Frontier Group Holdings, Inc.

Good day, and thank you for standing by. Welcome to the Frontier Group Holdings Q4 2025 Earnings Conference Call. At this time, all participants are in a dissonant mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, David Edmund, Senior Director, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to our fourth quarter and year-end 2025 earnings call. With me this morning are Jimmy Dempsey, President, Chief Executive Officer, Bobby Schroeder, Chief Commercial Officer, and Mark Mitchell, Chief Financial Officer. On today's call, Jimmy will be providing commentary on his strategic priorities, and then we're going to jump directly to the Q&A. However, a transcript of the prepared remarks, which would otherwise have been delivered by Bob and Mark, is available for download on our investor relations website. Before yielding, let me recite the customary Safe Harbor provisions. 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 released earlier, along with reports we file with the Securities and Exchange Commission. Moreover, we will also be discussing non-GAAP financial measures, actual results of which are reconciled to the nearest comparable GAAP measure in the appendix of the earnings announcement. And then we'll also be referencing stage-adjusted unit metrics which are based on 1,000 miles. So I'm going to give the floor to Jimmy to begin his prepared remarks.

Jimmy? I'd like to start by emphasizing how honored I am to be taking on the role of CEO, particularly at such a pivotal moment for Frontier. When I accepted this role, the board gave me a clear mandate to enact change at our company. We know that we need to do better across the business and deliver increased value for all our stakeholders, employees, customers, and our investors. With this in mind, I've spent the past two months rolling up my sleeves to build a clear strategic path designed to return Frontier to sustained profitability as the low-cost, high-value airline of choice. This plan comprises four strategic priorities. Right-sizing the fleet, strengthening our cost discipline, reducing cancellations and improving on-time performance, and driving customer loyalty. Today, I will walk you through the actions we are taking on these priorities that I expect will drive meaningful changes and improvement across our organization. First and foremost, I am focused on resetting and stabilizing the business through a comprehensive right-sizing of our fleet. Returning Frontier to profitability is about going back to our roots as an organization. This means taking action to increase fleet productivity and efficiency. Just recently, we entered into a non-binding agreement with AirCap, which will enable us to benefit from the early termination of 24 aircraft leases in the second quarter. We plan to take advantage of this by increasing utilization across our remaining fleet to support our planned growth and drive efficiency. AirCap will remain one of our largest lessors, and we look forward to expanding our partnership with an additional 10 sailing leasebacks in the future as part of this agreement. Separately, we reached a non-binding framework agreement with Airbus, which revises the delivery profile of our order book. It supports a more measured and sustainable long-term growth rate of approximately 10%, representing a meaningful moderation versus our prior growth trajectory. The update to our delivery profile and underlying growths growth rate helps to minimize the proportion of new market activity while supporting ongoing productivity and operational reliability. Our plan to right-size the fleet directly contributes to my next strategic priority, strengthening our cost discipline. Cost discipline has always been a cornerstone of our business model. We are targeting $200 million of annual run rate cost savings by 2027, largely from network optimization, productivity enhancements, and other efficiencies across the business, which includes approximately $90 million of expected annual rent savings from the early termination of the 24 aircraft leases. The next strategic priority throughout 2026 is centered around improving our operational reliability by reducing cancellations and improving our on-time performance. We're simply not satisfied with our past record in these areas. The status quo is not acceptable and every available option is on the table to improve our performance. I will give you some examples in a long list of initiatives we are working on across the business. Turn times, we are working on improvements to optimize our airport operation workflows, strengthening our Head Start performance and improving day of travel communications with our customers. Over 85% of our customers use our recently updated mobile app. By leveraging digital channels, we can push timely alerts, offer clear next steps during delays, and ensure customers feel supported and informed throughout their journey. We are also working on improved operational planning that better integrates scheduled maintenance into the early stage of our network design process to take advantage of our enhanced maintenance footprint. While we remain firmly committed to cost discipline and operational excellence, our final strategic priority is pairing that discipline with smart, high-return upgrades that will accelerate the maturity of our customer loyalty program. Last year, we launched a series of enhancements to our loyalty ecosystem, including changes that simplify elite benefits, enhance redemption opportunities, and create broader customer engagement. Our simplified award structure and easier elite status benchmarks have already begun to resonate with customers, and we are expanding on these efforts in 2026. Furthermore, we'll be modernizing every part of our commercial offering this year and into 2027, from digital tools and distribution to loyalty and onboard experience. These initiatives include the fleet-wide rollout of first-class seating, onboard Wi-Fi, an upgraded website and mobile app, and enhanced digital products and communications. These enhancements will broaden our appeal and effectively address friction points that have historically limited conversion and loyalty. We're building a product that remains incredibly affordable while delivering more value than ever before. Our loyalty assets represent one of our strongest long-term levers for value creation in the business. We're confident our recent and planned investments in our loyalty program and product offerings will be a significant part of our revenue growth. Overall, we're pairing our unique ability to provide low fares with an increasingly elevated product and customer experience to deliver unmatched value in air travel. The path ahead requires meaningful change. and we are embracing that reality with clarity and conviction in order to capitalize on the substantial opportunity we see in front of us. We've adopted a disciplined, actionable set of strategic priorities to transform our company and put Frontier on a path towards sustained profitability. Above all, we are deeply committed to creating long-term value for our shareholders, employees, and customers. Thank you for your continued support. As David noted, we'll preempt commentary from Bobby and Mark to allow sufficient time for analyst questions With that, operator, we're ready to begin the Q&A segment.