Q1 2025 Frontier Group Holdings Inc Earnings Call

Operator: Good day, and thank you for standing by.

Okay.

Speaker Change: Good day and thank you for standing by welcome to the Frontier Group Holdings Q1, 2021 earnings call at.

Operator: Welcome to the Frontier Group Holdings Q1 2021 earnings 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.

At this time all participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

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Operator: Please be advised that today's conference is being recorded.

Speaker Change: Please be advised that today's conference is being recorded.

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

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

David Erdman: Thank you and good afternoon, and welcome to our first quarter 2025 earnings call.

David Erdman: Thank you and good afternoon, and welcome to our first quarter 2025 earnings call on.

David Erdman: On the call with me in speaking order are Barry Biffle, Chief Executive Officer, Jamie Dempsey, President, Bobby Schroeter, Chief Commercial Officer, and Mark Mitchell, Chief Financial Officer.

Speaker Change: On the call with me speaking order or Barry before Chief Executive Officer, Jimmy Dempsey, President, Bobby Schroeder, Chief Commercial Officer, and Mark Mitchell Chief Financial Officer each.

David Erdman: Each will deliver prepared remarks, but before they do, I'll recite the customary safe harbor provision. During this call, we will be making forward-looking statements which are subject to risk. Actual results may differ materially from those predicted in these four locations.

Speaker Change: Each will deliver brief prepared remarks, but before they do all recite the customary safe Harbor provisions. During this call we will be making forward looking statements, which are subject to risks and uncertainties actual results may differ materially from those predicted in these forward looking statements additional information concerning risk factors, which could cause such.

David Erdman: Additional information concerning risk factors which could cause such differences are outlined in the announcement we released earlier, along with reports we filed with the Securities and Exchange Committee.

Speaker Change: Differences are outlined in the announcement, we released earlier along with the reports we filed with Securities and Exchange Commission we.

Barry Biffle: We will also discuss non-GAAP financial measures, actual results of which are reconciled to the nearest comparable GAAP measure in the Appendix of the Earnings and I'll now yield the floor to Barry to begin his prepared remarks. Thanks, David. Good afternoon, everyone.

Speaker Change: We will also discuss non-GAAP financial measures actual results of which are reconciled to the nearest comparable GAAP measure in the appendix of the earnings announcement.

Speaker Change: Yield the floor to bear to begin his prepared remarks spirit.

Thanks, David and good afternoon, everyone.

Barry Biffle: Our results for the quarter were lower than original expectations due to a disruption to travel demand and mark. This sudden change in demand was driven by the macro uncertainty that's been widely reported and it led to aggressive pricing and promotions across the industry. We experienced an outsized impact given the domestic leisure concentration of our business. However, current booking trends suggest demand for May and early summer travel has stabilized, supported by our recent revenue and network enhancements and capacity optimization. Further, planned capacity moderation across the industry is constructive.

Speaker Change: Our results for the quarter.

Speaker Change: Our original expectations due to a disruption to travel demand in March.

Speaker Change: Sudden change in demand was driven by the macro uncertainty that's been widely reported and it led to aggressive pricing and promotions across the industry, we experienced an outsized impact given the domestic leisure concentration of our business. However, current booking trends suggest demand for may and early summer travel has stabilized supported by our recent revenue and network.

Speaker Change: Smith and capacity optimization further planned capacity moderation across the industry is constructive and there.

Barry Biffle: In this environment, we're focused on the elements of our business that are within our control, primarily capacity and management of our costs and capital expenditures, while continuing to provide our customers with what we believe is the best overall value in Arizona.

Speaker Change: This environment, we're focused on the elements of our business that are within our control primarily capacity and management of our cost and capital expenditures, while continuing to provide our customers with what we believe is the best overall value in air travel.

Barry Biffle: Jimmy and Bobby will discuss our commercial initiatives in more detail during their prepared We've significantly reduced capacity through our mid-November selling schedule with the adjustments focused on the off-peak days of week. We expect capacity to be down low single digits in the second quarter and a similar reduction in the second half of the year based on current costs. Capacity reductions are expected to reduce costs and capital expenditures by over $300 million combined, compared to previous expectations.

Speaker Change: Jimmy and Bobby will discuss our commercial initiatives in more detail during their prepared remarks.

Speaker Change: We significantly reduced capacity through our mid November selling schedule with the adjustments focused on the off peak days of week, we expect capacity to be down low single digits in the second quarter and a similar reduction in the second half of the year based on current conditions.

Speaker Change: Capacity reductions are expected to reduce the cost and capital expenditures by over $300 million combined compared to previous expectations, Mark we'll provide context in his remarks.

Barry Biffle: Mark will provide context in his remarks. Accordingly, we're targeting profitability in the second half of the year based on a stabilized demand outlook, supplemented with our self-help measures and moderating industry capacity.

Accordingly, we're targeting profitability in the second half of the year based on a stabilized demand outlook supplemented with our self help measures and moderating industry capacity before concluding I'd like to thank Jim frontier for all their contributions during the quarter and for remaining focused on our top priority of delivering a safe and reliable experience to our customers I'll now turn the call over to Jimmy for.

Barry Biffle: Before concluding, I'd like to thank Team Frontier for all their contributions during the quarter and for remaining focused on our top priority of delivering a safe and reliable experience to our customers.

Jimmy Dempsey: I'll now turn the call over to Jimmy for a commercial overview. Thanks, Barry, and good afternoon, everyone. Briefly recapping our revenue performance, total operating revenue in the first quarter increased 5% versus the prior year quarter to $912 million on 5% higher capacity. RASM was $9.17, roughly in line with the prior year quarter and total revenue per passenger was $116, down 6% but below expectations despite a strong start. Economic uncertainty weighed heavily on demand, most notably in March, and it was met with aggressive pricing and promotions across the industry. The claimants were 12% higher and departures were 6% higher.

Speaker Change: Shall overview Jimmy.

Speaker Change: Thanks, Barry and good afternoon, everyone briefly recapping our revenue performance total operating revenue in the first quarter increased 5% versus the prior year quarter to $912 million on 5% higher capacity.

Speaker Change: <unk> was $9 one seven.

Speaker Change: Roughly in line with the prior year quarter, and total revenue per passenger was $116 down 6%, but below expectations. Despite the strong start to the year economic uncertainty weighed heavily on demand most notably in March and it was met with aggressive pricing and promotions across the industry.

Speaker Change: Payments were 12% higher than departures were 6%.

Jimmy Dempsey: We're up 6% on an average stage length of 925 miles, 3% below the prior year.

Speaker Change: 6% on average stage length of 925 miles, 3% below the prior year quarter.

Jimmy Dempsey: As we enter 2025, our forecast capacity deployment matched the improving demand by... As we experienced changes in the demand environment, particularly in March, we reassessed our capacity deployment from May forward with the resultant reduction focused on Tuesdays, Wednesdays and Saturdays. Our expectation is that the adjustment in capacity will continue for the remainder of this year, such that off-peak flying in summer will now be approximately half of our peak day flying.

Speaker Change: As we enter 2025, our forecast capacity deployment match, the improving demand backdrop.

Speaker Change: As we experienced changes in the demand environment, particularly in March.

Speaker Change: We reassessed our capacity deployment from May forward with the resulting production focused on Tuesdays Wednesdays and Saturdays our expectation is that the adjustment and capacity will continue for the remainder of this year such that off peak flying and summer will now be approximately half of our peak day flying.

Jimmy Dempsey: Our simplified out-and-back network provides three key benefits to the business as we navigate the current environment. It enables flexibility and changes in capacity deployment, both additions and reductions. It provides reliability and operational recovery benefits. and it lowers our cost. Our simplified network and presence in 13 bases across the country enables us to provide our customers with more for less.

Our simplified happened back network provides three key benefits to the business as we navigate the current environment.

Speaker Change: It enables flexibility in changes in capacity deployment, both additions and reductions it provides reliability and operational recovery benefits and it lowers our costs.

Speaker Change: Our simplified network and presence of 13 basis across the country enables us to provide our customers with more for less this value proposition is clear with the introduction a year ago of the new frontier, which in this environment takes on heightened importance and is strengthened by our enhanced product offerings and loyalty of training for example, our economy bundled provides customers with a direct comparisons.

Jimmy Dempsey: This value proposition is clear with the introduction a year ago of the new Frontier, which in this environment takes on heightened importance and is strengthened by our enhanced product offerings and loyalty upgrades. For example, our Economy Bundle provides customers with a direct comparison to other airlines' economy fares by offering a carry-on bag, seat selection, and no change cancellation. The Economy Bundle provides a standardised product enabling us to compete and win on costs. Moreover, our cardholders get two free cheque days when they book.

Speaker Change: Other airlines economy fares by offering a carryon bag seat selection and no change cancel fees. The economy bundle provides a standardized product, enabling us to compete and win on costs.

Speaker Change: Moreover, our cardholders get to free check.

Jimmy Dempsey: Our merchandising improvements introduced with the new Frontier will be enhanced shortly on our website and with the introduction of new Android and iOS apps.

