the company has been experiencing substantial growth. Frontier reported an income of $200 million in the previous calendar year, a net increase of 40% since 2014. 

The U.S. airline industry hasn't seen an IPO since the soon-to-be defunct Virgin America went public in 2014, debuting at an initial price per share at $23 before rising and settling in the $50-$58 range. While Virgin's IPO might provide Frontier's investors with some hope, the economics of American based airlines have drastically changed in the past couple of years. The stock prices of respective U.S. based carriers have risen drastically in the past few years, so much so that Berkshire Hathaway, Warren Buffet's famed company, did a complete 180 on airline stocks and invested over $2 billion in American, Delta, Southwest, and United, something I briefly covered here. This should give pause to potential Frontier IPO chasers, as one wonders how much room on the exchange and in investors minds there is for yet another airline. 

There's also the problem of competition, primarily from Spirit and Allegiant, both public companies performing better than Frontier and flying mostly the same routes. Will it come down to a battle of yellow planes versus ones with animals on them? Admittedly I love the animals, and I can't be the only traveler who refuses to fly Spirit due to their reputation as the worst airline in the world. I also have a soft spot for Frontier, as I took my first ever flight (and several subsequent ones) on the carrier. This was before they transitioned to being a budget airline and actually served you refreshments. My most recent Frontier flights were hellish experiences from DSM - DEN - SFO and back. After that trip, I'll never fly Frontier again unless the price is just too good to pass up. 

Negatives aside, Frontier has achieved record profitability in the past couple of years and, as Skift points out, the airline has the potential to achieve great things, or at least make its investors a decent amount of money. If previous airline IPOs serve as guidelines, we should expect Frontier's price per share to debut somewhere in the 20s range, giving it a decent amount of clearance before hitting a ceiling in the 50s where most airlines currently sit. Until the initial offering price and date are announced, we'll just have to sit back and wonder whether Frontier will be better to investors than it is to passengers.