Frontier Group Holdings Inc Stock

Thank you. Hello everyone. Thank you for joining us and welcome to the Frontier Group Holdings second quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to David Erdman, Senior Director of Investor Relations. David, please go ahead.

Thanks and good morning, everyone. Welcome to our second quarter 2026 earnings call. Joining me this morning in speaking order are Jimmy Dempsey, President and Chief Executive Officer, Bobby Schroeder, Chief Commercial Officer, and Mark Mitchell, Chief Financial Officer. Each will deliver brief prepared remarks and then we'll open the call for Before we begin, however, I will remind you that today's discussion will include forward-looking statements subject to risks and uncertainties, and we will refer to certain non-GAAP financial measures. Reconciliations can be found in the earnings release issued earlier today. and on our investor relations website. We also will be referencing stage adjusted unit metrics which are based on a conversion to 1,000 miles. So I'll turn the call over to Jimmy to begin his prepared remarks. Jimmy? Thanks, David, and good morning, everyone.

The second quarter performance was well ahead of our earlier expectations and marks a meaningful step forward in Frontier's transformation. The progress we've delivered this quarter validates the actions we have taken to strengthen the airline and position the business for sustained profitability. I'm incredibly proud of the focus, urgency and execution across Team Frontier as we continue advancing the plan we announced in February. February. Adjusted loss per share narrowed to 10 cents compared to our original guidance range of a loss of 45 to 60 cents per share, with top line performance the primary factor. We delivered an all-time company record for quarterly revenue of $1.3 billion, up 38% year-over-year, with RASM up 28%, augmented by strong travel demand, the continued progression of our revenue management initiatives, and a more favorable competitive capacity backdrop. We ended the quarter with liquidity of 1.16 billion, further strengthening our balance sheet and giving us added flexibility as we execute against our transformation priorities. Across the business, the team has been executing with discipline and momentum against the four priorities we set out in February. right-sizing our fleet, strengthening cost discipline, improving operational reliability, and deepening customer loyalty.

Beginning with fleet rightsizing, this work is now largely complete and is creating a more efficient, more productive platform for the future. In the second quarter, we returned all 24 aircraft under the aircraft agreement. Moreover, we are in advanced discussions to early terminate leases associated with 13 A320neo aircraft in the coming months and substantially replace that capacity with direct leases for up to 10 newer, more cost-efficient A321neo aircraft by the first quarter of 2027, facilitating slower capacity growth in Q4 of approximately by approximately 7%. On cost discipline, we are seeing clear benefits from the actions we have taken to bring productivity back into the airline and remain on track to deliver $200 of targeted annual run rate cost savings by 2027. Operational reliability also continued to improve, supported by a system-wide maintenance strategy that is contributing to stronger completion factor and on-time performance. For the first half of the year, Frontier ranked fourth among domestic carriers in completion factor and delivered a controllable completion factor of 99.3%. As demonstrated by today's results, customer loyalty and revenue management are gaining momentum.

In late June, we extended and improved our Barclays Cobran Credit Card Partnership. In addition, I'm pleased we recently announced the fleet-wide rollout of Starlink high-speed Wi-Fi. We expect it to launch in early 2027. The introduction of Wi-Fi in conjunction with first-class seating significantly enhances our onboard experience and it reinforces our overarching commitment to delivering meaningful value to customers while maintaining industry-leading fares. In conclusion, we are focused on strengthening the fundamentals of our business and segmenting our revenue base to meet customer expectations. We have real momentum and I'm confident in the path ahead for Frontier. As noted in our guidance update, we anticipate returning the airline to profitability in the second half of the year.

With that, I'll turn the call over to Bobby to walk through the commercial updates. Bobby Stinnett, Thanks, Jimmy. RASM came in at 11.52 cents, 28% higher year over year. The vast majority of the increase is a reflection of more disciplined revenue management alongside an improved overall supply-demand backdrop, which is further enhanced by CES exit from overlapping markets. These factors are allowing us to substantially mitigate higher fuel prices. Total revenue per passenger rose 20% to approximately $131 on flown load factor of 80.3%, up a point on capacity that was 8% higher. Loyalty continues to be one of our fastest growing highest margin revenue streams and the second quarter reinforced the strength of that platform. For example, the revenue contribution from the Barclays co-brand card increased nearly 30% year over year, supported by record co-brand card acquisition activity and continued double digit growth in cardholder spend through the first half of the year, reflecting the customer's recognition of the value we are delivering in the program.

Customer loyalty is increasingly tied to what we deliver on board as well. With our upcoming first class product and the Starlink rollout, Jimmy mentioned, we will be delivering a meaningful, meaningfully better in-flight experience. One that gives the customers who fly us today more reason to come back. And it puts Frontier in play for customers our fares alone haven't reached. That's what converts a one-time booking into a repeat customer and a repeat customer into our cardholder. As we layer in first class Starlink Wi-Fi and additional loyalty enhancements, we are building a more durable, increasingly diversified revenue base while preserving the cost discipline that defines Frontier's model. Domestic capacity in the third quarter is scheduled to be flat year-over-year, while competitive capacity is down over four points.

Our third quarter is Our third quarter scheduled capacity is expected to increase 2 to 3% sequentially and 17 to 18% year over year as we continue to normalize productivity and seize the unique opportunity to back the lost capacity in the high value carrier space. Fourth quarter growth, assuming execution of the deals Jimmy mentioned previously, is expected to be approximately 7% year-over-year, more in line with our long-term growth targets. With that, I will now turn it over to the call to Mark. Thanks, Bobby.

Total adjusted operating expenses in the second quarter were $1.3 billion, or $11.77 per ASM, including $436 million of fuel expense at an average cost of $4.17 per gallon, approximately $180 million higher compared to forward indications from early February. Total adjusted operating expenses excluding fuel in the early return agreement were 870 million, or 7.42 cents per ASM stage adjusted, reflecting a sequential decline of over 10% on higher aircraft utilization. The second quarter adjusted net loss was 22 million, 10 cents per share, significantly favorable to our expected guidance range of a 45 to 60 cent loss. The beat was driven by stronger than expected revenue performance and disciplined cost management. We ended the quarter with total liquidity of $1.16 billion, significantly above our guidance range, representing 27% of trailing 12-month adjusted revenue. The increase during the quarter was supported by stronger sales than expected. The signing bonus received in connection with the Barclays Amendment, which was slightly above expectations and disciplined capital allocation.

We ended the quarter with 165 Airbus aircraft, having taken delivery of two A320neos and four A321neos, and returning all 24 A320neos pursuant to the early return agreement. During the third quarter, we expect to take delivery of one additional A320neo and five A321neos from our Airbus order book. As Jimmy mentioned, we are in advanced discussions to early terminate the leases associated with 13 A320neo aircraft and enter into direct leases for up to 10 newer and more cost efficient A321neo aircraft. Assuming execution of these agreements, we would expect to operate a fleet of no greater than 168 Airbus aircraft by the end of the first quarter of 2027 and remain at that level through the end of 2027. We will provide an update should formal agreements be executed. Turning to guidance, third quarter adjusted diluted EPS is expected to range from a loss of 10 cents per share to a profit of 10 cents per share at an average fuel cost of $3.70 per gallon. Fourth quarter adjusted diluted EPS is expected to range from break-even to a profit of 20 cents per share at an average fuel cost of $3.45 per gallon, which would reflect the third consecutive quarter of earnings improvement.

Operator, we're ready to open the line for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Stand by while we compile the Q&A roster.

Your first question comes from the line of Savi Sith with Raymond James. Please go ahead.

Hey, good morning, everyone. The kind of question that I had was on the capacity growth. I think Bobby mentioned that maybe this kind of 7% capacity growth. level in 4Q is kind of maybe the target level. I was wondering if you can talk a little bit about that. And it looks like you're continuing to favor maybe a higher gauge aircraft. Just any high level thoughts on as you think about kind of medium term growth and how you're thinking about the strategy there?.

Hi, Tavi. It's Jimmy. We haven't changed what we said earlier this year. We We talked about somewhere between 7 and 10% capacity growth on an annualized basis over the kind of medium term. We're obviously going through a significant fleet transition at the moment, so it's quite lump be in terms of the capacity that we have to fly versus what we want to get to and then And you're also lapping quite an unproductive airline a year ago. And so if you look at capacity growth in Q3, you know, it's elevated compared to where we want it to be. We're taking advantage of an opportunity that we have to return 13 aircraft. And quite frankly, I really like the timing of it. And we return 13 aircraft in the next couple of months if we execute this deal.

And then we largely don't replace the fleet until after the winter. And so we'll take the fleet down from where it is as you cross through the winter and it It does give us that plus an opportunity to retrofit the first class seats onto the aircraft through this winter. And so you'll see our capacity dip from a growth perspective down to like 6%, 7%, 8%. We haven't really settled on it. We're working on timing. But in that range in the fourth quarter, which is a nice change from where we are in Q3, which is an 18% capacity growth.

Yes, and just to add on, I know you were talking about the gauge. I mean, look, the growth we're talking about is asset productivity, and then there is some gauge conversation in there. We like the A321neo. We think it's the best asset. unit cost machine and domestic flying. So we're looking at how we switch those out with some of these deals that were brought up. You're talking about an up gauge of 29%, but the unit costs or the cost per departure are significantly less than that. So from a P&L perspective, we think that's a really great move for us.

That's a very helpful color and if I just on the. On the implications of the unit cost side, any kind of thoughts as we think about, like, the next. 6 to 12 months on unit costs and how that might progress.

Mark Blyth, yes, thanks, Savi. This is Mark. Yes, so as you look at the unit cost, so we had good progression from Q1 to Q2, right? So we're still in the midst of the transition, but, you know, the completion or, you know, the substantial completion of the fleet rights, I think, puts us in a good place. we're on track with our cost savings plan. So I think what you saw in Q2, which was a 12% sequential improvement, slightly higher year over year because of some higher maintenance activity, some transition related items, and some incremental sales and marketing on higher revenue. As you fast forward into Q2, Q3 and Q4, which you're going to see as you look at Q3, continued progress where you're getting on our cost savings where you get a full quarter of the rent savings, you're going to see labor productivity come through. You're still in a bit of a transition on the ownership cost front, and we're still expecting some higher maintenance activity. and certainly the incremental sales and marketing. And so when you put that together, You'll see progress on the plan, but some headwinds that we're working to mitigate in addition to Q3 from a year-over-year basis, lower SLB gains. And as you fast forward beyond Q3, what we're really targeting as a business, because as you look at 27 based upon our fleet plan, there's little to no sale. the leaseback gains in there and we're targeting profitability in 27.

And so as part of that from a unit cost perspective, getting our unit costs to trend when you adjust out the SLB to be trending favorable.

I mean, in summary, Savi, we're seeing real improvement in productivity in the business. Take out the noise of selling leaseback gains, and the airline's unit costs are actually improving.

And so we're pretty happy with where we're going. Appreciate the call. Thank you.

Your next question comes from the line of Atul Maheswari with UBS. Please go ahead. Atul, a reminder to please unmute yourself locally. We will move on to the next question from John Godden with City Group. John, your line is open. Please go ahead.

Hey, guys. Thank you for taking my question. I wanted to just follow up on the long-term ASM growth. Savi's first question. And maybe you guys could just speak about the drivers and the contours of that growth over multiple years in the face of what could be rising profitability. When you think about 7% versus 10, or even being above 10 at certain times, Is that a margin trigger? Is that a return trigger? You know, we may be in a period here where profitability is improving, and I think people are just trying to get a handle on the interplay of your capacity growth decisions with respect to that.

Yes. Hi, John. I mean, look, if you look across the medium term for the airline, I mean, we established earlier this year that we wanted to have a fleet of aircraft, around 170 aircrafts. aircraft and to keep the fleet steady over a two-year period. And give the airline an opportunity to mature into its fleet. The airline in 2019 had 95 aircraft at the end of 2019. And and it grew quite meaningfully in the next kind of four to five years. And so giving the airline an opportunity to mature into itself and improve your operational performance is really foundational to actually running a good airline. And that's what we needed to do. So establishing a stable fleet over two years is very, very important to me.

And so that discipline around fleet is something that we've invested a huge amount of time in getting right, and we think we're moving into the right place. You then take that fleet, and you know you have an order book that runs from 2028 through to 2033. And we're trying to shape that order. book and that drives growth in the airline after you get the airline back to productivity of somewhere with I suppose with flexibility of somewhere between 7 and 10% I mean if you push productivity hard you can go above 10 10% So we've got to see if that makes any sense. I think I like the idea of growing the airline in the high single digits. level in order to create a more stable revenue backdrop for the airline and to give us the ability to mature the airline without actually having an operational stress in the airline. And so, like, will it be lumpy? Yes, there's periods probably through the next five years where you may have slightly higher than 7 or 8% and there may be periods where it's down around 5 or 6% growth. But in that kind of high single digits is where I'd like to see the airline in the medium term from where it is today. But I look at it, I mean, the fundamental thing that we're doing at the moment, rather than looking beyond 2028, is really getting the airline in a really strong condition before it adds aircraft to the fleet.

No, I think that's great. I think investors will appreciate kind of a thoughtful, disciplined message there. If I could just ask, you know, one more on now that we have the benefit of hindsight, the sort of play-by-play in markets after the spirit wind down. I think I heard you guys talk about 4% capacity, competitive capacity declines in your markets. that's a number that kind of implies to no surprise backfill maybe from, from other players. And maybe you could just kind of plug us into the competitive dynamic in the wake of it. Obviously you guys are benefiting considerably and doing a great job, but, but what's the competitive situation like?.

Look, I mean, this is the airline business in the United States. Like the field that we play on has four very dominant airlines that, you know, supply over 80% of the capacity or seats in the domestic market. And so it's extremely competitive. It continues to be competitive. What is it? happened is structural change on the back of two things, right? One is Spirit started restructuring the airline meaningfully in November last year. And so they cut their meaningful capacity. We also changed the way we were managing revenue. We moved to a much more disciplined revenue management strategy around the end of the fourth quarter and into the first quarter of this year.

And so those two things drove, like if you look at our RASM numbers going into Q1, They drove high teen RASM improvement through the first quarter prior to spirits liquidation. And then obviously, on our last earnings call, we kind of laid out that we thought the removal or liquidation of Spirit would cause about a three to five point improvement in RASM. It's probably a little bit higher than that. And that allied to the ability to mitigate high oil prices has come really from that structural change that's happened in the last couple of months. But look, back to your earlier question, it's still a very competitive marketplace.

Appreciate the thoughts. Thank you. Your next question comes from the line of Atul Maheswari with UPA. Yes. Atul, your line is open. Please go ahead. Good morning. Are you guys able to hear me?.

Yes, yes morning. OK, awesome. Thank you. Sorry, don't know what happened there. So first question look, I mean you'll be lapping some big Rasm numbers next year and the growth plans are moderate so. Given the you know the compares from this year are you optimistic that you can drive positive RASM-CASM-X spread X the SLB gains next year and if so what would be the key drivers of that positive spread?.

I mean, we're not guiding into next year at this point, but look, the airline is on a very, very good path. We've moved the airline back to talking about profitability towards the end of this year. And we have big investments going on into the onboard product and the operational performance of the airline. And so the introduction of Wi-Fi in early 2027, plus the rollout of our first class seats across this winter, I think adds a significant amount of improvement in product offering and diversification, in revenue that we will get in the airline. And I think that's very, very positive. And then we'll move into next year, obviously focused on unit costs. And so, you know, we're not forecasting next year, but the airline is certainly on the right trajectory to return to sustainable profitability.

And that's what we're looking at.

focused on today. Got it, that's helpful and you know as my follow up the average daily aircraft utilization is currently a little under 10 hours. A day where do you see this metric over the medium term and as you approach that medium term level versus you know where you are currently? Is there a way to size that? the chasm X tailwind that this might provide?.

Our objective is to get the airline to around 11, 11 and a half hours of utilization. And you'll have periods in the year where it's higher than that and other periods of the year where it's lower, depending on seasonality in the business. I mean, the airline today moving through Q3, I think has a utilization rate of just over 10 hours. And so, you know, we are behind in terms of moving the airline back to a higher utilization given the spike in oil prices. We've effectively trimmed about five or six points in available capacity across the summer months to meet our needs. or managed through a high oil price environment. And we'll continue to be diligent in terms of how we deploy our fleet. And so I think what we're building is flexibility with an objective to get the airline to above 11 hours of utilization over the medium term.

And that productivity obviously enables you to improve your unit cost output.

Thank you. Your next question comes from the line of Scott Group with Wolf Research. Scott, your line is open. Please go ahead.

It's against the law. Hey, thanks. Good morning. So the if I look back at Q2, you guys were talking about a, you know, 20% plus RASM and it ended up up 28%. I guess this quarter you're saying 20% plus again, like any more like directional color on where you think we could end up? Maybe, maybe thinking about it this way, like the last couple of years, like RASM's picked up a little bit on an absolute basis, Q2 to Q3. Is that something that, you know? is achievable again, just any more sort of near-term RASM color.

Look, there's a couple of things happening. We grew the airline at a slower pace in Q2, which contributes obviously to RASM, than we're growing in Q3. We think the airline has structurally changed its revenue platform, which enables you to get to the RASM levels that we're at today. But we do have growth coming in Q3 that's lapping a very unproductive airline last year. And so sequentially, the growth level is not that dissimilar to what we should be doing seasonally as you're rolling into this portion of the year. But we think a reasonable RASM output, given the 18% growth. in ASMs year over year is just over 20%. And that's what we're seeing in the system.

Make sense. And then I just want to make sure I'm understanding your point about next year. lapping the sale lease back, I don't know, what's that like a four or five point sort of chasm headwind is the point you're trying to make that you think like core chasm could be down year over year and so like the reported chasms up but it's not up the, you know, full four to five points of what, you know, the sale lease back headwind is, is that what you're.

trying to say? Yes, Scott, I think as you look, you know, at, you know, call it 25, right? I mean, you had 300 million in sale leaseback gains. And so, you know, that, you know, on the ASM basis, probably 0.7, you know, or 0.8, right, which would have put 25 close to, you know, 8 cents, you know. on a stage-adjusted basis. And so as we look into 27, what we are expecting is that our costs are trending to be able to be roughly flat, excluding that impact.

Look, Scott, it's dependent on growth, right, and inflation that you see across the airport world and other parts of the business. But yes, I mean, I think a CASMX fuel number to work off of somewhere in the mid-sevenths makes a lot of sense to me in the medium term. We're obviously challenging the business to get it lower than that.

I think that's a reasonable CASMX field number to work on. So, I'm just confused. I'm going to flop. So, you're saying 25x gains, you were over, you were 8 plus, but you're thinking you can get that down to mid-7s.

Yes, I think when you adjust for the sale, leaseback gains, like for like, you were pushing $0.08 and $0.25. And to Jimmy's point, as you look at $0.27, a reasonable target is mid-sevens.

And look, it'll be plus or minus something in the mid-sevenths. I mean, we haven't done our budget yet for next year. We need to look across the inflation that exists in the industry and in the model. It could be slightly harder than that, slightly better than that. We'll just have to see.

Thank you. Okay. Your next question comes from the line of Ravi Shankar with Morgan Stanley. Please go ahead.

Great, thanks, Monegat. Just on the current environment out there, do you feel like there's still room for the consumer to accept more jet fuel price pass-throughs at industry level without seeing demand destruction? What do you think is the current sense on elasticity?.

Hi, Robbie. I mean, I don't have a crystal ball, so it's difficult for us to predict what's going to happen in the future. I think there's been structural change in our revenue base, which I think is really positive for the airline. What we're seeing in the booking engine at the moment is 20% plus RASM improvement into Q3. We have slightly slower growth in Q4 than that, but the year-over-year comps get a little bit harder. So look, we think we've put a really good structural change into the business with more disciplined revenue management. And obviously the actual change in structure of the competitive capacity that's happening is a big positive for Frontier. benefiting from that and that's enabling us to mitigate high oil at the moment or largely mitigate high oil and we obviously want to get the airline back to profitability and overcome higher oil and the volatility in price in oil is really difficult to predict as is the consumers willingness to continue and.

and paying it. So we just don't have a crystal ball behind that. Bobby, I'll just add, look, the demand environment, we talked about a good demand supply backdrop. The demand environment is strong. the fair environment is constructive. And then the demand environment isn't just strong for a fair, but for our increasingly diverse revenue base in terms of ancillary, et cetera. So there's a lot of interest. good things that we see on the environment overall that's constructive for what you were discussing.

Understood, that makes sense. And maybe as a quick follow up, if you can give us a little more detail around the new credit card agreement and specifically around Sharing any color on the thinking behind the duration of the agreement here, kind of it's great that it's a long-term agreement, but at the same time, just given changing dynamics of loyalty out there, kind of do you guys consider doing maybe a shorter agreement and getting more by the Apple? Thank you.

Yes, I mean, I'll sit there and say, I mean, Barclays is an incredible partner for us. frankly, you've seen the results in some of the things that we've transformed over the past year or two, and there's a lot more to come in terms of capability to continue making our loyalty program the best loyalty program out there that people wanna engage with, both on an acquisition side and the spend side. Our thought process on the, the length, frankly, again, we've got a partner that actually is leaning into this with us and getting us to a place where we think we can grow the overall loyalty pie by a fairly significant amount over the next few years. So we got what we wanted out of the deal. And again, we think that partnering with Barclays is the best move we could make for the next decade.

Very good. Thank you. Your next question comes from the line of Michael Linenberg with Deutsche Bank. Please go ahead.

Oh, hey, good morning, everyone. Just maybe to follow up on the Barclays deal, the pre-purchase mileage facility. How much I saw that you were able to sell 175 million this quarter. How much capacity is left on that facility before you hit the cap?.

