Q2 2026 Frontier Group Holdings Inc Earnings Call

July 29, 2026

Speaker #1: And welcome to the Frontier Group Holdings Q2 2026 earnings conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press *1 to raise your hand.

Operator: Welcome to the Frontier Group Holdings Q2 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to David Erdman, Senior Director of Investor Relations. David, please go ahead.

Speaker #1: To withdraw your question, press *1 again. I will now hand the conference over to David Erdman, Senior Director of Investor Relations. David, please go ahead.

Speaker #2: Thanks, and good morning, everyone. Welcome to our Q2 2026 earnings call. Joining me this morning and speaking order are Jamie Dempsey, President and Chief Executive Officer; Bobby Schroeter, Chief Commercial Officer; and Mark Mitchell, Chief Financial Officer.

David Erdman: Thanks, good morning, everyone. Welcome to our Q2 2026 earnings call. Joining me this morning in speaking order are Jimmy Dempsey, President Chief Executive Officer, Bobby Schroeter, Chief Commercial Officer, and Mark Mitchell, Chief Financial Officer. Each will deliver brief prepared remarks, then we'll open the call for questions. Before we begin, however, I will remind you that today's discussion will include forward-looking statements subject to risks and uncertainties, and we will refer to certain non-GAAP financial measures. Reconciliations can be found in the earnings release issued earlier today and on our Investor Relations website. We also will be referencing stage-adjusted unit metrics, which are based on a conversion to 1,000 miles. I'll turn the call over to Jimmy to begin his prepared remarks. Jimmy?

Speaker #2: Each will deliver brief prepared remarks, and then we'll open the call for questions. Before we begin, however, I will remind you that today's discussion will include forward-looking statements subject to risks and uncertainties, and we will refer to certain non-GAAP financial measures.

Speaker #2: Reconciliations can be found in the earnings release issued earlier today and on our investor relations website. We also will be referencing stage-adjusted unit metrics, which are based on a conversion to $1,000 miles.

Speaker #2: So, I'll turn the call over to Jamie to begin his prepared remarks. Jamie?

Speaker #3: Thanks, David, and good morning, everyone. Our Q2 performance was well ahead of our earlier expectations, and marks a meaningful step forward in Frontier's transformation.

James G. Dempsey: Thanks, David, good morning, everyone. Our Q2 performance was well ahead of our earlier expectations and marks a meaningful step forward in Frontier's transformation. The progress we've delivered this quarter validates the actions we have taken to strengthen the airline and position the business for sustained profitability. I'm incredibly proud of the focus, urgency, and execution across Team Frontier as we continue advancing the plan we announced in February. Adjusted loss per share narrowed to $0.10 compared to our original guidance range of a loss of $0.45 to $0.60 per share, with top-line performance the primary factor. We delivered an all-time company record for quarterly revenue of $1.3 billion, up 38% year-over-year, with RASM up 28%, augmented by strong travel demand, the continued progression of our revenue management initiatives, and a more favorable competitive capacity backdrop.

Jimmy Dempsey: Thanks, David, good morning, everyone. Our Q2 performance was well ahead of our earlier expectations and marks a meaningful step forward in Frontier's transformation. The progress we've delivered this quarter validates the actions we have taken to strengthen the airline and position the business for sustained profitability. I'm incredibly proud of the focus, urgency, and execution across Team Frontier as we continue advancing the plan we announced in February. Adjusted loss per share narrowed to $0.10 compared to our original guidance range of a loss of $0.45 to $0.60 per share, with top-line performance the primary factor. We delivered an all-time company record for quarterly revenue of $1.3 billion, up 38% year-over-year, with RASM up 28%, augmented by strong travel demand, the continued progression of our revenue management initiatives, and a more favorable competitive capacity backdrop.

Speaker #3: The progress we've delivered this quarter validates the actions we have taken to strengthen the airline and position the business for sustained profitability. I'm incredibly proud of the focus, urgency, and execution across Team Frontier as we continue advancing the plan we announced in February.

Speaker #3: Adjusted loss per share narrowed to 10 cents, compared to our original guidance range of a loss of 45 to 60 cents per share, with top-line performance the primary factor.

Speaker #3: We delivered an all-time company record for quarterly revenue of $1.3 billion, up 38% year over year, with RASM up 28%, augmented by strong travel demand, the continued progression of our revenue management initiatives, and a more favorable competitive capacity backdrop.

Speaker #3: We ended the quarter with liquidity of $1.16 billion, further strengthening our balance sheet and giving us added flexibility as we execute against our transformation priorities.

James G. Dempsey: We ended the quarter with liquidity of $1.16 billion, further strengthening our balance sheet and giving us added flexibility as we execute against our transformation priorities. Across the business, the team has been executing with discipline and momentum against the four priorities we set out in February: rightsizing our fleet, strengthening cost discipline, improving operational reliability, and deepening customer loyalty. Beginning with fleet rightsizing, this work is now largely complete and is creating a more efficient, more productive platform for the future. In Q2, we returned all 24 aircraft under the aircraft agreement. Moreover, we are in advanced discussions to early terminate leases associated with 13 A320neo aircraft in the coming months and substantially replace that capacity with direct leases for up to 10 newer, more cost-efficient A321neo aircraft by Q1 2027, facilitating slower capacity growth in Q4 of approximately 7%.

Jimmy Dempsey: We ended the quarter with liquidity of $1.16 billion, further strengthening our balance sheet and giving us added flexibility as we execute against our transformation priorities. Across the business, the team has been executing with discipline and momentum against the four priorities we set out in February: rightsizing our fleet, strengthening cost discipline, improving operational reliability, and deepening customer loyalty. Beginning with fleet rightsizing, this work is now largely complete and is creating a more efficient, more productive platform for the future. In Q2, we returned all 24 aircraft under the aircraft agreement. Moreover, we are in advanced discussions to early terminate leases associated with 13 A320neo aircraft in the coming months and substantially replace that capacity with direct leases for up to 10 newer, more cost-efficient A321neo aircraft by Q1 2027, facilitating slower capacity growth in Q4 of approximately 7%.

Speaker #3: Across the business, the team has been executing with discipline and momentum against the four priorities we set out in February: bite-sizing our fleet, strengthening cost discipline, improving operational reliability, and deepening customer loyalty.

Speaker #3: Beginning with fleet right-sizing, this work is now largely complete and is creating a more efficient, more productive platform for the future. In Q2, we returned all 24 aircraft under the AirCap agreement.

Speaker #3: Moreover, we are in advanced discussions to early terminate leases associated with 13 A320neo aircraft in the coming months, and substantially replace that capacity with direct leases for up to 10 newer, more cost-efficient A321neo aircraft by Q1 2027, facilitating slower capacity growth in Q4 of approximately 7%.

Speaker #3: On cost discipline, we are seeing clear benefits from the actions we have taken to bring productivity back into the airline, and remain on track to deliver $200 million of targeted annual runway cost savings by 2027.

James G. Dempsey: On cost discipline, we are seeing clear benefits from the actions we have taken to bring productivity back into the airline and remain on track to deliver $200 million of targeted annual run rate cost savings by 2027. Operational reliability also continued to improve, supported by a system-wide maintenance strategy that is contributing to stronger completion factor and on-time performance. For H1, Frontier ranked fourth among domestic carriers in completion factor and delivered a controllable completion factor of 99.3%. As demonstrated by today's results, customer loyalty and revenue management are gaining momentum. In late June, we expanded and improved our Barclays co-brand credit card partnership. In addition, I'm pleased we recently announced the fleet-wide rollout of Starlink high-speed Wi-Fi. We expect it to launch in early 2027.

Jimmy Dempsey: On cost discipline, we are seeing clear benefits from the actions we have taken to bring productivity back into the airline and remain on track to deliver $200 million of targeted annual run rate cost savings by 2027. Operational reliability also continued to improve, supported by a system-wide maintenance strategy that is contributing to stronger completion factor and on-time performance. For H1, Frontier ranked fourth among domestic carriers in completion factor and delivered a controllable completion factor of 99.3%. As demonstrated by today's results, customer loyalty and revenue management are gaining momentum. In late June, we expanded and improved our Barclays co-brand credit card partnership. In addition, I'm pleased we recently announced the fleet-wide rollout of Starlink high-speed Wi-Fi. We expect it to launch in early 2027.

Speaker #3: Operational reliability also continued to improve, supported by a system-wide maintenance strategy that is contributing to stronger completion factor and on-time performance. For the first half of the year, Frontier ranked 4th among domestic carriers in completion factor and delivered a controllable completion factor of 99.3%.

Speaker #3: As demonstrated by today's results, customer loyalty and revenue management are gaining momentum. In late June, we extended and improved our Barclays co-brand credit card partnership.

Speaker #3: In addition, I'm pleased we recently announced the fleet-wide Wi-Fi. We expect it to launch in early 2027. The introduction of Wi-Fi, in conjunction with first-class seating, significantly enhances our onboard experience and it reinforces our overarching commitment to delivering meaningful value to customers while maintaining industry-leading fares.

James G. Dempsey: The introduction of Wi-Fi in conjunction with first-class seating significantly enhances our onboard experience. It reinforces our overarching commitment to delivering meaningful value to customers while maintaining industry-leading fares. In conclusion, we are focused on strengthening the fundamentals of our business and segmenting our revenue base to meet customer expectations. We have real momentum. I'm confident in the path ahead for Frontier. As noted in our guidance update, we anticipate returning the airline to profitability in H2. With that, I'll turn the call over to Bobby to walk through the commercial update.

Jimmy Dempsey: The introduction of Wi-Fi in conjunction with first-class seating significantly enhances our onboard experience. It reinforces our overarching commitment to delivering meaningful value to customers while maintaining industry-leading fares. In conclusion, we are focused on strengthening the fundamentals of our business and segmenting our revenue base to meet customer expectations. We have real momentum. I'm confident in the path ahead for Frontier. As noted in our guidance update, we anticipate returning the airline to profitability in H2. With that, I'll turn the call over to Bobby to walk through the commercial update.

Speaker #3: In conclusion, we are focused on strengthening the fundamentals of our business and segmenting our revenue base to meet customer expectations. We have real momentum, and I'm confident in the path ahead for Frontier.

Speaker #3: As noted in our guidance updates, we anticipate returning the airline to profitability in the second half of the year. With that, I'll turn the call over to Bobby to walk through the commercial updates.

Speaker #4: Thanks, Jamie. RASM came in at 11.52 cents, 28% higher year-over-year. The vast majority of the increase is a reflection of more disciplined revenue management, alongside an improved overall supply-demand backdrop, which is further enhanced by CS's exit from overlapping markets.

Robert Schroeter: Thanks, Jimmy. RASM came in at $0.1152, 28% higher year-over-year. The vast majority of the increase is a reflection of more disciplined revenue management alongside an improved overall supply-demand backdrop, which is further enhanced by CS exit from overlapping markets. These factors are allowing us to substantially mitigate higher fuel prices. Total revenue per passenger rose 20% to approximately $131 on flown load factor of 80.3% up 1 point on capacity that was 8% higher. Loyalty continues to be one of our fastest-growing, highest margin revenue streams. The Q2 reinforced the strength of that platform. For example, the revenue contribution from the Barclays co-brand card increased nearly 30% year-over-year, supported by record co-brand card acquisition activity and continued double-digit growth in cardholder spends through H1, reflecting the customer's recognition of the value we are delivering in the program.

