Frontier Airlines: Elevated fuel price and disruptions hamper Q3 results

Frontier announces major winter expansion
Frontier A320 NEO - Photo Credit: Frontier Airlines

Frontier Group Holdings, Inc. [NASDAQ: ULCC), parent company of Frontier Airlines, has reported financial results for the third quarter of 2023 and issued guidance for the fourth quarter.

Third Quarter 2023 Summary

Total Operating Revenues

Frontier Group Holdings reported total operating revenues of $883 million for the third quarter of 2023.

This figure represented a 3 percent decrease compared to the same quarter in 2022. The slight dip in revenue came despite a significant 21 percent growth in capacity.

Cost per Available Seat Mile (CASM)

 Frontier Group Holdings achieved a noteworthy milestone by reducing CASM to 9.66 cents, marking a 9 percent decline from the third quarter of 2022.

This cost-cutting strategy was instrumental in maintaining competitiveness in the market.

Frontier A320 at DEN
Photo Credit: Frontier Airlines


Adjusted CASM (Excluding Fuel)

By excluding fuel costs, a non-GAAP measure, Frontier managed to bring down adjusted CASM to an impressive 6.66 cents.

This represented a 3 percent reduction compared to the same quarter in the previous year. Such a feat signifies the company’s commitment to cost efficiency.

Pre-tax Margin

 The pre-tax margin for the third quarter of 2023 was reported at (5.1) percent. While this may seem concerning, it’s crucial to note that various external factors influenced these results, including elevated fuel prices, uneven demand recovery, and operational disruptions.

A Greener Approach to Flying

Frontier Airlines has been steadfast in its commitment to environmental sustainability. One of the highlights of the third quarter was the delivery of eight Airbus A321neo aircraft, contributing to a total fleet composition of 77 percent A320neo family aircraft, recognized for their fuel efficiency.

Frontier Airlines proudly claims the title of “America’s Greenest Airline” due to its impressive 103 available seat miles (“ASM”) per gallon, surpassing other major U.S. carriers.

Fleet of Frontier Airlines airplanes parked at airport
Konstantin Von Wedelstaedt (GFDL 1.2 or GFDL 1.2), via Wikimedia Commons

Barry Biffle, the President and CEO of Frontier Group Holdings, commented on the third-quarter results, acknowledging the challenges faced and the strategies in place to counter them.

“Elevated fuel prices, uneven demand recovery, and operational disruptions all impacted third quarter results,” he commented.

“To strengthen our competitive position, we are focused on simplifying our operations, concentrating growth in underserved markets, delivering the lowest costs and enhancing our loyalty program offering. I’m extremely proud of Team Frontier for their unwavering resolve to deliver Low Fares Done Right.”

Financial Highlights Q3

Revenue Performance

RASM (Revenue per Available Seat Mile): The RASM for the third quarter of 2023 stood at 9.10 cents, reflecting a decrease from 11.27 cents in the same quarter of the previous year.

This decrease can be attributed to several factors, including a 15 percent drop in revenue per passenger to $115 and a 2.5 percentage-point decrease in load factor to 80 percent.

Ancillary Revenue: Frontier Airlines reported ancillary revenue of $76 per passenger for the third quarter, a 3 percent decrease compared to the same quarter in 2022.

Cost Performance

Total Operating Expenses: Total operating expenses for the third quarter of 2023 amounted to $937 million, including $291 million in fuel expenses at an average cost of $3.08 per gallon. Excluding fuel, the total operating expenses, a non-GAAP measure, were $646 million.

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By Len Varley - Assistant Editor 4 Min Read
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