Frontier Group Holdings Q1 2026 Earnings Call - Spirit Exit and Fuel Volatility Drive Record Revenue and Strategic Reset

Conference Call Operator, Moderator: Hello, everyone. Thank you for joining us, and welcome to Frontier Group Holdings’ Q1 2026 earnings call. After today’s prepared remarks, we will host a question and answer session. I will now hand the conference over to David Erdman, Senior Director, Investor Relations. David, please go ahead.

David Erdman, Senior Director, Investor Relations, Frontier Group Holdings: Thank you. Good morning, everyone. Welcome to our first quarter 2026 earnings call. Joining me today in speaking order are Jimmy Dempsey, President and Chief Executive Officer, Bobby Schroeder, Chief Commercial Officer, and Mark Mitchell, Chief Financial Officer. Each will deliver brief prepared remarks. Then we’ll open the call for questions. Before we begin, I’ll remind you that today’s discussion will include forward-looking statements subject to risks and uncertainties. We will be referring to certain non-GAAP financial measures throughout the call. Reconciliations to these non-GAAP financial measures can be found in the earnings release issued today and also posted on our investor relations website. We’ll also be referencing stage-length adjusted unit metrics, which are based on 1,000 miles. I’ll give the call over to Jimmy to begin his prepared remarks. Jimmy.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Thanks, David. Before I review the quarter, I’d like to briefly address Spirit’s shutdown. Spirit played a meaningful role in providing affordable travel to a wide range of consumers in an industry dominated by four major airlines. While Frontier remains focused on ensuring consumers have access to affordable travel, our thoughts are with our friends and colleagues during this difficult time. Over the weekend, we provided discounted fares to assist affected customers on over 100 Spirit routes. We extended travel benefits to assist Spirit team members to return home and are encouraging them to apply for open positions in Frontier. Spirit’s exit meaningfully alters the supply landscape. Given our network, low-cost structure, and disciplined approach to capacity deployment, Frontier is best positioned to provide low fares and the best value in those markets in a manner consistent with our strategic priorities around network shape and long-term value creation.

We will expand service this summer with 9 additional routes plus 15 daily departures across 18 former Spirit routes, including Orlando, Las Vegas, Dallas, Fort Worth, Fort Lauderdale, and Detroit. This gives customers more options to rebook their travel plans with confidence while keeping fares low. Turning to the quarterly recap, we delivered adjusted revenue of nearly $1.1 billion, a company record, with stage-adjusted RASM up 17% year-over-year, reflecting sustained progress across our commercial initiatives and strong demand. This performance drove an EPS guidance beat despite sharply higher fuel prices. We remain centered on the 4 strategic priorities previously outlined to strengthen the business and return the airline to sustained profitability, including rightsizing the fleet, strengthening cost discipline, improving operational reliability, and building customer loyalty. I’ll briefly update you on the progress of each. Firstly, we have made excellent progress on fleet rightsizing.

We executed the previously announced 69 aircraft deferrals with Airbus and 24 lease terminations with AerCap. We expect all 24 aircraft to leave our fleet by early June. Secondly, on cost discipline, we have high confidence and remain on track to deliver $200 million of targeted annual run cost savings by 2027, including rent reductions, network optimization, and productivity benefits. Third, on operational reliability, we’re focused on completion factor and on-time performance. We launched a system-wide maintenance strategy to improve maintenance planning and reliability, reduced unscheduled aircraft out-of-service events, which enables improved aircraft return to service performance at the beginning of the day. We’re also enhancing our airport operations, simplifying our ticket counters, and improving turn times. Although this is a multi-year project, we are seeing positive early results. For the April year-to-date period, we ranked fourth among major domestic carriers in completion factor.

Finally, our loyalty programs delivered over 30% growth in the 1st quarter, our 4th consecutive quarter of double-digit growth. This is the result of continued momentum from investments in our co-brand credit card and membership programs. As previously announced, we plan to enhance the onboard experience with the introduction of first class seating and Wi-Fi service later this year and into next year. Turning to the current environment, in response to the fuel spike, we have taken decisive action to adjust capacity fares and ancillaries. We anticipate recapturing approximately 35%-45% of fuel prices in Q2. As a result, we expect RASM to increase by over 20% year-over-year in Q2 and stage adjusted RASM to be up high teens on capacity growth of approximately 7%. We expect continued improvement in fuel recovery as the year progresses.

This is enhanced by the capacity adjustments we are seeing in overlap markets where our competitive capacity is down 4% in Q2. Our liquidity position at the end of March is strong at nearly $1 billion and anticipate our liquidity to be between $900 million and $950 million at the end of Q2. This puts Frontier in a very strong position to take advantage of the opportunities provided by the fuel crisis. Higher fuel does not change our strategic priority to return to profitability. By staying aligned with our framework and focusing on items we can control, we believe we are well-positioned to navigate near-term volatility while emerging stronger as macro conditions normalize. This is an exciting time for Frontier as America’s value airline.