Bobby Schroeter: Thanks, Jimmy. RASM came in at $0.1152, 28% higher year-over-year. The vast majority of the increase is a reflection of more disciplined revenue management alongside an improved overall supply-demand backdrop, which is further enhanced by CS exit from overlapping markets. These factors are allowing us to substantially mitigate higher fuel prices. Total revenue per passenger rose 20% to approximately $131 on flown load factor of 80.3% up 1 point on capacity that was 8% higher. Loyalty continues to be one of our fastest-growing, highest margin revenue streams. The Q2 reinforced the strength of that platform. For example, the revenue contribution from the Barclays co-brand card increased nearly 30% year-over-year, supported by record co-brand card acquisition activity and continued double-digit growth in cardholder spends through H1, reflecting the customer's recognition of the value we are delivering in the program.

Speaker #4: These factors are allowing us to substantially mitigate higher fuel prices. Total revenue per passenger rose 20% to approximately $131. Unflown load factor was 80.3%, up a point on capacity—up a point on capacity that was 8% higher.

Speaker #4: Loyalty continues to be one of our fastest-growing, highest-margin revenue streams, and Q2 reinforced the strength of that platform. For example, the revenue contribution from the Barclays co-brand card increased nearly 30% year-over-year, supported by record co-brand card acquisition activity and continued double-digit growth in cardholder spend throughout the first half of the year.

Speaker #4: Reflecting the customers' recognition of the value we are delivering in the program. Customer loyalty is increasingly tied to what we deliver onboard as well.

Robert Schroeter: Customer loyalty is increasingly tied to what we deliver on board as well. With our upcoming first-class product and the Starlink rollout Jimmy mentioned, we will be delivering a meaningfully better in-flight experience, one that gives the customers who fly us today more reason to come back. It puts Frontier in play for customers our fares alone haven't reached. That's what converts a one-time booking into a repeat customer and a repeat customer into a cardholder. As we layer in first class, Starlink Wi-Fi, and additional loyalty enhancements, we are building a more durable, increasingly diversified revenue base while preserving the cost discipline that defines Frontier's model. Domestic capacity in Q3 is scheduled to be flat year-over-year, while competitive capacity is down over 4 points.

Bobby Schroeter: Customer loyalty is increasingly tied to what we deliver on board as well. With our upcoming first-class product and the Starlink rollout Jimmy mentioned, we will be delivering a meaningfully better in-flight experience, one that gives the customers who fly us today more reason to come back. It puts Frontier in play for customers our fares alone haven't reached. That's what converts a one-time booking into a repeat customer and a repeat customer into a cardholder. As we layer in first class, Starlink Wi-Fi, and additional loyalty enhancements, we are building a more durable, increasingly diversified revenue base while preserving the cost discipline that defines Frontier's model. Domestic capacity in Q3 is scheduled to be flat year-over-year, while competitive capacity is down over 4 points.

Speaker #4: With our upcoming first-class product and the Starlink rollout, Jamie mentioned, we will be delivering a meaningfully better in-flight experience—one that gives the customers who fly us today more reason to come back, and puts Frontier in play for customers our fares alone haven't reached.

Speaker #4: That's what converts a one-time booking into a repeat customer and a repeat customer into a cardholder. As we layer in first-class, Starlink Wi-Fi, and additional loyalty enhancements, we are building a more durable, increasingly diversified revenue base while preserving the cost discipline that defines Frontier's model.

Speaker #4: Domestic capacity in Q3 is scheduled to be flat year-over-year, while competitive capacity is down over 4 points. Our Q3 scheduled capacity is expected to increase 2 to 3% sequentially, and 17 to 18% year-over-year, as we continue to normalize productivity and seize the unique opportunity to backfill lost capacity in the high-value carrier space.

Robert Schroeter: Our Q3 scheduled capacity is expected to increase 2% to 3% sequentially and 17% to 18% year-over-year as we continue to normalize productivity and seize the unique opportunity to backfill lost capacity in the high-value carrier space. Q4 growth, assuming execution of the deals that Jimmy mentioned previously, is expected to be approximately 7% year-over-year, more in line with our long-term growth targets. With that, I'll now turn it over the call to Mark.

Bobby Schroeter: Our Q3 scheduled capacity is expected to increase 2% to 3% sequentially and 17% to 18% year-over-year as we continue to normalize productivity and seize the unique opportunity to backfill lost capacity in the high-value carrier space. Q4 growth, assuming execution of the deals that Jimmy mentioned previously, is expected to be approximately 7% year-over-year, more in line with our long-term growth targets. With that, I'll now turn it over the call to Mark.

Speaker #4: Q4 growth, assuming execution of the deals Jamie mentioned previously, is expected to be approximately 7% year-over-year—more in line with our long-term growth targets.

Speaker #4: With that, I'll now turn the call over to Mark.

Speaker #2: Thanks, Bobby. Total adjusted operating expenses in the Q2 were $1.3 billion, or $11.77 per ASM, including $436 million of fuel expense at an average cost of $4.17 per gallon, approximately $180 million higher compared to forward indications from early February.

Mark C. Mitchell: Thanks, Bobby. Total adjusted operating expenses in the Q2 were $1.3 billion, or $0.1177 per ASM, including $436 million of fuel expense at an average cost of $4.17 per gallon, approximately $180 million higher compared to forward indications from early February. Total adjusted operating expenses, excluding fuel in the early return agreement, were $870 million, or $0.0742 per ASM stage adjusted, reflecting a sequential decline of over 10% on higher aircraft utilization. Q2 adjusted net loss was $22 million, $0.10 per share, significantly favorable to our expected guidance range of a $0.45 to $0.60 loss. The beat was driven by stronger-than-expected revenue performance and disciplined cost management. We ended the quarter with total liquidity of $1.16 billion, significantly above our guidance range, representing 27% of trailing 12-month adjusted revenue.

Mark Mitchell: Thanks, Bobby. Total adjusted operating expenses in the Q2 were $1.3 billion, or $0.1177 per ASM, including $436 million of fuel expense at an average cost of $4.17 per gallon, approximately $180 million higher compared to forward indications from early February. Total adjusted operating expenses, excluding fuel in the early return agreement, were $870 million, or $0.0742 per ASM stage adjusted, reflecting a sequential decline of over 10% on higher aircraft utilization. Q2 adjusted net loss was $22 million, $0.10 per share, significantly favorable to our expected guidance range of a $0.45 to $0.60 loss. The beat was driven by stronger-than-expected revenue performance and disciplined cost management. We ended the quarter with total liquidity of $1.16 billion, significantly above our guidance range, representing 27% of trailing 12-month adjusted revenue.

Speaker #2: Total adjusted operating expenses, excluding fuel in the early return agreement, were $870 million, or $7.42 per ASM stage-adjusted, reflecting a sequential decline of over 10% on higher aircraft utilization.

Speaker #2: Q2 adjusted net loss was $22 million, or $0.10 per share, significantly favorable to our expected guidance range of a $0.45 to $0.60 loss.

Speaker #2: The beat was driven by stronger-than-expected revenue performance and disciplined cost management. We ended the Q2 with total liquidity of $1.16 billion, significantly above our guidance range, representing 27% of trailing 12-month adjusted revenue.

Speaker #2: The increase during the Q2 was supported by stronger sales than expected, the signing bonus received in connection with the Barclays amendment, which was slightly above expectations, and disciplined capital allocation.

Mark C. Mitchell: The increase during the quarter was supported by stronger sales than expected, the signing bonus received in connection with the Barclays amendment, which was slightly above expectations, and disciplined capital allocation. We ended the quarter with 165 Airbus aircraft, having taken delivery of 2 A320neos and 4 A321neos, and returning all 24 A320neos pursuant to the early return agreement. During the Q3, we expect to take delivery of 1 additional A320neo and 5 A321neos from our Airbus order book. As Jimmy mentioned, we are in advanced discussions to early terminate the leases associated with 13 A320neo aircraft and enter into direct leases for up to 10 newer and more cost-efficient A321neo aircraft.

Mark Mitchell: The increase during the quarter was supported by stronger sales than expected, the signing bonus received in connection with the Barclays amendment, which was slightly above expectations, and disciplined capital allocation. We ended the quarter with 165 Airbus aircraft, having taken delivery of 2 A320neos and 4 A321neos, and returning all 24 A320neos pursuant to the early return agreement. During the Q3, we expect to take delivery of 1 additional A320neo and 5 A321neos from our Airbus order book. As Jimmy mentioned, we are in advanced discussions to early terminate the leases associated with 13 A320neo aircraft and enter into direct leases for up to 10 newer and more cost-efficient A321neo aircraft.

Speaker #2: We ended Q2 with 165 Airbus aircraft, having taken delivery of two A320neos and four A321neos, and returning all 24 A320neos pursuant to the early return agreement.

Speaker #2: During Q3, we expect to take delivery of one additional A320neo and five A321neos from our Airbus order book. As Jamie mentioned, we are in advanced discussions to early terminate the leases associated with 13 A320neo aircraft and enter into direct leases for up to 10 newer and more cost-efficient A321neo aircraft.

Speaker #2: Assuming execution of these agreements, we would expect to operate a fleet of no greater than 168 Airbus aircraft by the end of Q1 2027 and remain at that level through the end of '27.

Mark C. Mitchell: Assuming execution of these agreements, we would expect to operate a fleet of no greater than 168 Airbus aircraft by the end of the Q1 2027 and remain at that level through the end of 2027. We will provide an update should formal agreements be executed. Turning to guidance. Q3 adjusted diluted EPS is expected to range from a loss of $0.10 per share to a profit of $0.10 per share at an average fuel cost of $3.70 per gallon. Q4 adjusted diluted EPS is expected to range from breakeven to a profit of $0.20 per share at an average fuel cost of $3.45 per gallon, which would reflect the third consecutive quarter of earnings improvement. Operator, we're ready to open the line for questions.

Mark Mitchell: Assuming execution of these agreements, we would expect to operate a fleet of no greater than 168 Airbus aircraft by the end of the Q1 2027 and remain at that level through the end of 2027. We will provide an update should formal agreements be executed. Turning to guidance. Q3 adjusted diluted EPS is expected to range from a loss of $0.10 per share to a profit of $0.10 per share at an average fuel cost of $3.70 per gallon. Q4 adjusted diluted EPS is expected to range from breakeven to a profit of $0.20 per share at an average fuel cost of $3.45 per gallon, which would reflect the third consecutive quarter of earnings improvement. Operator, we're ready to open the line for questions.

Speaker #2: We will provide an update should formal agreements be executed. Turning to guidance: Q3 adjusted diluted EPS is expected to range from a loss of 10 cents per share to a profit of 10 cents per share, at an average fuel cost of $3.70 per gallon.

Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Stand by while we compile the Q&A roster. Your first question comes from the line of Savi Syth with Raymond James. Please go ahead.

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

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

Savi Syth: Hey, good morning, everyone. The kind of question that I had was on the capacity growth. I think Bobby mentioned that maybe this kind of 7% level in Q4 is kind of the, maybe the target level. It looks like you're continuing to favor maybe a higher gauge aircraft. Just any high-level thoughts on as you think about kind of medium-term growth and how you're thinking about the strategy there.

Hey, good morning everyone. Um

James G. Dempsey: Yeah. Hi, Savi. It's Jimmy. Look, we haven't changed what we said earlier this year. We talked about somewhere between 7% and 10% capacity growth on an annualized basis over the kind of medium-term. It's quite lumpy in terms of the capacity that we have to fly versus what we want to get to. You're also lapping quite an unproductive airline a year ago. If you look at capacity growth in Q3, it's elevated compared to where we want it to be. We're taking advantage of an opportunity that we have to return 13 aircraft. Quite frankly, I really like the timing of it. We return 13 aircraft in the next couple of months if we execute this deal. We largely don't replace the fleet until after the winter.

Jimmy Dempsey: Yeah. Hi, Savi. It's Jimmy. Look, we haven't changed what we said earlier this year. We talked about somewhere between 7% and 10% capacity growth on an annualized basis over the kind of medium-term. It's quite lumpy in terms of the capacity that we have to fly versus what we want to get to. You're also lapping quite an unproductive airline a year ago. If you look at capacity growth in Q3, it's elevated compared to where we want it to be. We're taking advantage of an opportunity that we have to return 13 aircraft. Quite frankly, I really like the timing of it. We return 13 aircraft in the next couple of months if we execute this deal. We largely don't replace the fleet until after the winter.

the another question that I had was on the capacity growth. I think Bobbi mentioned that maybe this kind of 7% uh, level in 4. Q is kind of the maybe the target level. I was wondering if you can talk a little bit about that and it looks like you're continuing to favor maybe a higher gauge aircraft. Um, just in a high level thoughts on, as you think about kind of medium-term growth and and how you're thinking about the strategy there,

Yeah. Hi Toby, it's Jimmy. Uh look we we haven't changed. Uh what we said earlier this year. I mean we talked about somewhere between 7 and 10 percent capacity growth on an annualized basis over the kind of medium term. Um, we're obviously going through a significant Fleet transition at the moment and so it's quite, um, lumpy in terms of the capacity that we have to fly versus what we want to get to. Um, and then you're also lapping quite an unproductive Airline a year ago. Um, and so if you look at um, capacity growth in, um, Q3

James G. Dempsey: We'll take the fleet down from where it is as you cross through the winter. It does give us that, plus an opportunity to retrofit the first-class seats onto the aircraft through this winter. You'll see our capacity dip from a growth perspective down to like 6%, 7%, 8%. We haven't really settled on it. We're working on timing within that range in Q4, which is a nice change from where we are in Q3, which is an 18% capacity growth.

Jimmy Dempsey: We'll take the fleet down from where it is as you cross through the winter. It does give us that, plus an opportunity to retrofit the first-class seats onto the aircraft through this winter. You'll see our capacity dip from a growth perspective down to like 6%, 7%, 8%. We haven't really settled on it. We're working on timing within that range in Q4, which is a nice change from where we are in Q3, which is an 18% capacity growth.

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

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

You know, it's it's, it's elevated, uh, compared to where we want it to be. And we've, we're taking advantage of an opportunity that we have to return 13 aircraft and and quite frankly, I really like the timing of it. Um, and we returned 13 aircraft in the next couple of months, if we, if we execute this deal, um, and then we largely don't replace the fleet until after the winter. Um, and so we'll take the fleet down from where it is. Um, as you as you cross through the winter and it does give us that plus an opportunity to, uh, um, retrofit. Um, the first class seats onto the aircraft through this winter. Um, and so you'll see our capacity dip. Uh, um, from a growth perspective, down to like, 6 7 8%. We haven't really settled on it and we're working on timing, but in that range in the fourth quarter, which is, which is a nice change from where we are in Q3, which is an 18%, um, capacity growth.

Really great move for us.

Savi Syth: That's a very helpful color. If I just, on the implications of the unit cost side, any kind of thoughts as we think about the next 6 to 12 months on unit cost and how that might progress?

A very helpful color. And if I just on the on the, then the implications for the unit cost side, any kind of thoughts, as we think about, like the next 6 to 12 months, on unit cost. And and how that might progress

Mark C. Mitchell: Thanks, Savi. This is Mark. As you look at the unit cost, we had good progression from Q1 to Q2, right? We're still in the midst of the transition, but the substantial completion of the fleet rightsizing puts us in a good place. We're on track with our cost savings plan. I think what you saw in Q2, which was a 12% sequential improvement, slightly higher year-over-year because of some higher maintenance activity, some transition-related items, and some incremental sales and marketing on higher revenue. You fast-forward into Q3 and Q4, what you're going to see as you look at Q3, continued progress where you're getting on our cost savings, where you get a full quarter of the rent savings. You're going to see labor productivity come through.

Mark Mitchell: Thanks, Savi. This is Mark. As you look at the unit cost, we had good progression from Q1 to Q2, right? We're still in the midst of the transition, but the substantial completion of the fleet rightsizing puts us in a good place. We're on track with our cost savings plan. I think what you saw in Q2, which was a 12% sequential improvement, slightly higher year-over-year because of some higher maintenance activity, some transition-related items, and some incremental sales and marketing on higher revenue. You fast-forward into Q3 and Q4, what you're going to see as you look at Q3, continued progress where you're getting on our cost savings, where you get a full quarter of the rent savings. You're going to see labor productivity come through.

Yeah, thanks Bobby. This is Mark. Um yeah so as you look at the unit cost so we had good progression from q1 to Q2, right? So we're still in the midst of the, the transition, but you know the completion or, you know, the substantial completion of the fleet, right? Sizing puts us in a good place. Um, we're on track with our cost savings plan. So I think, you know what

what you you saw in Q2, which was a 12% um sequential Improvement slightly higher year-over-year because of some higher maintenance activities, some transition, um, related items and some incremental sales and marketing on higher revenue, is you fast forward into

Mark C. Mitchell: You're still in a bit of a transition on the ownership cost front. We're still expecting some higher maintenance activity and certainly the incremental sales and marketing. When you put that together, you'll see progress on the plan, but some headwinds that we're working to mitigate in addition to Q3 from a year-over-year basis, lower SLB gains. As you fast-forward beyond Q3, what we're really targeting as a business, because as you look at 2027, based upon our fleet plan, there's little to no sale-leaseback gains in there, and we're targeting profitability in 2027. As part of that, from a unit cost perspective, getting our unit costs to trend when you adjust out the SLB to be trending favorable.

Mark Mitchell: You're still in a bit of a transition on the ownership cost front. We're still expecting some higher maintenance activity and certainly the incremental sales and marketing. When you put that together, you'll see progress on the plan, but some headwinds that we're working to mitigate in addition to Q3 from a year-over-year basis, lower SLB gains. As you fast-forward beyond Q3, what we're really targeting as a business, because as you look at 2027, based upon our fleet plan, there's little to no sale-leaseback gains in there, and we're targeting profitability in 2027. As part of that, from a unit cost perspective, getting our unit costs to trend when you adjust out the SLB to be trending favorable.

Um, you know, Q3 and Q4, um, you know what, you're going to see, you know, as you look at Q3, um, you know, continued progress, where you're getting, um, on our cost savings where you get a full quarter of the rent savings. You're going to see layer a labor productivity come through, you're still in a bit of a transition on the ownership cost front, and then we're still expecting some higher maintenance activity and certainly the, the incremental, sales and marketing. And so when you you put that, um, you know, together, um, you know, you you'll see, you know, progress on the plan. But some headwinds, you know, that we're working to mitigate in addition to, you know, Q3 from a year-over-year basis, uh, lower SLB gains and as you fast forward Beyond

Um, you know, Q3 what we're really targeting as a business. Because you look, as you look at 27 based upon our Fleet plan, there's little to no, you know, sale lease back gains in there and, you know, we're targeting profitability.

James G. Dempsey: Yeah. In summary, Savi, we're seeing real improvement in productivity in the business. Take out the noise of sale and leaseback gains, and the airline's unit costs are actually improving. We're pretty happy where we're going.

Jimmy Dempsey: Yeah. In summary, Savi, we're seeing real improvement in productivity in the business. Take out the noise of sale and leaseback gains, and the airline's unit costs are actually improving. We're pretty happy where we're going.

Yeah. I mean in summary Savvy like we're we're we're seeing real Improvement in productivity in the business. Take out the noise and say the least back gains and the airlines uh unit costs are actually improving. Um and so we're we're pretty happy with where we're going.

Savi Syth: Appreciate the color. Thank you.

Appreciate the call. Thank you.

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

Your next question comes from the line of ATU Mahasar with UBS. Please go ahead.

As a reminder, please unmute yourself locally.

We will move on to the next question from John Godin with Citigroup. John, your line is open. Please go ahead.

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

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

Hey guys. Um, thank you for taking my question. I um, I wanted to just follow up on the long-term ASM growth. Um, uh, that's savy's first question and may, maybe you guys could just speak about the, the drivers, the and, and the Contours of of that growth over multiple years in, in the space of what could be rising profitability, when you think about 7% versus 10 or even being a above 10 at certain times, is that a margin trigger? Is that a return trigger? You know, we we may be in a period here where profitability is improving and I think people are just trying to get a handle on.

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

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

On the interplay of Your Capacity, growth decisions with respect to that.

Yeah. Uh, hi John. Um,

I mean, look, if you look across the medium term for the airline, I mean, we established earlier this year that we wanted to have a fleet of aircraft around 170 aircraft, and to keep the fleet steady over a two-year period and give the airline an opportunity.

James G. Dempsey: That discipline around fleet is something that we've invested a huge amount of time in getting right, and we think we're moving into the right place. You then take that fleet, you know you have an order book that runs from 2028 through to 2033. We're trying to shape that order book that drives growth in the airline after you get the airline back to productivity of somewhere with, I suppose, with flexibility of somewhere between 7% and 10%. If you push productivity hard, you can go above 10%, we've got to see if that makes any sense. I think I like the idea of growing the airline in the high single digits level in order to create a more stable revenue backdrop for the airline and to give us the ability to mature the airline without actually having an operational stress in the airline.

Jimmy Dempsey: That discipline around fleet is something that we've invested a huge amount of time in getting right, and we think we're moving into the right place. You then take that fleet, you know you have an order book that runs from 2028 through to 2033. We're trying to shape that order book that drives growth in the airline after you get the airline back to productivity of somewhere with, I suppose, with flexibility of somewhere between 7% and 10%. If you push productivity hard, you can go above 10%, we've got to see if that makes any sense. I think I like the idea of growing the airline in the high single digits level in order to create a more stable revenue backdrop for the airline and to give us the ability to mature the airline without actually having an operational stress in the airline.

