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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __ to __
Commission File Number: 001-40304
F9_corporate_FC-01.jpg
Frontier Group Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware46-3681866
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
4545 Airport Way
Denver, CO 80239
(720) 374-4490
(Address of principal executive offices, including zip code, and Registrant’s telephone number, including area code)
    
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par value per shareULCCThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐     No ☒
The registrant had 221,063,721 shares of common stock, $0.001 par value per share, outstanding as of October 20, 2023.


TABLE OF CONTENTS
Page
1

Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q should be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations and beliefs with respect to certain current and future events and anticipated financial and operating performance. Words such as “may,” “might,” “will,” “should,” “could,” “would,” “expect,” “intends,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “targets,” “predict,” “potential” and similar expressions are intended to identify forward-looking statements. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed or assured. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2023 (the “2022 Annual Report”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other factors set forth in other parts of this Quarterly Report on Form 10-Q, as well as those risks and uncertainties set forth from time to time under the sections captioned “Risk Factors” in our reports and other documents filed with the SEC, including our 2022 Annual Report. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
2

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(unaudited, in millions, except share and per share amounts)
September 30, 2023December 31, 2022
Assets
Cash and cash equivalents$640 $761 
Accounts receivable, net109 90 
Supplies, net75 55 
Other current assets112 114 
Total current assets936 1,020 
Property and equipment, net282 226 
Operating lease right-of-use assets2,830 2,484 
Pre-delivery deposits for flight equipment423 371 
Aircraft maintenance deposits87 105 
Intangible assets, net28 28 
Other assets349 265 
Total assets$4,935 $4,499 
Liabilities and stockholders’ equity
Accounts payable$109 $89 
Air traffic liability307 313 
Frequent flyer liability10 13 
Current maturities of long-term debt, net266 157 
Current maturities of operating leases528 465 
Other current liabilities469 518 
Total current liabilities1,689 1,555 
Long-term debt, net220 272 
Long-term operating leases2,324 2,034 
Long-term frequent flyer liability33 32 
Other long-term liabilities128 97 
Total liabilities4,394 3,990 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.001 par value per share, with 221,054,287 and 217,875,890 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
— — 
Additional paid-in capital399 393 
Retained earnings148 122 
Accumulated other comprehensive income (loss)(6)(6)
Total stockholders’ equity541 509 
Total liabilities and stockholders’ equity$4,935 $4,499 
See Notes to Condensed Consolidated Financial Statements
3

FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(unaudited, in millions, except per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Operating revenues:
Passenger$862 $883 $2,637 $2,361 
Other21 23 61 59 
Total operating revenues883 906 2,698 2,420 
Operating expenses:
Aircraft fuel291 306 827 856 
Salaries, wages and benefits221 182 635 528 
Aircraft rent150 140 429 401 
Station operations133 101 381 326 
Sales and marketing41 42 125 120 
Maintenance, materials and repairs48 42 145 107 
Depreciation and amortization13 8 36 36 
Transaction and merger-related costs, net— (12)1 8 
Other operating40 41 119 128 
Total operating expenses937 850 2,698 2,510 
Operating income (loss)(54)56 — (90)
Other income (expense):
Interest expense(8)(4)(21)(16)
Capitalized interest7 3 19 6 
Interest income and other10 3 28 5 
Total other income (expense)9 2 26 (5)
Income (loss) before income taxes(45)58 26 (95)
Income tax expense (benefit)(13)27 — (18)
Net income (loss)$(32)$31 $26 $(77)
Earnings (loss) per share:
Basic$(0.14)$0.13 $0.12 $(0.36)
Diluted$(0.14)$0.13 $0.12 $(0.36)
See Notes to Condensed Consolidated Financial Statements
4

FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited, in millions)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net income (loss)$(32)$31 $26 $(77)
Unrealized gains (losses) and amortization from cash flow hedges, net of deferred tax benefit/(expense) of $(1) and less than $(1), respectively, for the three and nine months ended September 30, 2023 and $(2) for each of the three and nine months ended September 30, 2022. (Note 4)
4 7 — 7 
Other comprehensive income (loss)4 7 — 7 
Comprehensive income (loss)$(28)$38 $26 $(70)
See Notes to Condensed Consolidated Financial Statements
5

FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in millions)
Nine Months Ended September 30,
20232022
Cash flows from operating activities:
Net income (loss)$26 $(77)
Deferred income taxes— (18)
Depreciation and amortization36 36 
Gains recognized on sale-leaseback transactions(97)(49)
Loss on extinguishment of debt— 7 
Stock-based compensation10 11 
Amortization of cash flow hedges, net of tax1 1 
Changes in operating assets and liabilities:
Accounts receivable12 (6)
Supplies and other current assets(18)(35)
Aircraft maintenance deposits(13)(14)
Other long-term assets(132)(68)
Accounts payable24 (13)
Air traffic liability(6)23 
Other liabilities(50)30 
Cash used in operating activities(207)(172)
Cash flows from investing activities:
Capital expenditures(37)(31)
Pre-delivery deposits for flight equipment, net of refunds(52)(86)
Other(2)— 
Cash used in investing activities(91)(117)
Cash flows from financing activities:
Proceeds from issuance of debt, net of issuance costs141 214 
Principal repayments on debt(84)(215)
Proceeds from sale-leaseback transactions124 49 
Proceeds from the exercise of stock options1 — 
Tax withholdings on share-based awards(5)(3)
Cash provided by financing activities177 45 
Net decrease in cash, cash equivalents and restricted cash(121)(244)
Cash, cash equivalents and restricted cash, beginning of period761 918 
Cash, cash equivalents and restricted cash, end of period$640 $674 
See Notes to Condensed Consolidated Financial Statements
6


