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US airline passengers like ‘spoiled brats,’ says veteran investor after near $50 billion Airbus deal

  • Franke's Indigo Partners has signed a draft agreement to buy 430 Airbus planes
  • The mammoth order is a big bet on the growth of extreme budget air travel
  • Franke says many still don't understand the concept of true no-frills flights
Bill Franke, Managing Partner of Indigo Partners (L) and John Leahy, Airbus Chief Operating Officer Customers, Airbus Commercial Aircraft (R)
CNBC's David Reid
Bill Franke, Managing Partner of Indigo Partners (L) and John Leahy, Airbus Chief Operating Officer Customers, Airbus Commercial Aircraft (R)

Veteran airline investor Bill Franke has claimed that U.S. travelers are spoiled and need to be better educated about no-frills travel.

Franke's private equity firm, Indigo Partners, stunned observers at the Dubai Airshow Wednesday when it signed a draft agreement to buy 430 planes with a list price of nearly $50 billion. Indigo Partners holds stakes in four low-cost airlines who will take delivery of the planes.

Speaking to reporters after the official signing, Franke said in the United States, airline customers are yet to understand budget air travel.

"The consumer is essentially like your teenage spoiled brat. They had been flying with all the amenities for ever and ever and that's what they think they ought to get," Franke said.

"They don't want to pay any more for the ticket, they just want all the amenities," he added.

Franke said that in Europe about 40 percent of travellers fly the low-cost model while in the U.S. the figure was closer to about 6 or 7 percent.

According to the Statista website, the low-cost carrier model, in fact, holds almost 30 percent of the U.S. domestic market and includes airlines such as Delta, Southwest, and American Airlines.

It categorizes the likes of Spirit Airlines and Frontier as ultra-low cost carriers (ULLC's).

Franke's monster order with Airbus on Wednesday is a firm backing of the belief that extreme budget travel in the U.S. and elsewhere has scope to grow as travelers begin to accept the pared-down flying experience.

Phoenix-based Indigo Partners holds stakes in Frontier Airlines, Spirit Airlines, Hungary-based Wizz Air, Mexico's Volaris, and Chile's Jetsmart.

The private equity firm holds a reputation for running a profit in a notoriously difficult sector. The now 80-year-old Franke said his model aimed to find locations where people would prefer to fly, but were priced out.

"We are generally focussed where people want to get off a bus or off a train and get on an airplane. The reason they haven't been able to is because of the high cost of the airfare," he said.

Franke added that any surplus of aircraft around the world shouldn't damage his business as the key was to focus on profitable routes.

"It is not whether you have too many airplanes or he has too many. It is how we employ ours. And ours have been very successful," he said.