Before concluding, I’d like to recognize Team Frontier for driving operational performance improvements and for upholding our commitment to the highest safety standards. This sustained commitment to safety was reinforced by our recent receipt of the FAA’s Diamond Award of Excellence for the second consecutive year, the agency’s highest recognition for maintenance, training, and safety. The discipline and professionalism our people bring to the airline every day are fundamental to our progress, and I sincerely thank them for their focus and execution. I’ll now turn it over to Bobby.

Bobby Schroeder, Chief Commercial Officer, Frontier Group Holdings: Thanks, Jimmy. First quarter adjusted revenue was a record for any quarter in Frontier’s history, driven by both yield and load factor strength. Total adjusted revenue per passenger increased 10% year-over-year to approximately $128, supported by a nearly 4-point improvement in flown load factor to approximately 78%. This performance came despite the operational disruptions from severe winter weather and extensive TSA delays during the busy spring break travel period. Loyalty momentum extended into the first quarter on record co-brand card acquisitions in February, then again in March, with March card spend reaching an all-time monthly high. Our loyalty assets have consistently been one of our strongest long-term value drivers, and their trajectory is accelerating.

Turning to the second quarter, our guidance reflects RASM growth of greater than 20% and stage-adjusted RASM up high teens year-over-year, supported by durable demand trends and lower competitive capacity on Frontier routes. We have participated in five broad industry fare actions since the start of March, a clear signal that demand at higher fares remains resilient and that industry capacity discipline is supporting a more constructive pricing environment. As we think about the foundation of our performance expectations, the recent conclusion of Spirit’s operations represents an incremental opportunity for Frontier. Our team is focused on helping impacted customers get to their destinations. We have seen significant revenue intake since the weekend, a trend we expect to continue throughout this coming week as those customers who are most acutely impacted seek alternatives.

Demand for the Frontier product is strong. In the second quarter of 2026, we have more route overlap with Spirit than any other U.S. carrier, uniquely positioning us to recapture the demand they left behind. Drawing on the benefits realized from prior Spirit capacity adjustments, we believe their exit supports a RASM uplift of 3-5% going forward. Scheduled average utilization, net of fuel-driven capacity adjustments, is expected to be higher sequentially, consistent with our strategic plan. Second quarter capacity is expected to be up 6-8% year-over-year on an average stage length of approximately 890 miles, both lower than originally planned, reflecting targeted reductions concentrated in long-haul flying.

We’ll continue to be nimble and tightly manage capacity based on fuel and demand trends, and accordingly, we are reserving updated long-term capacity guidance at this time. On the product side, first-class installations will run through the second half of the year. Wi-Fi vendor selection is in its final stages, with installations beginning in 2027. Combined with the bundle and segmentation enhancements driving non-ticket for passenger growth, we these additions position us to serve a broader customer base while preserving the cost discipline that defines our model. The combination of industry-wide capacity discipline and the continued maturation of our commercial initiatives give us real conviction in our trajectory through year-end. I’ll now turn the call to Mark for the financial update.

Mark Mitchell, Chief Financial Officer, Frontier Group Holdings: Thanks, Bobby. Total adjusted operating expenses in the first quarter were $1.1 billion, including $268 million of fuel expenses at an average cost of $2.88 per gallon. Adjusted non-fuel operating expenses were $868 million or $0.0885 per ASM, with the increase over the corresponding 2025 quarter driven largely by lower average daily aircraft utilization and higher fleet-related costs across reduced capacity. As utilization increases and targeted cost savings materialize in line with our strategic plan, we expect a meaningful reduction in our adjusted non-fuel unit costs. First quarter adjusted pre-tax loss was $69 million and adjusted net loss was $68 million, resulting in adjusted loss per share of $0.30 favorable to guidance.

We ended the quarter with $974 million in liquidity, including unrestricted cash and availability from our revolving loan facility. The increase from year-end was principally the result of a significant increase in our air traffic liability, fleet-related activity, and an expansion of our prepaid miles facility, net of operating losses and capital expenditures. As Jimmy mentioned, we expect to exit the second quarter with $900 million-$950 million of total liquidity, bolstered by internal liquidity measures, including fleet-related activity and advanced discussions associated with an extension of the company’s co-brand credit card agreement. Our second quarter guidance reflects continued commercial momentum alongside observed demand trends, while elevated fuel prices weigh on expected results. We remain focused on disciplined capital allocation and preserving liquidity through our fleet rightsizing and cost-saving initiatives, lower planned capital spending, and capacity optimization.

