For airline stock Frontier Group (NASDAQ:ULCC), labor troubles are proving to be just as much of a problem as they were at other airlines. In fact, Frontier is down nearly 4.5% as flight attendants rebel against new plans that would ultimately see salaries cut substantially for new hires.
The whole thing started when Frontier decided to require flights to return to their “home stations” every night. Sounds like a comparatively minor change, but flight attendants quickly pointed out that such a plan wasn’t actually covered by the current labor agreement. Further, it would reduce the pay for new hires up to 20%, which is a pretty big pay cut for anyone to take without a lot of advance planning.
Frontier originally put the plan in place as a means to reduce flights in oversold markets, increase the availability of premium seating, and make things more efficient. It would save about $200 million just in 2024 alone.
Savings on the Backs of Flight Attendants
It’s hard to buck a $200 million savings, but the flight attendants raised a few good points. First, the new plan would pretty much put an end to tax-free per diems (allowances that cover costs while away from home). Per diems for overnight travel must be reported on taxes, but those for more than overnight don’t. So, that’s an extra bill for the flight attendants.
Meanwhile, they also have to cover some of their own lodging and commute costs as they’ll basically be home every night. Thus, the $200 million savings come with big new bills for the flight attendants, and that’s not a situation they’re likely to be pleased about.
Is Frontier Airlines Stock a Good Buy?
Turning to Wall Street, analysts have a Hold consensus rating on ULCC stock based on one Buy and seven Holds assigned in the past three months, as indicated by the graphic below. After a 25.34% loss in its share price over the past year, the average ULCC price target of $7.75 per share implies 8.32% upside potential.
