Frontier (ULCC) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Condensed Consolidated Financial Statements (Unaudited) The company's unaudited financial statements show a net loss for the period and a decrease in cash and cash equivalents Condensed Consolidated Balance Sheets Balance Sheet Summary | Metric | June 30, 2025 (millions) | December 31, 2024 (millions) | Change (millions) | | :-------------------------- | :----------------------- | :-------------------------- | :---------------- | | Cash and cash equivalents | $563 | $740 | $(177) | | Total current assets | $832 | $990 | $(158) | | Total assets | $6,524 | $6,153 | $371 | | Total current liabilities | $2,045 | $1,852 | $193 | | Total liabilities | $6,018 | $5,549 | $469 | | Total stockholders' equity | $506 | $604 | $(98) | Condensed Consolidated Statements of Operations Statement of Operations Summary | Metric | Three Months Ended June 30, 2025 (millions) | Three Months Ended June 30, 2024 (millions) | Six Months Ended June 30, 2025 (millions) | Six Months Ended June 30, 2024 (millions) | | :------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total operating revenues | $929 | $973 | $1,841 | $1,838 | | Total operating expenses | $1,004 | $948 | $1,962 | $1,844 | | Operating income (loss) | $(75) | $25 | $(121) | $(6) | | Net income (loss) | $(70) | $31 | $(113) | $5 | | Basic EPS | $(0.31) | $0.14 | $(0.50) | $0.02 | | Diluted EPS | $(0.31) | $0.14 | $(0.50) | $0.02 | Condensed Consolidated Statements of Comprehensive Income (Loss) Comprehensive Income (Loss) Summary | Metric | Three Months Ended June 30, 2025 (millions) | Three Months Ended June 30, 2024 (millions) | Six Months Ended June 30, 2025 (millions) | Six Months Ended June 30, 2024 (millions) | | :------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net income (loss) | $(70) | $31 | $(113) | $5 | | Other comprehensive income (loss) | $— | $— | $— | $— | | Comprehensive income (loss) | $(70) | $31 | $(113) | $5 | Condensed Consolidated Statements of Cash Flows Cash Flow Summary | Metric | Six Months Ended June 30, 2025 (millions) | Six Months Ended June 30, 2024 (millions) | | :---------------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net cash used in operating activities | $(219) | $(13) | | Net cash used in investing activities | $(113) | $(34) | | Net cash provided by financing activities | $155 | $96 | | Net increase (decrease) in cash and equivalents | $(177) | $49 | | Cash and equivalents, end of period | $563 | $658 | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity decreased to $506 million at June 30, 2025, from $604 million at December 31, 2024, primarily due to a net loss of $113 million[13][25] - The number of common shares outstanding increased to 228.1 million at June 30, 2025, from 225.4 million at December 31, 2024, due to stock unit vesting and option exercises[13][25] Notes to Condensed Consolidated Financial Statements 1. Summary of Significant Accounting Policies - Frontier Group Holdings, Inc operates as a single business unit, providing ultra low-cost airline services to approximately 110 airports in the Americas[28][29] - The condensed financial statements are prepared in accordance with GAAP, and interim results may not be indicative of full-year performance due to industry seasonality and volatility[27][30][31] 2. Revenue Recognition - Air traffic liability increased to $324 million as of June 30, 2025, from $303 million at year-end 2024[33] Revenue by Type | Revenue Type | Three Months Ended June 30, 2025 (millions) | Three Months Ended June 30, 2024 (millions) | Six Months Ended June 30, 2025 (millions) | Six Months Ended June 30, 2024 (millions) | | :------------------------ | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Fare | $348 | $355 | $698 | $679 | | Non-fare passenger revenues | $550 | $595 | $1,084 | $1,116 | | Total passenger revenues | $898 | $950 | $1,782 | $1,795 | | Other revenues | $31 | $23 | $59 | $43 | | Total operating revenues | $929 | $973 | $1,841 | $1,838 | Revenue by Geographic Region | Geographic Region | Three Months Ended June 30, 2025 (millions) | Three Months Ended June 30, 2024 (millions) | Six Months Ended June 30, 2025 (millions) | Six Months Ended June 30, 2024 (millions) | | :---------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Domestic | $874 | $904 | $1,742 | $1,706 | | Latin America | $55 | $69 | $99 | $132 | | Total | $929 | $973 | $1,841 | $1,838 | 3. Other Current Assets Other Current