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited, in millions, except share amounts)
Common StockAdditional
paid-in
capital		Retained
earnings		Accumulated other comprehensive income (loss)Total
SharesAmount
Balance at December 31, 2021217,065,096 $— $381 $159 $(10)$530 
Net income (loss)— — — (121)— (121)
Shares issued in connection with vesting of restricted stock units676,146 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(275,822)— (3)— — (3)
Stock option exercises34,461 — — — — — 
Stock-based compensation— — 3 — — 3 
Balance at March 31, 2022217,499,881 $— $381 $38 $(10)$409 
Net income (loss)— — — 13 — 13 
Shares issued in connection with vesting of restricted stock units96,078 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(10,472)— — — — — 
Amortization of cash flow hedges, net of tax— — — — 1 1 
Unrealized loss from cash flows hedges, net of tax— — — — (1)(1)
Stock option exercises89,950 — — — — — 
Stock-based compensation— — 4 — — 4 
Balance at June 30, 2022217,675,437 $— $385 $51 $(10)$426 
Net income (loss)— — — 31 — 31 
Shares issued in connection with vesting of restricted stock units25,074 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(10,753)— — — — — 
Unrealized gain from cash flows hedges, net of tax— — — — 7 7 
Stock option exercises72,526 — — — — — 
Stock-based compensation— — 4 — — 4 
Balance at September 30, 2022217,762,284 $— $389 $82 $(3)$468 

See Notes to Condensed Consolidated Financial Statements
7

FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders’ Equity (Continued)
(unaudited, in millions, except share amounts)
Common StockAdditional
paid-in
capital		Retained
earnings		Accumulated other comprehensive income (loss)Total
SharesAmount
Balance at December 31, 2022217,875,890 $— $393 $122 $(6)$509 
Net income (loss)— — — (13)— (13)
Shares issued in connection with vesting of restricted stock units976,916 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(402,814)— (5)— — (5)
Unrealized loss from cash flows hedges, net of tax— — — — (7)(7)
Stock option exercises53,862 — — — — — 
Stock-based compensation— — 4 — — 4 
Balance at March 31, 2023218,503,854 $— $392 $109 $(13)$488 
Net income (loss)— — — 71 — 71 
Shares issued in connection with vesting of restricted stock units185,358 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(15,080)— — — — — 
Amortization of cash flow hedges, net of tax— — — — 1 1 
Unrealized gain from cash flows hedges, net of tax— — — — 2 2 
Stock option exercises2,003,261 — 1 — — 1 
Stock-based compensation— — 3 — — 3 
Balance at June 30, 2023220,677,393 $— $396 $180 $(10)$566 
Net income (loss)— — — (32)— (32)
Shares issued in connection with vesting of restricted stock units28,204 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(9,724)— — — — — 
Unrealized gain from cash flows hedges, net of tax— — — — 4 4 
Stock option exercises358,414 — — — — — 
Stock-based compensation— — 3 — — 3 
Balance at September 30, 2023221,054,287 $— $399 $148 $(6)$541 
See Notes to Condensed Consolidated Financial Statements
8


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1. Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the United States (“GAAP”) and include the accounts of Frontier Group Holdings, Inc. (“FGHI” or the “Company”) and its wholly-owned direct and indirect subsidiaries, including Frontier Airlines Holdings, Inc. (“FAH”) and Frontier Airlines, Inc. (“Frontier”). All wholly-owned subsidiaries are consolidated, with all intercompany transactions and balances being eliminated.
The Company is an ultra low-cost, low-fare airline headquartered in Denver, Colorado that offers flights throughout the United States and to select international destinations in the Americas, serving approximately 90 airports.
The Company is managed as a single business unit that provides air transportation for passengers. Management has concluded there is only one reportable segment.
The accompanying condensed consolidated financial statements include the accounts of the Company and reflect all normal recurring adjustments which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company for the respective periods presented. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form 10-Q. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 22, 2023 (the “2022 Annual Report”).
The interim results reflected in the unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for other interim periods or for the full year. The air transportation business is subject to significant seasonal fluctuations and is volatile and highly affected by economic cycles and trends.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.
2. Revenue Recognition
As of September 30, 2023 and December 31, 2022, the Company’s air traffic liability balance was $310 million and $328 million, respectively, which includes amounts classified as other long-term liabilities. During the nine months ended September 30, 2023, 92% of the air traffic liability as of December 31, 2022 was recognized as passenger revenue within the Company’s condensed consolidated statements of operations. Of the air traffic liability balances as of September 30, 2023 and December 31, 2022, $65 million and $60 million, respectively, was related to unearned membership fees.
9


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

During the three and nine months ended September 30, 2023 and 2022, the Company recognized $16 million, $36 million, $22 million and $67 million, respectively, in passenger revenues within the Company’s condensed consolidated statements of operations, related to expected and actual expiration of customer rights to book future travel.
Operating revenues are comprised of passenger revenues, which includes fare and non-fare passenger revenues, and other revenues. Disaggregated operating revenues are as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Passenger revenues:
Fare$302 $386 $966 $1,035 
Non-fare passenger revenues:
Service fees244 220 706 583 
Baggage211 202 664 518 
Seat selection65 61 211 183 
Other40 14 90 42 
Total non-fare passenger revenue560 497 1,671 1,326 
Total passenger revenues862 883 2,637 2,361 
Other revenues21 23 61 59 
Total operating revenues$883 $906 $2,698 $2,420 
The Company is managed as a single business unit that provides air transportation for passengers. Operating revenues by principal geographic region, as defined by the U.S. Department of Transportation (the “DOT”), are as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Domestic$818 $832 $2,476 $2,197 
Latin America65 74 222 223 
Total operating revenues$883 $906 $2,698 $2,420 
The Company attributes operating revenues by geographic region based upon the origin and destination of each passenger flight segment. The Company’s tangible assets consist primarily of flight equipment, which are mobile across geographic markets. Accordingly, assets are not allocated to specific geographic regions.
Frequent Flyer Program
The Company’s Frontier Miles frequent flyer program provides frequent flyer travel awards to program members based on accumulated mileage credits. Mileage credits are generally accumulated as a result of travel, purchases using the co-branded credit card and purchases from other participating partners. The Company defers revenue for mileage credits earned by passengers under its Frontier Miles program based on the equivalent ticket value a passenger receives by redeeming mileage credits for a ticket rather than paying cash.
The Company has a credit card affinity agreement with its credit card partner, Barclays Bank Delaware (“Barclays”), through 2029, which provides for joint marketing, grants certain benefits to co-branded credit cardholders (“Cardholders”) and allows Barclays to market using the Company’s customer database. Cardholders earn mileage credits under the Frontier Miles program and the Company sells mileage credits at agreed-upon rates to Barclays and earns fees from Barclays for the acquisition, retention and use of the co-branded credit card by Cardholders.
10