Speaker Change: When they book with US our merchandising improvements introduced with new frontier will be enhanced shortly on our website and with the introduction of new Android and iOS apps I'll now hand, it over to Bobby to recap on our enhanced product offerings.

Bobby Schroeter: I'll now hand it over to Bobby to recap on our enhanced product offer. Thanks, Jimmy. The new Frontier has reshaped our commercial strategy across product, network, and digital. A major part of the transformation is the work we're doing to elevate loyalty and customer engagement, ensuring Frontier is not only the lowest fare, but also the best overall value in air travel. Since last year, we've implemented a number of meaningful enhancements. We transformed our product in bundled merchandising while removing change fees from our bundled product. We added free check bags for co-brand cardholders and simplified the path to a lease.

Bobby: Thanks, Jimmy the new Frontier has reshaped our commercial strategy across product network and digital.

Bobby: Major part of the transformation is the work, we're doing to elevate loyalty and customer engagement, ensuring frontier is not only the lowest fare but also the best overall value and air travel.

Bobby: Since last year, we've implemented a number of meaningful enhancements, we transformed our product and bundled merchandising, while removing change fees from our bundled products. We added free checked bags for co brand card holders and simplified the path to elite status. Additionally, elite members now enjoy complementary seat upgrades, providing real tangible benefits.

Bobby Schroeter: Additionally, elite members now enjoy complimentary seat upgrades, providing real, tangible benefits that we are able to provide even at lower status tiers, something that's increasingly rare in other airlines. We previously announced that Frontier Miles will soon be redeemable for bundles and that an unlimited companion pass benefit is coming as well for our top-tier elite. both of which will further strengthen the appeal and competitiveness of the program. We also launched Upfront Plus early last year, which has performed well and sets the stage for our rollout of first class seating later this year. Platinum and Gold Elite members will be eligible for complimentary upgrades to these new premium products prior to departure.

Bobby: That we are able to provide even at lower status tiers, something thats increasingly rare and other airline programs.

Bobby: We previously announced that frontier miles will soon be redeemable for bundles and then an unlimited companion pass benefit is coming as well for our top tier elite members both of which will further further strengthen the appeal and competitiveness of the program.

Bobby: We also launched upfront plus last early last year, which has performed well and sets the stage for a rollout of first class seating later this year platinum and gold elite members will be eligible for complementary upgrades to these new premium products prior to departure.

Bobby Schroeter: Over the past several weeks, we've launched a series of targeted promotions. aimed at travelers who feel underserved by traditional airline programs. One of the key advantages of Frontier Models is that it delivers benefits faster than other frequent flyer products. where customers actually realize real value in the form of seed upgrades and added perks, even at the lowest tier level. We're seeing strong momentum and are tracking well against both our growth and financial expectations across Frontier Miles and our COBRA and credit card profile. As we've previously outlined, we believe there is significant long-term financial upside in transforming this platform, and the early results are encouraging.

Bobby: Over the past several weeks, we've launched a series of targeted promotions aimed at travelers who feel underserved by traditional airline programs. One of the key advantages of frontier Myles is that it delivers benefits faster than other frequent flyer programs, while custom where customers actually realize real value in the form of <unk>.

Bobby: <unk>, even at the lowest tier levels were.

Bobby: We're seeing strong momentum and are tracking well against both our growth and financial expectations across frontier miles in our co brand credit card program.

Bobby: As we previously outlined we believe there is significant long term financial upside in transforming this platform and the early results are encouraging.

Bobby Schroeter: On the digital front, we launched our new Android app, which is already showing stronger performance than the previous version. A redesigned iOS app is on track to roll out in the coming weeks, followed by a new website later this year. Together, these upgrades will significantly improve the customer experience with more intuitive design and expanded self-service. And in February, we introduced Frontier Vacations, a bundled product that makes trip planning easier by combining flights, hotels, and ground transportation in one streamlined, Frontier-branded booking agent.

Bobby: On the digital front.

Bobby: Launched our new Android App, which is already showing stronger performance than the previous version.

Bobby: Our redesigned iOS App is on track to rollout in the coming weeks followed by a new website. Later this year together. These upgrades will significantly improve the customer experience with more intuitive design and expanded self service tools.

Bobby: And in February we introduced frontier vacations, a bundled product that makes trip planning easier by combining flights hotels and ground transportation in one streamlined frontier branded booking experience <unk>.

Bobby Schroeter: Compared to a year ago, Frontier now offers more product choice, more destinations, and a stronger overall experience, reinforcing our position as the best value in air travel.

Bobby: Compared to a year ago frontier now offers more product choice more destinations and a stronger overall experience reinforcing our position as the best value in air travel.

Mark Mitchell: With that, I'll turn it over to Mark for the financial. Thanks, Bobby, and good afternoon, everyone. Briefly recapping the quarter, results were largely in line with our pre-announcement on April 10th. Total revenue was $912 million, 5% higher than the 24 quarter. Fuel expense totaled $238 million, 10% lower than the 24 quarter, driven by a 13% decrease in the average fuel cost, partially offset by 5% higher capacity. We generated a record 107 ASMs per gallon during the quarter, just above a 1% fuel efficiency improvement over the 24-hour period. Adjusted non-fuel operating expenses were $720 million, or $0.724 per available seat mile, 8% higher than the 24-quarter, mainly due to lower average daily aircraft utilization related to our disciplined capacity deployment, an increase in station costs, fleet growth, and lower sale leaseback gains from two fewer aircraft deliveries.

Mark: That I will turn it over to Mark for the financial update.

Mark: Thanks, Bobby and good afternoon, everyone.

Mark: Briefly recapping the quarter results were largely in line with our pre announcement on April 10th total revenue was 912 million, 5% higher than the 24 quarter fuel expense totaled 238 million, 10% lower than the 24 quarter driven by a 13% decrease in the average.

Mark: Fuel cost, partially offset by 5% higher capacity.

Mark: We generated a record 107 ASM per gallon during the quarter, just above a 1% fuel efficiency improvement over the 24 quarter.

Mark: Adjusted non fuel operating expenses were $720 million or 724 per available seat mile.

Mark: 8% higher than the 24 quarter, mainly due to lower average daily aircraft utilization related to our disciplined capacity deployment and increase in station cost fleet growth and lower sale leaseback gains from two fewer aircraft deliveries partly offsetting these items was a lease return benefit in the quarter, resulting from the.

Mark Mitchell: Partly offsetting these items was a lease return benefit in the quarter resulting from the extension of 14 aircraft leases that were otherwise set to be returned in 2026 and 2027. These lease extensions support our mid- to long-term fleet strategy. We took delivery of four A321neo aircraft and two spare aircraft engines during the quarter, raising our total aircraft fleet to 163 at quarter end. We expect to take delivery of three A321neos in the second quarter, one less than previously expected, all of which have committed sale-leaseback findings. We currently expect another 13 aircraft deliveries in the second half of 2025, all of which also have committed sale-leaseback financing, along with approximately 40 percent of our 26 deliveries.

Mark: Extension of 14 aircraft leases that were otherwise set to be returned in 26 and 27. These lease extension support our mid to long term fleet strategy.

Mark: We took delivery of four <unk> hundred 21, Neo aircraft and two spare engine aircraft engines during the quarter raising our total aircraft fleet to 163 at quarter end, we expect to take delivery of three <unk> hundred 21, <unk> in the second quarter, one less than previously expected all of which have committed sale leaseback financing.

Mark: We currently expect another 13 aircraft deliveries in the second half of 'twenty five all of which also have committed sale leaseback financing along with approximately 40% of our 26 deliveries.

Mark Mitchell: First quarter pre-tax loss was $40 million, yielding a 4.4% loss margin, and net loss was $43 million, or $0.19 per share. Our net loss includes a $3 million income tax. The following is a summary of the expenses primarily relating to a non-cash valuation allowance against our deferred tax asset. We ended the quarter with $889 million of total liquidity, comprised of unrestricted cash and cash equivalents of $684 million, and $205 million of availability from our undrawn revolving line of credit. As highlighted earlier, we've significantly reduced our planned capacity for the balance of the year to address the macro uncertainty.

First quarter pretax loss was $40 million, yielding a four 4% loss margin and net loss was $43 million or <unk> 19 per share. Our net loss includes a $3 million income tax.

Mark: Expense, primarily relating to a noncash valuation allowance against our deferred tax assets.

Mark: We ended the quarter with $889 million of total liquidity comprised of unrestricted cash and cash equivalents of $684 million and $205 million of availability from our undrawn revolving line of credit.

Mark: As highlighted earlier, we have significantly reduced our planned capacity for the balance of the year to address the macro uncertainty.

Mark Mitchell: We expect the capacity reductions to support over $300 million of combined cost reductions in capital spending deferrals over the balance of this year, which includes a mix of benefits from lower capacity and other opportunities to reduce cash outflows across the year. Most of the benefits are expected to be realized in the second half of this year in line with the progression of the capacity adjustment. The loss of $0.23 to $0.37 per share expected in the second quarter, per the guidance we provided in our earnings release, is based on approximately 228 million shares outstanding and the jet fuel curve as of April 29th, which yields an expected average all-in cost per gallon of $2.38.