Assets Breakdown | Other Current Assets | June 30, 2025 (millions) | December 31, 2024 (millions) | | :------------------- | :----------------------- | :--------------------------- | | Supplier incentives | $41 | $56 | | Prepaid expenses | $20 | $18 | | Forgivable loans | $15 | $16 | | Income tax and other taxes receivable | $4 | $4 | | Other | $5 | $4 | | Total | $85 | $98 | 4. Other Current Liabilities Other Current Liabilities Breakdown | Other Current Liabilities | June 30, 2025 (millions) | December 31, 2024 (millions) | | :------------------------ | :----------------------- | :--------------------------- | | Passenger and other taxes and fees payable | $144 | $141 | | Salaries, wages and benefits | $117 | $120 | | Aircraft maintenance | $76 | $51 | | Station obligations | $75 | $80 | | Fuel liabilities | $32 | $39 | | Leased aircraft return costs | $17 | $20 | | Other current liabilities | $47 | $49 | | Total | $508 | $500 | 5. Debt - The company has multiple pre-delivery credit facilities with a total capacity of $476 million for financing A320neo family aircraft PDPs[40][41][42][43] - As of June 30, 2025, there were no outstanding borrowings under the $205 million Revolving Loan Facility[45] - The company was in compliance with all debt covenants as of June 30, 2025[48] Debt Composition | Debt Type | June 30, 2025 (millions) | December 31, 2024 (millions) | | :---------------------------- | :----------------------- | :--------------------------- | | Pre-delivery Credit Facilities | $386 | $329 | | Building notes | $12 | $12 | | Affinity card advance purchase of miles | $101 | $100 | | PSP promissory notes | $66 | $66 | | Total debt | $565 | $507 | | Long-term debt, net | $234 | $241 | Debt Maturity Schedule | Debt Maturity Year | Total (millions) | | :----------------- | :--------------- | | Remainder of 2025 | $182 | | 2026 | $191 | | 2027 | $13 | | 2028 | $9 | | 2029 | $93 | | Thereafter | $77 | | Total | $565 | 6. Operating Leases - As of June 30, 2025, the company leased 164 aircraft and 42 spare engines under operating leases with remaining terms up to 12 years[49] - The company completed sale-leaseback transactions for seven aircraft in H1 2025, recognizing gains of $90 million[50] - Aircraft rent expense increased by 32% to $194 million for Q2 2025, primarily due to a larger fleet and higher lease return costs[51] Lease Cost Summary | Lease Cost Type | Three Months Ended June 30, 2025 (millions) | Three Months Ended June 30, 2024 (millions) | Six Months Ended June 30, 2025 (millions) | Six Months Ended June 30, 2024 (millions) | | :---------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Operating lease cost | $181 | $155 | $362 | $302 | | Variable lease cost | $122 | $94 | $226 | $173 | | Total lease costs | $303 | $249 | $588 | $475 | 7. Stock-Based Compensation - During H1 2025, 1,562,533 stock options were exercised, and 2,417,732 restricted stock units (RSUs) were issued[61][62][64] Stock-Based Compensation Expense | Metric | Three Months Ended June 30, 2025 (millions) | Three Months Ended June 30, 2024 (millions) | Six Months Ended June 30, 2025 (millions) | Six Months Ended June 30, 2024 (millions) | | :------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Stock-based compensation expense | $6 | $5 | $11 | $9 | 8. Commitments and Contingencies - The company has firm commitments to purchase 180 Airbus A320neo family aircraft and 9 spare engines through 2031, with total commitments estimated at $11.1 billion[67][69] - The company is cooperating with a DOT investigation and contesting a revised federal excise tax assessment of $133 million[70][71] - As of June 30, 2025, approximately 87% of employees are union-represented, with several collective bargaining agreements under negotiation[75][76][77][78] Aircraft and Engine Purchase Commitments | Year Ending | A320neo | A321neo Aircraft | Total Aircraft | Engines | | :---------------- | :------ | :--------------- | :------------- | :------ | | Remainder of 2025 | 7 | 6 | 13 | — | | 2026 | 8 | 15 | 23 | 4 | | 2027 | 8 | 26 | 34 | 3 | | 2028 | 4 | 30 | 34 | 2 | | 2029 | — | 36 | 36 | — | | Thereafter | — | 40 | 40 | — | | Total | 27 | 153 | 180 | 9 | 9. Earnings (Loss) per Share - Due to net losses in Q2 and H1 2025, diluted weighted-average shares outstanding were equal to basic shares as all equity awards were anti-dilutive[86] Earnings (Loss) per Share Calculation | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common stockholders | $(70) million | $31 million | $(113) million | $5 million | | Weighted-average common shares outstanding, basic | 227,941,534 | 224,214,030 | 227,307,480 | 223,822,565 | | Earnings (loss) per share, basic | $(0.31) | $0.14 | $(0.50) | $0.02 | | Weighted-average common shares outstanding, diluted | 227,941,534 | 226,603,798 | 227,307,480 | 226,203,376 | | Earnings (loss) per share, diluted | $(0.31) | $0.14 | $(0.50) | $0.02 | 10. Income Taxes - The effective tax rate for Q2 and H1 2025 was 0% and 2.7% respectively, lower than the statutory rate due to a valuation allowance on net operating losses[89] - As of June 30, 2025, the company had a valuation allowance of $45 million against its deferred tax assets, an increase of $26 million since year-end 2024[90] 11. Fair Value Measurements - Cash, cash equivalents, and restricted cash are categorized as Level 1 instruments carried at cost, which approximates fair value[95] - The estimated fair value of the company's debt is a Level 3 measurement, determined using a discounted cash flow method[96] Fair Value of Debt | Debt Type | June 30, 2025 Carrying Value (millions) | June 30, 2025 Estimated Fair Value (millions) | December 31, 2024 Carrying Value (millions) | December 31, 2024 Estimated Fair Value (millions) | | :---------------------------- | :-------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------------ | | Pre-delivery Credit Facilities | $386 | $391 | $329 | $333 | | Building notes | $12 | $12 | $12 | $12 | | Affinity card advance purchase of miles | $101 | $99 | $100 | $98 | | PSP Promissory Notes | $66 | $63 | $66 | $62 | | Total debt | $565 | $565 | $507 | $505 | 12. Related Parties - Indigo Partners LLC, an affiliate of substantial stockholders, provides management services for a quarterly fee of $1 million[98] - The company maintains a codeshare agreement with Volaris, a Mexican airline with which it shares two board directors[99] 13. Subsequent Events - In July 2025, the company executed an agreement with Pratt & Whitney for GTF engines to power 91 Airbus A321neo aircraft and committed to 28 additional spare engines[101] Revised Aircraft and Engine Purchase Commitments | Year Ending | A320neo | A321neo Aircraft | Total Aircraft | Engines | | :---------------- | :------ | :--------------- | :------------- | :------ | | Remainder of 2025 | 7 | 5 | 12 | 16 | | 2026 | 8 | 15 | 23 | 2 | | 2027 | 8 | 26 | 34 | 3 | | 2028 | 4 | 30 | 34 | 2 | | 2029 | — | 36 | 36 | 5 | | Thereafter | — | 40 | 40 | 9 | | Total | 27 | 152 | 179 | 37 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a net loss driven by lower revenues and higher non-fuel operating costs Recent Developments - The company is monitoring macroeconomic conditions, including potential impacts from expanding tariffs on the transportation industry[104][105] - Labor negotiations are ongoing with unions representing pilots, flight attendants, and other key employee groups[106] - The company received a revised federal excise tax assessment of $133 million in June 2025, which it is contesting[107] - FAA-mandated inspections of Pratt & Whitney GTF engines could temporarily ground aircraft and impact future capacity plans[108] Overview Key Financial and Operating Metrics | Metric | Three Months Ended June 30, 2025 (millions) | Three Months Ended June 30, 2024 (millions) | Six Months Ended June 30, 2025 (millions) | Six Months Ended June 30, 2024 (millions) | | :------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total operating revenues | $929 | $973 | $1,841 | $1,838 | | Total operating expenses | $1,004 | $948 | $1,962 | $1,844 | | Income (loss) before income taxes | $(70) | $32 | $(110) | $8 | | ASMs | 10,313 | 10,552 | 20,262 | 19,998 | | Diluted EPS | $(0.31) | $0.14 | $(0.50) | $0.02 | Revenues - Total operating revenues decreased by 5% to $929 million for Q2 2025, driven by a 2% moderation in capacity and a 2% decrease in RASM[111] - For H1 2025, total operating revenues were consistent at $1,841 million, as a 1% capacity increase was offset by a 1% RASM decrease[112] Q2 Operating Statistics | Operating Statistic | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :------------------------ | :------------------------------- | :------------------------------- | :--------- | | ASMs (millions) | 10,313 | 10,552 | (2)% | | RASM (¢) | 9.01 | 9.21 | (2)% | | Passengers (thousands) | 8,499 | 8,899 | (4)% | | Total ancillary revenue per passenger ($) | 68.33 | 69.34 | (1)% | | Total revenue per passenger ($) | 109.27 | 109.25 | —% | H1 Operating Statistics | Operating Statistic | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :------------------------ | :----------------------------- | :----------------------------- | :--------- | | ASMs (millions) | 20,262 | 19,998 | 1% | | RASM (¢) | 9.08 | 9.19 | (1)% | | Passengers (thousands) | 16,338 | 15,904 | 3% | | Total ancillary revenue per passenger ($) | 69.96 | 72.86 | (4)% | | Total revenue per passenger ($) | 112.66 | 115.54 | (2)% | Operating Expenses - Total operating expenses increased by 6% to $1,004 million for Q2 2025, resulting in an 8% increase in CASM to 9.73¢[113] - Non-fuel expenses increased by 17% for Q2 2025, driven by higher aircraft rent, lower sale-leaseback gains, and increased station costs[114] - For H1 2025, total operating expenses increased by 6% to $1,962 million, with CASM increasing by 5% to 9.68¢[115] Q2 Operating Expenses | Operating Expense Category | Three Months Ended June 30, 2025 (millions) | Three Months Ended June 30, 2024 (millions) | Change (millions) | Change (%) | | :------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------- | :--------- | | Aircraft fuel | $230 | $288 | $(58) | (20)% | | Salaries, wages and benefits | $254 | $244 | $10 | 4% | | Aircraft rent | $194 | $147 | $47 | 32% | | Station operations | $178 | $163 | $15 | 9% | | Maintenance, materials and repairs | $47 | $42 | $5 | 12% | | Sales and marketing | $39 | $47 | $(8) | (17)% | | Depreciation and amortization | $21 | $18 | $3 | 17% | | Other operating | $41 | $(1) | $42 | N/M | | Total operating expenses | $1,004 | $948 | $56 | 6% | H1 Operating Expenses | Operating Expense Category | Six Months Ended June 30, 2025 (millions) | Six Months Ended June 30, 2024 (millions) | Change (millions) | Change (%) | | :------------------------- | :-------------------------------------- | :-------------------------------------- | :---------------- | :--------- | | Aircraft fuel | $468 | $551 | $(83) | (15)% | | Salaries, wages and benefits | $503 | $477 | $26 | 5% | | Aircraft rent | $355 | $306 | $49 | 16% | | Station operations | $358 | $300 | $58 | 19% | | Maintenance, materials and repairs | $98 | $91 | $7 | 8% | | Sales and marketing | $80 | $87 | $(7) | (8)% | | Depreciation and amortization | $41 | $34 | $7 | 21% | | Other operating | $59 | $(2) | $61 | N/M | | Total operating expenses | $1,962 | $1,844 | $118 | 6% | Net Income (Loss) - The company reported a net loss of $70 million for Q2 2025, compared to net income of $31 million in the prior year period[118] - For H1 2025, the net loss was $113 million, a significant decline from net income of $5 million in the prior year period[119] Liquidity - As of June 30, 2025, total available liquidity was $766 million, including $561 million in unrestricted cash and $205 million from an undrawn credit facility[121] Reconciliation of Non-GAAP Measures - For all periods presented, there were no non-GAAP pre-tax adjustments for CASM, Adjusted CASM, EBITDA, or EBITDAR reconciliations[147][149][154] Non-GAAP Cost Metrics | Metric (Per ASM) | Three Months Ended June 30, 2025 (¢) | Three Months Ended June 30, 2024 (¢) | Six Months Ended June 30, 2025 (¢) | Six Months Ended June 30, 2024 (¢) | | :------------------------ | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | CASM | 9.73 | 8.98 | 9.68 | 9.22 | | CASM (excluding fuel) | 7.50 | 6.24 | 7.37 | 6.46 | | Adjusted CASM | 9.73 | 8.98 | 9.68 | 9.22 | | Adjusted CASM + net interest | 9.68 | 8.90 | 9.62 | 9.15 | Non-GAAP Profitability Metrics | Metric (millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(70) | $31 | $(113) | $5 | | Adjusted net income (loss) | $(70) | $31 | $(113) | $10 | | EBITDA | $(54) | $43 | $(80) | $28 | | EBITDAR | $140 | $190 | $275 | $334 | Comparative Operating Statistics Q2 Comparative Operating Statistics | Operating Statistic | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------- | | ASMs (millions) | 10,313 | 10,552 | (2)% | | Departures | 52,147 | 57,176 | (9)% | | Average aircraft in service | 163 | 145 | 12% | | Average daily aircraft utilization (hours) | 9.7 | 11.2 | (13)% | | Passengers (thousands) | 8,499 | 8,899 | (4)% | | Load Factor | 79.3% | 78.1% | 1.2 pts | | Fuel cost per gallon ($) | 2.36 | 2.84 | (17)% | H1 Comparative Operating Statistics | Operating Statistic | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :------------------------------ | :----------------------------- | :----------------------------- | :--------- | | ASMs (millions) | 20,262 | 19,998 | 1% | | Departures | 103,505 | 105,842 | (2)% | | Average aircraft in service | 158 | 141 | 12% | | Average daily aircraft utilization (hours) | 9.7 | 10.9 | (11)% | | Passengers (thousands) | 16,338 | 15,904 | 3% | | Load Factor | 77.2% | 75.5% | 1.7 pts | | Fuel cost per gallon ($) | 2.45 | 2.88 | (15)% | Liquidity and Capital Resources - Total available liquidity was $766 million as of June 30, 2025, including $561 million in unrestricted cash and $205 million in undrawn credit capacity[159] - The company had $560 million in total debt, net, with $326 million classified as short-term[159] - During H1 2025, 1,244,608 warrants were exercised, with 1,873,332 warrants remaining outstanding[160] - Net cash used in operating activities increased significantly to $219 million for H1 2025, driven by a net loss and changes in working capital[170] - Net cash used in investing activities increased to $113 million for H1 2025, due to pre-delivery deposits and capital expenditures[173] - Net cash provided by financing activities increased to $155 million for H1 2025, from debt issuances and sale-leaseback transactions[173] Material Cash Requirements | Material Cash Requirements | Remainder of 2025 (millions) | 2026 (millions) | 2027 (millions) | 2028 (millions) | 2029 (millions) | Thereafter (millions) | Total (millions) | | :------------------------- | :--------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | :-------------------- | :--------------- | | Debt obligations | $182 | $191 | $13 | $9 | $93 | $77 | $565 | | Interest commitments | $15 | $18 | $12 | $11 | $8 | $4 | $68 | | Operating lease obligations | $363 | $720 | $712 | $657 | $582 | $2,696 | $5,730 | | Flight equipment purchase obligations | $753 | $1,384 | $2,058 | $2,114 | $2,265 | $2,549 | $11,123 | | Total | $1,313 | $2,313 | $2,795 | $2,791 | $2,948 | $5,326 | $17,486 | Critical Accounting Policies and Estimates - There have been no material changes in critical accounting policies and estimates during the six months ended June 30, 2025[176] Recently Adopted Accounting Pronouncements - Information regarding recently adopted accounting pronouncements is referenced in the company's 2024 Annual Report on Form 10-K[177] Glossary of Airline Terms This section defines key industry-specific terms used in the report to aid reader comprehension Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to the market risk disclosures from the 2024 Annual Report - No material changes in market risk from the information provided in the 2024 Annual Report[200] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025 - Disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of June 30, 2025[202] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[203] Part II. Other Information Item 1. Legal Proceedings The company faces various legal proceedings not expected to materially impact its financial condition - Management believes the ultimate outcome of legal proceedings will not materially adversely affect the company's business, results of operations, or financial condition[205] Item 1A. Risk Factors There have been no material changes to the risk factors disclosed in the 2024 Annual Report - No material changes to the risk factors disclosed in the 2024 Annual Report[206] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or share repurchases during the period - No unregistered sales of equity securities or use of proceeds occurred[207][208] - The company does not have a share repurchase program and did not repurchase any shares during the second quarter of 2025[209] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred[210] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[211] Item 5. Other Information This section discloses the termination of a Rule 10b5-1(c) trading arrangement by the CEO - On May 12, 2025, CEO Barry Biffle terminated a Rule 10b5-1(c) trading arrangement for the sale of up to 2,164,580 shares of common stock[212] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including key corporate documents and certifications - Exhibits include Amended and Restated Certificate of Incorporation and Bylaws, Form of Common Stock Certificate and Warrant, and Certifications of CEO and CFO[215] Signature The report is certified by the Senior Vice President and Chief Financial Officer as of August 5, 2025 - The report was signed by Mark C. Mitchell, Senior Vice President and Chief Financial Officer, on August 5, 2025[219]