To to mature into its Fleet. Um you know the the airline in 2019 had 95 aircraft at the end of 2019 um and it grew quite meaningfully in the next kind of 4 to 5 years um and so giving that the airline an opportunity to mature into itself uh and improve, your operational performance is really foundational to actually running a good Airline and that's what we needed to do. So establishing a stable Fleet over 2 years is a very very important to me. Um and so that discipline around Fleet um is something that we've invested a huge amount of time in getting, right? Um and we think we're moving into into the right place. You then take that Fleet and you know you have an order book that runs from 20208 through to 2033 and we've trying to shape that order book and that drives growth in the airline after you get the airline back to productivity of somewhere with I suppose with flexibility of somewhere between 7 and 10.

James G. Dempsey: Will it be lumpy? Yeah, there's periods probably through the next five years where you may have slightly higher than 7% or 8%, and there may be periods where it's down around 5% or 6% growth. In that kind of high single digits is where I'd like to see the airline in the medium term from where it is today. Look, the fundamental thing, sorry, John, the fundamental thing that we're doing at the moment, rather than looking beyond 2028, is really getting the airline in a really strong condition before it adds aircraft to the fleet.

Jimmy Dempsey: Will it be lumpy? Yeah, there's periods probably through the next five years where you may have slightly higher than 7% or 8%, and there may be periods where it's down around 5% or 6% growth. In that kind of high single digits is where I'd like to see the airline in the medium term from where it is today. Look, the fundamental thing, sorry, John, the fundamental thing that we're doing at the moment, rather than looking beyond 2028, is really getting the airline in a really strong condition before it adds aircraft to the fleet.

I mean, if you pushed productivity hard, you can go above 10 10%. Uh, but we've got to see if that makes any sense. I think I like the idea of growing the airline in the high single digits, uh, um, um, level in order to create a more stable Revenue backdrop for the, for the airline, um, and to give us the ability to to mature, um, the airline without actually having, uh, uh, an operational stress in, in the airline. And so, like, will it be lumpy? Yeah, there's periods. Probably through the next 5 years, where you may have slightly higher than 7 or 8% and, and there'll be maybe periods where it's down around 5 or 6%, uh, growth. But in that kind of high single digits is where I'd like to see the airline in the medium-term group from where it is today.

And but I I look at it I mean it's the fundamental thing. Sorry. John the fundamental thing that we're doing at the moment rather than looking Beyond 2028 um is really getting the airline in a really strong condition um um to add their before it adds aircraft to to the fleet.

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

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

I know, I think that's great. I think investors will appreciate kind of a thoughtful discipline message there. Um, if if I could just ask, you know, what 1 more on. Now that we have the benefit of hindsight, the, the sort of play by play in, in markets after, um, the spirit, um, wind down, I, I think I heard you guys talk about 4% capacity, competitive capacity, declines, in your Market. Um, that's a number.

The number that kind of implies to no-surprise backfill, maybe from other players, and maybe you could just kind of plug us into the competitive dynamic in the wake of it. Obviously, you guys are benefiting considerably and doing a great job, but what's the competitive situation like?

James G. Dempsey: Look, this is the airline business in the United States. The field that we play on has four very predominant airlines that supply over 80% of the capacity or seats in the domestic market. It's extremely competitive. It continues to be competitive. What has happened is structural change on the back of two things, right? One is Spirit started restructuring the airline meaningfully in November last year. They cut a meaningful capacity. We also changed the way we were managing revenue. We moved to a much more disciplined revenue management strategy around the end of Q4 and into Q1 of this year. Those two things drove, if you look at our RASM numbers going into Q1, they drove high teen RASM improvement through Q1, prior to Spirit's liquidation.

Jimmy Dempsey: Look, this is the airline business in the United States. The field that we play on has four very predominant airlines that supply over 80% of the capacity or seats in the domestic market. It's extremely competitive. It continues to be competitive. What has happened is structural change on the back of two things, right? One is Spirit started restructuring the airline meaningfully in November last year. They cut a meaningful capacity. We also changed the way we were managing revenue. We moved to a much more disciplined revenue management strategy around the end of Q4 and into Q1 of this year. Those two things drove, if you look at our RASM numbers going into Q1, they drove high teen RASM improvement through Q1, prior to Spirit's liquidation.

Airlines that, um, you know, Supply over 80% of the capacity or seats in the, in the domestic Market. Um, and so it's, it's extremely competitive. It continues to be competitive. What, what, what has happened is structural change, uh, on the back of 2 things write, 1 is Spirit started restructuring and the airline meaningfully, in, in November last year. Um, and so they cut the meaningful capacity. Um, we also changed the way we we were, we were managing Revenue. Uh, we moved to a much more disciplined Revenue management strategy around the end of the fourth quarter and into the first quarter of this year. And so, those 2, things drove, like, if you look at our rasim numbers going into into q1, they drove

James G. Dempsey: Obviously, on our last earnings call, we laid out that we thought the removal or liquidation of Spirit would cause about a 3- to 5-point improvement in RASM. It's probably a little bit higher than that. That allied to the ability to mitigate high oil prices has come really from that structural change that's happened in the last couple of months. Look, back to your earlier question, it's still a very competitive marketplace.

Jimmy Dempsey: Obviously, on our last earnings call, we laid out that we thought the removal or liquidation of Spirit would cause about a 3- to 5-point improvement in RASM. It's probably a little bit higher than that. That allied to the ability to mitigate high oil prices has come really from that structural change that's happened in the last couple of months. Look, back to your earlier question, it's still a very competitive marketplace.

High teen rasim Improvement and through the first quarter prior to Spirits liquidation. Um, and then obviously, you know, on our last earnings call. We we we kind of laid out that we thought, um, the removal or or liquidation of spirit, um, would cause about a 3 to 5 point Improvement in in, in rosin, it's probably a little bit higher than that. Um, um, and that Allied to, to, to, to, to the ability to mitigate high oil prices has come really from that. Structural change. That's happened in the last couple of months, but look, uh, back to your earlier question, it's still a very competitive Marketplace.

John Godden: Appreciate the thoughts. Thank you.

John Godyn: Appreciate the thoughts. Thank you.

Appreciate the thoughts. Thank you.

Operator: Your next question comes from the line of Atul Maheswari with UBS. Atul, your line is open. Please go ahead.

Your next question comes from the line of Atum Mahas Swari.

Atul Maheswari: Morning. Are you guys able to hear me?

Which is open. Please go ahead.

James G. Dempsey: Yes.

Jimmy Dempsey: Yes.

Good morning. Uh, are you guys able to hear me?

David Erdman: Yes.

James G. Dempsey: Morning.

Jimmy Dempsey: Morning.

Atul Maheswari: Okay, awesome. Thank you. Sorry, don't know what happened there. First question. Look, you'll be lapping some big RASM numbers next year, and the growth plans are moderate. Given the compares from this year, are you optimistic that you can drive positive RASM, CASM ex spread, ex SLB gains next year? If so, what would be the key drivers of that positive spread?

Yes, yes morning. Okay, awesome. Uh

Thank you. Sorry, I don't know what happened there. Um, so first question look. I mean you'll be lapping some big

Uh, you know, the Compares from this year, are you optimistic that you can drive, positive razmas, spread X, the SLB gains next year and if so what would be the key drivers of that positive spread?

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

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

Uh, I mean, we're not, uh, morning until we're not guiding into next year at this point, but look, the airline is on a very, very good path. Um, you know, we've moved the airline back to talking about profitability, um, uh, towards the end of this year, um, and we have big Investments going on into the onboard product, um, and the operational performance of the airline. And so the introduction of Wi-Fi in early 2027, plus the, the roll out of our first class seats across this winter. I think adds, uh, significant amount of of improvement in product offering and diversification in Revenue that we will get in the airline. And I think that's very, very positive and then we'll move into next year.

Obviously focused on, on, on, on unit costs. And so, you know, we're not forecasting next year. But the airline is certainly uh, on the right trajectory to return uh to sustainable profitability. And and that's what we're we're focused on today.

Atul Maheswari: Got it. That's helpful. As my follow-up, the average daily aircraft utilization is currently a little under 10 hours a day. Where do you see this metric over the medium term? As you approach that medium-term level versus where you are currently, is there a way to size the CASM ex tailwind that this might provide?

Got it, that's helpful. And, you know, as my follow-up, the average daily aircraft utilization is currently a little under 10 hours.

Uh, today, where do you see this metric, uh, over the medium term and as you approach that medium-term level, uh, versus, you know, where you are currently? Is there a way to size the chasm—max tailwind that, uh, this might provide?

um,

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

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

you know, our objective is to get the airline to around 11, 11 11 and a half hours of of utilization and you'll have periods in the in the year uh where it's higher than that and and other periods of the Year where it's lower depending on seasonality in in in, in the business.

Um I mean you you the airline today moving through Q3 I think as a utilization rate is just over 10 10 hours. Uh and so you know we are behind in terms of moving the airline back um to a higher utilization. Given the the spike in oil prices. We've effectively trimmed about 5 or 6 points in in available capacity across uh the summer months to to to to to to to mitigate or manage through a high oil, price environment and we'll continue to be diligent in terms of how we deploy and deploy our Fleet. Um and so

So I think what we're building is flexibility, with an objective to get the airline to above 11 hours of utilization over the medium term.

James G. Dempsey: That productivity obviously enables you to improve your unit cost output.

Jimmy Dempsey: That productivity obviously enables you to improve your unit cost output.

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

Atul Maheswari: Thank you.

Thank you.

Operator: Your next question comes from the line of Scott Group with Wolfe Research. Scott, your line is open. Please go ahead.

Atul Maheswari: It's against the law.

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

James G. Dempsey: Hey, thanks. Good morning. The

Scott Group: Hey, thanks. Good morning. The

Scott Group: If I look back at Q2, you guys were talking about a 20% plus RASM, and it ended up 28%. I guess this quarter you're saying 20% plus again. Any more directional color on where you think we could end up? Maybe thinking about it this way, the last couple of years, RASM's picked up a little bit on an absolute basis, Q2 to Q3. Is that something that is achievable again? Just any more near-term RASM color.

About a, you know, 20% plus rasim and it ended up up, 28%, I guess this quarter you're saying 20% plus again, like any more like directional color on on where you think we can end up maybe maybe thinking about it this way, like, the last couple years, like, rasim picked up a little bit on an absolute basis. Q2 to Q3 is, is that something that

Is achievable again, just any any more sort of near-term rasim color.

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

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

Scott Group: Okay.

James G. Dempsey: That's what we're seeing in the system.

Jimmy Dempsey: That's what we're seeing in the system.

