Frontier Group Holdings reports net income of $26 million in the third quarter

Frontier Group Holdings, Inc., parent company of Frontier Airlines, Inc., today reported financial results for the third quarter of 2024 and issued guidance for the fourth quarter and full year 2024.

Highlights:

• Total operating revenues were $935 million, 6 percent higher than the comparable 2023 quarter, on a 4 percent increase in capacity
• Revenue per available seat mile (“RASM”) was 9.28 cents, 2 percent higher than the comparable 2023 quarter
• RASM on a stage-length adjusted basis to 1,000 miles, a non-GAAP measure¹, was 8.59 cents, 5 percent lower than the comparable 2023 quarter, while RASM on a stage-length adjusted basis to 1,000 miles inflected positive in the second half of the quarter compared to the corresponding 2023 period
• Cost per available seat mile (“CASM”) was 9.10 cents, a reduction of 6 percent over the comparable 2023 quarter
• Adjusted CASM (excluding fuel), a non-GAAP measure, was 6.89 cents, on a 14 percent shorter average stage length; adjusted CASM (excluding fuel) on a stage-length adjusted basis to 1,000 miles, a non-GAAP measure², was 4 percent lower than the comparable 2023 quarter
• Pre-tax income margin was 2.9 percent and adjusted (non-GAAP) pre-tax loss margin was 1.1 percent, within guidance, notwithstanding the impact of Hurricane Helene
• Closed a new revolving credit facility secured by the Company’s loyalty and brand-related assets which enhanced liquidity by $205 million to a total of $781 million as of September 30, 2024
• Expanded the Company’s total PDP financing capacity by $113 million to $478 million, in the aggregate, relating to aircraft on order from Airbus that are currently scheduled for delivery through 2027 and certain deliveries scheduled in 2028
• Took delivery of five A321neo aircraft during the third quarter, increasing the proportion of the fleet comprised of the more fuel-efficient A320neo family aircraft to 81 percent as of September 30, 2024, the highest of all major U.S. carriers
• Frontier’s average fleet age was approximately 4.5 years as of September 30, 2024, making it the youngest among all U.S.-based carriers
• Generated 103 available seat miles (“ASMs”) per gallon, reaffirming Frontier’s position as “America’s Greenest Airline” as measured by fuel efficiency (ASMs per fuel gallon consumed during the third quarter, compared to all other major U.S. carriers)
• Announced 33 new routes as part of the expanded winter schedule, including the return of Washington Dulles, Palm Springs, CAand Burlington, VT, and the addition of a new station in Vail/Eagle County, CO

“Our revenue and network initiatives began to overcome oversupplied industry capacity as evidenced by RASM which inflected positive by mid-August,” commented Barry Biffle, Chief Executive Officer. “We expect maturity of our network and revenue initiatives and moderating industry capacity growth to set the stage to continue to grow RASM and, along with our industry leading cost performance, to drive a return to double-digit adjusted pre-tax margins by summer 2025.”

Third Quarter 2024 Select Financial Highlights

The following is a summary of third quarter select financial results, including both GAAP and adjusted (non-GAAP) metrics. Refer to “Reconciliations of Non-GAAP Financial Information” in the appendix of this release.

Revenue Performance

Total operating revenue for the third quarter of 2024 increased 6 percent to $935 million, net of approximately $5 million related to Hurricane Helene, on capacity growth of 4 percent, both compared to the corresponding 2023 quarter. Departures increased 17 percent over the comparable 2023 quarter as average stage length decreased 14 percent to 856 miles. Total revenue per passenger was $106 and flown load factor was 78.0 percent.

RASM was 9.28 cents, 2 percent higher compared to the corresponding 2023 quarter. RASM on a stage-length adjusted basis to 1,000 miles, a non-GAAP measure, was 8.59 cents, 5 percent lower than the comparable 2023 quarter, largely driven by the impact of excess industry seat capacity in domestic markets in the first half of the quarter. As the quarter progressed, RASM on a stage-length adjusted basis to 1,000 miles was higher in the second half of the quarter compared to the corresponding 2023 period, driven by the Company’s capacity reductions which were focused on off-peak days, maturity of new markets and the progress of the Company’s revenue initiatives, combined with overall moderation in industry capacity growth.