Mark: We expect the capacity reductions to support over 300 million of combined cost reductions and capital spending deferrals over the balance of this year, which includes a mix of benefits from lower capacity and other opportunities to reduce cash out across the business. Most of the benefits are expected to be realized in the second half of this.

Mark: This year in line with the progression of the capacity adjustments.

Mark: The loss of 23 to 37 per share expected in the second quarter per the guidance. We provided in our earnings release is based on approximately 228 million shares outstanding and the jet fuel curve as of April 29th which yields an expected average all in cost per gallon of $2 38.

Mark Mitchell: It largely reflects softer travel demand in April, with current booking trends suggesting demand for May and early summer travel have stabilized, and the normal lead time to align cost with capacity reduction. The guide also reflects the expected sequentially higher non-fuel costs, which are primarily related to the timing of fleet deliveries and the impact of the least return benefit recognized in the first quarter, in addition to normal year-over-year increases directly tied to our larger fleet and sequentially higher capacity.

Mark: It largely reflects softer travel demand in April with current booking trends, suggesting demands for may and early summer travel have stabilized and the normal lead time to align costs with capacity reductions. The guide also reflects the expected sequentially higher non fuel costs, which are primarily related to the timing of fleet.

Mark: Deliveries and the impact of the lease return benefit recognized in the first quarter. In addition to normal year over year increases directly tied to our larger fleet and sequentially higher capacity.

Barry Biffle: The per share loss includes a projected tax expense provision in the range of $2 to $5 million due to the expected recognition of a non-cash valuation allowance similar to the first With that, I'll turn the call back to Barry for closing. Thanks, Mark. Leveraging the investment in our revenue and network enhancements and our significant cost advantage, we believe we'll be able to effectively navigate this environment and provide the opportunity to target profitability in the back half of the year.

Mark: The per share loss includes a projected tax expense provision in the range of $2 million to $5 million due to the expected recognition of a noncash valuation allowance similar to the first quarter with that I'll turn the call back to Barry for closing remarks, thanks Mark.

Barry: Leveraging the investment in our revenue network enhancements and our significant cost advantage. We believe we'll be able to effectively navigate this environment and provide the opportunity to target profitability in the back half of the year.

Barry Biffle: I want to thank everybody for joining us this afternoon.

Barry: Well. Thank you everybody for joining us this afternoon, operator, we're ready to take questions. Thank you at this.

Operator: Operator, we're ready to take questions. Thank you. At this time we will conduct a question and answer session. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Speaker Change: We will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Michael Linenberg: Our first question comes from the line of Michael Linenberg of Deutsche Bank. Your line is now open. Oh hey, good afternoon. Just a couple questions here. Just looking at your average fare being down, I think it was like 6 or 7 percent, I realize that there is a lot of promotions out there and there's a lot of pressure on pricing. I believe the first couple months of the year were fine. Maybe March was, maybe that's dragging it down. But I would have thought that you are launching a lot of premium type products or you've been doing a lot more upselling.

Speaker Change: Our first question comes from the line of Michael Lindenberg of Deutsche Bank. Your line is now open.

Michael Lindenberg: Oh, Hey, good afternoon.

Michael Lindenberg: Just a couple of questions here.

Michael Lindenberg: Looking at your average fare being down I think it was like six or 7%.

Michael Lindenberg: I realize that there is a lot of promotions out there and theres a lot of pressure on pricing I believe the first couple months of the year. We're fine maybe March was maybe maybe thats dragging it down but I would have thought that you are launching a lot of premium type products or.

Barry Biffle: And so I guess the question is, is it the bottom end of the fare structure that's just getting really, really hit here? I mean, if you could just provide some color about maybe how some of the newer, more premium-like products are doing, what the uptake is. I was hoping that that would have at least mitigated the overall average pricing for the quarters.

Michael Lindenberg: <unk> been doing a lot more up selling and so I guess the question is it is at the bottom end of the fare structure Thats just getting.

Michael Lindenberg: Really really hit here.

Speaker Change: If you could just provide some color about maybe how some of the newer more premium like products are doing what the uptake is.

Michael Lindenberg: Hoping that that would have at least mitigated.

Michael Lindenberg: The overall average pricing for the quarters.

Barry Biffle: Yeah, thanks, Mike.

Barry Biffle: So look, the premium products are actually doing great.

Speaker Change: Yeah. Thanks, Mike So that looked at the premium products are actually doing great.

Barry Biffle: The challenge for us is that, one, we had concentrated our capacity in March, we'd really pulled down kind of the off peak. And in fact, our RASM and FAERS, you know, year over year in January were actually, I don't have in front of me, but they were up. And so what you're seeing is reflected is all March, because even though it's a third of the of the quarter, it's more like a 40% of the capacity that we had planned. For the quarter. So when that took place, and we sell pretty close in, it just it just mechanically drag drug the average fair down.

Speaker Change: <unk> for US is that one we had concentrated our capacity in March we'd really pulled down kind of the off peak and in fact, our RASM in first year over year in January we're actually I don't have it in front of me, but they were up and so what you're seeing is reflected as all March because even though it's a third.

Speaker Change: The quarter, it's more like a 40% of the capacity that we had planned for the quarter. So when that took place and we sell pretty close in.

Barry Biffle: And so and we didn't hit the loads either in March that we would normally hit. So we took a hit the load, and we didn't sell as much of it, which which actually drug down the average.

Speaker Change: Just mechanically drive drove the average fare down and so and we didn't hit the loads either in March that we would normally hit so we took a hit to load and we didn't sell as much of it which which actually drove down the average.

Barry Biffle: Okay, that's helpful.

Michael Linenberg: And then just my second question, Barry, you know, as we get to the back part of the year, I mean, I think we were originally working with a capacity increase, I don't know, three, four or 5%, maybe even higher. And now you're going to be down. I think in the past, we've seen something on the order of about 20 to 30% of your markets were developmental, new markets, they take time to ramp up.

Speaker Change: Okay.

Speaker Change: And then just my second question Mary.

Speaker Change: As we get to the back part of the year I mean, I think we were originally working with the capacity increase I don't know three or four 5%, maybe even higher and now youre going to be down.

Speaker Change: I think in the past we've seen something on the order of about 20% to 30% of your markets, where developmental new markets. They take time to ramp up as we get to the back part of the year. The fact that youre shrinking is that number going to be a lot less I mean are we going to see you really.

Barry Biffle: As we get to the back part of the year, the fact that you're shrinking, is that number going to be a lot less? I mean, are we going to see you really, you know, focusing more on sort of the core, the core profitable markets of Frontier? Should we anticipate that that percentage comes in?

Speaker Change: Focusing more on just sort of the core.

Speaker Change: More profitable markets and frontier.

Speaker Change: Should we anticipate that that comes in and thanks for taking my question.

Barry Biffle: Thanks for taking my question. Yeah, thanks, Mike. Yes, that's kind of it. We didn't call that out. But thanks for pointing that out. That's a good tailwind for us when we go into the second half of the year. As far as capacity goes, we said it before. We said, you know, if there's any challenges, we weren't going to hit our margin targets, we would adjust capacity. And we're doing it. We're taking ownership of what we can control. We accept that we're at the center of this challenge, which is primarily a domestic leisure situation. But the good news is, as we said on the transcript and in our announcement, the good news is we've seen, you know, booking stabilized.

Mike: Yes, Thanks, Mike Yes.

Speaker Change: But we didn't call that out, but thanks for pointing that out.

Speaker Change: That's a good tailwind for us when we go into the second half of the year.

Speaker Change: As far as capacity goes we said it before we said if theres any challenges we were going to hit our margin targets, we would adjust capacity.

Speaker Change: We're taking we're taking ownership of what we can control we accept we accept that we are at the center of this challenge, which is primarily a domestic leisure situation, but the good news is as we said.

Speaker Change: On the transcript and our announcement the good news is we've seen bookings stabilize and in fact, the last couple of days is actually some of the best sales. We've had in like six weeks. So it feels like the shock that took place is kind of slowly moderating right. So I think kind of froze the demand for a while but it feels like it's finally stabilizing.

Barry Biffle: In fact, the last couple of days is actually some of the best sales we've had in like six weeks. So it feels like the shock that took place is kind of slowly moderating, right? So I think it kind of froze the demand for a while. But it feels like it's finally stabilized.

Barry Biffle: Great. Thanks. Thanks, Barry.

Speaker Change: Great. Thanks, Thanks Barry.

Savi Sith: One moment for our next question. Our next question comes from the line of Savi Sith of Raymond James. Your line is now open. Hey, good afternoon. Just around the return to kind of profitability in the second half, is that solely driven by the, you know, being able to take some of the costs out, given that you have more time to adjust capacity? Or is there kind of something else that you think will kind of drive that improvement as well? Well, I think there's several factors, right? I mean, there's things are finally starting to stabilize. But also, we've got the fact that we've reduced capacity.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Savi <unk> of Raymond James Your line is now open.