Uh, look, there's a couple of things happening. Um, we grew the airline, at a, at a slower Pace in, in Q2, which contributes, obviously to to rasim, then we're growing in, in Q3. Um, we think the airline is, is, is structurally changed, its Revenue platform. Uh, which enables you to get to, um, and the rasim levels that we're at today. Um, but we, you know, we do have growth coming in in Q3, that's lapping a very unproductive Airline last year and so sequentially. And the growth level is not is not that dissimilar to what we should be doing seasonally as you're rolling into this portion, uh, of the year. And but we think a, a reasonable rasim output given the 18% growth in in asm's year-over-year is just over 20%

Scott Group: Makes sense. I just want to make sure I'm understanding your point about next year. Lapping the Sale Leaseback, I don't know, what's that? Like a 4 or 5-point sort of CASM headwind. Is the point you're trying to make that you think core CASM could be down year-over-year, the reported CASM's up, but it's not up the full 4 to 5 points of what the Sale Leaseback headwind is? Is that what you're trying to say?

Okay. And that's what we're seeing in the system.

You know.

Makes sense. And then I just want to make sure I'm understanding your point about, uh, next year. So,

Mark C. Mitchell: Yeah, Scott, I think as you look, call it 2025, right? You had $300 million in Sale Leaseback gains, that on the ASM base was probably 0.7 or 0.8, right? Which would have put 2025 close to $0.08 on a stage-adjusted basis. As we look into 2027, what we are expecting is that our costs are trending to be able to be roughly flat, right, excluding that impact.

Mark Mitchell: Yeah, Scott, I think as you look, call it 2025, right? You had $300 million in Sale Leaseback gains, that on the ASM base was probably 0.7 or 0.8, right? Which would have put 2025 close to $0.08 on a stage-adjusted basis. As we look into 2027, what we are expecting is that our costs are trending to be able to be roughly flat, right, excluding that impact.

Lapping, the sale lease back. I don't know what's that like a 4 or 5 point sort of Chasm headwind is, is the point. You're trying to make that you think like core Chasm could be down year over year and so like the reported chasms up, but it's not up the, you know, full 4 to 5 Points of what you know the the sale at least back headwind is is that what you're trying to say.

James G. Dempsey: Look, Scott, it's dependent on growth, right? Inflation that you see across the airport world and other parts of the business. Yeah, I think a CASM ex fuel number to work off of somewhere in the mid-sevens makes a lot of sense to me in the medium term. We're obviously challenging the business to get it lower than that. I think that's a reasonable CASM ex fuel number to work on.

Jimmy Dempsey: Look, Scott, it's dependent on growth, right? Inflation that you see across the airport world and other parts of the business. Yeah, I think a CASM ex fuel number to work off of somewhere in the mid-sevens makes a lot of sense to me in the medium term. We're obviously challenging the business to get it lower than that. I think that's a reasonable CASM ex fuel number to work on.

Yeah, Scott, I think as you look, um, you know, it it, you know, call it 25, right. I mean you had 300 million and and sale lease back gains. And so, you know, that, you know, on the ASM base was probably 7, you know, or 0.8, right? Which would have put 25 close to, um, you know, 8 cents, um, you know, on a on a stage adjusted basis. And so, as we look, um, you know, into 27, um, you know, what we are? You know, expecting is that our our costs are are trending, um, you know, to be able to be, um, you know, roughly flat, right? Excluding. Um, you know, excluding that uh, that impact

And look at look it's got its dependent on growth right um um on inflation and that you see across the airport world and other parts of the business. But yeah, I mean I think, I think a Chasm mix fuel number uh to work off of somewhere in the mid 7th, makes a lot of sense um to me in the medium term and we're obviously,

Challenging the business to get it lower than that. Uh, but I think that's a reasonable chasm, ex-fuel number to work on.

Scott Group: I'm just confused. I'm going to pop. You're saying 2025 ex-gains, you were 8+, but you're thinking you can get that down to mid-7s. Is that?

So I just I I I'm just confused. I'm going to stop. So you're saying, 25 x gains you were over, you were 8, plus, but you're thinking, you can get that down to Mid 7s. Is that

Mark C. Mitchell: Yes. I think when you adjust for the sale-leaseback gains, yeah, like-for-like, you were pushing $0.08 in 2025. To Jimmy's point, as you look at 2027, a reasonable target is mid-7s.

Mark Mitchell: Yes. I think when you adjust for the sale-leaseback gains, yeah, like-for-like, you were pushing $0.08 in 2025. To Jimmy's point, as you look at 2027, a reasonable target is mid-7s.

James G. Dempsey: Look, it'll be ± something in the mid-7s. We haven't done our budget yet for next year. We need to look across the inflation that exists in the industry and in the model. It could be slightly higher than that, could be slightly better than that, we'll just have to see.

Jimmy Dempsey: Look, it'll be ± something in the mid-7s. We haven't done our budget yet for next year. We need to look across the inflation that exists in the industry and in the model. It could be slightly higher than that, could be slightly better than that, we'll just have to see.

Yes, I think when you adjust for the sale lease back gains. Yeah. Like for like, um, you know, you were pushing 8, cents and 25 and to Jimmy's Point, as you look at 27, reasonable Target is, is mid 7s?

Scott Group: Thank you.

And look, it'll be plus or minus something in the mid 7s. Uh, I mean that we haven't done our budget yet for next year, we need to look across the inflation that existed in the industry and and, and in the model, it could be slightly harder than us. Slightly better than us. And we just have to see. Um,

James G. Dempsey: Okay.

Jimmy Dempsey: Okay.

Thank you.

Operator: Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.

Okay.

Your next question comes from the line of Robbie Chancre with Morgan Stanley. Please go ahead.

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

Uh, great thanks. Uh morning guys, um, just on uh, the current environment out there kind of, do you feel like there's still room for the consumer to accept more jet fuel Price Busters as an industry level, uh, without seeing demand destruction or kind of? Uh, what do you think is the current, uh, Sense on elasticity?

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

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

James G. Dempsey: The volatility in price in oil is really difficult to predict, as is the consumer's willingness to continue paying it. We really just don't have a crystal ball behind this.

Jimmy Dempsey: The volatility in price in oil is really difficult to predict, as is the consumer's willingness to continue paying it. We really just don't have a crystal ball behind this.

Robert Schroeter: This is Bobby. I will just add, the demand environment, we talked about a good demand supply backdrop. The demand environment is strong. The fare environment is constructive. The demand environment is not just strong for our fare, but for our increasingly diverse revenue base in terms of ancillary, et cetera. There is a lot of good things that we see on the environment overall that is constructive for what you were discussing.

Bobby Schroeter: This is Bobby. I will just add, the demand environment, we talked about a good demand supply backdrop. The demand environment is strong. The fare environment is constructive. The demand environment is not just strong for our fare, but for our increasingly diverse revenue base in terms of ancillary, et cetera. There is a lot of good things that we see on the environment overall that is constructive for what you were discussing.

Benefiting from that. And that's enabling us to mitigate high oil. Um, at the moment, uh, or largely mitigate high oil, um, we obviously want to get the airline back to profitability and overcome higher oil in the volatility, in price in oil is, is, is, is really difficult to predict as is, is the consumer's, um, willingness to continue, um, um, and paying it. So, we, we were just don't have a crystal ball behind that. Yeah. And then this Bobby. I'll just add look the the demand environment we talked about a good uh demand Supply uh backdrop. The demand environment is strong. Um the fair environment is constructive and then um you know the demand environment isn't just strong for a fair. But for our increasingly diverse uh Revenue base uh in terms of, you know, ancillary Etc. So there's a lot of

A lot of um good things that we see uh in the environment overall um that's constructive for what you you were discussing.

Ravi Shanker: Understood. That makes sense. Maybe a quick follow-up, if you can give us a little more detail around the new credit card agreement and specifically around sharing any color on the thinking behind the duration of the agreement here. It is great that it is a long-term agreement, at the same time, just given changing dynamics of loyalty out there, do you guys consider doing maybe a shorter agreement and getting more bites at the apple? Thank you.

Understood that makes sense and maybe it's a good follow-up. Uh, if you can give us a little more detail around the new credit card agreement and specifically around uh sharing any color on the thinking behind the, uh, the duration of the agreement here. Kind of, it's great that it's a long-term agreement at the same time. Just given changing Dynamics and loyalty out there. Kind of do you guys consider doing maybe a shorter agreement and getting more by the Apple? Thank you.

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

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

Yeah, I mean, I'll I'll sit there and say, I mean, Barclays is a an incredible partner for us. Um, frankly, you've seen the results in in some of the things that we've transformed over the, the past year or 2 and there's a lot more to come in terms of capability to continue making our loyalty program. The best, uh, loyalty program out there, um, that people want to engage with both some in acquisition side, and the spend side, the our, our thought process on, on the, the length, frankly, again, we've got a partner that actually is, um, leading into this with us and getting us, uh, to a place where we, we think we can grow. Uh, though. We're all loyal to P by a fairly significant amount over the next few years. Um, so so we, we got, you know, what we wanted out of the, the deal. Um, and again we think that uh, partnering with Barclays is, is the best move we could make, uh, for the next decade.

Ravi Shanker: Very good. Thank you.

Very good. Thank you.

Operator: Your next question comes from the line of Michael Linenberg with Deutsche Bank. Please go ahead.

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

Your next question comes from the line of Michael Linenberg with Joyce Bank. Please go ahead.

Oh, hey. Um, hey, good morning, everyone. Um, just maybe to follow up on the Barclays field, the pre-purchase mileage facility.

How much, um, I I saw that you, you know, were able to sell 175 million this quarter, how much capacity is left, uh, on that facility before you hit the cap.

Mark C. Mitchell: The facility in the new agreement has a max amount of $375 million.

Mark Mitchell: The facility in the new agreement has a max amount of $375 million.

Mark C. Mitchell: Where we sat at the end of the quarter was roughly $120 million. You have plenty of runway as we progress through the term of the agreement.

Mark Mitchell: Where we sat at the end of the quarter was roughly $120 million. You have plenty of runway as we progress through the term of the agreement.

So, the facility and the new agreement has a max amount of $375 million. You know, where, you know, we sat—

Michael Linenberg: Okay, great. Thanks, Mark. Just maybe actually another question for you. Just on the sale-leaseback gains, it looked like the receipts per aircraft were down about 30%. Sort of two things, is that the right run rate to use for Q3? That's not a function of some sort of decline in asset values, right? That's probably more likely a function of just how the leases are structured? Thanks for taking my question.

Right where we sat, um, you know, at the end of the quarter was, you know, roughly $120 million. Um, so you have plenty of runway, right? As we progress through the term of the agreement,

Mark C. Mitchell: Yeah. No, I appreciate the question. Yeah, I think what you're seeing is a function of two things. One, the mix. We had two A320s and four A321s, keep in mind from prior expectations, one tail did slip into Q3.

Mark Mitchell: Yeah. No, I appreciate the question. Yeah, I think what you're seeing is a function of two things. One, the mix. We had two A320s and four A321s, keep in mind from prior expectations, one tail did slip into Q3.

Okay, great, thanks Mark. And then just maybe actually another question for you. Um, just on the sale, lease Back Games, it looked like the receipts per aircraft were down about 30% is is that sort of 2 things is, is that the right run rate to use for the third quarter? And is that discount is that's not a function of some sort of decline in asset values, right? That's probably more likely a function of just have. A lease was restructured. Thanks for taking my question.

