Latest news with #FrontierGroupHoldingsInc
The Star
30-04-2025
- Business
- The Star
A flying slump comes at worst time for Southwest
MORE pain for low-cost airlines is coming as President Donald Trump attempts to reorder global trade with massive tariffs, making passengers who fly toward the back of the plane nervous about their jobs and household finances. That's the takeaway from airline earnings conference calls as executives describe wilting demand for 'main cabin' airfares, which began in February and has continued into the current quarter. The hit is coming from lower-income leisure travellers while demand for business and international passengers – generally those who pay for premium seats and services – is holding steady, for now. This is putting the squeeze on those airlines that cater more to the budget-minded domestic traveller, including Frontier Group Holdings Inc and Spirit Airlines Inc. Most critically, Southwest Airlines Co, which started as a budget carrier in the 1970s and became the largest domestic carrier by offering no-frills, excellent service, is getting walloped – and at the worst possible time as it revamps its business model. The big three airlines – Delta Air Lines Inc, United Airlines Holdings Inc and American Airlines Group Inc – can afford to cut prices on main cabin fares to fill their planes because they have a profit cushion from those higher-margin international and corporate flyers. The good news for shareholders is that the airlines are curbing capacity to adjust to the weaker demand rather than slugging it out with airfare wars. Still, airline stocks have been crushed. Flying can be curtailed quickly in an economic downturn, and it's impossible to know where Trump's tariff trip lands. Some US companies are postponing investments, and others are cutting costs to cope with the higher cost from tariffs, both of which make workers uncertain about their futures. Federal government employees have drastically cut back on flying as the Department of Government Efficiency scours for cutbacks. Perhaps the fresh carnage from the pandemic has made investors more trigger-happy on airline stocks. Delta and United both have declined about 30% so far this year compared with a 7% drop for the S&P 500 Index. American, which was hurt by a fatal accident of an affiliated regional operator in January, has slumped 45%. Frontier and JetBlue Airways Corp, which have both struggled to return to profitability since the pandemic, have dropped 55% and 50% this year, respectively. Spirit just emerged from bankruptcy and doesn't trade. Alaska Air Group Inc, which regained profitability in 2022 and recently acquired Hawaiian Airlines, has declined 36%. Southwest has weathered the storm much better, with a 21% drop. Downturn in US demand Even so, it's a delicate time for Southwest to face a sharp downturn in US demand. The airline, founded after Texas lawyer Herb Kelleher and a partner sketched out a budget-airline plan on a cocktail napkin almost six decades ago, is just now making historic changes to its service model. The airline is breaking lots of tradition by adopting assigned seating, creating a multi-zone cabin with large seats and more leg room, adding overnight flights and – perhaps the biggest shock to the Southwest culture – charging for checked bags. Southwest gained a loyal following as it morphed from a low-cost airline that flew out of secondary airports, such as Love Field in Dallas and Midway in Chicago, to haul more US domestic passengers than any other airline. The airline never declared bankruptcy like its larger peers and had an unbeaten streak of profitability from 1973 until the pandemic practically shut down commercial air travel overnight. Flyers' attitudes changed after the pandemic. They are now more willing to pay for comfort, entertainment and perks. This desire for premium treatment coincided with large investments that the large airlines had made to upgrade seats, add onboard screens and internet and build modern lounges at airports to cater to the well-heeled. The big three, especially Delta and United, segmented the cabin and stopped the old-style upgrades that gave away their premium services. Southwest left out Southwest was left out of the premium bonanza, and its margins suffered at the hands of the big three, which could afford to compete aggressively for the economy passenger because they captured more revenue at the front of the plane. Elliott Investment Manage-ment noticed and took a large stake in Southwest last year with the goal of shaking up management and the business model. Southwest is just about to carry out this overhaul. Next month, it will introduce a multi-zone cabin with different fares and start charging for checked bags. At the beginning of next year, flights will have assigned seats and premium sections. Premium travellers This chase for premium travellers could end up alienating those longtime customers who cherished the quirky culture that fuelled Southwest's growth. Chief executive officer Bob Jordan, who successfully fended off Elliott's demand that he step down, did a 180-degree turn on Southwest's free checked bags after defending the policy last year as a brand-loyalty magnet. The cultural upheaval includes the workforce, with the exit of longtime executives such as chief financial officer Tammy Romo, and the first involuntary layoffs for the airline involving 1,750 leadership positions. — Bloomberg Thomas Black is a Bloomberg opinion columnist. The views expressed here are the writer's own.