So, the facility and the new agreement has a max amount of 375 where we sat right where we sat at the end of the quarter was roughly 120M. So, you have plenty of runway right as we progress through the term of the agreement.

Okay, great. Thanks, Mark. And then just maybe actually another question for you. Just on the sale leaseback gains, it looked like the receipts per aircraft were down about 30%. Is that sort of two things? Is that the right run rate to use for the third quarter? And And is that discount, that's not a function of some sort of decline in asset values, right? That's probably more likely a function of just how the lease was restructured. Thanks for taking my question.

Yes, so I appreciate the question. So yes, I think what you're seeing is a function of you know, the the So one, the mix, right? So we had two 320s and four 321s. And then keep in mind, you know, from prior expectations, one tail did slip into the third quarter.

Okay, thanks. Your next question comes from the line of Jamie Baker with JP Morgan Securities, LLC. Jamie, your line is open. Please go ahead.

Thanks, Operator, and good morning, everybody. So, look, the industry seems to have achieved new levels of pricing power. Frontier is obviously part of that. I assume you agree with the characterization. And I suppose a good fuel crisis brings out the best in everybody's pricing department and all that good stuff. My question though is what have your lessons learned in it frontier that you think are unique to your passenger demographics? So is it a subset of travelers that are comfortable paying higher fares? Is it a broad-based rising tide? Are you seeing travelers modify their booking behavior at all? I mean, look, obviously the goal is to assess the permanence this so understanding those building blocks and any nuances would be helpful.

Yes, I mean, I think Jamie, I think it's quite simply, you know, running a better airline operationally drives attachment from customers into the value that we provide to, from a pricing perspective to the customer base. I mean, we are certainly running a better operation this year. That's a meaningful change for the business where our completion factor has risen quite considerably. I think we were fourth ranked in the industry across the first six months of the year. I mean, that's not unnoticed by our customer base. I think some of our tools that we're using from a pure revenue management perspective improves the output that we get and the discipline that we're able to provide in terms of the fairs we're offering in the system and just managing that. And look, a big portion of the improvement that we saw in Q1 is really twofold.

One was revenue management. that you saw much more discipline around the deployment of bundles and bundle pricing and the ability to do that through NDC and into the OTAs. And I think that has been helpful to the business, but also pricing bundles in a more competitive fashion and creating attractiveness for the customer into our businesses has been beneficial to Frontier. And then you have structural change, right? And so you've had meaningful structural change across the industry that enables you to, you know, know, manage a higher oil price environment. So it's a lot of different things that are going on, but certainly a large part of it is our own discipline around revenue management.

Okay, perfect. And then just a quick follow-up, and I'll ask – I'll rephrase Mike's question, but a little bit more bluntly. Given a similar number of deliveries in the third quarter, is $47 million for sale leaseback gains a reasonable number to pencil into our models?.

Yes, I mean, I think, yes, somewhere in that neighborhood of, yes, call it 50 to.

Okay, perfect. All right. Thank you very much. Your next question comes from the line of Brandon Oglenski with Barclays. Brandon, please go ahead.

Hey, good morning. Thanks for taking the question. Jimmy, I guess as you look into 27, I think you said you do expect the airline to be profitable. And I understand that you want to keep the fleet flat. But is there inherent utilization capacity increases that we should be expecting next year?.

Is that high single digit growth rate the right one to pencil in? Ah, look, we haven't defined our plan for next year. I mean, we have the flexibility to to grow the airline by high single digit if the market. gives us the opportunity to. Like it really depends on what happens with the ongoing oil prices. As it stands at the moment, we would anticipate growing by somewhere between 5 and 8% next year. But we've got to go through a planning cycle and understand what we get to. We have the ability to obviously lower the productivity in the airline, but that will raise costs. And is that the right overall better answer for... the airline.

We prefer to get the airline back into a productive state and we are probably about five or six points behind in terms of capacity from where we would like to be because of the oil price crisis. And so you should see some growth into next year in the high single digits. and we'll work from there. And look, the lower the growth, the higher the unit cost, the higher the unit revenues we have to do to achieve, to overcome it, it's not complicated. And we understand those metrics. We just have to see what we feel about the environment as we're rolling into 2027. We feel pretty good at the moment.

Okay. And I mean, you guys have talked about first class for a while now. Starlink, I think, is a big announcement. How do you view these initiatives and new products, like, really rolling in to, you know, resolve?.

How they're rolling in from a timeline perspective or how we're thinking about that? Yes, and the potential revenue and margin upside from them. Yes, so from a first class perspective, we are looking at what we've discussed before, sort of a fourth, starting in a fourth quarter rollout going into the early part of next year. On the Starlink portion, we anticipate starting in early 2027, and that rollout will out will continue through. We're hopeful that would complete for summer, but you could see that moving through the year a little bit longer as well. As it pertains to revenue, look, we've talked about this before. I mean, first class was born in large part by our view on on upfront plus and the value that that brought. The paid load factor on that is now up over 80%, which is in line generally with what you see across the industry with other airlines premium products.

So we're showcasing that frankly, that segmentation and that desire for that product from our customer base, and frankly maybe even capturing folks that wouldn't have looked at us before with without that is high. And so as we progress into the first class side, we're not necessarily given a guide as to what we think that's worth, but we're going into it thinking that it's accretive beyond the premium products we have today.

Thank you for that. Your next question comes from the line of Daniel McKenzie with Seaport Global. Daniel, please go ahead.

Oh, hey, good morning. Thanks. You know, one house cleaning question here, and then just a broader question. I think it's for Mark. I'm curious how much cash you expect the additional lease returns to unlock and if it's included in the CapEx portion of the release today. And then if you could just remind me, would that filter through the cash flow from operations? And I'm just trying to get at the cash that could be produced by the business this year.

Yes, no, absolutely. So yes, so as you're looking at the CAPEX, so our CAPEX guide, you know, from what we put forward last time, right, has not changed. When you think about, you know, the transactions that we've executed, you know, the savings, the maintenance savings that we expect, and we do expect hundreds of millions of dollars of savings as you look, over the coming years that is going to flow through operating expenses. But as you look at the balance of this year, given those returns, just occurred, what we had in our CAPEX plan really would have incorporated any sort of CAPEX that was anticipated. So I think the right way to look at this is the go forward. You're getting a material ownership cost benefit by the early return of these aircraft.

Yes and then Jimmy is it too early to talk about a return on invested capital in the median term that exceeds the cost of capital you know so just Just going back to an earlier question on the link between growth and profitability and what the North Star is that's behind how you're managing the company, because there's been a number of structural changes, of course, and it seems like these structural changes better position Frontier.

Yes, Dan has gone. I agree with you. Look what we're doing in the airline is is focusing initially on the fundamentals, right? cost, good revenue management, putting the right fleet size in place, establishing the network to support the fleet that we have, and driving a better balance sheet and liquidity into the airline. We're very disciplined about those items and getting the airline on the right path from that perspective. adapt to the field that we play on. You know, it's changed post-COVID. You know, you have significant loyalty cash flows coming directly off credit card programs that fund a large portion of basic economy and the domestic airline business, and And it's something that we're quite immature in. And so we've looked at the business in the context of our loyalty program and the immaturity of our loyalty program in comparison to the rest of the industry. And we think there's a huge opportunity for Frontier to move the dial on loyalty. But you've got to run a good operation in order to do that, you've got to invest in the operation and improve the performance of the business and enhance your product and so we're doing all of those things and Bobby mentioned like Wi-Fi first class seats we're looking at more segmentation around premium seats in the cabin we'll talk to you guys later on the year probably about that But certainly it's with the purpose of bringing the airline back to sustainable profitability.

And that's the real focus of the airline. We're not... giving long-term targets yet in the business. What we're managing at the moment is bringing the airline back to those core fundamentals I mentioned. that needs to happen in order to have a strong platform and foundation to grow the airline and and have discussions around growth versus return on invested capital. But certainly that's the objective in the airline, is to get the airline back to really generating operating cash flows. and cash flow production in the airline over the long term. So that's where we are. You know, we've made real progress this year on doing a lot of that, but we still got a long way to go. And so like I thought, you know, I appreciate that. We're probably about a year out from having an operation that we are really, We have made real progress, but we still have a lot of work to do.

We have to establish the premium products into the airline and allow those to season into the airline. the customer base aware of those new products that we have and excited about them. But certainly we're very excited about the path we're on.

Yes, thank you for that. If I can just squeeze one final one in here. you know, just given that reference to premium products and getting those up to maturity, I'm just wondering if you can share, you know, that revenue uplift, like what percent of revenues are laid today and what would you expect that premium revenue bucket to look like, say, as a percent of total once they're up to maturity?.

I mean, we don't have Wi-Fi first class seats on board the aircraft at the moment. So, you know, we don't have any revenue linked to them at the moment. So, you know, we'll come back to you in time when we launch these to give you a sense of the revenue uplift that comes into Frontier on the back of them. But you can see structural change in the existing. We don't disclose that. Yes, like Economy Plus, for example.

Upfront Plus, I mean, we talked about, I just, I stated what our paid load factor is on that above 80%, which is effectively in line with what other carriers carriers get on their premium products which frankly showcases the want from our customer base for premium products. That gives us the confidence to go into, for example, first class, and frankly, what Jimmy was saying, that we're reviewing additional premium seating. And those are things that, again, we'll provide more information in the coming months on, but it gives us the confidence to go and look at that We believe there's a lot of opportunity there, not only on the revenue side, but frankly, it helps, you know, provide the products and services that different segments are looking for. And frankly, with some of these things like premium seating, Wi-Fi, et cetera, certain customer segments that our price alone wasn't able to compete for. So there is opportunity to go capture customers that we haven't been able to be in the consideration set for before with this as well.

Thanks so much for the time, you guys. Your next question comes from the line of Dwayne Fenningworth with Evercore ISI. Dwayne, please go ahead.

Hey, thanks, Jimmy and team. Just on the fleet, can you confirm that the fleet is basically fixed now through year-end 2027, or are there A321 lease deals that could bring you back to the table if the.

economics were attractive enough. There's always an openness within Frontier to look at lease deals if the economics make sense. Yes. But from what we see on the horizon, we think we are nearing the conclusion of some of the fleet opportunities that come. Maybe some stuff that will be available to tinker with, but I think we're largely getting to the point where we like the fleet that we have. We like the transition from the 320neo into the 321neo. It gives us flexibility around, particularly around the interior cabin of the aircraft and also, obviously, the operating cost benefit that the aircraft provides to Frontier. And so we like that mix. If more opportunities arise... We'll look at them, but as you said, Dwayne, the economics have to make sense.

Okay, thanks. And then second question, and apologies if we're geeking out on this one a little, but just curious how you define competitive capacity and specifically the set of routes. Is it essentially capacity on routes that you've served for over a year? or does it consider newer routes that you serve for less than a year?.

Yes, both. It considers – And maybe just remind us what that – yes, what – Think of it as a snapshot, so we're looking at what the network is comparatively to, you know, what our competitors within those routes within the markets specifically, and then taking that snapshot versus previous year.

If we're looking at it here over here. Okay, and if you have it does, if you have it, what is the like, like mix of new routes less than a year? Like how has that been changing and trending over time?.

Yes, I mean, as we pulled the airline down from a fleet perspective, we've added a little bit of frequency into the airline, like a modest amount of frequency into the airline. And so I think the immature markets are considerably below what they would have been historically. So historically, we may have been running somewhere. We're in the low teens market. We're between 25% and 35% immature market, so less than a year old. We're in the low teens I think we're at a point where we're in maturity at the moment. Okay, great. Thank you.

Thanks. Your next question comes from the line of Chris Stathoulopoulos from Susquehanna International Group. Chris, please go ahead.

Good morning, everyone. So the comment that there's been a structural change in the revenue platform for the airline, And I appreciate that. Obviously a lot going on here with segmentation, loyalty, premium products, but there's also, obviously, as you know, been a structural change here in cause we think about the US certainly here. And so as we think about the flow through here, and this is obviously not a 26, perhaps 20 back half of 27, 28 event, um is it fair that as these initiatives mature we should think that on a per-flight segment basis or a hub basis that you're going to be in a position where these changes are ultimately heroic accretive across the system, meaning not in markets where perhaps there are fewer competitors in different economics, more so in markets where there are larger airlines with considerably different hub or point economics.

I think it will be a mix of markets, but certainly the objective is to invest in loyalty premium products to invest in loyalty and premium products that actually improves the revenue output of the airline. I mean one of the key principles that we're operating the airline under is actually improving loyalty with the objective of creating a more stable revenue base for the airline. And so product segmentation, we've seen other airlines obviously do this very successfully here and premiumization of their product. I mean, that's certainly something that we've learned from other airlines and we think that that will be accretive to Frontier.

I guess I'll ask it a different way. So if I were to look at your top 25 or top 50 routes and rank order those based on your stage length adjusted trasm, the top quartile, let's say obviously margins are going to look better because of these revenue initiatives here, but as we move lower, Should we expect a meaningful change in the margin profile, given the, I guess the cost convergence, cost harmonization, however you want to describe that dynamic as all of these initiatives start to really materialize in 27 and beyond. Thank you. Well,.

Well, Chris, we still have a meaningful cost advantage over the industry. given the way we operate the airline and the focus on cost discipline within the airline. And so what we're really, if you look at it, what we're providing is incremental value to the customers at really low fares. We think that's going to be accretive, irrespective of whether it's on the top 50 or the bottom 50. bottom 50 routes in our network. We think the product resonates with the customer base and the product changes. You just have to look at upfront plus. We launched this over two years ago where we blocked the middle seat and the front two rows of the aircraft. and it has significantly increased the revenue for the real estate that exists at that part of the aircraft. Bobby has given you an insight into the load factors that we're achieving, but those are driving significant increase in the revenue for that portion of the aircraft.

And so it encourages us to do more of that, and it's not necessarily focused on specific routes. It's typically network-wide.

Okay, and there's a quick follow up here as we do our own math or bottoms up build on FY27 capacity. Any color you can give on how we should think about the net active fleet for next year, and then we, I guess, if we decompose that stage gauge and.

and the pointers. Thank you. Yes, we'll have to come back to you on that. There's a lot of work going on in the background around modifying the existing fleet and aircraft coming out of service, particularly across the first quarter and the back end of this year. So look, we'll have to come back to you on what the inact fleet would look like going into next year. Okay, thank you. But it shouldn't be that dissimilar to this year with a few lines of flying stripped out in order to facilitate the modification of the cabin.

Okay. So we'll come back. We have reached the end of the Q&A session. I will now turn the call back to Jimmy Dempsey for brief closing remarks.

Yes, thanks guys for attending the call. I mean, as you can see, we're pretty happy with the direction that we're going in in the business. We still have work to do to complete some of the things that we laid out earlier in the year. We're really excited about the product updates that we're bringing to the airline, particularly be Wi-Fi. We think that's a big product change for the airline and very complimentary to the incremental or the addition of first class seats. And so we're very focused on providing a very low value to our customer set. If you guys have any further questions please do reach out to either me or the team.

We'd be delighted to clarify any issues that you have and appreciate your support. Thanks very much guys.

This concludes today's call. Thank you for attending. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Hello, everyone. Thank you for joining us, and welcome to Frontier Group Holdings Q1 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to David Erdman, Senior Director of Investor Relations. David, please go ahead.

Thank you, and good morning, everyone. Welcome to our first quarter 2026 earnings call. Joining me today in speaking order are Jimmy Dempsey, President and Chief Executive Officer; Bobby Schroeter, Chief Commercial Officer; and Mark Mitchell, Chief Financial Officer. Each will deliver brief prepared remarks, and then we'll open the call for questions.

Before we begin, I'll remind you that today's discussion will include forward-looking statements subject to risks and uncertainties and we will be referring to certain non-GAAP financial measures throughout the call. Reconciliations to these non-GAAP financial measures can be found in the earnings release issued today and also posted on our Investor Relations website. We'll also be referencing stage-adjusted unit metrics, which are based on 1,000 miles.

So I'll give the call to -- over to Jimmy to begin his prepared remarks. Jimmy?

Thanks, David. Before I review the quarter, I'd like to briefly address Spirit shutdown. Spirit played a meaningful role in providing affordable travel to a wide range of consumers in an industry dominated by 4 major airlines. While Frontier remains focused on ensuring consumers have access to affordable travel, our thoughts are with our friends and colleagues during this difficult time.

Over the weekend, we provided discounted fares to assist affected customers on over 100 Spirit routes. We extended travel benefits to assist Spirit team members to return home and are encouraging them to apply for open positions in Frontier. Spirit's exit meaningfully alters the supply landscape. Given our network, low-cost structure and disciplined approach to capacity deployment, Frontier is best positioned to provide low fares and the best value in those markets in a manner consistent with our strategic priorities around network shape and long-term value creation.

We will expand service this summer with 9 additional routes plus 15 daily departures across 18 former Spirit routes, including Orlando, Las Vegas, Dallas, Fort Worth, Fort Lauderdale and Detroit. This gives customers more options to rebook their travel plans with confidence while keeping fares low.

Turning to the quarterly recap. We delivered adjusted revenue of nearly $1.1 billion, a Company record, with stage-adjusted RASM up 17% year-over-year, reflecting sustained progress across our commercial initiatives and strong demand. This performance drove an EPS guidance beat despite sharply higher fuel prices. We remain centered on the 4 strategic priorities previously outlined to strengthen the business and return the airline to sustained profitability, including rightsizing the fleet, strengthening cost discipline, improving operational reliability and building customer loyalty. I'll briefly update you on the progress of each.

Firstly, we have made excellent progress on fleet rightsizing. We executed the previously announced 69 aircraft deferrals with Airbus and 24 lease terminations with AerCap. We expect all 24 aircraft to leave our fleet by early June.

Secondly, on cost discipline, we have high confidence and remain on track to deliver $200 million of targeted annual run rate cost savings by 2027, including rent reductions, network optimization and productivity benefits.

Third, on operational reliability. We're focused on completion factor and on-time performance. We launched a system-wide maintenance strategy to improve maintenance planning and reliability, reduce unscheduled aircraft out-of-service events, which enables improved aircraft return to service performance at the beginning of the day. We're also enhancing our airport operations, simplifying our ticket counters and improving turn times. Although this is a multiyear project, we are seeing positive early results. For the April year-to-date period, we ranked fourth among major domestic carriers in completion factor.

Finally, our loyalty programs delivered over 30% growth in the first quarter, our fourth consecutive quarter of double-digit growth. This is the result of continued momentum from investments in our co-brand credit card and membership programs. As previously announced, we plan to enhance the onboard experience with the introduction of first-class seating and WiFi service later this year and into next year.

Turning to the current environment. In response to the fuel spike, we have taken decisive action to adjust capacity fares and ancillaries. We anticipate recapturing approximately 35% to 45% of fuel prices in quarter 2. As a result, we expect RASM to increase by over 20% year-over-year in Q2 and stage-adjusted RASM to be up high teens on capacity growth of approximately 7%. We expect continued improvement in fuel recovery as the year progresses. This is enhanced by the capacity adjustments we are seeing in overlap markets where our competitive capacity is down 4% in Q2.

Our liquidity position at the end of March is strong at nearly $1 billion and anticipate our liquidity to be between $900 million and $950 million at the end of Q2. This puts Frontier in a very strong position to take advantage of the opportunities provided by the fuel crisis.

Higher fuel does not change our strategic priorities to return to profitability. By staying aligned with our framework and focusing on items we can control, we believe we are well positioned to navigate near-term volatility while emerging stronger as macro conditions normalize. This is an exciting time for Frontier's Americas value airline.

Before concluding, I'd like to recognize Team Frontier for driving operational performance improvements and for upholding our commitment to the highest safety standards. This sustained commitment to safety was reinforced by our recent receipt of the FAA's Diamond Award of Excellence for the second consecutive year, the agency's highest recognition for maintenance training and safety. The discipline and professionalism our people bring to the airline every day are fundamental to our progress, and I sincerely thank them for their focus and execution.

I'll now turn it over to Bobby.

Thanks, Jimmy. First quarter adjusted revenue was a record for any quarter in Frontier's history, driven by both yield and load factor strength. Total adjusted revenue per passenger increased 10% year-over-year to approximately $128, supported by a nearly 4-point improvement in flown load factor to approximately 78%. This performance came despite the operational disruptions from severe winter weather and extensive PSA delays during the busy spring break travel period.

Loyalty momentum extended into the first quarter on record co-brand card acquisitions in February, then again in March, with March card spend reaching an all-time monthly high. Our loyalty assets have consistently been one of our strongest long-term value drivers and the trajectory is accelerating.

Turning to the second quarter. Our guidance reflects RASM growth of greater than 20% and stage-adjusted RASM up high teens year-over-year, supported by durable demand trends and lower competitive capacity on Frontier routes. We have participated in 5 broad industry fare actions since the start of March, a clear signal that demand at higher fares remains resilient and the industry capacity discipline is supporting a more constructive pricing environment.

As we think about the foundation of our performance expectations, the recent conclusion of Spirit's operations represents an incremental opportunity for Frontier. Our team is focused on helping impacted customers get to their destinations, and we have seen significant revenue intake since the weekend, a trend we expect to continue throughout this coming week as those customers who are most acutely impacted seek alternatives.

Demand for the Frontier product is strong. And in the second quarter of 2026, we have more route overlap with Spirit than any other U.S. carrier, uniquely positioning us to recapture the demand they left behind. Drawing on the benefits realized from prior Spirit capacity adjustments, we believe their exit supports a RASM uplift of 3% to 5% going forward.

Scheduled average utilization, net of fuel-driven capacity adjustments is expected to be higher sequentially, consistent with our strategic plan. Second quarter capacity is expected to be up 6% to 8% year-over-year on an average stage length of approximately 890 miles, both lower than originally planned, reflecting targeted reductions concentrated in long-haul flying. We'll continue to be nimble and tightly manage capacity based on fuel and demand trends. And accordingly, we are reserving updated long-term capacity guidance at this time.

