Q4 2023 Frontier Group Holdings Inc Earnings Call

Yeah.

Okay.

Operator: Good day, and thank you for standing by. Welcome to the Frontier Group Holdings, Inc. fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.

Good day and thank you for standing by welcome to the Frontier Group Holdings, Inc. Fourth quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you will need to.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Erdman, Senior Director, Investor Relations. Please go ahead.

Press Star one on your telephone you will.

Then here an automated message advising your hand, just raised to withdraw your question. Please press star one again please.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, David Erdman Senior Director Investor Relations. Please go ahead.

David Erdman: Thank you. Good morning, everyone. Welcome to our fourth quarter 2023 earnings call. Today's speakers will be Barry Biffle, Chief Executive Officer, Jimmy Dempsey, President, and Mark Mitchell, Chief Financial Officer. Each will deliver brief prepared remarks, and then we'll get to your questions. During today's call, we will be presenting supplemental materials which can be viewed on the webcast platform using a PC or a smartphone. If you're not accessing the call from either, or if technical issues arise, you can follow along by downloading the presentation from our website at ir.flyfrontier.com under events and presentations.

Thank you good morning, everyone welcome to our fourth quarter 2023 earnings call. Today's speakers will be Barry before Chief Executive Officer, Jimmy Dempsey, President and Mark Mitchell Chief Financial Officer.

Each will deliver brief prepared remarks, and then we'll get to your questions.

On today's call, we will be presenting supplemental materials, which can be viewed on the webcast platform with a PC or a smartphone if youre not accessing the call from either or technical issues arise that you can follow along by downloading the presentation from our website at IR Dot fly frontier Dot com backslash events and presentations.

Before yielding let me quickly review the customary safe Harbor provisions, which are included on slides two and three.

David Erdman: Before yielding, let me quickly review the customary Safe Harbor provisions, which are included on slides 2 and 3. 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 is outlined in the announcement we published earlier, along with reports we file with the FBI. We will also discuss non-GAAP financial measures which are reconciled to the nearest comparable GAAP measure in the appendix of the earnings announcement and in the presentation supplementing that.

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 published earlier along with reports we file with the SEC.

We will also discuss non-GAAP financial measures, which are reconciled to the nearest comparable GAAP measure in the appendix of the earnings announcement and in the presentation supplementing this call.

Barry Biffle: I'll now yield the floor to Barry to begin his comments. Thank you, David, and good morning, everyone. Before beginning the brief slide presentation, I'd like to quickly recap the fourth quarter results. We generated a pre-tax margin of nearly 1% for both the fourth quarter and the full year. Our fourth quarter results significantly outperformed guidance on strong operational performance and cost execution, with our CASM-excluding fuel 8% lower than the prior year quarter. We achieved a 99.5% completion factor on industry-leading average system utilization of 11.3 hours during the quarter, and the highest on-time arrivals and departures for the month of December since 2015, excluding the year 2020. Our operational performance during the December to January holiday season was also notable.

I'll now will yield the floor to be to Barry to begin his comments spirit.

Thank you David and good morning, everyone.

Before beginning the brief slide presentation I'd quickly I'd like to quickly recap the fourth quarter results, we generated a pre tax margin of nearly 1% for both the fourth quarter and the full year, our fourth quarter results significantly outperformed guidance on strong operational performance and cost execution with our CASM, excluding fuel, 8% lower than the prior year quarter.

We achieved a 99, 5% completion factor on industry, leading average system utilization of 11 three hours during the quarter and the highest on time arrivals and departures for the month of December since 2015, excluding pandemic your 2020.

Our operational performance during the December to January holiday season was also notable we had 15% more departures in the prior year holiday season, making it our busiest in airline history and.

Barry Biffle: We had 15% more departures than the prior year holiday season, making it our busiest holiday season in airline history. In addition, our completion rate and on-time arrivals and departures during the holiday period all ranked as our best post-pandemic performance. I want to take a moment to thank all of Team Frontier for producing such great results and taking care of our customers. While I'm pleased with the operational performance and that we generated a positive pre-tax margin for the fourth quarter and full year, I'm disappointed in the absolute result.

In addition, our completion rate and on time arrivals and departures during the holiday period, all ranked as our best post pandemic performance I want to take a moment to thank all of team frontier for producing such great results and taking care of our customers.

While I'm pleased with the operational performance and then we generated a positive pre tax margin for the fourth quarter and full year I am disappointed in the absolute result, we are therefore focused on taking meaningful steps to address the challenges that impacted our results during 2023.

Barry Biffle: We are therefore focused on taking meaningful steps to address the challenges that impacted our results during 2023 and on returning to double-digit margins. Turning to slide five, one of the largest challenges many low-cost and ultra-low-cost carriers faced in 2023 was the industry's oversupply of capacity in leisure markets, with Las Vegas and Orlando being two significant examples. Both markets have experienced rapid and disproportionate growth compared to 2019 when demand and capacity were far more balanced. As total U.S. domestic capacity increased just over 4% since 2019, total industry capacity in Las Vegas and Orlando grew by a combined 20% and is expected to continue to grow in 2024 based on current published schedules. This has resulted in a relative rasm and margin headwind for many LCCs and ULCCs, and Frontier is no exception. On slide six, no one's more aggressive and engaging in self-help to address overcapacity in leisure markets than Frontier.

On returning to double digit margins.

Turning to slide five one of the largest challenges many low cost and ultra low cost carrier space. In 2023 was the industry's oversupply of capacity and leisure markets with Las Vegas, and Orlando being two significant examples both markets have experienced rapid and disproportionate growth compared to 2019, when demand and capacity were far more <unk>.

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As total U S domestic capacity increased just over 4% since 2019 total industry capacity in Las Vegas, and Orlando grew by a combined 20% and are expected to continue to grow in 2024 based on current published schedules. This has resulted in a relative RASM and margin headwind to many lcc's and ULC CS and frontier is no exception.

On slide six.

No one is more aggressive and engaging in self help to address overcapacity in leisure markets and frontier.

Barry Biffle: By summer, we plan to reduce our Las Vegas and Orlando combined capacity by 11 points of our system share year-over-year, reducing the share of these markets by one-third. But to be clear, we're not retreating from our network footprint in either market. We are merely cutting what we believe is marginal unprofitable flying to return both bases to a rational optimal position for our cost structure and remain the low-cost leader in both markets. Turning to slide 7.

By summer, we plan to reduce Las Vegas, and Orlando combined capacity by 11 points of our system share year over year, reducing the share of these markets by one third to be clear, we're not retreating from our network footprint in either market. We're merely cutting what we believe is marginal unprofitable flying to returned both basis to a rational options optimal.

Position for our cost structure and remain the low cost leader in both markets.

Turning to slide seven.

Barry Biffle: Our network growth in 2024 is focused on exploiting higher fares for visiting friends and relatives. The market mix of routes by this summer will increase industry average fares in those markets by 5% year over year. Not only are we chasing higher fair markets, but the total revenue pool of industry revenue in our network this summer will be up over 50%, despite only growing capacity 12 to 15 percent, meaning we need a much smaller share of industry revenue, which is extremely constructive for increasing RAS. Additionally, the historical data suggests BFR routes tend to ramp up quicker and reach maturity sooner than leisure routes. Turning to slide 8.

Our network growth in 2024 is focused on exploring higher fare visiting friends and relative markets. The market mix of routes by this summer, we'll increase industry average fares in those markets by 5% year over year.

Not only are we chasing higher fare markets. The total revenue pool of industry revenue in our network. This summer will be up over 50%.

Despite only growing capacity, 12% to 15%, meaning we need a much smaller share of industry revenue extremely constructive for increasing RASM. Additionally, the historical data suggest VFR routes tend to ramp quicker and reached maturity sooner than leisure routes.

Turning to slide eight.

Barry Biffle: Another significant challenge we faced last year was the extended ATC ground delay programs, which negatively impacted our completion factor and utilization, particularly during the summer. To address this, we are executing on the network simplification strategy that we discussed on our last earnings call, with a focus on increasing the percentage of aircraft that return to base nightly to greater than 80% by peak summer this year. We expect this strategy to enable expanding our industry-leading utilization and improve reliability. The key element of our plan is leveraging our 13 crew bases, including our recently announced crew bases in Cleveland, Cincinnati, Chicago, and San Juan, Puerto Rico.

Another significant challenge we faced last year was the extended ATC ground delay programs, which negatively impacted our completion factor in utilization, particularly during the summer peak to address this we are executing on the network simplification strategy that we discussed on our last earnings call with a focus on increasing the percentage of aircraft that returned to base nightly to greater than 80%.

By peak summer of this year, we expect this strategy to enable expanding our industry, leading utilization and improve reliability.

A key element of our plan is leveraging our 13 crew basis, including our recently announced crew bases in Cleveland, Cincinnati, Chicago, and San Juan Puerto Rico.

Single day trips flown from our crew basis support operational reliability, recoverability and higher fares.

Our relative cost advantage to the industry outlined on slide nine is a key factor in our ability to stimulate demand with low fares and an increased to over 40%. In 2023. We believe unit cost leadership is fundamental to our long term profitability and expect frontier will remain the lowest unit cost provider in the United States.

Barry Biffle: Single-day trips flown from our crew bases support operational reliability, recoverability, and higher fares. Our relative cost advantage to the industry, outlined on slide nine, is a key factor in our ability to stimulate demand with low fares and increase them to over 40% in 2023. We believe unit cost leadership is fundamental to our long-term profitability and expect Frontier to remain the lowest unit cost provider in the United States, particularly as significant cost savings materialize from our network simplification strategy. We expect that our network simplification strategy will underpin the $200 million of associated annual run rate cost savings, which should be implemented by the end of 2024, as we highlighted in our third quarter. In addition, our order book is heavily weighted to the high-gauge A321neo, which will contribute meaningfully to our ability to control costs as we continue to increase gauge.

Particularly as significant cost savings materialized from our network simplification strategy.

We expect that our network simplification strategy will underpinned the $200 million of associated annual run rate cost savings, which should be implemented by the end of 2024 as we highlighted on our third quarter earnings call.

Further our order book is heavily weighted to the high gauge <unk> hundred 21, neo which will contribute meaningfully to our ability to control cost as we continue to increase gauge.

Accordingly, we expect 2024, adjusted CASM ex fuel to be down 1% to 3% on a stage adjusted basis to 1000 miles.

As highlighted on slide 10, we plan to leverage our network product brand and distribution to diversify our revenue and drive sequential RASM improvement.

I've spoken extensively about network enhancements, so let's briefly review the latter initiatives.

Last week, we launched our innovative <unk> product to cater to cost sensitive small business travelers, while providing a premium experience for one low price we've rebranded our stretch product to promote our premium economy seating starting at $19 consistent with our recent launch of our get it off for less campaign.

Barry Biffle: Accordingly, we expect 2024 Adjusted Chasm X-Fuel to be down 1-3% on a stage-adjusted basis to $1,000. As highlighted on slide 10, we plan to leverage our network, product, brand, and distribution to diversify our revenue and drive sequential RASM improvement. I've spoken extensively about network enhancements, so let's briefly review the latter in this. Last week, we launched our innovative BizFairs product to cater to cost-sensitive small business travelers while providing a premium experience for one low price. We've rebranded our Stretch product to promote our premium economy seating, starting at $19, consistent with our recent launch of our Get It All for Less campaign.

As we showcased last quarter, our relaunched frontier miles program features enhanced elite status tiers that can be earned faster and offers the highest credit card spend based travel rewards earned rate in the industry for each dollar of spending with the frontier Barclays Mastercard.

Our new website, and new mobile App as well as in D. C are expected to launch by late 2024, and should provide significant distribution merchandising and conversion benefits as well as improved brand positioning.

Further we've seen competitive overlap proceed in recent months to the extent carriers further engage in capacity rationalization. This would drive additional unit unit revenue benefit to frontier, which would be accretive to our guide. However, we've only included the published reductions in our base case.

On slide 11 network cost and revenue initiatives are expected to drive profit and growth in the business we.

We expect our pre tax margin for the full year 2024 to be in the range of 3% to 6% with capacity growth of 12% to 15% and adjusted CASM ex down 1% to 3% on a stage adjusted basis to 1000 miles.

Barry Biffle: As we showcased last quarter, our relaunched Frontier Miles program features enhanced elite status tiers that can be earned faster and offers the highest credit card spend-based travel reward earn rate in the industry for each dollar of spending with the Frontier Barclays Mastercard. A new website, a new mobile app, and NDC are expected to launch by late 2024 and should provide significant distribution, merchandising, and conversion benefits, as well as improve brand position. In addition, we've seen competitive overlap recede in recent months. To the extent carriers further engage in capacity rationalization, this would drive additional unit revenue benefits to Frontier, which would be accretive to our guide. However, we've only included the published reductions in our base, Slide 11. Network, Cost, and Revenue Initiatives are expected to drive profit and growth in the business.

First quarter 2024 guidance is reflective of seasonality in off peak dynamics expected during the quarter. Our guidance is based on fuel pricing as of February 2nd.

Turning to the final slide.

With full year benefit of our network cost and revenue initiatives, we expect $2025 to be between 10 and 14% pretax margins. This includes the expectations of new labor agreements with pilots and flight attendants as both recently became amendable that concludes the slides presentation and I'll now hand, the call over to Jimmy for a commercial update.

You Barry and good morning, everyone fourth quarter revenue was $891 million, reflecting RASM of $8 nine down 15% on 15% capacity growth.

An 8% decrease in average stage length. This.

This represents a four point year over year sequential improvement from the third quarter driven by stabilizing demand trends as we enter into 2024, we are now seeing improving revenue trends better than our earlier expectations and see positive momentum as we transition to our new network and deliver on multiple revenue initiatives, we expect the revenue trends.

Barry Biffle: We expect our pre-tax margin for the full year 2024 to be in the range of 3-6%, with capacity growth of 12-15%, and adjusted CASMX down 1-3% on a stage-adjusted basis to 1,000 miles. First quarter 2024 guidance is reflective of seasonality and off-peak dynamics expected during the quarter. Our guidance is based on fuel pricing as of February. Turning to the final slide.

We continue to show positive year over year sequential improvement.

We carried a record $8 1 million passengers during the quarter with a 99, 5% completion factor as well on time arrivals and departures in December were our highest since 2015.

Excluding the pandemic year of 2020 during.

During the quarter as Barry mentioned, we made steady progress toward our objective to increase the percentage of urban box line, including the announcement of four new crew bases of Cleveland, Cincinnati, Chicago, and San Juan Puerto Rico. The Cleveland base is expected to open in March and will employ 110 pilots and 255 tenants in its first year. The Cincinnati basis is scheduled to open in.

Barry Biffle: With the full year benefit of our network, cost, and revenue initiatives, we expect 2025 to be between 10 and 14% pre-tax margin. This includes the expectations of new labor agreements with pilots and flight attendants, as both recently became amendable. That concludes the slide presentation, and I'll now hand the call over to Jimmy for a commercial update. Thank you, Barry, and good morning, everyone. Fourth quarter revenue was $891 million, reflecting RASM of 8.9 cents, down 15% on 15% capacity growth and an 8% decrease in average stage length.

May and will employ 80 pilots and 160 flight attendants, while the Chicago base will serve both O'hare and midway unemployed 110 pilots along with 200 flight attendants already base there.

Finally, San Juan will be our 13th crew base and will employ 90 pilots into <unk> in its first year.

We've been the fastest growing airlines in Puerto Rico more than doubling seat capacity since 2019, and offering <unk> 14, non stop routes from San Juan alone, Puerto Rico is playing a key role in our Caribbean and Latin America growth strategy, not only because it is a popular tourist destination, but large populations of Puerto Rican reside in the U S mainland and they frequently traveled to the island to visit friends and family.

Or to work remotely frontier is well situated to capture a disproportionate share of this volume as we now serve more routes to Puerto Rico from the U S than any other carrier.

Jimmy Dempsey: This represents a four-point year-over-year sequential improvement from the third quarter, driven by stabilizing demand. As we enter into 2024, we are now seeing improving revenue trends, better than our earlier expectations. We expect the revenue trends to continue to show positive year-over-year sequential improvements. We carried a record 8.1 million passengers during the quarter, with a 99.5% completion rate. As well, on-time arrivals and departures in December were our highest since 2015, excluding the pandemic year of 2020. During the quarter, as Barry mentioned, we made steady progress toward our objective to increase the percentage of out-and-back flying, including the announcement of four new crew bases at Cleveland, Cincinnati, Chicago, and San Juan, Puerto Rico. The Cleveland base is expected to open in March and will employ 110 pilots and 250 flight attendants in its first year.

Moreover, we recently announced a significant expansion of our network as part of our strategy to grow in higher fare routes. During the second quarter, We launched nonstop service from 38 airports with our largest concentration of routes and visiting friends and relatives markets from Dallas forth Worth Charlotte Raleigh, Durham, Los Angeles, New York, Minneapolis, St Paul and sidewalk fine.

Early last month, we officially launched our re imagined frontier miles loyalty program and we're seeing positive trends memberships and engagements, particularly at elite levels have increased we have also observed observed improved spend on the Cobra around credit card. In fact December spend was over 10% Europe was up over 10% year over year.

And was the highest level on record.

While it's still early we expect to see continued improvement in spend throughout 2024.

That concludes my remarks, so ill yield the call to Mark.

Thank you Jimmy we generated a pretax margin of 0.7% on a GAAP basis, and <unk>, 8% on an adjusted basis in the fourth quarter, well above our guidance range on solid operational performance as Barry touched on earlier and costs related factors as a result of our fourth quarter performance.

We also generated a pre tax margin of <unk>, 9% for the full year.

