Frontier Group Holdings, Inc.

Hello everyone. Thank you for joining us and welcome to Frontier Group Holdings Q1 2026 earnings 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 1 to raise your hand. To withdraw your question, please press star 1 again. I will now hand the conference over to David Erdman, Senior Director of Investor Relations. David, please go ahead.

Thank you and good morning everyone. Welcome to our First quarter 2026 earnings call. Joining me today in speaking order are Jimmy Dempsey, President and Chief Executive Officer, Bobby Schroeder, Chief Commercial Officer, and Mark Mitchell, Chief Financial Officer. Each will deliver brief prepared remarks, and then we'll open the call for questions. Before we begin, I'll remind you that today's discussion will include forward-looking statements subject to risks and uncertainties, and we will be referring to certain non-GAAP financial measures throughout the call. Reconciliations to these non-GAAP financial measures can be found in the earnings release issued today and also posted on our investor relations website. We'll also be referencing stage adjusted unit metrics, which are based on 1,000 miles. So I'll give the call over to Jimmy to begin his prepared remarks. Jimmy?

Thanks, David. Before I review the quarter, I'd like to briefly address Spirit's shutdown. Spirit played a meaningful role in providing affordable travel to a wide range of consumers in an industry dominated by four major airlines. While Frontier remains focused on ensuring consumers have access to affordable travel, our thoughts are with our friends and colleagues during this difficult time. Over the weekend, we provided discounted fares to assist affected customers on over 100 Spirit routes. We extended travel benefits to assist Spirit team members to return home and are encouraging them to apply for open positions in Frontier. Spirit's exit meaningfully alters the supply landscape. Given our network, low-cost structure, and disciplined approach to capacity deployment, Frontier is best positioned to provide low fares and the best value in those markets, in a manner consistent with our strategic priorities around network shape and long-term value creation. We will expand service this summer with nine additional routes plus 15 daily departures across 18 former Spirit routes, including Orlando, Las Vegas, Dallas-Fort Worth, Fort Lauderdale, and Detroit. This gives customers more options to rebook their travel plans with confidence while keeping fares low. Turning to the quarterly recap, we delivered adjusted revenue of nearly $1.1 billion, a company record, with stage adjusted RASM up 17% year over year, reflecting sustained progress across our commercial initiatives and strong demand. This performance drove an EPS guidance beat despite sharply higher fuel prices. We remain centered on the four strategic priorities previously outlined to strengthen the business and return the airline to sustained profitability, including right-sizing the fleet, strengthening cost discipline, improving operational reliability, and building customer loyalty. I'll briefly update you on the progress of each. Firstly, we have made excellent progress on fleet right-sizing. We executed the previously announced 69 aircraft deferrals with Airbus and 24 lease terminations with Aircap. We expect all 24 aircraft to leave our fleet by early June. Secondly, on cost discipline, we have high confidence and remain on track to deliver $200 million of targeted annual run cost savings by 2027, including rent reductions, network optimization, and productivity benefits. Third, on operational reliability, we're focused on completion factor and on-time performance. We launched a system-wide maintenance strategy to improve maintenance planning and reliability, reduced unscheduled aircraft out of service events, which enables improved aircraft return to service performance at the beginning of the day. We're also enhancing our airport operations, simplifying our ticket counters and improving turn times. Although this is a multi-year project, we are seeing positive early results. For the April year today period, we ranked fourth among major domestic carriers in completion factor. Finally, our loyalty programs delivered over 30% growth in the first quarter. our fourth consecutive quarter of double-digit growth. This is the result of continued momentum from investments in our co-brand credit card and membership programs. As previously announced, we plan to enhance the onboard experience with the introduction of first-class seating and Wi-Fi service later this year and into next year. Turning to the current environment, in response to the fuel spike, we have taken decisive action to adjust capacity fares and ancillaries. We anticipate recapturing approximately 35% to 45% of fuel prices in quarter two, As a result, we expect RASM to increase by over 20% year-over-year in Q2 and stage-adjusted RASM to be up high teens on capacity growth of approximately 7%. We expect continued improvement in fuel recovery as the year progresses. This is enhanced by the capacity adjustments we are seeing in overlapped markets where our competitive capacity is down 4% in Q2. Our liquidity position at the end of March is strong at nearly $1 billion and anticipate our liquidity to be between $900 million and 950 million at the end of Q2. This puts Frontier in a very strong position to take advantage of the opportunities provided by the fuel crisis. Higher fuel does not change our strategic priority to return to profitability. By staying aligned with our framework and focusing on items we can control, we believe we are well positioned to navigate near-term volatility while emerging stronger as macro conditions normalize. This is an exciting time for Frontier's America's Value Airline. Before concluding, I'd like to recognize Team Frontier for driving operational performance improvement and for upholding our commitment to the highest safety standards. This sustained commitment to safety was reinforced by our recent receipt of the FAA's Diamond Award of Excellence for the second consecutive year, the agency's highest recognition for maintenance, training, and safety. The discipline and professionalism our people bring to the airline every day are fundamental to our progress, and I sincerely thank them for their focus and execution. I'll now turn it over to Bobby.