Yeah, so and I appreciate the question. So yeah. I I think um, you know what you're saying, as a function of um, you know, the, uh, the 2 things. So 1 the mix, right? So we had, um, 2 320 and, um, 4321. And then keep in mind, you know, from, you know, prior expectations, 1 tail, did slip into the third quarter.

Michael Linenberg: Okay, thanks.

Okay, thanks.

Operator: Your next question comes from the line of Jamie Baker with J.P. Morgan Securities LLC. Jamie, your line is open. Please go ahead.

Your next question comes from the line.

Jamie, your line is open. Please go ahead.

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

Thanks operator and good morning everybody. Um so look the industry seems to achieve. It seems to have achieved new levels of pricing power. Frontier is obviously part of that I assume you agree with the characterization and you know I suppose a good fuel crisis brings out the best in you know everybody's pricing department and all that good stuff. Um my question though is what what have you Lessons Learned?

...that are comfortable paying higher fares. Is it a broad-based rising tide? Are you seeing travelers modify their booking behavior at all? I mean, look, obviously the goal is to assess the permanence of this, so understanding those building blocks and any nuances would be helpful.

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

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

yeah, I, I mean, I think Jamie, I think it's it's, it's it's quite simply, uh, you know, running a better Airline operationally and drives attachment from customers into the value that we provide to to to

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

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

To to um, from a pricing perspective to to, to the customer base. Um, I mean we we are certainly running a better operation this year. That's a meaningful change. And for the business, where our completion factor is has risen quite quite quite considerably. I think we were fourth ranked, uh, in the industry, across the first 6 months of the year. I mean, that's not unnoticed by our our customer base. Um, I think some of our tools that we're using, uh, from a pure Revenue management perspective, uh, improves the output that we get. And the discipline that we're able to provide in terms of the fairs we're offering in in, in, in, in the system and just managing that and look, um, a big portion of the Improvement that we saw in q1. Um, is really twofold 1 of those Revenue management. Um, that that you saw much more discipline around and the deployment of

Jamie Baker: Okay, perfect. Just a quick follow-up. I'll rephrase Mike's question, but a little bit more bluntly. Given a similar number of deliveries in Q3, is $47 million for sale leaseback gains a reasonable number to pencil into our models?

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

Okay, perfect. And then just a quick follow-up and I'll ask. I'll, I'll rephrase Mike's question, uh, but a little bit more importantly, given a similar number of deliveries. In the third, quarter is 47 million for sale lease back gains of reasonable. Number of the pencil into our models.

Mark C. Mitchell: Yeah. I think somewhere in that neighborhood of, yeah, call it 50 to 60.

Mark Mitchell: Yeah. I think somewhere in that neighborhood of, yeah, call it 50 to 60.

Jamie Baker: Okay, perfect. All right. Thank you very much.

Um, yeah, I mean, I think, yeah—somewhere in that neighborhood of, yeah, call it 50 to 60.

Okay, perfect. All right, thank you very much.

Operator: Your next question comes from the line of Brandon Oglenski with Barclays. Brandon, please go ahead.

Your next question comes from the line of Brandon Olenski with Barclays. Brandon, please go ahead.

Brandon Oglenski: Hey. Good morning. Thanks for taking the question. Jimmy, I guess as you look into 2027, I think you said you do expect the airline to be profitable. I understand that you want to keep the fleet flat, but is there inherent utilization capacity increases that we should be expecting next year? Is that high single-digit growth rate the right one to pencil in?

Hey, good morning. Thanks for taking the question. Um,

Jimmy, I guess as you look into 27, I think you said you do expect the airline to be profitable and I understand that you want to keep the fleet flat. So, but is there inherent utilization capacity increases that we should be expecting next year is is that high single digit growth rate, the right 1 to pencil in.

James G. Dempsey: Look, we haven't defined our plan for next year. We have the flexibility to grow the airline by high single digit if the market gives us the opportunity to. It really depends on what happens with the ongoing oil prices. As it stands at the moment, we would anticipate growing by somewhere between 5% and 8% next year. We've got to go through a planning cycle and understand what we get to. We have the ability to obviously lower the productivity in the airline, but that'll raise costs, and is that the right overall better answer for the airline? We'd prefer to get the airline back into a productive state. We're probably about five or six points behind, in terms of capacity from where we'd like to be, because of the oil price crisis.

Jimmy Dempsey: Look, we haven't defined our plan for next year. We have the flexibility to grow the airline by high single digit if the market gives us the opportunity to. It really depends on what happens with the ongoing oil prices. As it stands at the moment, we would anticipate growing by somewhere between 5% and 8% next year. We've got to go through a planning cycle and understand what we get to. We have the ability to obviously lower the productivity in the airline, but that'll raise costs, and is that the right overall better answer for the airline? We'd prefer to get the airline back into a productive state. We're probably about five or six points behind, in terms of capacity from where we'd like to be, because of the oil price crisis.

Uh, look, we haven't defined our plan for next year. I mean, we have the flexibility to grow the airline by high single digits if the market, um, um,

James G. Dempsey: You should see some growth into next year in the high single digits, and we'll work from there. Look, the lower the growth, the higher the unit cost, the higher the unit revenues we have to do to achieve to overcome it. It's not complicated. We understand those metrics. We just have to see what we feel about the environment as we're rolling into 2027. We feel pretty good at the moment.

Jimmy Dempsey: You should see some growth into next year in the high single digits, and we'll work from there. Look, the lower the growth, the higher the unit cost, the higher the unit revenues we have to do to achieve to overcome it. It's not complicated. We understand those metrics. We just have to see what we feel about the environment as we're rolling into 2027. We feel pretty good at the moment.

gives us the opportunity to like, it really depends on what happens with the ongoing oil prices. Um, um, as it stands at the moment and we would anticipate growing by somewhere between 5 and 8% next year. But, you know, we've got to go through a planning cycle and and understand what what we get to and we have the, we have the ability to obviously lower the productivity in the airline. But that'll raise costs. And and is that the right overall better answer for, for, for the airline, and we'd prefer to get the airline back into a productive State. Um, and we're probably about 5 or 6 points behind uh, in terms of capacity from where we'd like to be um because of the the oil price crisis.

And so you should see some growth in the next year, in in the in the, uh, sing high single digits. Uh, and we'll work from there. Um, and look the lower the growth, the higher, the, you know, unit unit cost the higher, the unit revenues, we have to do to, to achieve to overcome it. It's not complicated. Um, and we understand those metrics, we'll just have to see what we feel about the environment as we're rolling into 2027.

Brandon Oglenski: Okay. You guys have talked about first class for a while now. Starlink, I think, is a big announcement. How do you view these initiatives and new products really rolling into resolve?

We feel pretty good at the moment.

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

Robert Schroeter: How they're rolling in from a timeline perspective, or how we're thinking?

Bobby Schroeter: How they're rolling in from a timeline perspective, or how we're thinking?

Brandon Oglenski: Yeah. The potential revenue and margin upside from those.

Robert Schroeter: Yeah. From a first-class perspective, we are looking at what we've discussed before, sort of starting in a Q4 rollout, going into the early part of next year. On the Starlink portion, we anticipate starting in early 2027, and that rollout will continue through. We're hopeful that would complete before summer, but you could see that moving through the year a little bit longer as well. As it pertains to revenue, look, we've talked about this before. First class was born in large part by our view on UpFront Plus and the value that brought. The paid load factor on that is now up over 80%, which is in line generally with what you see across the industry with other airlines' premium products.

Bobby Schroeter: Yeah. From a first-class perspective, we are looking at what we've discussed before, sort of starting in a Q4 rollout, going into the early part of next year. On the Starlink portion, we anticipate starting in early 2027, and that rollout will continue through. We're hopeful that would complete before summer, but you could see that moving through the year a little bit longer as well. As it pertains to revenue, look, we've talked about this before. First class was born in large part by our view on UpFront Plus and the value that brought. The paid load factor on that is now up over 80%, which is in line generally with what you see across the industry with other airlines' premium products.

How how they're rolling in from a timeline per second or how we're thinking. Yeah. And and and the potential, you know, revenue and and margin upside from them.

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

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

From a first class perspective, um, we are looking at, um, what we discussed before, sort of a fourth starting in a fourth quarter, roll out. Um, going into the early part of of next year, um, on the starlink, uh, portion. Um, we anticipate starting, um, in early 2027 and that roll out will continue through. Um, we're hopeful that, um, complete for summer, but you could see that, um, moving through the year a little bit longer as well, um, as it pertains to revenue. Look, we, uh, we, we've talked about this before, I mean, first class was was born, um, in in large part by our, uh, our view on, uh, upfront. Plus in the, the value that that brought, um, the paid load Factor on that, um, is now up over 80%, um, which is in line, um, generally with what you see, uh, across the industry with other uh, Airlines premium products.

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

Brandon Oglenski: Thank you for that.

Thank you for that.

Operator: Your next question comes from the line of Daniel McKenzie with Seaport Global. Daniel, please go ahead.

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

Please go ahead.

Daniel Mckenzie: Oh, hey. Good morning. Thanks. One housecleaning question here, then just a broader question. I guess for Mark, I'm curious how much cash you expect the additional lease returns to unlock, and if it's included in the CapEx portion of the release today. If you could just remind me, would that filter through to cash flow from operations? I'm just trying to get at the cash that could be produced by the business this year.

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

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

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

Yeah, no absolutely. So yeah. So as you're looking at the capex. Um, so our capex guide, you know, from what we had put forward last time, right has not changed when you think about, um, you know, the transactions that that we've executed, um, you know, the, the savings, the maintenance savings that we expect and we do expect hundreds of millions of dollars of savings as you look, um, you know, over the coming years that is going to flow through operating um, you know expenses, um, you know, but you know, as you look at, you know, the balance of this year, you know, given those returns

Um, you know, it just occurred. Um, you know, what we had in our CapEx plan, right, really would have incorporated, you know, any sort of CapEx that was anticipated. So I think that the right way to look at this is the go forward—you're getting a material ownership cost benefit by the early return of these aircraft.

Daniel Mckenzie: Yeah. Jimmy, is it too early to talk about a return on invested capital in the medium term that exceeds the cost of capital? Just going back to an earlier question on the link between growth and profitability, and what the North Star is that's behind how you're managing the company. There's been a number of structural changes, of course. It seems like these structural changes better position Frontier.

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

James G. Dempsey: Yeah. Dan has gone. I agree with you. Look, what we're doing in the airline is focusing initially on the fundamentals, right? Costs, good revenue management, putting the right fleet size in place, establishing the network to support the fleet that we have, and driving a better balance sheet and liquidity into the airline. We're very disciplined about those items and getting the airline on the right path from that perspective. We've got to adapt to the field that we play on. It's changed post-COVID. You have significant loyalty cash flows coming directly off credit card programs that fund a large portion of basic economy in the domestic airline business. It's something that we're quite immature in. So we've looked at the business in the context of our loyalty program and the immaturity of our loyalty program in comparison to the rest of the industry.