From a fleet perspective, following the 7 aircraft inductions in the first quarter, 1 additional than expected, we now expect to take delivery of another 7 aircraft in the second quarter and return 24 aircraft. Furthermore, for full year 2026, we lowered our capital spending guidance range by $30 million, and we are reaffirming the expectation of a reduction in our pre-delivery deposit balance in the range of $170 million-$210 million. We expect our pre-delivery deposit balance to be reduced by this amount resulting from the previously announced agreement to defer the induction of 69 Airbus aircraft, with a similar reduction expected in our related PDP financing facility balance. For more details on our second quarter and full year guidance, refer to the announcement we published this morning.

Given fuel volatility, we expect to provide full year EPS guidance once we have improved visibility into the macro outlook. With that, Elizabeth, we’re ready to open the line for questions.

Conference Call Operator, Moderator: Thank you. We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Savanthi Syth with Raymond James. Your line is open. Please go ahead.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group1: Hey, good morning, everyone. Maybe just on the observation that you’re expecting like a 3 to 5 percentage point RASM uplift from Spirit’s exit. Curious, if that’s in the guide that you provided and if just how, you know, what if you’re seeing that in current trends or just kinda based on historical trends?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Hi, Savi. It’s Jimmy here. the 3%-5% RASM uplift is linked to historical trends that we’ve seen structural change on Spirit’s network, where either we had existing capacity or replaced capacity that they walked away from. That’s effectively a run rate RASM uplift. We think it’s approximately 3%-5%. We actually think it could be higher than that going forward. What’s in the guide, we estimate given that the we’re guiding Q2, and we’re largely halfway through the quarter, we think about 2 points of improvement in the quarter that’s built into the guide that we gave today is linked to Spirit shutting down.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group1: That’s helpful. Thank you. If I might just on the fleet, are you still expecting kind of 25 aircraft this year in total and none next year?

Mark Mitchell, Chief Financial Officer, Frontier Group Holdings: Savi, we have 24 aircraft, you know, for this year, and we have 6, you know, for next year. One of the things that wanna highlight, we have, you know, as part of the fleet, the last 5, you know, deliveries of this year and the first 6, you know, of next year, you know, we have an agreement in principle, you know, to sell those aircraft without a corresponding leaseback agreement. You know, as you think about the fleet, while there will be 24 inductions, you will end the year with roughly 171 aircraft, and then there will be no, you know, deliveries that we retain next year.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: I mean, said another way, Savi, you know, we effectively begin 2026 with the same number of aircraft that we largely end 2027. You know, we’ll effectively have the same fleet for those 2 years. That’s what’s planned at the moment.

Mark Mitchell, Chief Financial Officer, Frontier Group Holdings: Yep.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Now we’re replacing-

Christopher Stathoulopoulos, Analyst, Susquehanna International Group1: Thank you.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: where we’re getting the upside on that is actually removing 320 NEOs from the fleet. They’re obviously fuel efficient aircraft, but they’re 320s, and we’re replacing them as we progress through this year, largely with 321 NEOs, which is really an efficiency drive in the airline that’s been going on for years.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group1: Along with utilization, I’m assuming. Perfect. Thank you.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Yeah.

Conference Call Operator, Moderator: Your next question comes from the line of Jon Heidorn with Citigroup. Your line is open. Please go ahead.

Jon Heidorn, Analyst, Citigroup: Hey, guys. Thanks for taking my question. Appreciate the color on what’s going on with competitive capacity, Spirit overlapping markets, et cetera. You know, there’s a debate out there about kind of short term versus long term. Clearly, your commentary and your guidance suggests that there’s a benefit that you see and that’s growing in kind of the short to medium term as we get to that 3% to 5%. What can you do to kind of protect those profits and those markets longer term? It does seem like there’s other competitive capacity kind of trying to backfill Spirit as well.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Hi, Jon. Look, there’s always going to be in a situation like this that arises, there’s always going to be a chase for capacity that occurs across their network. We positioned ourselves over the last 6 to 9 months on launching routes that we thought would be opportunities that come as they reduce their capacity, with the possibility that they would cease operations. You’ve seen us move quite quickly with an overlap of over 100 routes against Spirit. Look, I’m, we are going to be very, very disciplined in how we deploy incremental capacity into the business. I mean, we’re very disciplined on what we’re doing in our fleet. Our fleet determines, you know, the availability of aircraft to drive incremental capacity.

You know, that discipline is something that we’re putting in place across the airline as we administer the new plan that was announced in February, where we’re really focused on right-sizing fleets, cost control in the airline, you know, fundamentally fixing the operations to drive loyalty into the business. And we’ll make decisions around Spirit capacity as a result or lost capacity in the marketplace, using those measures. In terms of protection of capacity, we’re already in over 30% of our business overlapped with them. We’ll continue to look at further opportunities as the weeks and months progress.

Bobby Schroeder, Chief Commercial Officer, Frontier Group Holdings: One thing I’d add too, just in terms of history here, you know, Spirit has already come out of markets. As we said, we’ve we have that history to showcase what we think the benefit to us will be. Just the absorption of this, the reductions that have already existed, you know, in May, the backfill of that from an industry perspective has been about 50%. We’ve been about 40% of that 50%. It showcases the discipline that’s existing throughout the industry on capacity adds and backfill.