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

3. Other Current Assets
Other current assets consist of the following (in millions):
September 30, 2023December 31, 2022
Supplier incentives$63 $55 
Prepaid expenses29 20 
Derivative instruments8 24 
Income tax and other taxes receivable7 8 
Other5 7 
Total other current assets$112 $114 
4. Financial Derivative Instruments and Risk Management
The Company may be exposed to interest rate risk through aircraft and spare engine lease contracts for the time period between agreement of terms and commencement of the lease, when portions of rental payments can be adjusted and become fixed based on the swap rate. As part of its risk management program, the Company enters into contracts in order to limit the exposure to fluctuations in interest rates. During each of the three and nine months ended September 30, 2023, as well as the three months ended September 30, 2022, the Company did not enter into any swaps and, therefore, paid no upfront premiums. During the nine months ended September 30, 2022, the Company paid upfront premiums of $9 million for the option to enter into and exercise cash-settled swaps with a forward starting effective date for seven of the Company’s future aircraft deliveries. As of September 30, 2023, the Company had hedged the interest rate exposure on $130 million of total aircraft and spare engine rent for three aircraft and one engine to be delivered by the end of 2023.
Additionally, the Company is exposed to credit losses in the event of nonperformance by counterparties to its derivative instruments but does not presently expect that any of its counterparties will fail to meet their respective obligations. The amount of such credit exposure is generally the fair value of the Company’s outstanding contracts in a receivable position. To manage credit risks, the Company selects counterparties based on credit assessments and monitors the market position with each counterparty.
The assets associated with the Company’s derivative instruments are presented on a gross basis and include upfront premiums paid. These assets are recorded as a component of other current assets on the Company’s condensed consolidated balance sheets. There were $8 million and $24 million of assets outstanding as of September 30, 2023 and December 31, 2022, respectively.
The following table summarizes the effect of interest rate derivative instruments reflected in aircraft rent expense within the Company’s condensed consolidated statements of operations (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Derivatives designated as cash flow hedges
Amortization of cash flow hedges, net of tax$— $— $(1)$(1)
11


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

The following table summarizes the net of tax impact of the overall effectiveness of derivative instruments designated as cash flow hedging instruments within the Company’s condensed consolidated statements of comprehensive income (loss) (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Derivatives designated as cash flow hedges
Amortization of cash flow hedges, net of tax$— $— $1 $1 
Interest rate derivative contract gains (losses), net of tax4 7 (1)6 
Total$4 $7 $— $7 
As of September 30, 2023, $6 million of losses, net of tax, related to interest rate hedging instruments included in accumulated other comprehensive income (loss), a component of stockholders’ equity on the Company’s condensed consolidated balance sheets, is expected to be reclassified into aircraft rent within the Company’s condensed consolidated statements of operations over the aircraft or engine lease term.
5. Other Current Liabilities
Other current liabilities consist of the following (in millions):
September 30, 2023December 31, 2022
Passenger and other taxes and fees payable$119 $113 
Salaries, wages and benefits104 104 
Aircraft maintenance70 63 
Station obligations56 57 
Fuel liabilities34 34 
Leased aircraft return costs33 84 
Other current liabilities53 63 
Total other current liabilities$469 $518 
6. Debt
The Company’s debt obligations are as follows (in millions):
September 30, 2023December 31, 2022
Secured debt:
Pre-delivery credit facility(a)
$328 $277 
Floating rate building note(b)
16 17 
Unsecured debt:
Affinity card advance purchase of mileage credits(c)
80 71 
PSP Promissory Notes(d)
66 66 
Total debt490 431 
Less current maturities of long-term debt(266)(157)
Less debt acquisition costs and other discounts, net(4)(2)
Long-term debt, net$220 $272 
__________________
(a)The Company, through an affiliate, entered into the pre-delivery payment (“PDP”) facility with Citibank, N.A., as facility agent, in December 2014 (as amended from time to time, the “PDP Financing Facility”). The PDP Financing Facility is collateralized by the Company’s purchase agreement for Airbus A320neo family aircraft deliveries (see Note 9) through the term of the facility, which extends
12


