Frontier (ULCC) - 2025 Q4 - Annual Report

Financial Performance - Total available liquidity as of December 31, 2025, was $874 million, consisting of $654 million in unrestricted cash and $220 million from an undrawn revolving line of credit[32] - Fare revenue per passenger increased from $43.09 in 2024 to $44.60 in 2025, while total revenue per passenger decreased from $113.38 in 2024 to $112.17 in 2025[35] - Total ancillary revenue per passenger decreased from $70.29 in 2024 to $67.57 in 2025, with non-fare passenger revenue per passenger dropping from $67.50 to $63.79[35] - Marketing expenses accounted for approximately 4% of total revenue in 2025, down from 5% in 2024[50] - A hypothetical increase of 100 basis points in average annual interest rates on variable-rate debt would have increased the annual interest expense by $4 million during the year ended December 31, 2025[430] Revenue Growth and Strategy - Ancillary revenues increased from $60.55 per passenger in 2021 to $67.57 per passenger in 2025, reflecting a growth of approximately 11.5%[34] - The planned introduction of First Class seating by the end of 2026 and onboard Wi-Fi by the end of 2027 is expected to enhance customer loyalty and create additional ancillary revenue opportunities[29] - The company’s strategy includes expanding its network in high-volume markets to stimulate demand and achieve stable growth[30] Fleet and Operational Efficiency - The fleet is noted to be the most fuel-efficient among major U.S. carriers, measured by available seat miles per fuel gallon consumed[23] - The company plans to continue optimizing fleet utilization and network efficiency to align capacity with demand patterns[29] - The average size and seat capacity of the aircraft in the fleet is expected to increase, contributing to lower operating costs[24] - The company has a firm purchase commitment for 168 A320neo family aircraft, expecting to operate a fleet of 292 A320neo family aircraft by the end of 2031[58] - Aircraft fuel expenses represented 24% of total operating costs in 2025, down from 28% in 2024, with an average fuel price of $2.47 per gallon in 2025 compared to $2.73 in 2024[60] Employee and Labor Relations - As of December 31, 2025, the company had approximately 7,750 total employees, including 2,300 pilots and 3,700 flight attendants[67] - Approximately 86% of the company's employees were represented by labor unions under collective bargaining agreements as of December 31, 2025[70] - The company focuses on maintaining a robust pipeline of qualified pilot candidates, with programs designed to train new pilots in as little as 24 months[69] Regulatory and Compliance Issues - The DOT issued a final rule in August 2023 mandating accessibility measures for aircraft lavatories, requiring compliance by October 2026[96] - The DOT's proposed rule on family seating, requiring airlines to seat children aged 13 and under next to an adult at no additional cost, is still under evaluation[94] - The Credit Card Competition Act could reduce fees on credit card transactions, potentially impacting profitability from co-branded credit card agreements[97] - The EPA's new GHG emissions standards for aircraft engines, finalized in January 2021, will apply to new aircraft engines manufactured after January 1, 2028[106] - The CORSIA program requires airlines to offset growth in CO2 emissions from 2021 to 2035, with costs and compliance obligations uncertain[108] - California's SB 253 requires disclosures on Scope 1, 2, and 3 GHG emissions for companies with annual revenue over $1 billion, effective in 2026[110] - The SEC adopted rules for climate-related disclosures, but enforcement remains uncertain following a vote to end defense of the rules in March 2025[112] Maintenance and Repair - The company maintains long-term flight hour agreements for engine overhaul services and contracts with third-party specialists for heavy airframe maintenance, reducing the need for expensive spare parts inventory[64] - The company’s maintenance and repair expenses for aircraft will increase as the fleet ages, particularly after the expiration of maintenance holidays[66] Seasonal Demand and Market Presence - The airline served approximately 100 airports in the U.S. and international destinations, focusing on high-demand and underserved markets[37] - The company is subject to seasonal fluctuations in demand for air travel, with higher demand typically in the summer months[83] Digital and Customer Experience - The company’s digital capabilities are being enhanced through an upgraded website and mobile app to improve customer experience[26] - Approximately 70% of total tickets sold in 2025 were through direct distribution channels, with a slight decrease from 72% in 2024[44] - The FRONTIER Miles frequent flyer program was enhanced in 2025, offering priority boarding and free seat upgrades for Elite Gold members[51] Cost Management - The company maintains a zero-percent standard commission policy for travel agency bookings, enhancing cost efficiency in distribution[46] - The company’s operational priorities include designing systems around automation and utilizing third-party specialists to maintain a low-cost base[69] - Local noise abatement procedures could adversely impact operations if regulations become more restrictive[113]