On the product side, first class installations will run through the second half of the year. WiFi vendor selection is in its final stages with installations beginning in 2027. Combined with the bundle and segmentation enhancements driving non-ticket per passenger growth, we -- these additions position us to serve a broader customer base while preserving the cost discipline that defines our model. The combination of industry-wide capacity discipline and the continued maturation of our commercial initiatives give us real conviction in our trajectory through year-end.

I'll now turn the call to Mark for the financial update.

Thanks, Bobby. Total adjusted operating expenses in the first quarter were $1.1 billion, including $268 million of fuel expenses at an average cost of $2.88 per gallon. Adjusted nonfuel operating expenses were $868 million or $0.0885 per ASM with the increase over the corresponding 2025 quarter, driven largely by lower average daily aircraft utilization and higher fleet-related costs across reduced capacity. As utilization increases and targeted cost savings materialize in line with our strategic plan, we expect a meaningful reduction in our adjusted nonfuel unit costs.

First quarter adjusted pretax loss was $69 million and adjusted net loss was $68 million, resulting in adjusted loss per share of $0.30, favorable to guidance.

We ended the quarter with $974 million in liquidity, including unrestricted cash and availability from our revolving loan facility. The increase from year-end was principally the result of the significant increase in our air traffic liability, fleet-related activity and an expansion of our prepaid miles facility, net of operating losses and capital expenditures. As Jimmy mentioned, we expect to exit the second quarter with $900 million to $950 million of total liquidity, bolstered by internal liquidity measures, including fleet-related activity and advanced discussions associated with an extension of the company's co-brand credit card agreement.

Our second quarter guidance reflects continued commercial momentum alongside observed demand trends, while elevated fuel prices weigh on expected results. We remain focused on disciplined capital allocation and preserving liquidity through our fleet rightsizing and cost-saving initiatives, lower planned capital spending and capacity optimization.

From a fleet perspective, following the 7 aircraft inductions in the first quarter, one additional than expected, we now expect to take delivery of another 7 aircraft in the second quarter and return 24 aircraft.

Furthermore, for full year 2026, we lowered our capital spending guidance range by $30 million, and we are reaffirming the expectation of a reduction in the predelivery deposit balance in the range of $170 million to $210 million. We expect our predelivery deposit balance to be reduced by this amount resulting from the previously announced agreement to defer the induction of 69 Airbus aircraft with a similar reduction expected in our related PDP financing facility balance.

For more details on our second quarter and full year guidance, refer to the announcement we published this morning. And given fuel volatility, we expect to provide full year EPS guidance once we have improved visibility into the macro outlook.

With that, Elizabeth, we're ready to open the line for questions.

[Operator Instructions] Your first question comes from the line of Savi Syth with Raymond James.

Maybe just on the observation that you're expecting like a 3 to 5 percentage point RASM uplift from Spirit's exit. Just curious if that's in the guide that you provided? And if just -- what you're seeing that in current trends or just kind of based on historical trends?

Yes. Savi, it's Jimmy here. Yes. Look, the 3% to 5% RASM uplift is linked to historical trends that we've seen structural change on Spirit's network where either we had existing capacity or replace capacity that they walked away from. And so that's effectively a run rate RASM uplift. We think it's approximately 3% to 5%. We actually think it could be higher than that going forward.

What's in the guide, we estimate, given that we're guiding Q2, we're largely halfway through the quarter, we think about 2 points of improvement in the quarter that's built into the guide that we gave today is linked to Spirit shutting down.

That's helpful. And if I might, just on the fleet, are you still expecting kind of 25 aircraft this year in total and none next year?

Yes. So Savi, we have 24 aircraft for this year, and we have 6 for next year. And one of the things that I want to highlight, we have -- as part of the fleet, the last 5 deliveries of this year and the first 6 of next year, we have an agreement in principle to sell those aircraft without a corresponding leaseback agreement. And so as you think about the fleet, while there will be 24 inductions, you will end the year with roughly 171 aircraft, and then there will be no induction -- no deliveries that we retain next year.

I mean, said another way, Savi, we effectively begin 2026 with the same number of aircraft that we largely end 2027. And so we'll effectively have the same fleet for those 2 years. That's what's planned at the moment.

Now we're replacing -- where we're getting the upside on that is actually removing 320neos from the fleet. And they're obviously fuel-efficient aircraft, but they're 320s. And we're replacing them as we progress through this year, largely with 321neos, which is really an efficiency drive in the airline that's been going on for years.

Along with utilization, I'm assuming.

Yes.

Your next question comes from the line of John Godyn with Citigroup.

I appreciate the color on what's going on with competitive capacity, Spirit overlapping markets, et cetera. There's a debate out there about kind of short-term versus long-term. Clearly, your commentary and your guidance suggests that there's a benefit that you see and that's growing in kind of the short- to medium-term as we get to that 3% to 5%. What can you do to kind of protect those profits and those markets longer term? Because it does seem like there's other competitive capacity kind of trying to backfill Spirit as well.

John, look, there's always going to be -- in a situation like this that arises, there's always going to be a chase for capacity that occurs across their network. We positioned ourselves over the last 6 to 9 months on launching routes that we thought would be opportunities that come as they reduce their capacity with the possibility that they would cease operations. And so you've seen us move quite quickly with an overlap of over 100 routes against Spirit.

And look, we are going to be very, very disciplined in how we deploy incremental capacity into the business. I mean we're very disciplined on what we're doing in our fleet. Our fleet determines the availability of aircraft to drive incremental capacity. That discipline is something that we're putting in place across the airline as we administer a new plan that was announced in February, where we're really focused on rightsizing fleet, cost control in the airline, fundamentally fixing the operations to drive loyalty into the business. And we'll make decisions around Spirit capacity as a result or lost capacity in the marketplace using that -- those measures.

In terms of protection of capacity, we're already in over 30% of our business overlapped with them. We'll continue to look at further opportunities as the weeks and months progress.

Yes. And one thing I'd add too, just in terms of history here, Spirit has already come out of markets. As we said, we have that history to showcase what we think the benefit to us will be. But just the absorption of the reductions that have already existed in May, the backfill of that from an industry perspective has been about 50%, and we've been about 40% of that 50%. So it showcases the discipline that's existing throughout the industry on capacity adds and backfill.

Okay. So if I could just clarify that last point, it sounds like embedded in your 3% to 5% view is some sort of normal historical backfill that you've seen from other players as well. Is that fair?

No. The 3% to 5% is based on history. And there's obviously been a substantial capacity change over the past few days. We expect a 3% to 5% run rate improvement across the system on the back of that given the overlap that we have with Spirit. And as I said to Savi earlier, we anticipate about 2 points of that in the near term. And then we'll see how it develops as things normalize in the coming weeks. And we think it may be more than 3 to 5 points.

Okay. Fair enough. And then just one last one on this topic. Over the last year or so, there have been so many scenarios playbook with Spirit. I'm just curious from here, now that we've had the cessation in operations, are there any opportunities to pick up assets or anything like that? Are there remaining assets? I mean, are there more plays in the playbook from here? Or are we done?

I mean, look, Spirit announced yesterday that they will have effectively an orderly wind down of the business. We will look at assets that come out during that wind down. Clearly, there's an immediate availability of aircraft assets in their business. We'll look at opportunities as they present themselves in the coming days and weeks as to whether that is incremental to our business.

I just want to reassert that we're going to be disciplined in any decision we make on the basis that it either improves our unit cost base, improves our market position and network deployment and fundamentally is a value creator for the business and generates profitability. So we'll be focused on that, but we know that there's a significant amount of opportunities that are coming around assets that are within Spirit.

Your next question comes from the line of Duane Pfennigwerth with Evercore ISI.

Can you speak to how your second half growth plans may have changed in light of higher fuel? I think the original plan was to dial up utilization in off-peak periods. Again, from arm's length, off-peak historically sounds less exciting from a fuel pass-through perspective. So just how do we square what has changed in the backdrop with the plan to push more in off-peak?

Yes. Duane, our plan continues to be to bring off-peak flying back into the business. We just believe we overcut off-peak capacity in the last year, particularly, but certainly in the last 2 years. What we've seen recently actually is the off-peak capacity performing pretty well from a RASM perspective. I mean you see our Q2 RASM up over 20% year-over-year. I mean that's a huge performance improvement. Obviously, oil prices and fuel recapture on oil prices across the industry is helping that. But what we're seeing on off-peak days is pretty positive.

And like, I look at our capacity deployment in the last -- in May and June, we probably cut June a little bit too much. We look at maybe redeploying some capacity opportunistically in June. I do believe we'll continue to trim capacity as the year progresses as part of a package of measures to preserve liquidity and cash, but also to manage the fuel recapture in the business. And certainly, Tuesday, Wednesdays will probably be the primary focus of that or long stage off-peak times of the day where we reduced some trim capacity.

We're not guiding the second half. Obviously, it's volatile in terms of fare and fuel in the industry at the moment. But directionally, I think we'll be slightly smaller than we had anticipated earlier in the year, but I'm not sure meaningfully smaller.

Okay. Jimmy, I appreciate that color. I just wanted to follow-up with one of Savi's questions. You referred to outright sale of aircraft. And I just wondered, is that a part of the transaction where you're giving back previously leased aircraft? Or is this separate? And are you actually selling delivery positions? And if so, can you speak to the cash inflow that you would expect in total or per shell if that's what you're doing?

Yes, we're not going to go to the commercial terms of the deal that we've done. But we're -- as part of the fleet management strategy that we put in place, we wanted to end 2027 with a similar number of aircraft as starting 2026, and that's just part of that process.

Your next question comes from the line of Scott Group with Wolfe Research.

So Jimmy, you said a couple of times like maybe it's going to be more than 3% to 5%. Maybe it's just too early, but like what are you seeing in real time in the last few days on those 100 or so routes where you overlap, if it's truly 30% of your capacity, I would have thought maybe the uplift could have been more than that 3% to 5%. You seem to think like maybe it can, but I don't know, maybe just some real-time color on what's actually happening in the market.

Yes. I mean the 3% to 5% is based on history, not based on the last 4 or 5 days of activity. What you're seeing in the last 4 or 5 days is effectively a reaccommodation process for unfortunate Spirit consumers who've lost their flights. And you're seeing that across the industry. We happen to be in a position where we offer significant value in the industry and at very low fares. And so our recapture offer or rescue fare offer was very attractive into the marketplace.

What we're talking about in the 3% to 5% is really the run rate on a go-forward basis, that we anticipated improving our system-wide RASM. So we just need to normalize out of this period where there's a reaccommodation process going on and move to a more normalized RASM improvement in these markets, and we'll see where we go. The 3 to 5 points is based on history where we've seen them reduce capacity or exit markets across our system and the impact it has on us. This is obviously more significant. And so it could lead to a higher RASM uplift, but we'll just have to wait and see.

Right. And assuming you get that, what do you -- what does this mean for your longer-term capacity growth? Like is it a lot more, a little bit more? Or could it mean, hey, we don't want to add any? Could you want to keep the benefits of the price? How do you think about that without -- I know you're not giving specific numbers around long-term capacity, but what are your initial thoughts here?

Yes. Look, I mean, primarily, we want to move the airline back to profitability. I mean we were on a very, very good trajectory in Q1 prior to the fuel price spike. We were actually going to get very close to breakeven in Q1, and we were certainly on a trajectory to make money in Q2. And so to move our business back to a profitable state, which was very important. We were ahead of our plan.

And so we're very -- we're quite excited about the progress of the business. That doesn't change, right? We've got a fuel price spike that we've got to manage through, but managing the business over the long-term in a disciplined fashion. What we talked about in February was lowering the capacity growth in the airline from, say, 20% to 25% annually to somewhere slightly less than 10% each year. We've got to go through a reset phase in the business so that we can improve utilization. Some of that utilization is delayed given the fuel price spike and the management of the fuel price spike in the short-term, but that will come back in time.

And so we're actually quite excited about the business moving back into a profitable state as fuel prices normalize or as the industry moves to recapture a higher proportion of the fuel price as you progress through this year. Like our expectation is that you start recapturing a higher proportion of fuel as you progress through this quarter to the end of this quarter and through the rest of the year. Like I anticipate that we're recapturing close to 50% of the fuel price by the end of Q2. So above the range that we gave you this morning, but progressing to a positive state where maybe the end of this year or into early next year, you're actually recapturing all of the oil price.

Okay. And then just last one, if I can. I don't know if I missed any sort of cost overall or CASM guidance for Q2, but there's so many moving pieces with the model, depreciation, sale leaseback gains. I don't know, any color on some of the moving parts there?

Yes. So a couple of things, right? So as you look at the financials that are in the P&L in the earnings release, within the rent, maintenance and depreciation line, you see $139 million of nonrecurring charges tied to the early return of the 24 aircraft. So -- and we have that detailed out in the release, so you just need to normalize for that. If you step back for the quarter, the CASM ex that we had is elevated given the lower utilization in the quarter on a larger fleet, understanding that we have growth planned for this year. And keep in mind as well when you compare to the prior year, there is a lease extension benefit in that prior year period.

And as you look forward, as we've highlighted, we expect a meaningful reduction in our CASM ex as we work through the fleet rightsizing that we've talked about, as we work through the cost savings initiatives and those begin to materialize. So you are going to see a meaningful progress on the CASM ex front. And we haven't provided specific guidance, but we've given those general parameters.

Your next question comes from the line of Michael Linenberg with Deutsche Bank.

This is Shannon Doherty on for Mike. Maybe, Jimmy, when is the $75 million to $95 million cash charge associated with the lease termination being incurred? We expect that you gave us the range last quarter as it was still work in progress, but do you have a final number now since everything presumably is locked down? And should we expect to see a hit this quarter?

Mark is going to take that.

Yes, I could touch base on it. So Shannon, in the 8-K we put out earlier in the quarter, we had given a range of $200 million to $270 million in total, most of that nonrecurring -- or I'm sorry, noncash charges. The range now is right in the middle of that $212 million to $239 million. When you look at the cash component that we had highlighted before, what you mentioned, the $75 million to $95 million, that -- those cash payments will occur largely in 2028 and 2029.

Okay. And for my second question, U.S. government officials have basically expressed that the airline industry does not need a bail out. Where do you stand today in your conversations? Are they still happening maybe as a part of the AVA and seeking support for higher fuel prices?

Shannon, yes, look, we've got a very strong relationship with Secretary Duffy and the DOT. And they requested that we share our perspective on the impact of fuel and the industry dynamics associated with that. And so Frontier and the AVA, we were encouraged to share the estimates of the fuel impact on the airlines, and we did that and share the cost impact this year if the volatility persists across the year.

Look, we're very focused on self-help and managing the liquidity in the business in a strong fashion. You can see our liquidity position at the end of March is very strong. We have 25% of trailing 12 months revenues in cash at the end of March from a liquidity perspective. I mean that's at the upper end of where this airline has been for many, many years. We prefer to be a little bit higher, but it's in a pretty strong position.

We anticipate, given some measures that we're doing internally, to largely keep it around the same, maybe slightly lower in terms of liquidity at the end of June. So we feel pretty good about our liquidity position as it stands right now. And so we'll continue to inform the government as to where we are across the AVA members, but we feel very good about our liquidity position right now.

Your next question comes from the line of Ravi Shanker with Morgan Stanley.

So I think you said that you'll participate in 5 jet fuel-related price increases this year. I'm not sure if the industry has had 5 or 6 so far. So I just wanted to confirm that you guys do intend to participate in kind of any further jet fuel round of price increases across the industry? Or would it be more opportunistic?

Ravi, we're going to be opportunistic. I mean we tend to react to the prices that exist in the marketplace. And we've observed multiple attempts of price increases and price increases that have come through. That I suspect will continue as the airline industry seeks to recapture fuel. But look, the fuel price itself is volatile and the revenue environment is reacting to that at the moment.

Yes. And this is Bobby. I mean, look, we're going to be opportunistic, as Jimmy said. And frankly, you've seen that the customer is resilient with higher fares on that. So we'll continue to look at that and optimize it as appropriate.

Got it. And Bobby, maybe you're kind of a good segue to my follow-up question, which is outside of the Spirit situation, if you guys can just summarize the demand environment as you see it overall and maybe kind of the confidence that you have that your customer base will be able and willing to accept these price increases without any crack.

I mean, look, the demand environment is quite strong. You've seen in Q1, we talked about this. It came from both sides. It came from an increase in yield and it came in an increase in load factor, load factor year-over-year. So what we're seeing is higher fares and people transacting and flying at a higher rate as well. So quite a strong environment from a revenue perspective. And frankly, going forward, there are a variety of things, including the conclusion of Spirit's operations that provides a lot of opportunity that we'll capitalize on.

Yes. And Ravi, just to add to that, like we mentioned in the transcript earlier, our competitive overlap capacity is down 4% year-over-year which is helpful to Frontier. And so you can see us outperforming the industry in a year-over-year RASM perspective. And so we feel pretty good about the RASM trajectory that the airline is on. It was on a very positive RASM trajectory prior to the fuel price crisis. You're seeing us perform pretty well in terms of recapture of revenue in our business.

And then we do operate the most fuel-efficient aircraft in the industry. We have a substantial portion of our fleet for our 321neo aircraft that have the lowest per passenger cost for fuel in the industry. And so we feel pretty good about the recapture potential in the airline as you progress through this year, particularly given the demand backdrop that we have in the business today.

Your next question comes from the line of Chris Stathoulopoulos with Susquehanna Financial Group.

So I want to go back to the 3% to 5% RASM uplift. I understand that, that's history. It's not exact math here, more directional. But if you could, is that market specific? So if I look at Spirit selling schedule and overlaps, I mean, there's a few markets where I think it would perhaps make more sense than others just stage length adjusting RASM. So I want to understand the context? Or is that just broad stroke kind of system, hey, this is historically how it's looked and perhaps I'm kind of overthinking this.

Look, this is built on a route-specific level in terms of how we're reviewing it. And then, of course, that's rolling up to a range that exists. So we've seen historical benefit that, again, translates to that 3% to 5%. But as we've said, too, look, there's connection a variety of other things that can get thrown into there that can create benefit beyond what we've seen. So it's early days. We're going to see, but we think that, again, that 3% to 5% is a solid number based on what we viewed historically on a route level basis, and there's opportunity for upside potentially within that as well.

Okay. And then on the 2Q RASM guide, I appreciate you given the stage length. Could you parse out, if you did, apologies, but on revenue initiatives and peak versus off-peak and any uplift in Spirit that you're seeing there? Just want to get a better sense of what core is doing given all the other moving parts around that.

Yes. We're actually seeing, Chris, an improvement in off-peak days over and above what we're seeing in other days of the week across this period, which is interesting. But we're not going to specify exactly what that is. But it's encouraging to the overall strategy that we're putting in place to bring off-peak capacity back in.

What we did lay out for you was the impact of the 3% to 5% run rate improvement in Spirit on the quarter earlier in the call. And we mentioned that given that we're more than halfway through the quarter from a booking perspective, we think it's about 2 points of the 20 in RASM that we're talking about for the quarter. RASM improvement.

Your next question comes from the line of James Kirby with JPMorgan Securities LLC.

Maybe to start off here, can you share how much of 2Q was booked prior to the spike in fuel? And I ask because maybe there's a thought that the leisure customer has a shorter-term booking curve and maybe there is a chance to recapture fuel above peers. Is that the right way to think about it?

I'm not sure that -- I think our booking curves are different depending on the segment of the airlines that you're looking at. Q1, obviously, March is a bigger portion of the quarter than individually January or February, given that we operate lower capacity. What we have been seeing, and we've been saying this for quite some time, James, is we've been seeing continued improvement in year-over-year RASM in the business. That is across the booking curve that we're seeing. And it's improved post the fuel price spike as a result of some things that we've done in terms of capacity adjustments that we've made in our business, but also the industry fare umbrella that exists from the fare increases that are being pushed through by mostly by the major airlines.

Okay. That's helpful, Jimmy. And then maybe following up on Ravi's question on demand. And maybe given your experience with Ryanair, how long do you think the consumer can sustain demand at current levels given fuel prices? Is there a historical time period where you might expect to see consumer softening on kind of discretionary spend?

We don't see any sign that there's softening of demand in the environment, and we're seeing constructive capacity deployment across the industry. And so I mean, we feel pretty good about it at the moment. I mean I can't give you any insight into what happens beyond the next 3 or 4 months that we're seeing in our booking engine. But what we're seeing in our booking engine continues to be very positive on a year-over-year basis, which gives us confidence that the fuel recapture rate continues to improve as the year progresses.

Your next question comes from the line of Daniel McKenzie with Seaport Global.

A couple of questions, and apologies for taking the dead horse here. But the 3 to 5 percentage point RASM uplift, one caveat, I think, is that neither Frontier or Spirit had a meaningful premium product historically.

And I guess my first question is, I guess, Bobby, can you speak to the revenue contribution from the new premium products and how that compares with the back of the cabin? And I guess, in particular, how many points of RASM increase are coming from the premium products today?

Yes. So look, right now, we have our premium product, we have a variety of them, but Upfront Plus is the one that drives quite a bit of benefit. I won't get into the numbers, but it has increased significantly. We think that that actually showcases the demand that we'll have for the first-class product as we roll that out in the fourth quarter and -- or sorry, in the second half. And so this is upside and opportunity that we think exists with our product base and what we can do from a premium product perspective. You're right. We haven't had what other carriers have, and we're starting to move towards where we can capture a larger share from a premium perspective with that product.

