Q3 2021 Frontier Group Holdings Inc Earnings Call
[music].
Earnings Conference call.
All participants are in listen only mode.
Later, we will conduct a question and answer session.
If you would like to ask a question during that time simply press star one on your telephone keypad, if anyone should require assistance. During the conference. Please press Star Zero I would now like to turn the conference over to <unk> head of Investor Relations. Please go ahead.
Thank you operator, and welcome everyone to Frontier's third quarter earnings call. This call is being recorded and simultaneously webcast.
A replay of this call can be found on our website.
The call with me today are Barry Decile Sanchez, President and CEO, Jimmy Dempsey, EVP, and CFO and Daniel <unk> Senior VP commercial as well as other members of the management team. Following our prepared remarks, there will be a question and answer session for the sell side analysts.
I also wanted to remind everyone on the call today.
Today's discussion does contain forward looking statements that are based on the company's current expectations and are not guarantee future performance there could be significant risks and uncertainties that cause actual results to differ materially from those reflected by the forward looking statements, including the risk factors discussed in our reports.
On file with the SEC, we undertake no duty to update any forward looking statements in comparing results today, we will be adjusting all periods to exclude special items. Please refer to our third quarter 2021 earnings release, which is available on our website for the reconciliation of our non-GAAP measures.
With that I will turn it over to Barry for his opening remarks Barry.
Thank you Susan and thank you everyone for taking the time to attend our third quarter earnings call. This quarter reflect another step in our path to recovery with the business remaining resilient in managing the dynamic nature of the pandemic.
I'm very proud of the team and thank them for their continued delivery of safe and reliable service to our customers.
During the quarter, we increased our capacity, while also delivering a high level of operational reliability. We continue to view the delta various transitory and remain focused on getting the airline back to full utilization in the second quarter of 2022, while being nimble to address any further impacts from COVID-19.
We also achieved $63 in ancillary revenue per passenger which is higher than the levels, we were able to achieve pre COVID-19.
While the pandemic has lasted longer than any of us expected the vaccine boosters vaccines for children and the new therapeutic treatment expected to be approved by year end provides strong support for sustained demand recovery into 2022.
More broadly as the recovery progresses and demand returns we plan to continue the expansion of our domestic and international network, while continuing to build on our ancillary performance in a moment Daniel will take you through our third quarter revenue performance and the opportunities we see going forward.
On the cost side, we're focused on expanding our relative cost advantage by driving efficiency in all aspects of the business and offsetting inflation by being relentless and eradicating waste and our efforts to drive lower costs.
And to be clear when we reference our relative cost advantage, we mean, our total costs, including fuel and interest expense I'll now turn it over to Daniel to provide a commercial update.
Thank you Barry.
Wanted to join you in thanking team frontier for all of their hard work in managing the Covid pandemic, while delivering safe and reliable service to our customers.
We generated $630 million of total operating revenues during the third quarter with our total revenue per passenger of $106, increasing 8% from the second quarter, and reflecting a 97% of the comparable comparable amounts during the pre covet quarter in 2019 with a load factor of 77%.
We have an 8% increase in average departures per day versus the comparable period in 2019 on a 7% shorter average stage length.
We generated $63 ancillary revenue per passenger during the quarter, which is 12% higher than the comparable pre COVID-19 quarter in 2019.
On the network front, we continued our domestic and international network expansion during the third quarter opening stations in St Maarten, San Jose Costa Rica in Burbank, California.
And we introduced our largest have a schedule in Las Vegas.
Our expansion will continue into the balance of 2021 with new stations being out in Antigua.
<unk> in Costa Rica.
And last week, we introduced our largest ever schedule in Orlando, making it our largest station in terms of daily departures for the winter schedule.
As we grow our network we are focused on doing so in a financially disciplined way ensuring as Byron mentioned, but we are relentless and eradication rates and eliminating things we don't get paid for such as access at airport costs.
To that end, we're taking action on the significant increase we're seeing on a cost per implant under certain airports.
Following our decision to exit Lax and San Jose, California earlier this year in the first quarter of 2022, we will be ending service to Washington, Dulles and Newark.
As with any airport at the sovereign cost relationship improves we will revisit that decision.
As we discussed on our last earnings call. The Delta variant has impacted demand encouragingly over the last two months as Covid case count stabilized.
We've seen the start of demand recovery with improvements in both volume and fare levels.
And as we manage the post covered revenue environment, we see an opportunity associated with rising household incomes, which combined with our competitive says it gives us confidence in our growth potential we've seen early indications of this and the overall strength of our ancillary performance.
The recent strength and momentum of our loyalty program, including both a record number of discount them memberships in the quarter and adding a record number of new frontier Barclays credit card accounts underpins our confidence in the planned growth of our business and our ability to increase our 2023 ancillary revenue per passenger target to $65.
With that I'll turn it over to Jamie to provide more details on our financials.
Thanks Daniel.
