Frontier Reports Q2 Results Amid ULCC Reboot

DALLAS — Denver-based Frontier Airlines (F9) released its second quarter 2024 financial results on August 8, 2024. The results reveal a mixed performance as the American ultra-low-cost carrier (ULCC) model experiences an industry-wide shakeup.

Key Highlights:

• Total operating revenues reached US$973 million, a slight 1% increase year-over-year
• Pre-tax income and adjusted pre-tax income both stood at US$32 million, with a pre-tax margin of 3.3%
• Net income was US$31 million, down from US$71 million in Q2 2023
• Earnings per share decreased to US$0.14 from US$0.31 in the same quarter last year

The airline faced headwinds from domestic seat growth outpacing seasonal demand trends. However, F9 achieved annual run rate cost savings of over US$100 million from a program launched in Q3 2023. 

The company also took delivery of six A321neo aircraft during the quarter, increasing its fleet of fuel-efficient A320neo family aircraft to 80% of the total fleet, the highest among major U.S. carriers.

A New Frontier

In May 2024, F9 announced significant changes to its ULCC model, focusing on enhancing customer experience and pricing transparency. Other American ULCCs such as Spirit Airlines (NK) followed suit. These changes, branded as "The New Frontier," include among others:

1. Transparent Pricing and Bundled Options: F9 introduced four fare classes—Basic, Economy, Premium, and Business—designed to cater to customer needs and budgets. These options are presented at the start of the booking process, aiming to provide significant savings and transparent choices. The new bundles include various perks such as seat assignments, carry-on bags, and early boarding, with the Business bundle offering additional benefits like UpFront Plus seating with extra legroom and a guaranteed empty middle seat.
2. Elimination of Change Fees: The airline removed change and cancellation fees for customers who select Economy, Premium, or Business bundles. This change aims to provide greater flexibility and a stress-free travel experience, aligning with the airline's commitment to meeting customer expectations for flexible travel options.

Q3 2024 Outlook

Looking ahead, the airline updated its aircraft delivery schedule with Airbus, deferring 54 aircraft deliveries originally planned for 2025-2028 to 2029-2031. This adjustment will lower fleet inductions and reduce financing needs in the coming years.

For Q3 2024, F9 expects capacity to grow by 4-6% year-over-year, with an adjusted pre-tax margin between -3% to -6%. The full-year 2024 outlook projects capacity growth of 5-7% compared to 2023, with an adjusted pre-tax margin range of -1.5% to 1.5%.

Frontier's CEO Barry Biffle commented on the results, noting that despite industry oversupply across the U.S., the airline effectively navigated the quarter due to network and revenue diversification, combined with its "industry-leading" cost advantage.

Despite the current demand/supply imbalance, the carrier remains optimistic about its long-term prospects, citing its cost advantage and network enhancements as critical drivers for future margin improvement. F9 operates flights to over 120 destinations in the U.S., the Caribbean, Mexico, and Central America and employs over 3,000 staff.