Speaker Change: Hey, good afternoon.

Speaker Change: Just around the return to profitability in the second half is that solely driven by the.

Speaker Change: Being able to take some of the costs out.

Speaker Change: Given that you have more time to adjust capacity or is there something else that you think will kind of drive that improvement as well.

Speaker Change: Well I think there are several factors right.

Speaker Change: There is things are finally, starting to stabilize but also we've got the fact that we've reduced capacity.

Barry Biffle: You know, this kind of caught us flat footed, right? Like, we didn't know this was going to be the environment. And so we are now changing our schedule for the second half. And you're going to see where the marginal kind of flying kind of that Tuesday, Wednesday, Saturday, we're going to be pulling down capacity significantly. And so that that kind of the structure of that that helps also the demand environment health. And then, you know, I think everything else we've done on the revenue side, all the revenue initiatives with the new frontier, we're really starting to get traction with our economy bundle now, is that landscape is kind of changing, we think it's really benefiting us on a relative basis, you know, kind of once we get past May 28, we see real real kind of green shoots there as well.

Speaker Change: This is kind of caught us flat footed right like we didn't know this was going to be the environment and so we are now changing our schedule for the second half and youre going to see where the marginal kind of flying.

Speaker Change: Tuesday, Wednesday, Saturday, we're gonna be pulling down capacity significantly and so that's kind of the structure of that helps also the demand environment and then I think everything else. We've done on the revenue side all of the revenue initiatives with the new frontier, we're really starting to get traction with our economy bundle now as that landscape is kind of changing we.

Speaker Change: It's really benefiting us on a relative basis kind of once we get.

Speaker Change: Past may 28.

Speaker Change: We see real real kind of green shoots there as well so theres just a lot of things coming and looking at I think the reality is is that.

Barry Biffle: So there's just a lot of things coming in. Look, and I think the reality is, is that I think There's very few people making money domestically, if anyone, and so I think there's carriers that are subsidizing their basic economy with international and corporate, but to the extent any of that slows down, their ability to actually subsidize that goes away. So I think you're going to continue to see capacity moderation until the margins improve.

Speaker Change: I think.

Speaker Change: There's very few people, making money domestically if anyone and so I think theres carriers that are subsidizing their basic economy with international and corporate.

Speaker Change: But to the extent any of that slows down their ability to actually subsidize that goes away. So I think youre going to continue to see capacity moderation until the margins improve so I think that's just a backdrop for we feel like really good once this starts to turnaround in the second half.

Savi Sith: So I think that's just a backdrop for we feel like really good once this starts to turn around in the second half. I appreciate that, Barry.

Barry Biffle: And if I might, like, if I look at on the product side, like some of the changes that you've been making, be it on the loyalty program over the last year, over some time, be the loyalty program, or even more recently, you know, some of your cheeky promotions, you know, it's really been kind of going after maybe a Southwest customer. And I'm curious, you know, what you've seen in that front over the last year, and maybe has that changed more recently, since they've kind of announced some policy changes? Well, I can start off, and then I think Bobby or Jimmy can take it, but, you know, as a reminder, we launched the new Frontier last May, and it just takes time to get traction, right?

Speaker Change: I appreciate that.

Speaker Change: And if I might like if I look at on the product side like some of the changes that you've been making be it on the loyalty program over the last year.

Speaker Change: It's over some time be the loyalty program or even more recently some of your cheeky promotion, it's really been kind of going after maybe at southwest customer and I'm curious what you've seen in that front over the last year and maybe has that changed more recently since they've kind of announce some policy changes.

Speaker Change: Well I'll start off and then I think Bob you Jimmie can take it.

Speaker Change: As a reminder, we we launched the new frontier last may.

Barry Biffle: We don't have the most frequent travelers, and so it takes a while for them to see it. So, putting those bundled options up front where people could see them was really, really critical. But we're finally starting to really kind of, just in the last, actually probably a few weeks, really get that dialed in as the maturity's starting to build and the landscape's changing. I mean, I mentioned it a while ago. Now, we're all on kind of an equal footing. If you think about it, I mean, our product versus everyone else, and if you compare what we offer with our economy product, we offer much more than anyone else does.

Speaker Change: And it just takes time to get traction.

Speaker Change: Don't have the most frequent travelers and so it takes a while for them to see it so putting those bundled options upfront where people could see them.

Speaker Change: It was really really critical but we're finally starting to to really kind of just in the last actually probably few weeks really get that dialed in and.

Speaker Change: And as the maturity is starting to build and the landscape changing I mentioned, a while ago.

Speaker Change: Now, we're all on a kind of an equal footing.

Speaker Change: Right. If you think about it I mean, our product versus everyone else and if you compare what we offer with our economy product we offer much more than anyone else. Scott. So you get a free changes you get a seat assignment and it's not just a seat assignment that is in the worst seats on the plane, it's actually real seat assignments.

Barry Biffle: You get free changes, you get a seat assignment, and it's not just a seat assignment that is in the worst seats on the plane, it's actually real seat assignments, and you get a carry-on bag.

Bobby Schroeter: So, I don't know, Bobby or Jimmy, you want to comment?

Speaker Change: And you get a carry on bag, so I don't know Bobby or Jim you want to.

Bobby Schroeter: Yeah, Bobby can talk about loyalty in a second. One of the things, Savi, that we've kind of learned ourselves, like we launched the New Economy Bundle. We always had bundles in the background, but they weren't pushed as hard on our customers. Our customers are starting to understand the economy bundle, but we're actually starting to really understand how to use it, and use it competitively against the industry. And so, that's something that's changed in our business, it's really been accelerated in the last two or three months, where we're understanding the power that the economy bundle has in our business.

Speaker Change: Bob you can talk about loyalty and a second one of the things savvy that we've kind of learned ourselves like we launched the new frontier a year ago.

Speaker Change: When we launched the economy bundle, we always had bundles in the background, but they werent pushing as hard on our customers. Our customers are starting to understand the economy bundle, but we're actually starting to really understand how to use us and used our competitively across the against the industry and so that's something that has changed in our business. It's really been accelerated in the last two or three months, where we are.

Speaker Change: Our understanding of the power that the economy bundle has in our business and I'll, let Bob talk about the.

Bobby Schroeter: I'll let Bobby talk about the loyalty program. Yeah, sure, Savi. Great to talk to you. So, the Loyalty Program, we've obviously made a lot of changes. We've talked about those before with regard to Companion Pass with the seat upgrades and a variety of other things that are there. What that does is, again, we talk about equal footing, but the reality is we've leapfrogged in a lot of ways the benefits that you get with this. The Companion Pass, for example, that we have for our elite tiers that get that, you're able to bring a companion each time.

Bob: The loyalty program, Yeah sure Savi.

Speaker Change: Great to talk to you. So the loyalty program. We've obviously made a lot of changes we've talked about those before.

Bob: With regard to companion pass.

Bob: The seat upgrades and a variety of other things that are there what that does is again, we talk about equal footing, but the reality is we've leapfrogged and a lot of ways. The benefits that you get with this the companion pass for example that we have for our.

Bob: Our elite tiers that get that Youre able to bring a companion. Each time, you don't have to decide who that is firm and lock. It in for the year you are able to change that each time and you get to these elite tiers faster than others and then you get the real benefit so one of the things thats been missing for some time, especially as you think about some of the.

Bobby Schroeter: You don't have to decide who that is and lock it in for the year. You're able to change that each time. And you get to these elite tiers faster than others, and then you get the real benefits. So, one of the things that's been missing for some time, especially as you think about some of the maybe lower elite tiers that are very loyal and profitable, but they're promised these opportunities that don't really come to fruition. You hear stories about people being number 72 on the list. You're not going to see that with us. So, there's opportunity for people to engage with our program, get real benefits, and see those benefits quickly.

Bob: Maybe lower elite tiers that are very loyal and profitable.

Bob: But their promise these opportunities that don't really come to fruition.

Bob: You hear stories about people being number 72 on the list you don't youre not going to see that with us. So there is opportunity for people to engage with our program get real benefits and see those benefits quickly. So we think thats a great opportunity as I said in my prepared remarks, we are we.

Bobby Schroeter: So, we think that's a great opportunity. As I said in my prepared remarks, we've seen movement there, both on the growth and financial side, that lines up exactly with what we talked about previously. And we think that's a really massive opportunity for us over the course of the next few years as well.

Bob: We've seen movement there both on the growth and financial side that lines up exactly with what we talked about previously and we think thats, a really massive opportunity for us over the course of the next few years as well.

Operator: Appreciate it. One moment for our next question.

Bob: I appreciate it thanks.

Speaker Change: One moment for our next question.