Jimmy Dempsey: The Cincinnati base is scheduled to open in May and will employ 80 pilots and 160 flight attendants, while the Chicago base will serve both O'Hare and Midway and employ 110 pilots along with 200 flight attendants already based there. And finally, San Juan will be our 13th crew base and will employ 90 pilots and 200 flight attendants in its first year. We've been the fastest-growing airline in Puerto Rico, more than doubling its sea capacity since 2019, and offering 14 non-stop routes from San Juan alone. Puerto Rico is playing a key role in our Caribbean and Latin America growth strategy, not only because it's a popular tourist destination, but large populations of Puerto Ricans reside on the U.S. mainland, and they frequently travel to the island to visit friends and family or to work remotely.

Total revenue was $891 million down 2% compared to the 2022 quarter fuel expense was roughly in line with the prior year quarter as the 12% benefit from lower fuel prices and 3% improvement in our industry, leading fuel efficiency to a 105% ASM per gallon with us.

That by the increase in consumption from capacity growth of 15%.

Fuel expense for the quarter reflects an average cost per gallon of $3 18.

Which was slightly below the low end of our guidance range at.

Adjusted non fuel operating expenses in the fourth quarter totaled $590 million or five nine per ASM, 8% lower than the prior year quarter the improvement.

<unk> and adjusted CASM, excluding fuel was driven by a $36 million lease return cost benefit during the quarter from the execution in December of an extension of four <unk> hundred 20 aircraft leases that were otherwise scheduled to return in 2024.

Moving forward, we will continue to be opportunistic with our fleet management, including attractive aircraft lease extension opportunity.

Jimmy Dempsey: Frontier is well situated to capture a disproportionate share of this volume as we now serve more routes to Puerto Rico from the U.S. than any other carrier. Moreover, we recently announced a significant expansion of our network as part of our strategy to grow in higher-fare routes. During the second quarter, we launched non-stop service from 38 airports with our largest concentration of routes in the visiting friends and relatives markets from Dallas-Fort Worth, Charlotte, Raleigh-Durham, Los Angeles, New York, Minneapolis-St. Paul, and San Juan.

Our adjusted non fuel operating expenses also benefited during the quarter from efficiencies realized across the business given the strong operational performance and our continued focus on costs.

While our fourth quarter pretax income was $6 million, we generated a net loss of $37 million driven by the recognition of a $37 million noncash valuation allowance against our U S Federal and state net operating loss deferred tax assets, which wasn't contemplated in our effective tax rate.

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Our adjusted net income of $1 million for the quarter excludes this adjustment as it is a significant special noncash items.

Jimmy Dempsey: Finally, early last month, we officially launched our reimagined Frontier Miles loyalty program, and we're seeing positive trends. Memberships and engagements, particularly at elite levels, have increased. We have also observed improved spend on the Cobra brand credit card. In fact, December spend was up over 10% year-over-year and was the highest level on record.

Important to note that these Nols generally don't expire and can therefore continue to be used against future taxable income given our full year adjusted pre tax guidance of 3% to 6%. We presently expect to utilize a substantial portion of Nols this year.

Any corresponding reversal to this adjustment as we generate taxable income would also be excluded for non-GAAP purposes.

Jimmy Dempsey: While it's still early, we expect to see continued improvement in spend throughout 2020. That concludes my remarks, so I yield the call to Mark. Thank you, Jimmy. We generated a pre-tax margin of 0.7% on a gap basis and 0.8% on an adjusted basis in the fourth quarter, well above our guidance range on solid operational performance, as Barry touched on earlier, and cost-related. As a result of our fourth quarter performance, we also generated a pre-tax margin of 0.9% for the full year. Total revenue was $891 million, down 2% compared to the 2022 quarter. Fuel expense was roughly in line with the prior year quarter as the 12% benefit from lower fuel prices and 3% improvement in our industry-leading fuel efficiency to 105 ASMs per gallon was offset by the increase in consumption from capacity growth of 15%. Fuel expense for the quarter reflects an average cost per gallon of $3.18, which was slightly below the low end of our guidance.

We ended the year with $609 million of unrestricted cash and cash equivalents and $139 million net of total debt.

In addition, we have unencumbered loyalty and brand related assets, which we believe could generate significant additional liquidity if desired.

We had 136 aircraft in our fleet at year end after taking delivery of four <unk> hundred 21, Neo aircraft and returning to <unk> hundred 20, <unk> aircraft during the quarter, we expect to take delivery of six <unk> hundred 21 Neo is in the first quarter of 2024 and a total of 23 <unk> hundred 21 Neo aircraft and two.

<unk> thousand 24, all of which are anticipated to be financed through sale leaseback transactions.

With that I'll turn the call back to Barry for closing remarks. Thanks.

Thanks, Mark our objective for 2024 clear every member of team Frontier is focused on executing our network cost and revenue initiatives, improving our operational reliability and delivering an enhanced experience for our customers with the network growth focused on high fare VFR markets.

Alongside our commitment to remain the lowest cost provider in the United States I am confident these measures will drive higher margins in the business. Thanks, everyone for joining the call today, and we will now open up for questions.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again and one moment, while we compile our Q&A roster.

Mark Mitchell: Adjusted non-fuel operating expenses in the fourth quarter totaled $590 million, or $0.059 per ASM, 8% lower than the prior year. The improvement in Adjusted Chasm Excluding Fuel was driven by a $36 million lease return cost benefit during the quarter from the execution in December of an extension of four A320CO aircraft leases that were otherwise scheduled to return in 2024. Moving forward, we will continue to be opportunistic with our fleet management, including attractive aircraft lease extension opportunities. Our adjusted non-fuel operating expenses also benefited during the quarter from efficiencies realized across the business, given the strong operational performance and our continued focus on cost. While our fourth-quarter pre-tax income was $6 million, we generated a net loss of $37 million, driven by the recognition of a $37 million non-cash valuation allowance against our U.S. federal and state net operating loss deferred tax assets, which wasn't contemplated in our effective tax rates guide. Our adjusted net income of $1 million per quarter excludes this adjustment as it's a significant special non-cash loan.

Yes.

Thank you.

Great.

Okay.

And our first question comes from Duane <unk> of Evercore ISI.

No.

Hey, good morning.

Just on the unit cost guidance can you give us some thoughts on how we should think about stage length. This year.

Or is there a way to maybe convert the guide to kind of a nominal.

Cost guidance and just just broad strokes, what would the underlying kind of tailwind and headwinds be from out from a unit cost perspective.

So Duane I think what's important nodes are stages going down so I think to be intellectually honest. That's why we are pinning it to 1000 miles and we expect to be down 1% to 3% on a stage adjusted basis.

But we expect it to be closer to 900 for the year.

Yes, okay.

The guide Okay got it.

Yeah, No just just maybe broad strokes the underlying kind of tail.

<unk> headwinds year over year.

Yes, so when you look at that.

<unk> four for the full year I mean that is underpinned by the network simplification that we've touched on and getting our out and back flying to over 80%.

Mark Mitchell: It's important to note that these NOLs generally don't expire and can therefore continue to be used against future taxable income. Given our full-year adjusted pre-tax guidance of 3 to 6 percent, we presently expect to utilize a substantial portion of NOLs this year. Any corresponding reversal to this adjustment as we generate taxable income would also be excluded for non-GAAP. We ended the year with $609 million of unrestricted cash and cash equivalents and $139 million net of taxes.

That is going to drive the $200 million of annual run rate cost savings that we expect to have fully implemented.

By the by the end of the year. Additionally, as we go through the year.

23, aircrafts that were taking delivery of those are 321, neo so you'll continue to get the <unk>.

Gage gauge benefit there and so I think those are the main drivers of the 1% to 3% down.

And the CASM stage length adjusted.

Okay I appreciate those thoughts and then I'm sure you get the question a lot.

Barry Biffle: In addition, we have unencumbered loyalty and brand-related assets, which we believe could generate significant additional liquidity if desired. We had 136 aircraft in our fleet at year-end after taking delivery of four A321neo aircraft and returning two A320ceo aircraft during the course of the year. We expect to take delivery of six A321neos in the first quarter of 2024 and a total of 23 A321neo aircraft in 2024, all of which are anticipated to be financed through sale-leaseback transactions. With that, I'll turn the call back to Barry for closing. Thanks, Mark.

As a team maybe it's Barry maybe it's Jimmy but to.

To the extent that spirit becomes available again.

Can you just gauge your interest or to the extent you'd be attempted to reengage. There is there any price on the equity where it would make sense from your perspective, thanks for your thoughts.

Thanks, Duane is the first time I've been asked that question.

We are 100% focused on our business and delivering profits for our shareholders, So sorry, but.

We don't have anything in entertaining to talk about.

Very clear thank you.

Thank you one moment for our next question.

Yeah.

And our next question comes from Savi <unk> of Raymond James.

Hey, good morning.

I was kind of curious what your thoughts were as you cannot roll forward. This network changes.

Dwayne Fenningsworth: Our objective for 2024 is clear. Every member of Team Frontier is focused on executing our network, cost, and revenue initiatives, improving our operational reliability, and delivering an enhanced experience for our customers with a network growth focus on the high-fare VFR market. Alongside our commitment to remain the lowest-cost provider in the United States, I'm confident these measures will drive higher margins in the business. Thanks, everyone, for joining the call today, and we will now open up for questions. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again and wait for one moment while we compile our Q&A roster. And our first question comes from Dwayne Fenningsworth of Evercore ISI. Hey, good morning.

Yes.

Utilization with go and along those lines I think.

How the pilot trends are looking at in terms of being able to can meet the utilization target.

Well I'll talk about the pilots and I'll, let mark talk about utilization, but on the pilot side, we've seen a dramatic change in the marketplace I think you've seen the regionals looking at this and I think when you see the regional as being able to be staffed I think that tells you everything we know about the about the shortage of pilots. So we don't see any challenges there.

And then yes, and then relative to the utilization so in the fourth quarter. We delivered 11 three hours on a total system basis as we progress with the network simplification, we expect the utilization to increase.

As we go through the year.

And we will continue to push to drive that drive that higher.

Barry Biffle: Just on the unit cost guidance. Can you give us some thoughts on how we should think about stage length this year? Or is there a way to maybe convert the guide to kind of a nominal unit cost guidance?

I appreciate that and then if I might just a clarification question on doing.

<unk>.

So limited labor.

Cost.

Dwayne Fenningsworth: And just, just broad strokes, what would the underlying kind of tailwinds and headwinds be from a unit cost perspective? Well, so Dwayne, I think what's important to know is our stage is going down. So I think to be intellectually honest, that's why we're pinning it to a thousand miles, and we expect it to be down one to three percent on a stage-adjusted basis, but we expect it to be closer to 900 for the year. Okay.

Labor cost increases in the 2024 bed I know you mentioned it is contemplated in the 2025 outlook.

No. These just opened I know a lot of people that have been opened for multiple years are starting to include it. We didn't included in 'twenty four but we have included 25.

Thank you.

Thank you one moment for our next question.

And our next question comes from Ravi Shanker of Morgan Stanley.

Good morning, everyone. This is Katherine on for Ravi. Thank you for taking my question.

Barry Biffle: Yeah, just maybe broad stroke the underlying kind of tailwinds and headwinds year-over-year. Yeah, so when you look at that guidance for the full year, I mean, that is underpinned by, you know, the network simplification that we've touched on in getting our out-and-back flying to over 80%. You know, that is going to drive the 200 million dollars of annual run rate cost savings that we expect to have fully implemented by the end of the year. You know, additionally, as we go through the year, you know, the 23 aircraft that we're taking delivery of, you know, those are 321 NEOs, so you'll continue to get, you know, the gauge benefit there, and so, you know, I think those are, you know, the main drivers of the, you know, the 1 to 3%, you know, down, you know, in the chasms.

About six months ago at our conference you kind of talked about structural pressures from ATC and plain restrictions, which it sounds like you are expecting deliveries, but I was just curious what the lay of the land is today have those pressures eased are you trying to work around them.

Is there an opportunity for a bigger reset in the operating model to kind of deal with the current environment.

Yeah no. Thanks for the question.

We don't expect the situation to change I think the weather has been a little more kind to the industry.

But we do continue to see kind of hints of these.

Attended ground delay programs. So I think the next test is kind of Presidents' day weekend, and then you've got all the all the weekends through the spring break season, and Easter, particularly you have to watch, Florida, and what that does to ground delay programs, but we are not waiting for the situation to change to improve our our trajectory we are taking control.

Barry Biffle: Okay, appreciate those thoughts. And then, I'm sure you get the question a lot as a team, maybe it's Barry, maybe it's Jimmy, but to the extent that Spirit becomes available again, can you just gauge your interest or to the extent you'd be tempted to re-engage there? Is there any price on the equity where it would make sense from your perspective? Thanks for your thoughts. Thanks, Dwayne. It's the first time I've been asked that question. We are 100% focused on our business and delivering profits for our shareholders. I'm so sorry, but we don't have anything entertaining to talk about.

The situation and we are designing our schedule around these issues and expect them to continue through the spring and summer and when we look at last year. We added several percent of our of our flights that were canceled in the summer and the majority of those like 90% were related to multi day trips.

And so we have to change the network to ensure that we combat these challenges and overcome the reliability issues. So, but we feel really good about it because if we make everything look like the outback that we had we expect to continue to improve our reliability as we've seen in recent months.

Savvy Smith: Very clear. Thank you. Thank you. One moment for our next question. And our next question comes from Savvy Smith of Raymond James. Hey, good morning.

Barry Biffle: I was kind of curious what your thoughts were as you kind of roll forward this network change, you know, where utilization would go, and along those lines, I think, you know, how the pilot trends are looking in terms of being able to meet the utilization target. Well, I'll talk about the pilots, and I'll let Mark talk about the utilization, but on the pilot side, we've seen a dramatic change in the marketplace. I think, I mean, you've seen the regionals looking at this, and I think when you see the regionals being able to be staffed, it tells you everything you know about the shortage of pilots, so we don't see any challenges there. And then, yeah, and then relative to utilization, you know, so, you know, in the fourth quarter, we delivered 11.3 hours on a total system basis.

Got it thank you and just as a quick follow up I was curious how close in bookings are trending I know there was.

Kind of a slight drop off less labor day, so any color on what you think normal behavior might look like thanks for the questions.

Yes, Jimmy kind of alluded this will let him answer that question sure.

Like what we've seen over the last kind of four or five months as a <unk>.

<unk>.

Booking trajectory in the early part of Q4 by the end of.

Q3, and we've seen as I mentioned in the prepared remarks, we've seen a transition to an improving revenue Markus as we progress through.

Q1, and so we're actually quite encouraged by what we see.

Obviously, working very hard internally in terms of restructuring the network thus providing.

Significant.

Improvements as you progress through March April May and June.

Savvy Smith: As we progress with the network simplification, we expect the utilization to increase as we go through the year, and we'll continue to push to drive that. Appreciate that. And if I might just clarify a question on doing color, any kind of labor cost increases in the 2024 guide? I know you mentioned it is contemplated in the 2025 outlook. No, these just opened.

And also youre seeing very strong demand in the short term.

Improving close in pricing so built into our guide is a sequential improvement over the last few quarters.

On our on our unit revenues.

Thank you.

Thank you one moment for our next question.

And our next question comes from Brandon <unk> of Barclays.

Hey, good morning, everyone. Thanks for taking the question Jamie maybe if we can follow up there so I.

I would assume that you have some acceleration built into your <unk> revenue outlook is that what youre seeing in the bookings and can you compare and contrast that with Easter.

Barry Biffle: I know a lot of people that have been open for multiple years are starting to include it. We didn't include it in 24, but we have included it for... Thank you. Thank you. One moment for our next question. And our next question comes from Ravi Shanker of Morgan Stanley. Good morning, everyone. This is Catherine on behalf of Ravi.

Easter holiday timing not to be too near term here, but I guess it must be the network changes you are making that you are seeing the positive improvements is that correct.

Catherine: Thank you for taking my question. About six months ago, at our Laguna Conference, you kind of talked about structural pressures from ATC and plane restrictions, which it sounds like you are expecting deliveries of. But I was just curious what the lay of the land is today. Have those pressures eased? Are you trying to work around them?

Yes, yes.

If you look at the announcements we've made recently Youll see a big network shift happening March April May June.

And that network shift has dropped is driving significant improvements in our revenue and our revenue I'll turn like one of the things that we're focused on is entering a bigger revenue pool, but also actually in markets that have higher fares and so that is giving us.

A better revenue outcome that we're seeing across the business. It's early.

Barry Biffle: You know, is there an opportunity for a bigger reset in the operating model to kind of deal with the current environment? Yeah, no, thanks for the question. I mean, you know, we don't expect the situation to change.

The Big network shift happens during March April May and June as I said, and so we will see the progress but the early signs are very very good.

Easter comes back as you mentioned into this quarter.

Catherine: I think the weather's been a little more kind to the industry, but we do continue to see kind of hints of these, you know, extended ground delay programs. So I think the next test is kind of President's Day weekend, then you've got all the, all the weekends through the spring break season and Easter, particularly you have to watch Florida and what that does to ground delay programs.

And we've got to deal with that overall, that's positive for this quarter. Obviously, it's out of April but we think some of the changes, we're making actually will drive longer term.

For for growth in the business, particularly around utilization off peak periods, where we're entering more VFR markets.

So.

And I guess anticipated in that improvement into <unk> and <unk> just from where you are in the first quarter is more of it commercial revenue base or is it also the <unk>.

Barry Biffle: But we are not waiting for the situation to change. To improve our, our trajectory. We are taking control of the situation, and we are designing our schedule around these issues and expect them to continue through the spring and summer. And, you know, when we look at last year, we had several percent of our flights that were canceled in the summer, and the majority of those, like 90%, were related to multi-day trips. And so we have to change the network to ensure that we combat these these challenges and overcome the reliability issues. So, but we feel really good about it because if we make everything look like the out and back that we had, we expect to continue to improve our reliability as we've seen in recent months. I got it.

The patients that you are cost can come down.

And maybe a more controllable operating environment this summer.

Well, yes, I mean look part of the guide today is clearly our costs are on a very good trajectory there on a different trajectory to the entire industry, where our unit costs are actually coming down obviously, we stay so just the 2000 modules to give you a fair comparison.