Jon Heidorn, Analyst, Citigroup: Okay. If I could just clarify that last point, it sounds like embedded in your 3%-5% view is some sort of normal historical backfill that you’ve seen from other players as well. Is that fair?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: No. Like, the 3% to 5% is what is based on history, and there’s obviously been a substantial capacity change over the past few days. That’s what we expect a 3% to 5% run rate improvement across the system on the back of that, given the overlap that we had with Spirit. As I said to Savi earlier.

Jon Heidorn, Analyst, Citigroup: Okay.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: We anticipate about 2 points of that in the near term, and then we’ll see how it develops as things normalize in the coming weeks. We think it may be more than 3-5 points.

Jon Heidorn, Analyst, Citigroup: Okay. Fair enough. Then just one last one on this topic. Over the last year or so, there have been so many scenarios playbooked with Spirit. I’m just curious from here, now that we’ve had the cessation in operations, are there any opportunities to pick up assets or anything like that? Are there remaining assets? I mean, are there more plays in the playbook from here, or are we done?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: I mean, look, Spirit announced yesterday that they’ll have effectively an orderly wind down of the business. We will look at assets that come out during that wind down. Clearly there’s an immediate availability of aircraft assets in their business, and we’ll look at opportunities as they present themselves in the coming days and weeks as to whether that is incremental to our business. You know, I just want to reassert that, you know, we’re going to be disciplined in any decision we make on the basis that it either improves our unit cost base, improves our market position and network deployment, and fundamentally is a value creator for the business and generates profitability.

We’ll be focused on that, but we know that there’s a significant amount of opportunities that are coming around assets that are within Spirit.

Jon Heidorn, Analyst, Citigroup: Excellent. Thanks, guys.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Thanks.

Bobby Schroeder, Chief Commercial Officer, Frontier Group Holdings: Thanks.

Conference Call Operator, Moderator: Your next question comes from the line of Duane Pfennigwerth with Evercore ISI. Your line is now open. Please go ahead.

Duane Pfennigwerth, Analyst, Evercore ISI: Hey, thanks. Good morning. Can you speak to how your second half growth plans may have changed in light of higher fuel? I think the original plan was to dial up utilization in off-peak periods. Again, from arm’s length, off-peak historically sounds less exciting from a fuel pass-through perspective. Just how do we square what has changed in the backdrop with the plan to push more in off-peak?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Yeah. Hey, Duane. You know, our plan it continues to be to bring off-peak flying back into the business. You know, we just believe we overcut off-peak capacity in the last year, particularly, but certainly in the last two years. What we’ve seen recently actually is the off-peak capacity performing pretty well from a RASM perspective. I mean, you see our Q2 RASM up over 20%, year-over-year. I mean, that’s a huge performance improvement. Obviously, oil prices and fuel recapture on oil prices across the industry is helping that. What we’re seeing on off-peak days is pretty positive. Like, I look at our capacity deployment in the last in May and June. We probably cut June a little bit too much.

We look at maybe redeploying some capacity opportunistically in June. I do believe we’ll continue to trim capacity as the year progresses as part of a package of measures to preserve liquidity and cash, but also to manage the fuel recapture in the business. Certainly Tuesdays, Wednesdays, you know, will probably be the primary focus of that or long stage off-peak times of the day, where we reduce and trim capacity. We’re not guiding the second half. Obviously, it’s volatile in terms of fare and fuel in the industry at the moment. Directionally, I think we’ll be slightly smaller than we had anticipated earlier in the year, but I’m not sure meaningfully smaller.

Duane Pfennigwerth, Analyst, Evercore ISI: Okay, Jimmy, I appreciate that. Cutler, I just wanted to follow up with one of Savi’s questions. You referred to outright sale of aircraft, and I just wondered, is that a part of the transaction where you’re giving back previously leased aircraft, or is this separate, and are you actually selling delivery positions? If so, can you speak to the cash inflow that you would expect in total or per shell, if that’s what you’re doing? Thank you.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Yeah, Duane. Hey. We’re not gonna go into the commercial terms of the deal that we’ve done. We’re, you know, as part of the fleet management strategy that we put in place, we wanted to end 2027 with similar number of aircraft as starting 2026, and that’s just part of that process.

Duane Pfennigwerth, Analyst, Evercore ISI: Thank you.