Thanks, Jimmy. First quarter adjusted revenue was a record for any quarter in Frontier's history, driven by both yield and load factor strength. Total adjusted revenue per passenger increased 10% year over year to approximately $128, supported by a nearly four-point improvement in flow and load factor to approximately 78%. This performance came despite the operational disruptions from severe winter weather and extensive TSA delays during the busy spring break travel period. Loyalty momentum extended into the first quarter on record co-brand card acquisitions in February, then again in March, with March card spend reaching an all-time monthly high. Our loyalty assets have consistently been one of our strongest long-term value drivers, and their trajectory is accelerating. Turning to the second quarter, our guidance reflects RASM growth of greater than 20%, and stage-adjusted RASM up high teams year-over-year, supported by durable demand trends and lower competitive capacity on frontier routes. We have participated in five broad industry fair actions since the start of March, a clear signal that demand at higher fairs remains resilient and that industry capacity discipline is supporting a more constructive pricing environment. As we think about the foundation of our performance expectations, The recent conclusion of Spirits operations represents an incremental opportunity for Frontier. Our team is focused on helping impacted customers get to their destinations, and we have seen significant revenue intake since the weekend. The trend we expect to continue throughout this coming week is those customers who are most acutely impacted seek alternatives. Demand for the Frontier product is strong, and in the second quarter of 2026, we have more route overlap with Spirits. than any other U.S. carrier, uniquely positioning us to recapture the demand they left behind. Drawing on the benefits realized from prior SPIRIT capacity adjustments, we believe their exit supports a RASM uplift of 3 to 5 percent going forward. Scheduled average utilization net of fuel-driven capacity adjustments is expected to be higher sequentially, consistent with our strategic plan. Second quarter capacity is expected to be up 68% year over year on an average stable stage length of approximately 890 miles, both lower than originally planned, reflecting targeted reductions concentrated in the long haul flying. We'll continue to be nimble and tightly managed capacity based on fuel on demand trends. And accordingly, we are reserving updated long term capacity guidance at this time. On the product side, first class installations will run through the second half of the year. Wi-Fi vendor selection is in its final stages with installations beginning in 2027. Combined with the bundle and segmentation enhancements driving non-ticket for passenger growth, these additions position us to serve a broader customer base while preserving the cost discipline that defines our model. The combination of industry-wide capacity discipline and the continued maturation of our commercial initiatives give us real conviction in our trajectory through year end. I'll now turn the call to Mark for the financial update.