That's a really good thing we are working very hard on the business on extracting significant amount of cost out. That's a lot of that is driven by the network shift that we're doing that helps the business, but what we're doing.

Yes.

Trying to improve sequential revenue as you progress through this year clearly year over year as you get into the second half of this year you have an easier comp from a from a unit perspective.

Jimmy Dempsey: And just as a quick follow-up, I was curious how close bookings are trending. I know there was kind of a slight drop off last Labor Day. So any color on what you think normal behavior might look like.

But what we're seeing at the moment gives us a lot of hope opt.

Optimism around the improving revenue environment as you progress through this year.

Okay. Thank you.

Welcome.

One moment for next Gen.

Jimmy Dempsey: Thanks for the question. Yeah, Jimmy kind of alluded to this. We'll let him answer that question.

And our next question comes from Michael Lindenberg of Deutsche Bank.

Jimmy Dempsey: Sure. Look, like what we've seen over the last kind of four or five months is a bottoming of the booking trajectory in the early part of Q4, the back end of Q3. And we've seen it, as I mentioned in the prepared remarks, transition to an improving revenue market as we progress through Q1. And so we're actually quite encouraged by what we see.

Oh, Hey, good morning, everyone, Hey, I think on the last call Jimmy you talked about.

Some of the potential issues that you could have later in the year with the GTS.

And I know you had indicated that it was somewhat fluid and youre in conversations with Pratt do you have a better sense about any potential groundings that we see later this year if at all into 2024 event.

Yes, Mike This is Barry we expect no financial impact.

Jimmy Dempsey: We're obviously working very hard internally in terms of restructuring the network. That's providing a significant improvement as you progress through March, April, May, and June. And also, you're seeing very strong demand in the short term, improving close-end pricing. So, you know, built into our guide is a sequential improvement over the last few quarters on our unit revenue. Thank you.

We expect no financial impact from the GTS.

Okay, Great and then Barry since I have you on my second.

When I look at your network and I look at some of the routes that you do fly to I know.

You've talked up VFR, but there are some markets that you're in where you actually had decent presence in what I would characterize as business markets I know in the past you did cater to some price sensitive on the business side, maybe it was 5% maybe it was 10%.

Brandon Robert Oglenski: One moment for our next question, and our next question comes from Brandon Oglenski of Barclays. Hey, good morning, everyone.

But im only bringing this up because.

When I look at one of your recent offerings. Some of your product offerings, there is a bit of a.

Call It a business type fair or sort of product.

Jimmy Dempsey: Thanks for taking the question. Jimmy, maybe if we can follow up there. I would assume that you have some acceleration built into your 2Q revenue outlook. Is that what you're seeing in the bookings? And can you compare and contrast that with the Easter holiday timing?

That you are rolling out and maybe take advantage of some of the network changes can you talk about that and maybe maybe theres some opportunity with with your presence in these big markets, Chicago and L. A and Atlanta et.

Et cetera.

Any thoughts on that would be great. Thanks for taking my questions.

Sure. So look I mean, we're not making a major strategy shift to go after business is historically, we've been in the mid single digits for business travel and the majority of those we believe are small business, but yes, we've heard from our customers they would like to see.

Brandon Robert Oglenski: Not to be too near term here, but I guess it must be the network changes you're making that you're seeing positive improvements. Is that correct? Yes, I mean, if you look at the announcements we've made recently, you see a big network shift happening in March, April, May, June, and that network shift is driving a significant improvement in our revenue outturn. One of the things that we're focused on is entering a bigger revenue pool, but also in markets that have higher fares, and so that is giving us a better revenue outcome that we're seeing across the business. It's early in the morning.

Or kind of a bundled fare available through third party channels, that's something we haven't had in the past and so we have launched the <unk> which includes.

Our bag carry on bag and includes.

Actually premium economy seating, if it's available as well as flexibility no change.

Jimmy Dempsey: The big network shift happens during March, April, May, and June, as I said, and so we'll see that progress, but the early signs are very, very good. Obviously, Easter comes back, as you mentioned, into this quarter, and we've got to deal with that overall. That's positive for this quarter, although obviously, it's out of April.

Cancel fees so.

It's a great product for small businesses saves them money.

Obviously, we don't have the frequency.

The Big Airlines do but I think for some people that want to save money.

Is a great product, but we just didn't have anything if they did have a managed travel.

Jimmy Dempsey: But we think some of the changes we're making actually will drive longer-term support for growth in the business, particularly around utilization off-peak periods where we're entering more VFR more. And I guess anticipated in that improvement into 2Q and 3Q, just from where you are in the first quarter, is more of it commercial or revenue based, or is it also, you know, the expectations that your costs can come down, you know, and maybe a more controllable operating environment this summer? Well, yes.

Partnership with the travel agency, we just didn't have a solution for them and now we do and so.

You can kind of do the math if you just get a few points of this 30% to 50% higher fare.

It's a great way to diversify our revenues and improve overall RASM.

Very good thank you.

Thank you one moment for our next question.

And our next question comes from Scott Group of Wolfe.

Great. Thanks, Good morning, So I wanted to just go back to the fourth quarter for a second just on the cost side. So if you look at just cost ex fuel third quarter was 645 million fourth quarter dropped to $590 million and then the Q1 guide it goes right back to $6 50. So.

Jimmy Dempsey: I mean, look, part of the guide today is clearly that our costs are on a very good trajectory. They're on a different trajectory from the entire industry, where our unit costs are actually coming down. Obviously, we staged that at just 1,000 miles, just to give you a fair comparison.

Any help on what happened in Q4.

Yes, so Scott to give you the broad strokes on Q4, right. So that $5 90 as I highlighted in the prepared remarks includes the $36 million benefit from the four <unk> hundred 20, <unk> lease extensions that we executed if you adjust for that right here at $6 26.

Jimmy Dempsey: That's a really good thing. We're working very hard in the business to extract a significant amount of cost out. A lot of that is driven by the network shift that we're doing. That helps the business, but what we're doing is trying to improve sequential revenue as you progress through this year. Clearly, year over year, as you get into the second half of this year, you have an easier comp from a unit perspective.

And.

No.

From there looking at that number too.

What we're guiding.

In the in the first quarter that takes into consideration the seasonality that comes into play in Q1, right. So payroll tax related seasonality Deicing I mean, you've got a growing fleet.

Michael John Linenberg: But what we're seeing at the moment gives us a lot of hope or optimism around the improving revenue environment as you progress through this year. Okay, thank you. Thank you. One moment for our next question. And our next question comes from Michael Linenberg of Deutsche Bank. Oh, hey, good morning, everyone.

As well right and so those additional costs so.

At the end of the day I think that's the walk from Q4.

Q1.

Sure.

Okay. That's helpful. And then can you just talk about I know you said, you're assuming improving RASM throughout the year, just what maybe what your overall sort of RASM growth expectation is and just how to think about that.

The cadence of margins from down 4% to 7% in Q1 to down to up 36% for the for the year I just want to understand like where do you think you are.

Barry Biffle: Hey Jimmy, I think on the last call, you talked about some of the potential issues that you could have later in the year with the GTF. And I know you had indicated that it was somewhat fluid and you were in conversations with Pratt. Do you have a better sense about, you know, any potential groundings that we might see later this year? If at all, it's a 2024 event. Yeah, Mike, this is Barry. You know, we expect no financial impact from the GTF.

Ending the year on a margin run rate.

Yes.

We don't actually guide RASM, but look I think you can look at the initiatives that we've talked about and kind of play those out they continue to rollout as we move through the year. So you would obviously expect the cadence of that is that you will continue to see more accretive.

RASM improvement as you move through the year as the as the initiatives mature.

Michael John Linenberg: Okay, good. And then, Barry, since I have you on my second, when I look at your network and I look at some of the routes that you do fly to, I know you've talked up VFR, but there are some markets that you're in where you actually have, you know, a decent presence in what I would characterize as business markets. I know in the past, you did cater to some price sensitive customers on the business side, maybe it was 5%, maybe it was 10%. But I'm only bringing this up because when I look at one of your recent offerings, some of your product offerings, there is a bit of a, you know, call it a business-type fare or sort of product that you are rolling out. And maybe that's to take advantage of some of the network changes. Can you talk about that? And maybe, maybe there's some opportunity with your presence in these big markets, you know, Chicago and LA and Atlanta and etc. Transcribed by https://otter.ai. Any thoughts on that would be great.

And go out and you take the bus fare for example that we just talked about a moment ago. We just launched it last week.

We're starting to discuss with certain corporations getting it on their shelf.

And getting there, but there's just a lot of different paths to revenue diversification that we're focused on but they all have slightly different timings as we move through the through the year.

And then I guess ultimately what I'm trying to get at is where are we.

Going where are we going from a margin perspective, the rest of this year, because I'm trying to get to 10% to 14%.

Next year with labor so just.

Anything you could do just like to sort of help on the bridge.

But we've given you the first quarter and we've given you our year. So you can kind of it while we didnt break out quarters. Two through four you can kind of do the algebra to figure out what that takes to hit that number and I think if you. If you take that into the second half of the year you will see that the run rate of that is delivered well against 2025.

Barry Biffle: Thanks for taking my question. Sure. So look, I mean, we're not making a major strategy shift to go after business. I mean, historically, we've been in the mid-single digits for business travel, and the majority of those, we believe, are small businesses.

And then keep in mind as you look at 24 and as we deliver on the network simplification plan and the revenue initiatives and cost initiatives that are there and you move into 'twenty five youre getting the full year benefit of all of those items that are being put in place in 24 hours I mean, I think that's important to note as you consider 25 versus 24.

Barry Biffle: But yes, we've heard from our customers. They would like to see kind of a bundled fare available through third-party channels. It's something we haven't had in the past. And so we have launched the biz fare, which includes, you know, a bag, a carry-on bag. It includes premium economy seating, if it's available, as well as flexibility, no change, cancel fees.

Got it okay. Thank you.

Thank you John.

One moment for our next question.

Okay.

Okay.

Okay.

And our next question comes from Stephen Trent of Citi.

Yeah.

Barry Biffle: So it's a great product for small businesses, and it saves them money. Obviously, we don't have the frequency that the big airlines do, but I think for some people that want to save money, it's a great product. But we just didn't have anything.

Good morning, gentlemen, and thanks for taking my time, taking the time to answer my questions.

I was wondering just from a clarification perspective could.

Could you refresh my memory, maybe a question for markets.

Barry Biffle: If they did have a managed travel partnership with a travel agency, we just didn't have a solution for them. But now we do. And so, look, you know, you can kind of do the math. If you just get a few points of this at, you know, 30 to 50 percent higher fare, it's a great way to diversify our revenues and improve our overall image. Very good. Thank you. Thank you. Please take a moment for our next question. And our next question comes from Scott Group of Wolfe. Hey, thanks. Good morning.

You guys will be including any sale leaseback gains.

And opex. Thank you.

Yes, I mean, we have consistently.

Consistent practice in the past and as we go forward sale leaseback gains are a credit to operating expenses.

And any sort of high level view sort of a ballpark on.

Where that could end up for this year for example.

We don't call that out, but I think I think the best thing to think about Steven is that the reason why it's there because had we debt financed its the most fair way to to compare it so they get the benefit on the debt financing side, we get it through the sale leaseback, but.

Scott H. Group: So I want to just go back to the fourth quarter for a second just on the cost side. So if you look at just cost x fuel, the third quarter was $645 million, the fourth quarter dropped to $590 million, and then the Q1 guide, it goes right back to $650. So, any help on what happened in Q4? Scott, to give you the broad strokes on Q4, that $590,000, as I highlighted in the previous remarks, includes the $36 million benefit from the four A320 CEO lease extensions that will be executed. If you adjust for that, you're at $626,000.

But we don't actually call that specifically out.

But it wouldn't have nowhere to people to have that.

P&L impact will be similar to those who definitely.

Yes, no it makes sense makes sense.

That's right and just one last question I know there is.

And sort of cross border view.

One of your competitors having.

It's <unk>.

Codeshare with a Mexican carrier potentially getting.

Not renewed by the department of Transportation, how are you guys thinking about your relationship with Valores.

Regard thank you.

But we're really excited about our partnership with Valores, it's been disappointing obviously.

Given the challenges over the last few years.

Mark Mitchell: From there, you know, looking at that number to, you know, what we're guiding for the first quarter, that takes into consideration the seasonality that comes to play in Q1, so payroll tax related seasonality, de-icing, you've got a growing fleet as well, those additional costs, so at the end of the day, I think that's the walk from Q4 and then into Q1. Okay, that's helpful. And then can you just talk about, I know you said you're assuming improving RASM throughout the year, just what maybe your overall sort of RASM growth expectation is and just how to think about, right, the cadence of margins from down four to seven percent in Q1 to down to up, you know, three to six percent for the year.

Their category that we haven't been able to exploit that partnership but we're excited to get that back turned on this year.

And we expect to do great things with it where larger now we have a greater brand presence, we have more distribution power coming.

But.

We're seeing them growing as well in their position, but we never had ATI with with with Polaris is just a true partnership where we have a codeshare in overall marketing partnership. So we're excited to get it turned on and I guess, if you think about it I guess, we will have a little bit more of a level playing field.

What they are saying come through.

Okay I appreciate it Barry Thank you.

Thank you one moment for our next question.

Yeah.

And our next question comes from Conor Cunningham of Melius research.

Okay.

Hi, everyone. Thank you just just back to the underserved markets and all the changes that youre, making there it seems like you're indicating that but a lot of the stuff is the unit revenue accretive.

Mark Mitchell: I just want to understand, like, where you think you're ending the year on a margin run rate. We don't actually guide RASM, but look, I think you can look at the initiatives that we've talked about and kind of play those out. They continue to roll out as we move through the year. So you would obviously expect the cadence of that to be that you will continue to see more creative RASM improvement as you move through the year, as the initiatives mature and go out. I mean, you take the Biz Fair, for example, that we just talked about a moment ago. We just launched it last week.

<unk> is a bit surprising to some of us.

The brand and the fares just being that while received historically you would think of as Spooling period being like over a year or two years. So just any thoughts around on what's being on why the success so far.

I think if you enormous course, I think those assumptions are correct, but having been a part of.

Scott H. Group: I mean, we're starting to discuss with certain corporations, you know, getting it on their shelf and getting there. But, you know, there are just a lot of different paths to revenue diversification that we're focused on, but they all have slightly different timings as we move through the year. I mean, I guess ultimately, what I'm trying to get at is where are we going from a margin perspective the rest of this year? Because I'm trying to get to 10 to 14% next year with labor. So just anything you could do just to sort of help on the bridge.

Processes like this over the last 30 years I think you have to consider that where we're pulling this capacity from as a negative opportunity cost. So when you are not doing well financially on those the redeployment in many cases is almost immediately accretive when you move to better better market opportunities.

I'll give you. An example, if you're flying something four times a day in the fourth frequency didn't add any more revenue, but you had all this cost moving that frequency somewhere else that gain to the network as 100% incremental.

Okay.

That's helpful makes sense and then on all these new products that youre talking about base fare premium economy, and they'll call the loyalty changes.

Mark Mitchell: We've given you the first quarter, and we've given you our year, so you can kind of, well, we didn't break out quarters 2 through 4, you can kind of do the algebra to figure out what it takes to hit that number. And I think if you take that into the second half of the year, you will see that the run rate of that delivers well against 2025. And then keep in mind as we deliver on the network simplification plan and the revenue initiatives and cost initiatives that are there, and you move into 25, you're getting the full year benefit, right, of all of those items that are being put in place in 24. So I mean, I think that's important to note as you consider 25 versus 24.

I was just wondering if you could probably if you could give some context to just the contribution you're talking about a seven point improvement in pretax margin. So what portion of these new products is what's occurring in 2025.

<unk>.

Yeah. Appreciate the question, but we haven't actually broken that out.

In detail, but I can tell you the majority of the benefit of both this year and next year is going to come from the network.

And the shift to the VFR flying and away from the oversupplied leisure markets and then each one of the others.

Our smaller contribution we haven't expected huge things from the Bismarck. For example, we think that it takes a while to mature.

Obviously, the frequent flyer things take take tonnage mature, but early signs are fantastic right.

Scott H. Group: Okay, thank you. Thank you. One moment for our next question. And our next question comes from Steven Trent of Citi. Good morning, gentlemen, and thanks for taking my time, excuse me, taking the time to answer my questions.

Jim You mentioned earlier, you just take the credit card spend alone I mean within a month of launching it at the spins up over 10% year over year, So which is just huge.

Sorry, we're not giving a breakdown of those components.

Steven Trent: I was wondering, just on a clarification perspective, could you refresh my memory, maybe this is a question for Mark, if you guys will be including any sale leaseback gains in OPEX. Thank you. Yes, I mean, we have consistently and, in the past and as we go forward, sales e-spec gains are a credit to operating... And any sort of high-level view, sort of a ballpark on, you know, where that could end up for this year, for example? We don't call that out, but I think the best thing to think about, Stephen, is that the reason why it's there is because had we debt financed it, it's the most fair way to compare it. So they get the benefit on the debt financing side. We get it through the sale-leaseback scheme, but we don't actually call that specifically out, but it would be similar to people who have deafness.

It's all good thank you.

Thank you one moment for our next question.

And our next question comes from Andrew <unk> of Bank of America.

Hi, good morning, everyone.

Alright.

Your back half margins are going to look drastically better than what's your what's coming through in <unk>, but maybe maybe going back to Scott's question can you just provide a little bit more color on sort of the bridge on how you get from back half margins to your 2025 goal.

Yes.

Kind of.

What kind of headwinds are you assuming from labor how are we thinking about kind of incremental revenues any any color you can provide on kind of bridging back half 'twenty four 'twenty five margins I think would be very helpful for folks.

Sure.

As I said, a while ago, we've given the first quarter. We began the year. So you can you can do the simple algebra and sulfur acts to figure out what that has to be obviously as we've discussed the diversification of the revenue has multiple components that actually unfold through through the year and so obviously that will have better greater benefit in six months from now that it.