I also want to thank all of our team frontier members for their hard work and dedication as we manage the airlines through the pandemic, while staying financially disciplined we.
We were profitable in the third quarter on a GAAP basis, recognizing $23 million of net income.
Our adjusted net loss of $24 million or.
Or <unk> 11 per share excludes a number of special items. These include $72 million of cares act credits and $1 million of costs associated with the early lease termination of our remaining 319 aircraft, while the quarter was impacted by the Delta variant and rising fuel prices. We remained financially disciplined in managing the business we.
We ended the third quarter with $802 million of unrestricted cash and cash equivalents and have a 161 million current income tax receivable from our annual tax returns filed during the first quarter of 2021, we continue to be focused on repaying the $150 million of its outstanding loan under the Treasury facility at the appropriate time as previously highlighted.
This will enable us to unencumber, our co branded credit card program unrelated brand assets that are currently collateralized, the treasury loan and make that collateral available to access liquidity if needed while the company has adequate liquidity on our balance sheet with the strength of our loyalty programs as highlighted by Daniel including our co branded credit card program discount down subscription.
On a related brand assets. We believe we have approximately 1 billion of potential untapped liquidity based on debt financing secured by other airlines.
We ended the third quarter with 112 aircraft in our fleet. After the addition of five new Airbus <unk> hundred 20, Neo aircrafts that were financed through sale and leaseback transactions, partially offset by two lease returns during the quarter, including retiring the lost 319 aircraft. We have no planned deliveries in the fourth quarter, our fleet is 10% larger.
The prior year and continues to be the most fuel efficient of all major U S carriers when measured by ASM per gallon of fuel consumed generating almost 100 ASM per gallon during the quarter.
65% of our fleet is comprised of the fuel efficient <unk> hundred 20, Neo aircrafts and we will introduce the <unk> hundred 21 Neo aircraft in the second half of 2022, adding another step change in efficiency to the business.
We remain focused on getting the airline back to full utilization in the second quarter of 2022, while remaining flexible to address the unpredictability of COVID-19 on our bookings.
As Daniel outlined to Delta variant had a significant impact on the airlines bookings through August and September creating a deficit in forward bookings as we entered the fourth quarter. During September we experienced the normalization of volume levels, but at discounted fares were currently seeing an improvement in fare levels as the holiday season approaches however fuel prices have.
Continued to increase creating a short term cost hurdle to overcome.
Our forward guidance is summarized in the earnings release. It takes the lingering effects from the Delta variants into consideration along with higher expected fuel prices. These impacts are partially offset by the improvements in booking trends that began during the latter part of the third quarter as COVID-19 cases stabilized as a result, our guidance range for our fourth quarter adjusted net income.
<unk> is a loss of between 10 and 15%.
More details on our forward guidance can be found in our third quarter earnings release with US I will hand, it back to Barry for some closing remarks.
Thank you Jimmy.
While COVID-19 has lasted longer than any of us expected and the Delta is created a delay in the recovery. We are in a strong financial position and we're seeing an improvement in demand.
We have a proven and resilient business model that is poised to take advantage of the future growth opportunity of our business and we couldnt be more excited about the future with that operator, please open up the call for questions.
Thank you at this time I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad.
We have your first question from Ravi Shanker with Morgan Stanley. Your line is open.
Great.
You said at a conference that conference a few months ago that industry pricing discipline.
But we saw earlier this year was one of your biggest positive takeaways during the pandemic.
You mentioned in your release that there was some discarding affairs to get volumes back up in September.
You just described the competitive pricing environment, right now and kind of how you see that evolving.
Into 'twenty two both will be its fair that is faster.
Sure.
Recall the conversation it was it was.
<unk> talking about prior to the Delta variant starting.
He had seen more pricing discipline across the industry than we had seen.
Honestly since probably 2013, and so whether it be levels rules.
Restrictions and so obviously that was kind of washed away when the delta where it hit.
I am pleased to say now, though we have seen kind of the depths of the delta from a demand perspective was in September we've seen demand continue to recover and as that volume has come through our revenue management team has worked really hard to systematically continue to take advantage of that and methodically raise fares.
We continue to see strengthening to the point now where yesterday, we reached the highest sales level on a daily basis that we've seen since July.
Which gives us the confidence as we look forward.
By spring break if you can kind of roll through the booking curve what that would look like we believe that from a demand and revenue environment, we should be back to 19 levels by the time, we get to spring.
Got it.
That's great.
And.
So for my follow up.
The airport fees that you mentioned and kind of that's kind of changing our decision to fly to certain airports.
Obviously, that's understandable is something that's been flagged by all the airlines.
What's the long term sustainable solution to that I mean, do you just kind of sit out those airports for a while and kind of go back to that when things come back to normal and kind of how long does that take and okay.
Any color on the forward outlook there would be helpful.
Yeah.
Thanks Ravi This is Daniel I think I think it was going to be a combination of such of situations depending on depending on the airport. We've done that we're going to see airports. We're absolutely I think they realize what that costs are driving service away and they'll try and figure out ways to make it more cost effective and we'll absolutely look at that and potentially come back to those efforts and we have so many growth opportunities.
