Frontier Airlines Reports Third Quarter 2024 Financial Results
DENVER, Oct. 29, 2024 /PRNewswire/ -- Frontier Group Holdings, Inc. (NASDAQ:ULCC), 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, CA and 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.
(unaudited, in millions, except for percentages and per share data)
Three Months Ended September 30,
2024
2023
As Reported (GAAP)
Adjusted
(Non-GAAP)
As Reported (GAAP)
Adjusted
(Non-GAAP)
Total operating revenues
$ 935
$ 935
$ 883
$ 883
Total operating expenses
$ 916
$ 954
$ 937
$ 937
Pre-tax income
$ 27
$ (10)
$ (45)
$ (45)
Pre-tax margin
2.9 %
(1.1) %
(5.1) %
(5.1) %
Net income
$ 26
$ (11)
$ (32)
$ (32)
Earnings per share, diluted
$ 0.11
$ (0.05)
$ (0.14)
$ (0.14)
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 $2.67 per 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.
Equipment
Quantity
Seats
A320neo
82
186
A320ceo
8
180 - 186
A321ceo
21
230
A321neo
42
240
Total fleet
153
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.
Frontier is "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). During the third quarter of 2024, Frontier generated 103 ASMs per gallon, similar to the comparable 2023 quarter.
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.
Fourth Quarter 2024
The Company expects positive stage-adjusted year-over-year RASM in the fourth quarter - notwithstanding hurricane-related impacts - supported by continued moderation in capacity growth and further progress on recently deployed network and revenue initiatives. The Company estimates an impact to its projected fourth quarter adjusted (non-GAAP) pre-tax margin of approximately 2 percent (which is reflected in the guidance provided below) related to Hurricane Milton flight cancellations and demand softness for travel to hurricane-affected areas.
The current forward guidance estimates are presented in the table below. To recap, capacity is expected to decline by (2) to (3) percent over the comparable 2023 quarter. The average fuel price per gallon is expected to be in the range of $2.40 to $2.50 based on the blended fuel curve on October 24, 2024. Adjusted (non-GAAP) total operating expenses (excluding fuel) are expected to be $725 to $745 million, which includes an estimate of approximately $10 million of cost inefficiencies from hurricane-related impacts and temporary excess crew-related costs due to capacity reductions. The comparable 2023 quarter was favorably impacted by a $36 million lease return cost benefit related to the extension of four A320ceo aircraft leases.
Adjusted (non-GAAP) pre-tax margin (excluding special items) is expected to be 0 to 2 percent, including storm-related impacts.
Full Year 2024
Full year 2024 adjusted (non-GAAP) CASM (excluding fuel) on a stage-length adjusted basis to 1,000 miles, is expected to be down approximately 1 percent compared to the prior year, at the low end of prior guidance (down 1 to 2 percent), driven by lower off-peak day-of-week capacity in the fourth quarter, which more closely aligns with demand trends.
Fourth Quarter
2024(a)
Capacity change (versus 4Q 2023)(b)
(2) to (3) percent
Adjusted (non-GAAP) total operating expenses (excluding fuel)c)
$725 to $745 million
Average fuel cost per gallon(d)
$2.40 to $2.50
Effective tax rate(e)
10 percent
Adjusted (non-GAAP) pre-tax margin
0 to 2 percent
Pre-delivery deposits, net of refunds
$5 to $25 million
Other capital expenditures(f)
$35 to $55 million
Full Year
2024(a)
Adjusted (non-GAAP) CASM (excluding fuel), stage-length adjusted to 1,000 miles (versus 2023)(c)
~(1) percent
(a)
Includes guidance on certain non-GAAP measures, including adjusted total operating expenses (excluding fuel) and adjusted pre-tax margin, and which excludes, among other things, special items. The Company is unable to reconcile these forward-looking projections to GAAP as the nature or amount of such special items cannot be determined at this time.
(b)
Given the dynamic nature of the current demand environment, actual capacity adjustments made by the Company may be materially different than what is currently expected.
(c)
Amount estimated excludes fuel expense and special items, the latter of which are not estimable at this time. The amount takes into consideration the expected capacity change versus the prior year quarter.
(d)
Estimated fuel cost per gallon is based upon the blended jet fuel curve on October 24, 2024 and is inclusive of estimated fuel taxes and into-plane fuel costs.
(e)
The Company's actual tax rate may differ from the forecasted rate due to varying factors which may include, but are not limited to, the composition of items of income and expense recognized, including the amount of non-deductible or other similar items including but not limited to any valuation allowance adjustments.
(f)
Other capital expenditures estimate includes capitalized heavy maintenance.
Conference Call
The Company will host a conference call to discuss third quarter 2024 results today, October 29, 2024, at 11:30 a.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 153 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 193 new Airbus planes on order, Frontier will continue to grow to deliver on the mission of providing affordable travel across America.
End Notes
1 Amount represents the stage-length adjusted to 1,000 miles: RASM * Square root (stage length / 1,000).
2 Amount represents the stage-length adjusted to 1,000 miles: Adjusted CASM (excluding fuel) * Square root (stage length / 1,000).
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 Current Report on Form 8-K are based upon information available to the Company on the date of this report. 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; disruptions to the Company's flight operations, including due to factors beyond the Company's control, such as adverse weather events or air traffic controller staffing shortages; the Company's ability to attract and retain qualified personnel at reasonable costs; 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 and the conflict in the Middle East; 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, 2023, which was filed with the SEC on February 20, 2024, and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, which was filed with the SEC on May 2, 2024.
Frontier Group Holdings, Inc.Condensed Consolidated Statements of Operations(unaudited, in millions, except share and per share data)
Three Months Ended September 30,
Percent Change
Nine Months Ended September 30,
Percent Change
2024
2023
2024
2023
Operating revenues:
Passenger
$ 910
$ 862
6 %
$ 2,705
$ 2,637
3 %
Other
25
21
19 %
68
61
11 %
Total operating revenues
935
883
6 %
2,773
2,698
3 %
Operating expenses:
Aircraft fuel
261
291
(10) %
812
827
(2) %
Salaries, wages and benefits
236
221
7 %
713
635
12 %
Aircraft rent
177
150
18 %
483
429
13 %
Station operations
164
133
23 %
464
381
22 %
Maintenance, materials and repairs
53
48
10 %
144
145
(1) %
Sales and marketing
46
41
12 %
133
125
6 %
Depreciation and amortization
19
13
46 %
53
36
47 %
Other operating
(40)
40
N/M
(42)
120
N/M
Total operating expenses
916
