Frontier Group Holdings, Inc.

Good day, and thank you for standing by. Welcome to the Frontier Group Holdings first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there are questions and answers session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Erdmann, Senior Director of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to our first quarter 2023 earnings call. Today's speakers will be Barry Biffle, President and CEO, Jimmy Dempsey, EVP and CFO, and Daniel Schurz, Senior Vice President, Commercial. Each will deliver brief prepared remarks, and then we'll get to your questions. But first, let me quickly review the customary Safe Harbor provisions. During this call, we will be making forward-looking statements which are subject to risks and uncertainties. Actual results may differ materially from those predicted in these forward-looking statements. Additional information concerning risk factors which could cause such differences are outlined in the announcement we published earlier, along with reports we file with the SEC. We will also discuss non-GAAP financial measures which are reconciled to the nearest comparable GAAP measure in the appendix of the earnings announcement. So I'll give the floor to Barry to begin his remarks. Barry?

Thanks, David, and good afternoon, everyone. Our results for the first quarter reflect an adjusted pre-tax loss margin of 1.9%, slightly outperforming expectations on a strong spring break period. While demand during January and the first half of February was seasonally weak, particularly in off-peak days, demand strengthened as we progressed from President's Day through the spring break period. In fact, We operated an average utilization of 11.8 hours per day in March. The progression in demand throughout the quarter helped drive revenue of $848 million, a record for any first quarter in the company's history. We expect the strength in demand for leisure travel to continue to extend into the busy summer travel season. The leisure demand is supported by a consumer which today has a greater propensity and ability to travel compared to pre-pandemic periods. More notably, they have far more flexibility to travel and to do so more often with work from home arrangements and flexible work schedules. We believe this is largely the basis for the surge in total leisure travel demand that began in earnest last year. It's showing resiliency and we've positioned ourselves to capture a disproportionate share of it through our low fares done right strategy and innovative product offerings. Our Go Wild Pass, which launched last fall, is a prominent example. It's a leisure focused product were best suited to offer. Before the pandemic, this kind of product would have had limited appeal. Today, however, sales have been strong with customers across many consumer segments, creating the ability for inexpensive, frequent travel. The path gives them the freedom and peace of mind to unlock unlimited and spontaneous travel to all destinations we serve. Of the past sales thus far, over half do not have prior travel history with Frontier. With this previously untapped customer base, We also have the opportunity to expand brand awareness and preference, along with driving incremental revenues as these customers engage with our loyalty platforms such as Discount Den and the Frontier World MasterCard. It's a key part of our strategy to increase the contribution from loyalty and subscription-related products, supporting our goal of achieving ancillary revenue of $85 per passenger by the fourth quarter and $100 per passenger by 2026. The strength we're experiencing in leisure travel demand favors peak days and peak periods, where we see an outsized contribution. This outsized contribution is a trend that has developed over the last year as we emerged from the pandemic. Having analyzed this new customer behavior and until peak and off-peak demand relationship normalizes, we're reshaping our capacity beginning in the second quarter to exploit this dynamic and expect the changes to be fully deployed in the second half of 2023. We are excited about this shift in our ability to lower execution risk while maximizing revenue and profits. While we expect the update to our network strategy to enhance our operational performance and pre-tax margins, the resulting adjustments to capacity and utilization will increase our unit cost. With that said, we still expect our total cost advantage, which widened from over $60 per passenger pre-pandemic to over $70 per passenger in 2022, to further expand in 2023. We anticipate our cost advantage to benefit from the ongoing gauge and fuel efficiency benefits from the increasing mix of A321neo aircraft the operational benefits from our enhanced network strategy, and the significantly lower debt service exposure we have compared to the rest of the industry. Overall, as a result of the planned network changes I've highlighted, we're adjusting our full-year capacity guidance to reflect expected growth of 19% to 22%. The entire organization is aligned and focused on the return to double-digit pre-tax margins. Our second quarter guidance of adjusted pre-tax margins in the range of 7% to 10% is a significant step to getting double-digit pre-tax adjusted margins in the second half of the year and will represent the highest post-pandemic margins achieved by the company. With that, I'll hand the call over to Daniel for a commercial update.