As we've said multiple times. This year, we have lots of places to put our aircraft until we're finding we're finding more cost effective places in the short term.
Look a number of the airports we've made decisions on are in multi airports cities and there are much more cost effective for us to fly for them in those in those cities and those metro regions.
And if that if that's ultimately what we have to do for the long term, we will do it for the long term. So yes, if costs come down and I think some apples, we'll see cost come down we will be back with a cost don't come down we will.
We'll stick with lower cost airports.
Very helpful. Thanks, guys.
We have your next question from Brandon <unk> with Barclays. Your line is open.
Hey, good afternoon, everyone and thanks for taking my question.
I guess Barry in your response to that one from Ravi you talked about by spring break hopefully getting back to normal I think unfair structure, just revenue and yields.
Do you think you can be profitable by then too.
It is gaining back full utilization really the key there.
We would expect to be profitable if we get back to 2019 revenue per passenger levels and look I think to be clear I think what happens and there is confusion, especially.
During a pandemic I think a lot of people who've gotten an education about the difference between sales and revenue.
And normally there's not as much volatility week to week month to month, and definitely not quarter to quarter, but you see this.
So when we talk about sales today, we're talking about all future sales for all travel periods, which you need to look over the next three to six months and so even if youre getting back to 2019 revenue per passenger levels. It takes a full flow through of the booking curve in order for those revenues to materialize from a flow perspective.
So we're not immune to the debt that was put in all of our load factors in fares caused by the Delta area, but what we're telling you is that we're moving out of that and we're climbing towards what we believe is spring and we're seeing really good things from an overall fair perspective in total total dollars, which leads us to believe that we will.
C revenues.
It should be back to 19 levels, and obviously to cover fuel will need a little bit more than that.
But we're we're pretty optimistic about the future and yes, we will be profitable.
If the current trajectories.
Okay I appreciate that.
And I guess, Jimmy or Daniel you guys.
Talking about getting back to full utilization by Q2 I think.
We'll be taking deliveries in the front half of next year right. So should we be thinking full utilization and capacity growth north of 30% versus where you were at <unk> 19.
Yes.
Yes, Brandon.
We're still working through what we think Q1 should look like we think it is probably up to about 10% lower capacity.
Originally planned we haven't finalized it yet.
No.
The issue that's happening at the moment, we think there'll be a sustained recovery post around spring break, but we think the off peak periods still need work. So it's focusing on the off peak periods and the capacity deployed in those periods that we are doing at the moment and so we think our capacity to be a little bit lower than what we previously saw where it was up about 30% and ASM year over.
A year.
We Havent said exactly.
Okay got it.
Okay.
We had.
We haven't set a final number that shows.
Alright, thank you.
Thanks, Brett. Thank you we have your next question from Helane Becker with Cowen Your line is open.
Thanks, very much operator, hi, everybody and thank you very much for the time I just have a couple of questions. The first one is on Costa Rica, specifically and then this just getting like really but I've seen that demand in the market hasnt been that strong and yet you guys are going and opening I think a second I think you just said a second station there.
So obviously, you're seeing something that the peer group isn't seeing can you just talk about.
That market opportunity and I know thats kind of weed. It that I was just interested in that.
So.
No. It's a good question I think I'll talk about two things one one we have much lower fares, what we're bringing into what we're bringing to the Costa Rica market.
Rather than running Liberia too.
San Jose, which we opened in the summer, we're bringing much lower Fas and.
We're following the leisure demand that exists there is incredible the strong leisure demand in these initial destinations on that one so that's what you've seen in our expansion internationally.
And I would also point out again.
We're looking we're looking for we're looking at digital nomads, we know Costa Rica's interesting for people to go.
Stay there for a few weeks on work.
We're also we're also we're also we're also differentiating from other arms, we fly a fruit we fly a lower frequency level, we find the right frequency level for the right market and Thats, a consistent part of our network deployment strategy and it's just the same in Costa Rica is across our network.
Okay. That's really helpful. Thanks, Daniel and then my other question is this.
With respect to capacity growth in 2022.
Lake.
And it's kind of subpart A&P support Asbury earlier in the year on one of the earnings calls you talked about.
Demand would be strong for the holidays.
I think Jimmy just said that you expect strong demand for spring break next year.
With the off peaks still meeting trouble so.
The demand that you thought you would see for Thanksgiving and Christmas are you seeing that level of demand or is it better or worse and then so be it.
The question is with respect to capacity I know you had the aircraft coming in.
Bigger aircraft, replacing smaller aircraft, which is a good thing I'm, assuming that means that you don't need to hire quite as many pilots and is that a gating factor on capacity not even getting back to 2019 levels I'm talking about the ability to grow beyond those levels.
As GDP grows and as we kind of get out of this pandemic and get back to whatever our next normalized so maybe a lot in there but pick two questions.