Mark Mitchell: I mean, the P&L impact would be similar to those who have deafness... Yeah, no, it makes sense. I know. I appreciate that. And just one last question. I know there's a sort of cross-border view; you have one of your competitors having its code share with a Mexican carrier potentially getting not renewed by the Department of Transportation. You know, how are you guys thinking about your relationship with Volaris in that regard?

Two months from now and so I think when you play that out that actually and you annualize that in the back end into 2025.

Steven Trent: Thank you. We're really excited about our partnership with Volaris. It's been disappointing, obviously, given the challenges over the last few years and their category that we haven't been able to exploit that partnership. But we're excited to get that back on this year.

You can easily cover what would you expect to be somewhere in around a quarter of paying for the headwind of our labor deals.

But.

We believe that we can so I will get back to the 10% to 14% range. After 2025 as a result.

Barry Biffle: And we expect to do great things with it. We're larger now. We have a greater brand presence. We have more distribution power coming. But, you know, we're seeing them growing as well and in their position. But, you know, we never had ATI with Volaris.

Okay got it Mark.

<unk> $36 million benefit you had in <unk> from the lease extensions does this just just go away. How long are these leases extended four does that $36 million kind of come back in 'twenty five at all how should we how should we think about that.

Barry Biffle: It's just a true partnership where we have a co-chair and overall marketing partnership. So we're excited to get it turned on. And I guess, you know, if you think about it, I guess we'll have a little bit more of a level playing field if what they're saying comes through. Okay, appreciate it, Barry.

Yes, yes. So these are eight year leases that we extended out 12 years, and so that $36 million is out far into the future. So that's not a $25 items.

Okay got it thank you.

Barry Biffle: Thank you. Thank you. One moment for our next question, and our next question comes from Conor Cunningham of Melius Research. Hi, everyone.

Yes.

Thank you one moment for our next question.

Yeah.

Yes.

And our next question comes from James Kirby of Jpmorgan Securities.

Hey, good morning, guys.

Conor Cunningham: Thank you. Just back to the underserved markets and all the changes that you're making there. It seems like you're indicating that a lot of this stuff is unit revenue accretive, which I think is a bit surprising to some of us. Is the brand and the fares just being that well-received? Historically, you would think of a spooling period being like over a year, two years

Just following up with <unk> question earlier with the pilot pipeline.

There are many airports earlier last month on just slowing down the training and pushing some out.

Is that a function of what's flying or is that just.

A function of less turnover and any color you can share there.

Yes, we've seen thanks for the question, we've actually seen against what our earlier expectations were a kind of a slowdown in attrition.

Barry Biffle: So just any thoughts on why the success so far? I think if you, in the normal course, I think those assumptions are correct, but having been a part of processes like this over the last 30 years, I think you have to consider that where we're pulling this capacity from is a negative opportunity cost. So when you're not doing well financially on those, the redeployment, in many cases, is almost immediately advantageous when you move to better market opportunities. I mean, I'll give you an example.

So we've seen that coupled with other kind of canaries in the coal mine around the industry. So you have just seen a big change in that and so to give you an idea.

We've needed in round numbers around 30 pilots a month right and to get those with attrition for the last several years, we generally hire 60.

Conor Cunningham: If you're flying something four times a day, and the fourth frequency didn't add any more revenue, but you had all this cost, moving that frequency somewhere else, that gain to the network is 100 percent incremental. Okay, that's helpful. Makes sense. And then, on all these new products that you're talking about, BizFair Premium Economy, and all the loyalty changes, you know, I was just wondering if you could probably give some context to just the contribution. You're talking about a seven point improvement in pre-tax margins. So what portion of these new products is what's occurring in 2025? Thank you. Yeah, I appreciate the question, but we haven't actually broken that out in detail, but I can tell you the majority of the benefit, both this year and next year, is going to come from the network and the shift to VFR flying and away from the oversupplied leisure markets. And then each one of the others, you know, are smaller contributions. We haven't expected huge things from the biz fair, for example. We think that takes a while to mature.

And so what happens is that fit that.

If youre attrition dries up you could because of the timing.

It takes call it six months to eight months to get to the full kind of training of our New first officer. Then you have of training of our captain and kind of to create a crew. So if you see a material change in the attrition you could actually very quickly be two 300 pilots are way too many.

Addition to that we're seeing efficiencies in the outback schedule, which is going to actually change kind of our needs of pilots per airplane.

But then I would just also add that we have actually we.

<unk> invested significantly in our in our in our programs to bring in pilots. So we have a cadet program. We have a rotary transition program for military we have our college programs and so we just have a really robust.

Pipeline and we're seeing a lot more stickiness with the people. So like people we've hired in the last year and a half two years.

Barry Biffle: Obviously, the frequent flyer things take time to mature, but the early signs are fantastic, right? I mean, you know, as Jimmy mentioned earlier, you just take the credit card spend alone. I mean, within a month of launching it, the spend's up over 10% year over year, so that's just huge. So sorry, we're not giving a breakdown of each one of those. It's all good.

Have a much lower attrition rate than people that we hired more than more than a year and a half year and a half ago and the other thing is we have over 700 cadets in our pipeline right. Now. So if you just do the math and cadets alone we have over two years' worth of supply. So it's.

Andrew George Didora: Thank you. Thank you. One moment for our next question. And our next question comes from Andrew Didora of Bank of America. Hi, good morning, everyone.

I think the marketplace has changed dramatically in the last one to two years.

Got it that's great color I appreciate it Barry and second question.

If I recall correctly your prepared remarks, you mentioned competitive pressures.

Barry Biffle: You know, Barry, I know your back half margins are going to look drastically better than what's coming through in one queue. But maybe, going back to Scott's question, can you just provide a little bit more color on sort of the bridge on how you get from the back half margins to your 2025 goal? And I guess, you know, what kind of headwinds are you assuming from labor? You know, how are we thinking about, you know, kind of incremental revenues? Any color you can provide on kind of bridging back half 24 to 25 margins would be very helpful for folks. Sure. Look, as I said a while ago, we've given you the first quarter, and we've given you the year, so you can do the simple algebra and solve for x to figure out what that has to be.

Spending in certain markets I'm, just wondering if you can elaborate on what type of markets. Those are I believe you mentioned, it's not embedded in guidance, but.

Is that is that trend you see continuing as the year goes on in terms of rational rationalization of capacity.

Yes look so we.

So let me clear so we've seen some capacity recede against us by the biggest examples we saw spirit.

Leave out of out of.

Out of Denver, we've seen capacity against this in Puerto Rico, and other places start to recede.

And look we can look at <unk>, just like everybody else can and understand that the fares that that some of these carriers, we're seeing our some of the lowest quartile of their revenue in the best way to stop losing money and stop doing things that lose money. So I think people are making rational decisions around around the system. We expect people to continue to do that but we have owned.

Andrew George Didora: Obviously, as we've discussed, the diversification of revenue has multiple components that actually unfold through the year. And so obviously, that will have a better, greater benefit six months from now than it will two months from now. And so I think when you play that out, and then you annualize that in the back end into 2025, you can easily cover what we expect to be somewhere in the round of a quarter of a penny for the headwind of our labor deals. But we believe that we can solidly get back to the 10 to 14% range for 2025 as a result. Okay, got it. Mark, just the $36 million benefit you had in 4Q from the lease extensions, does this just go away? How long were these leases extended for?

<unk> captured in our guide the changes that we've seen thus far but we would expect to see a continued kind of rationalization of oversupply.

Especially in a lot of these leisure markets.

Got it I appreciate the questions.

Sure.

Thank you one moment for our next question.

Yeah.

Okay.

Right.

And our next question comes from Christopher <unk>.

So Pos Phyllis.

Sorry, Jay.

Thank you everyone. Good morning so.

I guess, Barry I'm going to try to get to the margin question in a different way.

Mark Mitchell: Does that $36 million kind of come back in 25 at all? How should we think about that? Yeah, yeah, so these were eight-year leases that we extended out, you know, 12 years. And so, you know, that $36 million is out, you know, far into the future, so that's not a... Okay, got it.

And it's important here given the change here in your network deemphasizing less mgo.

If we take out the benefit of product, which is going to take some time to mature and we think about the cadence of RASM for for this year and for next.

Ultimately again outside of if we just hold product constant.

Andrew George Didora: Thank you. Thank you. One moment for our next question, and our next question comes from James Kirby of JPMorgan Securities. Hey, good morning, guys.

A piece of that or a big piece of that arguably is going to be about.

Where you are flying and how we can argue for or against any sort of sees.

Seasonal outperformance et cetera, with respect to yield. So my question is if you could just put a finer point on where you are growing and to your point. We can all look at the dose schedules today, but want to better understand that and then ultimately as we think about the moving pieces for next year.

James Kirby: Just following up with Savi's question earlier about the pilot pipeline. There were media reports earlier last month on just slowing down the training and pushing some out. Is that a function of less flying? Or is that just a function of less turnover? And any color you can share there?

<unk>.

Sort of a similar composition and part B or C. Do you need to make any changes with this shift with respect to the aircraft type or anything in so far as nuanced around crew scheduling and alike. Thank you.

Barry Biffle: Yeah, we've seen, thanks for the question, we've actually seen a slowdown in attrition. And so we've seen that coupled with, you know, other, you know, kind of canaries in the coal mine around the industry. So you've just seen a big change in that. And to give you an idea, you know, we needed around 30 pilots, right? And to get those with attrition for the last several years, we generally hire... right?

So no we don't expect any change to our aircraft or.

I think our scheduling is becoming simpler because of what we've talked about simplification of the network as far as the markets that we're chasing I mean, it's very clear I mean, we mentioned this.

James Kirby: And so what happens is that if your attrition dries up, you could, because of the timing, it takes, you know, call it six to eight months to get to the full kind of training of a new first officer. Then you have the training of a captain and kind of create a crew. So if you see a material change in attrition, you could actually have two, three hundred pilots. Way too many.

Earlier, but.

Average fare across the system. So you take all of the.

The markets that we will be flying.

And this summer.

And you look at those markets compared to the same markets last year.

And the average fare is up 5% on the total.

So that just tells you that with the new flying we are chasing significantly higher I think the fair is more in the 15 to 20 Buck range higher on the things that we're actually going into so these are significantly higher price markets that we're in today.

Barry Biffle: In addition to that, we're seeing efficiencies in the out and back schedule, which is going to actually change, you know, our needs for pilots per airplane. But then I would also add that we have actually, you know, invested significantly in our programs to bring in pilots. So we have a cadet program. We have a rotary transition program for the military. We have our college programs.

The second thing is I'll point, you back to another thing that we said in the slide is that the revenue pool itself. So the total revenue pool and all of the industry.

We're flying year over year will be up over 50%.

And so when you're only growing 12% to 15% in the revenue pool is going up 50, you need a smaller share of a much bigger pie. So just kind of really de risks the business in a big way and I think it kind of lowers competitive friction if you think about it.

Barry Biffle: And so we just have a really robust pipeline, and we're seeing a lot more stickiness with the people. People we've hired in the last, like, year and a half, two years have a much lower attrition rate than people that we hired more than a year and a half ago. And the other thing is we have over 700 cadets in our pipeline right now. So if you just do the math, in cadets alone, we have over two years' worth of supply. So it's, I think the marketplace has changed dramatically in the last one to two years. Got it. That's a great call.

But specifically for the routes I mean, obviously, we have talked about our 13 basis, and we're going to grow significantly, especially from the ones that we've announced recently, we just announced.

A bunch of new routes out of out of San Juan We announced a bunch of new routes out of out of Dallas Fort Worth which is the base that we just opened last year and we've got more announcements in the weeks to come we've got some this week. Some some actually next week and then probably.

James Kirby: I appreciate that, Barry. And second question. If I recall correctly, you're prepared to mark; you mentioned competitive pressures, rescinding in certain markets. I just wonder if you can elaborate on what type of markets those are. I believe you mentioned it's not embedded in guidance.

Few more announcements later this month, but I think youll find in general that all of these are markets with considerably higher fares in the marketplace. We were in last summer, which we think will be significantly improving our RASM trajectory.

Barry Biffle: But is that the trend you see continuing as the year goes on in terms of rational rationalization of capacity? Yeah, look, so we've seen some capacity recede against this, by the biggest examples, we saw Spirit leave out of Denver, we've seen capacity against this in Puerto Rico and other places start to recede. And look, we can look at D.O.

Understood. Thank you for that color and my second question, the 80% or more than 80% excuse me out and back.

If you could bridge that for march's anticipated two thirds what needs to be done to realize that and more importantly is how do you sustain that thank you.

Thanks actually we just went through this yesterday and in fact, if you look at our March schedule.

Barry Biffle: just like everybody else can understand that the fares that some of these carriers were seeing were some of the lowest quartile of their revenue. And the best way to stop losing money is to stop doing things that lose money. So I think people are making rational decisions around the system. We expect people to continue to do that, but we have only captured in our guide the changes that we've seen thus far. But we would expect to see a continued kind of rationalization of oversupply, especially in a lot of these leisure markets.

We're actually already there.

The 80% range to Outback were not scheduled with our crew there and Thats because for example, the Cincinnati base doesn't open until May, but we actually have the flying already kind of set up as if it was out in back but there will be a lot of people still in hotels, so what happens as we flow through.

Through the next several months as the schedule doesn't change materially from an out and back perspective of the metal, but what happens as we opened the basis and we have the crew members based in those cities they become an out and back crew pairing. So so you've actually already kind of done the majority of the simplification. It just gets easier every month as you flow through.

Barry Biffle: I appreciate the questions. Sure. Thank you. One moment for the next question. And our next question comes from Christopher Sapat. Apostolic S-I-G. Thank you, everyone.

Christopher Sapat: Good morning. I guess, Barry, I'm going to try to get to the margin question in a different way. And it's important here, given the change here in your network, de-emphasizing LAS MCO. But if we take out the benefit of product, which is going to take some time to mature, and we think about the cadence of RASM for this year and for next, ultimately, again, outside of if we just hold product constant, a piece of that or a big piece of that, arguably, is going to So my question is, if you could just put a finer point on where you're growing, and to your point, we can all look at the DO schedules today, but want to better understand that. And then, ultimately, as we think about the moving pieces for next year, is that sort of a similar composition in part B or C, do you need to make any changes with respect to the aircraft type or anything insofar as nuanced around Thank you.

And we get there by June with the final opening of San Juan, which we expect so Cleveland is in.

March we've got to Chicago in Cincinnati in May and then we have San Juan Puerto Rico in June.

Great. Thank you.

Thank you at this time I would like to turn it back to Barry before for closing remarks.

I just want to thank everybody for joining us today, we are really excited about.

The results.

Yes.

We're putting forth in our guide and as well as our expectations as we move through the year and into next year, a lot of great things going on with the companies and we appreciate everybody.

Joining us today, and we look forward to updating you on our progress and our success.

Next quarter.

This concludes today's conference call. Thank you for participating and you may now disconnect.

Barry Biffle: Thanks, so no, we don't expect any change to our aircraft, or I think our scheduling is becoming simpler because of what we talked about with the simplification of the network. As far as the markets that we're chasing, I mean, it's very clear. We mentioned this earlier, but, you know, the average fare across the system, so you take all of the markets that we will be flying to this summer. And you look at those markets compared to the same markets last year, and the average fare is up 5% on the total. So that just tells you that with the new flying, we are chasing significantly higher. I think, you know, the fare is more in the $15 to $20 buck range higher on the things that we're actually going into.

Okay.

Yeah.

Okay.

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Barry Biffle: So these are, you know, significantly higher price markets than we're into today. The second thing is, I'll point you back to another thing that we said in the slides, is that the revenue pool itself, so the total revenue pool in all of the industries that we fly year over year will be up over 50%. So when you're only growing 12% to 15% and the revenue pool is going up 50%, you need a smaller share of a much bigger pie. So it just kind of really de-risks the business in a big way.

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Barry Biffle: And I think, you know, it kind of lowers competitive friction if you think about it. But specifically for the routes, I mean, obviously, we have talked about our 13 bases, and we're going to grow significantly, especially from the ones that we've announced recently. We just announced a bunch of new routes out of San Juan. We also announced a bunch of new routes out of Dallas-Fort Worth, which is a base that we just opened last year. And we've got more announcements in the weeks to come. We've got some this week, some actually next week, and then probably a few more announcements later this month. But I think you'll find, in general, that all of these are markets with considerably higher fares than the marketplace we were in last summer, which we think will significantly improve our RASM trajectory. Thank you for that, Conor. And my second question, the 80 percent or more than 80 percent, excuse me, out and back, if you could bridge that for marches anticipated two-thirds, you know, what needs to be done to realize that? And more importantly, how do you sustain that?

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Barry Biffle: Thanks. Actually, we just went through this same process yesterday. And in fact, if you look at our March schedule... We're actually already there, at the 80 percent range to out-and-back, but we're not scheduled with our crew there. And that's because, for example, the Cincinnati base doesn't open until May, but we actually have the flying already kind of set up as if it was out-and-back, but there will be a lot of people still in hotels. So what happens as we flow through the next several months is the schedule doesn't change materially from an out-and-back perspective of the metal, but what happens as we open the bases and we have the crew members based in those cities, they become an out-and-back crew pairing. So you've actually already kind of done the majority of the simplification. It just gets easier every month as you flow through it, and we'll get there by June with the final opening of San Juan, which we expect. So Cleveland is in March. We've got Chicago and Cincinnati in May, and then we have San Juan, Puerto Rico, in June.

Okay.

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Barry Biffle: Great, thank you. Thank you. At this time, I'd like to turn it back to Barry Biffle for closing remarks. I just want to thank everybody for joining us today.

Barry Biffle: We're really excited about the results that we're putting forth in our guide and as well as our expectations as we move through the year and into next year. A lot of great things going on with the company so we appreciate everybody joining us today and we look forward to updating you on our progress and our success next quarter. This concludes today's conference call. Thank you for participating and you may now disconnect. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Thanks for watching! ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day and thank you for standing by.

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Dan.