Thanks, Bobby. Total adjusted operating expenses in the first quarter were 1.1 billion, including 268 million of fuel expenses at an average cost of $2.88 per gallon. Adjusted non-fuel operating expenses were 868 million, or 8.85 cents per ASM, with the increase over the corresponding 2025 quarter driven largely by lower average daily aircraft utilization and higher fleet-related costs across reduced capacity. As utilization increases and targeted cost savings materialize in line with our strategic plan, we expect a meaningful reduction in our adjusted non-fuel unit costs. First quarter adjusted pre-tax loss was 69 million and adjusted net loss was 68 million, resulting in adjusted loss per share of 30 cents favorable to guidance. We ended the quarter with $974 million in liquidity, including unrestricted cash and availability from our revolving loan facility. The increase from year end was principally the result of a significant increase in our air traffic liability, fleet-related activity, and an expansion of our prepaid miles facility, net of operating losses, and capital expenditures. As Jimmy mentioned, we expect to exit the second quarter with $900 to $950 million of total liquidity, bolstered by internal liquidity measures, including fleet-related activity and advanced discussions associated with an extension of the company's co-brand credit card agreement. Our second quarter guidance reflects continued commercial momentum alongside observed demand trends, while elevated fuel prices weigh on expected results. We remain focused on disciplined capital allocation and preserving liquidity through our fleet rightsizing and cost-saving initiatives, lower planned capital spending, and capacity optimization. From a fleet perspective, following the seven aircraft inductions in the first quarter, one additional than expected, we now expect to take delivery of another seven aircraft in the second quarter and return 24 aircraft. Furthermore, for full year 2026, we lowered our capital spending guidance range by 30 million, and we are reaffirming the expectation of a reduction in our pre-delivery deposit balance in the range of 170 to 210 million. We expect our pre-delivery deposit balance to be reduced by this amount, resulting from the previously announced agreement to defer the induction of 69 Airbus aircraft with a similar reduction expected in our related PDP financing facility balance. For more details on our second quarter and full-year guidance, refer to the announcement we published this morning. And given fuel volatility, we expect to provide full-year EPS guidance once we have improved visibility into the macro outlook. With that, Elizabeth, we're ready to open the line for questions.

Thank you. 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 1 to raise your hand. To withdraw your question, please 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. Please stand by while we compile the Q&A roster. Your first question comes from the line of Savvy Sith with Raymond James. Your line is open. Please go ahead.

Hey, good morning, everyone. Maybe just on the observation that you're expecting like a three to five percentage point RASM uplift from Spirit's exit. I'm curious if that's in the guide that you provided and if you're seeing that in current trends or just kind of based on historical trends.

Yeah, hi, Savi. It's Jimmy here. Yeah, look, the 3% to 5% RASM uplift is linked to historical trends that we've seen, structural change on Spirit's network, where either we had existing capacity or replaced capacity that they walked away from. And so that's effectively a run rate RASM uplift. We think it's approximately 3% to 5%. We actually think it could be higher than that going forward. What's in the guide, we estimate, given that we're guiding Q2, we're largely halfway through the quarter. We think about two points of improvement in the quarter that's built into the guide that we gave today is linked to Spirit shutting down.

That's helpful. Thank you. And if I might just, on the fleet, are you still expecting kind of 25 aircraft this year in total and none next year?

Yeah. So, um, so savvy, we have 24 aircraft, um, you know, for, for this year. Um, and we have six, um, you know, for next year. And, um, you know, one of the things that I want to highlight, we have, um, you know, as part of the fleet, um, the last five, um, you know, deliveries of this year and the first six, um, you know, of next year, um, you know, we have an agreement in principle. to sell those aircraft without a corresponding leaseback agreement. And so as you think about the fleet, while there will be 24 inductions, you will end the year with roughly 171 aircraft, and then there will be no deliveries that we retain next year.

I mean, said another way, Salvi, we effectively begin 2026 With the same number of aircraft that we largely and 2027 and so you, you know, we will effectively have the same fleet and for those two years. That's what's planned at the moment. Yep. Now we're replacing or we're getting where we're getting the upside on that is actually removing 320 meals from the fleet. And they're obviously fuel efficient aircraft, but they're to 320 and we're replacing them as we progress through this year. largely with 321neos, which is really an efficiency drive in the airline that's been going on for years.

Along with utilization, I'm assuming. Perfect. Thank you.

Yeah.

Your next question comes from the line of John Godden with Citigroup. Your line is open. Please go ahead.

Hey, guys. Thanks for taking my question. Appreciate the color on what's going on with competitive capacity, spirit overlapping markets, et cetera. You know, there's a debate out there about kind of short-term versus long-term. Clearly, your commentary and your guidance suggest that there's a benefit that you see and that's growing in kind of the short to medium term as we get to that 3% to 5%. What can you do to kind of protect those markets profits and those markets longer term, because it does seem like there's other competitive capacity kind of trying to backfill spirit as well.