Sure sure. Thanks Helane.
Look I mean, I remain as confident today as ever that the holidays are going to be big.
I think what happened, though for the last three months since we last spoke to you on the last call.
What's happened is the delta.
Put a damper on demand.
And so.
It hurt obviously it hurts August September.
October and even the front end of November we're seeing everybody now like Thanksgiving's really booking the Christmas holidays are really booking.
The biggest challenge, though to the quarter, while I think I can say that we're going to have one of the best Thanksgiving and Christmas periods, we've had in a long time or if ever.
The periods around it are still soft and I think that's driven by a couple of things one.
<unk>.
The Delta variant caused the return to office to get delayed and a lot of people have moved that to January if theyre not in the office and they're largely not traveling so I think that that hurts business travel, which which isn't direct to us, but it's indirect in that it hurts the whole the whole travel ecosystem.
And then the second thing is as the wide bodies are just now being unleashed to go back to their proper homes in the international so as we see that capacity go out I suspect that you'll start to see things improve the other reality is that you don't have the full vaccines right. So the kids just now children five to 11, just now got approved there.
Now getting their shots theyre not fully vaccinated, yet so I think thats slowed us down but he has the holiday periods look good the <unk>.
Shoulder periods still a little bit soft, but I think when you flow that through once everybody is back in the office. Once you have the boosters in place and I think probably most importantly, we're underestimating.
Many of the power of this therapeutic pill.
That eliminates desk by like 90% it will be available by the year end that I think youll start to see those those off peak periods start to fill in and that's why we're confident by spring and beyond everything will be good.
Okay. Okay. Thank you.
We have your next question from Hunter Keay with Wolfe Research Your line is open.
Hey, everybody.
Excuse me what.
What are you expecting for sale leaseback gains in <unk>.
Yes, we have no aircraft deliveries in the fourth quarter. So we don't expect any sudden leaseback gains related to aircraft deliveries this quarter.
Hello.
Okay got it. Thank you and then on the <unk> CASM number. Please just to Peel that back which is the ultimate.
Nature of the first question.
What is driving that pressure if you could just help me understand the specific line items in the P&L how much of this is transient and how much of this is sticky.
How much are you spending a little bit to ensure good operational integrity. Just help me understand that that CASM guide for <unk> you. Please thanks.
Yes.
We entered into.
You trace all the way back this year, our objective is to get the airline back to full utilization.
As you got towards the end of the fourth quarter and so we've been hiring.
Highlights on flight attendants in order to satisfy that.
Since the Delta variant.
It came about we've been close in counseling flights and if you look through September October we've taken anywhere between 7% and 9% of the planned capacity.
Out of the business. So you are carrying a bit of cost in relation to crude.
For the quarter.
The differential is really the sudden leaseback gains.
You referred to and then also we're probably about 3% to 4% higher than capacity and it's a little bit of inflation.
We certainly are not immune to it like every other airline we've seen we've seen some inflation occurs through the summer, but it's less than about $5 million in terms of the quarter. So relatively small in the context of our overall cost base, but there is an element of inflation, particularly around stations airport costs.
Like other airlines have mentioned on their calls and we're certainly seeing some disjointed airport costs coming in.
Largely linked to uneven capacity across the industry.
History starts to move through the pandemic and so that's really what's happening.
Sequentially, it's a little bit higher in Q3.
Than we had expected, but largely because of the items that I just laid out.
Thank you.
We have your next question from Savi <unk> with Raymond James Your line is open.
Hey, good afternoon, everyone.
Maybe first just to follow up a little bit on Helane question. Just wondering in terms of your kind of what your hiring plans are for 2022, mainly I'm kind of curious if you are confident about being able to meet those targets. It seems like from the training infrastructure standpoint, it seems like the industry as a whole is doing a lot of hiring and training.
Just to get to summer capacity and I know there is kind of fleet changes and things like that so just curious.
What your views are on kind of supply and training capabilities across like pilots flight attendants and mechanics.
Well, let's just go buy work groups. So start with pilots we're extremely confident.
We plan out the airlines, a long ways and advances.
Hunters question, just a moment ago pointed out however, when when plans change like a delta variant, we get stuck with the cost but right now we have significant excess crew.
Just simply because we over hard and we plan to fly a larger airline right now, but if you just flow this out and you go through the training from recruitment to hiring to training to getting on the line and being a a a pilot and the first officer seat that then frees up someone to move from the first office receipt.
To the captain's seat in that whole process can take six to eight months and so my confidence on the front half of next year and even into Q2 is like close to 100% because we've almost all of these people are already on property.
That we need in order to satisfy that flight attendants can be managed a little bit closer in there isn't there isn't the upgrade cycle with the captains and so forth, but when we look today.
The.
The people that we're getting through.
Through the door for training and continuing to fill classes, we feel really good and in fact, we've.
We've seen now that.
Once we got past the unemployment incentives and so forth back in September we've seen in all parts of our business. The places that we did have shortages, we have been able to satisfy that so feel really good about the flight attendants.