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Operator: Welcome to the Frontier Group Holdings, Inc. Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Erdman, Senior Director, Investor Relations. Please go ahead.

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David Erdman: Thank you. Good morning, everyone. Welcome to our fourth quarter 2023 earnings call. Today's speakers will be Barry Biffle, Chief Executive Officer, Jimmy Dempsey, President, and Mark Mitchell, Chief Financial Officer. Each will deliver brief prepared remarks, and then we'll get to your questions. During today's call, we will be presenting supplemental materials which can be viewed on the webcast platform using a PC or a smartphone. If you're not accessing the call from either, or if technical issues arise, you can follow along by downloading the presentation from our website at ir.flyfrontier.com under events and presentations.

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Yes.

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David Erdman: Before yielding, let me quickly review the customary Safe Harper provisions, which are included on slides 2 and 3. During this call, we will be making forward-looking statements that 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, is outlined in the announcement we published earlier, along with reports we file with the FBI. We will also discuss non-GAAP financial measures, which are reconciled to the nearest comparable GAAP measure in the appendix of the earnings announcement and in the presentation supplementing that.

Okay.

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Barry Biffle: I'll now yield the floor to Barry to begin his comments. Thank you, David, and good morning, everyone. Before beginning the brief slide presentation, I'd like to quickly recap the fourth quarter results. We generated a pre-tax margin of nearly 1% for both the fourth quarter and the full year. Our fourth quarter results significantly outperformed guidance on strong operational performance and cost execution, with our CASM-excluding fuel 8% lower than the prior year quarter. We achieved a 99.5% completion factor on industry-leading average system utilization of 11.3 hours during the quarter, and the highest on-time arrivals and departures for the month of December since 2015, excluding the year 2020. Our operational performance during the December to January holiday season was also notable.

Yes.

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Barry Biffle: We had 15% more departures than the prior year holiday season, making it our busiest holiday season in airline history. In addition, our completion rate and on-time arrivals and departures during the holiday period all ranked as our best post-pandemic performance. I want to take a moment to thank all of Team Frontier for producing such great results and taking care of our customers. While I'm pleased with the operational performance and that we generated a positive pre-tax margin for the fourth quarter and full year, I'm disappointed in the absolute result.

Okay.

Okay.

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Barry Biffle: We are therefore focused on taking meaningful steps to address the challenges that impacted our results during 2023 and on returning to double-digit margins. Turning to slide five, one of the largest challenges many low-cost and ultra-low-cost carriers faced in 2023 was the industry's oversupply of capacity in leisure markets, with Las Vegas and Orlando being two significant examples. Both markets have experienced rapid and disproportionate growth compared to 2019 when demand and capacity were far more balanced. As total U.S. domestic capacity increased just over 4% since 2019, total industry capacity in Las Vegas and Orlando grew by a combined 20% and is expected to continue to grow in 2024 based on current published schedules. This has resulted in a relative rasm and margin headwind for many LCCs and ULCCs, and Frontier is no exception. On slide six, no one's more aggressive and engaging in self-help to address overcapacity in leisure markets than Frontier.

Thanks.

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Good day and thank you for standing by welcome to the Frontier Group Holdings, Inc. Fourth quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question.

During this session you will need to press star one on your telephone you will then hear an automated message advising your hand just raised.

Withdraw your question. Please press star one again.

Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, David Erdman Senior Director Investor Relations. Please go ahead.

Yes.

Thank you good morning, everyone welcome to our fourth quarter of 2023 earnings call. Today's speakers will be Barry before Chief Executive Officer, Jimmy Dempsey, President and Mark Mitchell Chief Financial Officer.

Barry Biffle: By summer, we plan to reduce our Las Vegas and Orlando combined capacity by 11 points of our system share year-over-year, reducing the share of these markets by one-third. But to be clear, we're not retreating from our network footprint in either market. We are merely cutting what we believe is marginal unprofitable flying to return both bases to a rational optimal position for our cost structure and remain the low-cost leader in both markets. Turning to slide seven.

Each will deliver brief prepared remarks, and then we'll get to your questions.

On today's call, we will be presenting supplemental materials, which can be viewed on the webcast platform with a PC or a smartphone. If you are not accessing the call from either with technical issues arise that you can follow along by downloading the presentation from our website at IR fly frontier Dot com backslash events and presentations.

Barry Biffle: Our network growth in 2024 is focused on exploiting higher fares for visiting friends and relatives. The market mix of routes by this summer will increase industry average fares in those markets by 5% year over year. Not only are we chasing higher fair markets, but the total revenue pool of industry revenue in our network this summer will be up over 50%, despite only growing capacity 12 to 15 percent, meaning we need a much smaller share of industry revenue, which is extremely constructive for increasing RAS. Additionally, the historical data suggests BFR routes tend to ramp up quicker and reach maturity sooner than leisure routes. Turning to slide 8.

Before yielding let me quickly review the customary safe Harbor provisions, which are included on slides two and three.

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.

<unk> information concerning risk factors, which could cause such differences are outlined in the announcement, we published earlier along with reports we file with the SEC.

We will also discuss non-GAAP financial measures, which are reconciled to the nearest comparable GAAP measure in the appendix of the earnings announcement and in the presentation supplementing this call.

Barry Biffle: Another significant challenge we faced last year was the extended ATC ground delay programs, which negatively impacted our completion factor and utilization, particularly during the summer. To address this, we are executing on the network simplification strategy that we discussed on our last earnings call, with a focus on increasing the percentage of aircraft that return to base nightly to greater than 80% by peak summer this year. We expect this strategy to enable expanding our industry-leading utilization and improve reliability. The key element of our plan is leveraging our 13 crew bases, including our recently announced crew bases in Cleveland, Cincinnati, Chicago, and San Juan, Puerto Rico.

I will now will yield the floor to be superior to begin his comments spirit.

Thank you David and good morning, everyone.

We're beginning the brief slide presentation I'd quickly I'd like to quickly recap the fourth quarter results.

We generated a pretax margin of nearly 1% for both the fourth quarter and the full year, our fourth quarter results significantly outperformed guidance on strong operational performance and cost execution with our CASM, excluding fuel, 8% lower than the prior year quarter. We achieved a 99, 5% completion factor on industry, leading average system utilization of 11 three hours.

During the quarter and the highest on time arrivals and departures for the month of December since 2015, excluding pandemic your 2020.

Barry Biffle: Single day trips flown from our crew bases support operational reliability, recoverability, and higher fares. Our relative cost advantage to the industry, outlined on slide nine, is a key factor in our ability to stimulate demand with low fares and increase to over 40% in 2023. We believe unit cost leadership is fundamental to our long-term profitability and expect Frontier will remain the lowest unit cost provider in the United States, particularly as significant cost savings materialize from our network simplification strategy. We expect that our network simplification strategy will underpin the $200 million of associated annual run rate cost savings, which should be implemented by the end of 2024, as we highlighted in our third quarter. In addition, our order book is heavily weighted to the high-gauge A321neo, which will contribute meaningfully to our ability to control costs as we continue to increase gauge.

Our operational performance during the December to January holiday season was also notable we had 15% more departures in the prior year holiday season, making it our busiest in airline history and.

In addition, our completion rate and on time arrivals and departures during the holiday period, all ranked as our best post pandemic performance I want to take a moment to thank all of team frontier for producing such great results and taking care of our customers.

While I'm pleased with the operational performance and then we generated a positive pre tax margin for the fourth quarter and full year I am disappointed in the absolute result, we are therefore focused on taking meaningful steps to address the challenges that impacted our results during 2023.

On returning to double digit margins.

Turning to slide five one of the largest challenges many low cost and ultra low cost carrier space. In 2023 was the industry's oversupply of capacity and leisure markets with Las Vegas, and Orlando being two significant examples both markets have experienced rapid and disproportionate growth compared to 2019, when demand and capacity were far more <unk>.

Barry Biffle: Accordingly, we expect 2024 Adjusted Chasm X-Fuel to be down 1-3% on a stage-adjusted basis to $1,000. As highlighted on slide 10, we plan to leverage our network, product, brand, and distribution to diversify our revenue and drive sequential RASM improvement. I've spoken extensively about network enhancements, so let's briefly review the latter in this. Last week, we launched our innovative BizFairs product to cater to cost-sensitive small business travelers while providing a premium experience for one low price. We've rebranded our Stretch product to promote our premium economy seating, starting at $19, consistent with our recent launch of our Get It All for Less campaign.

<unk>.

As total U S domestic capacity increased just over 4% since 2019 total industry capacity in Las Vegas, and Orlando grew by a combined 20% and are expected to continue to grow in 2024 based on current published schedules. This has resulted in a relative RASM and margin headwind to many lcc's and you Occ's and frontier is no exception.

On slide six.

No one is more aggressive and engaging in self help to address overcapacity in leisure markets been frontier.

By summer, we plan to reduce Las Vegas, and Orlando combined capacity by 11 points of our system share year over year, reducing the share of these markets by one third to be clear, we're not retreating from our network footprint in either market. We are merely cutting what we believe is marginal unprofitable flying to return both basis to a rational opposite optimal.

Barry Biffle: As we showcased last quarter, our re-launched Frontier Miles program features enhanced elite status tiers that can be earned faster and offers the highest credit card spend-based travel reward earn rate in the industry for each dollar of spending with the Frontier Barclays MasterCard. A new website, a new mobile app, and NDC are expected to launch by late 2024 and should provide significant distribution, merchandising, and conversion benefits, as well as improve brand position. In addition, we've seen competitive overlap recede in recent months. To the extent carriers further engage in capacity rationalization, this would drive additional unit revenue benefits to Frontier, which would be accretive to our guide. However, we've only included the published reductions in our base, Slide 11. Network, Cost, and Revenue Initiatives are expected to drive profit and growth in the business.

Position for our cost structure and remain the low cost leader in both markets.

Turning to slide seven.

Our network growth in 2024 is focused on exploring higher fare visiting friends and relative markets. The market mix of routes by this summer, we'll increase industry average fares in those markets by 5% year over year.

Not only are we chasing higher fare markets. The total revenue pool of industry revenue in our network. This summer will be up over 50%.

Despite only growing capacity, 12% to 15%, meaning we need a much smaller share of industry revenue extremely constructive for increasing RASM. Additionally, the historical data suggest VFR routes tend to ramp quicker and reached maturity sooner than leisure routes.

Turning to slide eight.

Barry Biffle: We expect our pre-tax margin for the full year 2024 to be in the range of 3-6%, with capacity growth of 12-15%, and adjusted CASMX down 1-3% on a stage-adjusted basis to 1,000 miles. First quarter 2024 guidance is reflective of seasonality and off-peak dynamics expected during the quarter. Our guidance is based on fuel pricing as of February. Turning to the final slide.

Another significant challenge we faced last year was the extended ATC ground delay programs, which negatively impacted our completion factor in utilization, particularly during the summer peak to address this we are executing on the network simplification strategy that we discussed on our last earnings call with a focus on increasing the percentage of aircrafts that return to base nightly to greater than 80%.

By peak summer. This year, we expect this strategy to enable expanding our industry, leading utilization and improve reliability.

Barry Biffle: With the full year benefit of our network, cost, and revenue initiatives, we expect 2025 to be between 10 and 14% pre-tax margin. This includes the expectations of new labor agreements with pilots and flight attendants, as both recently became amendable. That concludes the slide presentation, and I'll now hand the call over to Jimmy for a commercial update. Thank you, Barry, and good morning, everyone. Fourth quarter revenue was $891 million, reflecting a rasm of 8.9 cents, down 15% on 15% capacity growth and an 8% decrease in average stage length.

A key element of our plan is leveraging our 13 crew basis, including our recently announced crew bases in Cleveland, Cincinnati, Chicago, and San Juan Puerto Rico.

Single day trips flown from our crew basis support operational reliability, recoverability and higher fares.

Our relative cost advantage to the industry outlined on slide nine is a key factor in our ability to stimulate demand at low fares and an increased to over 40%. In 2023, We believe unit cost leadership is fundamental to our long term profitability and expect frontier will remain the lowest unit cost provider in the United States.

Particularly as significant cost savings materialize from our network simplification strategy.

Jimmy Dempsey: This represents a four-point year-over-year sequential improvement from the third quarter, driven by stabilizing demand. As we enter into 2024, we are now seeing improving revenue trends, better than our earlier expectations. We carried a record 8.1 million passengers during the quarter, with a 99.5% completion rate.

We expect that our network simplification strategy will underpinned the $200 million of associated annual run rate cost savings, which should be implemented by the end of 2024 as we highlighted on our third quarter earnings call.

Further our order book is heavily weighted to the high gauge <unk> hundred 21, neo which will contribute meaningfully to our ability to control costs as we continue to increase gauge.

Accordingly, we expect 2024, adjusted CASM ex fuel to be down 1% to 3% on a stage adjusted basis to 1000 miles.

Jimmy Dempsey: As well, on-time arrivals and departures in December were our highest since 2015, excluding the pandemic year of 2020. During the quarter, as Barry mentioned, we made steady progress toward our objective to increase the percentage of out-and-back flying, including the announcement of four new crew bases at Cleveland, Cincinnati, Chicago, and San Juan, Puerto Rico. The Cleveland base is expected to open in March and will employ 110 pilots and 250 flight attendants in its first year.

As highlighted on slide 10, we plan to leverage our network product brand and distribution to diversify our revenue and drive sequential RASM improvement.

I've spoken extensively about network enhancements, so let's briefly review the latter initiatives.

Last week, we launched our innovative <unk> product to cater to cost sensitive small business travelers, while providing a premium experience for one low price we've rebranded our stretch product to promote our premium economy seating starting at $19 consistent with our recent launch of our get it offer less campaign.

As we showcased last quarter, our relaunched frontier miles program features enhanced elite status tiers that can be earned faster and offers the highest credit card spend based travel rewards earned rate in the industry for each dollar of spending with the frontier Barclays Mastercard.

Jimmy Dempsey: The Cincinnati base is scheduled to open in May and will employ 80 pilots and 160 flight attendants, while the Chicago base will serve both O'Hare and Midway and employ 110 pilots along with 200 flight attendants already based there. And finally, San Juan will be our 13th crew base and will employ 90 pilots and 200 flight attendants in its first year. We've been the fastest-growing airline in Puerto Rico, more than doubling its sea capacity since 2019, and offering 14 non-stop routes from San Juan alone. Puerto Rico is playing a key role in our Caribbean and Latin America growth strategy, not only because it's a popular tourist destination, but large populations of Puerto Ricans reside on the U.S. mainland, and they frequently travel to the island to visit friends and family or to work remotely.

Our new website, and new mobile App as well as in D. C are expected to launch by late 2024, and should provide significant distribution merchandising and conversion benefits as well as improved brand positioning for.

Further we've seen competitive overlap recede in recent months to the extent carriers further engage in capacity rationalization. This would drive additional unit unit revenue benefit to frontier, which will be accretive to our guide. However, we've only included the published reductions in our base case.

Okay.

On slide 11 network cost and revenue initiatives are expected to drive profit and growth in the business we.

We expect our pre tax margin for the full year 2024 to be in the range of 3% to 6% with capacity growth of 12% to 15% and adjusted CASM ex down 1% to 3% on a stage adjusted basis to 1000 miles.

Jimmy Dempsey: Frontier is well situated to capture a disproportionate share of this volume as we now serve more routes to Puerto Rico from the U.S. than any other carrier. Moreover, we recently announced a significant expansion of our network as part of our strategy to grow in higher-fare routes. During the second quarter, we launched non-stop service from 38 airports with our largest concentration of routes in the visiting friends and relatives markets from Dallas-Fort Worth, Charlotte, Raleigh-Durham, Los Angeles, New York, Minneapolis-St. Paul, and San Juan.

First quarter 2024 guidance is reflective of seasonality in off peak dynamics expected during the quarter. Our guidance is based on fuel pricing as of February <unk>.

Turning to the final slide.

With full year benefit of our network cost and revenue initiatives, we expect 2025 to be between 10 and 14% pretax margins. This includes the expectations of new labor agreements with pilots and flight attendants as both recently became amendable that concludes the slide presentation and I will now hand, the call over to Jimmy for a commercial update.

You Barry and good morning, everyone fourth quarter revenue was $891 million, reflecting RASM of $8 nine down 15% on 15% capacity growth on an 8% decrease in average stage length. This.

Jimmy Dempsey: Finally, early last month, we officially launched our reimagined Frontier Miles loyalty program, and we're seeing positive trends. Memberships and engagements, particularly at elite levels, have increased. We have also observed improved spend on the co-brand credit card. In fact, December spend was up over 10% year-over-year and was the highest level on record.

This represents a four point year over year sequential improvement from the third quarter driven by stabilizing demand trends as we enter into 2024, we are now seeing improving revenue trends better than our earlier expectations and see positive momentum as we transition to our new network and deliver on multiple revenue initiatives, we expect the revenue trends.

Jimmy Dempsey: While it's still early, we expect to see continued improvement in spend throughout 2020. That concludes my remarks, so I yield the call to Mark. Thank you, Jimmy. We generated a pre-tax margin of 0.7% on a gap basis and 0.8% on an adjusted basis in the fourth quarter, well above our guidance range on solid operational performance, as Barry touched on earlier, and cost-related. As a result of our fourth quarter performance, we also generated a pre-tax margin of 0.9% for the full year. Total revenue was $891 million, down 2% compared to the 2022 quarter. Fuel expense was roughly in line with the prior year quarter as the 12% benefit from lower fuel prices and 3% improvement in our industry-leading fuel efficiency to 105 ASMs per gallon was offset by the increase in consumption from capacity growth of 15%. Fuel expense for the quarter reflects an average cost per gallon of $3.18, which was slightly below the low end of our guidance.

It continued to show positive year over year sequential improvement.

We carried a record $8 1 million passengers during the quarter with a 99, 5% completion factor as well on time arrivals and departures in December were our highest since 2015.

Excluding the pandemic year of 2020 during.

During the quarter as Barry mentioned, we made steady progress toward our objective to increase the percentage of Aetna back flying.