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

through December 2026. In August 2023, the PDP Financing Facility was amended and restated to expand the number of financial institution participants as lenders and increase the total available capacity to $365 million, among other things. The Company capitalized $2 million in deferred financing costs related to the amendment during the three months ended September 30, 2023, which reduced the carrying value of the loan on the Company’s condensed consolidated balance sheet. These costs will be amortized on a straight-line basis over the life of the facility.
Interest is paid every 90 days based on the Secured Overnight Financing Rate (“SOFR”) plus a margin for each individual tranche. The PDP Financing Facility consists of separate loans for each PDP aircraft. Each separate loan matures upon the earlier of (i) delivery of that aircraft to the Company by Airbus, (ii) the date one month following the last day of the scheduled delivery month of such aircraft and (iii) if there is a delay in delivery of aircraft, depending on the cause of the delivery delay, up to six months following the last day of the scheduled delivery month of such aircraft. The PDP Financing Facility will be repaid periodically according to the preceding sentence, with the PDP Financing Facility maturing in December 2026.
(b)Represents a note with a commercial bank related to the Company’s headquarters building. Under the terms of the note, the Company began repaying the outstanding principal balance with quarterly payments beginning in January 2022 and continuing until the maturity date in December 2023. On the maturity date, one final balloon payment will be made to cover all unpaid principal, accrued unpaid interest and other amounts due. The interest rate of one-month SOFR plus a margin is payable monthly.
(c)The Company entered into an agreement with Barclays in 2003 which, as amended, provides for joint marketing, grants certain benefits to Cardholders and allows Barclays to market using the Company’s customer database, through 2029. Cardholders earn mileage credits under the Frontier Miles program and the Company sells mileage credits at agreed-upon rates to Barclays and earns fees from Barclays for the acquisition, retention and use of the co-branded credit card by Cardholders. In addition, Barclays will pre-purchase miles if the Company so requests and meets certain conditions precedent. The pre-purchased miles facility amount available to the Company is to be reset on January 15 of each calendar year through, and including, January 15, 2028, based on the aggregate amount of fees payable by Barclays to the Company on a calendar year basis and subject to certain other conditions, up to an aggregate maximum facility amount of $200 million. The Company pays interest on a monthly basis, which is based on a one-month Effective Federal Funds Rate (“EFFR”) plus a margin. Beginning March 31, 2028, the facility is scheduled to be repaid in 12 equal monthly installments.
(d)As a result of the Company’s participation in the payroll support programs offered by the U.S. Department of the Treasury (the “Treasury”), the Company obtained a series of 10-year, low-interest loans from the Treasury (collectively, the “PSP Promissory Notes”) that are due between 2030 to 2031. The PSP Promissory Notes include an annual interest rate of 1.00% for the first five years and the SOFR plus 2.00% in the final five years, with bi-annual interest payments. The loans can be prepaid at par at any time without incurring a penalty.
In connection with the term loan facility entered into with the Treasury on September 28, 2020 (the “Treasury Loan”), which was repaid in full on February 2, 2022, and the PSP Promissory Notes, the Company issued to the Treasury warrants to purchase 3,117,940 shares of FGHI common stock at a weighted-average price of $6.95 per share. The Treasury has not exercised any warrants as of September 30, 2023.
Cash payments for interest related to debt were $20 million and $9 million for the nine months ended September 30, 2023 and 2022, respectively.
The Company has caused standby letters of credit and surety bonds to be issued to various airport authorities and vendors that are collateralized by a portion of the Company’s property and equipment and, as of September 30, 2023 and December 31, 2022, the Company did not have any outstanding letters of credit that were drawn upon.
As of September 30, 2023, future maturities of debt are payable as follows (in millions):
September 30, 2023
Remainder of 2023$55 
2024238 
202551 
2026— 
2027— 
Thereafter146 
Total debt principal payments$490 
The Company continues to monitor covenant compliance with various parties, including, but not limited to, its lenders and credit card processors, and as of September 30, 2023, the Company was in compliance with all of its covenants.
13


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

7. Operating Leases
The Company leases property and equipment under operating leases. For leases with initial terms greater than 12 months, the related operating lease right-of-use asset and corresponding operating lease liability are recorded at the present value of lease payments over the term on the Company’s condensed consolidated balance sheets. Some leases include rental escalation clauses, renewal options, termination options and/or other items that cause variability that are factored into the determination of lease payments, when appropriate. The Company does not separate lease and non-lease components of contracts, except for certain flight training equipment, for which consideration is allocated between lease and non-lease components.
Aircraft
As of September 30, 2023, the Company leased 134 aircraft with remaining terms ranging from 1 month to 12 years, all of which are under operating leases and are included within operating lease right-of-use assets and operating lease liabilities on the Company’s condensed consolidated balance sheets. In addition, as of September 30, 2023, the Company leased 38 spare engines which are all under operating leases, with the remaining term ranging from one month to 12 years. As of September 30, 2023, the lease rates for 18 of the engines depend on usage-based metrics which are variable and, as such, these leases are not recorded on the Company’s condensed consolidated balance sheets as operating lease right-of-use assets or as operating lease liabilities.
During the three and nine months ended September 30, 2023 and 2022, the Company executed sale-leaseback transactions with third-party lessors for three, seven, three and eight new Airbus A320neo family aircraft, respectively, and also entered into direct leases for five and ten new Airbus A320neo family aircraft during the three and nine months ended September 30, 2023, respectively. The Company did not enter into any direct leases during the three and nine months ended September 30, 2022. Additionally, the Company completed sale-leaseback transactions for one and three engines during the three and nine months ended September 30, 2023 and 2022, respectively. All of the leases from the sale-leaseback transactions are accounted for as operating leases. The Company recognized sale-leaseback gain transactions of $40 million, $97 million, $21 million and $49 million during the three and nine months ended September 30, 2023 and 2022, respectively, which are included as a component of other operating expenses within the Company’s condensed consolidated statements of operations.
Aircraft Rent Expense and Maintenance Obligations
During the three and nine months ended September 30, 2023 and 2022, aircraft rent expense was $150 million, $429 million, $140 million and $401 million respectively. Aircraft rent expense includes supplemental rent, which is made up of maintenance reserves paid or to be paid that are not probable of being reimbursed and probable lease return condition obligations. Supplemental rent expense (benefit) for maintenance-related reserves that were deemed non-recoverable, and any impact from changes in those estimates, was less than $1 million and $(2) million for the three and nine months ended September 30, 2023, respectively, and less than $1 million and $(1) million for the three and nine months ended September 30, 2022, respectively. The portion of supplemental rent expense related to probable lease return condition obligations was $13 million, $37 million, $23 million and $56 million for the three and nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023 and December 31, 2022, the Company’s total leased aircraft return cost liability was $62 million and $102 million, respectively, which are reflected in other current liabilities and other long-term liabilities within the Company’s condensed consolidated balance sheets.
Additionally, certain of the Company’s aircraft lease agreements require the Company to pay maintenance reserves to aircraft lessors to be held as collateral in advance of the Company’s required performance of major maintenance activities. As of September 30, 2023 and December 31, 2022, the Company had aircraft maintenance deposits that are expected to be recoverable of $109 million and $117 million, respectively, on the Company’s condensed consolidated balance sheets, of which $22 million and $12 million, respectively, are included in accounts receivable, net on the Company’s condensed consolidated balance sheets as the eligible maintenance has been
14