Conference Call Operator, Moderator: Your next question comes from the line of Scott Group with Wolfe Research. Your line is open. Please go ahead.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group2: Hey, thanks. Good morning. Jimmy, you said a couple of times, like, maybe it’s gonna be more than 3% to 5%. Maybe it’s just too early, but, like, what are you seeing in real time the last few days on those, you know, 100 or so routes where you overlap? Like, you know, if it’s truly 30% of your capacity, I would have thought maybe the uplifts could have been more than that 3% to 5%. You seem to think, like, maybe it can, but I don’t know. Maybe just some real-time color on what’s actually happening in the market.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: I mean, the 3%-5% is based on history, not based on the last four or five days of activity. What you’re seeing in the last four or five days is effectively a reaccommodation process for unfortunate spare consumers who’ve lost their flights. You’re seeing that across the industry. We happen to be in a position where we offer significant value in the industry and at very low fares. Our recapture offer or our rescue fare offer was very attractive into the marketplace. What we’re talking about in the 3%-5% is really the run rate on a go-forward basis that we anticipate is improving our system-wide RASM.

We just need to normalize out of this period where there’s a reaccommodation process going on, and move to a more normalized RASM improvement in these markets. We’ll see where we go. The 3-5 points is based on history where we’ve seen them reduce capacity or exit markets across our system, and the impact it has on us. This is obviously more significant, it could lead to a higher RASM uplift, but we’ll just have to wait and see.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group2: Right. Assuming you get that, right, what does this mean for your longer term capacity growth? Like, is it a lot more, a little bit more? Could it mean, hey, we don’t want to add any, so we want to keep the benefits of the price? How do you think about that without I know you’re not giving specific numbers around long-term capacity, but what are your initial thoughts here?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: I mean, primarily we want to move the airline back to profitability. I mean, we were on a very, very good trajectory in Q1 prior to the fuel price spike. We were actually gonna get very close to break even in Q1, and we were certainly on a trajectory to make money in Q2, to move our business back to a profitable state, which was very important. We were ahead of our plan. We were quite excited about the progress of the business. That doesn’t change, right? We’ve got a fuel price spike that we’ve got to manage through, but managing the business over the long term in a disciplined fashion.

You know, what we talked about in February was lowering the capacity growth in the airline from, say, 20% to 25% annually to somewhere slightly less than 10% each year. We’ve got to go through a reset phase in the business so that we can improve utilization. Some of that utilization is delayed given the fuel price spike and the management of the fuel price spike in the short term, but that’ll come back in time. We’re actually quite excited about the business moving back into a profitable state as fuel prices normalize or as the industry moves to recapture a higher proportion of the fuel price as you progress through this year.

Like, our expectation is that you start recapturing a higher proportion of fuel as you progress through this quarter to the end of this quarter and through the rest of the year. Like, I anticipate that we’re recapturing close to 50% of the fuel price by the end of Q2. Above the range that we gave you this morning, but progressing to a positive state where maybe the end of this year or into early next year, you’re actually recapturing all of the oil price.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group2: Okay. Just last one, if I can. I don’t know if I missed any sort of cost or overall or CASM guidance for Q2, but there’s so many moving pieces with the models, depreciation, sale, leaseback gains.

Mark Mitchell, Chief Financial Officer, Frontier Group Holdings: Yep

Christopher Stathoulopoulos, Analyst, Susquehanna International Group2: any color around some of the moving parts there.

Mark Mitchell, Chief Financial Officer, Frontier Group Holdings: Yeah. A couple of things, right? As you look at, you know, the financials that are in the P&L and the earnings release, you know, within the rent, maintenance, and depreciation line, you see $139 million of non-recurring charges tied to, you know, the early return of the 24 aircraft. And we have that, you know, detailed out in the release, you just need to normalize for that. If you step back, you know, for the quarter, you know, the CASM X, you know, that we had, you know, is elevated given, you know, the lower utilization in the quarter, you know, on a larger fleet, you know, understanding that we have growth planned, you know, for this year.

Keep in mind as well, when you compare to the prior year, you know, there is a lease extension benefit in that prior year period. If you look forward, as we’ve highlighted, we expect a meaningful reduction in our CASM X, as we work through the fleet right sizing that we’ve talked about, as we work through, you know, the cost savings initiatives and those begin to materialize. You are gonna see, you know, a meaningful progress, you know, on the CASM X front. We haven’t provided specific guidance, but, you know, we’ve given those general parameters.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group2: Thank you, guys.

Conference Call Operator, Moderator: Your next question comes from the line of Michael Linenberg with Deutsche Bank. Your line is open. Please go ahead.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group3: Oh, hi. This is Shannon Doherty on for Mike. Thanks for taking my questions. Maybe Jimmy, when is the $75 million-$95 million cash charge associated with the lease termination being incurred? You know, we expect that you gave us the range last quarter as it was still a work in progress, but do you have a final number now since everything presumably is locked down? Should we expect to see a hit this quarter?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Mark’s gonna say.