Say that.
Yes, something materially changes that further increases the trajectory, we incorporated that into our thinking for our 2023 guidance that we gave that that we would be subsequent X fuel, including the inflation. We know today. So if that answers your question.
Now that's extremely helpful. Thank you Mary and then if I might ask just on.
The moving the ancillary revenue target up from 63 to 65 year for about for 2023.
You've heard a lot of airlines right now talking about demand for premium products being strong.
It was already kind of a of a secular trend and then may be strengthening is that you think driving some customers behavior or even a frontier to just buy more ancillary any kind of treat them selves, we're kind of a better overall experience or is your bullishness really driven by you know just what you are seeing on the credit card and loyalty sign up standpoint.
Well with others burnt questions Daniel within both were soon we assume that we're seeing a really strong performance for the quarter or.
And I'll pull product loved notably what I, what I will do some told us the sort of.
The buyout when you've got the money to pay for it products of seats of seats from bundles I'm absolutely both with some strength. That's all that's all premium that's all equivalent to the premium products from the other airlines have been talking about.
But it's also tired and I think it's the same service credit strongest protocol applications. The strongest protocol protocol approvals in the quarter I think you're seeing.
And all of these products walking in lock step in this in this sort of.
Strong strong the markets and we've got we've got we've got the Premier we've got our own premium pillows and yes, that's part of what's driving this target.
We've got lots of we've got lots of ideas in the pipeline fogelson's with some salter customers as well.
When we think we can both that we can both discount on on the on the protocol probably going to continue to performance firmly wall.
And I've been to that.
Living room does that too I think we as an industry and.
I don't know probably spin 80, 90% of our time on it over the last couple of months on the negative but people keep talking about inflation.
And.
The positive or silver lining in this is that incomes you just look at the latest reports they are up more than they've been in a long long time, and we're seeing that extra money flow through to these extra products, you're seeing all types of other industries and so while we're being relentless about eradicating ways to make sure I'm sure that we managed down the cost side of inflation.
The revenue opportunities real and so we're going to make sure that we get our fair share of that as we move forward and more buying power translates to more pricing power for us. So we're really excited about.
Alright, thank you.
We have your next question from Duane Pennyworth, we'd Evercore ISI your lines open.
Hey, thanks.
So I guess drawn on a lot of the previous questions as you think about the four Q.
Starting week and finishing strong can you just comment on the opportunity to improve RASM sequentially because.
It feels like the peak is is very strong northeast, Florida, and maybe I'm just whining here a little bit I don't I don't know that I've ever seen it.
This so so can you just say like again, you've got decent momentum an ancillary.
And we're going to finish strong here so is sequential improvement in RASM off the table.
Duane Nathaniel no absolutely not weeks.
We believe we believe we we believe I believe we can see sequential improvement. The challenge is Jimmy alluded to earlier is that we went into that we went into the quarter with a lot of bookings driven in the bottom of it.
The bad part of the Delta.
Spike, but we are seeing.
We are we are seeing improvement so over overall overall, we expect to see the trajectory continue it's going to probably be slight because of the impact of it because of the impact of adult or aren't because of how that impacted impact at the beginning of the quarter, but yes, it's continuing to improve.
And we expect.
And is Barrett said, we expect a lot of others for future sales future travel until we expect that we've spent not improvement as the portrait goes on them expect we expect to have been proven to continue into 2022 with fire was highlighter yep.
Yep, that's helpful and then on.
Again, given given just the timing and the rhythm of how we started the quarter, maybe just a little bit hard to measure but.
You made a bit of a pushing on international.
Can you talk.
High level, how the unit unit revenue profile of the international New markets.
Impairs to domestic new markets.
We're saying look we're starting a lot of new international amongst for the fourth quarter right around right around now so they're just starting on those as in any market. There was there was ramp.
But what we're seeing is demand is built demand as building each week for these international markets with same strong Lisa demand for the peaks.
What we've source continued strength, obviously in Cancun led us to announce more Kan Coon service for winter, which starts in December and January and was in good singularly trends on those on those new markets as well, we're very comfortable with how we have deployed our international capacity. This winter.
Okay and then.
Certainly appreciate.
Some of the inflationary commentary in airports et cetera, which.
We can't call it a dead horse at this point across the industry, but.
Certainly add a lot of questions around that.
Just just to come at it maybe a little bit differently as.
As you look across your groups and your vendors are you seeing any relief on labor availability, yet any changes on that front.
To the better.
Yeah.
Think that we've definitely seen that I'm actually going to X jig filing that talk a little bit.
He is responsible for our airports, where we had the most acute challenges of object want us to talk a little bit about what we're seeing now.
Yeah, we've had we've seen a material change in our retention.
Tricia and rates.
If you look at year to date through June and then year to date through September October.
We've seen across the network really improvement across the board in attrition rates coming down.
Lot of that is due to we've done targeted way.
Which increases at the city level.
And those have been very effective.
