Frontier defers Airbus deliveries after beating second quarter estimates, cancels XLR order

Frontier Airlines' parent Frontier Group has posted a second quarter net profit of $31 million, down from last year's second quarter profit of $71 million, beating analyst estimates. The group's revenues totalled $973 million for the period, up slightly from $967 million. Total operating expenses for the quarter were $948 million, up from $888 million. ""Despite industry oversupply across the United States, we effectively navigated the quarter due in part to our network and revenue diversification, combined with our industry-leading and improving cost advantage,"" the group's CEO Barry Biffle. He continued: ""While consumer travel demand has remained resilient on peak days of the week, post-pandemic travel patterns have compelled us to concentrate our flying on peak days. Coupled with the maturity of new revenue initiatives and our cost advantage, we believe we will drive margin improvement and be the clear low-cost winner in 2025 and beyond."" The airline said on August 8, 2024, in the report that it was deferring 54 of its Airbus jet deliveries to between 2029 to 2031, having previously estimated the aircraft to be delivered from 2025 through to 2028. From the beginning of January next year, it has a remaining orderbook of 187 aircraft. It took delivery of six A321neos in the second quarter, all financed with sale-leaseback transactions. Frontier said in its it had declined the option to convert 18 A320neo family jets to A321neoXLRs. Rather, these will be converted to A321neo aircraft instead. The airline had previously been optimistic about the extra long range aircraft. The airline also expects to take delivery of 11 A321neos in the second half of the year, it said in an earnings call. Frontier SVP and CFO Mark Mitchell said in the call: ""We have financing arranged for our aircraft deliveries into early 2026."" As of June 30, 2024, Frontier had a fleet of 148 Airbus single-aisle aircraft, which are all financed through operating leases that expire between 2025 and 2036. The company said it is ""currently experiencing fare pressure caused by excess domestic capacity growth which is expected to begin to decelerate in the second half of 2024 and into early 2025."" June off-peak demand had underperformed against expectations and had led to scheduled capacity adjustments for late August 2024. ""Since this change, average selling fares for September 2024 have inflected positively compared to the prior year,"" it said. For the third quarter, capacity is set to grow 4-6% over the same quarter last year. Adjusted total operating expenses (excluding fuel) are expected to be $700-$720 million. Full year capacity is expected to grow 5-7%. Fuel costs are now expected to be $2.70-$2.80 per gallon. Unrestricted cash and cash equivalents as of June 30, 2024, was $658 million. Cash net of debt was $206 million, $50 million higher than March 31, 2024.