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

performed. The remaining $87 million and $105 million are included within aircraft maintenance deposits on the Company’s condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively.
A majority of these maintenance reserve payments are calculated based on a utilization measure, such as flight hours or cycles. Maintenance reserves collateralize the lessor for maintenance time run off the aircraft until the completion of the maintenance of the aircraft. As of September 30, 2023, fixed maintenance reserve payments for aircraft and spare engines, including estimated amounts for contractual price escalations, were expected to be $1 million for the remainder of 2023, $3 million per year for 2024 through 2026, $4 million per year for 2027 and 2028, and $1 million thereafter, before consideration of reimbursements.
In March 2023, the Company extended the term for certain aircraft operating leases that were slated to expire in the fourth quarter of 2023. As a result, for the nine months ended September 30, 2023, the Company recorded an $18 million benefit to aircraft rent in the Company’s condensed consolidated statement of operations related to previously accrued lease return costs that were variable in nature and associated with the anticipated utilization and condition of the airframes and engines at the original return date. Given the extension of these aircraft operating leases, such variable return costs are no longer probable of occurring.
Airport Facilities
The Company’s facility leases are primarily for space at approximately 90 airports that are primarily located in the United States. These leases are classified as operating leases and reflect the use of airport terminals, ticket counters, office space and maintenance facilities. Generally, this space is leased from government agencies that control the use of the airport. The majority of these leases are short-term in nature and renew on an evergreen basis. For these leases, the contractual term is used as the lease term. As of September 30, 2023, the remaining lease terms vary from one month to 11 years. At the majority of the U.S. airports, the lease rates depend on airport operating costs or use of the facilities and are reset at least annually, and because of the variable nature of the rates, these leases are not recorded on the Company’s condensed consolidated balance sheets as right-of-use assets and lease liabilities.
Other Ground Property and Equipment
The Company leases certain other assets such as flight training equipment, building space and various other equipment. Certain of the Company’s leases for other assets are deemed to contain fixed rental payments and, as such, are classified as operating leases and are recorded on the Company’s condensed consolidated balance sheets as a right-of-use asset and liability. The remaining lease terms ranged from one month to eight years as of September 30, 2023.
15


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

Lease Costs
The table below presents certain information related to lease costs for operating leases during the three and nine months ended September 30, 2023 and 2022 (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Operating lease cost(a)
$138 $121 $396 $356 
Variable lease cost(a)
85 50 229 169 
Total lease costs$223 $171 $625 $525 
_________________
(a)    Expenses are included within aircraft rent, station operations, maintenance, materials and repairs and other operating within the Company’s condensed consolidated statements of operations.
During the three and nine months ended September 30, 2023 and 2022, the Company acquired, through new or modified operating leases, operating lease assets totaling $283 million, $621 million, $96 million and $244 million, respectively, which are included in operating lease right-of-use assets on the Company’s condensed consolidated balance sheets. During the three and nine months ended September 30, 2023 and 2022, the Company paid cash of $137 million, $394 million, $107 million and $343 million, respectively, for amounts included in the measurement of lease liabilities.
8. Stock-Based Compensation
During the three and nine months ended September 30, 2023 and 2022, the Company recognized $3 million, $10 million, $4 million and $11 million, respectively, in stock-based compensation expense, which is included as a component of salaries, wages and benefits within the Company’s condensed consolidated statements of operations.
Stock Options and Restricted Awards
There were no stock options granted during the nine months ended September 30, 2023. During the nine months ended September 30, 2023, 2,415,537 vested stock options were exercised with a weighted-average exercise price of $0.31 per share. As of September 30, 2023, the weighted-average exercise price of outstanding options was $2.74 per share.
During the nine months ended September 30, 2023, 1,593,826 restricted stock units were issued with a weighted-average grant date fair value of $11.71 per share. During the nine months ended September 30, 2023, 1,190,478 restricted stock units vested, of which 427,618 restricted stock units were withheld to cover employees’ tax withholding obligations, with a weighted-average grant date fair value of $11.86 and $12.28 per share, respectively.
Phantom Equity Awards
On December 3, 2013, to give effect to the reorganization of the Company’s corporate structure, an agreement was reached to amend and restate a phantom equity agreement with the Company’s pilots. Under the terms of this agreement, when an amendment to the underlying collective bargaining agreement was approved, the Company’s pilots employed in June 2011 (the “Participating Pilots”), through their agent, FAPAInvest, LLC, received phantom equity units. Each unit represented the right to receive common stock or cash in connection with certain events, including a qualifying initial public offering, such stock to be distributed or cash paid to the Participating Pilots in 2020 and 2022 based on a predetermined formula. In accordance with the amended and restated phantom equity agreement, the obligation became fixed as of December 31, 2019 and was no longer subject to valuation adjustments. As of December 31, 2021, the remaining liability was $26 million and presented within other current
16


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

liabilities on the Company’s condensed consolidated balance sheet. During the nine months ended September 30, 2022, the $26 million was fully paid.
Stockholders’ Equity
As of September 30, 2023 and December 31, 2022, the Company had authorized common stock (voting), common stock (non-voting) and preferred stock of 750,000,000, 150,000,000 and 10,000,000 shares, respectively, of which only common stock (voting) were issued and outstanding. All classes of equity have a par value of $0.001 per share.
9. Commitments and Contingencies
Flight Equipment Commitments
As of September 30, 2023, the Company’s firm aircraft and engine purchase orders consisted of the following:
A320neoA321neo
Total
Aircraft(a)
Engines
Year Ending
Remainder of 2023— 4 4 1 
2024— 23 23 2 
202517 25 42 4 
202619 22 41 4 
202721 21 42 3 
Thereafter10 52 62 2 
Total67 147 214 16 
__________________
(a)    While the schedule presented reflects the contractual delivery dates as of September 30, 2023, the Company has recently experienced delays in the deliveries of Airbus aircraft which may persist in future periods.
The Company is party to certain aircraft purchase agreements with Airbus (as amended from time to time, the “Airbus Purchase Agreements”) pursuant to which, as of September 30, 2023, the Company had commitments to purchase an aggregate of 67 A320neo and 147 A321neo aircraft, with deliveries expected through 2029 per the latest delivery schedule. The Company has the option to convert 18 A320neo family aircraft to A321XLR family aircraft under certain terms and conditions. Since the option has not been exercised, this conversion right is not reflected in the table above.
The Airbus Purchase Agreements also provide for, among other things, varying purchase incentives for each aircraft type (e.g., A320neo versus A321neo), which are allocated proportionally by aircraft type over the remaining aircraft to be delivered so that each aircraft’s capitalized cost upon induction would be equal. Therefore, as cash paid for deliveries is greater than the capitalized cost due to the allocation of these purchase incentives, a deferred purchase incentive is recognized within other assets on the Company’s condensed consolidated balance sheets, which will ultimately be offset by future deliveries of aircraft with lower cash payments than their associated capitalized cost.
17


