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Frontier Airlines Reports Financial Results for the Second Quarter of 2021

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Frontier Airlines Reports Financial Results for the Second Quarter of 2021

Frontier Group Holdings, Inc., parent company of Frontier Airlines, Inc. (NASDAQ: ULCC), today reported its financial results for the second quarter of 2021.

Frontier experienced strengthening demand for leisure travel during the second quarter, with capacity, as measured by ASMs, exceeding the levels achieved in the comparable pre-COVID quarter in 2019. The Company was profitable on a GAAP basis and ended the quarter with $936 million of unrestricted cash and cash equivalents, the highest cash balance in the Company's history. Frontier is focused on positioning the airline to be an industry leader in the recovery from the COVID-19 pandemic, and during the quarter returned all of its aircraft and employees into service across all of its stations.

Frontier had 109 aircraft at the end of the quarter, 11 percent higher than the corresponding prior year period. The airline is expected to take delivery of five additional A320neo aircraft in the third quarter of 2021 with no aircraft expected to be delivered in the fourth quarter. Frontier opened 15 new stations during the second quarter of 2021 and operated over 400 flights per day during the quarter, which was 10 percent higher than the comparable pre-COVID quarter in 2019. While restoring the operation to pre-pandemic levels, Frontier remained financially disciplined, with the business ending the quarter in a very strong liquidity position.

"I am extremely proud of our Frontier team for all of their hard work, dedication and professionalism with our customers through the pandemic and their commitment to our mission of Low Fares Done Right," said Barry Biffle, Frontier's president and CEO. "During the quarter, as the recovery in leisure travel progressed, our capacity exceeded the comparable pre-COVID quarter and we leveraged our financial discipline and relative cost advantage to be profitable on a GAAP basis. Our focus on leisure travel, along with the strength and resilience of our business model and available liquidity, positions us to continue to be an industry leader in the recovery."

The following is a summary of select financial results for the second quarter of 2021, including both GAAP and adjusted (Non-GAAP) metrics. Please see "Reconciliation of Non-GAAP Financial Information" on page 9 below.

(unaudited, in millions, except for percentage and per share amounts)
Three Months Ended June 30,
2021 2020 2019
As Reported (GAAP) Adjusted
(Non-GAAP)
As Reported (GAAP) Adjusted
(Non-GAAP)
As Reported (GAAP) Adjusted
(Non-GAAP)
Total operating revenues $ 550 $ 550 $ 194 $ 194 $ 637 $ 637
Total operating expenses $ 532 $ 613 $ 188 $ 284 $ 536 $ 538
Net income (loss) $ 19 $ (50 ) $ 17 $ (37 ) $ 81 $ 79
Net income (loss) margin 3.5 % (9.1 )% 8.8 % (19.1 )% 12.7 % 12.4 %
Diluted earnings (loss) per share2 $ 0.08 $ (0.24 ) $ 0.08 $ (0.19 ) $ 0.37 $ 0.40

Recent Company Highlights:

  • Frontier completed the second quarter of 2021 with $936 million of unrestricted cash and cash equivalents, the highest cash balance in the Company's history.
  • The Company reported $19 million of net income on a GAAP basis during the quarter as the recovery in demand for air travel across the U.S. continued to strengthen.
  • Frontier's capacity during the quarter, as measured by ASMs, exceeded the levels achieved in the comparable pre-COVID quarter in 2019.
  • Frontier took delivery of five A320neo aircraft during the quarter. This brings the airline's total fleet count to 109 aircraft, which is 11 percent higher than the prior year. Frontier expects to take delivery of an additional five A320neo aircraft during the third quarter of 2021, with no deliveries expected in the fourth quarter.
  • Frontier's fleet continues to be the most fuel-efficient of all major U.S. carriers when measured by ASMs per fuel gallon consumed, generating over 100 ASMs per gallon during the second quarter of 2021.
  • Frontier signed a letter of intent with two of its leasing partners to add ten additional A321 aircraft through direct leases, with deliveries expected to begin in the second half of 2022 and continuing into the first half of 2023. The additional A321 aircraft will enable the Company to boost its ASM growth rate as the recovery from the COVID-19 pandemic continues.
  • The Company generated approximately $60 of ancillary revenue per passenger, which was 6.1 percent higher than the ancillary revenue per passenger generated during the comparable pre-COVID quarter in 2019.
  • Frontier added more leisure destinations for customers for the second half of 2021, including a significant expansion in its schedule in Orlando, Las Vegas and Atlanta, with over 160 destinations collectively from these cities, and further international expansion, including Antigua, Aruba, Belize, Costa Rica, St. Maarten, and Turks and Caicos.

Cash and Liquidity:

Frontier ended the second quarter of 2021 with $936 million of unrestricted cash and cash equivalents, including $266 million of net proceeds from its IPO and $171 million of additional payroll support program funding provided by the U.S. government (consisting of $21 million from PSP2 and $150 million from PSP3). As a result of the strength of the Company's liquidity position and the recovery in demand for air travel across the U.S., Frontier allowed the Treasury Loan facility draw down date of May 28, 2021 to lapse. The Company expects to receive its $161 million current income tax receivable later this year. The Company is focused on repaying the $150 million outstanding under the Treasury Loan, thereby unencumbering the Company's co-branded credit card program and related brand assets that are currently collateralizing the Treasury Loan.

