Frontier Group Holdings, Inc. (Nasdaq: ULCC), parent company of Frontier Airlines, Inc., today reported results for the first quarter of 2023 and issued guidance for second quarter and full year 2023.
First Quarter 2023 Summary:
• Achieved total operating revenues of $848 million, a record for any first quarter in company history and 40 percent higher than the 2022 quarter, resulting in a 19 percent increase in revenue per available seat mile (“RASM”) on 18 percent higher capacity compared to the 2022 quarter
• Generated ancillary revenue of $80 per passenger, $11 more per passenger than the 2022 quarter
• Utilization averaged 11.8 hours per day in March 2023
• Realized a pre-tax margin of (2.0) percent and an adjusted (non-GAAP) pre-tax margin of (1.9) percent
• Ended the quarter in a strong liquidity position with $790 million of unrestricted cash and cash equivalents
• Took delivery of six A321neo aircraft during the first quarter, increasing the proportion of the fleet comprised of the more fuel-efficient A320neo family aircraft to 74 percent as of March 31, 2023, among the highest of all major U.S. carriers
• Generated 104 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”
• Launched eight new routes, including five new routes from Phoenix, and announced 22 new routes to start the summer travel season, including significant expansion in Cleveland, San Francisco and Tampa
“Post-pandemic demand has increased due, in part, to work from home arrangements and flexible working schedules. We also see a change in passenger behavior with outsized demand on peak days and peak periods,” commented Barry Biffle, President and CEO.
“Having analyzed this new customer behavior, we are reshaping our capacity beginning in the second quarter to exploit this post-pandemic demand dynamic, and expect the changes to be fully deployed in the second half of 2023. We are excited about our planned network revisions and believe it will both reduce our execution risk through slightly lower total utilization while maximizing revenue and profits.”
Mr. Biffle continued, “The operations performed well in the first quarter with utilization peaking in March at 11.8 hours. Ancillary revenue continued to grow, achieving an industry leading $80 per passenger in the first quarter, and we expect continued improvement through the year. While our overall capacity will be lower as a result of the shift to exploit the new demand dynamic, which will drive a corresponding unit cost impact, we believe our cost advantage of over $701 per passenger will widen further throughout the year, allowing Frontier to remain the lowest unit cost operator in the industry in spite of lower utilization on off-peak days and in off-peak periods. As a result, we are forecasting adjusted pre-tax margins in the range of 7 to 10 percent in the second quarter, our highest post-pandemic margin, further improving to 10 to 13 percent in the second half of 2023.”
Revenue Performance
Total operating revenue for the first quarter of 2023 was $848 million, a record for any first quarter in company history, driven by RASM growth of 19 percent on capacity growth of 18 percent, as compared to the 2022 quarter. The RASM increase was driven by a nine percentage-point increase in load factor to 82.8 percent and an 11 percent increase in revenue per passenger to $124, both compared to the 2022 quarter.
Ancillary revenue per passenger for the first quarter was $80, 15 percent higher than the 2022 quarter.
Cost Performance
Total operating expenses for the first quarter of 2023 were $873 million, including $1 million in employee retention costs associated with the Company’s terminated combination with Spirit Airlines, Inc. (“Spirit”). Excluding this item, adjusted (non-GAAP) total operating expenses were $872 million, including $292 million of fuel expenses at an average cost of $3.45 per gallon. Adjusted (non-GAAP) total operating expenses (excluding fuel) were $580 million.
Cost per available seat mile (“CASM”) was 9.95 cents in the first quarter of 2023, while adjusted (non-GAAP) CASM was 9.94 cents. CASM (excluding fuel), a non-GAAP measure, was 6.62 cents, while adjusted (non-GAAP) CASM (excluding fuel) was 6.61 cents, 8 percent lower than the 2022 quarter.
Earnings
Pre-tax loss for the first quarter of 2023 was $(17) million, or $(16) million on an adjusted (non-GAAP) basis excluding special items, reflecting a pre-tax margin of (2.0) percent and an adjusted (non-GAAP) pre-tax margin of (1.9) percent.
Net loss for the first quarter of 2023 was $(13) million, or $(12) million on an adjusted (non-GAAP) basis excluding special items.
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