Okay. Thank you.
Thanks Duane.
We have your next question from Jamie Baker with J P. Morgan your lines open.
Hey, good afternoon, everybody must.
Most of my questions have been addressed but.
Try this one on so in response to hire fueled the levers wouldn't normally thinks about are tightening up capacity trying to push up yields just stating the obvious.
I'm curious, though as a smaller entity and specific to recapturing fuel is it possible to think outside of the box.
Ever sit around and throw around I don't know different pricing ideas internally, maybe reducing the booking window something like a few clubber.
Selling advance tickets without fuel included and then rerunning the car down the road I'm only asking because you are small you are nimble and it seems like most of the industry evolution has come from smaller airlines.
A simple no will suffice speed tickets to goof you have a question.
Well I couldn't answer no that would be incorrect.
Ben.
Spend a lot of time on this.
In fact.
We're sitting here laughing because there's a whiteboard that has some notes from a week or two ago late and they were talking about some of these various things in the room. We're in so.
Look.
First of all we get 100 miles per gallon.
Per seat and if you just do the math on that roughly a thousand miles the about 12 gallons and you're 80 percentiles load factors 12 gallons field.
So just do the math, the two and a half box 30 Bucks and fuel we think about this all the time, but when you look at the broader industry, especially the big four they need like 35, 40% more I think on average so just do the math they need about 20 gallons so right out of the gate.
We've got eight gallons two five bucks. That's the that is the differential in the past advantage that we have versus them the industry needs that full amount of money and we only need a portion of it so that gives us a unique position, where we're kind of structurally hedged against them, but we're not immune to economic pressures and.
I will tell you we have like I said earlier, we are revenue management team is acutely aware of the price of gas they fill up their cars too so.
We've been watching it and I will start with where it's $63 on the non ticket moving to 65 by 2023, if you do the math on that and you look at the increase versus what we paid in 2019 that will largely cover the field. We're looking at other ways to make sure that the non ticket plus other fair initiatives brings our total revenue per passenger.
Mostly are RASM to ensure that at some point in the very near future. If these fuel prices stay at these elevated levels that we can cover it.
Okay very thorough thank you Bury and then a second and then it's just because it feels like to call is winding down, but I understood and may given the IPO timing, but is there any internal consideration to pulling the reporting date forward a little bit I'm just thinking about.
The periods when investors are most focused on the airlines.
It just doesn't feel like the second week of November at that period small knit.
Yeah.
Jamie Jimmy here.
Hope you are doing well.
Our anticipation is that we report at least a week earlier all the way through next year.
There were some internal reasons why we were reporting this late in the previous quarter. We were I think we were around the third of August so.
So we would expect to report at least a week earlier than this going forward. It's just that we just have an anomaly this quarter.
Understood. Thanks for the thorough answers appreciate it guys ticket.
Thanks, Jamie sorry, if it meant of travel scheduled no no not at all I'm thinking about to get attention, but I won't frontier to get and it's just.
It can be tough to breakthrough on People's calendars, a lot of outsiders are knee deep in other sectors right now and it's just sometimes.
Sometimes we can get to know how to get me Sienna.
I was T Z Jamie did get it.
No worries take care.
We have your next question from miles Walton with UBS. Your line is open.
And Thanksgiving.
Maybe pick up a little bit on the detail of the fuel efficiency that you've been talking about the 100 gallons excuse me 100 100.
Essence per gallon.
That's down about 4% year on year, largely because it stays like that would get the 321 Neil comes in the second half of next year, what should we be thinking about for fuel efficiency gains as you look into 22 versus versus 21 and is that a trend and can use going forward it's fleet.
<unk> even levels, so I'm not looking at the actual I think you may be comparing to when we had some of the 320 one's parked possibly last year.
2000 see US yeah, maybe some of the <unk>. So I think look our run rate for our fleet. If we've got it fully operational is right around 100 miles per gallon.
So so it's I think there could have been a mix when we're looking at some of the historical through the pandemic. In fact for example in the heart of the pandemic. We had all the 21 is actually part which are very efficient in addition to the news.
Did you go to the next year is it a couple of points.
Honestly I just asked what Barry, saying like if you looked at frontier Freak.
<unk>, we were doing about 97 miles per gallon.
Where have close to 100 now obviously, it's hotter in the summer so sequentially, it's a little bit lower mobiles earlier in the year.
Do you expect to see somewhere between one and 2% 1% largely over the next three or four years inefficiency that comes into the queue.
So that's really what you see it's.
It's not going to be 234%, you've got two thirds of the fleet now.
Operated as a 300000 years.
You then see the introduction of the 321, Neal, which gives you an improved efficiency, but it's in the kind of just above 1%. So.
And to give you a specific models the 321 neo when we bring that in next year with our configuration is going to have approximately 110 miles per gallon plus eat so it's pretty good step function change and as we flow those through the business. That's why Jim He's talking about gaining 1% to 2% a year, it's just math because.
