Freddie Laker. Richard Branson. William Franke?
Although not a household name, William “Bill” Franke is the man we can thank for the ultra-low-carrier model in the USA. He also hired both Doug Parker (CEO of American) and Scott Kirby (President of United).
Franke is now 80 years old but still a managing partner at Phoenix-based Indigo Partners, a private equity group. His tenure has included overhauling America West, Spirit, and Frontier (where he is also Chairman). Quite a resume for someone most people have never heard of.
Hugo Martin of the Los Angeles Times recently sat down with Franke and published a Q&A. I’m going to quote parts of it that interest me and add commentary.
How It All Started
The governor of Arizona called and said, “Our local airline, America West Airlines, is in bankruptcy, the creditors have filed a motion to convert the Chapter 11 to a Chapter 7 liquidation. We are going to lose 6,000 or more jobs here in Arizona. I would appreciate it if you would go out and take a look at the airline.” I told the governor, “Look, all I know about airlines is that the boarding pass tells me I’m seat 16B.”
Perhaps he was being modest, because he took over America West, reorganized it, and acquired US Airways. Eventually, US Airways and American Airlines merged to create the world’s largest airline.
Spirit and Frontier
Next, he moved on to Spirit Airlines, which was a struggling Midwest-based airline in 2006. Franke moved the airline to Florida and radically changed the way business was done, adding fees for everything from seat assignments to water.
In effect, what we were doing was giving you a lower overall price while at the same time giving you the right to take those things or not take those things. We didn’t do a good enough job in explaining that to the consumers.
Successful at Spirit, Frontier became the next project.
But is it really the ancillary fees that have marked the fundamental transformation or something else?
You would agree that the most expensive asset of an airline is the airplane? Large airlines flew those historically six to eight hours a day. We fly ours 12 and 13 hours a day.
He also maximized aircraft utilization, something most U.S. carriers now accomplish.
Although legacies have now added “basic economy” fares, Franke is not worried. He sees that his work has opened up air travel to a new segment of the population rather than balkanized an existing market. Flying has become an attractive and sometimes cheaper alternative to driving or taking a bus or train.
On Airline Executive Leadership
Franke hired both Parker and Kirby. What is special about these men?
First thing they have to be is bright and open-minded and coachable. There are people in our business who are bright but are very set in their ways. They are not coachable. They probably don’t fit our mold…
Customer Service is NOT the Focus
Finally, Franke admits that customer service is not the focus, candidly noting that the low-cost model is based on price first and service second.
There is a certain push-comes-to-shove between customer service and the low-cost model that the market needs to understand. In Europe, they do understand. That’s the model.
For those who have suffered on Frontier or Spirit, I suppose I would not fault you for cursing Franke. But isn’t he right? At least you have the choice. I’m impressed by Franke’s legacy and the three airlines he has played an instrumental role in creating.