Frontier Airlines Reports Second Quarter 2023 Financial Results

DENVER, Aug. 01, 2023 (GLOBE NEWSWIRE) -- Frontier Group Holdings, Inc. (Nasdaq: ULCC), parent company of Frontier Airlines, Inc., today reported financial results for the second quarter of 2023 and issued guidance for the third quarter and full year 2023.

Second Quarter 2023 Summary:

• Achieved total operating revenues of $967 million, six percent higher than the 2022 quarter
• Cost per available seat mile ("CASM") improved 20 percent over the 2022 quarter
• Adjusted CASM (excluding fuel), a non-GAAP measure, improved five percent over the 2022 quarter
• Realized a pre-tax margin of 9.1 percent, a post-pandemic record
• Generated ancillary revenue of $80 per passenger, $5 higher per passenger than the 2022 quarter
• Utilization averaged 11.5 hours per day
• Ended the quarter with $780 million of unrestricted cash and cash equivalents
• Took delivery of three A321neo aircraft during the second quarter, increasing the proportion of the fleet comprised of the more fuel-efficient A320neo family aircraft to 75 percent as of June 30, 2023, the highest of all major U.S. carriers
• Generated 103 available seat miles (“ASM”) per gallon, reaffirming Frontier's position as the most fuel-efficient of all major U.S. carriers and its ongoing commitment to being “America's Greenest Airline” as measured by ASMs per fuel gallon consumed
• Executed an agreement with CleanJoule to purchase up to 30 million gallons of sustainable aviation fuel, further demonstrating the Company's commitment to reduce carbon emissions in air transportation
• Launched 26 new routes during the quarter, including new routes from Atlanta, Baltimore, Chicago Midway, Cleveland, Detroit, Houston, Orlando, San Juan, St. Thomas and Tampa, giving customers greater access to Frontier's Low Fares Done Right
  

“Results this quarter reflect strong execution by Team Frontier. Our earnings before tax delivered our highest post-pandemic, pre-tax margin on 36 percent capacity growth and 35 additional aircraft compared to the 2019 quarter, and we delivered a five percent improvement in non-fuel adjusted unit costs over the prior year quarter," commented Barry Biffle, President and CEO. "I'm proud of the strong work ethic of Team Frontier employees as we managed through the challenging conditions presented by June weather. We are focused on delivering Low Fares Done Right, including sustaining our cost advantage over the industry as we grow the airline.”

Second Quarter 2023 Select Financial Highlights

The following is a summary of second 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 second quarter of 2023 was $967 million, reflecting a revenue per available seat mile (“RASM”) of 10.4 cents, on capacity growth of 23 percent as compared to the 2022 quarter. The RASM decrease from 12.0 cents in 2022 was driven by a nine percent decrease in revenue per passenger to $127 and stage length, which was eight percent higher, partially offset by a one percentage-point increase in load factor to 85.3 percent, all compared to the 2022 quarter.

Ancillary revenue per passenger for the second quarter was $80, six percent higher than the 2022 quarter.

Cost Performance

Total operating expenses for the second quarter of 2023 were $888 million, including $244 million of fuel expenses at an average cost of $2.69 per gallon. Adjusted (non-GAAP) total operating expenses (excluding fuel) were $644 million.

CASM was 9.51 cents in the second quarter of 2023, 20 percent lower than the 2022 quarter. CASM (excluding fuel), a non-GAAP measure, was 6.90 cents, eight percent lower than the 2022 quarter.

Earnings

Pre-tax income for the second quarter of 2023 was $88 million, reflecting a margin of 9.1 percent.

Net income for the second quarter of 2023 was $71 million.

Cash and Liquidity

Unrestricted cash and cash equivalents as of June 30, 2023 was $780 million.

Fleet

As of June 30, 2023, Frontier had a fleet of 126 Airbus single-aisle aircraft, as scheduled below, all financed through operating leases that expire between 2023 and 2035.

Frontier is “America's Greenest Airline” measured by ASMs per fuel gallon consumed. During the second quarter of 2023, Frontier generated 103 ASMs per gallon.

Frontier took delivery of three A321neo aircraft during the second quarter of 2023, increasing the proportion of the fleet comprised of the more fuel-efficient A320neo family aircraft to 75 percent as of June 30, 2023, 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 June 30, 2023, approximately 70 percent of future committed aircraft deliveries, including direct leases, are for A321neo aircraft. As of June 30, 2023, the Company had commitments for an additional 222 aircraft to be delivered through 2029, including purchase commitments for 67 A320neo aircraft and 150 A321neo aircraft as well as commitments for another 5 A321neo aircraft through direct leases.