Hi, John. Look, there's always going to be, in a situation like this that arises, there's always going to be a chase for capacity that occurs across their network. We positioned ourselves over the last six to nine months on launching routes that we thought would be opportunities that come as they reduce their capacity with the possibility that they would cease operations. And so you've seen us move quite quickly with an overlap of over 100 routes against Spirit. And look, we are going to be very, very disciplined in how we deploy incremental capacity into the business. I mean, we're very disciplined on what we're doing in our fleet. Our fleet determines the availability of aircraft to drive incremental capacity. That discipline is something that we're putting in place across the airline as we administer the new plan that was announced in February. We're really focused on right-sizing fleets, cost control in the airline, fundamentally fixing the operations to drive loyalty into the business. We'll make decisions around spirit capacity as a result or lost capacity in the marketplace using those measures. In terms of protection of capacity, we're already in over 30% of our business overlapped with them. We'll continue to look at further opportunities as the weeks and months progress.

One thing I'd add, too, just in terms of history here, Spirit has already come out of markets. As we said, we have that history to showcase what we think the benefit to us will be, but Just the absorption of the reductions that have already existed in May, the backfill of that from an industry perspective has been about 50%, and we've been about 40% of that 50%. So it showcases the discipline that's existing throughout the industry on capacity ads and backfill.

Okay, so if I could just clarify that last point, it sounds like embedded in your 3% to 5% view is some sort of normal historical backfill that you've seen from other players as well. Is that fair?

No, the 3% to 5% is based on history, and there's obviously been a substantial capacity change over the past few days. We expect a 3% to 5% run rate improvement across the system on the back of that, given the overlap that we had with Spirit. And as I said to Savi earlier, we anticipate about two points of that in the near term, and then we'll see how it develops as things normalize in the coming weeks. We think it may be more than 3% to 5%.

Okay, fair enough. And then just one last one on this topic. Over the last year or so, there have been so many scenarios playbooked with Spirit. I'm just curious, from here, now that we've had the cessation in operations, are there any opportunities to pick up assets or anything like that? Are there remaining assets? I mean, are there more plays in the playbook from here, or are we done?

I mean, look, Spirit announced yesterday that they'll have effectively an orderly wind down of the business. We will look at assets that come out during that wind down. Clearly, there's an immediate availability of aircraft assets in their business. We'll look at opportunities as they present themselves in the coming days and weeks as to whether that is incremental to our business. I just want to reassert that we're going to be disciplined in any decision we make on the basis that it either improves our unit cost base, improves our market position and network deployment, and fundamentally is a value creator for the business and generates profitability. So we'll be focused on that, but we know that there's a significant amount of opportunities that are coming around assets that are within SPIRIT.

Excellent. Thanks, guys.

Your next question comes from the line of Duane Fenningworth with Evercore ISI. Your line is now open. Please go ahead.

Hey, thanks. Good morning. Can you speak to how your second half growth plans may have changed in light of higher fuel? I think the original plan was to dial up utilization in off-peak periods. Again, from arm's length, off-peak historically sounds less exciting from a fuel pass-through perspective. So just how do we square what has changed in the backdrop with the plan to push more in off-peak?

Yeah, hey, Duane. In our plan, it continues to be to bring off-peak flying back into the business. We just believe we overcut off-peak capacity in the last year particularly, but certainly in the last two years. What we've seen recently actually is the off-peak capacity performing pretty well from a RASM perspective. I mean, you see our Q2 RASM up over 20%. I mean, that's a huge performance improvement. Obviously, oil prices and fuel recapture on oil prices across the industry is helping that. But what we're seeing on off-peak days is pretty positive. I look at our capacity deployment in May and June. We've probably cut June a little bit too much. We look at maybe redeploying some capacity opportunistically in June. I do believe we'll continue to trim capacity as the year progresses as part of a package of measures to preserve liquidity and cash, but also to manage the fuel recapture in the business. And certainly Tuesday, Wednesdays will probably be the primary focus of that, or long-stage off-peak times of the day where we reduce in trim capacity. We're not guiding the second half. Obviously, it's volatile in terms of fare and fuel in the industry at the moment. But directionally, I think we'll be slightly smaller than we had anticipated earlier in the year, but I'm not sure meaningfully smaller.

Okay, Jimmy, I appreciate that. Cutler, I just wanted to follow up with one of Savi's questions. You referred to outright sale of aircraft, and I just wondered, is that a part of the transaction where you're giving back previously leased aircraft, or is this separate, and are you actually selling delivery positions? And if so, can you speak to the cash inflow that you would expect in total or per shell if that's what you're doing? Thank you.

Yeah, Duane. Hey, we're not going to go into the commercial terms of the deal that we've done. But we're, you know, as part of the fleet management strategy that we put in place, we wanted to end 2027 with a similar number of aircraft as starting 2026. And that's just part of that process. Thank you.