You are bringing in again, the most efficient aircraft we've ever had.
Got it and then the other thing.
Maybe.
Polka on a little bit to ask the question it sounds like you're pointing more to the corporate reopening is sort of the next leg of recovery.
And I am curious if we can we completely separated from case counts.
Sounds and.
<unk> levels in the magic till coming through and really the next leg is going back to the office somehow spring.
Your network as well as everyone else's.
Well, it's such as that right. It's when people sit around their house when they're not in their office. They don't travel as much in general even further on their own dime.
But I'm just saying in general you need forget for midweek travel for obviously, you need you need any business travel to take place but.
But I think it's a convergence of many issues. That's a structural one when people are not back in their offices. These are a lot of the same people who travel and so that is a drag on the industry. The international has been a drag there is still some drags and there's.
There's more and more positive announcements on this every day.
But getting a PCR test to go to an international destination is not only.
Kind of a pain and time consuming it's expensive and if you've got a family of four and you're spending a couple of hundred bucks each to do that that's a drag on international leisure travel. So so you've got that you've got the pills you've got you've got just several things a whole litany of it that points to you're going to have a lot better demand.
As we turn the clock and the calendar in the next year.
And then I don't think we're already seeing right. So so that's additive.
Thanks again.
We had your next question from Mike Lindenberg with Deutsche Bank Your lines open.
Yeah good.
Good afternoon, everyone, Hey, Jessie.
Counterpoint on Jamie's that comment I actually appreciate the fact that you guys go this late in the quarter, because it's like a mid quarter update and I think the last quarter, Barry when you're out kind of giving us an update and how things had materially worsen since everybody else had reported so it was nice to kind of get that information in real time, so definitely the counter.
Point, there, but at the end of the day I guess when they get to do what's right for you guys.
Just jumping over to a question here.
When I look about at how you've done.
Operationally.
Definitely outperformed.
Your peer group. Despite the fact that you guys have been adding back a decent amount of capacity and maybe some of it is that you got out in front of the whole vaccine mandate.
I think that that's somewhat of an Untold story you guys were early with United and I believe Hawaiian.
But as you think about growing the business.
What what's the right number like how many domus styles do you have now how do you think about pilots flight attendants aircraft per domicile, what what's the appropriate number that will allow you to continue to put up good numbers.
So.
In that so so operational design is a big is a big thing that what we do in fact, our head of network.
Is is.
His title is not not just network, but.
His his title as the network and operational designs and we spend a lotta time looking through what drives her liability. Our mission is low fares done right.
Look at things the cause challenges to reliability, we look at things that have caused controllable cancellations in the past and we've looked at the maintenance that it takes to support that the crew that it takes a sports and then the actual schedule construction and so the first thing that's probably and it was almost a requirement to be nimble through COVID-19, we had been worker.
For years to move to a more modular network and what we mean by that is that we are largely out and back with the majority of our trips being less than two days from a crew perspective, having three and four day trips, especially during thunderstorm seasons are are snow seasons, it's nearly impossible for them to not run into some.
The weather and.
A multi day sequence. So we have moved to.
Preferring out and backs that has been necessitated the need to have eight operational crew bases across our system.
A little more than which is a little more than many other carriers, maybe our size would have but we've made that investment effectively in excess reserve costs, because you have to have reserves and each a minimum amount of reserves on those basis, but we believe that that resiliency pays off and strong reliability.
And then when you think about the maintenance.
That footprint, we constantly debate this a lot and we're looking through right now what is the best way to make that efficient as we continue to grow we've looked at more mechanics and more parts in more places or do you do the work and more concentrated places.
And we will see how that sorts out, but we're trying to make sure that we offer the safe reliable operation at the lowest cost possible and while we're not perfect. I think we put together pretty good recipe and I think this year, we were probably paranoid early on about the labor shortages and I think we did a fantastic job. If you go kind of March April may.
And I think we were ahead of the curve and then and then what we didn't realize as the entire rest of the country not just airlines, but restaurants and everybody was going to try to hire everybody in the month of June.
And so kind of proud that last 10% to 15% of hiring was a challenge.
And so now I think the vaccine mandate that you have today.
Oh, you should just put out the final one so you've got some that are required to be vaccinated and then you have large employers 100, plus that are vaccinate or test, which we fall in the second category because we are not a government contractor and so so we're working through that there is 400 and some odd pages of rules, we're going to make sure that we're compliant with that and.
That goes into effect I think January 4th and we are working through the process right now to make sure that we're fully compliant.
But we run a safe and reliable operation and we'll do everything we can to do it in a smart and component way, great and just as if I could just super helpful. Very if I could just sit in a quick one here to Daniel and maybe this is just sort of a little bit of a follow up on saw these question I mean again I look at the stats and.
You are ancillary is up 11% on a year over two year basis, you're departures that I should excuse me your stage length is down 7%. So when I, usually think about stickiness of ancillary usually the longer the hall.
The more likely you're going to you're going to get that people to buy up for the extra comfort and I'm just curious.