Mark Mitchell, Chief Financial Officer, Frontier Group Holdings: I could touch base on it. Shannon Doherty, in the AK we’d put out earlier in the quarter, we’d given a range of $200 million-$270 million in total, most of that non-cash charges. The range now is right in the middle of that, $212 million-$239 million. When you look at the cash component that we had highlighted before, what you mentioned, the $75 million-$95 million, those cash payments will occur largely in 2028 and 2029.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group3: Okay, thanks to the caller there. For my second question, you know, U.S. government officials have basically expressed that the airline industry does not need a bailout. Where do you stand today in your conversations? Are they still happening maybe as a part of the A4A, you know, in seeking support for higher fuel prices? Thanks for taking the question.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Hi, Shannon. Yeah, look, we’ve got a very strong relationship with Secretary Duffy and the DOT. They requested that we share our perspective on the impact of fuel and the industry dynamics associated with that. You know, Frontier and the A4A, we were encouraged to share the estimates of the fuel impact on the airlines, and we did that and shared the cost impact this year if the volatility persists across the year. Look, we’re very focused on self-help and managing the liquidity in the business in a strong fashion. You can see our liquidity position at the end of March is very strong. You’ve 25% of trading 12 months revenues in cash at the end of March from a liquidity perspective.

I mean, that’s at the upper end of where this airline has been for many years. We’d prefer it to be a little bit higher, but it’s in a pretty strong position. We anticipate, given some measures that we’re doing internally, to largely keep it around the same, maybe slightly lower, in terms of liquidity at the end of June. We feel pretty good about our liquidity position as it stands right now. We’ll continue to inform the government as to where we are across the A4A members. We feel very good about our liquidity position right now.

Conference Call Operator, Moderator: Your next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open. Please go ahead.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group0: Great. Thanks. Morning, everyone. I think you said that you had participated in 5 jet fuel rate price increases this year. I’m not sure if the industry has had 5 or 6 so far. Just wanted to confirm that you guys do intend to participate in kind of any further jet fuel round of price increases across the industry, or will it be more opportunistic?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Ravi, we’re gonna be opportunistic. I mean, we tend to react to the prices that exist in the marketplace. We’ve observed multiple attempts at price increases and price increases that have come through. That I suspect will continue as the airline industry seeks to recapture fuel. Look, the fuel price itself is volatile, and the revenue environment is reacting to that at the moment.

Bobby Schroeder, Chief Commercial Officer, Frontier Group Holdings: Yeah, and this is Bobby. I mean, look, you know, we’re gonna be opportunistic, as Jimmy said, and frankly, you’ve seen that the customer’s resilient with higher fares on that. We’ll continue to look at that and optimize it as appropriate.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group0: Got it. Thank you for that. Bobby, maybe you’re kind of a good segue to my follow-up question, which is, you know, outside of the Spirit situation, if you guys can just summarize the demand environment as you see it overall, and maybe kind of the confidence that you have that your customer base will be able and willing to accept these price increases without any cracks.

Bobby Schroeder, Chief Commercial Officer, Frontier Group Holdings: I mean, look, the demand environment is quite strong. You’ve seen in Q1 we talked about this. It came from both sides. It came from an increase in yield, and it came in an increase in load factor, flown load factor year-over-year. Seeing is higher fares and people transacting and flying at a higher rate as well. Quite a strong environment from a revenue perspective. Frankly, you know, going forward, there are a variety of things, including the conclusion of Spirit’s, you know, operations that provides a lot of opportunity that we’ll capitalize on.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Yeah, Ravi, just to add to that, like, and we mentioned it in the transcript earlier, you know, our competitive overlap capacity is down 4% year-over-year, which is helpful to Frontier. You can see us outperforming the industry in a year-over-year RASM perspective. We feel pretty good about the RASM trajectory that the airline is on. It was on a very positive RASM trajectory prior to the oil price crisis. You’re seeing us perform pretty well in terms of recapture of revenue in our business. You know, we do operate the most fuel-efficient aircraft in the industry.

We have a substantial portion of our fleet are 321 NEO aircraft that have the lowest per passenger cost for fuel in the industry. We feel pretty good about the recapture potential in the airline as you progress through this year, particularly given the demand backdrop that we have in the business today.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group0: Very helpful. Thanks, everyone.

Conference Call Operator, Moderator: Your next question comes from the line of Christopher Stathoulopoulos with Susquehanna International Group. Your line is open. Please go ahead.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group: Good morning. Wanna go back to the 3%-5% RASM uplift. I understand that that’s history, it’s not exact math here, more directional. If you could, is that market specific? If I look at Spirit’s selling schedule and overlaps, I mean, there’s a few markets where I think it would perhaps make more sense than others just stage length adjusting RASM. Wanna understand the context, or is that just broad stroke kinda system, "Hey, this is historically how it’s looked," and perhaps I’m kind of overthinking this. Thanks.