Clearly the announcement of four new crew bases of Cleveland, Cincinnati, Chicago, and San Juan Puerto Rico. The Cleveland base is expected to open in March and will employ 110 pilots and 255 tenants in its first year. The Cincinnati basis is scheduled to open in May and will employ 80 pilots and 160 flight attendants, while the Chicago base will serve both O'hare and midway.

Unemployed 110 pilots along with 200 flight attendants already base there.

Finally, San Juan will be our 13th crew base and will employ 90 pilots in 200 <unk> in its first year.

We've been the fastest growing airline in Puerto Rico more than doubling seat capacity since 2019, and offering 14 nonstop routes from San Juan alone, Puerto Rico is playing a key role in our Caribbean and Latin America growth strategy, not only because it's a popular tourist destination, but large populations of Puerto Rican reside in the U S mainland and they frequently traveled to the island to visit friends and family.

Mark Mitchell: Adjusted non-fuel operating expenses in the fourth quarter totaled $590 million, or $0.059 per ASM, 8% lower than the prior year. The improvement in Adjusted Chasm Excluding Fuel was driven by a $36 million lease return cost benefit during the quarter from the execution in December of an extension of four A320CO aircraft leases that were otherwise scheduled to return in 2024. Moving forward, we will continue to be opportunistic with our fleet management, including attractive aircraft lease extension opportunities. Our adjusted non-fuel operating expenses also benefited during the quarter from efficiencies realized across the business, given the strong operational performance and our continued focus on cost. While our fourth-quarter pre-tax income was $6 million, we generated a net loss of $37 million, driven by the recognition of a $37 million non-cashed valuation allowance against our U.S. federal and state net operating loss deferred tax assets, which wasn't contemplated in our effective tax rate guide. Our adjusted net income of $1 million per quarter excludes this adjustment as it's a significant special non-cash loan.

Or to work remotely frontier is well situated to capture a disproportionate share of this volume as we now serve more routes to Puerto Rico from the U S than any other carrier.

Moreover, we recently announced a significant expansion of our network as part of our strategy to grow in higher fare routes. During the second quarter, We launched nonstop service from 38 airports with our largest concentration of routes and visiting friends and relatives markets from Dallas forth Worth Charlotte Raleigh, Durham, Los Angeles, New York Minneapolis, St. Paul on San Juan.

Early last month, we officially launched our re imagined frontier miles loyalty program and we're seeing positive trends memberships and engagements, particularly on elite levels have increased we have also observed observed improved spend on the Cobra branded credit card in fact December spend was over 10% Europe was up over 10% year over year.

And was the highest level on record.

While it's still early we expect to see continued improvement in spend throughout 2020 for that.

That concludes my remarks, so ill yield the call tomorrow.

Thank you Jimmy we generated a pretax margin of 0.7% on a GAAP basis, and <unk>, 8% on an adjusted basis in the fourth quarter, well above our guidance range on solid operational performance as Barry touched on earlier and costs related factors as a result of our fourth quarter performance.

Mark Mitchell: It's important to note that these NOLs generally don't expire and can therefore continue to be used against future taxable income. Given our full-year adjusted pre-tax guidance of 3 to 6 percent, we presently expect to utilize a substantial portion of NOLs this year. Any corresponding reversal to this adjustment as we generate taxable income would also be excluded for non-GAAP. We ended the year with $609 million of unrestricted cash and cash equivalents and $139 million net of taxes.

We also generated a pre tax margin of <unk>, 9% for the full year.

Total revenue was $891 million down 2% compared to the 2022 quarter fuel expense was roughly in line with the prior year quarter as the 12% benefit from lower fuel prices and 3% improvement in our industry, leading fuel efficiency to a 105% ASM per gallon with us.

Barry Biffle: In addition, we have unencumbered loyalty and brand-related assets, which we believe could generate significant additional liquidity if desired. We had 136 aircraft in our fleet at year-end after taking delivery of four A321neo aircraft and returning two A320ceo aircraft during the course of the year. We expect to take delivery of six A321neos in the first quarter of 2024 and a total of 23 A321neo aircraft in 2024, all of which are anticipated to be financed through sale-leaseback transactions. With that, I'll turn the call back to Barry for closing. Thanks, Mark. Our objective for 2024 is clear. Every member of Team Frontier is focused on executing our network, cost, and revenue initiatives, improving our operational reliability, and delivering an enhanced experience for our customers with a network growth focus on the high-fare VFR market.

That by the increase in consumption from capacity growth of 15%.

Fuel expense for the quarter reflects an average cost per gallon of $3 18.

Which was slightly below the low end of our guidance range.

Adjusted non fuel operating expenses in the fourth quarter totaled 590 million or five nine per ASM, 8% lower than the prior year quarter. The improvement in adjusted CASM, Excluding fuel was driven by a $36 million lease return cost benefit during the quarter from the.

<unk> in December of an extension of four <unk> hundred 20 aircraft leases that were otherwise scheduled to return in 2024.

Moving forward, we will continue to be opportunistic with our fleet management, including attractive aircraft lease extension opportunity.

Our adjusted non fuel operating expenses also benefited during the quarter from efficiencies realized across the business given the strong operational performance and our continued focus on costs.

Barry Biffle: Alongside our commitment to remain the lowest-cost provider in the United States, I'm confident these measures will drive higher margins in the business. Thanks, everyone, for joining the call today, and we will now open up for questions. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again and wait for one moment while we compile our Q&A roster. And our first question comes from Dwayne Fenningsworth of Evercore ISI. Hey, good morning.

While our fourth quarter pretax income was $6 million, we generated a net loss of $37 million driven by the recognition of a $37 million noncash valuation allowance against our U S Federal and state net operating loss deferred tax assets, which wasn't contemplated in our effective tax rate.

<unk>.

Our adjusted net income of $1 million for the quarter excludes this adjustment as it is a significant special noncash item.

It's important to note that these Nols generally don't expire and can therefore continue to be used against future taxable income given our full year adjusted pre tax guidance of 3% to 6%. We presently expect to utilize a substantial portion of Nols this year.

Dwayne Fenningsworth: Just on the unit cost guidance, can you give us some thoughts on how we should think about stage length this year? Or is there a way to maybe convert the guide to kind of a nominal unit cost guidance? And just, just broad strokes, what would the underlying kind of tailwinds and headwinds be from a unit cost perspective? Well, so Dwayne, I think what's important to know is our stage is going down. So I think to be intellectually honest, that's why we're pinning it to a thousand miles, and we expect to be down one to three percent on a stage adjusted basis. But we expect it to be closer to nine hundred for the year.

Any corresponding reversal to this adjustment as we generate taxable income would also be excluded for non-GAAP purposes.

We ended the year with $609 million of unrestricted cash and cash equivalents and $139 million net of total debt.

In addition, we have unencumbered loyalty and brand related assets, which we believe could generate significant additional liquidity if desired.

Barry Biffle: Okay. Yeah, just maybe broad stroke the underlying kind of tailwinds and headwinds year over year. Yeah, so when you look at that guidance for the full year, I mean, that is underpinned by, you know, the network simplification that we've touched on in getting our out-and-back flying to over 80%. You know, that is going to drive the 200 million dollars of annual run rate cost savings that we expect to have fully implemented by the end of the year. You know, additionally, as we go through the year, you know, the 23 aircraft that we're taking delivery of, you know, those are 321 NEOs, so you'll continue to get, you know, the gauge benefit there, and so, you know, I think those are, you know, the main drivers of the, you know, the 1 to 3%, you know, down, you know, in the chasms.

We had 136 aircraft in our fleet at year end after taking delivery of four <unk> hundred 21, Neo aircraft and returning to <unk> hundred 20 aircraft during the quarter, we expect to take delivery of six <unk> hundred 21 Neo is in the first quarter of 2024 and a total of 23 <unk> hundred 21 Neo aircraft and two.

<unk> thousand 24, all of which are anticipated to be financed through sale leaseback transactions.

With that I'll turn the call back to Barry for closing remarks. Thanks.

Thanks, Mark our objective for 2024 clear every member of team Frontier is focused on executing our network cost and revenue initiatives, improving our operational reliability and delivering an enhanced experience for our customers, where the network growth focus on high fare VFR markets.

Alongside our commitment to remain the lowest cost provider in the United States I am confident these measures will drive higher margins in the business. Thanks, everyone for joining the call today, and we will now open up for questions.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again and one moment, while we compile our Q&A roster.

Barry Biffle: Okay, appreciate those thoughts. And then, I'm sure you get the question a lot as a team, maybe it's Barry, maybe it's Jimmy, but to the extent that Spirit becomes available again, can you just gauge your interest or to the extent you'd be tempted to re-engage there? Is there any price on the equity where it would make sense from your perspective? Thanks for your thoughts. Thanks, Dwayne. It's the first time I've been asked that question. We are 100% focused on our business and delivering profits for our shareholders. I'm so sorry, but we don't have anything entertaining to talk about.

Yes.

Thank you Scott.

Great.

Okay.

And our first question comes from Duane <unk> of Evercore ISI.

No.

Hey, good morning.

Just on the unit cost guidance can you give us some thoughts on how we should think about stage length. This year.

Or is there a way to maybe convert the guide to kind of a nominal.

Cost guidance and just just broad strokes, what would the underlying kind of tailwind and headwinds be from out from a unit cost perspective.

So Duane I think what's important nodes are stages going down so I think to be intellectually honest. That's why we are pinning it to a 1000 miles and we expect to be down 1% to 3% on a stage adjusted basis.

Dwayne Fenningsworth: Very clear. Thank you. Thank you. One moment for our next question. And our next question comes from Savvy Smith of Raymond James. Hey, good morning.

But we expect it to be closer to 900 for the year.

Yes, okay.

Savvy Smith: I was kind of curious what your thoughts were as you kind of roll forward this network change, you know, where utilization would go, and along those lines, I think, you know, how the pilot trends are looking in terms of being able to meet the utilization target. Well, I'll talk about the pilots, and I'll let Mark talk about the utilization, but on the pilot side, we've seen a dramatic change in the marketplace. I think, I mean, you've seen the regionals looking at this, and I think when you see the regionals being able to be staffed, it tells you everything you know about the shortage of pilots, so we don't see any challenges there. And then, yeah, and then relative to utilization, you know, so, you know, in the fourth quarter, we delivered 11.3 hours on a total system basis.

Okay got it.

Yeah, No just just maybe broad strokes the underlying kind of tail.

<unk> and headwinds year over year.

Yes, so when you look at that guidance for for the full year I mean that is underpinned by the network simplification that we've touched on and getting out and back flying to over 80% that is going to drive the $200 million of annual run rate cost savings that we expect to have fully implemented.

By the by the end of the year. Additionally, as we go through the year.

23, aircrafts that were taking delivery of those are 321, neo so youll continue to get the gauge gauge benefit there and so I think those are the main drivers of the 1% to 3% down.

And then the CASM stage length adjusted.

Okay I appreciate those thoughts and then I'm sure you get the question a lot.

Barry Biffle: As we progress with the network simplification, we expect the utilization to increase as we go through the year, and we'll continue to push to drive that. Appreciate that. And if I might just clarify a question on doing color, any kind of labor cost increases in the 2024 guide? I know you mentioned it is contemplated in the 2025 outlook. No, these just opened.

As a team maybe it's Barry maybe it's Jimmy but to.

To the extent that spirit becomes available again.

Can you just gauge your interest or to the extent you'd be.

Attempted to Reengage, there or is there any price on the equity where it would make sense from your perspective, thanks for your thoughts.

Thanks, Duane is the first time I've been asked that question.

We are 100% focused on our business and delivering profits for our shareholders I am so sorry.

Savvy Smith: I know a lot of people that have been open for multiple years are starting to include it. We didn't include it in 24, but we have included it for... Thank you. Thank you. One moment for our next question. And our next question comes from Ravi Shanker of Morgan Stanley. Good morning, everyone. This is Catherine on behalf of Ravi.

We don't have anything in entertaining to talk about.

Very clear thank you.

Thank you one moment for our next question.

Yeah.

And our next question comes from Savi Smith of Raymond James.

Hey, good morning.

I was kind of curious what your thoughts are as you cannot roll forward. This network changes.

Where utilization with go and along those lines I think.

Catherine: Thank you for taking my question. About six months ago, at our Laguna Conference, you kind of talked about structural pressures from ATC and plane restrictions, which it sounds like you are expecting deliveries of. But I was just curious what the lay of the land is today. Have those pressures eased? Are you trying to work around them?

How the pilot trends are looking at in terms of being able to can meet the utilization target.

Well I'll talk about the pilots and I'll, let mark talk about utilization, but on the pilot side, we've seen a dramatic change in the marketplace I think you've seen the regionals looking at this and I think when you see the regional as being able to be staffed I think that tells you everything we know about the about the shortage of pilots. So we don't see any challenges there.

Barry Biffle: You know, is there an opportunity for a bigger reset in the operating model to kind of deal with the current environment? Yeah, no, thanks for the question. I mean, you know, we don't expect the situation to change.

I just talked about and then yes, and then relative to the utilization. So in the fourth quarter. We delivered a 11 three hours on a total system basis as we progress with the network simplification, we expect the utilization to increase as we go through the year and we will continue to push to drive that.

Catherine: I think the weather's been a little kinder to the industry, but we do continue to see kind of hints of these, you know, extended ground delay programs. So I think the next test is probably President's Day weekend. Then you've got all the weekends through the spring break season and Easter.

That higher.

I appreciate that and if I might just a clarification question on <unk>.

Color.

So limited labor.

Cost.

Any kind of labor cost increases in the 2024 bed I know you mentioned it is contemplated in the 2025 outlook.

Barry Biffle: Particularly, you have to watch Florida and what that does to ground delay programs. But we are not waiting for the situation to change to improve our trajectory. We are taking control of the situation, and we are designing our schedule around these issues and expect them to continue through the spring and summer. And, you know, when we look at last year, we had several percent of our flights that were canceled in the summer. And the majority of those, like 90 percent, were related to multi-day trips. And so we have to change the network to ensure that we combat these challenges and overcome the reliability issues.

No. These just opened I know a lot of people that have been opened for multiple years are starting to include it. We didn't included in 'twenty four but we have included <unk> 25.

Okay. Thank you.

You.

Thank you one moment for our next question.

Yeah.

And our next question comes from Ravi Shanker of Morgan Stanley.

Good morning, everyone. This is Katherine on for Ravi. Thank you for taking my question.

About six months ago at our Laguna Conference you kind of talked about structural pressures from ATC and plain restrictions, which it sounds like you are expecting deliveries, but I was just curious what the lay of the land is today have those pressures eased are you trying to work around them.

Jimmy Dempsey: But we feel really good about it because if we make everything look like the out and back that we had, we expect to continue to improve our reliability as we've seen in recent months. Got it. Thank you. And just as a quick follow up, I was curious how close bookings are trending. I know there was kind of a slight drop off last Labor Day. So any color on what you think normal behavior might look like?

Is there an opportunity for a bigger reset and operating model to kind of deal with the current environment.

Yeah no. Thanks for the question.

We don't expect the situation to change I think the weather has been a little more more kind to the industry.

But we do continue to see kind of hints of these.

Attended ground delay programs. So I think the next test is kind of Presidents' day weekend, and then you've got all the all the weekends through the spring break season, and Easter, particularly you have to watch, Florida, and what that does to ground delay programs, but we are not waiting for the situation to change to improve our our trajectory we are taking control.

Jimmy Dempsey: Thanks for the question. Yeah, Jimmy kind of alluded to this. We'll let him answer that question.

Jimmy Dempsey: Sure. Look, like what we've seen over the last kind of four or five months is a bottoming of the booking trajectory in the early part of Q4, the back end of Q3. And we've seen it, as I mentioned in the prepared remarks, transition to an improving revenue market as we progress through Q1. And so we're actually quite encouraged by what we see.

The situation and we are designing our schedule around these issues and expect them to continue through the spring and summer and when we look at last year. We added several percent of our of our flights that were canceled in the summer and the majority of those like 90% were related to multi day trips.

Jimmy Dempsey: We're obviously working very hard internally in terms of restructuring the network. That's providing a significant improvement as you progress through March, April, May, and June. And also, you're seeing very strong demand in the short term, improving close-end pricing. So, you know, built into our guide is a sequential improvement over the last few quarters on our unit revenue. Thank you.

And so we have to change the network to ensure that we combat these challenges and overcome the reliability issues. So, but we feel really good about it because if we make everything look like the outback that we had we expect to continue to improve our reliability as we've seen in recent months.

Got it thank you and just as a quick follow up I was curious how close in bookings are trending I know there was.

Brandon Robert Oglenski: One moment for our next question, and our next question comes from Brandon Oglenski of Barclays. Hey, good morning, everyone.

Kind of a slight drop off less labor day, so any color on what you think normal behavior might look like thanks for the questions.

Jimmy Dempsey: Thanks for taking the question. Jimmy, maybe if we can follow up there. I would assume that you have some acceleration built into your 2Q revenue outlook. Is that what you're seeing in the bookings? And can you compare and contrast that with the Easter holiday timing?

Yes, Jimmy kind of alluded this will let him answer that question sure.

Like what we've seen over the last kind of four or five months is it.

<unk>.

Booking trajectory in the early part of Q4 by the end of.

Brandon Robert Oglenski: Not to be too near term here, but I guess it must be the network changes you're making that you're seeing positive improvements. Is that correct? Yes, I mean, if you look at the announcements we've made recently, you see a big network shift happening in March, April, May, June, and that network shift is driving a significant improvement in our revenue outturn. One of the things that we're focused on is entering a bigger revenue pool, but also in markets that have higher fares, and so that is giving us a better revenue outcome that we're seeing across the business. It's early in the morning.

Q3, and we've seen as I mentioned in the prepared remarks, we've seen it transitioned to an improving revenue markets as we progress through.

Q1, and so we're actually quite encouraged by what we see.

Obviously, working very hard internally in terms of restructuring the network thus providing.

Significant.