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

Hey, thanks. Good morning. So, Jimmy, you said a couple times, like, maybe it's going to be more than 3% to 5%. Maybe it's just too early, but, like, what are you seeing in real time the last few days on those, you know, 100 or so routes where you overlap? Like, you know, if it's truly 30% of your capacity, I would have thought maybe the uplift could have been more than that 3% to 5%. You seem to think, like, maybe it can, but I don't know, maybe just some real-time color on what's actually happening in the markets.

Yeah, I mean, the 3% to 5% is based on history, not based on the last four or five days of activity. What you're seeing in the last four or five days is effectively a reaccommodation process for unfortunate spirit consumers who've lost their flights. And you're seeing that across the industry. We happen to be in a position where we offer significant value in the industry at very low fares. And so our recapture offers or a rescue fare offer was very attractive into the marketplace. What we're talking about in the 3% to 5% is really the run rate on a go-forward basis that we anticipate is improving our system-wide RASM. So we just need to normalize out of this period where there's a reaccommodation process going on and move to a more normalized RASM improvement in these markets, and we'll see where we go. The three to five points is based on history where we've seen them reduce capacity or exit markets across our system and the impact it has on us. This is obviously more significant, and so it could lead to a higher RASM uplift, but we'll just have to wait and see.

Right. And assuming you get that, what does this mean for your longer-term capacity growth? Is it a lot more, a little bit more? Could it mean, hey, we don't want to add any? Could we want to keep the benefits of the price? How do you think about that? I know you're not giving specific numbers around long-term capacity, but what are your initial thoughts here?

Yeah, look, I mean, primarily we want to move the airline back to profitability. I mean, we were on a very, very good trajectory in Q1 prior to the fuel price spike. And we were actually going to get very close to break even in Q1. And we were certainly on a trajectory to make money in Q2. And so to move our business back to a profitable state, which was very important, we were ahead of our plan. And so we were quite excited about the progress of the business. That doesn't change, right? We've got a fuel price spike that we've got to manage through. But managing the business over the long term a disciplined fashion and you know what we talked about in february was lower lowering the capacity growth in the airline from say 20 to 25 percent uh annually to to somewhere slightly less than 10 percent each year we've got to go through a reset phase in the business so that we can improve utilization some of that utilization is is delayed given the fuel price spike and the management of the fuel price spike in the short term but that'll come back in time and so We're actually quite excited about the business moving back into a profitable state as fuel prices normalize or as the industry moves to recapture a higher proportion of the fuel price as you progress through this year. Our expectation is that you start recapturing a higher proportion of fuel as you progress through this quarter to the end of this quarter and through the rest of the year. I anticipate that we're recapturing close to 50% of the fuel price by the end of Q2. So above the range that we gave you this morning, but progressing to a positive state where maybe the end of this year or into early next year, you're actually recapturing all of the oil price.

Okay. And then just last one, if I can, I don't know if I missed any sort of cost or overall orgasm guidance for Q2, but there's so many moving pieces with the model, depreciation, sale-leaseback gains. I don't know, any call-up around some of the moving parts there?

Yeah. Yeah, so a couple things, right? So as you look at, you know, the financials that are in the P&L and the earnings release, you know, within the rent, maintenance, and depreciation line, you see $139 million of non-recurring charges tied to, you know, the early return of the 24 aircraft. And we have that, you know, detailed out in the release, so you just need to normalize for that. If you step back for the quarter, the CASMX that we had is elevated given the lower utilization in the quarter on a larger fleet, understanding that we have growth planned for this year. And keep in mind as well, when you compare to the prior year, there is a lease extension benefit in that prior year period. And as you look forward, as we've highlighted, we expect a meaningful reduction in our CASMX as we work through the fleet rightsizing that we've talked about, as we work through the cost savings initiatives, and those begin to materialize. So you are going to see a meaningful progress on the CASMX front. And we haven't provided specific guidance, but we've given those general parameters.

Thank you, guys.

Your next question comes from the line of Michael Lindenberg with Deutsche Bank. Your line is open. Please go ahead.

Oh, hi. This is Shannon already on for Mike. Thanks for taking my question. Maybe, Jimmy, when is the $75 to $95 million cash charge associated with the lease termination being incurred? You know, we suspect that you gave us the range last quarter as it was still a work in progress, but do you have a final number now since everything presumably is locked down? And should we expect to see a hit this quarter?