Forward Guidance

The guidance provided below is based on the Company's current estimates and is not a guarantee of future performance. This guidance is subject to significant risks and uncertainties that could cause actual results to differ materially, including the risk factors discussed in the Company's reports on file with the Securities and Exchange Commission (the "SEC"). Frontier undertakes no duty to update any forward-looking statements or estimates, except as required by applicable law. Further, this guidance excludes special items and the reconciliation of non-GAAP measures to the comparable GAAP measures because such amounts cannot be determined at this time.

Looking forward, the Company expects third-quarter capacity to grow by 21 to 23 percent over the comparable 2022 quarter and full-year capacity to grow 19 to 21 percent over the prior year. Third quarter adjusted (non-GAAP) pre-tax margin (excluding special items) is expected to be 4 to 7 percent, and the full year 2023 adjusted (non-GAAP) pre-tax margin (excluding special items) is expected to be 4 to 6 percent. These ranges reflect the impact of weather-related cancellations in the third quarter, slightly higher fuel cost per gallon than previous guidance, and a moderation in average fares caused primarily by a shift in demand to competing long-haul international destinations.

The current forward guidance estimates for the third quarter 2023 and full-year 2023 are presented in the following table:

Conference Call

The Company will host a conference call to discuss second quarter 2023 results today, August 1, 2023, at 4:30 p.m. Eastern Time (USA). Investors may listen to a live, listen-only webcast available on the investor relations section of the Company's website at https://ir.flyfrontier.com/news-and-events/events. The call will also be archived and available for 90 days on the investor relations section of the Company's website.

About Frontier Airlines

Frontier Airlines, Inc., a subsidiary of Frontier Group Holdings, Inc. (Nasdaq: ULCC), is committed to “Low Fares Done Right.” Headquartered in Denver, Colorado, the Company operates 126 A320 family aircraft and has the largest A320neo family fleet in the U.S. The use of these aircraft, along with Frontier’s high-density seating configuration and weight-saving initiatives, have contributed to Frontier’s continued ability to be the most fuel-efficient of all major U.S. carriers when measured by ASMs per fuel gallon consumed. With more than 220 new Airbus planes on order, including direct leases, Frontier will continue to grow to deliver on the mission of providing affordable travel across America.

Cautionary Statement Regarding Forward-Looking Statements and Information

Certain statements in this release should be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the Company’s current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Words such as “expects,” “will,” “plans,” “intends,” “anticipates,” “indicates,” “remains,” “believes,” “estimates,” “forecast,” “guidance,” “outlook,” “goals,” “targets” and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. All forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law.

Actual results could differ materially from these forward-looking statements due to numerous risks and uncertainties relating to the Company's operations and business environment including, without limitation, the following: unfavorable economic and political conditions in the states where the Company operates and globally, including an inflationary environment and potential recession, and the resulting impact on cost inputs and/or consumer demand for air travel; the highly competitive nature of the global airline industry and susceptibility of the industry to price discounting and changes in capacity; the Company's ability to attract and retain qualified personnel at reasonable costs; the potential future impacts of the COVID-19 pandemic, and possible outbreaks of another disease or similar public health threat in the future, on the Company’s business, operating results, financial condition, liquidity and near-term and long-term strategic operating plan, including possible additional adverse impacts resulting from the duration and spread of the pandemic; high and/or volatile fuel prices or significant disruptions in the supply of aircraft fuel, including as a result of the war between Russia and Ukraine; the Company's reliance on technology and automated systems to operate its business and the impact of any significant failure or disruption of, or failure to effectively integrate and implement, the technology or systems; the Company’s reliance on third-party service providers and the impact of any failure of these parties to perform as expected, or interruptions in the Company's relationships with these providers or their provision of services; adverse publicity and/or harm to the Company's brand or reputation; reduced travel demand and potential tort liability as a result of an accident, catastrophe or incident involving the Company, its codeshare partners or another airline; terrorist attacks, international hostilities or other security events, or the fear of terrorist attacks or hostilities, even if not made directly on the airline industry; increasing privacy and data security obligations or a significant data breach; further changes to the airline industry with respect to alliances and joint business arrangements or due to consolidations; changes in the Company's network strategy or other factors outside its control resulting in less economic aircraft orders, costs related to modification or termination of aircraft orders or entry into less favorable aircraft orders; the Company's reliance on a single supplier for its aircraft and two suppliers for its engines, and the impact of any failure to obtain timely deliveries, additional equipment or support from any of these suppliers; the impacts of union disputes, employee strikes or slowdowns, and other labor-related disruptions on the Company's operations; extended interruptions or disruptions in service at major airports where the Company operates; the impacts of seasonality and other factors associated with the airline industry; the Company's failure to realize the full value of its intangible assets or its long-lived assets, causing the Company to record impairments; the costs of compliance with extensive government regulation of the airline industry; costs, liabilities and risks associated with environmental regulation and climate change; the Company's inability to accept or integrate new aircraft into the Company's fleet as planned; the impacts of the Company's significant amount of financial leverage from fixed obligations, the possibility the Company may seek material amounts of additional financial liquidity in the short-term and the impacts of insufficient liquidity on the Company's financial condition and business; failure to comply with the covenants in the Company's financing agreements or failure to comply with financial and other covenants governing the Company's other debt; changes in, or failure to retain, the Company's senior management team or other key employees; current or future litigation and regulatory actions, or failure to comply with the terms of any settlement, order or arrangement relating to these actions; increases in insurance costs or inadequate insurance coverage; and other risks and uncertainties set forth from time to time under sections captioned “Risk Factors” in the Company's reports and other documents filed with the SEC, including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 22, 2023.