Yes. I mean just to add to what Bobby said, like our loyalty program as a whole is quite immature. And there's a huge opportunity within the business to improve loyalty. It requires us, in my opinion, to improve operational performance in the business. We're quite focused on actually improving the operations. It's actually quite a bit of excitement internally in terms of improving the operation of the business and giving value and showcasing our value to the customers. We have put a comprehensive plan in place to improve operations on a multiyear basis. And we're seeing some really good positive returns on that. But that improved operation and value that we provide to the customer will enhance our loyalty programs over time. And so first class seats, the introduction of WiFi, they're all additive to diversifying the revenue base of the airline, which we think is very, very important as we move the airline back to profitability.

Yes. And just over the -- talking about loyalty specifically over the past year, we've seen significant penetration increases in the loyalty bookings, so people that are attached to the program itself on the credit card penetration and Go Wild as well. So significant moves, and that's even prior to some of the things that we just talked about. So we anticipate, again, acceleration and increased benefit in the loyalty program as we move forward through a lot of these initiatives.

Yes. Actually raised a lot more questions. But I guess, next question is really an OEM question, CASM ex question. I'm just wondering if you can speak to the quality and reliability of the ADU321neos. So for those of us that are not close to the OEMs and close to the quality today, how many spares are you having to carry today? And where would you like that to be preferably? And I guess I'm just trying to get a sense of how much friction might be in the cost structure today from the 321neos.

So Dan, we were -- we started delivering 321neos in 2022, and we were really at the very tail end of the powder metal issue that occurred with the GTF. And so we have limited friction in our business in relation to the GTF issues. We did last year add to our spares ratio from an engine spare ratio perspective in order to manage any latent issues that we had kind of at the tail end of that powder metal issue. And that's actually been quite successful in managing the operational capacity that we can deploy.

We're clearly carrying a higher number of spares than you would optimally carry in the business. But we think that that conservative approach is actually performing well from an operational perspective in the business. I do think the overall business is carrying too many spares. But I'm not interested in changing that at the moment from a spare aircraft perspective. I want to see a meaningful improvement in our ability to return aircraft to service every day on time and not eat our spares in the morning in order to do that.

That is a multiyear strategy in the business that I think will provide over time, a meaningful improvement in the ability to lower the spares ratio if we think that, that makes sense. But in the next year to 1.5 years, I don't see that as an opportunity in the business.

We have a follow-up question from Savi Syth with Raymond James.

I'm just curious, as kind of Spirit kind of frees up space in various airports, are there -- how is that being allocated? Are you being able -- are you able to kind of access the gates that you need? Or is there some airports that you still have to wait and see if you can expand into?

It's different by airport, Savi. Yes. I mean we are very connected into the airport infrastructure discussion at the moment across the network. I mean, look, we're very focused on, as we've announced, growing in Orlando, Vegas, DFW, Fort Lauderdale and Detroit, and we'll continue to pursue infrastructure to support that.

Got it. And then just to clarify, it doesn't seem like your plans are significantly different in terms of capacity for the second half. I know that's a moving target right now. But are you still thinking kind of reaching 11.5 hours of utilization by next summer or sometime between here and next summer?

Good question. I do think the drive back to getting above 11 hours to 11.5 hours, as you mentioned, will be somewhat delayed because of the fuel price spike. I don't think it will be meaningfully delayed. We are managing our cost base very diligently, and that's inclusive of training classes for pilots and flight attendants and other things in order to manage the timing of new hires into the business to support like a production level of 11.5 hours a day. I think it will be slightly delayed, but not by much. It really depends on how long the fuel crisis goes on.

There are no further questions at this time. I will now turn the call back to Jimmy Dempsey for closing remarks.

Thanks, everybody, for attending our call. We are very focused on delivering the plan that we set out in February. We're seeing real promise in the airline in terms of performance and driving the airline back to a return to profitability. Clearly, recapturing higher fuel prices is very, very important to the business, and we're working diligently to do that as we progress through this year.

We think the airline sits in a very, very strong position given the opportunity that exists from the last few days where capacity has changed quite dramatically on overlap routes. We think that's very positive for Frontier. And we look forward to talking to you guys in the coming months about our progression around taking advantage of that opportunity. So thank you very much.

This concludes today's call. Thank you for attending. You may now disconnect.

Happy St. Patrick's Day. Yes. All right, folks, moving right along with Frontier Airlines, Jimmy Dempsey. Actually, I was going to [ set ] you as the most newly appointed airline executive this year, and there always seems to be some change right before our conference. And then after you assume the role, Delta reconstituted their bench.

So there's been a lot of managerial change, but this is the first time I've welcomed you up here as a CEO. Also joined by David Erdman, who runs Investor Relations in the front row. You don't have any prepared boiler plate remarks that you need to be.

Okay. All right. I'll admit I'm a little nervous because the last time I saw Jimmy just last week, he was being firesided by Steve Hazy, and I know Steve Hazy. So I'll do my best.

Well, best of luck. I wish you well...

Thank you very much. So I want to call on your Ryanair background for a moment because I'd be interested in hearing what you think helps explain the incredible structural profitability of that franchise and to a lesser extent, that business model in Europe and sort of compare and contrast that with some of the challenges that the ultra-low-cost carrier model in the United States have had? Because if I better understand your perception of those differences, it helps me frame some of the questions that are admittedly will be more unique to Frontier.

Yes. Look, thank you guys for hosting us here today. Look, Ryanair is a phenomenal business. I was in Ryanair for nearly 11 years. It is a machine that not only has grown quite meaningfully across Europe, it's done at a very successful profitable way.

There's one key difference between the United States and Europe. There is obviously country borders and language barriers across Europe that don't exist in here in the States, and you have a very different legacy airline structure than you have in Europe. But the one big difference is you do not have credit card loyalty programs in Europe like you have here.

I think that, that has changed the dynamic quite considerably in terms of how ULCCs in the U.S. compete against legacy airlines. And you've certainly seen that post COVID, where a lot of the legacy airlines have performed very, very well. Their loyalty programs or credit card programs have been phenomenally successful over the last number of years. That also gives us an opportunity.

We have a very immature loyalty program. We've had a credit card program for many years. We haven't invested in it as much as we should. And look, we shouldn't be ashamed to say we can learn from what the legacies have done in terms of how they have attracted loyalty to their business. We're clearly much smaller than all the legacy airlines. And we'll continue to be significantly smaller than the legacy airlines for a long period of time. But that doesn't mean we can't improve the performance of our loyalty program and invest quite heavily in it. You've seen that over the last 2 years or so where we've actually focused quite heavily on the areas that we think will actually drive cardholder retention, loyalty into the business. And we've seen substantial improvements in our cash flows driven from loyalty.

In Q4, actually, we had a 30% improvement in cash flows off a very relatively low base. But that puts huge leverage in the business where you can actually leverage the loyalty program for improved cash flows. And it's a key component of the 4 areas that I want to focus on as I transferred into the CEO role, where we want to rightsize our fleet, which is very, very important to us.

We put a deal in place with AerCap and with -- separately with Airbus in order to rightsize the fleet to the number of aircraft that we actually can support in the airline while still growing the airline, but growing at a much more modest pace. We're moving the airline from a growth rate of well over 20% to less than half of that, somewhere in the high single digits. And we think that creates a much more stable environment.

We're obviously focused on costs, as you mentioned, Ryanair. That is an area that I think is very important to create that discipline in the airline where we're chasing unit cost savings and making the airline efficient and productive. And I think that's fundamentally important. And so we announced a $200 million cost saving plan going into 2027. We get half of that from reducing rent from the deal we did with AerCap, which is extremely helpful to the business.

And then we're focused on 2 areas that we think -- that I believe that are very important to the airline, creating a stable revenue base through loyalty and repeat customers, but also improving the customer service elements of the airline. So on-time performance and completion factor and focusing on those areas, so that we actually give our customers an opportunity to be loyal to us and get repeat travelers. And I think that's the big difference between here and Europe is that loyalty is very highly valued in the United States as the credit card programs.

Do you think there's a sort of a demographic difference as well? I mean one thing that Mark Streeter and I have noticed is that our colleagues at JPMorgan in London and elsewhere in Europe, just fly discount carriers with Infinity. I mean it's just how they get around, whereas I think there's less patronage of your business model here in the United States. Is that just a function of Ryanair and to a lesser extent, easyJet being in the channels where people want to go? Or is there just sort of a different acceptance of the product?

I think the product is much more widely accepted, particularly in London, right, where you're probably referring to. We're not in New York as big as Ryanair, say is in London. And so there is a disconnect there in terms of your sample size. Look, I just think that there's a shorter sector in Europe. The average flight distance is much shorter. The opportunity to travel to multiple different cities and leisure travel is different in Europe. You have U.K. and Ireland, which is 2 effectively island nations flying to Europe. You have opportunities to drive here on shorter sectors that are different to Europe.

And then you have -- in here, you have 4 very large domestic airlines in the U.S. And I think that marketplace is different. And so Frontier performed phenomenally well pre-COVID. There's no doubt that we have struggled post-COVID to bring the airline back to a sustainable profitable place. That's where we're focused on today. And the key difference, in my opinion, is around loyalty and bringing repeat customers back into the business. The credit card programs and the loyalty to your credit card program is a fundamental difference here to Europe. I think that is clear.

Yes. And the reason I wanted to explore this is because when you made the announcement on the earnings call, restoring capacity in the off-peak, really, really pushing aircraft utilization, all of which have been core tenets of the ultra-low-cost carrier model over time, it did strike me as sort of Ryanair [ esc ] in execution, which is why I was left wondering this. Did you consider at any point the sort of alternative iteration of ultra-low-cost flying, which -- I mean, just to sort of paraphrase some country or Allegiant is just only fly very limited schedules just when you know you can make money. I mean, was that an internal debate? Or were you just firmly in the camp that you ultimately chose?

Well, I come firmly from the camp that costs matter, right? And keeping your unit costs low absolutely are fundamentally important to running a good airline irrespective of the type of airline you are. I think it's different in the United States in terms of the field that we play on, and we've got to adapt our business model for that.

So I think if you compartmentalize the ULCC business model, the costs matter, but also in the United States, loyalty, repeat customers, you're flying longer stages. And certainly, the lessons that we've learned in the last couple of years is that the legacy airlines have actually deployed considerable volume into basic economy, and we've recognized that. But also, they've done phenomenally well in terms of premium revenue that they've generated. And we can copy that. And so we're bringing -- we brought a product on board in the last 2 years called UpFront Plus, which is effectively blocking the middle seat of the aircraft in the front 2 rows. The load factors on that have been phenomenally good.

The revenue generated off those seats have been phenomenally good. That's anathema to a ULCC in terms of removing a middle seat on an aircraft. And that drove us to actually introducing first-class seat on board the aircraft. And so you'll have the front 2 rows with first-class seats by the end of this year.

And then the big product gap that we have, and we mentioned this on our earnings call, we're working on is actually putting connectivity onto the aircraft. That's a significant product gap. And people don't choose Ryanair. We're not in their decision set -- or sorry, the Frontier. We're not in their decision set if we don't have connectivity. And so we'll introduce that sometime in 2027.

And we think that closes the product gap that we have between us and a lot of our peers in the industry. And really, what I'm trying to do is focus the airline on costs and productivity, whilst also encouraging customers to recognize the value that we provide and ensure that we provide a good value to them so that they come back for more. And that's where our focus is because slowing the growth in the airline creates a more stable revenue base, improving the customer appreciation of the airline and the product that we have is very important to having that repeat customer come back for more.

And that's something that we're working very hard on at the moment. And that will take time. That will take a year to 2 years in order to move the airline from where it is today into a place where our on-time performance has improved. Our cancellation rate has improved. The performance of the airline, the core tenets of the airline are in a very, very good place, so that we can actually grow the airline again in 2028 and beyond.

So I don't know if you were in the room when we were talking at JetBlue a few minutes ago, but one observation that I made is that with premium products, the airline industry used to give it away and then figured out how to monetize it over time. Presumably, you'd like to skip the giving away phase and go straight to monetization. So curious about your thoughts on that. And then, again, not saying JetBlue is right or Frontier is right, but they've already decided to go with 3 or 4 rows, you're at 2. How do we think about the evolution of the product and hopefully being able to monetize it from day 1?

Look, I mean, we're putting 2 rows in. If 2 rows sell like gangbusters and it makes sense to change another row, we'll look at that and make a decision at that time. It will be based on data. I think it's important for us to look at the data that exists and see, okay, is that selling? It encourages you to do it. You can see it from UpFront Plus. We've migrated from UpFront Plus now to first-class seats at the end of this year.

When you turned on UpFront plus, right? it...

Yes. No. But you will have an opportunity to upgrade -- you have an opportunity to upgrade into Upfront Plus today from our loyalty program, and you'll continue to do that. But obviously, our objective is to sell those seats, not give them away for free. We're not going to sell 100% of those seats. And so there's always going to be some areas that you can actually upgrade some people from the loyalty program to give them value. Mean the one difference between Frontier and the rest of the industry from a loyalty perspective is aspirational travel and ability to upgrade.

And I think that's something that we're working on trying to close that gap. That's one of the reasons why your credit card program won't necessarily go from $4 a passenger to $35 a passenger. But if it goes to double digits over a reasonable period of time, it gives the airline huge leverage in terms of monetizing the loyalty program and bringing the airline back to sustained profitability.

Okay. So one thing I probably should have started at before -- started with before going like a full Ryanair, discuss the first quarter because you did provide some additional color this morning. If you could just kind of rehash that for the sake of folks in the audience.

Yes. We updated our guide today, clearly to reflect the impact of higher oil prices from the Iranian conflict. And so we updated our fuel guidance, but also our revenue guidance. What we've seen in the airline over the last 2 or 3 or 4 months really is progressively improved revenue performance in the business. We've moved our pricing strategy to a much more disciplined set pricing strategy, which we think is actually making a significant difference. We talked about this on our earnings call a few weeks ago, where we think about half the improvement in revenue is to do with actions that we have taken ourselves.

The other half of the improvement in revenue is linked to the overall supply-demand dynamic that exists in the industry today. And so today, we updated our RASM to stage length adjusted 15% improvement or I think it was like mid-single teens. It's around 15% improvement in RASM and stage length adjusted RASM today. That's a phenomenal performance and turnaround for the airline from that discipline.

One of the things that we're actually seeing is we've moved into -- we've had NDC for a while. We haven't moved the big OTAs into NDC. And so you're now seeing Frontier display quite clearly on the OTAs, our fare plus our all-in pricing, and that's allowing us to sell into that. And we're seeing really strong attachment to our bundles through the OTAs. That's giving us a boost in terms of revenue. But just our core discipline around revenue management has improved quite significantly and is driving an outsized improvement in unit revenues, which we're really, really happy about.

And how should we be thinking about fuel price recovery for Frontier? Because where I sit, there are sort of 2 potentially opposing phenomenon. On one end, I do think that you cater to a demographic that might be experiencing some more spending pain given the price that they're paying at the pump.

On the other hand, my understanding is that you've got a steeper-than-average booking curve because you really do fill up a little bit later than some of your competitors, certainly the ones with large international networks since those tend to book very far out. So maybe your demographic is hurting a little bit more than Delta's. But on the other hand, you've got this steeper booking curve, you take a larger percentage inside of 30 days. So maybe that helps the fuel recovery. How do those 2 -- one, do you agree with the premise? And if you do, how do those 2 observations reconcile? Well, firstly, I disagree if you think I'm wrong because that's what makes it.

Well, it's interesting, right, because no one's right or wrong at the moment. We're actually all experiencing this at the moment and going through what's happening with the industry in terms of fare increases, trying to pass on higher oil prices. I mean you got to start from where we sit, right? Our fuel burn per passenger is 40% below our peer set in the industry.

So we start from a better place on a per passenger basis given the high-density business model we have and the new aircraft -- the predominance of new aircraft in the fleet. So that's one very strong place. We obviously are seeing fare increases across the industry at the moment, and we're following suit. I think that's constructive to the industry that you're seeing the supply-demand dynamic that exists is allowing airlines to pass on higher fares or higher fuel prices through higher fares. That's very, very constructive.

But we're also seeing things that are different in our business, like our Q1 guide update was largely set prior to the fuel price increase, right? And so you're seeing the underlying business perform very, very well in today's environment. And then you see -- you have a jump in oil prices and a change in the fare management across the industry. And you're seeing that across the next 2 or 3 months. And really, we haven't seen volumes skip a beat in terms of bookings over the last 2 weeks since the crisis -- the oil crisis started and which is very constructive into the business. And it's a very, very comforting fact that's happening in the industry. And so we'll watch it.

We'll see how this develops over the next couple of months because like we've got to plan our business on the base that there's going to be elevated fuel for a while. We don't know how high that fuel price is. And we'll make decisions around the business and what we do based on how high and elevated that oil price is and what the industry is capable of doing in terms of passing that on. But our starting point is really, really good.

It looks like Mark Streeter has a question from the front row.

Jimmy, when you answered Jamie's initial question on Ryanair versus ultra-low-cost carriers in the U.S., I thought you might throw in airport costs, landing fees, cost per passenger and how different it is in Europe versus the U.S. And we just had JetBlue on stage pointing out complaining about LaGuardia costs. We had a dinner with Delta last night talking about projected cost in -- at LAX, for example, projected to double over the next couple of years. So does that force you -- when you look at the network and think about Frontier of the future, does that force you more into a sort of mid-continent sort of focused network away from the coast because the coastal airports are so expensive? Or is that reading too much into sort of where the U.S. market is headed?

I mean not necessarily. And irrespective of whether it's Ryanair or Frontier or any airline, you look at the profitability of the route and the revenue performance overcoming costs. And so I mean, if we can overcome the airport cost that's rising through higher fares and pass it on, we'll obviously operate from that airport. We are clearly very focused on keeping our costs low, but we're more focused on making the airline profitable and generating higher profitability in the airline. And that's where our focus is. So irrespective of the location.

I think it's very hard in the United States to avoid the 2 coasts given the population densities that exist. And so I think it would be I think it would be negative to the business to say, okay, we'll just exit those 2 areas because their airport charges are high. I think there's large population densities. There's also large spending power. And so we'll watch that balance and see what the best network to deploy is for the airline. I couldn't see a scenario that has us not in those areas in the business.

So one of the slides that we had up yesterday, I honestly don't remember which panel it was, but it highlighted your growth in Atlanta. JFK appears to have been an experiment that might not have achieved your return hurdles, however, you want to put it. Southwest made a run, obviously, ever since the AirTrain acquisition. And I would say through in the towel in Atlanta, why is it going to work for Frontier?

Well, I mean, we...

A pretty high level of operations that you have planned.

Yes, it's one of our largest bases in the network. I mean we see an opportunity that has presented itself where Southwest has reduced its capacity considerably and as has Spirit. And so we've effectively replaced not all of that capacity, but some of that capacity to move it to one of the higher bases in terms of volume in our business. It makes absolute sense commercially. The performance that we're seeing in the airport is very strong. And so we'll continue to manage that.

The airport itself is quite constrained in terms of capacity. And so it's -- I would be surprised if the growth rate in Atlanta continues at the pace it's been in the last 2 years, really, we're getting an opportunity to grow the airport because other airlines are shrinking in that location. We'll take advantage of things like that as they occur across across the U.S. We're doing the same in Vegas, where Spirit has reduced capacity quite considerably. We've not replaced all their capacity, but we've added some capacity into that marketplace, and that market is doing very well. And what we see is probably increased capacity, modest capacity growth over time in that marketplace.

So we'll just react to structural change that exists across the industry and see if there's opportunities to grow in certain airports. Take Denver as an example. We haven't grown Denver in 10 years. And we're in the sort of 60 to 75 departures a day zone in Denver, but we operate very successfully in Denver given the history of the airline in that marketplace. If opportunities exist to grow that market, we look at it, but we haven't seen that in the last 10 years.

And since you brought Spirit up, and you may not have these figures committed to memory, but could you just discuss sort of the overlap trajectory over time where that now stands today? And then, of course, Spirit, I mean, we're not here to debate the potential for them to emerge from bankruptcy, but the latest plan is a further 17% capacity reduction, '27 over '26. How does that play into Frontier's fortunes?

Look, Spirit has gone from over 200 aircraft to -- they will end up in 75 to 80 aircraft zone. I mean I think the big impact to Frontier is you had 2 low-cost carriers or ULCCs butting heads for quite some time on between 45% and 50% of their capacity. You've now seen that capacity reduce, that overlap capacity reduced to in the less than 30% zone in that sort of area code. But largely that overlap is on large markets that exist that both airlines are relatively small in comparison to the other airlines.

And so I think the structural change and benefit to Frontier has happened. You're seeing it certainly in the West of the United States, where Spirit historically was connecting a lot of traffic through Vegas and offering heavily discounted fares all across the West. You've seen them deconstruct that network quite considerably. And so we get the benefit of that.

And you're seeing part of that probably in the RASM improvements that we have that's outsized in comparison to the industry. I think at 75 aircraft, they're largely in markets that don't overlap with us other than on major volume routes, which we don't see as being an impact to our RASM. And so it is what it is. We wish them well and see how they perform as they emerge from bankruptcy.

We're very focused on fixing our business, putting the airline on to a sustainable profitable path. That's where our focus is. So I'm not really up to speed as much as probably you are in terms of where Spirit is today.

Yes. Back to the utilization decision that you reached, something that your larger competitors have shared with me. I don't need to name names, and I'm sure you've heard this before. But when I've discussed Frontier with others, what has often been expressed to me is, well, in low-frequency markets or where they don't have a consistent day of the week schedule, they don't really get on our nerves.

But if they are running high frequency peak and off -- if there's a consistent high utilization schedule, that's when we kind of sit up and take notice of them. One, I'm curious if that's been your competitive experience over the years. But two, if that's accurate, as part of the high utilization plan, did you build any OA yield aggression into your forecast? I mean it does seem that they compete more aggressively with you, the more consistently high frequency you are.