Revenue Performance

Total operating revenues for the second quarter of 2021 totaled $550 million, an increase of 184 percent compared to the second quarter of 2020 as the recovery from the COVID-19 pandemic strengthened for leisure travel. Frontier had 81 percent more average aircraft in service during the second quarter of 2021 as compared to the prior year, with average daily aircraft utilization recovering to over 10 hours per day and the fleet operating at an 80 percent load factor. Further improvement is expected to the utilization and load factor levels achieved in the comparable pre-COVID period as the recovery from the COVID-19 pandemic continues. Frontier's capacity during the quarter totaled 6,934 million ASMs and exceeded the 6,877 million ASMs achieved in the comparable pre-COVID quarter in 2019. Frontier's total revenue per passenger totaled $98.06 during the quarter, with ancillary revenue per passenger of $59.99, which was 6.1 percent higher than the $56.52 of ancillary revenue per passenger generated during the comparable pre-COVID quarter in 2019.

Cost Performance

Total operating expenses for the second quarter of 2021 totaled $532 million, including $87 million of CARES Act credits and $6 million of early lease termination costs. The Company's adjusted total operating expense totaled $613 million, including $139 million of fuel expenses at an average cost per gallon of $2.03. Frontier's adjusted total operating expenses, excluding fuel, totaled $474 million with a resulting adjusted CASM (excluding fuel) of 6.84 cents during the quarter compared to 5.47 cents in the second quarter of 2019. The Company's Adjusted CASM (excluding fuel) was significantly improved from the second quarter of 2020, including the benefit from lease payment deferrals, substantially all of which have been repaid at the end of the second quarter of 2021. The Company's capacity during the second quarter of 2021 recovered to exceed the capacity in the comparable pre-COVID quarter in 2019. As the recovery from the pandemic continues to unfold and utilization levels normalize, the resulting capacity benefit on the Company's fleet, which had 26 percent more aircraft in service in the second quarter of 2021 compared to 2019, is expected to favorably impact the Company's Adjusted CASM (excluding fuel).

Fleet:

As of June 30, 2021, Frontier had a fleet of 109 Airbus single-aisle aircraft, consisting of 68 A320neos, 18 A320ceos, 21 A321ceos, and 2 A319ceos. All aircraft in the fleet are financed with operating leases that expire between 2021 and 2033. Frontier's fleet is the most fuel-efficient of all major U.S. carriers when measured by ASMs per fuel gallon consumed. This fuel efficiency reflects Frontier's operation of a large number of aircraft with new generation, fuel-efficient engines, lightweight seats, and an efficient seating layout.

Frontier took delivery of five A320neo aircraft during the quarter and expects to take delivery of an additional five A320neo aircraft during the third quarter of 2021, with no deliveries expected in the fourth quarter.

During July 2021, the Company signed a letter of intent with two of its leasing partners to add ten additional A321 aircraft through direct leases, with deliveries beginning in the second half of 2022 and continuing into the first half of 2023. The additional A321 aircraft will enable the Company to boost its ASM growth rate as recovery from the COVID-19 pandemic continues.

Forward Guidance:

The third quarter and full year 2021 guidance items provided below are based on the Company's current estimates and are not a guarantee of future performance. This guidance is subject to significant risks and uncertainties that could cause actual results to differ materially, including the risk factors discussed in the Company's reports on file with the Securities and Exchange Commission. Frontier undertakes no duty to update any forward-looking statements or estimates.

Looking forward to the third quarter, we continue our focus on getting the airline back to full utilization as we enter 2022 while remaining flexible to address any impact from the Delta variant on our bookings. Within the last week, we have noted softening in the level of bookings over seasonal norms that we believe is directly related to the increased COVID-19 case numbers associated with the Delta variant. The impact of the Delta variant on bookings, and the duration of that impact, are difficult to predict. As a result, the top end of our guidance range for net income is being adjusted to breakeven providing us with a third quarter net income (loss) margin range of 0 percent to (5) percent. We are confident that as cases decline we will see a positive impact on forward bookings. Our current forward guidance estimate summarized in the table below takes the recent softening in bookings we are seeing today into consideration.

Third Quarter
2021
Capacity (versus 3Q 2019)(a) 2 to 4%
Adjusted total operating expenses (excluding fuel) ($ millions)(b) $515 - $525
Average fuel cost per gallon(c) $2.15
Effective tax rate 24%
Adjusted net income (loss) margin range 0% to (5)%
Full Year
2021
Pre-delivery deposits, net of refunds - year over year change ($ millions) $20
Other capital expenditures ($ millions)(d) $60 to $80

__________________
(a) The Company expects that demand will continue to gradually recover as 2021 progresses and will monitor and adjust capacity levels as appropriate. Given the dynamic nature of the current demand environment, including any impact from the Delta variant, the actual capacity adjustments made by the Company may be different than what is currently expected.
(b) Amount estimated excludes fuel expense and special items, which may include loss on disposal of assets, early lease termination costs, special charges and credits, and other items which are not estimable at this time.
(c) Fuel cost per gallon is inclusive of estimated fuel taxes and into-plane fuel costs.
(d) Other capital expenditures estimate includes capitalized heavy maintenance.

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This press release was sourced from Frontier Airlines on 04-Aug-2021.