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

As of September 30, 2023, purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and PDPs, consisted of the following (in millions):
Total
Year Ending
Remainder of 2023$243 
20241,389 
20252,500 
20262,357 
20272,447 
Thereafter3,757 
Total$12,693 
Litigation and Other Contingencies
The Company is subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. The Company regularly evaluates the status of such matters to assess whether a loss is probable and reasonably estimable in determining whether an accrual is appropriate. Furthermore, in determining whether disclosure is appropriate, the Company evaluates each matter to assess if there is at least a reasonable possibility that a loss or additional losses may have been incurred and whether an estimate of possible loss or range of loss can be made. The Company believes the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on its condensed consolidated financial position, liquidity or results of operations and that the Company’s current accruals cover matters where loss is deemed probable and can be reasonably estimated.
The ultimate outcome of legal actions is unpredictable and can be subject to significant uncertainties, and it is difficult to determine whether any loss is probable or even possible. Additionally, it is also difficult to estimate the amount of loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Thus, actual losses may be in excess of any recorded liability or the range of reasonably possible loss.
Employees
The Company has seven union-represented employee groups that together represented approximately 86% of all employees as of September 30, 2023. The table below sets forth the Company’s employee groups and status of the collective bargaining agreements as of September 30, 2023:
Percentage of Workforce
Employee GroupRepresentative
Amendable Date(a)
September 30, 2023
PilotsAir Line Pilots Association (ALPA)January 202430%
Flight AttendantsAssociation of Flight Attendants (AFA-CWA)May 2024 48%
Aircraft TechniciansInternational Brotherhood of Teamsters (IBT)
May 2025
5%
Aircraft Appearance AgentsIBTOctober 20231%
DispatchersTransport Workers Union (TWU)
August 2028(b)
1%
Material SpecialistsIBT
March 2022(c)
<1%
Maintenance ControllersIBTOctober 2023
<1%
__________________
(a)    Subject to standard early opener provisions.
(b)    On August 4, 2023, the Company finalized a collective bargaining agreement with its dispatchers, represented by TWU, which will be amendable in August 2028.
18


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

(c)    The Company’s collective bargaining agreement with its material specialists, represented by IBT, was still amendable as of September 30, 2023 and negotiations are ongoing; however, the agreement is operating under its current arrangement until an amendment has been reached.
The Company is self-insured for health care claims, subject to a stop-loss policy, for eligible participating employees and qualified dependent medical and dental claims, subject to deductibles and limitations. The Company’s liabilities for claims incurred but not reported are determined based on an estimate of the ultimate aggregate liability for claims incurred. The estimate is calculated from actual claim rates and adjusted periodically as necessary. The Company had accrued $5 million for health care claims estimated to be incurred but not yet paid, as of September 30, 2023 and December 31, 2022, which are included as a component of other current liabilities on the Company’s condensed consolidated balance sheets.
General Indemnifications
The Company has various leases with respect to real property as well as various agreements among airlines relating to fuel consortia or fuel farms at airports. Under some of these contracts, the Company is party to joint and several liability regarding environmental damages. Under others, where the Company is a member of an LLC or other entity that contracts directly with the airport operator, liabilities are borne through the fuel consortia structure.
The Company’s aircraft, services, equipment lease and sale and financing agreements typically contain provisions requiring the Company, as the lessee, obligor or recipient of services, to indemnify the other parties to those agreements, including certain of those parties’ related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or such other equipment. The Company believes that its insurance would cover most of its exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft, services, equipment lease and sale and financing agreements described above.
Certain of the Company’s aircraft and other financing transactions include provisions that require payments to preserve an expected economic return to the lenders if that economic return is diminished due to certain changes in law or regulations. In certain of these financing transactions and other agreements, the Company also bears the risk of certain changes in tax laws that would subject payments to non-U.S. entities to withholding taxes.
Certain of these indemnities survive the length of the related financing or lease. The Company cannot reasonably estimate the potential future payments under the indemnities and related provisions described above because it cannot predict (i) when and under what circumstances these provisions may be triggered, and (ii) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time.
10. Net Earnings (Loss) per Share
Basic and diluted earnings (loss) per share are computed pursuant to the two-class method. Under the two-class method, the Company attributes net income to common stock and other participating rights (including those with vested share-based awards). Basic net earnings per share is calculated by taking net income, less earnings allocated to participating rights, divided by the basic weighted-average common stock outstanding. Net loss per share is calculated by taking net loss divided by basic weighted-average common stock outstanding as participating rights do not share in losses. In accordance with the two-class method, diluted net earnings per share is calculated using the more dilutive impact of the treasury-stock method or from reducing net income for the earnings allocated to participating rights.
19