Improvement as you progressed through March April May and June.

And also youre seeing very strong demand in the short term.

Improving close in pricing so built into our guide is a sequential improvement over the last few quarters.

Jimmy Dempsey: The big network shift happens during March, April, May, and June, as I said, and so we'll see that progress, but the early signs are very, very good. Obviously, Easter comes back, as you mentioned, into this quarter, and we've got to deal with that overall. That's positive for this quarter, although obviously, it's out of April.

On our on our unit revenues.

Thank you.

Thank you one moment for our next question.

And our next question comes from Brandon <unk> of Barclays.

Hey, good morning, everyone. Thanks for taking the question Jamie maybe if we can follow up there so I.

I would assume that you have some acceleration built into your <unk> revenue outlook is that what youre seeing in the bookings and can you compare and contrast that with Easter.

Jimmy Dempsey: But we think some of the changes we're making actually will drive longer-term support for growth in the business, particularly around utilization off-peak periods where we're entering more VFR markets. And I guess the anticipated improvement into 2Q and 3Q, just from where you are in the first quarter, is more of it commercial or revenue based? Or is it also, you know, the expectations that your costs can come down, you know, and maybe a more controllable operating environment this summer? Well, yes.

Easter holiday timing not to be too near term here, but I guess it must be the network changes you are making that you are seeing the positive improvements is that correct.

Yes, yes.

If you look at the announcements we've made recently Youll see a big network shift happening March April May June.

And that network shift has dropped is driving significant improvements in our revenue and our revenue I'll turn like one of the things that we're focused on is entering a bigger revenue pool, but also actually in markets that have higher fares and so that is giving us.

<unk>.

Better revenue outcome that we're seeing across the business. It's early.

The Big network shift happens during March April May and June as I said, and so we will see the progress but the early signs are very very good at.

Jimmy Dempsey: I mean, look, part of the guide today is clearly that our costs are on a very good trajectory. They're on a different trajectory from the entire industry, where our unit costs are actually coming down. Obviously, we staged it adjusted to 1,000 miles just to give you a fair comparison.

Easter comes back as you mentioned into this quarter.

And we've got to deal with that overall, that's positive for this quarter. Obviously, it's out of April but we think some of the changes, we're making actually will drive longer term.

Jimmy Dempsey: That's a really good thing. We're working very hard in the business to extract a significant amount of cost out. A lot of that is driven by the network shift that we're doing. That helps the business. But what we're doing is trying to improve sequential revenue as you progress through this year. Clearly, year over year, as you get into the second half of this year, you have an easier comp from a unit perspective.

<unk> for growth in the business, particularly around utilization off peak periods, where we're entering more VFR markets.

So.

And I guess anticipated in that improvement into <unk> and <unk> just from where you are in the first quarter is more of it commercial revenue base or is it also the <unk>.

Expectations that your cost can come down.

And maybe a more controllable operating environment this summer.

Jimmy Dempsey: But what we're seeing at the moment gives us a lot of hope or optimism around the improving revenue environment as you progress through this. Okay, thank you.

Well, yes, I mean look part of the guide today is clearly our costs are on a very good trajectory there on a different trajectory to the entire industry, where our unit costs are actually coming down obviously, we stay so just the 2000 miles just to give you a fair comparison.

Michael John Linenberg: Thank you. One moment for our next question. And our next question comes from Michael Linenberg of Deutsche Bank. Oh, hey, good morning, everyone.

That's a really good thing we are working very hard on the business on on extracting significant amount of cost out. That's a lot of that is driven by the network shift that we're doing that helps the business, but what we're doing.

Barry Biffle: Hey Jimmy, I think on the last call, you talked about some of the potential issues that you could have later in the year with the GTF. And I know you had indicated that it was somewhat fluid and you were in conversations with Pratt. Do you have a better sense about, you know, any potential groundings that we might see later this year? If at all, it's a 2024 event. Yeah, Mike, this is Barry. You know, we expect no financial impact from the GTS.

Yes.

Trying to improve sequential revenue as you progress through this year clearly year over year as you get into the second half of this year you have an easier comp from a from a unit perspective, but.

But what we're seeing at the moment gives us a lot of hope on Optum.

Optimism around the improving revenue environment as you progress through this year.

Okay. Thank you.

Okay.

One moment for next Gen.

And our next question comes from Michael Lindenberg of Deutsche Bank.

Oh, Hey, good morning, everyone, Hey, I think on the last call Jimmy you talked about.

Michael John Linenberg: Okay, good. And then, Barry, since I have you on my second, when I look at your network and I look at some of the routes that you do fly to, I know you've talked up VFR, but there are some markets that you're in where you actually have, you know, a decent presence in what I would characterize as business markets. I know in the past, you did cater to some price sensitive customers on the business side, maybe it was 5%, maybe it was 10%. But I'm only bringing this up because when I look at one of your recent offerings, some of your product offerings, there is a bit of a, you know, call it a business-type fare or sort of product that you are rolling out. And maybe that's to take advantage of some of the network changes. Can you talk about that? And maybe, maybe there's some opportunity with your presence in these big markets, you know, Chicago and LA and Atlanta and etc. Transcribed by https://otter.ai. Any thoughts on that would be great.

Some of the potential issues that you could have later in the year with the GTS.

And I know you had indicated that it was somewhat fluid and youre in conversations with Pratt do you have a better sense about any potential groundings that we see later this year if at all into 2024 event.

Yes, Mike This is Barry we expected financial impact.

We expect no financial impact from the GTS.

Okay. Good and then Barry since I have you on my second.

When I look at your network and I look at some of the routes that you do fly too I know you've talked up VFR.

There are some markets that you're in where you actually had decent presence in what I would characterize as business markets I know in the past you did cater to some price sensitive on the business side, maybe it was 5% maybe it was 10%.

But im only bringing this up because.

When I look at one of your recent offerings. Some of your product offerings, there is a bit of a.

Call It a business type fair or sort of product.

That you are rolling out and maybe take advantage of some of the network changes can you talk about that and maybe maybe theres some opportunity with with your presence in these big markets, Chicago and L. A and Atlanta et.

Et cetera.

Barry Biffle: Thanks for taking my question. Sure. So look, I mean, we're not making a major strategy shift to go after business. I mean, historically, we've been in the mid-single digits for business travel, and the majority of those, we believe, are small businesses.

Any thoughts on that would be great. Thanks for taking my questions.

Sure. So look I mean, we.

We're not making a major strategy shift to go after business I mean is historically, we've been in the mid single digits.

For business travel.

Geordie of those we believe are small business, but yes, we've heard from our customers they would like to see.

Michael John Linenberg: But yes, we've heard from our customers. They would like to see kind of a bundled fare available through third-party channels. It's something we haven't had in the past, and so we have launched the biz fare, which includes, you know, a bag, a carry-on bag. It includes premium economy seating, if it's available, as well as flexibility, no change, and cancel fees. So it's a great product for small businesses. It saves them money. Obviously, we don't have the frequency that the big airlines do, but I think for some people that want to save money, it's a great product. But we just didn't have anything.

Kind of a bundled fare available through third party channels, that's something we haven't had in the past and so we have launched the bus fare which includes.

Our bag carry on bag and includes.

Actually premium economy seating, if it's available as well as flexibility no change cancel.

Cancel fees so.

It's a great product for small businesses saves them money.

Obviously, we don't have the frequency.

The Big Airlines do but I think for some people that want to save money.

It's a great product, but we just didn't have anything if they did have a managed travel.

Barry Biffle: If they did have a managed travel partnership with a travel agency, we just didn't have a solution for them, and now we do. And so, look, you know, you can kind of do the math. If you just get a few points of this at, you know, 30 to 50 percent higher fares, it's a great way to diversify our revenues and improve our overall reputation. Very good.

Our partnership with the travel agency, we just didn't have a solution for them and now we do and so.

You can kind of do the math if you just get a few points of this at 30% to 50% higher fare.

It's a great way to diversify our revenues and improve overall RASM.

Very good thank you.

Michael John Linenberg: Thank you. Thank you. One moment for our next question, and our next question comes from Scott Group on Wolfe. Hey, thanks. Good morning.

Thank you one moment for our next question.

And our next question comes from Scott Group of Wolfe.

Great. Thanks, Good morning, So I wanted to just go back to the fourth quarter for a second just on the cost side. So if you look at just cost X fuel third quarter was 645 million fourth quarter dropped to $590 million and then the Q1 guide it goes right back to 650 so.

Scott H. Group: So I want to just go back to the fourth quarter for a second just on the cost side. So if you look at just cost x fuel, the third quarter was $645 million, the fourth quarter dropped to $590 million, and then the Q1 guide, it goes right back to $650. So, any help on what happened in Q4? Scott, to give you the broad strokes on Q4, that $590,000, as I highlighted in the previous remarks, includes the $36 million benefit from the four A320 sealed lease extensions that will be executed. If you adjust for that, you're at $626,000.

Any help on what happened in Q4.

Yes, so Scott to give you the broad strokes on Q4, right. So that $5 90 as I highlighted in the prepared remarks includes the $36 million benefit from the four <unk> hundred 20, <unk> lease extension that we executed if you adjust for that right here at $6 26.

Mark Mitchell: From there, you know, looking at that number to, you know, what we're guiding for the first quarter, that takes into consideration the seasonality that comes to play in Q1, so payroll tax-related seasonality, de-icing, you've got a growing fleet as well, those additional costs, so at the end of the day, I think that's the walk from Q4 and then into Q1. Okay, that's helpful. And then can you just talk about, I know you said you're assuming improving RASM throughout the year, just what maybe your overall sort of RASM growth expectation is and just how to think about, right, the cadence of margins from down four to seven percent in Q1 to down to up, you know, three to six percent for the year.

Yes.

From there looking at that number to where.

What we're guiding.

In the first quarter that takes into consideration the seasonality that comes to play in Q1, right. So payroll tax related seasonality Deicing I mean, you've got a growing fleet.

As well right and so those additional costs so.

The end of the day I think thats the the walk from Q4.

Q1.

Okay. That's helpful. And then can you just talk about I know you said, you're assuming improving RASM throughout the year, just what maybe what your overall sort of RASM growth expectation is and just how to think about right.

The cadence of margins from down 4% to 7% in Q1 to down to up 36% for the for the year I just want to understand like where do you think you are ending the year on a margin run rate.

Mark Mitchell: I just want to understand where you think you're ending the year on a margin run rate. We don't actually guide RASM, but look, I think you can look at the initiatives that we've talked about and kind of play those out. They continue to roll out as we move through the year. So you would obviously expect the cadence of that to be that you will continue to see more creative RASM improvement as you move through the year, as the initiatives mature and go out. I mean, you take the Biz Fair, for example, that we just talked about a moment ago. We just launched it last week.

Yes, we don't actually guide RASM, but look I think you can look at the initiatives that we've talked about and kind of play those out they continue to roll out as we move through the year. So you would obviously expect the cadence of that is that you will continue to see more accretive.

<unk> improvement as you move through the year as the as the initial.

<unk> mature and go out and you take the bus fare for example that we just talked about a moment ago. We just launched it last week.

Scott H. Group: I mean, we're starting to discuss with certain corporations, you know, getting it on their shelf and getting there. But, you know, there are just a lot of different paths to revenue diversification that we're focused on, but they all have slightly different timings as we move through the year. I mean, I guess ultimately what I'm trying to get at is where we are going from a margin perspective the rest of this year because I'm trying to get to 10 to 14% next year with labor. So just anything you could do just to sort of help on the bridge.

We're starting to discuss with certain corporations getting it on their shelf.

And getting there, but there's just a lot of different paths to revenue diversification that we're focused on but they all have slightly different timings as we move through the through the year.

And then I guess ultimately what I'm trying to get at is where are we.

Going where are we going from a margin perspective, the rest of this year, because I'm trying to get to 10% to 14%.

Next year with labor so just.

Anything you can do just like to sort of help on the on the bridge.

Mark Mitchell: We've given you the first quarter, and we've given you our year, so you can kind of, well, we didn't break out quarters two through four, you can kind of do the algebra to figure out what it takes to hit that number. And I think if you take that into the second half of the year, you will see that the run rate of that delivers well against 2025. And then keep in mind as we deliver on the network simplification plan and the revenue initiatives and cost initiatives that are there, and you move into 25, you're getting the full year benefit, right, of all of those items that are being put in place in 24. So I mean, I think that's important to note as you consider 25 versus 24.

But we've given you the first quarter and we've given you our year. So you can kind of while we didnt break out quarters. Two through four you can kind of do the algebra to figure out what that takes to hit that number and I think if you. If you take that into the second half of the year you will see that the run rate of that is delivered well against 2025.

And then keep in mind as you look at 24 and as we deliver on the network simplification plan and the revenue initiatives and cost initiatives that are there and you move into 'twenty five youre getting the full year benefit of all of those items that are being put in place in 24 hours I mean, I think that's important to note as you consider 25 versus 24.

Scott H. Group: Okay, thank you. Thank you. One moment for our next question. And our next question comes from Steven Trent of Citi. Good morning, gentlemen, and thanks for taking my time, excuse me, taking the time to answer my questions.

Got it okay. Thank you.

Thank you one moment for our next question.

Okay.

Okay.

And our next question comes from Stephen Trent of Citi.

Okay.

Good morning, gentlemen, and thanks for taking my time excuse me, taking the time to answer my questions.

Steven Trent: I was wondering just on a, from a clarification perspective, could you refresh my memory, maybe this is a question for Mark, if you guys will be including any sale leaseback gains in OPEX. Thank you. Yes, I mean, we have consistently and. Any sort of high-level view, sort of a ballpark on where that could end up for this year, for example? We don't call that out, but I think the best thing to think about, Stephen, is that the reason why it's there is because had we debt financed, it's the most fair way to compare it. So they get the benefit on the debt financing side. We get it through the sale-leaseback scheme, but we don't actually call that specifically out, but it would be similar to people who have deafness.

I was wondering just from a clarification perspective could.

Could you refresh my memory, maybe a question for markets.

You guys will be including any sale leaseback gains.

And opex. Thank you.

Yes, I mean, we have consistently.

Consistent practice in the past and as we go forward sale leaseback gains are a credit to operating expenses.

And any sort of high level view sort of a ballpark on.

Where that could end up for this year for example.

We don't call that out, but I think I think the best thing to think about Steven is that the reason why it's there because had we debt financed its the most fair way to to compare it so they get the benefit on the debt financing side, we get it through the sale leaseback, but.

We don't actually call that specifically out.

But it wouldn't have nowhere to people that have that.

Mark Mitchell: I mean, the P&L impact would be similar to those who have deafness... Yeah, no, it makes sense. I know. I appreciate that. And just one last question. I know there's a sort of cross-border view; you have one of your competitors having its code share with a Mexican carrier potentially getting not renewed by the Department of Transportation. You know, how are you guys thinking about your relationship with Volaris in that regard?

<unk> impact will be similar to those who definitely.

Yes, no it makes sense makes sense.

That's great and just one last question I know there is.

And that sort of cross border view.

You have one of your competitors having.

It's co.

Codeshare with a Mexican carrier potentially getting.

Not renewed by the department of Transportation, how are you guys thinking about your relationship with Valores.

Steven Trent: Thank you. We're really excited about our partnership with Volaris. It's been disappointing, obviously, given the challenges over the last few years and their category that we haven't been able to exploit that partnership. But we're excited to get that back on this year.

Regard thank you.

We're really excited about our partnership with Valores, it's been disappointing obviously.

Given the challenges over the last few years.

In their category that we haven't been able to exploit that partnership but we're excited to get that back turned on this year.

Barry Biffle: And we expect to do great things with it. We're larger now. We have a greater brand presence.

And we expect to do great things with it where larger now we have a greater brand presence, we have more distribution power coming.

Barry Biffle: We have more distribution power coming, but, you know, we're seeing them growing as well and in their position. But, you know, we never had ATI with Volaris.

But.

We're seeing them growing as well in their position, but we never had ATI with with with Polaris is just a true partnership.

Barry Biffle: It's just a true partnership where we have a co-chair and an overall marketing partnership. So we're excited to get it turned on. And I guess, you know, if you think about it, I guess we'll have a little bit more of a level playing field if what they're saying comes through. Okay, appreciate it, Barry.

We have a codeshare in overall marketing partnership so we're excited to get it turned on and I guess, if you think about it I guess, we will have a little bit more of a level playing field.

What they are saying it comes through.

Okay I appreciate it Barry Thank you.

Barry Biffle: Thank you. Thank you. One moment for our next question, and our next question comes from Conor Cunningham of Melius Research. Hi, everyone.

Thank you one moment for our next question.

And our next question comes from Conor Cunningham of Melius research.

Conor Cunningham: Thank you. Just back to the underserved markets and all the changes that you're making there. It seems like you're indicating that a lot of this stuff is unit revenue accretive, which is a bit surprising to some of us. Is the brand and the fares just being that well received? Historically, you would think of a spooling period being like over a year, two years.

Hi, everyone. Thank you just just back to the underserved markets and all the changes that youre, making there it seems like you're indicating that but a lot of this stuff is the unit revenue accretive.

<unk> is a bit surprising to some of us.

The brand and the fares just being that well receive it historically you would think of as Spooling period being like over a year or two years. So just any thoughts around on what's being on why the success so far.

Barry Biffle: So just any thoughts on why the success so far? I think if you, in the normal course, I think those assumptions are correct, but having been a part of, and many more. So when you're not doing well financially on those, the redeployment, in many cases, is almost immediately aggrieved when you move to better market opportunities. I mean, I'll give you an example.

I think if you in normal course, I think those assumptions are correct, but having been a part of.

Processes like this over the last 30 years I think you have to consider that where we're pulling this capacity from as a negative opportunity cost. So when you are not doing well financially on those the redeployment in many cases is almost immediately accretive when you move to better better market opportunities.

