Frontier Group Holdings, Inc. (ULCC) Earnings

Management highlights

- Spirit's shutdown: Frontier provided discounted fares to affected customers on over 100 Spirit routes, extended travel benefits to Spirit team members, and will expand service this summer with nine additional routes plus 15 daily departures across 18 former Spirit routes. - Quarterly recap: Delivered adjusted revenue of nearly $1.1 billion, stage adjusted RASM up 17% year over year. Progress on fleet right-sizing: executed 69 aircraft deferrals with Airbus and 24 lease terminations with Aircap. On cost discipline: on track to deliver $200 million of targeted annual run cost savings by 2027. On operational reliability: ranked fourth among major domestic carriers in completion factor for April year to date. On loyalty programs: over 30% growth in first quarter, fourth consecutive quarter of double-digit growth. - Second quarter: Guidance reflects RASM growth of greater than 20%, stage-adjusted RASM up high teens year-over-year. Participated in five broad industry fair actions since start of March. Recent conclusion of Spirit's operations represents incremental opportunity for Frontier. First class installations will run through second half of the year, Wi-Fi vendor selection in final stages with installations beginning in 2027. - Financial update: Total adjusted operating expenses in first quarter were 1.1 billion, including 268 million of fuel expenses. Ended quarter with $974 million in liquidity. Expect to exit second quarter with $900 to $950 million of total liquidity. Lowered full-year 2026 capital spending guidance range by 30 million, reaffirming expectation of reduction in pre-delivery deposit balance in range of 170 to 210 million.

Guidance

- Anticipate recapturing approximately 35% to 45% of fuel prices in quarter two, 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%. - Expect continued improvement in fuel recovery as year progresses. - Lowered full-year 2026 capital spending guidance range by 30 million, reaffirming reduction in pre-delivery deposit balance in range of 170 to 210 million. - Given fuel volatility, expect to provide full-year EPS guidance once have improved visibility into macro outlook.

Segment performance

Adjusted revenue was nearly $1.1 billion, a company record. Stage adjusted RASM up 17% year over year. First quarter adjusted revenue was a record, driven by yield and load factor strength. Total adjusted revenue per passenger increased 10% year over year to approximately $128, supported by a nearly four-point improvement in flow and load factor to approximately 78%. Loyalty programs delivered over 30% growth in the first quarter, fourth consecutive quarter of double-digit growth.

Analyst Q&A

• Q: On the observation of expecting a 3 to 5 percentage point RASM uplift from Spirit's exit, curious if that's in the guide and seeing in current trends or based on historical trends.

  A: Jimmy says 3% to 5% RASM uplift is linked to historical trends, think it could be higher, about two points of improvement in near term built into guide.

• Q: On fleet, still expecting kind of 25 aircraft this year in total and none next year?

  A: Jimmy says have 24 aircraft this year, six for next year, have agreement in principle to sell last five deliveries of this year and first six of next year without corresponding leaseback agreement, end 2026 with roughly 171 aircraft, no deliveries retained next year.

• Q: Speak to how second half growth plans may have changed in light of higher fuel, original plan to dial up utilization in off-peak periods.

  A: Jimmy says continues to be to bring off-peak flying back, saw off-peak capacity performing well from RASM perspective, may trim capacity as year progresses to preserve liquidity and cash, directionally slightly smaller than anticipated earlier in year but not meaningfully smaller.

• Q: When is $75 to $95 million cash charge associated with lease termination being incurred?

  A: Shannon says range now is $212 to $239, cash payments for $75 to $95 will occur largely in 2028 and 2029.

• Q: U.S. government officials say airline industry doesn't need bailout, where stand in conversations?

  A: Jimmy says have strong relationship with DOT, shared perspective on impact of fuel and industry dynamics, very focused on self-help and managing liquidity, liquidity position at end of March is very strong.

• Q: Participate in further jet fuel rated price increases across industry, opportunistic?

  A: Bobby says opportunistic, react to prices in marketplace, customer resilient with higher effects.

• Q: Summarize demand environment, confidence customer base will accept price increases without cracks?

  A: Bobby says demand environment quite strong, saw increase in yield and load factor in Q1, competitive overlap capacity down 4% year-over-year, feel good about RASM trajectory.

• Q: 3% to 5% RASM uplift market-specific?

  A: Jimmy says built on route specific level, rolling up to range, solid number based on historical view, potential upside.

• Q: How much of 2Q was booked prior to spike in fuel, thought on leisure customer booking curve?

  A: Jimmy says booking curves different depending on segment, seeing continued improvement in year-over-year RASM post fuel price spike.

• Q: How long consumer can sustain demand at current levels given fuel prices, historical time period for softening?

  A: Jimmy says don't see sign of softening of demand, booking engine continues to be very positive on year-over-year basis.

• Q: Revenue contribution from new premium products and how many points of RASM increase from premium products today?

  A: Bobby says premium products like Upfront Plus drive significant benefit, loyalty program has huge opportunity, first class seats and Wi-Fi additive to diversifying revenue base.

• Q: Quality and reliability of ADU321neos, spares carried and preferred level?

  A: Jimmy says started delivering 321 NEOs in 2022, had limited friction with GTF issues, added to spares ratio last year, conservative approach performing well, overall business carrying too many spares but not changing now, multi-year strategy to improve ability to return aircraft to service.

• Q: How is space allocated from Spirit's freeze up in various airports, ability to access gates?

  A: Jimmy says different by airport, very connected into airport infrastructure discussion, focused on growing in certain routes.

• Q: Plans for capacity in second half, reaching 11 and a half hours of utilization by next summer?

  A: Jimmy says drive back to 11 and a half hours will be somewhat delayed because of fuel price spike, not meaningfully delayed, managing cost base diligently