As you move into international and I realize it's early are you anticipating a higher take right on an ancillary as you move into some of these international markets any thoughts on that and thanks for taking the questions.
Absolutely.
Very clearly answer the first part there's a lot less relationship with overall between state between stage longtime slow rhythm resting stage level.
There are different things with it but.
But if we look at international we do have experience, we do have experience in international markets.
Obviously, we have long experience in both Franklin in Tacoma.
And yes, we do yes, we do we do see we do see more of the premium Lisa tradeoff behavior is that the behavior were describing for the overall system. This summer we tend to us that we tend to see more of that premium that premium trade that we do we do see until we products performing better it's a different.
Partly different customer mix it so slightly different hopes of travel mix on it does tend to what well.
Very good thanks, Daniel Thanks, Barry Thanks, everyone.
Thanks, a lot we have we have your next question.
Question from Steven Frank with CD your lines open.
Thank you operator.
Afternoon, gentlemen, thanks very much for taking my question most of my questions also answered.
And Mr. Lindenberg beat me to it to ask about your crew stations, but.
Curious when do you think about.
Frontier is really had very little incremental that addition, during the pandemic versus most of your peers when you're thinking about coming out of the other side as many of your competitors are paying down debt.
What do you see in terms of the opportunity to.
Push the envelope.
In terms of being agreeing airline I think a lot of people.
Love Your honor then animal.
<unk> on the planes and what have you and all you guys.
Guys thinking high level about sustainable aviation fuel more aggressively or are taking the next step.
And cutting their climate footprint with.
The wiggle room, you guys will have versus others.
<unk>.
Like going on there maybe we will follow up if you.
You had a deck question there let me start with the Green look where America's greatest airline we've got 100 miles per gallon proceed.
And we've got a really good lead with the youngest fleet in America highest concentration of new generation 820, Neo family aircraft really proud of our position and I know, there's lots to talk about sustainable aviation fuels and and we are interested and intrigued by it but you know a lot of people talk about 2050 and if.
You really excited even about 2030, if you get if you get really excited about 30% to 50%.
No reduction in C O two.
Great News you could fly frontier today, you don't have to wait 10 to 20 years to get it from a lot of the Greenwashing people across this industry around this globe and so sustainable aviation fuel as an excuse to not.
Reduce remember, it's reduce reuse and recycle and where we are today as we are in the unique position that we offer consumers the ability to save the planet and save money at the same time, which gives you kind of ESG without compromise and as far as the debt.
I'm not sure I understood. What you were talking about the debt versus everybody else, but Jimmy is intriguing staring at the phone.
Steve and I hope, you're feeling well.
We're very proud of the fact that we've managed through COVID-19 without adding substantial debts of the business.
We talked about this in the IPL and I've talked about a sense and we added about one dollar a passenger that are as the rest of the industry.
Approximately $20 per passenger when you're almost amortize their death and then they have service that over or next five five years or so so our objective at the moment is to actually clear at the government loan and pay it down.
And that puts us in a very very good and unique position across the industry.
And then one of the things that we've learned through through the Covid process is the value that's inherent in the the loyalty program that we have on our brand assets.
And that puts us in a really really strong position from a balance sheet perspective and the airline.
As your immersion cove, not having tapped out liquidity too.
To bolster your balance sheet.
Operate through through through the pandemic and so our anticipation is you get to a sustained recovery gift.
Get back to cash flow strong cash flow generation as you progress through 2022 and that puts us in a really strong positions grow this business.
Super helpful really appreciate the color guys. Thank you.
Sure.
We have your next question from Andrew The dollar Bank of America Your lines open.
Hey, good afternoon, everyone. Just two quick ones from me I guess first sorry.
Do you have a sense of what percentage of your passengers connected on to you from an international destination pretend dunnock I'm, just trying to get a sense of what the easing of these international restrictions could could mean for you.
So internet I am sorry international from other metal of another airline or international on us.
From another airline.
This is Daniel it's a tiny tiny tiny number of customers at all.
On balance is it marginally helpful. As it marginally helpful. It's very marginally helpful. But it's not it's not meaningful to us in any way.
Got it.
Makes sense.
So we wanted to clarify what did you say I would just add on the international the average consumer I mean, we all followed every day, but getting rid of these restrictions across the board is good for all international whether it be mirror mirror international wide body long haul when people are confused especially less sophisticated.
Dated leisure travelers. They just stay away so getting all these restrictions remove is good for all types of air travel.
Right I.
I hear you.
Sorry, just clarification.
From your early earlier commentary revenues getting back to 2019 levels by the spring did you mean total company revenues back by the spring or were you talking about unit revenue a revenue per passenger metric. Thanks.
Ah RASM.
Unit revenue right Okay.
Okay. Thank you.
We have your next question from Queens. These steps alone since Gehenna your lines open.
Good evening, Thanks for taking my question so two questions both around RASM.
The first so the comment that you expect to be profitable.
The spring.