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

The following table sets forth the computation of net earnings (loss) per share on a basic and diluted basis pursuant to the two-class method for the periods indicated (in millions, except for share and per share amounts):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Basic:
Net income (loss)$(32)$31 $26 $(77)
Less: net income attributable to participating rights— (1)— — 
Net income (loss) attributable to common stockholders$(32)$30 $26 $(77)
Weighted-average common shares outstanding, basic220,837,983 217,720,426 219,483,736 217,532,815 
Net earnings (loss) per share, basic$(0.14)$0.13 $0.12 $(0.36)
Diluted:
Net income (loss)$(32)$31 $26 $(77)
Less: net income attributable to participating rights— (1)— — 
Net income (loss) attributable to common stockholders$(32)$30 $26 $(77)
Weighted-average common shares outstanding, basic220,837,983 217,720,426 219,483,736 217,532,815 
Effect of dilutive potential common shares— 2,158,514 1,155,147 — 
Weighted-average common shares outstanding, diluted220,837,983 219,878,940 220,638,883 217,532,815 
Net earnings (loss) per share, diluted$(0.14)$0.13 $0.12 $(0.36)
Approximately 2,128,892 and 208,041 shares were excluded from the computation of diluted shares for the nine months ended September 30, 2023 and three months ended September 30, 2022, respectively, due to antidilutive effects. Due to the net loss incurred during the three months ended September 30, 2023 and nine months ended September 30, 2022, respectively, diluted weighted-average shares outstanding are equal to basic weighted-average shares outstanding because the effect of all equity awards is anti-dilutive.
11. Fair Value Measurements
Under ASC 820, Fair Value Measurements and Disclosures, disclosures relating to how fair value is determined for assets and liabilities are required, and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs, as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes several valuation techniques in order to assess the fair value of its financial assets and liabilities.
20


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash are comprised of liquid money market funds, time deposits and cash, and are categorized as Level 1 instruments. The Company maintains cash with various high-quality financial institutions and holds restricted cash to secure medical claims paid. Cash, cash equivalents and restricted cash are carried at cost, which management believes approximates fair value. As of September 30, 2023 and December 31, 2022, the Company had less than $1 million of restricted cash.
Interest Rate Derivative Contracts
Interest rate derivative contracts are valued under an income approach based on data either readily observable in public markets, derived from public markets or provided by counterparties who regularly trade in public markets and, therefore, they are classified as Level 2 inputs. Given the swaptions will be cash-settled upon exercise and that the market value will be determined using overnight indexed swap (“OIS”) discounting, OIS discounting is applied to the income approach valuation.
Debt
The estimated fair value of the Company’s debt agreements has been determined to be Level 3 measurement, as certain inputs used to determine the fair value of these agreements are unobservable. The Company utilizes a discounted cash flow method to estimate the fair value of the Level 3 debt.
The carrying amounts and estimated fair values of the Company’s debt are as follows (in millions):
September 30, 2023December 31, 2022
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Secured debt:
PDP Financing Facility$328 $332 $277 $277 
Floating rate building note16 17 17 17 
Unsecured debt:
Affinity card advance purchase of mileage credits80 75 71 66 
PSP Promissory Notes66 54 66 52 
Total debt$490 $478 $431 $412 
21


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

The tables below present disclosures about the fair value of assets and liabilities measured at fair value on a recurring basis on the Company’s condensed consolidated balance sheets (in millions):
Fair Value Measurements as of September 30, 2023
DescriptionBalance Sheet ClassificationTotalLevel 1Level 2Level 3
Cash and cash equivalentsCash and cash equivalents$640 $640 $— $— 
Interest rate derivative contractsOther current assets$8 $— $8 $— 
Fair Value Measurements as of December 31, 2022
DescriptionBalance Sheet ClassificationTotalLevel 1Level 2Level 3
Cash and cash equivalentsCash and cash equivalents$761 $761 $— $— 
Interest rate derivative contractsOther current assets$24 $— $24 $— 
The Company had no transfers of assets or liabilities between fair value hierarchy levels between December 31, 2022 and September 30, 2023.
12. Related Parties
Management Services
Indigo Partners LLC (“Indigo Partners”) manages an investment fund that is the controlling stockholder of the Company. The Company is assessed a quarterly fee by Indigo Partners for management services. The Company recorded less than $1 million for each of the three months ended September 30, 2023 and 2022 and $1 million for each of the nine months ended September 30, 2023 and 2022 for these fees, which are included as other operating expenses within the Company’s condensed consolidated statements of operations.
Codeshare Arrangement
The Company entered into a codeshare agreement with Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (an airline based in Mexico doing business as “Volaris”) during 2018. Two of the Company’s directors are members of the board of directors of Volaris and one is an alternate director. As of September 30, 2023, Indigo Partners holds approximately 18% of the total outstanding common stock of Volaris.
In August 2018, the Company and Volaris began operating scheduled codeshare flights. Each party bears its own costs and expenses of performance under the codeshare agreement. The codeshare agreement is subject to automatic renewals and may be terminated by either party at any time upon the satisfaction of certain conditions.
13. The Proposed Merger with Spirit Airlines, Inc. (“Spirit”)
On February 5, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Top Gun Acquisition Corp. (“Merger Sub”), a direct wholly-owned subsidiary of the Company, and Spirit. The Merger Agreement provided that, among other things, the Merger Sub would be merged with and into Spirit (the “Merger”), with Spirit surviving the Merger and continuing as a wholly-owned subsidiary of the Company. On July 27, 2022, the Company and Spirit mutually terminated the Merger Agreement.
The Company recorded less than $1 million and $1 million in expenses related to the proposed Merger within transaction and merger-related costs, net in the Company’s condensed consolidated statement of operations during the three and nine months ended September 30, 2023, respectively, which included merger-related retention bonus expense for all eligible employees who were subject to CARES Act compensation restrictions. During the three and nine months ended September 30, 2022, the Company recorded $13 million and $33 million, respectively, of
22


FRONTIER GROUP HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)

expenses related to the proposed Merger within transaction and merger-related costs, net in the Company’s condensed consolidated statement of operations. These costs included $9 million and $17 million, respectively, of retention bonus expenses, and $4 million and $16 million, respectively, related to transaction costs, which include banking, legal and accounting fees, among others, charged in connection with the Merger. During the three and nine months ended September 30, 2022, the Company received $25 million from Spirit for reimbursement of incurred merger-related expenses in accordance with the termination provisions set forth in the Merger Agreement, which was recorded in transaction and merger-related costs, net, resulting in net transaction and merger-related costs (credits) of $(12) million and $8 million, respectively.
The Merger Agreement provides that in the event that Spirit, within twelve months following the termination of the Merger Agreement, consummates an acquisition with another acquiror or enters into a definitive written agreement providing for an acquisition with another acquiror, which is ultimately consummated, the Company will be owed an additional $69 million. Although Spirit entered into a definitive written agreement providing for an acquisition with another acquiror within this 12 month period ending July 27, 2023, the acquisition has not been consummated as of September 30, 2023.
23