Bobby Schroeder, Chief Commercial Officer, Frontier Group Holdings: Well, it’s Look, this is built on a route specific level in terms of how we’re reviewing it, and then of course that’s rolling up to a range that exists. we’ve seen, you know, historical benefit that again translates to that 3 to 5. As we’ve said too, look, there’s, you know, connections, variety of other things that can get thrown into there that can create benefit beyond what we’ve seen. It’s early days, we’re gonna see, we think that again, that 3 to 5 is a solid number based on what we viewed historically on a route level basis, and there’s opportunity for upside potentially within that as well.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group: Okay. Then on the 2Q RASM guide, appreciate you giving the stage length. Could you parse out, if you did, apologies, but on revenue initiatives and peak versus off-peak and any uplift from Spirit that you’re seeing there? Just wanna get a better sense of what core is doing, given all the other moving parts around that. Thanks.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Yeah. We’re actually seeing, Chris, an improvement in off-peak days over and above what we’re seeing in other days of the week across this period, which is interesting. We’re not gonna specify exactly what that is. It’s encouraging to the overall strategy that we’re putting in place to bring off-peak capacity back in. What we did lay out for you was the impact of the 3%-5% run rate improvement in Spirit on the quarter earlier in the call. We mentioned that, you know, given that we’re more than halfway through the quarter from a booking perspective, you know, we think it’s about 2 points of the 20 in RASM that we’re talking about for the quarter.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group: Okay. Thank you.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: RASM improvement. Yeah.

Conference Call Operator, Moderator: Your next question comes from the line of Jamie Baker with J.P. Morgan Securities LLC. Your line is open. Please go ahead.

Jamie Baker, Analyst, J.P. Morgan Securities LLC: Hey, good morning, guys. Thanks for the time. Maybe to start off here, could you share how much of 2Q was booked prior to the spike in fuel? I ask ’cause maybe there’s a thought that, you know, the leisure customer has a shorter term booking curve and maybe there is a chance to recapture fuel above peers. Is that the way to think about it?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: I’m not sure that I think our booking curves are different depending on the segment of the end of the airlines that you’re looking at. Q1, you know, obviously March is a bigger portion of the quarter than individually January or February, given that we operate lower capacity. What we have been seeing, and we’ve been saying this for quite some time, Jamie Baker, is we’ve been seeing continued improvement in year-over-year RASM in the business. That is across the booking curve that we’re seeing.

It’s improved post the fuel price spike as a result of some things that we’ve done in terms of capacity adjustments that we’ve made in our business, but also the industry fare umbrella that exists from the fare increases that are being pushed through by mostly by the major airlines.

Jamie Baker, Analyst, J.P. Morgan Securities LLC: Okay. That’s helpful, Jimmy, thanks. Maybe following up on Bobby’s question on demand, you know, and maybe given your experience with Ryanair, you know, how long do you think the consumer can sustain demand at current levels given fuel prices? Is there, you know, a historical time period where you might expect to see consumer softening on kind of discretionary spend?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: We don’t see any sign of the softening of demand in the environment, and we’re seeing constructive capacity deployment across the industry. I mean, we feel pretty good about it at the moment. I mean, I can’t give you any insight into what happens, you know, beyond the next 3 or 4 months that we’re seeing in our booking engine, but what we’re seeing in our booking engine continues to be very positive on a year-over-year basis, which gives us confidence that the fuel recapture rate continues to improve as the year progresses.

Jamie Baker, Analyst, J.P. Morgan Securities LLC: Okay. Thanks for the time.

Conference Call Operator, Moderator: Your next question comes from the line of Daniel McKenzie with Seaport Global. Your line is open. Please go ahead.

Daniel McKenzie, Analyst, Seaport Global: Good morning. Thanks for the time here. Couple of questions, apologies for kicking a dead horse here. The 3 to 5 percentage point RASM uplift, one caveat I think is that neither Frontier or Spirit had a meaningful premium product historically. I guess my first question is, I guess, Bobby, can you speak to the revenue contribution from the new premium products and how that’s compares with the back of the cabin? I guess in particular, how many points of RASM increase are coming from the premium products today?

Bobby Schroeder, Chief Commercial Officer, Frontier Group Holdings: Yeah. Look, right now we have our premium product. We have a variety of them, but UpFront Plus is the one that drives quite a bit of benefit. Won’t get into numbers, but it has increased significantly. We think that that actually showcases the demand that we’ll have for the first class product as we roll that out in the second half. You know, this is upside, an opportunity that we think exists with our product base and what we can do from a premium product perspective. You’re right, we haven’t had what other carriers have, and we’re starting to move towards where we can capture a larger share from a premium perspective with that product.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Yeah, I mean, just to add to what Bobby said, like our loyalty program as a whole is quite immature. There’s a huge opportunity within the business to improve loyalty. It requires us, in my opinion, to improve operational performance in the business. We’re, you know, we’re quite focused on actually improving the operation. There’s actually quite a bit of excitement internally in terms of improving the operation of the business and giving value and showcasing our value to the customers. You know, we have put a comprehensive plan in place to improve operations on a multi-year basis. We’re seeing some really good positive returns on it. That improved operation and value pro- that we provide to the customer will enhance our loyalty programs over time.