Atul Moswary: Our next question comes from the line of Atul Moswary of UBS. Your line is now open. Good evening. Thanks a lot for taking my question. So, Barry, on the second quarter guidance, relative to, you know, where consensus is currently, is the swing factor simply on cost due to the lead time to align costs with capacity reduction, or will the second quarter rasm, will that be meaningfully worse than the first quarter, despite the lower capacity in the early summer booking stability? Just wanted to get some sense of what's embedded in the guidance.

Speaker Change: Our next question comes from the line of our two almost wary of UBS. Your line is now open.

Speaker Change: Okay.

Speaker Change: Good evening, Thanks, a lot for taking my question.

Speaker Change: So.

Speaker Change: Barry on the second quarter guidance relative to where consensus is currently is the swing factor simply.

Speaker Change: Simply on costs due to the lead time to align costs with capacity reduction.

Speaker Change: The second quarter, RASM will that'd be meaningfully worse than the first quarter, despite the lower capacity.

Speaker Change: Some are looking stability just wanted to get some sense of what's embedded in the guidance.

Barry Biffle: Yeah, look, so when this started happening in March, for us, we, you know, after a week or two, you finally figure out like, this is not an anomaly. And there's there's real challenges out there. And so we were fortunate we had not closed the May schedule. And so we started trimming the May schedule, we consequently trim the June schedule. But that closed in, you've just got too many costs you can't get rid of. So, so that is a, that's an impact.

Speaker Change: Yes look so when.

This started happening in March for us.

Speaker Change: We.

Speaker Change: After a week or two you finally figure out like this is not an anomaly and there's real challenges out there and so we were fortunate we had not closed the may schedule and so we started trimming the may schedule, we consequently to trim the June schedule, but that close in you've just got too many costs you can't get rid of so so that is.

Mark Mitchell: I don't know, Mark, you want to kind of talk about this? Yeah, no, no. And in addition to that, when you look from Q1 to Q2, you know, so we have one less aircraft delivery plan. So, you know, there's a headwind there. We also had two spares, you know, that we took delivery of in the first quarter. So on a sequential basis, and we did some lease extensions in the first quarter, you know, that provided a benefit that so I think is, you know, as you look sequentially, you know, the costs are up a bit.

Speaker Change: That's an impact.

Speaker Change: You want kind of talk about this yes.

Speaker Change: In addition to that when you look from Q1 to Q2. So we have one less aircraft delivery plan. So there is a headwind there. We also had two spares that we took delivery of in the first quarter. So on a sequential basis and we did some lease extensions in the first quarter that provided a benefit that so I think as you look sequentially the costs are.

Mark Mitchell: And then in addition, you know, all the push is very highlighted, you know, for the initiatives we have to drive costs out in the balance of the year, it takes a bit of time, you know, to, you know, it takes a bit of time, right, for those to work their way through. Yeah, and just to add to that, like we think with all the network adjustments we've made, particularly, even though it's close in, that yes, we're carrying costs, but it looks like we've stabilized RASM. And we would expect positive RASM year over year in the quarter, albeit on much lower capacity, right?

Speaker Change: Up a bit and then in addition, all of the push as Barry highlighted for the initiatives, we have to drive cost out and the balance of the year. It takes a bit of time right for those to work their way through the system and just to add to that.

Speaker Change: We think with all the network adjustments, we've made particularly even though it's close in.

Speaker Change: Yes, we're carrying costs, but it looks like we've stabilized RASM.

Speaker Change: And we would expect positive RASM year over year in the quarter, albeit on a much lower capacity right. So we manage the network chain.

Mark Mitchell: So we've managed the network changes, particularly Tuesdays, Wednesdays, and Saturdays, in order to get ourselves into a good position from a unit revenue.

Speaker Change: Change is particularly Tuesdays Wednesdays and Saturdays in order to get ourselves into into a good position from a from a unit revenue perspective.

Atul Moswary: Got it. That's very helpful.

Barry Biffle: And then as my follow up, you know, the back half expectations of a return to profitability. Relative to the internal expectations that you had for the back half earlier in the year, how far below that initial plan would you be for the back half, assuming demand has stabilized at current levels? Just some way to dimensionalize that would be helpful. And, you know, related to that, would you expect to be profitable for the full year? We're not putting out a guide for the full year, but we are targeting profitability in the second half. And I don't think we ever actually put out a guide for the second half.

Speaker Change: Got it Thats very helpful.

Speaker Change: A follow up.

Speaker Change: The back half expectations of a return to profitability.

Speaker Change: Relative to the internal expectations that you had the back half of our year end of the year, how far below that initial plan that would be for the back half.

Speaker Change: Assuming demand does stabilize at current levels, just some way to dimensionalize that would be helpful and related to that what do you expect to be profitable for the full year.

Speaker Change: We're not putting out a guide for the full year, but we are targeting profitability in the second half.

Speaker Change: I don't think we ever actually put out a guide to the second half.

Barry Biffle: I mean, but we will fall short of our original expectations of any double-digit margins this year. Sadly, when we walked into January, in fact, even when we had our earnings call, we thought we were going to wildly blow that out, as I mentioned a while ago. I mean, January fares were up substantially year over year. Let's put all this in context. We know that there are some macroeconomic challenges, and the leisure customer, it's the most discretionary, and they've just paused the last, you know, four to six weeks of their travel. Good news is, like I said, actually our sales in the last few days have been really good.

Speaker Change: But.

Speaker Change: We will fall short of our of our original expectations of hitting double digit margins this year.

Speaker Change: Sadly when we walked into January in fact, even when we had our earnings call. We thought we were going to wild.

Speaker Change: Wildly blow that out as I mentioned, while ago January fares were up substantially.

Speaker Change: Loads year over year so.

Speaker Change: I think.

Speaker Change: Let's put all of this in context, we know that there are some macroeconomic challenges and the leisure customer it's the most discretionary and they just paused the last.

Speaker Change: Four to six weeks of their travel good news is like I said actually our sales in the last few days have been really good and in fact today is even better than yesterday. So.

Barry Biffle: In fact, today's even better than yesterday. So it feels like, you know, because people haven't lost jobs, I mean, unemployment's ticked up a little bit, they still have more money. The savings rates showed that they're actually saving money. And so I think there is pent-up demand. I think we get past a lot of these challenges that are out there and get out of the headlines every day with all of the kind of uncertainty, and I think people return to their normal lives, and that's when I think we'll see travel come in. And the good news is I think you're going to see capacity continue to come out because I think there will be some pressure on profitable basic economy seats out there.

Speaker Change: It feels like.

Speaker Change: Because people haven't lost jobs and unemployment has ticked up a little bit.

Speaker Change: We still have more money in the savings rates showed that they're actually saving money and so I think there is pent up demand I think we'll get past a lot of these challenges that are that are out there and get out of the headlines every day.

Speaker Change: With all of the kind of uncertainty and I think people return to the normalized and that's when I think we'll see travel come in and the good news is I think youre going to see capacity continue to come out because I think I think there will be some pressure.

Speaker Change: Unprofitable basic economy seats out there. So I think there's pretty good backdrop, but I'm not going to get into how different was this we're dealing with what we can control and we're changing the capacity to match the demand and we believe it's going to take us into the third quarter to get that done.

Atul Moswary: So I think there's a pretty good backdrop, but I'm not going to get into the, you know, how different was this. We're dealing with what we can control, and we're changing the capacity to match the demand, and we believe it's going to take us into the third quarter to get that done. Got it. Thank you and good luck with the rest of the year.

Speaker Change: Got it thank you and good luck with rest of the year.

Speaker Change: Thanks.

Brandon Oglenski: One moment for our next question. Our next question comes from the line of Brandon Oglenski of Barclays. Your line is now open. Hey, Barry and team, thanks for taking the question. And Barry, don't take this as condescending at all. But I mean, I feel like you guys have had good quarters here and there. But there's always a setback, you know, the past three years, and now it's tariffs and maybe a more broader economic slowdown. But I guess, in the context of like a multi-year challenge to get to that double digit profitability, I mean, some of your competitors will say structurally, the market has just moved on from the low cost model.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Brandon <unk> of Barclays. Your line is now open.

Speaker Change: Hey, Barry and team thanks for taking the question.

Speaker Change: And Barry don't take this as condescending at all but I mean, so like you guys have had good quarters here and there, but theres always as a setback.

<unk> three years and now its tariffs and maybe a more broader economic slowdown, but I guess in the context of like a multiyear challenge to get to that double digit profitability.

Speaker Change: I mean, some of your competitors, let's say structurally the market has just moved on from our low cost model, but maybe what came internally do you need to do something structurally or you're just over scaled in off peaks or does this have to be more like M&A solutions across the industry to get this right.

Barry Biffle: But maybe looking internally, do you need to do something structurally? Are you just over scaled and off peaks? Or does this have to be more like M&A solutions across the industry to get this right? Well, Brandon, I appreciate it. Listen, so. Let's just start with what I said a while ago, January, our RASM was up 19% year-over-year. I mean, let that sink in. There's a 19% We were on a roll. So I don't think there's anything wrong with our business, and I don't think there's anything wrong with our relative business. I think that there is a demand shock.