I mean, look, we are filling out a network that exists at the moment as opposed to adding like 3 to 5 times a day on specific routes. Most of the utilization flying is filling that network out on a Tuesday, Wednesday and Saturday, where capacity came down. So it's effectively the existing network, but with slightly more frequency by day of week as opposed to multiple times per day. We think that that's attractive for our business to encourage loyalty into our business and repeat customers.

We think we pushed away some customers in the last 2 years by dropping the frequency on off-peak days of the week. And so we think this is a positive change for the business. We'll run our business in terms of frequency where we see opportunities for higher frequency. We're typically a very low frequency business model. You can look at our route network out of most of the major bases that we have. It's not a multi-frequency daily departure route network. But if frequency is needed in the business, we'll add it. We'll do it based on what we see in terms of the marketplace.

Okay. Fair enough. I think Mark has another one.

Jamie and I had some spirited debates with your predecessor about sale-leaseback accounting and the appropriateness of it all and so forth. But more importantly, it really was the negative impact, if you will, from the reliance on sale leasebacks in terms of how you were growing your business and network decisions and so forth. You seem to have come in with a change of thought regarding that. So maybe you could just explain that a little bit more and sort of how you're thinking about the previous reliance on those gains and how that sort of impacts how you're thinking about running the airline?

I mean I think there's 2 separate issues, right? I think sale and leasebacks in isolation are pretty good. It's a very good structure to -- for a growing airline to use in order to put the business in a position where you don't have a big capital expenditure at the point of purchase of a brand-new aircraft, right? What I don't like about the sale and leaseback gains themselves is the accounting that exists here in the U.S. where you take the gain straight upfront.

I think that -- that's a U.S. GAAP issue that previous to 2018, you spread the gain over the life of the asset in your fleet. I think that was a much better accounting tool than what exists today in the industry. And so -- so that's my preference. If you separate that from the underlying business, the underlying business needs to make money.

And so I would agree with you on that the underlying business needs to generate cash flow and make money. And that's why we're very focused on managing our growth rate, stabilizing our revenue base and lowering our costs. Those 3 things are very, very important in terms of bringing the airline back to profitability.

We'll continue to do sale and leasebacks in the future when we deliver aircraft in '28, '29, '30. We may have a better blend in terms of on-balance sheet and off-balance sheet financing in the airline. But fundamentally, what we're focused on is generating cash flow within the airline itself from an operating perspective as opposed to sale and leaseback gains. And sale and leaseback gains will be what they are when we deliver aircraft.

We would agree with that approach.

I have a question in the back.

As a follow-on to that question, I'm curious if -- what do you guys think, if at all, around the pace of lessor consolidation? Is that on your radar? And how do you think about that?

I mean, look, consolidation happens in every industry. We actually haven't seen an impact in terms of pricing yet from consolidation. We have quite a broad spectrum of leasing companies in our portfolio, and we wish them all well with their consolidation, but it doesn't impact our business.

On the topic of lessors, clearly, the changes with AerCap, the changes with Airbus are significant profit drivers for 2026. How do we think about margin expansion in 2027 as we anniversary the fleet changes that you've announced for this year?

Look, we want to bring...

Aside from the macro.

Obviously. We haven't set targets, multiyear targets into the business. It's something we'll consider as we progress through this transformation program that we're putting in place. The objective is clearly to bring the airline back to sustainable profitability and cash flow generation.

We believe we're on a very, very strong track to do that. You can see it in the RASM numbers that we've published today that the constructive supply-demand dynamic that exists today and our performance within that is very constructive to bring the airline back to profitability. We'll see where fuel prices go. It is what it is in terms of fuel prices and how elevated they will be and for how long they will be elevated. And we'll adapt our business to adjust to that.

I think having the airline with the same fleet at the beginning of 2026 with effectively around the same fleet at the end of 2027. So effectively 2 years where we're bringing productivity into the airline by using our assets, but not growing the shell count in the airline. I think that makes a huge difference to the business, and it creates more stability in terms of revenue production and should bring the airline back to reasonable profitability in the next year to 2 years.

Current fuel prices, though, assuming no knock-on impact to the U.S. consumer, profitability in 2026 seems like a stretch?

I don't know, we'll see. I mean we're obviously, like every other airline, giving you an update today in terms of where the marketplace is for fuel. It's very constructive, the ability for airlines today to pass on higher oil prices. I really don't know where oil prices go in the next month, 2 months or 6 months. And we'll adapt our business from what we see and judge.

Like we've got 2 hurdles in our business, right? We set our schedule 6 to 8 months out before we hire -- if we're growing the airline and hire pilots. And then about 6 to 8 weeks out, we will determine, is that flying right before we actually send it to crew to do the crew pairings for the airline. Those 2 hurdles are important. And so we've already hired the pilots through the next 6 months. If we were to adjust the capacity in the airline, it's in the fourth quarter at this point.

And actually, what we're seeing in terms of bookings through off-peak April and May is very constructive at the moment. And so the decision at the moment is just to wait and see and continue with our capacity deployment plans right now and see how high oil prices are and whether we're passing them on in full or the large majority of them will determine what we do in terms of capacity in the latter parts of this year.

I'm really glad you made it. I really appreciate it, Jimmy.

Thanks.

Good afternoon. Welcome to Barclays 43rd Annual Industrial Select Conference. I'm Brandon Oglenski, airline and transport analyst. And next up on the airline track, we have Frontier joined by Jimmy Dempsey, CEO; and Mark Mitchell, CFO. We have plenty to get into here just given what's been a pretty volatile ride for a lot of airline equities in the last 12 months, I'd say. But Jimmy, Mark, thank you for coming down.

Thanks for having us Brandon.

Yes. I mean plenty to talk about specific to your company. But I think in general, what we're seeing across the market is just a better environment for airline demand right now. While we got a mic issue fixed here. But Jimmy, I know, maybe you can just talk to the general health of the airline market today versus where we were, let's say, 12 months ago.

Yes. Look, we're seeing 2 things in our business. One, we're seeing constructive supply-demand dynamics. We've certainly seen a very constructive capacity over the last number of months, and we're managing through that in a very productive way. The second thing we're seeing is real discipline coming into our pricing strategy and the way we're merchandising our product. In mid-October, we moved to -- back to a very distinct basic fare plus bundle strategy. And that allied to the introduction of NDC onto our online travel agents is enabling customers to make a very simple value decision in our business.

And so we're seeing about -- in Q1, about a 10-plus percent improvement in stage length adjusted RASM year-over-year, which is really positive into our business. When we saw the shutdown back in November, that cost the airline close to $30 million in both perishable seats that we didn't sell in November, plus also forward bookings into December peak. We recovered that throughout December given the improving demand environment and also some of the things that we've been doing in terms of the pricing strategy we have. We've seen that carry forward into January and February now, and the trends are looking very, very positive into March. So we feel pretty good about the unit revenue environment that we're in right now.

Okay. And I think the guidance for 1Q is roughly flat or slightly down capacity and again, 10% unit revenue growth. Is that just driven by your own initiatives? Or is the industry pricing as well has gotten stronger?

Well, there's the macro event that happened last year that caused unit revenues to fall off as the quarter progressed a year ago. Actually, what we're seeing at the moment is slightly shrinking capacity in January and February, but growth in capacity of about 8% in March. And actually, March, we're seeing the biggest year-over-year improvement in unit revenues and total revenue. And given that March is the biggest revenue month of the quarter, we're actually seeing pretty good performance in March as we trend into selling the rest of the spring break season.

Okay. Appreciate that. I guess more strategically, though, looking beyond the near term here, it's been a pretty rough few years for low-cost carriers in general, and your results have been a little challenged too. And obviously, there's been a leadership change at the company here recently with you taking over as CEO. And we all know in the past that there's been attempts to merge with your large competitor who's now in their second bankruptcy and getting smaller. I guess adding all this up, Jimmy, what's your biggest priority taking over Frontier?

Last week, I announced a list of tasks that we have in the airline. We were very focused on rightsizing the fleet. And the airline got out of sync from an aircraft perspective to the activity in the airline. And so we addressed that with taking 24 aircraft out in a deal with AerCap that will close in the next few weeks. Those aircraft leave our fleet in April, May and early June this year. And so that rightsizing is a meaningful change in the ownership cost of the business.

We then also adjusted our longer-term growth profile to somewhere around 10%, 8% to 10% going forward and adjust it to about an 11.5 hour utilization, what we call utilization rate, so the productivity of the airline. Last year and the year before, our utilization of our assets dropped quite meaningfully to the point in Q4 where we had a utilization rate of less than 9 hours. We'll move that back towards 11.5 hours over the next 18 to 24 months. And that will put the airline in a very productive state, which will take unit cost down overall for the airline. Big change -- the second big change that we focused on is driving a strengthening cost discipline into the airline.

And so partly benefit from the rent reduction that we have of close to $100 million. And the other $100 million that we anticipate to take out will come from efficiencies associated with moving that productivity back into the airline and network selection across the business. So those 2 key things are something that we worked on very hard in the last 2 months since I took over. And then we're really working on solidifying the operations performance of the airline, so reducing cancellations and improving our on-time performance.

I think that's a very, very important next step in the airline to do that in order to improve the loyalty and repeat business of the airline, which ultimately, we want to create a very stable revenue base. And so having slower growth as opposed to 20% plus growth, having growth in the 8% to 10% zone over the medium term plus a better operational performance, we think will give real stability and improvement to our revenue base that has been missing for the airline for the last couple of years.

Okay. I think also on earnings, you also announced a new order book with Airbus. Is that right or a change order book?

Yes, we deferred 69 aircraft with Airbus, which slows the growth rate of the airline. So it moves the aircraft from 27, 28 and 29 into 2031, 2032 and '33.

And again, that aligns you better with the 8% to 10% growth rate is that -- that's right.

That's right.

Okay. Can you talk about the AerCap deal specifically, there going to be any upfront costs with this that shareholders should be thinking about?

Do you want to talk?

Yes. I mean, so we will have, as we complete the transaction, some costs that are on our balance sheet that are noncash at this stage will get expensed. But for this year and next year, there is no significant cash penalty to the business.

Okay. And I guess, can you put this in the context of the lease extensions you guys actually executed, I think, maybe the last 2 years, obviously, under different circumstances, but...

So in context -- so help me understand the question.

Well, just -- so you were extending leases not that long ago. and now we're sending aircraft back. So just...

Yes, yes. Yes. So relative to the extension, so as we set our leases up, our leases are set up based upon a certain utilization assumption and trying to time our maintenance bill with that utilization. As the airline over the last couple of years brought its utilization down, there was a disconnect in timing between expected maintenance and what the return cost of the aircraft would be. So to optimize that maintenance, we look to extend the aircraft, take advantage of that maintenance optimization, the lower rent and in certain cases, engines and aircraft that had better reliability than some of the newer engines that were coming online.

Right. Because the deal with AerCap is returning A320, is that right?

Yes. So then the deal with AerCap is taking advantage of a situation where there is a need for spare engines and that need for spare engines drove some economics that we were able to take advantage of to, as Jimmy mentioned, rightsize the fleet, get our fleet down to a level where we can get utilization to where we believe it should be and do that in a way that doesn't create a cash penalty for the organization and actually create efficiencies as we move forward.

Okay. And on the new order book with Airbus or the deferrals, how does that change your PDP requirements?

Yes. So what we highlighted as part of our guide, we expect our PDP balance to drop by somewhere between $170 million to $210 million this year when you look end of '25 to end of '26. So given that we are pushing aircraft out, those PDP requirements go down. As the PDP asset balance goes down, you also have a corresponding decrease to the debt balance.

Okay. Jimmy, I guess, outside of the changes to the fleet, which I think could be helpful to get utilization back to where you want it. I think what investors are a little concerned about is you're seeing good unit revenue performance now. And I think that March comment, maybe we can unpack that a bit more. But as we look out into the second quarter or third quarter, obviously, ASMs are going to be up double digits, I think, according to plan. Can you maintain a double-digit unit revenue profile even with capacity growth?

I mean I'm not sure our state adjusted RASM needs to be up double digit in terms of RASM going into the rest of the year in order to hit our guide for the year. But one of the things that we're seeing in the business, which is very interesting, take March as an example, our capacity is up 8%. We expect our unit revenues to be up higher than 10% in March alone year-over-year, and that should carry forward into April, May and June based on what we see in terms of the supply-demand dynamic and also some of the things that we're doing in our business this year. I mentioned earlier that we have moved quite quickly to having NDC and transparency in terms of giving the customer the ability to see the value that they have when we line up against other airlines and online travel agents.

We obviously moved to that process 2 years ago on our own website. but had a delayed start in NDC. That's actually showing real benefit into the business today. And so if you look at the 10% plus RASM move this year, half of that is linked to the supply-demand dynamic that exists and half of it is through actions that we have made ourselves. So that gives us confidence that our unit revenues will be up in spite of capacity growth in the coming quarters to actually match our internal targets that we have this year. So we're pretty -- we feel pretty good about the revenue environment that we're experiencing at the moment.

And Jim, just for those that don't know, NDC, maybe unpack that a little bit for the layman.

Yes, it's effectively a direct connect between us and the online travel agents as opposed to going through a global distribution system.

But the importance of that is that you can now market your products better, right?

So if you look at the Frontier website, you'll have a basic fare plus 3 bundles. If you go to an online travel agent, you previously had the basic fare and then you came back to Frontier through manage my booking or a check-in and bought an a la carte bag seat or a bundle. Today, now you're able to buy that directly on the online travel agent at the point of booking. And so what we're experiencing is an improvement in conversion and attachment across the business, both on our website and also on OTAs, which is really favorable to the business.

And you're seeing our volume business come back. And so -- which is very important to a carrier like Frontier. The last couple of years, we've had load factors under some pressure. And so what we're seeing right now is load factors are coming back and recovering and so improving year-over-year, but not at the expense of fare. And so that's a very positive sign for the business.

Okay. I mean I think the larger airlines will say we still see challenges in the main cabin, effectively saying premium products are outperforming. How would you address that?

Look, we have studied what the big guys are doing across the U.S. We see a real opportunity for Frontier in expanding its loyalty program. Our cash flows from loyalty assets, particularly the credit card program are quite immature in comparison to the major airlines across the United States that we compete with. We don't anticipate moving our cash flows towards their levels, obviously. They have a significant scale advantage and international aspirational travel advantage against us. But we certainly see real progression in terms of cash flows over the last 2 years as we've invested heavily in the loyalty program, and we'll continue to do that over the next 2 years.

Our cash flows in Q4 were up 30% year-over-year, which is a meaningful improvement in cash flows. And that's pretty much on volume -- static volume across the fourth quarter. So we have invested quite heavily in the loyalty program. We're seeing real results come through in that. And so the next 2 things that we're doing in the business to step into that premium product offering that we're learning from the major airlines is adding a first class seat that comes later this year. And then we're getting close to selecting a WiFi provider that we think will be installed and operational between now -- by the end of 2027.

Okay. Interesting. From a network perspective, I think a lot of folks have noticed that you were a little bit late to file your 2Q schedules. Can you talk to the rationale behind that? And then what are the priorities for growing the network this year?

Yes. We delayed launching the network because we were in the process of figuring out a rightsizing on the fleet. And so the schedule from mid-May on was delayed somewhat. It's on sale now to the end of August. We will refine that over the coming weeks and probably take some of the capacity down 1 or 2 points in Q2, for example. We have a schedule out on sale, and we're just refining the timing of when the 24 aircraft exit the fleet. And so you'll see some refinements, down in terms of capacity adjustments in Q2. And so that should be positive to the business.

I think markets like Atlanta have been new for you guys, right, or bigger push.

We've seen -- like we've seen 2 things happen, for example, in Atlanta. Southwest has reduced capacity in Atlanta and Spirit has reduced capacity quite considerably in Atlanta. So we're largely replacing the capacity that they have exited from over the last few years. And we're seeing really good performance and strong performance in Atlanta. In addition to that, we're seeing really good performance across the West of the United States. Spirit has obviously shrunk its capacity considerably in the West of the U.S.

And so we're seeing real opportunities in Las Vegas and elsewhere where fares were heavily discounted previously and now are no longer being discounted heavily by Spirit because it's not in the market anymore. I mean if you look at Frontier over the last 3 or 4 years, you've seen the overlap between Frontier and Spirit at somewhere between 40% and 50%. You're seeing that overlap reduce quite considerably, and we think that's actually quite structurally favorable to the business going forward.

Okay. I'll ask this question gingerly, but there's been a lot of discussion of M&A across the industry with some deals live right now, too. I mean, how important is that to maybe fixing some of the problems at the low-cost level? Or is there a path forward for Frontier here on your own?

Yes. I mean we have spent the last couple of months putting a plan in place to build -- bring the airline back to sustained profitability. We think we have a really good plan that we've put in place. We've got to invest in bringing back the productivity in the airline this year. If you look at what we've done, you effectively have the same number of aircraft at the end of last year to the end of 2027. And so all you're doing is infilling the productivity into the airline that has been reduced over the last few years. And so that kind of growth is effectively infilling a network that already exists. And we think that, that's very favorable for the business. So we're very, very focused on building a sustainable, profitable path for Frontier as opposed to consolidation in the industry.

Okay. if I could just push back though because some CEOs would say, oh my gosh, we're at a competitive disadvantage, especially on loyalty. You mentioned it as well that you just won't be at the same relative levels as maybe some of your larger competitors. But do you view that as potentially an opportunity as well?

I think it's a great opportunity for us. I mean our average cash per passenger is about $7 if you incorporate our credit card, our GoWild! program on Discount 10. And so that's considerably below the rest of the industry. And so there's huge leverage in our loyalty program, given the investments we put in, the investments we plan to do into it, we think that there's real opportunity to enhance the cash flows coming off the loyalty program in the coming years.

Okay. And if there's any questions from the audience, just raise your hand, we'll get you a mic. I guess, Jimmy, how much cost is tied up in the underutilization today that you think you can address going forward?

Well, primarily, the rent, you can see in the ownership costs. We are reducing our rent bill by close to $100 million. So that's a meaningful cost reduction that comes with those aircraft exit the fleet. And there's probably another $60 million to $70 million of inefficiency in the business, direct cost inefficiency in the business that will come out with the utilization change. And that's managing the -- just take, for example, managing your real estate assets across the week. You have -- you're underutilizing the real estate on a Tuesday and Wednesday, and now you'll use them a little bit more across the week, and so you get a real fixed overhead benefit in the business.

And so if you look at Frontier and the movement back to higher utilization, our marginal cost of producing that season on a Tuesday and Wednesday is significantly lower than the rest of the industry. And so what we're moving back to is ensuring that the contribution comes towards the airline and the ownership cost of the airline by operating on those days. And I think that contribution is very, very important to the overall profitability of the airline. And it will effectively make the peak days of the week more profitable than they are today.

John?

With the addition to more capacity on the off-peak days, will that be absorbed by the market or have any effect on unit revenues? And then could you also just comment on the cost aspect, how are things developing with the pilots and that negotiation that's ongoing?

Yes. I'll deal with the pilot negotiation is ongoing. We're in mediation with the [indiscernible]. And so that process will continue. Obviously, the pilot body is a very important part of the airline. And so we'll go through that process this year and see how we get on. In terms of the cost revenue dynamic, we are infilling our existing network in a large part in terms of the utilization that's coming into the business. And so that's less expensive from a revenue perspective. than adding new markets into the business. So about half the growth that we expect this year is coming from an improved -- or sorry, increased use of our existing network. The other half is from opportunities, as I mentioned to Brandon earlier, around markets where we see a reduction in capacity in the industry.

And Jimmy, I think you hit on something that you're seeing volume come back. So is it like the off-peak volume that just wasn't there for a while?

It's both. Yes, we're seeing real improvement in the booking curve and earlier in the booking curve. And so we're experiencing an ability to yield up and yield up not at the expense of volume. And so you're seeing your load factor improve in the airline at the moment.

Well, I guess, how would you characterize your customer profile as well because we hear so much about the supposed K-shape economy and the haves and the have-nots. But is that the case for your business as well?

I mean this is difficult to separate out. Like we have a mixture of customers across all the demographics in the economy. What we're actually experiencing at the moment is a higher conversion and attachment rate from customers across both our website and on online travel agencies across the spectrum. And so I think it's more to do with the fact that we're displaying the value we provide and clarity in terms of what people are purchasing compared to where we were previously. And I think that's actually giving us a lift.

I think you maybe mentioned it, is domestic first class still on track?

It's -- we expect to have that installed by the end of this year.

Across the fleet.

Across the entire fleet.

And when do you plan to go live with that as a product?

Well, we sell at the moment Upfront Plus, which is effectively like European business class. So we block the middle seat on the first 2 rows of the aircraft. So we're selling that today. We're not selling it necessarily as a first-class product. But we will navigate from Upfront Plus into first class when we get clarity on exactly the launch date in the fleet. So that will happen as you progress through this year.

Okay. Obviously, it's good to get utilization back up. But as you defer aircraft, something else has been happening with the sale leaseback gains because you get pretty sizable gain when you take a delivery of new Airbus and do that transaction. So how are you going to offset that as you lose that contract expense, Mark?

Yes. I mean I think the combination of the lower rent bill we talked about, the efficiency that you're getting across the business on top of the fact that the maintenance bill tied to those 24 aircraft, given that they were kind of mid-life was significant. When you take the combination of those items, they more than overcome the sale leaseback that assuming you continue to sale leaseback in the future is pushed to the right.

Okay. So you're accruing maintenance expense on those 24 leases then?

So we weren't accruing lease return costs because they weren't, for the most part, in that lease return window. As you get close to the end, that's when we accrue. But they were at a point in their life cycle where you were incurring and expected to incur in the near term, meaningful maintenance costs that now with the early return of those aircraft, those maintenance costs you're able to avoid those. So again, the combination of the rent, the avoidance of maintenance costs and the efficiencies you're getting across the business, those items overcome and help you to move off of that sale-leaseback dynamic.

