Frontier Group has reported a “strong rebound in demand” during the first quarter of 2021 (Q1 2021) as leisure travel strengthened ahead of spring break and Easter, which led the airline to a cash positive position in March. Even so, total operating revenues were $271 million, down by half compared to the first quarter of 2020.
Frontier’s capacity, as measured by ASMs, was lower by 36% and RASM declined 22% compared to the same period a year ago. Although Frontier’s deployed capacity has not yet returned to pre-COVID-19 historical levels, the company’s departures in March 2021 were 7 percent higher than the departures in March 2019 as the recovery process strengthened for leisure travel.
“This is our first quarter reporting as a public company and we couldn’t be more pleased with what we are seeing relative to the recovery in leisure travel,” said Barry Biffle, Frontier’s president and CEO. “We believe our relative cost advantage driven by financial discipline coupled with our focus on leisure travel positions us well to be among the airline industry leaders as demand for leisure travel continues to rebound. In addition, we diligently limited the amount of debt added to our balance sheet while maintaining a strong liquidity position.” Biffle added, “We are well poised to take advantage of the recovery and expect to return to profitability in the second half of 2021.”
Total operating expenses were $363 million, a decrease of 44% from the $650 million incurred during Q1 2020, driven by the 36% reduction in capacity and the benefit from the recognition of payroll support program grants under the CARES Act. Adjusted total operating expenses of $495 million were 16% lower than the prior year.
Frontier ended the first quarter with $853 million liquidity. On March 31, 2021, Frontier priced an initial public offering, which closed shortly after the end of the quarter. The IPO generated $271 million of net proceeds to Frontier before an estimated $6 million in offering expenses.
“Frontier is in a very strong liquidity position following the successful completion of our IPO, the additional payroll support program funding (PSP2 and PSP3) provided by the U.S. government and the strengthening recovery in demand for air travel across the U.S.,” said James Dempsey, Frontier’s EVP and CFO. “This strong liquidity position will enable Frontier to quickly return to its pre-COVID-19 traffic growth trajectory.”
Also during the quarter, Frontier finalised a transaction to accelerate the return of the four remaining A319 aircraft from its fleet. The airline confirmed that three aircraft will exit Frontier’s fleet during the second quarter of 2021 and the fourth aircraft will exit in the third quarter 2021.
Frontier added three A320neo aircraft to its fleet during the first quarter of 2021, fitted with 30% lighter-weight Recaro seats. The airline expects to take delivery of an additional 10 A320neo aircraft during the remainder of 2021.
As of March 31, 2021, Frontier had a fleet of 107 Airbus single-aisle aircraft, consisting of 63 A320neos, 19 A320ceos, 21 A321ceos, and 4 A319ceos. All aircraft in the fleet are financed with operating leases, which expire between 2021 and 2033.
Looking ahead, Frontier says that the strength in forward bookings is encouraging and expects to see an acceleration in the pace of monthly demand as it moves from March 2021 through June 2021 and anticipates “returning to profitability in the second half of 2021”.