Brandon: Well Brandon I appreciate you listened so.

Brandon: Let's just start with what I said, a while ago January our RASM was up 19% year over year.

Brandon: I mean, let that sink in.

Brandon: It was up 19%.

Brandon: We were on a roll.

Brandon: So I don't think theres anything wrong with our business and I don't think theres anything wrong with our relative business I think that there is a demand shock.

Barry Biffle: And we're dealing with that demand shock in the ways that we can control it. I do think one of the reasons why we were doing so well in January, and even into most of February, and in fact, we really didn't see any impact to February. It was March that hit us. But if you look at it...

Brandon: And we're dealing with that demand shock and the ways that we can control it.

Brandon: I do think one of the reasons why we're doing so well.

Brandon: January and even into most of February.

Brandon: And in fact, we really didn't see any impact to February was it was march that hit us.

Brandon: But.

Brandon: If you look at it.

Barry Biffle: The 2-3-6 was one of the big drivers of that, and I think if you say, what is the structural change, I do think we have continued to fly too much 2-3-6 flying, even through the peak periods, and we are changing that. And that's why I'm confident when we look at the trends now, and I think you couple it with what we believe is going to happen in the rest of the industry, I think we're going to have a pretty constructive second half. But yes, Brandon, no one's more frustrated than me. I used to work with a gentleman at American Airlines a long time ago, and he used to say this is the business of, you know, once in a 10-year event every quarter, and this was quite an event over the last six weeks.

Brandon: Okay.

Brandon: The 236 was one of the big drivers of that and I think if you say what is the structural change I do think we have continued to fly too much two through six flying even through the peak periods and we are changing that and that's why I'm confident when we look at the trends now and I think you couple that with what we believe is going to happen the rest of the <unk>.

Brandon: History, I think we're going to have a pretty constructive second half, but yes, Brandon no one's more more frustrated than me.

Speaker Change: I used to work with the gentlemen at American Airlines, a long time ago, you used to say this is the business of <unk>.

Speaker Change: Once in a 10 year event every quarter and this was this was quite an event over the last six weeks, but I do think there's kind of some green shoots out there and I think that.

Barry Biffle: But I do think there's kind of some green shoots out there, and I think that, you know, this is going to get passed. And I can't get you to bite on the M&A question. Okay, I appreciate that, Barry.

Speaker Change: This is going to get this is going to get passed.

Speaker Change: And I can't buy it on the M&A question.

Speaker Change: Hi.

Speaker Change: No.

Mark Mitchell: And then, Mark, really quick, are you extending leases or actually sending aircraft back off lease? Sorry, because there was a lot in your prepared remarks. And I think, like... Yeah, no, absolutely. Thank you. Yeah, no. So during the quarter, you know, we had an opportunity to extend 14 eight-year leases. You know, those leases got extended four to six years, you know, as part of our, you know, fleet strategy. You know, the economics were attractive, you know, for these extensions. You know, these extensions helped to align our planned heavy maintenance checks on the aircraft and enabled us to optimize shop visit timing and related costs.

Speaker Change: Okay I appreciate that Barry and then Mark really quick.

Speaker Change: Are you extending leases or actually.

Speaker Change: Sending aircraft back off lease sorry, because there was a lot in your prepared remarks.

Speaker Change: No.

Speaker Change: <unk>.

Speaker Change: Thank you.

Speaker Change: So during the quarter, we had an opportunity to extend 14 eight year leases and those leases got extended for years to six years as part of our fleet strategy.

Speaker Change: The economics were attractive for these extensions, yes. These extensions helped to align our planned heavy maintenance checks on the aircraft and enabled us to optimize shop visit timing and related costs.

Mark Mitchell: And, you know, the other thing to keep in mind, you know, the aircraft, you know, that these leases relate to, you know, are tied to a favorable maintenance contract. So, you know, overall, you know, it was something we spent a lot of time on, made sense, and so that, I mean, that's the backdrop to those extensions.

Speaker Change: And the other thing to keep in mind, the aircrafts that these leases relate to are tied to our favorite favorable maintenance contracts. So overall.

Speaker Change: Something we spent a lot of time on made sense and so that I mean, thats the backdrop to those those extensions.

Operator: All right, thank you.

Speaker Change: Alright, thank you.

Thomas Fitzgerald: One moment for our next question. Our next question comes from the line of Thomas Fitzgerald of TD Cowen. Your line is now open. Thanks so much for the time.

Speaker Change: One moment for our next question.

Thomas Fitzgerald: Our next question comes from the line of Thomas Fitzgerald of Cowen. Your line is now open.

Thomas Fitzgerald: I wanted to ask you about some of the big hub markets you've been growing in like LAX and JFK and I'm just kind of curious how that's been ramping up versus your expectations and just how you're thinking about some of those markets in your broader network and if it's more your customers would like you to be there and it's very additive for the loyalty program and maybe a strategic flying or if those routes are holding their own or holding their own just in an absolute sense. Yeah, we're quite encouraged actually. It's enabled us to move more capacity into sort of bigger markets like LAX and JFK.

Thomas Fitzgerald: Thanks, so much for the time I wanted to ask you about.

Thomas Fitzgerald: Some of the big hub markets <unk> been growing in like Lax and JFK and I'm, just kind of curious how that's been ramping up versus your expectations and.

Thomas Fitzgerald: Just how youre thinking about some of those markets in your in your broader network and if it's more your customers really like you to be there and it's very additive for the further loyalty program, maybe a strategic flying or if those rates are holding their own are holding their own.

Thomas Fitzgerald: In absolute sense.

Thomas Fitzgerald: Yes, we are quite encouraged actually it's enabled us to move more capacity into sort of a bigger markets like lax and JFK.

Barry Biffle: And we're seeing both leisure traffic and BF4 traffic in and out of those markets. That seems very, very attractive and really likes low fares at our low fare level. I mean, it's new. A lot of them are maturing and in their first year of activity, but the early results are very, very good. So we expect to continue growing in some of those markets where we see big, large traffic volumes to big, major cities around the United States.

Thomas Fitzgerald: Seeing both leisure traffic and VFR traffic in and out of those markets that seems very very attractive and really likes low fares at our low fare level I mean, it's new a lot of them are maturing and in their first year of activity, but the early results are very very good. So we expect to continue growing in some of those markets, where we see big.

Thomas Fitzgerald: Large traffic volumes to big major cities around the United States.

Thomas Fitzgerald: Okay, that's really helpful.

Bobby Schroeter: And then just I'm curious on the loyalty program, you know, you had a nice jump in other revenue per passenger and apologies if I missed this, but are you able to provide us with just the growth in sign ups and then the growth in spend rates? Thanks again for the time. We can't get into the details specifically there. What I will say is there has been a very good growth trajectory that we've seen from the introduction of the new benefits and opportunities. So I'll give you one stat, actually, on it. So spend itself, as an example, has been up 30 percent year over year as we've progressed through this.

Speaker Change: Okay. That's very helpful. And then just I'm curious on the loyalty program.

Thomas Fitzgerald: Had a nice jump in other revenue per passenger.

Apologies if I missed this but are you able to provide us with.

Thomas Fitzgerald: Just the growth in sign ups and then the growth in spend rates. Thanks again for the time.

Speaker Change: We can't get into the details specifically there what I will say is there has been.

Speaker Change: A very good growth trajectory that we've seen from the introduction of the new benefits and opportunities.

Speaker Change: So I'll give you one stat actually on it so spend.

Speaker Change: Self as an example has been up 30% year over year as we progress through this so youre seeing people sign up at a higher rate youre seeing people engage at a higher rate and there's a reason for that we are providing more to those customers and we believe that there are a lot of customers out there that we will find that there.

Bobby Schroeter: So you're seeing people sign up at a higher rate. You're seeing people engage at a higher rate, and there's a reason for that. We're providing more to those customers, and we believe that there are a lot of customers out there that will find that this is the best program out there from a value perspective and the best program for them that may have been engaged with other programs in the past. And again, we're seeing some of that, and we anticipate that growth will continue. The trajectory, as I said before, hones in on and is tracking with what we've discussed previously around what we need to accomplish over the next few years within this and what we expect to accomplish.

Speaker Change: This is the best program out there from a value perspective, and the best program for them that may have been engaged with other programs in the past and again, we're seeing some of that and we anticipate that growth will continue the trajectory as I said before hones in on and is tracking with what we've.

Speaker Change: We have discussed previously around.

Speaker Change: What we need to accomplish over the next few years within this and what we expect to accomplish so that's good news and again very positive results overall.

Bobby Schroeter: So that's good news. And again, very positive results overall.

Jamie Baker: One moment for our next question. Our next question comes from the line of Jamie Baker of JPMorgan Securities. Your line is now open. Yeah, so I think it wasn't just low cost, it was high cost carriers, too, that had flooded kind of Vegas and Florida. And we've seen that moderate. Look, I think Spirit in Florida is an example. Its cutback capacity, I forget the number, but it's close to 20%. So we've seen that moderate, and you're starting to see the markets heal from that.