Okay. And I think you guys mentioned earlier about focusing on operations getting more reliable. What are the drivers there?

I mean, look, it's -- we want to run a much better airline. It starts as operating performance to your customer. We want to improve particularly the on-time performance of the airline. And if we improve the on-time performance, we'll naturally improve the cancellation rate that exists in the airline, excluding air traffic control and weather issues that exist. So we're very focused on fixing some of the issues that have existed in the airline around ensuring that we have an on-time performance. I'll give you like a simple example. We're changing the focus around the turn and creating some automation in the turn that will save us some time in the turn.

And we're going to maintain the turn times in place, but use that time to ensure that our turns actually go on time as opposed to bleeding 1 or 2 minutes every turn in the aircraft. That's actually a meaningful improvement if you roll that across all the departures you have in the day. The second thing we're doing is matching and optimizing our maintenance footprint back into our network plan. So our network plan is set now for the next 3 or 4 months. We'll tweak that over the coming months, but optimizing the task list for each of the aircraft so that the routing of the aircraft touches the right base at the right time. And so that will actually improve the first wave departures in the airline every day.

And so we're very -- and we have a litany, we have about 60 projects that we're working through. We think those 2 projects are meaningful adjustments in the airline. It will take time to get that deployed across the fleet. But I think it will actually give us much more certainty in terms of the performance of the airline from an operational perspective, and it feeds into our push for improving the loyalty and retention of the customer that we want to bring into the airline so that we have much more repeat customers in the air.

Okay. And this is different from like opening new crew bases that you guys were trying to address this within the past, right?

Yes, we have 13 crew bases across the U.S. at the moment. So it's not opening new crew bases necessarily to solve this issue. It will be advancing the maintenance footprint in some of those bases so that we have capabilities that exist across the U.S. that touches the aircraft on a more frequent basis.

Yes. And I guess, Jimmy, as we only have a couple of minutes left here, didn't mean to be too negative here. It's been a difficult run and we've covered you since the IPO. And obviously, shareholders have seen the stock perform the way it has. But I guess looking forward, what do you ultimately see Frontier generating? Is it -- can this be a double-digit margin business? If so, I mean that...

I'll tell you where my focus is at the moment. It's clearly bringing the airline back to a sustainable profitable place. I'm very focused on bringing operating cash flows back into the business. I think the airline has relied too heavily on sale and leaseback gains over the last couple of years, and we need to focus on bringing those operating cash flows back in. And part of that is balancing the network and the deployment of our assets. And so bringing productivity back into the airline, I think, is part of that strategy.

What we're seeing in terms of our revenue performance and the revenue performance across the industry is very favorable at the moment. And so I think that leads us to a very strong path back to profitability for the airline and fundamentally generating operating cash flows in the business. That's where my focus is. We have a lot of stakeholders in the business, both investors, employees and customers. And we provide real value to customers today in terms of the lowest fares in the industry. And I want to bring the airline back to making sustainable profitability in order for us to grow the airline over the medium term and long term, excuse me.

Okay. Well, Jimmy, Mark, thank you very much for coming. Appreciate you being here.

Thank you. Yes. Thanks.

Appreciate it.

Good day, and thank you for standing by. Welcome to the Frontier Group Holdings Q4 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your speaker for today, David Erdman, Senior Director, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to our Fourth Quarter and Year-End 2025 Earnings Call. With me this morning are Jimmy Dempsey, President and Chief Executive Officer; Bobby Schroeter, Chief Commercial Officer; and Mark Mitchell, Chief Financial Officer.

On today's call, Jimmy will be providing commentary on his strategic priorities, and then we're going to jump directly to the Q&A. However, a transcript of the prepared remarks, which would otherwise have been delivered by Bobby and Mark is available for download on our Investor Relations website.

Before yielding, let me recite the customary safe harbor provisions. We will be making forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially from those predicted in these forward-looking statements. Additional information concerning risk factors which could cause such differences are outlined in the announcement we released earlier, along with reports we filed with the Securities and Exchange Commission. Moreover, we will also be discussing non-GAAP financial measures, actual results of which are reconciled to the nearest comparable GAAP measure in the appendix of the earnings announcement. And then we'll also be referencing state adjusted unit metrics, which are based on 1,000 miles.

So I'm going to give the floor to Jimmy to begin his prepared remarks. Jimmy?

I'd like to start by emphasizing how honored I am to be taking on the role of CEO, particularly at such a pivotal moment for Frontier. When I accepted this role, the Board gave me a clear mandate to enact change at our company. We know that we need to do better across the business and deliver increased value for all our stakeholders, employees, customers and our investors.

With this in mind, I have spent the past 2 months rolling up my sleeves to build a clear strategic path designed to return Frontier to sustain profitability as the low-cost, high-value airline of choice. This plan comprises 4 strategic priorities: rightsizing the fleet, strengthening our cost discipline, reducing cancellations and improving on-time performance and driving customer loyalty. Today, I will walk you through the actions we are taking on these priorities that I expect will drive meaningful changes and improvement across our organization.

First and foremost, I am focused on resetting and stabilizing the business through a comprehensive rightsizing of our fleet. Returning Frontier to profitability is about going back to our roots as an organization. This means taking action to increase fleet productivity and efficiency. Just recently, we entered into a nonbinding agreement with [ AerCap ], which will enable us to benefit from the early termination of 24 aircraft leases in the second quarter. We plan to take advantage of this by increasing utilization across our remaining fleet to support our planned growth and drive efficiency. [ Air Capital ] remains one of our largest lessors, and we look forward to expanding our partnership with an additional 10 sale leasebacks in the future as part of this agreement.

Separately, we reached a nonbinding framework agreement with Airbus, which revises the delivery profile of our order book. It supports a more measured and sustainable long-term growth rate of approximately 10%, representing a meaningful moderation versus our prior growth trajectory. The update to our delivery profile and underlying growth rate helps to minimize the proportion of new market activity while supporting ongoing productivity and operational reliability. Our plan to rightsize the fleet directly contributes to my next strategic priority, strengthening our cost discipline.

Cost this month has always been a cornerstone of our business model. We are targeting $200 million of annual run rate cost savings by 2027, largely from network optimization, productivity enhancements and other efficiencies across the business, which includes approximately $90 million of expected annual rent savings from the early termination of the 24 aircraft leases.

The next strategic priority throughout 2026 is centered around improving our operational reliability by reducing cancellations and improving our on-time performance. We're simply not satisfied with our past record in these areas. The status quo is not acceptable and every available option is on the table to improve our performance. I will give you some examples in the long list of initiatives we are working on across the business.

[indiscernible] times, we are working on improvements to optimize our airport operation workflows, strengthening our head start performance and improving day of travel communications with our customers. Over 85% of our customers use our recently updated mobile app. By leveraging digital channels, we can push timely alerts, offer clear next steps during delays and ensure customers feel supported and informed throughout their journey. We are also working on improved operational planning that better integrates scheduled maintenance into the early stage of our network design process to take advantage of our enhanced maintenance footprint.

While we remain firmly committed to cost discipline and operational excellence, our final strategic priority is pairing that discipline with smart high-return upgrades that will accelerate the maturity of our customer loyalty program. Last year, we launched a series of enhancements to our loyalty ecosystem, including changes that simplify elite benefits, enhanced redemption opportunities and create broader customer engagement. Our simplified award structure and easier lead status benchmarks have already begun to resonate with customers, and we are expanding on these efforts in 2026.

Furthermore, we'll be modernizing every part of our commercial offering this year and into 2027 from digital tools and distribution to loyalty and onboard experience. These initiatives include the fleet-wide rollout of first-class seating, onboard WiFi, and upgraded website and mobile app and enhanced digital products and communications. These enhancements will broaden our appeal and effectively address friction points that have historically limited conversion and loyalty. We're building a product that remains incredibly affordable while delivering more value than ever before.

Our loyalty assets represent one of our strongest long-term levers for value creation in the business. We're confident our recent and planned investments in our loyalty program and product offerings will be a significant part of our revenue growth. Overall, we're pairing our unique ability to provide low fares with an increasingly elevated product and customer experience to deliver unmatched value in air travel.

The path ahead requires meaningful change and we are embracing that reality with clarity and conviction in order to capitalize on the substantial opportunity we see in front of us. We've adopted a disciplined actionable set of strategic priorities to transform our company and put Frontier on a path towards sustained profitability. Above all, we are deeply committed to creating long-term value for our shareholders, employees and customers.

Thank you for your continued support. As David noted, we'll preempt commentary from Bobby and Mark to allow sufficient time for analyst questions.

With that, operator, we're ready to begin the Q&A segment.

[Operator Instructions] The first question we have today is coming from Atul Maheswari of UBS.

I had a question on your long-term growth plan of 10%. So where is this growth going to be concentrated? Is it simply going to be backfilling the space vacated by Spirit? Or are there other geographies where you see an opportunity? And then related to this topic, why is 10% the right growth target for this year and for the long term? Why is it not a smaller number than that as that would accelerate your ROIC improvement. So any thoughts there would be helpful.

Yes, sure. Thanks, Atul. Look, we'll obviously be disciplined in deploying our capacity across over a multiyear basis across the system. And what you're seeing this year is effectively infilling our network from a growth perspective. So we anticipate growth will be approximately 10%. I mean there's a long way to go from now to the end of the year to determine exactly what that rate will perfectly be. We anticipate about half of that is filling out the existing network. And so moving capacity that was taken down on Tuesday, and Wednesdays, and Saturdays and moving back into bringing capacity back into those days.

And then about half is new markets. And new markets are driven by items that didn't work last year or opportunities that are presenting themselves with changes in capacity across the environment. So you're seeing us take advantage of that in parts of the U.S. And you've seen us do that in a lot of airports around the states like Atlanta, Las Vegas and other places.

In terms of the 10% growth rate and why that makes sense for us. Look, historically, we've grown the airline by mid- to high single-digit teens, and in some cases, well over 20%. We think that about -- when you grow by about 5% to 7%, you don't necessarily take a significant RASM penalty to that growth. And we like the growth profile of around 10%. This drives a lot of utilization flexibility in the organization where you can manage your utilization and manage growth rates either below or above at 10% depending on market opportunities.

What we see at the moment because we're infilling a lot of productivity into the airline, we think that, that would provide real stability in the revenue performance across this year, sort of piggybacks on the benefits that we're seeing from a revenue perspective across the back end of the fourth quarter and certainly, the run rate that we're seeing right now in terms of RASM going through this quarter and into the second quarter.

Got it. That's helpful. And then as my follow-up, I had a question on the guidance that was issued for this year. Based on my math, it appears you will need high single digit, maybe double-digit RASM growth over the second to the fourth quarter to achieve the midpoint of the guidance. So a, can you confirm with that math is correct? And then b, if it is, what's giving you the confidence that you can drive this level of RASM increase beginning in the second quarter of this year because that's the time your capacity growth will also accelerate to double-digit levels.

Look, a couple of things are happening, right? This is a major transition year for the airline. We will change the utilization profile of the business as you progress through into the second half of the year. And what we're seeing right now in terms of the RASM performance is meaningfully improved year-over-year. We're seeing a trend above 10% in terms of RASM improvement. We're seeing that in the early booking process through March and particularly April and May. And so we're actually quite encouraged by what we see in terms of RASM trends going across the year.

In terms of the long term, post adjusting our costs, like one of the focuses in the business is getting a significant saving in unit costs across this year, but largely moving into 2027. And so you effectively have a reset year in terms of the business and its productivity, and that's where our focus lies at the moment. We're certainly seeing that stability in revenue and improvement in revenue carry forward, which gives us confidence that, that performance happens for the rest of the year.

Yes. And this is Bobby. So some of the things that we're seeing, of course, there's a good supply/demand backdrop that exists, capacity has been moderated a bit. But some of the things we've done that we're seeing unique benefits to as well. Last quarter, we moved back to a basic first product architecture that has the 3 clearly defined bundles that we have within there. So economy and premium and business. And then we reinforced revenue management discipline around that structure. So that allowed us to yield up more effectively across the fare ladder.

And then in addition to that, which has enhanced this, we've seen significant in the past quarter, significant NDC distribution enhancement. So that's helping to improve the conversion across third-party channels. It's allowing us to merchandise those bundles more effectively on the OTAs and aggregators. And they're effectively, if you think about it now, they're on the shelf that they weren't before. So that's driving purchases early in the curve, allowing for improved attachment rates and better yield opportunities. And those are things that are going to continue in the future.

So as Jimmy said, we're seeing that in the first quarter, and those are on continued benefits that we'll see throughout the year, we believe.

And our next question is coming from the line of Savi Syth of Raymond James.

I wonder if you could remind us what the delivery cadence is for 2026. And then as you look to '27 and '28, just generally how many aircraft are you kind of anticipating with this revised orders?

Yes. So the delivery cadence for this year. So we have 24 aircraft scheduled, 6 in the first quarter, 8 in the second quarter and then 5 in both the third and fourth quarter. And with the fleet plan that we announced, when you look at those 24 inductions, 24 early terminations, we expect to end the year with the same number of aircraft we began the year with, so 176. And then as you look across '27, we expect to be roughly by the end of '25 at a similar level to where we ended '25 and expect '26.

Yes. And Savi, I mean that's an important point, right? We're going to start and end the year at the same number of aircraft and actually starting to end 2027 with the same number of aircraft that we started 2026 with. And so really, the growth that you're seeing in the business is bringing back that productivity in the airline that's been missing for the last couple of years. And so that puts us on a better trajectory in terms of core operating unit costs in the business. So that gives us real confidence that this plan that we're putting in place today is very manageable across the airline.

You're effectively infilling utilization into a largely already existing network. So that's where our confidence is coming from this plan from a stability of revenue perspective but also from an ability to operate the airline at a higher utilization clip.

That makes sense. I mean I wonder like what do you think you can get to in terms of utilization as you exit this year? And what's the dispute order? Like what's the new normal in utilization? And when can we get there?

We've targeted about 11.5 hours across the entire fleet. And the fleet is more complicated than it was prior to COVID, where you got closer to 12 hours because of some of the engine noise with the new engine technology that exists across the fleet. So you do have aircraft that are less productive because of that. And so we've picked 11.5 hours. It gives us flexibility to add time to it, if we see it in certain periods and take time away from a seasonal perspective or other periods. So we think about 11.5 hours. That's our initial target to reset the business and do that between now and probably running into the summer of 2027.

You get a big boost from a utilization rate of like averaging about 9 hours last year when you remove the 24 aircraft and rightsize the fleet. I mean that's a very, very important change that will happen quite abruptly midway through the second quarter. So that's a really good step change as you progress into the second half of this year. And then you've got to grow into the remainder of the fleet from a pilot flight attendants perspective to operate at close to 11.5 hours probably by summer 2027.

One moment for the next question. The next question will be coming from the line of Jamie Baker of JPMorgan Securities.

So the $200 million of run rate cost savings, I'm curious what labor assumptions underpin that. I believe that one time, Barry had at least sort of implied that revised economics were part of a longer-term plan that you would articulated. I know that there was never an official 2026 guide today. But yes, straightforward question. Is there a pilot deal in your full year guide?

There is not a pilot deal in our full year guide. We continue, Jamie, in negotiations with the pilots through the mediation process. And so look, we'll update on that if we have something to talk to you about. The $200 million of cost savings, about half of it is rent, right, which comes from the deal we've done today. About another 1/3 of it is really network shape, driving unit cost savings into the business from where we fly basically. And then you've got efficiencies that come on the back of having a business that was fragmented as the we progressed. So Tuesdays and Wednesdays had lower flying. Saturday had slightly lower flying than the other 4 days of the week. And so you get efficiencies from that.

But back to your primary question, no, we haven't baked in the cost savings, any changes to crew other than efficiency that comes naturally across the week from flying a more stable schedule.

Well, that's -- and that's a good segue into my second question. And I guess this kind of builds on what Savi was asking about. But clearly, there are 2 iterations of low-cost flying in the U.S., the high daily utilization model and the other being more of the kind of [ Allegion ] [indiscernible]country, only flying, when you can make money, low utilization model, whatever you want to call that. So it's clear you're leaning back into the high utilization model. What is it about Frontier's structure or network that assures us that, that is the better of the 2 low-cost iteration operating models in the U.S.?

Well, fundamentally, the efficiency that comes to the airline from flying a more regular schedule throughout the week is a meaningful cost saving in the business. And so this business model, the focus is always on strengthening your cost discipline across the business. And that's the appetite to do it. What we've seen in our business over the past number of months as we invest in loyalty, invest in the network and adapt the network to today's environment and the playing field that we're in today, we've seen real performance improvement across the week, including some of the off-peak days that you have, albeit with lower capacity deployed in those days.

So we're pretty confident that the run rate RASM that we're seeing at the moment, given the structural change that's happening in the -- that has been happening in the industry, and the capacity discipline that is in a number of carriers across the industry puts us in a really good place to take advantage of that and bring the airline back to that cost discipline place than it was prior to COVID.

One moment for the next question. And the next question will come from the line of Ravi Shanker of Morgan Stanley.

This is Katherine on for Ravi. I guess just a question on the guidance range. Obviously, there's a bit of a wide range here. So can you just maybe talk us through what would push you mainly to the low end of the guidance versus the high end and what you're assuming there for the full year?

Yes. So as you look at the full year, right? I mean, as Jimmy highlighted, this is a transition year. So this as we go through this year, working to reset the productivity and the efficiency of the airline. We've got cost savings that we've got line of sight to that we're targeting. And so as you look at that guidance range, it takes into account the fact that there is a transition, there's a timing element to that needs to be worked through.

And as you look at the other side of the range, we are seeing a more constructive supply-demand environment, and we do expect as we go through the year, benefits on it from a productivity standpoint and a cost savings standpoint and also for their traction on the revenue initiatives that were highlighted earlier.

Got it. That's very helpful. And just as a quick follow-up. What was the catalyst for deferring some of these planes? I know you talked about how 10% is going to be the right growth for you. So is it more so figuring out what the growth rate long term would work for you guys? Or kind of what kind of kicked us off?

Yes. I mean we've been -- look, we're obviously managing over the last 2 months, at 2 deals that we've been doing to rightsize the fleet. The reason we picked 10% is we think it provides more stability from a revenue perspective than the airline has had historically where it's had a growth rate of 20% plus in certain years, but certainly high teens growth rate. And so we think 10% is a good number for the business to grow at. It provides an opportunity for us to drive growth into new markets where we're offering value that is clearly a differentiator with the rest of the industry, given our low cost base.

And so we think about 10% makes sense. Obviously, you can accelerate that if you choose to or decelerate it depending on how you utilize the airline. But we think around 8%, 9%, 10% is a good number for the airline to be at over the kind of long term. We expect that as the airline grows beyond 2030 and beyond, that may come down a little bit because the airline is much bigger. And so the level of growth is not necessarily as high from a percentage term basis, but may well be consistent with the [ ASM ] production that you produce each year from a growth perspective.

And the next question will come from the line of Duane Pfennigwerth of Evercore.

Thank you. Jimmy, I wonder if you could speak to return conditions generally on your engines. How much is an engine rebuild costing you in the current backdrop versus maybe what was contemplated in these leases 12 years ago? And if you're willing to speak to it, just remind us what your agreements sort of require at the back end. Is there a true-up mechanism in your return conditions?

Yes. I'm not going to get into the complexity of the deal that we've done in great detail. These are not 12-year-old aircraft. These are midway through their lease life. And so the opportunity that came is related to a need for more engines in the CFM engine pool. And so we have been in dialogue with multiple parties around this for the last month or so to try and put a structure in place that work for both us and them. And so we've got to a very creative place. There is no liquidity penalty on Frontier in 2026 in relation to this deal. We have to work through the redelivery conditions of the engines over the coming months. But we think that the cost of this is relatively minor in the context of our fleet.

And actually, what it does, Duane, is it gives you a meaningful improvement in expected maintenance costs in the next 3 to 5 years from removing these aircraft from the fleet. So this is a very positive deal both in the short term and to reset the productivity of the airline, but over the medium term in terms of the maintenance profile of the business in the next 3 to 5 years. And so we're really happy with the deal that's been struck.

Okay. How will you measure -- should we view this as this is a one and done or this is one of perhaps several of these. How will you measure if 24 aircraft is sufficient to get you back to where you need to be?

I mean, look, they're -- I don't know that there's another opportunity that is -- that can mirror this opportunity that we put in place to remove 24 aircraft. There may well be an opportunity. It would just accelerate the productivity of the airline. You would just move back to an 11.5 hour utilization rate at a faster pace. We've been very focused on this deal and separately fixing the medium- to long-term growth rate of the airline, so that we could have a measured growth profile of the airline. If another deal comes along, we'll certainly look at it, but we'll be disciplined in terms of how we assess whether it's the right thing to do for the airline or not.

And the next question will come from the line of Michael Linenberg of Deutsche Bank.

Yes. Just maybe touching back on Duane's question, Jimmy. Obviously, the return of 24 airplanes, normally, there's a sizable upfront cash component tied to redelivery costs. I think you said that there was no liquidity penalty. So presumably, no cash goes out the door when they return. And I think you mentioned also that the P&L impact, it seemed like it would be modest. Is that reflected like when I look at the range for the year, the loss of $0.40 for the profit of $0.50, does that include any sort of P&L impact that would be associated with any sort of redelivery costs on the airplane?

Yes. So there will be a onetime expense for noncash onetime expense that occurs when we execute the final agreements. But there -- and look, that onetime expense is likely to be non-GAAPed out. The guidance range takes into account any real costs linked to this deal that we have from a return condition perspective.

So those onetime costs that we expect to be non-GAAPed out would not be part of that range.

Yes. Okay. Great. And then just on my second question, I saw that you did increase the size of the revolver and as I recall, I believe you had collateral pledged against that revolver, you could correct me if I'm wrong. But if you could just give us a sense where does your sort of unencumbered collateral position stand.