Bloomberg
20-02-2025
- Business
- Bloomberg
Spirit Airlines Cleared to Exit Bankruptcy in Take-Private Deal
By and Mary Schlangenstein Save Spirit Airlines Inc. won court approval to leave bankruptcy via a lender-backed take-private deal after rejecting a takeover offer from rival Frontier Group Holdings Inc. Judge Sean Lane said Thursday he would authorize Spirit's restructuring plan — which hands control of the Florida-based discount airline to top bondholders. That group includes Ken Griffin's Citadel Advisors, Pacific Investment Management Co. and Western Asset Management Co., according to court documents.
Yahoo
08-02-2025
- Business
- Yahoo
Frontier Group Holdings Inc (ULCC) Q4 2024 Earnings Call Highlights: Record Revenue and ...
Total Operating Revenue: $1 billion, a 12% increase from the prior year quarter. Adjusted Pre-Tax Margin: 5.1% for the fourth quarter. RASM (Revenue per Available Seat Mile): $0.1023, a 15% increase. Total Revenue per Passenger: $117, up 6% from the prior year quarter. Fuel Expense: $229 million, 24% lower than the previous year quarter. Average Fuel Cost: $2.48 per gallon. Adjusted Non-Fuel Operating Expenses: $728 million. Net Income: $54 million or $0.23 per diluted share. Total Liquidity: $935 million, including $730 million in unrestricted cash and cash equivalents. Fleet Size: 159 aircraft at quarter end. Passengers: 33 million in 2024, a 10% increase from 2023. Warning! GuruFocus has detected 9 Warning Signs with ULCC. Release Date: February 07, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Frontier Group Holdings Inc (NASDAQ:ULCC) reported a 12% increase in total operating revenue for the fourth quarter, reaching a record $1 billion. The company achieved a 5.1% adjusted pre-tax margin in the fourth quarter, significantly higher than the original guidance. Frontier Group Holdings Inc (NASDAQ:ULCC) launched 22 new routes in December, expanding its network and leveraging its 13 crew bases. The company reported a 10% increase in passengers for 2024, totaling a record 33 million travelers. Frontier Group Holdings Inc (NASDAQ:ULCC) is making significant investments in customer experience enhancements, including premium seating and digital upgrades, to drive demand and revenue growth. The company experienced a 15% reduction in average daily aircraft utilization, impacting operating expenses. Ancillary revenue per passenger slightly decreased, offsetting some of the gains from increased fare revenue. Frontier Group Holdings Inc (NASDAQ:ULCC) faces challenges with overcapacity in certain markets, requiring adjustments to its network. The company anticipates a drag on first-quarter performance due to the timing of Easter, which could impact revenue. There are potential cost pressures from sale leaseback transactions and other operational expenses that could affect margins. Q: Barry, your guidance didn't provide a lot of details on the metrics. Can you give us a sense of where you're seeing some of your unit trends on revenue and cost and how you think that's going to play out in 2025? A: Barry Biffle, CEO: Our revenue trends are performing well due to network changes initiated last year. We're seeing tailwinds from network initiatives and premium focus, with a cost advantage expected to remain over 40% this year. Q: Can you elaborate on which commercial initiatives are gaining traction right now? A: James Dempsey, President: We've adjusted our network to meet demand patterns, focusing on peak days. Our out-and-back network from 13 bases is maturing, showing strong demand patterns. Bobby Schroeter, CCO: Our premium seating and loyalty program changes are driving revenue and engagement. Q: How is the Easter effect expected to impact your first-quarter performance? A: Barry Biffle, CEO: The Easter effect will be a drag on Q1, potentially 1 to 2 points. However, it generally benefits the first half overall, with a stronger Q2 expected. Q: Can you speak to the network priorities for 2025? A: James Dempsey, President: We'll build on the structural changes made in 2024, potentially expanding beyond 13 bases. Our focus is on maturing the network and managing capacity to align with demand. Q: How do you see the load factor and yield dynamic playing out this year? A: Barry Biffle, CEO: We report flown, not booked, so load factors should improve as we reshape capacity to match demand. We're focusing on peak days and periods, not chasing utilization on low-demand days. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus.