Speaker Change: One moment for our next question.

Jamie Baker: Our next question comes from the line of Jamie Baker of Jpmorgan Securities. Your line is now open.

James: Hey, Good afternoon. This is James on for Jeremy.

James: Barry you characterized the driving force of last year's oversupply as low cost carriers flooding. The same leisure markets that you called out, Florida and Vegas.

James: Where we sit today is that still ongoing.

Speaker Change: And just maybe more broadly do you see any regions that are particularly weaker than than the broader market.

James: Yes, so I think it was.

James: Isn't just low cost it was it was high cost carriers to that had flooded.

James: Kind of Vegas, and Florida, and we've seen that moderate.

James: Look I think spirit in Florida as an example has cut back capacity.

James: I forget the number but it's close to 20%. So we've seen that moderate and youre starting to see the markets heal from that I mean, like I said I think.

Barry Biffle: I mean, like I said, I think, you know, had we continued, maybe we should have done ourselves some favors to actually just show you, you know, almost by month how this all progressed. I mean, basically, this demand shock hit us roughly the beginning of March. took away a lot of bookings in March. We basically did not have a spring break. And our revenues weren't that much different than even February. And then that continued into Easter. And we really didn't have, basically, an Easter either. So that's why, you know, I mentioned a while ago that it's improved significantly now.

James: Had we continued and maybe maybe we should've done ourselves some favors it's actually just show you.

James: Almost five months how does this all progressed.

James: Basically this demand shock hit us roughly at the beginning of March.

James: Took away a lot of bookings in March we basically did not have a spring break.

James: And our revenues worth that much different than even February.

James: And then that continued into Easter and we really didn't have basically an easter either.

James: So that's why I mentioned, a while ago that it's improved significantly now.

Barry Biffle: And even like just when we look at our sales for May at the beginning of the month compared to the beginning of March and the beginning of April, it's come a long way. So I think if you just look overall, there's – you've had just like the – hit to the last two months and it's more impactful to the second quarter, but again, I think this does subside. Got it.

James: And even like just when we look at our sales for May at the beginning of the month compared to the beginning of March at the beginning of April it's.

James: It's come a long way so I think if you just look overall.

James: There is <unk>.

James: <unk> had just like this.

James: This hit to the last two months and its more impactful to the second quarter, but again I think this does subside.

Barry Biffle: And then for my second question... How do we think about the mechanics of tariffs in a sale-leaseback transaction? I'm just not too familiar with kind of the mechanics behind it. I mean, is there a cost that Frontier would bear? Or, you know, how does that work? We have no plans to pay tariffs. You got it. Okay, thanks for your questions. One moment for our next question.

James: Got it.

James: And then for my second question.

James: How do we think about the mechanics of tariffs any sale leaseback transaction I'm, just not too familiar with kind of the mechanics behind it I mean is there a cost that frontier would bear or how does that work.

James: We have no plans to pay tariffs.

James: Got it okay. Thanks for your questions.

Speaker Change: Good morning, gentlemen, our next question.

Duane Pfennigwerth: Our next question comes from the line of Duane Pfennigwerth of Evercore ISI. Your line is now open. Hey, thanks.

Speaker Change: Our next question comes from the line of Duane <unk> with Evercore.

Speaker Change: Evercore ISI your line is now open.

Barry Biffle: If you can, from a high level, can you talk about the profile of new markets? I mean, you look, you put in a lot of effort to reconfigure your network to out and back, you made a lot of changes, everybody was working hard in the planning department. But can you can you talk about the profile of new markets that are working for you? versus the markets that aren't. Are these weaker trends consistent across your network? And then just to follow up on competitive capacity, again, with the new restructured network, is there just a different profile of competition in some markets versus other markets?

Speaker Change: Hey, thanks.

Speaker Change: If you can from a high level.

Speaker Change: Can you talk about the profile of new markets.

Speaker Change: Look you put in a lot of effort too.

Speaker Change: Reconfigure your network to Outback, you've made a lot of changes everybody was working hard in the planning department, but can you can you talk about the profile of new markets that are working for you.

Speaker Change: Versus the markets that arent are these weaker trends consistent across your network.

Speaker Change: And then just to follow up on competitive capacity with again with the new restructured network is there just a different profile of competition in some markets versus other markets.

Barry Biffle: Help us out there.

Barry Biffle: Yeah, so thanks, Duane. Look, I mean, I know everybody's wanting to try to understand what's going on. And that's why we're trying to tell you, almost to the minute, what we're seeing. The biggest hit is really the Tuesday, Wednesday. It's been a drag for years, but it is dried up. I mean, effectively, the load factors continue to drop on, like, while they're down overall, they were down because the midweek. This is why, you know, we're looking at the fall, there's going to be a significant drawdown. I mean, we're talking about a few hours a day of Tuesday, Wednesday.

Speaker Change: Help us out there.

Speaker Change: So thanks Duane.

Speaker Change: I mean, I know everybody is wanting to try to understand what's going on and that's why we're trying to tell you almost to admit it what we're seeing.

Speaker Change: The biggest hit is really the Tuesday Wednesday.

Speaker Change: It's been a drag for years, but it has dried up.

Speaker Change: <unk> the load factors continue to drop on while they are down overall they were down because the midweek. This is why we're looking at the fall theres going to be significant.

Speaker Change: Drawdown I mean, we're talking about a few hours a day of Tuesday Wednesday, So mechanically we're going we will address this and we kind of joked about it Duane.

Barry Biffle: So mechanically, we will address this. And we kind of joked about it, Duane, like, when you run an 85% load factor on a Tuesday, I'll let you add some more capacity. But it doesn't really matter the route mix. It's really more the off-peak that's caused a lot of it. And we probably had too much of it. At the same time, there was, and I think it's because of the timing, when this happened in March and April, most significantly. Florida, and even Vegas were hit pretty hard. I mean, to give you an idea, we were looking at March Madness weekend.

Speaker Change: When you run at 85% load factor on a Tuesday, I'll, let you add some more capacity.

Speaker Change: But it doesn't really matter the route mix, it's really more of the off peak that's caused a lot of it and we probably had too much of it at.

Speaker Change: At the same time, there was and I think it's because of the timing.

Speaker Change: When this happened in March and April.

Speaker Change: Most significantly.

Speaker Change: Florida, and even Vegas were hit pretty hard.

Speaker Change: To give you an idea we were looking at March madness weekends.

Barry Biffle: And we had flights going out. Maybe we had held out too much before, but we had flights going out, you know, 60, 70 percent load factors inbound to Vegas at March Madness. I mean, basically, what happened in March and April, the demand just froze. And so we just didn't see a lot of incremental demand. And, in fact, we would lower the fares to see if we would get it. We ended up starting to raise the fares back because we figured out that you just didn't stimulate demand, it wasn't, people were not behaving as normal stimulation would happen at low fares.

Speaker Change: And we've had flights going out maybe we'd held out too much before but we had flights going out 60, 70% load factors inbound to Vegas.

Speaker Change: March Madness, I mean, basically what happened in March and April the demand just broken and so we just didn't see a lot of incremental demand and in fact, we would lower the fares to see if we get it we ended up rates starting to raise the fares back because we figured out that you just didn't stimulate demand and what it wasn't people not behavior.

Speaker Change: As normal stimulation, we happen to low fare. So we actually figured out the people who are going to travel we're going to travel and so we actually raised our fares back significantly.

Barry Biffle: So we actually figured out the people who were going to travel were going to travel, and so we actually raised our fares back significantly.

Barry Biffle: Thanks Barry, it does, thank you.

Speaker Change: Thanks, Barry and then it does thank you may.

Barry Biffle: Maybe this is like an off the wall question, but would your contracts allow you, not to sale lease back, but to outright sell down positions from your order book for a period of time? Not without a negotiation. I mean, the contract does not allow it, but we can sublease aircraft, and that is probably the easiest thing to do from the existing fleet. Thanks for taking the questions. Yeah, one thing, we can defer, but it's kind of in the outside 18 months, I mean, that's contractual. But no, the easiest thing to do to moderate capacity is all of our fleets are relatively modern, and so we can sublease aircraft.

Speaker Change: Maybe this is like an off the wall question, but.

Speaker Change: Would your.

Speaker Change: Contracts allow you not to sale leaseback, but to outright.

Speaker Change: Sell down positions from your order book for a period of time.

Speaker Change: Not without a negotiation the contract does not allow it but we can a sublease aircraft.

Speaker Change: And that is probably the easiest thing to do from.

Speaker Change: From the existing fleet.

Speaker Change: Yes.

Speaker Change: Thanks for taking the questions.

Speaker Change: One thing we can't we can defer, but it's kind of in the outside 18 months I mean, that's.

Speaker Change: That is contractual but.

Speaker Change: Now the easiest thing to do to moderate capacity is all of our fleets relatively modern and so we can sublease aircrafts.

Barry Biffle: Thank you.