Cost Performance

Total operating expenses were $916 million in the third quarter, comprised of $261 million of fuel expenses at an average cost of $2.67per gallon, and $655 million of operating expenses (excluding fuel), which includes a $38 million non-recurring credit related to a legal settlement executed during the quarter, net of accumulated legal fees.

Excluding the non-recurring item, adjusted total operating expenses (excluding fuel), a non-GAAP measure, were $693 million, reflecting the Company’s ongoing aggressive cost management and the continuation of benefits from the cost savings program which has generated annual run rate cost savings of more than $100 million since it was launched in the third quarter of 2023.

CASM was 9.10 cents in the third quarter of 2024, 6 percent lower than the comparable 2023 quarter. CASM (excluding fuel), a non-GAAP measure, was 6.51 cents, 2 percent lower than the 2023 quarter. Adjusted CASM (excluding fuel), a non-GAAP measure, on a stage-length adjusted basis to 1,000 miles was 6.37 cents, 4 percent lower than the comparable 2023 quarter due to the benefits from the Company’s cost savings program and the cost benefit from two additional aircraft sale-leaseback transactions in the quarter, net of higher costs associated with an increase in departures driven by a lower average stage length, and higher costs related to fleet growth and reduced off-peak day-of-week capacity.

Earnings

Pre-tax income was $27 million for the third quarter of 2024, reflecting a pre-tax margin of 2.9 percent, while adjusted (non-GAAP) pre-tax loss was $10 million, reflecting an adjusted pre-tax loss margin of 1.1 percent.

Net income was $26 million for the third quarter of 2024 while adjusted (non-GAAP) net loss was $11 million.

New Credit Facilities

As previously announced, on September 26, 2024, the Company entered into a series of transactions designed to enhance liquidity and expand capacity for financing facilities intended to fund aircraft pre-delivery payments.

Specifically, the Company entered into a revolving credit facility which provides $205 million of commitments secured by the Company’s loyalty program and brand-related assets, and which, subject to certain terms, conditions and additional lending commitments, may be increased to $500 million. The facility also permits the Company to enter into additional indebtedness secured by the Company’s loyalty program and brand-related assets, which may provide for significant incremental liquidity, as desired, to the extent such indebtedness is pari passu to that of the revolving credit facility.

Additionally, the Company entered into new PDP financing facilities and amended its existing PDP financing facility, which increased the Company’s total PDP financing capacity to $478 million, in the aggregate, relating to aircraft on order from Airbus that are currently scheduled for delivery through 2027 and certain deliveries scheduled in 2028. The Company’s previous PDP financing facility provided up to $365 million of PDP financing for aircraft deliveries through 2026.

For additional details, refer to the Form 8-K filed on September 30, 2024 and Form 10-Q filed today, both with the Securities and Exchange Commission.

Liquidity

Total liquidity as of September 30, 2024 was $781 million, consisting of unrestricted cash and cash equivalents of $576 million and $205 million of availability from the Company’s revolving credit facility described above. Unrestricted cash and cash equivalents was $107 million net of debt.

In the third quarter, the Company was awarded damages related to litigation brought against a former aircraft lessor for breach of contract. A mutual settlement was executed shortly thereafter and proceeds of $40 million were received in early October.

Fleet

As of September 30, 2024, Frontier had a fleet of 153 Airbus single-aisle aircraft, as scheduled below, all financed through operating leases that expire between 2025 and 2036.

Frontier took delivery of five A321neo aircraft during the third quarter of 2024, all financed with sale-leaseback transactions. The Company has secured sale-leaseback financing commitments for expected deliveries through 2025 and approximately one-third of 2026 expected deliveries.

The proportion of Company’s fleet comprised of the more fuel-efficient A320neo family aircraft is approximately 81 percent as of September 30, 2024, the highest of all major U.S. carriers. The A321neo is expected to unlock meaningful scale efficiencies by way of fuel savings and higher average seats per departure. As of September 30, 2024, the Company had commitments for an additional 193 aircraft to be delivered through 2031, including purchase commitments for 27 A320neo aircraft and 166 A321neo aircraft, the latter of which represents 86 percent of future committed deliveries.

As previously disclosed, in September 2024, the Company executed an amendment with Airbus which defers certain aircraft deliveries with original delivery dates in 2025 through 2028, out to 2029 through 2031, lowering fleet inductions in each of the next four years, thereby reducing the Company’s financing needs and PDP commitments in the coming years.