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February 21, 2024

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Frontier Airlines reported its 4th Quarter and full year 2023 results. The carrier reported a net loss in both the 4th quarter and full year, reflecting increased competition for Ultra Low-Cost Carriers in a changing market. The small net loss for 2023 of $11 million in 2023 was lower than the $37 million loss in 2022. The fourth quarter net loss of $37 million in 2023 compared with a $40 million profit in 2022 was disappointing at year-end.

Frontier is focused on changes and a new strategy to move capacity from highly competitive markets like Orlando and Las Vegas to higher yield “Visiting Friends and Relatives” or VFR markets. Management cited capacity growth of more than 20% in two major leisure markets, Orlando and Las Vegas, while the rest grew slightly over 4%. That overcapacity impacts yields and load factors, reducing margins. The transition to new markets will occur during 2024, with full-year benefits accruing to 2025.

From an operational standpoint, the focus on cost continues, shifting to more than 80% out-and-back flying to minimize delays during weather situations and establishing new crew bases in Cincinnati, Chicago, Cleveland, and San Juan.

Frontier is expecting 23 additional A321neo aircraft in 2024, which will add capacity through the increase in gauge over older A320ceo aircraft that will be retired. At 105 gallons per ASM, the fuel efficiency of the primarily A320neo and A321neo fleets makes Frontier the most fuel-efficient US airline.  Our internal data models confirm this assessment.

The success of Frontier’s route changes will determine its success in 2024. Early indications are positive, and management believes that the company will return to profitability in 2024 and double-digit operating margins in 2025. Management is focused on improving Frontier’s operation and expressed no interest in going after Spirit at a lower price should that carrier become available.

This will be a pivotal year for Frontier and determine whether their strategic changes will succeed.

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President AirInsight Group LLC

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