Company executives say Frontier Airlines’ network and passenger-capacity pivots are already paying off as parent Frontier Group Holdings posted a modest third-quarter profit of $26 million.
That compares with Frontier’s $32 million loss during last year’s July-September period.
“Our revenue and network initiatives helped to overcome headwinds from excess domestic capacity, and we saw green shoots midway through the quarter as we optimised our capacity and other carriers made needed cuts of their own,” chief executive Barry Biffle said during the carrier’s earnings call on 29 October.
Frontier’s third-quarter revenues increased 6% year-on-year, to $935 million from $883 million.
The Denver-headquartered ultra-low-cost carrier (ULCC) is undertaking a financial turnaround effort it has branded ”The New Frontier”, which involves sweeping changes to its customer-facing products – including multiple tiers of seating options and “transparent” pricing with no hidden fees.
Additionally, the carrier is slowing growth via network changes and a plan to defer delivery of dozens of Airbus A320neo-family aircraft through the end of the decade. The ULCC now plans to grow capacity, measured in available seat miles, by roughly 10% annually starting next year.
Thanks to these changes and shifts underway in the US airline sector, Biffle says, Frontier is on course to return to “double-digit adjusted pre-tax margins” by next summer.
US passenger capacity growth has slowest rate in the post-Covid-19 era, he says, as Frontier and its competitors – namely, Southwest Airlines, JetBlue Airways and Spirit Airlines – trim their networks and curb medium-term growth plans.
“There’s just been simply too much capacity, and there has been in particular too much narrowbody capacity – and those [aircraft] tend to fly similar-type routes,” Biffle says. ”We are seeing the market forces push capacity out and I think you’re going to continue to see that happen. The industry will pull capacity until people reach their target margins, and I would argue you’re a long way away from that.
“We’ve made tough decisions ourselves,” he continues. “I remain pretty confident that we will right-size capacity in the domestic US, and the margins will come back in shape – and the ULCC model will be the highest-margin [model] in that domestic space.”
Frontier has posted a $31 million profit through the first nine months of 2024.
Looking ahead, Frontier Group Holdings expects the negative impacts of Hurricane Milton – which earlier this month pounded Frontier’s operational bases in Tampa and Orlando – will extend into the fourth quarter. It forecasts a 2% decrease in adjusted pre-tax margins due to flight cancellations and “demand softness for travel to hurricane-affected areas”.
Additionally, Frontier expects its fourth-quarter capacity to decline year-on-year by 2-3% as it continues pursuing a “network simplification strategy” that involves route-trimming and flying more out-and-back routes, Biffle says.
Frontier took delivery of five new Airbus A321neos during the third quarter, ending the period with a fleet of 153 narrowbody Airbus jets – all of which are financed through operating leases that expire between 2025 and 2036.