First class seats, the introduction of Wi-Fi, they’re all additive to diversifying the revenue base of the airline, which we think is very, very important as we move the airline back to profitability.

Bobby Schroeder, Chief Commercial Officer, Frontier Group Holdings: Just over the, you know, talking about loyalty specifically, over the past year, we’ve seen significant penetration increases in the loyalty bookings, so people that are attached to the program itself on the credit card penetration and GoWild! Pass as well. Significant moves, and that’s even prior to some of the things that we just talked about. We anticipate again, acceleration and increased benefit in the loyalty program as we move forward through a lot of these initiatives.

Daniel McKenzie, Analyst, Seaport Global: Yeah. Actually raises a lot more questions. I guess, next question is really an OEM question, CASMx question. You know, I’m just wondering if you can speak to the quality and reliability of the A321neos. You know, for those of us that are not close to the OEMs and, you know, close to the quality today, you know, how many spares are you having to carry today, and where would you like that to be preferably? I guess, you know, I’m just trying to get a sense of how much friction might be in the cost structure today from the A321neos.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Daniel McKenzie, we started delivering A321neos in 2022. We were really at the very tail end of the powdered metal issue that occurred with the GTF. We have limited friction in our business in relation to the GTF issues. We did last year add to our spares ratio from an engine spare ratio perspective in order to manage any latent issues that we had kind of at the tail end of that powdered metal issue, and that’s actually been quite successful in managing, you know, the operational capacity that we can deploy.

We’re clearly carrying a higher number of spares than you would optimally carry in the business, but we think that that conservative approach is actually performing well from an operational perspective in the business. I do think the overall business is carrying too many spares. But I’m not interested in changing that at the moment from a spare aircraft perspective. I want to see a meaningful improvement in our ability to return aircraft to service every day on time and not eat our spares in the morning in order to do that. That is a multi-year strategy in the business that I think will provide, over time, a meaningful improvement in the ability to lower the spares ratio if we think that that makes sense.

In the next year to year and a half, I don’t see that as an opportunity in the business.

Daniel McKenzie, Analyst, Seaport Global: All right. Thanks for the time, you guys.

Conference Call Operator, Moderator: We have a follow-up question from Savanthi Syth with Raymond James. Your line is open. Please go ahead.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group1: Hey, thanks for taking my follow-up. I’m just curious, as kind of Spirit’s kind of freeze up, states in various airports, you know, how is that being allocated? Are you able to kinda access the gates that you need, or is there some airports that you still have to wait and see if you can expand into?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: It’s different by airport, Savi. Yes, I mean, we are very connected into the airport infrastructure discussion at the moment across the network. I mean, look, we’re very focused on, as we’ve announced, growing in Orlando, Vegas, DFW, Fort Lauderdale, and Detroit. We’ll continue to pursue infrastructure to support that.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group1: Got it. Then just to clarify, it doesn’t seem like your plans are significantly different in terms of capacity for the second half. I know that’s a moving target right now, are you still thinking?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Yeah

Christopher Stathoulopoulos, Analyst, Susquehanna International Group1: kind of reaching 11 and a half hours of utilization by next, by next summer or sometime between here and next summer?

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: A good question. I do think the drive back to getting above 11 hours, so to 11 and a half hours as you mentioned, will be somewhat delayed because of the fuel price spike. I don’t think it’ll be meaningfully delayed. We are managing our cost base very diligently. And that’s inclusive of training classes for pilots and flight attendants and other things in order to manage the timing of new hires into the business to support like a production level of 11 and a half hours a day. I think it will be slightly delayed, but not by much.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group1: Got it. Thank you.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Really depends on how long the fuel crisis goes on for.

Christopher Stathoulopoulos, Analyst, Susquehanna International Group1: Makes sense.

Conference Call Operator, Moderator: There are no further questions at this time. I will now turn the call back to Jimmy Dempsey for closing remarks.

Jimmy Dempsey, President and Chief Executive Officer, Frontier Group Holdings: Yeah. Thanks everybody for attending our call. We are very focused on delivering the plan that we set out in February. We’re seeing real promise in the airline in terms of performance and driving the airline back to a return to profitability. Clearly, recapturing higher fuel prices is very important to the business, and we’re working diligently to do that as we progress through this year. I think the airline sits in a very strong position given the opportunity that exists from the last few days, where capacity has changed quite dramatically on overlap routes. We think that’s very positive for Frontier, and we look forward to talking to you guys in the coming months about our progression around taking advantage of that opportunity.

Thank you very much.

Conference Call Operator, Moderator: This concludes today’s call. Thank you for attending. You may now disconnect.