Yeah, I could touch base on it. So Shannon, in the 8K we put out earlier in the quarter, we had given a range of $200 to $270 million in total, most of that non-recurring, or I'm sorry, non-cash charges. The range now is right in the middle of that, $212 to $239. When you look at the cash component that we had highlighted before, what you mentioned, the $75 to $95, Those cash payments will occur largely in 2028 and 2029.

Okay, thanks to the caller there. And my second question, you know, U.S. government officials have basically expressed that the airline industry does not need a bailout. Where do you stand today in your conversations? Are they still happening maybe as a part of the ABA, you know, in seeking support for higher fuel prices? Thanks for taking the question.

Hi, Shannon. Yeah, look, we've got a very strong relationship with Secretary Duffy and the DOT. And they requested that we share our perspective on the impact of fuel and the industry dynamics associated with that. And so, you know, Frontier and the AVA, we were encouraged to share the estimates of the fuel impact on the airlines. And we did that and shared the cost impact this year if the volatility persists across the year. Look, we're very focused on self-help and managing the liquidity in the business in a strong fashion. You can see our liquidity position at the end of March is very strong. You have 25% of trading 12 months revenues in cash at the end of March from a liquidity perspective. I mean, that's at the upper end of where this airline has been for many, many years. We'd prefer it to be a little bit higher, but it's in a pretty strong position. We anticipate, given some measures that we're doing internally, to largely keep it around the same, maybe slightly lower in terms of liquidity at the end of June. So we feel pretty good about our liquidity position as it stands right now. And so we'll continue to inform the government as to where we are across the AVA members. But we feel very good about our liquidity position right now.

Your next question comes from the line of Ravi Shankar with Morgan Stanley. Your line is open. Please go ahead.

Great. Thanks. Morning, everyone. So I think you said that you had participated in five jet fuel rated price increases this year. I'm not sure if the industry has had five or six so far. So I just wanted to confirm that you guys do intend to participate in kind of any further jet fuel round of price increases across the industry, or will it be more opportunistic?

We're going to be opportunistic. I mean, we tend to react to the prices that exist in the marketplace, and we've observed multiple attempts at price increases and price increases that have come through. That, I suspect, will continue as the airline industry seeks to recapture fuel. But look, the fuel price itself is high, and the revenue environment is reacting to that at the moment.

Yeah, and this is Bobby. I mean, look, you know, we're going to be opportunistic, as Jimmy said, and, frankly, you've seen that the customer's resilient with higher effects on that. So we'll continue to look at that and optimize it as appropriate.

Got it. Thank you for that. And, Bobby, maybe your kind of good segue to my follow-up question, which is, you know, outside of the spirit situation, If you guys can just summarize the demand environment as you see it overall and maybe kind of the confidence that you have that your customer base will be able and willing to accept these price increases without any cracks.

I mean, look, the demand environment is quite strong. You've seen in Q1, we talked about this. It came from both sides. It came from an increase in yield and it came in an increase in load factor, flow and load factor year over year. seeing is higher fares and people transacting and flying at a higher rate as well so quite a strong environment from a revenue perspective and frankly you know going forward there are a variety of things including the conclusion of spirits you know operations that provides a lot of opportunity that will capitalize on yeah and Robbie just to add to that like and we mentioned it in the transcript earlier

Our competitive overlap capacity is down 4% year-over-year, which is helpful to Frontier. You can see us outperforming the industry in a year-over-year RASM perspective. We feel pretty good about the RASM trajectory that the airline is on. It was on a very positive RASM trajectory prior to the oil price crisis. You're seeing us perform pretty well in terms of recapture of revenue. in our business. And then, you know, we do operate the most fuel-efficient aircraft in the industry. We have a substantial portion of our fleet, our 321neo aircraft, that have the lowest per-passenger cost for fuel in the industry. And so we feel pretty good about the recapture potential in the airline as you progress through this year, particularly given the demand backdrop that we have in the business today. Very helpful. Thanks, everyone.

Your next question comes from the line of Chris Staphalopoulos with Susquehanna International Group. Your line is open. Please go ahead.