Conor Cunningham: If you're flying something four times a day, and the fourth frequency didn't add any more revenue, but you had all this cost, moving that frequency somewhere else, that gain to the network is 100 percent incremental. Okay, that's helpful. Makes sense. And then, on all these new products that you're talking about, BizFair Premium Economy, and all the loyalty changes, you know, I was just wondering if you could probably give some context to just the contribution. You're talking about a seven point improvement in pre-tax margins. So what portion of these new products is what's occurring in 2025? Thank you. Yeah, I appreciate the question, but we haven't actually broken that out in detail, but I can tell you the majority of the benefit, both this year and next year, is going to come from the network and the shift to VFR flying and away from the oversupplied leisure markets.

I'll give an example, if you're flying something four times a day in the fourth frequency didn't add any more revenue, but you had all this cost moving that frequency somewhere else that gain to the network as 100% incremental.

Okay.

That's helpful. It makes sense and then on all these new products that youre talking about base fare premium economy, and they'll call the loyalty changes.

I was just wondering if you could probably if you could give some context to just the contribution you're talking about a seven point improvement in pre tax margin. So what portion of these new products is what's occurring in 2025.

Yeah. Appreciate the question, but we haven't actually broken that out.

In detail, but I can tell you the majority of the benefit of both this year and next year is going to come from the network.

And the shift to the VFR flying and away from the oversupplied leisure markets and then each one of the others.

Conor Cunningham: And then each one of the others, you know, are smaller contributions. We haven't expected huge things from the biz fair, for example. We think that takes a while to mature. Obviously, the frequent flyer things take time to mature, but the early signs are fantastic, right? I mean, you know, as Jimmy mentioned earlier, you just take the credit card spend alone.

Our smaller contribution we haven't expected huge things from the <unk>. For example, we think that it takes a while to mature.

Obviously, the frequent flyer things take take tonnage mature, but early signs are fantastic right.

Jim You mentioned earlier, you just take the credit card spend alone.

Barry Biffle: I mean, within a month of launching it, the spend's up over 10% year over year, so that's just huge. So, but sorry, we're not giving a breakdown of each one of those. It's all good.

Within a month of launching it at the spins up over 10% year over year, So which is just huge.

Sorry, we're not giving a breakdown of each one of those components.

Conor Cunningham: Thank you. Thank you. One moment for our next question. And our next question comes from Andrew Didora of Bank of America. Hi, good morning, everyone.

It's all good thank you.

Thank you one moment for our next question.

And our next question comes from Andrew <unk> of Bank of America.

Hi, good morning, everyone.

Andrew George Didora: You know, Barry, I know your back half margins are going to look drastically better than what's coming through in one cue. But maybe going back to Scott's question, can you just provide a little bit more color on sort of the bridge on how you get from the back half margins to your 2025 goal? And I guess, you know, what kind of headwinds are you assuming from labor? You know, how are we thinking about, you know, kind of incremental revenues? Any color you can provide on kind of bridging back half 24 to 25 margins would be very helpful for folks. Sure. Look, as I said a while ago, we've given you the first quarter, and we've given you the year, so you can do the simple algebra and solve for x to figure out what that has to be.

I know your back half margins are going to luck drastically better than what's your what's coming through in <unk>, but maybe maybe going back to Scott's question can you just provide a little bit more color on sort of the bridge on how you get from back half margins to your 2025 goal and I guess what.

Kind of what.

What kind of headwinds are you assuming from labor how are we thinking about kind of incremental revenues any any color you can provide on kind of bridging back half 'twenty four 'twenty five margins I think would be very helpful for folks.

Sure.

As I said while ago, we've given the first quarter. We began the year. So you can you can do the simple algebra and sulfur acts to figure out what that has to be obviously as we've discussed the diversification of the revenue has multiple components that actually unfold through through the year and so obviously that will have better greater benefit in six months from now that it.

Barry Biffle: Obviously, as we've discussed, the diversification of revenue has multiple components that actually unfold through the year. And so obviously, that will have a better, greater benefit six months from now than it will two months from now. And so I think when you play that out, and then you annualize that in the back end into 2025, you can easily cover what we expect to be somewhere in the round of a quarter of a penny for the headwind of our labor deals. But we believe that we can solidly get back to the 10 to 14% range for 2025 as a result. Okay, got it. Mark, just the $36 million benefit you had in 4Q from the lease extensions, does this just go away? How long were these leases extended for?

Two months from now and so I think when you play that out that actually and you annualize that in the back end into 2025.

Can easily cover what will you expect to be somewhere in around a quarter a penny for the headwind of our labor deals.

But.

We believe that we can so I will get back to the 10% to 14% range. After 2025 as a result.

Okay got it Mark.

$36 million benefit you had in <unk> from the lease extensions does this just just go away. How long are these leases extended forward is that 36 million kind of come back in 'twenty five at all how should we how should we think about that.

Andrew George Didora: Does that $36 million kind of come back in 25 at all? How should we think about that? Yeah, yeah. So these are eight-year leases that we extended out, you know, 12 years. And so, you know, that 36 million is out, you know, far into the future. So that's not a, Okay, got it.

Yes, yes. So these are eight year leases that we extended out 12 years, and so that $36 million is out far into the future. So that's not a 25 items.

Mark Mitchell: Thank you. Thank you. One moment for our next question, and our next question comes from James Kirby of JPMorgan Securities. Hey, good morning, guys.

Okay got it thank you.

Yes.

Thank you one moment for our next question.

Yes.

And our next question comes from James Kirby of Jpmorgan Securities.

Hey, good morning, guys.

Andrew George Didora: Just following up with Savi's question earlier about the pilot pipeline. There were media reports earlier last month on just slowing down the training and pushing some out. Is that a function of less flying? Or is that just a function of less turnover? And any color you can share there?

Just following up with <unk> question earlier with the pilot pipeline.

There are many airports earlier last month on just slowing down the training and pushing some out.

Is that a function of what's flying or is that just.

A function of less turnover and any color you can share there.

James Kirby: Yeah, we've seen, thanks for the question, we've actually seen a slowdown in attrition. And so we've seen that coupled with, you know, other, you know, kind of canaries in the coal mine around the industry. So you've just seen a big change in that. And to give you an idea, you know, we needed around 30 pilots, right? And to get those with attrition for the last several years, we generally hire six, right? And so what happens is that if your attrition dries up, you could, because of the timing, it takes, you know, call it six to eight months to get to the full kind of training of a new first officer, then you have training for a captain and kind of create a crew.

Yes, we've seen thanks for the question, we've actually seen against what our earlier expectations were a kind of a slowdown in attrition.

And so we've seen that coupled with other.

Canaries in the coal mine around the industry. So you've just seen a big change in that and so to give you an idea.

We've needed in round numbers around 30 pilots a month right and to get those with attrition for the last several years, we generally hire 60 right and so what happens is that fit that if you. If you if your attrition drives up you could because of the timing it.

It takes six to eight months to get to the full kind of training of our New first officer. Then you have of training of our captain and kind of took greater crew. So if you see a material change in the attrition you could actually very quickly be two to 300 pilots are way too. Many in addition to that we're seeing efficiencies in the outback schedule, which.

Barry Biffle: So if you see a material change in attrition, you could actually very quickly be two, three hundred pilots, way too many. In addition to that, we're seeing efficiencies in the out and back schedule, which is going to actually change, you know, our needs for pilots per airplane. But then I would also add that we have actually, you know, invested significantly in our programs to bring in pilots. So we have a cadet program. We have a rotary transition program for the military. We have our college programs, too.

He's going to actually change kind of our needs of pilots per airplane.

But then I would just also add that we have actually we have.

Invested significantly in our in our programs to bring in pilots. So we have a cadet program. We have a rotary transition program for military we have our college programs and so we just have a really robust.

James Kirby: And so we just have a really robust pipeline, and we're seeing a lot more stickiness with the people. People we've hired in the last, like, year and a half, two years have a much lower attrition rate than people that we hired more than a year and a half ago. And the other thing is we have over 700 cadets in our pipeline right now. So if you just do the math, in cadets alone, we have over two years' worth of supply. So it's, I think the marketplace has changed dramatically in the last one to two years. Got it. That's a great call.

Pipeline and we're seeing a lot more stickiness with the people. So like people we've hired in the last year and a half two years.

We have a much lower attrition rate than people that we hired more than more than a year and a half year and a half ago and the other thing is we have over 700 cadets in our pipeline right. Now. So if you just do the math and cadets alone we have over two years' worth of supply. So it's.

I think the marketplace has changed dramatically in the last one to two years.

Got it that's great color I appreciate that and second question.

Barry Biffle: I appreciate that, Barry. And second question, if I recall correctly, you're prepared to mark; you mentioned competitive pressures, rescinding in certain markets. I just wonder if you can elaborate on what type of markets those are. I believe you mentioned it's not embedded in guidance.

If I recall correctly your prepared remarks, you mentioned competitive pressures.

Spending in certain markets. Just wondering if you can elaborate on what type of markets. Those are I believe you mentioned, it's not embedded in guidance, but.

James Kirby: But is that the trend you see continuing as the year goes on in terms of rational rationalization of capacity? Yeah, look, so we, I mean, so let me be clear. So we've seen some capacity recede against this, by the biggest examples, we saw Spirit leave out of Denver; we've seen capacity against this in Puerto Rico and other places start to recede. And look, we can look at DO just like everybody else can and understand that the fares that some of these carriers were seeing were some of the lowest quartile of their revenue. And the best way to stop losing money is to stop doing things that cost money.

Is that is that trend you see continuing as the year goes on in terms of rational rationalization of capacity.

Yes look so I.

So let me clear so we've seen some capacity receipt against us by the <unk>.

Biggest examples we saw spirit.

Leave out of out of.

Out of Denver, we've seen capacity against this in Puerto Rico, and other places start to recede.

And look we can look at <unk>, just like everybody else can and understand that the fares that that some of these carriers, we're seeing our some of the lowest quartile of their revenue in the best way to stop losing money and start doing things that lose money. So I think people are making rational decisions.

Barry Biffle: So I think people are making rational decisions around the system. We expect people to continue to do that, but we have only captured in our guide the changes that we've seen thus far. But we would expect to see a continued kind of rationalization of oversupply, especially in a lot of these leisure markets.

Round around the system, we expect people to continue to do that but we've only captured in our guide the changes that we've seen thus far but we would expect to see a continued kind of rationalization of oversupply.

Especially in a lot of these leisure markets.

James Kirby: I appreciate the questions. Sure. Thank you. One moment for the next question. And our next question comes from Christopher Sapat. Apostolos S. S. I. G. Thank you, everyone. Good morning.

Got it I appreciate the questions.

Sure.

Thank you one moment for our next question.

Yes.

Okay.

Okay.

And our next question comes from Christopher <unk>.

So Pos Phyllis Sai.

Jay.

Okay.

Christopher Sapat: I guess, Barry, I'm going to try to get to the margin question in a different way. And it's important here, given the change in your network, deemphasizing LAS MCO. But if we take out the benefit of product, which is going to take some time to mature, and we think about the cadence of RASM for this year and for next, you know, ultimately, again, outside of if we just hold product constant, a piece of that or a big piece of that, arguably, is going to be about, you know, where you're flying and how we can argue for or against any sort of, you So my question is, if you could just put a finer point on, you know, where you're growing up.

Thank you everyone. Good morning so.

I guess, Barry I'm going to try to get to the margin question in a different way.

And it's important here given the change here in your network deemphasizing less mgo.

But if we take out the benefit of product, which is going to take some time to mature and we think about the cadence of RASM.

For this year and for next year.

Ultimately again outside of if we just hold product constant.

A piece of that or a big piece of that arguably is going to be about.

Where you are flying and how we can argue for or against any sort of.

Seasonal outperformance et cetera, with respect to yield. So my question is if you could just put a finer point on.

Barry Biffle: And to your point, we can all look at the DO schedules today but want to better understand that. And then, you know, ultimately, as we think about the moving pieces for next year, is that sort of a similar composition in Part B or C? Do you need to make any changes with respect to the aircraft type or anything, insofar as it relates to crew scheduling and the like?

Where youre growing and to your point, we can all look at the dose schedules today, but want to better understand that and then ultimately as we think about the moving pieces for next year.

That.

Sort of a similar composition and part B or C. Do you need to make any changes with this shift with respect to the aircraft type or anything in so far as nuanced around crew scheduling and alike. Thank you.

Christopher Sapat: Thank you. Thank you. So no, we don't expect any change to our aircraft or I think our scheduling is becoming simpler because of what we talked about with the simplification of the network. As far as the markets that we're chasing, I mean, it's very clear. We mentioned this earlier, but, you know, the average fare across the system, so you take all of the markets that we will be flying in this summer. And you look at those markets compared to the same markets last year, and the average fare is up 5%, on the total. So that just tells you that with the new flying, we are chasing significantly higher. I think, you know, the fare is more in the $15 to $20 buck range higher on the things that we're actually going into.

So no we don't expect any change to our aircraft or.

I think our scheduling is becoming simpler because of what we've talked about with the simplification of the network.

As far as the markets that we're chasing I mean, it's very clear I mean, we mentioned this earlier, but.

The average fare across the system. So you take.

All of.

The markets that we will be flying.

And this summer.

And you look at those markets compared to the same markets last year.

And the average fare is up 5% on the total.

So that just tells you that with the new flying we are chasing significantly higher I think the fair is more in the 15 to 20 Buck range higher on the things that we're actually going into so these are significantly higher price markets that we're in today.

Christopher Sapat: So these are, you know, significantly higher price markets than we're into today. The second thing is, I'll point you back to another thing that we said in the slides, is that the revenue pool itself. So the total revenue pool in all of the industries that we fly year over year will be up over 50%. So when you're only growing 12% to 15% and the revenue pool is going up 50%, you need a smaller share of a much bigger pie. So it just kind of really de-risks the business in a big way. And I think, you know, it kind of lowers competitive friction if you think about it.

Second thing is I'll point, you back to another thing that we said in the slide is that the revenue pool itself. So the total revenue pool and all of the industry.

That we're flying year over year will be up over 50%.

And so when you're only growing 12% to 15% in the revenue pool is going up 50, you need a smaller share of a much bigger pie.

Kind of really de risks the business in a big way and I think it kind of lowers competitive friction if you think about it.

Barry Biffle: But specifically for the routes, I mean, obviously, we have talked about, you know, our 13 bases, and we're going to grow significantly, especially from the ones that we've announced recently. We just announced a bunch of new routes out of San Juan. We announced a bunch of new routes out of Dallas-Fort Worth, which is a base that we just opened last year. And we've got more announcements in the weeks to come. We've got some this week, some actually next week, and then probably a few more announcements later this month. But I think you'll find, in general, that all of these are markets with considerably higher fares than the marketplace we were in last summer, which we think will significantly improve our RASM trajectory. Understood. Thank you for that, Conor. And my second question, the 80 percent or more than 80 percent, excuse me, out and back, if you could bridge that for marches anticipated two-thirds, you know, what needs to be done to realize that? And more importantly, how do you sustain that?

But specifically for the routes I mean, obviously, we have talked about our 13 basis, and we're going to grow significantly, especially from the ones that we've announced recently, we just announced.

A bunch of new routes out of out of San Juan We announced a bunch of new routes out of out of Dallas Fort Worth which is the base that we just opened last year and we've got more announcements in the weeks to come we've got some this week. Some some actually next week and then probably.

Few more announcements later this month, but I think youll find in general that all of these are markets with considerably higher fares than the marketplace. We were in last summer, which we think will be significantly improving our RASM trajectory.

Understood. Thank you for that color and my second question, the 80% or more than 80% excuse me out and back.

If you could bridge that for march's anticipated two thirds what needs to be done to realize that and more importantly is how do you sustain that thank you.

Christopher Sapat: Thanks. Actually, we just went through this same process yesterday. And in fact, if you look at our March schedule... We're actually already there, at the 80 percent range to out-and-back, but we're not scheduled with our crew there. And that's because, for example, the Cincinnati base doesn't open until May, but we actually have the flying already kind of set up as if it was out-and-back, but there will be a lot of people still in hotels. So what happens as we flow through the next several months is the schedule doesn't change materially from an out-and-back perspective of the metal, but what happens as we open the bases and we have the crew members based in those cities, they become an out-and-back crew pairing. So you've actually already kind of done the majority of the simplification.

Thanks actually we just went through this yesterday and in fact, if you look at our March schedule.

We're actually already there.

The 80% range to out and back were not scheduled with our crew there and Thats because for example, the Cincinnati base doesn't open until May, but we actually have the flying already kind of set up as if it was out in back but there will be a lot of people still in hotels, so what happens as we flow through.

Through the next several months as the schedule doesn't change materially from an out and back perspective of the metal, but what happens as we opened the basis and we have the crew members based in those cities they become an out and back crew pairing. So so you've actually already kind of done the majority of the simplification. It just gets easier every month as you flow through.

Barry Biffle: It just gets easier every month as you flow through it, and we get there by June with the final opening of San Juan, which we expect. So Cleveland is in March. We've got Chicago and Cincinnati in May, and then we have San Juan, Puerto Rico, in June.

And we get there by June with the final opening of San Juan, which we expect so Cleveland is in.

March we've got to Chicago in Cincinnati in May and then we have San Juan Puerto Rico in June.

Barry Biffle: Great, thank you. Thank you. At this time, I'd like to turn it back to Barry Biffle for closing remarks. I just want to thank everybody for joining us today. We're really excited about the results that we're putting forth in our guide and our expectations as we move through the year and into next year. There are a lot of great things going on with the company, so we appreciate everybody joining us today, and we look forward to updating you on our progress and our success next quarter. This concludes today's conference call. Thank you for participating, and you may now disconnect.

Great. Thank you.

Thank you at this time I would like to turn it back to Barry before for closing remarks.

Hey, just want to thank everybody for joining us today, we are really excited about.

The results.

Yes.

We're putting forth in our guide and as well as our expectations as we move through the year and into next year, a lot of great things going on with the company. So we appreciate everybody.

Joining us today, and we look forward to updating you on our progress and our success.

Next quarter.

This concludes today's conference call. Thank you for participating and you may now disconnect.