Yes. So the revolver is backed by our loyalty assets. And so as we have in the script, as we've talked about before, those cash flows continue to perform well. We just had in Q4, our third consecutive quarter, it's double-digit growth. Q4 was up over 30%. So those are the assets that back the revolver. And yes, you're right. In December, one of the banks that supports the facility, increase their position, providing a vote of confidence for the revolver.

Yes. And just to add to what Mark said, like one of the byproducts of deferring aircraft with Airbus is that you have less PDP payments that are required in the near term because you're effectively taking a pause on deliveries during 2027. And so you end up actually with less because we finance some of our PDP, you end up with less drawn debt in our PDP structure. So you actually end up in a lower net debt position.

Yes. And to Jimmy's point, so you'll see in the guidance that we put forward an expectation of net PDP deposit returns so lower PDP balance at the end of the year of $170 million to $210 million. And with that deposit level going down, the corresponding debt levels would go down as well. Yes, so helping the leverage ratios.

Our next question is coming from the line of Scott Group of Wolfe Research.

This is Ryan Capozzi on for Scott. Maybe first, so we saw a pretty big divergence in fare revenue versus ancillary revenue trends this quarter. What were some of the drivers here? And how should we think about the growth of both segments going forward?

Yes. So I kind of talked about this a little bit earlier. One of the things that we've done in the past quarter was migrate back to a basic first product. And what that means is people go in, they're deciding whether they want to take the basic product. and purchase ancillary purchase whatever ancillary products they want from that or they can choose a bundle of which we have 3 bundles there and can choose that. So that has had good up and movement around ancillary itself in addition to NDC, the new distribution capability, which is you have -- it's effectively a direct connect we've been scaling that up more broadly in the past quarter. And not only does that help conversion overall but the products, the bundled products are actually on the shelf, which they hadn't been previously.

So that again helps move things back in the curve, helps you yield up and helps bundle attachment as well. So there's a variety of things that are unique to us again that have helped from that perspective.

On the fare side, additionally, as we move back to basic first, a lot of that we're disciplined in how we handle that from a revenue management perspective. And that has helped, along with, of course, the environment, the macro environment has helped solidify an outsized benefit on that side as well. So you're seeing far improvements. You're seeing ancillary improvements. And again, we anticipate based on some of those things being very structural to see that back [indiscernible] as well.

And Ryan, just to add to what Bobby you said, like, one of the benefits we're getting from having -- we went through this about 2 years ago with the new Frontier in our website, and we played around with different structures during last year. we got to a much more disciplined place from October on in terms of the way we price as he mentioned. But don't underestimate the impact that moving to NDC and giving clarity to someone who's looking through an online travel agent, exactly the total cost of their trip with Frontier.

And so what you're seeing today is an ability for a customer to look at the value that they can get from Frontier by adding a bundle, economy bundle or other bundles to their booking. And so they know the all-in price. Historically, a customer would book through a GDS or through an OTA linked to GDS. And they wouldn't have that clarity, they just see the fare. And then they typically come to our site at management booking or at check-in and add either on an a la carte basis or through a bundle, the incremental products that they want to buy.

And so what we're seeing is an earlier conversion of bundles in the booking curve at the point of booking of the customer, but also clarity for the customer where they actually see the real value that's created by booking with us in comparison to the competition. And so that is having a unique benefit into Frontier. And other airlines have obviously had NDC for quite some time. We were late to the game. But since we launched it, we've seen a really good attachment rate and conversion rate across that distribution channel, where it's adding to the improvement in unit revenues that we're seeing in the business.

Got it. That's helpful there. And then could you maybe just talk specifically about your strategy in Atlanta this year and maybe why you're growing so aggressively there this year?

Yes. I mean you've seen Southwest Spirits, reduced capacity in Atlanta. And we have, for a long time, had an operation in Atlanta, and we've seen an opportunity to enhance that in terms of the volume of traffic flows that we are flying from Atlanta. And we're really happy with the performance of the base. We had about 60 daily departures in Atlanta through the peak last summer. And obviously, we're encouraged by the commercial performance that we're adding more departures this year to Atlanta. So we're very happy with the performance.

Our next question is coming from the line of Andrew Didora of Bank of America.

Actually, just another question on your growth this year. So you talked about 50-50, kind of 50% new markets. You just touched on Atlanta. I guess in the 50% that you kind of dub the infilling, adding on Tuesday, Wednesday, Saturday flying. Like RASM is improving now, I know these off-peak days have been highlighted as sort of the weakest RASM day. So why are you adding these back?

Largely because, Andrew, we see a real improvement in the revenue environment from more disciplined capacity deployment across the industry. You've seen significant reduction in capacity that's come from Spirit Airlines, particularly in the West of the United States.

And so if you look historically, like 2 years ago, the overlap between Frontier and Spirit was close to 50%. It's now meaningfully lower than that and meaningfully lower than that in the West of the United States. And so we see opportunities that are coming on the back of their changes in capacity that we think allows us to move more flights to off-peak days of the week and do it successfully and contribute to the overall airline. And so that's really one of the reasons behind us.

We're also seeing some discipline across other airlines in terms of their capacity deployment. And then we're really encouraged by the performance in terms of our revenue generation with the changes that we made that we discussed earlier around the disciplined pricing strategy together with actually the new distribution capability that we have across all our LTAs now.

So we feel pretty confident that the revenue environment is moving in a very, very good place. And I mean, fundamentally, this business model is built on higher utilization and really strong cost discipline and that higher utilization gets you to a really good unit cost place that we think gets the airline back to -- on a path to sustain profitability.

Got it. Understood. And then I guess I'll ask the question. Given you're backfilling a lot of Spirits markets, does that mean you're no longer would have interest kind of going forward in terms of combining with Spirit in the future?

Yes, sure. Look, I'm not going to speculate on what happens next with Spirit. Look, both the Board and I are solely focused on putting Frontier on a path back to sustainable profitability. And that's really been the focus and high attention for the last 2 months.

Our next question will come from the line of Daniel McKenzie of Seaport Global.

Jimmy, I guess, first, congrats on your new role. And I guess my first question really is just putting on the head of a longer-term investor, getting that capital into your stock, is the Board holding you to any specific profit metrics, so either return on invested capital, operating margin or however, I guess you're measuring the success of the business.

Look, for the last 2 [indiscernible], as you can see from what we've announced today, we are very focused on bringing the airline back to sustained profitability. I've been given a clear mandate to change the business and bring that back. And like I've been very focused on rightsizing -- initially rightsizing the fleet and getting a cost plan that makes sense for the airline over the medium term.

Our job now is really to fix some of the other things in the business, such as like reducing cancellations and improving our on-time performance, that is the considerable effort that we have a series of projects around to build customer loyalty into the business and a good customer experience that drives repeat traffic flows. And really, the outcome of that will be determined by how we perform on loyalty, right, and also the metrics that we have every day in terms of our operational performance.

That's where the focus of the business is at the moment. Clearly from a long-term incentive perspective, there are multiple different metrics that exist in all of our teams in long-term incentives around shareholder performance and then the performance of Frontier within that world. And so we are very aligned with our shareholders with a real focus on returning the airline to sustain profitability.

Yes, very good. My next question really is, I guess, for Bobby. A couple of points here. Just going back to that point of loyalty. What was the redeemed revenue per passenger in 2025? And how would you see Frontier exit in 2026 on that metric?

And then just related to this is sort of the K-shaped economic recovery that we have seen here. I'm just curious, what percent of your passengers and/or revenue has been permanently lost from this uneven economic recovery, sort of among the low to middle income workers. And is that part of the missing revenue story today that potentially could come back at some point? Or how are you thinking about that?

Yes. I mean, rather than talk about sort of the specific revenue around loyalty. I'll just talk about it in components of what we drive through revenue or through loyalty. So we have the co-brand card. Of course, that is a cornerstone of the loyalty program in terms of how we profit from that, but also provide value to our customers overall. That has seen tremendous amount of engagement. The overall loyalty revenue is up over 30% as we stated. And a lot of that -- a large part of that is the co-brand card set up. And again, that's because of the changes that we've made throughout the organization, not just in terms of what we provide from a product perspective, but also what we're providing in the loyalty program itself.

And so you've seen engagement, not just in terms of new customers and acquisitions within that, but the spend has gone up tremendously as well within that, showcasing that people want to engage with us as an airline more than they had in the past. We also have 2 other subscription programs, of course, [ discount then ] and Go Wild, which have been very beneficial to us. Go Wild has seen a tremendous amount of upside in the revenue year-over-year as well. In large part because of the product that we provide, it's -- you're able to fly for free for a year and in some cases, more than a year based on when we rolled this out. And people have been seeing that value and transacting and we've been acquiring more Go Wild customers than we had historically within that.

On the K-shape scenario, the way I'd say that is, look, we have a cost structure that provides opportunity for really multiple segments and create flexibility within that. We have people who want to have the lowest price possible. We have not. We also have been putting in a variety of options and premium products that people can engage with. [ Upfront Plus ] is one of those. Historically, we talked about the paid load factor there. That's up over 80% now. So -- and we have first class coming in a variety of other things.

So we actually have the ability to profit in a wide range of setups and how people want to engage that other airlines don't have the ability to do as much. So we're focused on making sure that we have the cost structure set where we can continue to engage on that and provide the lowest fare but also providing premium products that people can engage with and if they so choose, be able to do that as well. So we have that spectrum. And so we haven't seen that. In fact, we've actually seen people engaging at a higher rate with us as we talked about some of the unique things that we have going for us, those actually will help in the future as well.

In terms of -- just to complete the K-shaped economy comment, like we are seeing an improvement -- a meaningful improvement in unit revenues. Like our unit revenues are going to be 10% plus up in the quarter. We'll see how March finally books in the coming weeks, but the trends are very, very favorable to the business.

Bobby mentioned that we've obviously added some premium products into the business. But one of the benefits that we're getting is people booking earlier with clarity and booking their nonticket items earlier in the process. And so our booking curve is actually extending out further than it previously was, which is a really good sign for our business and the product that we're selling and merchandising to our customers.

Our next question will be coming from the line of Chris McKenzie of Susquehanna International Group.

So I want to go back to -- and apologies upfront for another capacity question here, but I'm trying to reconcile, so the sustained profitability as part of your 4, I guess, 4-pronged plan here, 8% to 9% to 10% you said longer term here. Maybe if you could help understand -- and part of that, I heard in so far as the market is 50% in new markets. In the past, it's been about competing in some of these larger markets which are also typically more expensive to compete in and not sure how that also squares with the sustained profitability.

But I guess maybe a more granular approach to how you're thinking about holistically whether it's the 10%, the 8% or 9% to 10%, you can frame that departure stage engage, those tend to obviously have different margin profiles. How you're thinking about macro scenarios under that and also all the things that we're seeing from competitors here with their rebanking and connectivity efforts, it's just not entirely clear how that level of growth at this point is sort of, I guess, really squares with the plan that you've outlined and perhaps the best path forward, if you will, into this transition year into longer term?

Yes. I mean, most of the growth that's coming, I mentioned this earlier in the call, is coming from infilling the network that already exists, right? And so it's not a charge for 10% growth over the next 2 years where you're adding substantially new markets into the airline. So you already have clearly with a 10% improvement in RASM in this quarter, revenue stability in that network. And so we're really encouraged by the performance that we're seeing in the business in that network.

We're obviously then looking at the opportunities that exist across the entire U.S. where capacity is changing across airports. And so we'll take advantage of capacity opportunities that exist at our cost base. And so our cost base is very, very important to how we deploy assets and how we move the airline back to a path to profitability. And getting more productivity and efficiency into the airline is foundational to that cost base and giving us the ability to offer real value to customers and that they now see it very clearly that real value, and they're able to attach to it and convert. And so that's where our business is. That's why we have confidence in growing the airline by 10% a year.

We think it's very, very good for the unit cost in the business. And look, we have a value proposition to the customer that really is unmatched across the United States in a lot of the major markets that exist out there. And so we consistently provide the lowest fares and the lowest all-in pricing for customers. And we should be very proud of that as an airline. And why wouldn't we grow?

Okay. My second question, I just want to follow up on the point Jamie made earlier. So it sounds like you're betting on or you're anchoring to this high utilization model, if you will. And I know you described this as a transition year. But as we think about Frontier exiting this year or end of decade, and you're able to achieve these initiatives here. In this environment, brand loyal, premium tech focused, however you want to describe it, could you help frame and I'm not asking for guidance here, but a high level assuming this all plays out and this environment is the new norm, if you will, how we should think about margins, free cash flow, return on -- anything at a high level that we should think about, assuming this all falls in place here and this high utilization model, as you said, you're anchoring yourself to is successful.

Sure. Look, we're very focused on moving the airline back to free cash flow generation business model. That is a core tenet of the modeling that's been put in place and the drive to rightsize the fleet this year. We use this year as a transition. I'm not going to start guiding 3, 4 years out but our expectation is that the airline gets back to sustained profitability and free cash flow generation over the next number of years, which puts the airline in a very, very strong position.

Thank you. We next have a follow-up from the line of Savi Syth of Raymond James.

I just was curious as you kind of go through these changes and some of your kind of sister organizations have kind of thought about financing aircraft definitely. And curious what your views are on kind of continuing to use sale and leaseback versus some other avenues for financing?

Yes. I mean we're largely financed Savi this year through sale and leasebacks. I mean over the medium term, I think the airline will probably diversify somewhat from sale and leaseback financing. But I mean in the immediate near term, we've largely financed most of the fleet that's coming this year. And so I don't see any near-term change. But I can obviously over time, see navigating to kind of a more balanced financing structures across the airline where you continue to have a high proportion of your fleet financed with sale and leasebacks or financing, but you bring some other forms of financing into the business. That makes sense. If it commercially makes sense, we should do it.

We will now turn the call back to Jimmy Dempsey for brief remarks. Please go ahead.

I just wanted to quickly say thank you to all the analysts that are on the call. We're happy to take follow-up calls if you have any further questions today or in the coming days. And look, we look forward to seeing you in person over the next couple of months. Appreciate your time, and thank you very much.

We have a lot of work to do here. We're going to roll up our sleeves now and move the airline back to a sustainable profitability path. I think that's fundamentally important for the airline. And I think today's plan that we've laid out to you puts us in a really good place to -- and path to bring the airline back to that location. So thanks very much, and enjoy your day.

This concludes today's conference call. Thank you so much for joining. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Frontier Group Holdings Quarter 3 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, David Erdman, Senior Director of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to our third quarter 2025 earnings call. On the call with me in speaking order are Barry Biffle, Chief Executive Officer; Jimmy Dempsey, President; Bobby Schroeter, Chief Commercial Officer; and Mark Mitchell, Chief Financial Officer. Each will deliver brief prepared remarks, but before they do, I'll recite the customary safe harbor provisions.

During this call, we will be making forward-looking statements, which are subject to risks and uncertainties. Actual results may differ materially from those predicted in these forward-looking statements. Additional information concerning risk factors, which could cause such differences are outlined in the announcement we released moments ago, along with reports we file with the Securities and Exchange Commission.

We'll also be discussing non-GAAP financial measures, actual results of which are reconciled to the nearest comparable GAAP measure in the appendix of the earnings announcement. And as well, we'll be talking about stage adjusted unit metrics, which are based on 1,000 miles.

So I'll give the floor to Barry to begin his prepared remarks. Barry?

Thanks, David, and good afternoon, everyone. We delivered third quarter results per share at the midpoint of our guidance range, demonstrating disciplined execution as we navigated competitive fare pressures and excess peak capacity through the rigorous cost management. Operationally, our performance was noteworthy in September and October, ranking third and fourth, respectively, in completion factor among domestic carriers, underscoring our reliability and operational strength.

Looking ahead, the competitive landscape is shifting in our favor. With our largest low-fare competitor significantly reducing capacity, we anticipate a more balanced supply-demand environment. This positions us to accelerate key commercial initiatives aimed at driving RASM growth and reinforcing our competitive advantage. Our strategy remains clear: to be the leading low-fare carrier in the top 20 U.S. metros. We are leveraging enhancements to our loyalty program and upgraded product offerings, including the rollout of first-class seating by spring, an important milestone in elevating customer experience and revenue opportunities. At the same time, we will continue to aggressively manage costs to preserve our industry-leading cost advantage, which is central to delivering sustainable margin improvement.

I want to thank our 15,000 Team Frontier members, including pilots, flight attendants, mechanics, airport staff and more, whose dedication enables us to deliver the exceptional service and execute on our strategy every day.

I'll now turn the call over to Jimmy for commercial review. Jimmy?

Thanks, Barry, and good afternoon, everyone. In the third quarter, total revenue was $886 million on 4% lower capacity year-over-year. Revenue per passenger rose to $106, up 1% from the prior year, supported by an 81% load factor, nearly 3 points higher than last year. RASM was $0.0914 and stage-adjusted RASM improved 2% year-over-year to $0.0876, reflecting disciplined capacity deployment.

For the fourth quarter, we expect capacity to be roughly flat year-over-year with an average stage length of approximately 890 miles. Importantly, competitive seat capacity is projected to decline by 2 percentage points, including significant reductions by Spirit Airlines, which is exiting 36 overlapping routes and reducing frequencies by 30% across 41 others in December.

This dynamic should drive sequential improvement in stage-adjusted RASM and supports our confidence as we plan for 2026. We expect to return to growth next year given the developing competitive landscape, and we'll provide formal 2026 capacity guidance on our next earnings update. To capitalize on emerging opportunities, we announced 42 new routes launching through early 2026, expanding our presence in major metro areas such as Atlanta, Baltimore, Charlotte, Chicago, Dallas-Fort Worth, Detroit, Fort Lauderdale and Houston, along with new international destinations, including Guatemala, Honduras, Mexico, Turks and Caicos and the Bahamas.

These additions reinforce our commitment to scale and strengthen our network. Finally, I'm pleased to welcome Jeff Matthew as our new Chief Information Officer. Jeff brings deep experience leading large-scale IT organizations and will accelerate our digital transformation, enhancing customer engagement and driving efficiency.

I'll now hand it over to Bobby to provide a brief loyalty update.

Thanks, Jimmy. The significant investments in our loyalty assets, including Frontier Miles, our co-brand credit card, Go Wild Pass and Discount Den generated approximately $7.50 in revenue per passenger in the third quarter, up more than 40% year-over-year, driven by enhancements that resonate with higher income, higher credit customers.

Frontier Miles now offers the most attainable elite status in the industry with meaningful benefits like premium seat upgrades, free bags and unlimited companion travel. We've expanded redemption options through miles for bundles and improved boarding for our most loyal customers. In addition, cardholders received 2 free check bags, a benefit we introduced last year that has been very well received, and we recently introduced free companion passes with the credit card. These initiatives are fueling engagement and position us to double loyalty revenue per passenger over time, creating a durable high-margin revenue stream.

I'll turn it over to Mark now for the financial update.

Thanks, Bobby, and good afternoon, everyone. Recapping our cost performance during the third quarter. Our nonfuel operating expenses were $729 million, down 6% sequentially, driven largely by fleet impacts associated with spare engine inductions and related sale-leaseback financing gains. The increase in nonfuel expenses over the prior year quarter was primarily related to a onetime $38 million nonrecurring credit tied to a legal settlement recognized in the 2024 quarter and fleet-related growth.

On a unit basis, adjusted CASM ex fuel in the third quarter was $0.0753, 9% higher year-over-year due largely to a 15% reduction in aircraft utilization resulting from our disciplined capacity deployment primarily on off-peak days. Fuel expense was $234 million, down 10% year-over-year, driven mainly by a 5% decrease in the average fuel cost, 4% lower capacity and slightly higher fuel efficiency. We generated 105 ASMs per gallon in the quarter, 2% higher than the corresponding '24 quarter.

Third quarter net loss was $77 million, including $1 million of tax expense, resulting in a net loss per share of $0.34 at the midpoint of our guidance. We ended the quarter with $691 million in total liquidity, in addition, post quarter end, we issued a $105 million par value note in a private placement that is secured by substantially all of the spare parts and tooling related to our fleet of A320 family aircraft. The note matures in 2032.

Pro forma for this transaction, liquidity on September 30 was approximately 21% of trailing 12 months revenue. Briefly recapping fleet activity during the quarter, we took delivery of 2 A321neo aircraft, both financed with sale-leaseback transactions, bringing our total aircraft fleet to 166 at quarter end. We expect another 10 aircraft deliveries in the fourth quarter, our largest quarterly allocation of the year, comprised of 7 A320neos and 3 A321neos, of which all have committed sale-leaseback financing.

Following the agreement with Pratt executed in July, we took delivery of 6 GTF spare engines in the third quarter, all of which were financed with sale-leaseback transactions. We expect to take delivery of another 10 GTF spare engines in the fourth quarter, which we also expect to finance with sale-leaseback transactions.

Turning to guidance. As provided in this afternoon's announcement, we expect fourth quarter adjusted earnings between $0.04 and $0.20 per diluted share on capacity, which is expected to be roughly flat year-over-year. The average all-in fuel cost is expected to be $2.50 per gallon, which is $0.09 higher relative to the prior quarter forward curve indication.

Our fourth quarter guidance reflects an expected improvement in competitive overlap capacity versus the prior year quarter, continued progress across key commercial initiatives, fleet-related financing activities and jet fuel prices, which are elevated relative to the prior quarter guidance expectation. Lastly, we do not expect a material tax provision in the fourth quarter due to a cumulative tax loss carryforward, which will largely offset any tax expense.

Thanks again, everyone. And operator, we're ready to begin the Q&A segment.

[Operator Instructions] Our first question comes from Ravi Shanker of Morgan Stanley.

Just a couple of questions on the competitive capacity here. Obviously, you guys are being pretty disciplined right now with flat growth next quarter. But what's the rest of the industry potentially fills in for the capacity that's coming out here and we end up in roughly the same situation that we had before?