Good morning. So I want to go back to the 3% to 5% RASM uplift. I understand that that's history. It's not exact math here, more directional. But if you could, is that... Is that market-specific? So if I look at spirit selling schedule and overlaps, I mean, there's a few markets where I think it would perhaps make more sense than others just stage length adjusting rather than. So I want to understand the context, or is that just broad stroke kind of system, hey, this is historically how it's looked, and perhaps I'm kind of overthinking this. Thanks.

Well, it's it's look, this is a built on a route specific level in terms of how we're reviewing it. And then, of course, that's rolling up to a range that exists. So we've, we've seen, you know, historical benefit that again translates to that three to five. But as we said to look, there's, there's, you know, connections, variety of other things that can throw get thrown into there that can create benefit beyond what we've seen. So it's early days we're going to see, but we think that, again, that three to five is a solid number based on what we viewed historically on our out-level basis. And there's opportunity for upside potentially within that as well.

Okay. And then on the 2Q RASM guide, appreciate you giving the stage length. Um, could you parse out if you did apologies, but on on revenue initiatives and peak versus off peak and any uplift from spirit that that you're, you're seeing there just want to. Get a better sense of what core is doing given all the other moving parts around that. Thanks.

Yeah, we're actually seeing Chris and improvement and off peak days. Over and above what we're seeing in other days of the week across this period, which is interesting. But we're not going to specify exactly what that is. But it's encouraging to the overall strategy that we're putting in place to bring off-peak capacity back in. What we did lay out for you was the impact of the 3% to 5% run rate improvement in spirit on the quarter earlier in the call. And we mentioned that, you know, given that we're more than halfway through the quarter from a booking perspective, you know, we think it's about two points of the 20 in RASM that we're talking about for the core.

Okay.

Thank you. RASM improvement.

Your next question comes from the line of James Kirby with JP Morgan Securities, LLC. Your line is open. Please go ahead.

Hey, good morning, guys. Thanks for the time. Maybe to start off here, could you share how much of 2Q was booked prior to the spike in fuel And I ask because maybe there's a thought that the leisure customer has a shorter-term booking curve, and maybe there is a chance to recapture fuel above piers. Is that the right way to think about it?

I'm not sure. I think our booking curves are different depending on the segment of the airlines that you're looking at. Q1? Obviously, March is a bigger portion of the quarter than individually January or February, given that we operate lower capacity. What we have been seeing, and we've been saying this for quite some time, James, is we've been seeing continued improvement in year-over-year RASM in the business. That is across the booking curve that we're seeing. and it's improved post the fuel price spike as a result of some things that we've done in terms of capacity adjustments that we've made in our business, but also the industry fare umbrella that exists from the fare increases that are being pushed through mostly by the major airlines.

Okay, that's helpful, Jimmy. Thanks. And maybe following up on Robbie's question on demand, you know, And maybe given your experience with Ryanair, how long do you think the consumer can sustain demand at current levels given fuel prices? Is there a historical time period where you might expect to see consumer softening on discretionary spend?

We don't see any sign of the softening of demand in the environment. And we're seeing constructive capacity deployment across markets. across the industry, and so, I mean, we feel pretty good about it at the moment. I mean, I can't give you any insight into what happens, you know, beyond the next three or four months that we're seeing in our booking engine, but what we're seeing in our booking engine continues to be very positive on a year-over-year basis, which gives us confidence that the fuel recapture rate continues to improve as the year progresses.

Okay, thanks for the time.

Your next question comes from the line of Daniel McKenzie with Seaport Global. Your line is open. Please go ahead.

Oh, hey, good morning. Thanks for the time here. A couple of questions and apologies for kicking a dead horse here, but the three to five percentage point RASM uplift. One caveat, I think, is that neither Frontier or Spirit had a meaningful premium product historically, and I guess my first question is, I guess, Bobby, can you speak to the revenue contribution from the new premium products and how that compares with the back of the cabin? And I guess in particular, how many points of RASM increase are coming from the premium products today?

Yeah, so look, right now we have our premium products, we have a variety of them, but Upfront Plus is the one that drives quite a bit of benefit. Will get into numbers, but it has increased significantly. We think that that actually showcases the demand that we'll have for the first class product as we roll that out in the in the fourth quarter. And sorry, in the second half. And so, you know, this is upside an opportunity that we think exists with our product base and what we can do from a premium product perspective. You're right. We haven't had what other carriers have, and we're starting to move towards where we can capture a larger share from a premium perspective with that product.