Jimmy Dempsey: Yeah. Dan has gone. I agree with you. Look, what we're doing in the airline is focusing initially on the fundamentals, right? Costs, good revenue management, putting the right fleet size in place, establishing the network to support the fleet that we have, and driving a better balance sheet and liquidity into the airline. We're very disciplined about those items and getting the airline on the right path from that perspective. We've got to adapt to the field that we play on. It's changed post-COVID. You have significant loyalty cash flows coming directly off credit card programs that fund a large portion of basic economy in the domestic airline business. It's something that we're quite immature in. So we've looked at the business in the context of our loyalty program and the immaturity of our loyalty program in comparison to the rest of the industry.

Yeah, Dan has gone. I agree with you. Look, what we're doing in the airline is focusing initially on the fundamentals: right costs, good revenue management.

Uh, putting the right Fleet uh size in place, um establishing the network, to support the fleet that we have um, and driving a better balance sheet in liquidity. In in the airline, like, we're very disciplined about, uh, those items and get in the airline on the right path from from that perspective. Um, we've got to adapt to the field that we play on. Um, you know, it's changed postco, um, you know, you have, uh, significant loyalty cash flows coming,

James G. Dempsey: We think there's a huge opportunity for Frontier to move the dial on loyalty. You've got to run a good operation in order to do that. You've got to invest in the operation and improve the performance of the business and enhance your product. So we're doing all of those things, and Bobby mentioned like Wi-Fi, first-class seats. We're looking at more segmentation around premium seats in the cabin. We'll talk to you guys later on in the year probably about that. Certainly it's with the purpose of bringing the airline back to sustainable profitability. That's the real focus of the airline. We're not giving long-term targets yet in the business. What we're managing at the moment is bringing the airline back to those core fundamentals I mentioned.

Jimmy Dempsey: We think there's a huge opportunity for Frontier to move the dial on loyalty. You've got to run a good operation in order to do that. You've got to invest in the operation and improve the performance of the business and enhance your product. So we're doing all of those things, and Bobby mentioned like Wi-Fi, first-class seats. We're looking at more segmentation around premium seats in the cabin. We'll talk to you guys later on in the year probably about that. Certainly it's with the purpose of bringing the airline back to sustainable profitability. That's the real focus of the airline. We're not giving long-term targets yet in the business. What we're managing at the moment is bringing the airline back to those core fundamentals I mentioned.

Uh, directly off credit card programs that fund a large portion of basic economy and the domestic airline business, um, and it's something that we're quite immature in. And so we've looked at the business in the context of our loyalty program and the immaturity of our loyalty program, uh, in comparison to the rest of the industry, and we think there's a huge opportunity for Frontier to move the dial on loyalty. But you've got to run a good operation. In order to do that, you've got to invest in the operation and improve the performance of the business.

Um, uh, and and that's the real focus of the of, of the airline. Um, we're not

James G. Dempsey: That needs to happen in order to have a strong platform and foundation to grow the airline and have discussions around growth versus return on invested capital. Certainly that's the objective in the airline, is to get the airline back to really generating operating cash flows and cash flow production in the airline over the long term. That's where we are. We've made real progress this year on doing a lot of that. We've still got a long way to go. Like I said.

Jimmy Dempsey: That needs to happen in order to have a strong platform and foundation to grow the airline and have discussions around growth versus return on invested capital. Certainly that's the objective in the airline, is to get the airline back to really generating operating cash flows and cash flow production in the airline over the long term. That's where we are. We've made real progress this year on doing a lot of that. We've still got a long way to go. Like I said.

Giving long-term targets yet in the business? Uh, we, what, we're, what we're managing at the moment is, is, is bringing the airline back to those core fundamentals. I mentioned, uh, and that needs to happen in order to have a strong platform and Foundation, um, to grow the airline, uh, and and and have discussions around growth versus, uh, returning invested Capital. Uh, but certainly that's the objective in in the airlines to get the airline back to really generating operating cash flows. Um, um and cash flow uh, production in the airline over the long term. And so that's where we are. Um, you know, we we've we've made real progress this year, uh, on doing a lot of that. Uh, um, but we still got a long way to go.

Daniel Mckenzie: No, I appreciate that.

James G. Dempsey: We're probably about a year out from having an operation that we are really comfortable with. We've made real progress, we've still got a lot of work to do. We've got to establish the premium products into the airline and allow those to season into the airline, and get the customer base aware of those new products that we have and excited about them. Certainly we're very excited about the path we're on.

Jimmy Dempsey: We're probably about a year out from having an operation that we are really comfortable with. We've made real progress, we've still got a lot of work to do. We've got to establish the premium products into the airline and allow those to season into the airline, and get the customer base aware of those new products that we have and excited about them. Certainly we're very excited about the path we're on.

And so like I got, you know, I appreciate that. Probably we're probably about a year out from from from having an operation. That we are really uh uh comfortable with. We've made real progress and but we've still got a lot of work to do. Uh, we've got to establish the pro, the, the premium products into the airline uh, and allow those to season, uh, into the airline, um, and get the customer base, um, aware of, of those new products that we have um, um, and excited about them. But certainly, we're, we're very excited about the path. We're on.

Daniel Mckenzie: Yeah. Thank you for that. If I can just squeeze one final one in here. Just given that reference to premium products and getting those up to maturity, I'm just wondering if you can share that revenue uplift. What % of revenues are they today, and what would you expect that premium revenue bucket to look like at, say, as a % of total once they're up to maturity?

James G. Dempsey: We don't have Wi-Fi, first-class seats on board the aircraft at the moment. We don't have any revenue linked to them at the moment. We'll come back to you in time when we launch these to give you a sense of the revenue uplift that comes into Frontier on the back of them. You can see-

Jimmy Dempsey: We don't have Wi-Fi, first-class seats on board the aircraft at the moment. We don't have any revenue linked to them at the moment. We'll come back to you in time when we launch these to give you a sense of the revenue uplift that comes into Frontier on the back of them. You can see-

Uh yeah, thank you for that if I can just squeeze 1 final 1 in here. Um, you know, just given that reference to premium products and getting those up to, to maturity. I'm just wondering if you can share, you know, that Revenue uplift. Like, what percent of revenues are late today and what would you expect that premium Revenue bucket to look like if they at the percent of total, uh, once they're up to maturity?

Daniel Mckenzie: Sorry, I was thinking-

James G. Dempsey: structural change in the You're thinking the existing? We don't disclose that.

Jimmy Dempsey: structural change in the You're thinking the existing? We don't disclose that.

I mean, we don't have Wi-Fi first class seats, uh, on board the aircraft at the moment. So, um, you know, we we don't have any Revenue linked to that at the moment. So, um, you know, we, we, we'll come back to you in time when we when we launch these to to give you a sense of the revenue uplift that comes into Frontier on the back of them. Um, but you can see. Sorry, I was thinking Central change in the

Daniel Mckenzie: Yeah. Like economy plus, for example. Yeah.

You're thinking of the existing. What? We don't we don't have to slow, is that? Yeah economy like economy Plus for example

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

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

Yeah. So up up front plus. I mean, we, we talked about. I just I I stated what our paid load factor is on that above 80%, which is effectively in line with what other carriers um, uh Legacy carriers get on their premium products, which frankly showcases, the, um, the the want, uh, from our customer base for premium products. Um, that gives us the confidence to go into, for example, first class. And frankly, um, what Jimmy was saying, um, that we're reviewing, uh, additional premium seating, and, um, those are things that again, will will provide more information in the coming months on, but

Gives us the confidence to go and look at that. Uh, we believe there's a lot of opportunity there, not only on the revenue side, but frankly, um, it helps, uh, you know, provide uh, the products and services that different segments are looking for. And frankly, with some of these um, things like, uh, premium seating Wi-Fi, Etc,

Robert Schroeter: There is opportunity to go capture customers that we haven't been able to be in the consideration set for before with this as well.

Bobby Schroeter: There is opportunity to go capture customers that we haven't been able to be in the consideration set for before with this as well.

Certain customer segments that, uh, where our price alone wasn't able to compete for. Um, so there is, you know, opportunity to go capture customers that we haven't been able to be in the consideration set for before with this as well.

Daniel Mckenzie: Thanks so much for the time, you guys.

James G. Dempsey: Thanks, Dan.

Jimmy Dempsey: Thanks, Dan.

Thanks so much for the time, you guys.

Operator: Your next question comes from the line of Duane Pfennigwerth with Evercore ISI. Duane, please go ahead.

Your next question comes from the line of Dwayne Pfennig with Evercore ISI. Dwayne, please go ahead.

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

Hey, thanks, Jimmy and team. Um, just on the fleet, can you confirm that? Uh the fleet is basically fixed now through a year and 2027 or are there

A321 lease deals that could bring you back to the table, if the economics were attractive enough.

James G. Dempsey: There's always an openness within Frontier to look at lease deals if the economics make sense. Yes. From what we see on the horizon, we think we are nearing the conclusion of some of the fleet opportunities that come. Maybe some stuff that will be available to tinker with, but I think we're largely getting to the point where we like the fleet that we have. We like the transition from the A320neo into the A321neo. It gives us flexibility, particularly around the interior cabin of the aircraft, and also obviously the operating cost benefit that the aircraft provides to Frontier. We like that mix. If more opportunities arise, we'll look at them. As you said, Duane, the economics have to make sense.

Jimmy Dempsey: There's always an openness within Frontier to look at lease deals if the economics make sense. Yes. From what we see on the horizon, we think we are nearing the conclusion of some of the fleet opportunities that come. Maybe some stuff that will be available to tinker with, but I think we're largely getting to the point where we like the fleet that we have. We like the transition from the A320neo into the A321neo. It gives us flexibility, particularly around the interior cabin of the aircraft, and also obviously the operating cost benefit that the aircraft provides to Frontier. We like that mix. If more opportunities arise, we'll look at them. As you said, Duane, the economics have to make sense.

There's always an openness within Frontier to look at lease deals if the economics make sense.

Yes.

Um, we'll look at them. But, you know, as you said Dwayne, the, the economic supplement makes sense.

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

Okay. Thanks and then um second question and apologies if we're geeking out on this 1 a little but just curious how you Define competitive capacity and specifically the set of routes

Is it essentially, uh, capacity on routes that you've served for over a year?

Or does it consider, uh, newer routes that you serve for less than a year?

James G. Dempsey: Both.

Jimmy Dempsey: Both.

Robert Schroeter: Yeah, both.

Bobby Schroeter: Yeah, both.

James G. Dempsey: Both.

Jimmy Dempsey: Both.

well, yeah, both

Duane Pfennigwerth: Maybe just remind us what that's for.

Robert Schroeter: Think of it as a snapshot. We're looking at what the network is comparatively to what our competitors within those routes, within the markets specifically, then taking that snapshot versus previous year, if we're looking at it year over year.