Speaker Change: Thank you.

Operator: One moment for our next question. Our next question comes from the line of Andrew Didora of Bank of America. Your line is now open. Hey everyone, thanks for taking the questions. So Barry, you mentioned your January RASM was up 19.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Andrew <unk> of Bank of America. Your line is now open.

Andrew: Hey, everyone. Thanks for taking the questions.

Speaker Change: So Barry you mentioned in your January RASM was up 19 can.

Andrew Didora: Can you maybe give us some sense of how that progressed in February and March and any way you can speak to kind of where April has shook out at this point? Yes, so, yeah, look, we saw a little bit down from January to February, but the big drop was March. So I think if you graph this out, the way it looks like is that there was a shock that hit the market in March, continued through April. It's put a massive dent into May and even June bookings. But we're finally now taking, you know, while we've missed a lot of sales, we're now starting to get back to pacing to kind of a normal sales environment, if that kind of helps think about it.

Andrew: Can you maybe give us.

Speaker Change: Some sense of how that progressed.

Speaker Change: In February and March and any way you can speak to kind of where April is kind of at this point.

Speaker Change: Okay.

Speaker Change: Yes so.

Speaker Change: Yeah look we saw a little bit down from from from January to February, but the big drop was March.

Speaker Change: So I think if you if you graphed this out the way it looks like is that there was a shock to hit to hit the market. In March continued through April it's put a massive dent into may and even June bookings, but we're finally now taking while we've missed a lot of sales we're now starting to get.

Speaker Change: Back to pacing to kind of a normal sales environment, if that kind of helps to think about it.

Barry Biffle: And it stands to reason, right? I think there was a lot of uncertainty. People worried about, are they gonna lose their job? You know, is there something wrong in the economy? And then if you don't lose your job and you save your money and you still wanna travel, I think it's just gonna delay their purchase. Yep, got it.

Speaker Change: Stands to reason right I think there was a lot of uncertainty people worried about or they can lose their job is there something wrong in the economy and then if you don't lose your job and you save your money and you still want to travel I think is just going to delay their purchases.

Mark Mitchell: And just in terms of what's underlying the EPS guidance that you gave, did I hear Jimmy correctly, you're expecting positive RASM in 2Q on the download single digit capacity? That's right. We've cut out a lot of Tuesday, Wednesday and Saturday flying. We did expect Rasm to be up meaningfully in Q2. We still expect it to be marginally positive. But we'll see how it progresses. We've got a lot of sales to do between now and the end of June. But our expectation is, and based on our guides, is that it will be in positive territory. Got it.

Speaker Change: Got it.

Speaker Change: And then just in terms of what's underlying the EPS guidance that you gave here Jimmy correctly, you're expecting positive RASM in Q2 on the download single digit capacity.

Speaker Change: That's right yeah like we've we've cut a lot of Tuesday Wednesday.

Speaker Change: Saturday flying.

Speaker Change: So we expect like we did expect RASM to be up meaningfully in Q2, we still expect it to be marginally positive.

Speaker Change: <unk>.

Speaker Change: But we'll see how it progressed, we've got a lot of sales to do between now and the end of June but our expectation is and based on our guide is that it'll be in positive territory.

Operator: Thank you. One moment for our next question.

Speaker Change: Got it thank you.

Speaker Change: One moment for our next question.

Stephen Trent: Your next question comes from the line of Stephen Trent of Citi. Your line is now open. Good afternoon, gentlemen, and thanks very much for taking my question. Most of mine have been answered, but I was curious about how you were thinking about, you know, ancillary revenue per passenger, sort of when we think about sort of, you know, your previous strategy before you rolled in a premium, you know, that was a big focus, which, you know, I totally get. And as we move forward from a high level, you know, how are you thinking about sort of Verizon, per se, development relative to, you know, ancillary revenue per customer?

Speaker Change: Your next question comes from the line of Stephen Trent of Citi. Your line is now open.

Stephen Trent: Yeah, Good afternoon, gentlemen, and thanks very much for taking my question most of mine have been answered but I.

Speaker Change: I was curious about how you were thinking about.

Stephen Trent: Ancillary revenue per passenger sort of when we.

Stephen Trent: Think about sort of PVA strategy before you.

Stephen Trent: The premium that was a big focus which I totally get it.

Stephen Trent: As we move forward.

Stephen Trent: From a high level, how are you thinking about sort of.

Stephen Trent: RASM per se.

Stephen Trent: Developments relative to Q2.

Stephen Trent: Accident year revenue per.

Bobby Schroeter: Thank you. Yeah, thanks, Stephen. I mean, we can talk about it. We've kind of gone away from the ancillary. The competitive landscape's changed, especially if you take kind of post-May 28th, right? And so we believe with the new Frontier and how we've laid out the bundles, we believe it enables us to really use our cost advantage and give those savings to customers for the products that they want. And so, you know, we're less focused on kind of the ancillary and just the dollars per passenger that we get in total. Appreciate that.

Stephen Trent: Customer thank you.

Stephen Trent: Yeah, Thanks, Steven can talk about it.

Stephen Trent: Okay.

Stephen Trent: <unk> kind of gone away from the ancillary.

Stephen Trent: The competitive landscape has changed especially if you take kind of post may 28.

Stephen Trent: And so we believe with the new frontier and how we've laid out the bundles. We believe enables us to really use our cost advantage and give those savings to customers for the products that they want and need.

Stephen Trent: And so we're less focused on on kind of the ancillary and just the dollars per passenger that we get in total.

Bobby Schroeter: Um, and just one really quick follow up, you know, could we see sort of medium term, more alliances, and the sort of culture agreement that you're doing with Volaris, for example, do you see room to do something along those lines? Thank you. Absolutely. We've kind of tested that for a few years now. It's been very successful. And because we're focused so much on the loyalty side of our business, we believe that that's an opportunity. And we're looking at partnerships as we speak.

Stephen Trent: I appreciate that.

Stephen Trent: And just one really quick follow up.

Stephen Trent: Could we see sort of medium term.

Stephen Trent: More alliances.

Stephen Trent: I'm missing a codeshare agreement.

Speaker Change: Youre doing a valores for example, do you see room to do something.

Stephen Trent: Along those lines. Thank you.

Stephen Trent: Absolutely.

Stephen Trent: Kind of tested that for five years now it's been very successful in.

Stephen Trent: Because we're focused so much on the on the loyalty side of our business. We believe that that's an opportunity and we're looking at partnerships as we speak.

Bobby Schroeter: Appreciate it, Barry. Thanks, Chris.

Barry: I appreciate it Barry.

Savi Sith: One moment for our next question. Our next question comes from the line of Savi Sith of Raymond James. Your line is now open. Hey, thanks for taking my follow up. Can I just ask on the fleet side? It seems is there just one less delivery for the full year as a result of this? And it seemed like Airbus and you know, was catching up and delivering well. I'm curious on kind of what you're seeing on the fleet side and what you're seeing on the GTF engine side. Now, you're right, Savi. From what we had talked about before, when you look Q2 to Q3, one aircraft shifted.

Stephen Trent: Yes.

Stephen Trent: One moment for our next question.

Speaker Change: Our next question. Our next question comes from the line of Savi said the Raymond James Your line is now open.

Stephen Trent: Thanks for taking my follow up.

Speaker Change: Can I just ask on the fleet side.

Speaker Change: It seems is there just one less delivery for the full year as a result of this does it seem like Airbus.

Speaker Change: Catching up and delivering well if I'm curious on kind of what youre seeing on the fleet side and what you're seeing on the GTS engine side.

Speaker Change: Right now Youre right Savi from what we had talked about before when you look Q2 to Q3 one aircraft.

Mark Mitchell: So we had mentioned, you know, four before it is three for Q2. And then for the full year, one aircraft did shift from December to, you know, the first quarter. So, you know, when you look at the year in total, you did have a shift out of one aircraft. And on the GTF front, you're still getting enough kind of engines to replace as needed. So you're not seeing any impacts there. Correct. No significant AOG.

Speaker Change: Shifted so we had mentioned before it is three for Q2 and then for the full year. One aircraft did shift from December to the first quarter. So when you look at the year in total you did have a shift out of one one aircraft.

Speaker Change: And on the ETF front yourself getting enough data engine to replace doesn't need it so youre not seeing any impacts there.

Speaker Change: Correct no significant issues.

Savi Sith: All right, thank you.

Speaker Change: Alright, thank you.

Operator: I am showing no further questions at this time.

I am showing no further questions at this time I would now like to turn it back to Barry for closing remarks.

Barry Biffle: I would now like to turn it back to Barry Biffle for closing remarks. I want to thank everybody for joining, and we look forward to talking to you next. Thank you for your participation in today's conference. This concludes the program. You may now disconnect. Thanks for watching!

Speaker Change: Well I, thank everybody for joining and we look forward to talking to you next quarter.

Sure.

Speaker Change: Thank you for your participation in today's conference. This concludes the program you may now disconnect.

Speaker Change: Okay.

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