Just to add to what Bobby said, our loyalty program as a whole is quite immature. There's a huge opportunity within the business to improve loyalty. It requires us, in my opinion, to improve operational performance in the business. where we're quite focused on actually improving the operation. It's actually quite a bit of excitement internally in terms of improving the operation of the business and giving value and showcasing our value to the customers. We have put a comprehensive plan in place to improve operations on a multi-year basis, and we're seeing some really good positive returns. But that improved operation and value that we provide to the customer will enhance our loyalty programs over time. And so first class seats, the introduction of Wi-Fi, they're all additive to diversifying the revenue base of the airline, which we think is very, very important as we move the airline back to profitability.

Yeah, and just talking about loyalty specifically, over the past year we've seen significant penetration increases in the loyalty bookings, so people that are attached to the program itself on the credit card penetration and Go Wild as well. So significant moves, and that's even prior to some of the things that we just talked about. So we anticipate, again, acceleration and increased benefit in the loyalty program as we move forward through a lot of these initiatives.

Yeah, actually raised a lot more questions. But I guess the next question is really an OEM question, CASMX question. I'm just wondering if you can speak to the quality and reliability of the ADU321neos. For those of us that are not close to the OEMs and close to the quality today, how many spares are you having to carry today and where would you like that to be preferably? I'm just trying to get a sense of how much friction might be in the cost structure today from the 321neos.

Dan, we started delivering 321 NEOs in 2022, and we were really at the very tail end of the powdered metal issue that occurred with the GTF. And so we have limited friction in our business in relation to the GTF issues. We did last year add to our spares ratio from an engine spare ratio perspective in order to manage any latent issues that we had kind of at the tail end of that powder metal issue. And that's actually been quite successful in managing the operational capacity that we can deploy. We're clearly carrying a higher number of spares than you would optimally carry in the business, but we think that that conservative approach is actually performing well from an operational perspective in the business. I do think the overall business is carrying too many spares, but I'm not interested in changing that at the moment from a spare aircraft perspective. I want to see a meaningful improvement in our ability to return aircraft to service every day on time and not eat our spares in the morning in order to do that. That is a multi-year strategy in the business that I think will provide over time a meaningful improvement in the ability to lower the spares ratio if we think that that makes sense. But in the next year to year and a half, I don't see that as an opportunity in the business. All right. Thanks for the time, you guys.

We have a follow-up question from Savvy Sith with Raymond James. Your line is open. Please go ahead.

Hey, thanks for taking my follow-up. I'm just curious, as kind of spirits, kind of freeze up a space in various airports. How is that being allocated? Are you able to kind of access the gates that you need, or is there some airports that you still have to wait and see if you can expand into?

It's different by airport, Savi. Yes, I mean, we are very connected into the airport infrastructure discussion at the moment across the network. I mean, look, we're very focused on, as we've announced, growing in Orlando, Vegas, DFW, Fort Lauderdale, and Detroit, and we'll continue to pursue infrastructure to support that.

Got it.

And then just to clarify, it doesn't seem like your plans are significantly different in terms of capacity for the second half. I know that's a moving target right now, but Are you still thinking kind of reaching 11 and a half hours of utilization by next summer or sometime between here and next summer?

Good question. I do think the drive back to getting above 11 hours, so to 11 and a half hours, as you mentioned, will be somewhat delayed because of the fuel price spike. I don't think it'll be meaningfully delayed. We are managing our cost base very diligently, and that's inclusive of training classes for pilots and flight attendants and other things in order to manage the timing of new hires into the business to support a production level of 11 and a half hours a day. I think it will be slightly delayed, but not by much.

Got it. Thank you.

It really depends on how long the fuel crisis goes on for.

Makes sense.

There are no further questions at this time. I will now turn the call back to Jimmy Dempsey for closing remarks.

Thanks everybody for attending our call. We are very focused on delivering the plan that we set out in February. We're seeing real promise in the airline in terms of performance and and driving the airline back to a return to profitability. Clearly, recapturing higher fuel prices is very, very important to the business, and we're working diligently to do that as we progress through this year. I think the airline sits in a very, very strong position given the opportunity that exists from the last few days where capacity has changed quite dramatically on overlap routes. We think that's very positive for Frontier. And we look forward to talking to you guys in the coming months about our progression around taking advantage of that opportunity. So thank you very much.

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