Reconciliations of Non-GAAP Financial Information

The Company is providing below a reconciliation of GAAP financial information to the non-GAAP financial information provided. The non-GAAP financial information is included to provide supplemental disclosures because the Company believes they are useful additional indicators of, among other things, its operating and cost performance. These non-GAAP financial measures have limitations as analytical tools. Because of these limitations, determinations of the Company’s operating performance or CASM excluding unrealized gains and losses, special items or other items should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. These non-GAAP financial measures may be presented on a different basis than other companies using similarly titled non-GAAP financial measures.

Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) and Adjusted Pre-tax Income (Loss)
($ in millions) (unaudited)

Adjusted net income (loss) and adjusted pre-tax income (loss) have limitations as analytical tools. Adjusted net income (loss) and adjusted pre-tax income (loss) do not reflect the impact of certain cash charges resulting from matters the Company considers not to be indicative of the Company's ongoing operations and do not reflect the Company's cash expenditures, or future requirements, for capital expenditures or contractual commitments, and other companies in the industry may calculate adjusted net income (loss) and adjusted pre-tax income (loss) differently than the Company does, limiting their usefulness as comparative measures. Because of these limitations, adjusted net income (loss) and adjusted pre-tax income (loss) should not be considered in isolation from or as a substitute for performance measures calculated in accordance with GAAP. In addition, because derivations of adjusted net income (loss) and adjusted pre-tax income (loss), including adjusted pre-tax margin, are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of net income, including adjusted net income (loss) and adjusted pre-tax income (loss), as presented may not be directly comparable to similarly titled measures presented by other companies. For the foregoing reasons, adjusted net income (loss) and adjusted pre-tax income (loss) have significant limitations which affect their use as indicators of the Company's profitability. Accordingly, you are cautioned not to place undue reliance on this information.

Reconciliation of Total Operating Expenses to Total Operating Expenses (excluding fuel), Adjusted Total Operating Expenses and Adjusted Total Operating Expenses (excluding fuel)
($ in millions) (unaudited)

Total operating expenses (excluding fuel), adjusted total operating expenses and adjusted total operating expenses (excluding fuel) have limitations as analytical tools and other companies in the industry may calculate total operating expenses (excluding fuel), adjusted total operating expenses and adjusted total operating expenses (excluding fuel) differently than the Company does, limiting their usefulness as comparative measures. Because of these limitations, total operating expenses (excluding fuel), adjusted total operating expenses and adjusted total operating expenses (excluding fuel) should not be considered in isolation from or as a substitute for performance measures calculated in accordance with GAAP. In addition, because derivations of total operating expenses (excluding fuel), adjusted total operating expenses and adjusted total operating expenses (excluding fuel) are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of total operating expenses, including total operating expenses (excluding fuel), adjusted total operating expenses and adjusted total operating expenses (excluding fuel) as presented may not be directly comparable to similarly titled measures presented by other companies. For the foregoing reasons, total operating expenses (excluding fuel), adjusted total operating expenses and adjusted total operating expenses (excluding fuel) have significant limitations which affect their use as an indicator of the Company's profitability. Accordingly, you are cautioned not to place undue reliance on this information.

Reconciliation of Net Income (Loss) to EBITDA and EBITDAR and to Adjusted EBITDA and Adjusted EBITDAR
($ in millions) (unaudited)

Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest
(unaudited)

Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest
(unaudited)

Reconciliation of Net Income (Loss) per Share to Adjusted Net Income (Loss) per Share
(unaudited)

Adjusted net income (loss) per share has limitations as an analytical tool. Adjusted net income (loss) per share does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations and does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments, and other companies in our industry may calculate Adjusted net income (loss) per share differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted net income (loss) per share should not be considered in isolation from or as a substitute for performance measures calculated in accordance with GAAP. In addition, because derivations of adjusted net income are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of net income, including Adjusted net income (loss) per share, as presented may not be directly comparable to similarly titled measures presented by other companies. For the foregoing reasons, Adjusted net income (loss) per share has significant limitations which affect its use as an indicator of our profitability. Accordingly, you are cautioned not to place undue reliance on this information.

Contacts:

Jennifer F. de la Cruz
Corporate Communications
Email: [email protected]
Phone: 720.374.4207

David Erdman
Investor Relations
Email: [email protected]
Phone: 720.798.5886