I don't think that's likely. Thanks for the question. Look, the capacity that's coming out right now is some of the lowest cost capacity and some of the lowest yielding customers. The only ones that could actually profit off that is actually us. So, I just don't see that being replaced by big airlines. It's not their business.

Understood. Maybe a quick follow-up. Kind of how long do you think the tailwind here lasts? And is this something that is really strong out of the gate kind of given the disruption? Or do you think it gets kind of better, if you will, from your perspective, the long way it goes on?

Well, I wish I knew the answer to the pace of that. I mean it's dribbling pretty good tailwind right now. Could that tailwind go from 30 miles an hour to 100 miles an hour? Possibly it increases, but we see a lot of tailwinds over the next year. At some point, it's going to change. But right now, we see a pretty good path to a very good environment for Frontier.

Our next question comes from Atul Maheswari of UBS.

I have a question on the government shutdown. There's just recent news that if a deal is not reached by November 7, we're looking at 10% cuts across the top 40 airports. If that were to come to pass, what would be the financial impact on Frontier? Presumably, this is good for RASM for the fourth quarter, but then you would end up carrying excess costs. So maybe can you help us dimensionalize relative to your current guidance, like how much of an incremental risk this would be?

We -- listen, we've heard about this in the last 20 minutes just like you did. My knee-jerk reaction is we need to figure out how to make sure we can accommodate all of our customers. I guess the good news here is that we're in a low demand period of November. I mean the high demand, obviously, is Thanksgiving. So, I think we'll be able to accommodate everyone. And so I would actually expect on balance, this is probably a positive just simply because of the RASM that we're going to generate on less flights. But I think that the customer disruption is more my larger concern. But I don't see this being a major impact to us.

Okay. Got it. That's fair. And then as my follow-up, Boeing recently announced that is expecting certification to MAX 10 next year and with some aircraft in inventory that it already has that is ready to be delivered upon certification. So, assuming this does come to pass and this happens in '26 and the legacies get hold of this aircraft, they're likely to use this higher gauge asset to expand the basic economy type of offering, which directly competes with the product that you have in the marketplace. So, the question then is how much of a risk does this present to Frontier next year and beyond? And what would you do to counter this risk going forward?

I think the main risk is probably anyone holding the residual value of a 737-100. I don't think it's a challenge to us. I think if you look at the situation, we see less capacity in our markets, not more. And I don't see basic economy improving. I mean just think about that relatively definite math. It doesn't improve your margins to expand basic economy selling product below your cost. So, I don't think that's going to be a major opportunity. You've seen across the industry, domestic profits have been under pressure. So, I think that I think cooler heads are going to prevail on capacity over the next year. This may enable them to be more efficient, but I think you actually see the lesser efficient aircraft leave the United States.

Our next question comes from Brandon Oglenski of Barclays.

Comrades. Good afternoon and thanks for taking the question from the people of comm union of New York. Barry, well, there is going to be free bus travel here. So, I don't know that might be a competitive mode looking forward. But Barry, in all seriousness, can you talk to how Spirit cutting in November has maybe changed the pricing dynamic here closer in on the fourth quarter? Because I suspect that they were pretty close in booked to begin with.

Yes. I think, look, I mean, look, we were really excited, I would say, 2 months ago when things started changing over there, and we started seeing some book away. And then you got to, I guess, probably second week of September. And unfortunately, what we believe is their book away caused them to drop their fares dramatically. And so we saw a significant drop to fares that had been improving, by the way. I mean, on our last call, we were staring at advanced yields going up considerably year-over-year and then they went down.

Now we're getting into a better phase. So, the fares are now restoring. It did do damage to September and again to October. But we're getting into the capacity cut phase. And I think this will give a sugar high to them for RASM, right, because they would consolidate flights. But it's starting to show up and be meaningful to us. And I don't think it's going to benefit this quarter that much. But like this morning, we just -- we haven't had a chance to flow it through, but they pulled out of another 5 cities. So, I expect that this continues to improve, and we think it's pretty meaningful. Where they have cut, we've seen high single digits plus RASM improvements where they're cutting. So this is going to continue. I think this is going to be really meaningful for Frontier.

Okay. I appreciate that response. And you guys talked a lot about loyalty on this call. I mean can you give us your initial impact from Southwest maybe recently? And more importantly, especially as you look to launch First Class, like are you seeing more momentum on that angle?

Yes. So, look, I mean, we haven't gotten the benefit of First Class yet, but we'll work backwards from your question, and Jimmy or Bobby can chime in. But First Class is going to be wildly accretive, right, because we haven't had that product, and we know the demand is there. So that's going to be worth several points next year. But I think if you look at the loyalty, there's no real benefit, I don't think necessarily from Southwest. It's mainly all the investments we've made over the last year. I don't know, Bobby, if you want to kind of add to that?

Yes. This is Bobby. So, we talked about what we added quite a bit in terms of benefits that we've had over the past really 1.5 years, 2 years, a lot of that actually kind of building up to this past year as well as we transformed what we're providing some of the elite tiers, the accessibility we're providing that. So, look, in the end, we've created a program that is the most rewarding in the sky. And it is something where people can get to these elite tiers much faster than you see with other airlines. They actually are getting those benefits where it might be more difficult to see those at other airlines as well.

We've talked before, you get a much higher conversion rate on seat upgrades at 80% on our top tiers. They're getting 80% upgrades to our top premium seat upgrade there. So, they're also getting free bagged, and we've added free companions on not only the higher elite tiers, but also that's unlimited companion travel, but also on the credit card, you're getting companion passes as you spend and hit certain milestones.

So, just a lot that we've put into this, and you're seeing the engagement there. Look, you have a lot of people out there that are disenfranchised with their other programs, whether those are airlines or other types of travel programs or other credit cards. We're providing an incredible value there, and you're seeing people not only engage in terms of acquisition, but also spend. I mean spend was up tremendously year-over-year because people are wanting to move up that ladder in terms of elite status because they see the benefits that they're getting.

And I would just add, I mean, and Brandon, you're old enough to remember, I mean, the Starwood program in the 2000s was just amazing, and they kind of used their costs and so forth to build that loyalty and that credit card was one of the -- consistently one of the top-ranked cards. And now that we've kind of got it underway, we sat down 1.5 years, 2 years ago and said, we've got the lowest cost. We should be able to provide the most value and loyalty.

And so, we have made methodical changes over the last year, 1.5 years, as Bobby mentioned, and now we're starting to see the benefits of that. And it's early. But when you see 40% jump to the loyalty ecosystem year-over-year, we're on a track. And so, we're doing in the $7, $7.5 range, and we can see that doubling in pretty short order. So, we're pretty excited about it. I think it's one of the key pillars to getting back to sustainable margins, but it's a big part of what we're doing.

And the savings that people get are real like I mean it's thousands of dollars a year that you can save if you use this card. And to Bobby's point, when he mentioned kind of the disenfranchise, what we're seeing is the customer that just flies a couple of times a year on one of the big airlines, they don't have the actual tier that they need to get really upgraded. They're #36 on the upgrade list. They never get upgraded. And so, when they take that spend and put it on our card, they actually get rewarded with real loyalty. They get real upgrades, and that upgrade is not going to be upfront plus next year, it's going to be first class. So – so, I think that we've just started. We're kind of in the first inning or 2, but we are going to close the gap on loyalty revenues with the big guys, and this is going to be a material part of our discussions, I think, in the quarters to come.

Yes. And just on the -- just a quick add to on First Class. I mean, obviously, we're going to be selling that, and we anticipate a variety of the income coming from just people buying it outright. But that is a product that, again, those disenfranchised customers with other programs have the opportunity to get upgraded to that they would never see. And with us, they will be able to see that at a much lower rate. Therefore, they'll get it faster. So, we're excited about that.

And #36 on the upgrade sounds good to me. I'm usually way behind that.

Our next question comes from Savi Syth of Raymond James.

This is Carter on for Savi. I was wondering what you guys are seeing on pricing in your Spirit overlap markets relative to your other markets more broadly? And are you seeing anything different in Fort Lauderdale where you guys most recently added service?

Look, I mean, I think I mentioned this a while ago, we saw pricing go down after they filed. We've seen that kind of recover now. And we've seen our pricing obviously go up in those markets. So, I wouldn't say it's over, but -- and then obviously, they're trimming capacity and pulling out, so there is no more pricing in some of those. So, I think it's stabilized.

Got it. And then just for my follow-up, I want to clarify, does your earlier comment about returning to growth in 2026 mean you're no longer planning on having flattish capacity through the first half of '26? Or is that more of just a comment of returning to growth in the back half?

It's a very dynamic situation right now. I mean we're watching the competitive situation. And based on how that plays out, we have the ability to flex up or down. But we believe there will be opportunities for us in our cost structure to kind of replace that capacity in several places. And if so, that will dictate growth. But it's -- we'll update everybody by Q1 in our next call because I think most of this -- we believe most of this should be sorted out by then.

Our next question comes from Michael Linenberg of Deutsche Bank.

This is Shannon Doherty on for Mike. Barry, earlier this year, we were talking about double-digit margins by the summer of '25. Obviously, Liberation Day threw a monkey wrench into that plan. But do you see a path back to double-digit margins in '26 with the current competitive landscape? And if so, can you help us bridge just there from today?

Well, look, I mean, we didn't plan on all of the things that happened in the turmoil in the front half of this year and what has happened. But I can tell you that as far as our pillars of kind of path back to sustainable profitability, look, I think doubling our loyalty revenues from where it is, introducing first class, getting that premium, getting kind of our fair share of that premium as well as the fair share of loyalty. I think the competitive capacity reduction, as we've talked about, I mean, that's going to be a huge tailwind for us going into next year.

And then we're going to double down on our costs. I know everybody kind of accepts the inflation, but we're going to double down. We hope to have all that ready to lay out at the next call. But you're going to see kind of another wave of us kind of pushing further down on cost to ensure that we maintain a wide margin of cost advantage versus the industry. And we're going to continue to improve our operation. Our complaints are down dramatically year-over-year. We continue to be kind of 30%, 40% down every month year-over-year in complaints, and that's kind of tied to what's happened with our improvement in the operations.

So, I'm not going to declare the day we're going to get back to any margin target, but I can tell you that there's plenty of fundamentals that are in our favor at this point.

And maybe a follow-up on like thinking our growth for next year. Will Spirit cutting deeper than 20% next year, maybe a lot more be the determining factor of unlocking growth again? I mean, clearly, you are carrying a lot of extra costs, taking down aircraft utilization and you want to get back to growth. So, I'm just trying to figure out what gets you there.

Yes, Shannon, it's Jimmy here. Look, we're watching what's happening in terms of network deployment across the industry, including Spirit at the moment. And there are certainly opportunities that are existing. You've seen us launch some stuff across the United States in the last couple of months that fill in for some capacity that we think is going to be adjusted in their network. Whether that drives material growth next year or not, we don't know.

We've got to see how things develop in the next 2 or 3 months. Hence, we're kind of deferring to the next earnings call to give you an insight into our growth. But clearly, we have a substantial body of aircraft that we can deploy to infill for any disruptive capacity that comes out of the marketplace in the next couple of months. And so, we're positioned for that. As I said in the last earnings call, it does take time from a growth perspective to hire and train pilots and get them deployed in our network. And that's typically a 6- to 8-month process. And so, any meaningful growth will occur sometime Q2 or Q3 or Q4 next year, depending on our view over the next couple of months and what we want to do in terms of growing the airline into opportunities that crop up.

Our next question comes from Duane Pfennigwerth of Evercore ISI.

Just one question for me for the team. How has your thinking about consolidation of the ULCC sector evolved or changed over the last 90 days?

Good to hear from you, Duane. I don't know that it's changed. I think we're going to see -- and I've said this before, I think you're going to see less capacity in the United States. And I don't know if that's a U.S. ULCC thing. I think it's just a domestic capacity thing. And I think it will be far beyond just the ULCC space. I think you're going to see a lot less seats. Consolidation is one of the mechanisms to help facilitate that, but it's not the only way to get there. But I do think there'll be less seats. There's another carrier that is not a ULCC that we suspect is going to shrink a considerable amount over the next year. So, I think a seat is a seat and the more that go out, it's probably constructive to the supply and demand balance as we move into '26.

Our next question comes from Scott Group of Wolfe Research.

This is Ryan Capozzi on for Scott. So, aircraft utilization has been down pretty significantly so far this year. Just curious how we should think about utilization levels into 4Q and really more so into next year?

Yes. I mean from a utilization standpoint, I mean, I think to Jimmy's point, when you look at the lead time that's needed to ramp that up, I mean, from the environment that we sit in today, the overall macro environment, I think you'll see consistency and where we've been Q3 to Q4 from a utilization standpoint. But then as both Jimmy and Barry have mentioned, as you look into '26, we need to evaluate what that landscape looks like and how we want to move forward with utilization. Obviously, the higher you're able to drive that, that brings down unit cost. So, there's positive there, but you just need to balance that with the larger macro.

Yes. And just to give a little context, we have -- there's 2 things going on with the fleet. One is you have a delivery order book that can provide growth, and then you can also utilize your assets more. And what we've been doing in the last 8 to 9 months is reducing some utilization on the asset base. What you're likely to see as you progress through next year is growth more on peak days and off-peak days through new aircraft deliveries, which is healthy growth coming into the business.

Whether we choose to do higher utilization or not, that's something that we have to consider going into next year to see where the competitive capacity environment looks.

Got it. Appreciate the color there. And then I guess on competitive capacity, I think you had mentioned 2 percentage points of improvement in 4Q. Any sense of what level of reductions you're expecting in 1Q here?

Look, we haven't quantified the level of reductions that we expect. As people solidify their schedules going into Q1, we'll have more of an insight into that in the coming month or 2.

Our next question comes from Jamie Baker of JPMorgan Securities.

This is James on for Jamie. A lot of questions about domestic capacity. Maybe just a question on the international routes you guys announced and what you're seeing there, particularly how RASM is trending into 4Q and 2026?

Yes. I mean -- so just you're talking about the fourth quarter starts. We've been seeing some pretty good results happy with the new routes, specifically, as you brought up within the Latin America kind of VFR or Latin VFR routes that are launching sort of in the holiday, Christmas, three Kings peak period. So pretty excited about the results that we've been seeing so far.

Okay. Got it. And then for my second question, we're seeing smaller regional airlines enter the market? I'm just in the past few years, are you seeing any -- particularly in the routes that Spirit exited, are you seeing any of those airlines come in to fill that capacity that you're now competing with?

No, we're not really seeing that. I mean, look, I think the landscape has become pretty clear. I mean Frontier has been the one to outplay and out last. And so, I don't think that -- I don't see a new entrant trying to come in on some of the things that we're doing.

Our next question comes from Tom Fitzgerald of TD Cowen.

I'm curious on the loyalty program, if you're -- where you're seeing the most strength in sign-ups and whether it's just kind of any place where you have a base or a decent enough schedule density of those particular markets that stand out?

Yes. Look, it's obviously where we have bases. We've got 13 bases and then we've got large concentrations, right, in other cities, Raleigh, Baltimore, New York and so forth. But I mean, it's where you would expect. I mean customers, you've got to be able to earn it when you fly and you've got to be able to use it. So, it kind of fits our geography. But I think the big thing that's changed, I mean, obviously, to see this kind of growth when we're not actually growing the airline right now is actually really impressive.

Yes, I mean, to echo what Barry said, you're going to see it where there's relevance on both the network and the program and where you can -- you're looking for aspirational opportunities where you can go and then, frankly, the benefits you can get from that. And we're hitting on all those things.

That's really helpful. And then just curious on first-class seating as you kind of just keep going up market. Is there a -- do you assume any like time for that -- those products to mature in the market? Or do you think it hits right away? And I'm wondering if there's any like kind of if you're upgrading a lot at the beginning to kind of entice people to get them familiar with the product if then it shows up in the revenue, but if it's a lot of it's upgrades or if there's like a noncash component.

Yes, thanks. So look, I mean, we're not expecting it to go to full maturity. That could take honestly, years. I mean -- but you're going to see an immediate benefit in the product moving to first from just having Upfront Plus. It took us about a year for Upfront Plus. At first, a lot of people got it for free and so forth. And our top Elites will get upgraded into it, which is what helps kind of feed the loyalty asset ecosystem. But you're going to mature as more people figure it out.

I mean, at the end of the day, we've observed in the United States a huge change in the appetite for leisure customers to pay for first class seats. And we believe that given our cost structure, we can deliver a first-class seat cheaper than anyone. And so we're going to obviously benefit from not only having a premium product, but it's going to be priced at a level that you won't see for the big guys.

So, I mean, I wouldn't be surprised that we're going to be priced under a premium economy seat in many cases. But yet for us, that could double the revenue we're getting per passenger. So, it's great for us, and I think it's going to be great for consumers, but it could take 1 to 3 years to get -- reach full maturity. But it will be huge. I think it's going to be huge, not just for our kind of our revenue on board, but also in the credit card because at the end of the day, I mean, that frustration about people getting upgraded at the big airlines, you're going to get real value with Frontier with that product, but it will take time.

Our next question comes from Daniel McKenzie of Seaport Global.

I just have 2 house cleaning questions and then one other question just following up on Duane's. But the house cleaning questions, it looks like full-time equivalents are down 6% year-over-year, but unit labor costs are up 10%. So I'm just wondering if you can square that dynamic. And I guess what I'm really wondering here is if it's just the beginning of sort of unit cost derisking for future labor deals. And then the second housecleaning question is, what percent of the network you expect will be premiumized, so to speak, by year-end '26?

Well, there are several things going on, on the salary wage and benefits. I mean we, we stopped hiring flight attendants and what happens when you're looking at in your numbers, we actually were largely kind of rightsized, I guess, on the flight attendants, but we carried a lot -- hundreds and hundreds of extra pilots. So, I think it's a little -- I think that's just a mathematical nuance. As we get back to hiring flight attendants as an example, I think you'll see the numerator and denominator change. And I'm sorry, what was the second question?

Just the percent of the network that will be premiumized by year-end '26.

Okay. Well, 100% of the fleet will actually have the first class product. And look, it's 8 seats. We've got 202, give or take. I mean, it's going to be 4% of your seats. So, it's pretty rough -- it's pretty simple math, right? If you take 4% of your seats and we end up getting paid close to double what we were getting on the others, once this is rolling out, this is a material jump in your RASM.

Yes. Second question here, just following up on Duane's question. Some of Spirit's creditors are pushing their management team for a merger and Frontier is the most -- one of the most logical airlines, of course. And I guess just to kind of push on that a little bit further is, has that ship sailed as far as Frontier is concerned, just given the network overlap? Or is that -- I guess my question really is if that were to become a possibility at some point in the future, is that network overlap manageable, say, with carve-outs or givebacks?

I'm not going to comment on merger. We spent a lot of time on this in the past. I've spoken about it a lot. We're not going to comment on I'll go back to, we see significant opportunity for Frontier focusing on our business and what we see is pretty significant tailwinds to our business due to competitive capacity. And we don't see that changing. We've not seen anything that's going to change that opinion. And again, every day, it seems to get better for us. I mean they just closed another 5 cities or announced closing another 5 cities today, including like Phoenix, St. Louis, Milwaukee. So, these are all key cities for Frontier. So, we see pretty good upside, but we're not talking about a merger.

Our next question comes from Christopher Stathoulopoulos of SIG.

Barry, I wanted to ask for an update on the revenue initiatives because there's a lot going on here. I heard [ $715 ] per passenger in the third quarter. But the comment you made 2 questions ago, I think it was first class priced. I think you gave a price point or you quantified a certain percentage below a basic economy seat or what I took to be an entry-level product versus, I'm assuming network peers.

I said premium economy on one of the big airlines, not basic.

Okay. Okay. Maybe -- I think that's an interesting point. If you could speak to is that in select markets? And I think you said that that's going to take 2 to 3 years to mature. I think that's an important point and one that I hope you could give some more color.

Look, I think we'll get somewhere between 60% to 80% of the benefit within the first year, right? I think for it to fully mature, it will take you a few years. But it will be additive incremental -- it will be positive ROI within months. I mean -- and so -- and when you think about the pricing, I'll just go back to the pricing. I mean, if you look where we fly today, it's not uncommon for us to have a $49 fare and maybe the legacies have got a $69, $79 basic economy, but then they're $400 or $500 for first class. And so I think you could see us easily being in that $200 to $250 range for first class. And it's going to be a smacking deal for anybody that wants to fly first class, but it's going to be a huge improvement. I mean we're going to take 4 seats off the plane that were actually the lowest fares that we were selling, and they're now going to become the highest fares we're selling. That's a huge move on your RASM when you do something like that. So this will be a massive improvement to us.

But we -- I mean, look, the pricing is going to be dynamic by route, by day and depending upon the situation.

Okay. Great. And the comment on the down to competitive capacity for the fourth quarter, I'm guessing that's your system or select routes. And then if there are any markets where you're seeing, I guess, better or worse in so far as additions or deletions from competitors?

Yes. I mean there's a number of routes where -- I mean, Jimmy spoke about this in his prepared remarks. But Jimmy, I don't know if you want to remind them of the numbers there.

Yes, we've seen a significant change in 2 areas. One is where they've exited markets. And so we've seen them exit about 36 routes that overlap with us. And we've also seen a significant reduction in frequencies, about 30% across 41 other markets. So, it's a considerable change in overlap capacity between us and Spirit. And it's across the system in a lot of cases. But the predominance particularly in the West.

I am showing no further questions at this time. I would now like to turn it back to the Chief Executive Officer, Barry Biffle, for closing remarks.

I want to thank everybody for calling in. We're really excited about the future and things have really kind of turned around from a foundational perspective. So I look forward to updating you again and talking to you again in the new year.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.