Bobby Schroeter: Think of it as a snapshot. We're looking at what the network is comparatively to what our competitors within those routes, within the markets specifically, then taking that snapshot versus previous year, if we're looking at it year over year.

It considers, and maybe just remind us what that for the quarter—think of it as a snapshot. So, we're looking at what the network is, comparatively to, you know, what our competitors are within those routes, within the markets, specifically, and then taking that snapshot versus the previous year.

Duane Pfennigwerth: Okay. If-

Robert Schroeter: Does that answer your question?

Bobby Schroeter: Does that answer your question?

Duane Pfennigwerth: It does. If you have it, what is the mix of new routes less than a year? How has that been changing and trending over time?

If we're looking at it here over a year, okay, does that answer your question? If you have it—does it? If you have it, what is the...

James G. Dempsey: Yeah. As we pulled the airline down from a fleet perspective, we've added a little bit of frequency into the airline, like a modest amount of frequency into the airline. I think the immature markets are considerably below what they would've been historically. Historically, we may have been running somewhere between 25% and 35% immature markets, so less than a year old. We're in the low teens immaturity at the moment.

Jimmy Dempsey: Yeah. As we pulled the airline down from a fleet perspective, we've added a little bit of frequency into the airline, like a modest amount of frequency into the airline. I think the immature markets are considerably below what they would've been historically. Historically, we may have been running somewhere between 25% and 35% immature markets, so less than a year old. We're in the low teens immaturity at the moment.

Like mix of new routes less than a year. Like, how has that been changing and and trending over time?

Yeah. I mean, as we pulled the airline down, uh, from a fleet perspective, we've added a little bit of frequency into the airline, like a modest amount of frequency and into the airline. And so I think that the the immature markets are, you know, considerably blow up what they would have been historically. So in historically we we may have

Been running somewhere between 25 and 35% immature market so less than a year old. Um, we're we're in the, in the low teens. Uh, um, uh, immaturity at the moment.

Duane Pfennigwerth: Okay, great. Thank you.

James G. Dempsey: Thanks.

Jimmy Dempsey: Thanks.

Okay, great. Thank you.

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

Thanks.

Chris Stathoulopoulos: Hey, good morning, everyone. The comment that there's been a structural change in the revenue platform for the airline. I appreciate that. Obviously, a lot going on here with segmentation loyalty premium products. There's also, obviously, as you know, been a structural change here in cost as we think about the US certainly here. As we think about the flow-through here, this is obviously not a 2026, perhaps back half of 2027, 2028 event. Is it fair that as these initiatives mature, we should think that on a per flight segment basis or a hub basis, that you're going to be in a position where these changes are ultimately accretive across the system? Meaning not in markets where perhaps there are fewer competitors in different economics. More so in markets where there are larger airlines with considerably different hub or point economics.

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

Hey, good morning, everyone. Um, so—

The, the, the common thing is that there's been a...

A structural change in the revenue platform for the airline, um, and I appreciate that all. Obviously a lot going on here with segmentation loyalty premium products, but there's also, um, obviously as you know, been been a structural change here in cost as we think about the, the, the US certainly here. And so,

As we think about the flow through here, and this is obviously not a 26 — perhaps 20 back, half of 27/28 events.

Um, is it fair that as these initiatives mature, we should think that—

on a per-flight segment basis, or a hub basis that

You're going to be in a position where these changes are ultimately heroically accreted across the system, meaning not.

James G. Dempsey: I think it'll be a mix of markets. Certainly the objective is to invest in loyalty and premium products. To invest in loyalty and premium products that actually improves the revenue output of the airline. One of the key principles that we're operating the airline under is actually improving loyalty with the objective of creating a more stable revenue base for the airline. Product segmentation. We've seen other airlines obviously do this very successfully here, and premiumization of their product. That's certainly something that we've learned from other airlines, and we think that that will be accretive to Frontier.

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

In markets where perhaps there are fewer competitors, in different economics more. So, in markets where there are larger airlines with considerably different hub or point economics,

I I think it'll be a mix of of markets, uh, but certainly, the objective is is to invest in in uh, loyalty um and premium products.

uh,

To invested loyalty and premium products, um, that actually improves the revenue for that part of the airline.

I mean, one of the key, um,

The principles that we're operating the airline under are actually improving loyalty, with the objective of creating a more stable revenue base for the airline.

And so product segmentation and we've, you know, we've seen other airlines obviously do this very successfully here um, and premiumization of their product. Um, I mean that's certainly something that we've learned from other Airlines and we think that that would be accretive to the frontier.

Chris Stathoulopoulos: I guess I'll ask it a different way. If I were to look at your top 25 or top 50 routes and rank order those based on your stage length adjusted TRASM, the top quartile, let's say, obviously margins are going to look better because of these revenue initiatives here. As we move lower, should we expect a meaningful change in the margin profile given the, I guess, the cost convergence, cost harmonization, however you want to describe that dynamic as all of these initiatives start to really materialize in 2027 and beyond? Thank you.

I I guess I'll ask it a different way so if I were to look at your top 25 or top 50 routes and rank order, those based on your stage lengths, adjusted trauzzi, um, the the top core tile, let's say Obviously margins are going to look better because of these revving initiatives here, but as we move lower, uh, should we expect a a, a meaningful change?

James G. Dempsey: Well, Chris, we'll still have a meaningful cost advantage over the industry given the way we operate the airline and the focus on cost discipline within the airline. If you look at us, what we're providing is incremental value to the customers at really low fares. We think that's going to be accretive, irrespective of whether it's on the top 50 or the bottom 50 routes in our network. We think the product resonates with the customer base and the product changes. You just have to look at UpFront Plus, right? We launched this over two years ago, where we blocked the middle seat and the front two rows of the aircraft. It has significantly increased the revenue for the real estate that exists at that part of the aircraft. Bobby has given you an insight into the load factors that we're achieving.

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

In the margin profile. Given the, I guess the cost convergence cost harmonization, however, you want to describe that dynamic as as all of these initiatives start to really materialized in 27 and Beyond thank you. Well, well, well Chris, we still have a meaningful cost advantage over the industry. Um, given the, the way we operate the airline and the focus on cost discipline within the airline.

James G. Dempsey: Those are driving a significant increase in the revenue for that portion of the aircraft. It encourages us to do more of that. It's not necessarily focused on specific routes. It's typically network-wide.

Jimmy Dempsey: Those are driving a significant increase in the revenue for that portion of the aircraft. It encourages us to do more of that. It's not necessarily focused on specific routes. It's typically network-wide.

Incremental value to the customers at really low fairs. We think that's going to be a creative irrespective of whether it's on the top 50 or the bottom 50, uh, roots in our network. Uh, and we think the product resonates with the customer base and the product changes, you just have to look it up front plus. Right, we launched this over 2 years ago, um, uh, where we blocked the middle seat and the front 2 rows of the aircraft. Uh, and it has significantly increased um the the revenue for the real estate that that that exists at that part of the aircraft. Um um, and Bobby is giving you an insight into the load factors that we're achieving. Uh, but those are driving significant, increase significant increase in the revenue for that portion of the aircraft uh and so it encourages us to do more of that. Um and it's not necessarily focused on specific routes, it's typically Network wide.

Chris Stathoulopoulos: Okay. As a quick follow-up here, as we do our own math or bottoms-up build on FY27 capacity, any color you can give on how we should think about the net active fleet for next year? Then we, I guess, if we decompose that stage gauge and departures. Thank you.

James G. Dempsey: Yeah. We'll have to come back to you on that. There's a lot of work going on in the background around modifying the existing fleet and aircraft coming out of service, particularly across Q1 and the back end of this year. Look, we'll have to come back to you on what the inactive fleet would look like going into next year.

Jimmy Dempsey: Yeah. We'll have to come back to you on that. There's a lot of work going on in the background around modifying the existing fleet and aircraft coming out of service, particularly across Q1 and the back end of this year. Look, we'll have to come back to you on what the inactive fleet would look like going into next year.

Okay. And there's a quick follow-up here as we do our our own math or bottoms that build on FY, 27 capacity, any color you can give and how we should think about the net active 3 for next year. And then the I guess if we decompose that to the age gauge, uh, and uh, departures. Thank you. Yeah. We'll we'll have to come back to you on that. There's a there's a there's a lot of work going on uh in the background around um uh modifying the existing Fleet, uh and aircraft coming out of service. Uh, particularly across the first quarter in the back end of this year. So look, we'll have to come back to you.

On what the inactive fleet would look like going into next year.

Chris Stathoulopoulos: Okay. Thank you.

James G. Dempsey: It shouldn't be that dissimilar to this year with a few lines of flying stripped out in order to facilitate the modification of the cabin.

Jimmy Dempsey: It shouldn't be that dissimilar to this year with a few lines of flying stripped out in order to facilitate the modification of the cabin.

Okay, thank you. But it it shouldn't be that dissimilar to this year, uh, with a few lines of flying stripped out in order to facilitate um, uh, the modification of, of the, the cabin.

Chris Stathoulopoulos: Okay.

James G. Dempsey: We'll come back to you.

Jimmy Dempsey: We'll come back to you.

Operator: We have reached the end of the Q&A session. I will now turn the call back to Jimmy Dempsey for brief closing remarks.

James G. Dempsey: Yeah. Thanks, guys, for attending the call. As you can see, we're pretty happy with the direction that we're going in in the business. We still have work to do to complete some of the things that we laid out earlier in the year. Really excited about the product updates that we're bringing to the airline, particularly the introduction of high-speed Wi-Fi. We think that's a big product change for the airline and very complementary to the incremental or the addition of first-class seats. Look, we're very focused on providing a very low value to our customer set. If you guys have any further questions, please do reach out to either me or the team. We'd be delighted to clarify any issues that you have and appreciate your support. Thanks very much, guys.

Jimmy Dempsey: Yeah. Thanks, guys, for attending the call. As you can see, we're pretty happy with the direction that we're going in in the business. We still have work to do to complete some of the things that we laid out earlier in the year. Really excited about the product updates that we're bringing to the airline, particularly the introduction of high-speed Wi-Fi. We think that's a big product change for the airline and very complementary to the incremental or the addition of first-class seats. Look, we're very focused on providing a very low value to our customer set. If you guys have any further questions, please do reach out to either me or the team. We'd be delighted to clarify any issues that you have and appreciate your support. Thanks very much, guys.

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

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

Yeah, thanks guys for attending the call. And I mean, as you can see, we're, we're pretty happy with the direction that we're going in. Uh, in the business, we still have work to do, um, to do to, to, to, to complete some of the things that we laid out earlier in the year, really excited about the product updates that we're, we're, we're bringing to the, to the airline, particularly the introduction of of, of of uh, High Speed Wi-Fi. We think that's a a big product change for the airline. And I'm very confident to the incremental or the addition of first class seats. Uh, and so look, we're very focused on providing uh a very low value to to our customer Set. Uh if you guys have any further questions please do reach out to either me or the team we'd be delighted to to clarify any issues that you have uh and appreciate your your support. Thanks very much guys.

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

Q2 2026 Frontier Group Holdings Inc Earnings Call

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