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 8. “Financial Statements and Supplementary Data” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 22, 2023 (the “2022 Annual Report”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” section of our 2022 Annual Report and other factors set forth in other parts of this Quarterly Report on Form 10-Q and our other reports and documents filed with the SEC.
Overview
Frontier Airlines, Inc. (“Frontier”) is an ultra low-cost carrier whose business strategy is focused on Low Fares Done Right. We are headquartered in Denver, Colorado and offer flights throughout the United States and to select international destinations in the Americas. Our unique strategy is underpinned by our low-cost structure and superior low-fare brand.
The following table provides select financial and operational information for the three and nine months ended September 30, 2023 and 2022, respectively (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Total operating revenues$883 $906 $2,698 $2,420 
Total operating expenses$937 $850 $2,698 $2,510 
Income (loss) before income taxes$(45)$58 $26 $(95)
Available seat miles (“ASMs”)9,697 8,040 27,809 23,076 
Total operating revenues for the three months ended September 30, 2023 totaled $883 million, a decrease of 3% compared to the three months ended September 30, 2022. This was primarily due to a 19% decline in RASM driven by a decrease in fare revenue per passenger and a decrease in load factor, as compared to the corresponding periods in 2022, partially offset by an increase in capacity, as measured by ASMs.
Total operating revenues for the nine months ended September 30, 2023 totaled $2,698 million, an increase of 11% compared to the nine months ended September 30, 2022. This was primarily due to an increase in capacity, as measured by ASMs, which was partially offset by an 8% decline in RASM due mainly to a 6% decline in total revenue per passenger.
Total operating expenses during the three months ended September 30, 2023 totaled $937 million, resulting in a cost per available seat mile (“CASM”) of 9.66¢, compared to 10.57¢ for the three months ended September 30, 2022. Fuel expense was 5% lower during the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. The $15 million decrease in fuel expense for the three months ended September 30, 2023, compared to the corresponding periods in 2022, was primarily driven by a 20% decrease in fuel prices, partially offset by the 19% increase in fuel gallons consumed during the three months ended September 30, 2023. Our non-fuel expenses increased by 19% during the three months ended September 30, 2023, as compared to the corresponding prior year period, driven primarily by higher capacity and a larger fleet size and the resulting increase in operations during these same periods, partially offset by increased sale-leaseback gains. Additionally, a $12 million net credit related to the transaction and merger-related costs was recognized during the three months ended
24

September 30, 2022. While non-fuel expenses increased, CASM (excluding fuel), a non-GAAP measure, decreased 1% for the three months ended September 30, 2023 to 6.66¢ on 21% capacity growth largely due to increased sale-leaseback gains and the fixed nature of aircraft rent as well as lower sales and marketing costs which were partly offset by increases in airport costs. Also, the 2022 period benefited from the $12 million net credit related to transaction and merger-related costs.
Total operating expenses during the nine months ended September 30, 2023 totaled $2,698 million, resulting in a CASM of 9.70¢, compared to 10.88¢ for the nine months ended September 30, 2022. Fuel expense was 3% lower during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022. The $29 million decrease in fuel expense for the nine months ended September 30, 2023, compared to the corresponding periods in 2022, is primarily driven by an 18% decrease in fuel prices, partially offset by the 18% increase in fuel gallons consumed during the nine months ended September 30, 2023, as a result of our 21% increase in capacity. Our non-fuel expenses increased by 13% during the nine months ended September 30, 2023, as compared to the corresponding prior year period, driven primarily by a larger fleet size and the increase to capacity during these same periods, partially offset by an increase in sale-leaseback gains in the current period, lower lease return costs and lower transaction and merger-related costs. CASM (excluding fuel), a non-GAAP measure, decreased 6% for the nine months ended September 30, 2023 to 6.73¢, as compared to the corresponding period in 2022, as a result of the fixed nature of aircraft rent expense in connection with the aforementioned growth in capacity and other factors mentioned above.
Adjusted (non-GAAP) CASM (excluding fuel) decreased from 6.90¢ for the three months ended September 30, 2022 to 6.66¢ for the three months ended September 30, 2023. For the three months ended September 30, 2022, this excludes the impact of the $12 million credit from net transaction and merger-related costs and $1 million in collective bargaining contract ratification costs. There were no adjustments for the three months ended September 30, 2023. For the reconciliation to corresponding GAAP measures, see “Results of Operations—Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest.”
Adjusted (non-GAAP) CASM (excluding fuel) decreased from 7.09¢ for the nine months ended September 30, 2022 to 6.72¢ for the nine months ended September 30, 2023. For the nine months ended September 30, 2023, this excludes the impact of $1 million in net transaction and merger-related costs, and for the nine months ended September 30, 2022, this excludes the impact of $8 million in net transaction and merger-related costs, $7 million in asset impairment charges, and $2 million in collective bargaining contract ratification costs. For the reconciliation to corresponding GAAP measures, see “Results of Operations—Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest.”
We generated a net loss of $32 million during the three months ended September 30, 2023, compared to net income of $31 million for the three months ended September 30, 2022. Considering these aforementioned non-GAAP adjustments and the related tax impacts, our adjusted (non-GAAP) net loss was $32 million for the three months ended September 30, 2023, as compared to an adjusted (non-GAAP) net income of $33 million for the three months ended September 30, 2022. For the reconciliation to corresponding GAAP measures, see “Results of Operations—Reconciliation of Pre-Tax Income (Loss) to Adjusted Pre-Tax Income (Loss), Net Income (Loss) to Adjusted Net Income (Loss) and to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR.”
We generated net income of $26 million during the nine months ended September 30, 2023, compared to a net loss of $77 million for the nine months ended September 30, 2022. Considering the aforementioned non-GAAP operating adjustments along with the $7 million non-operating write-off of deferred financing costs during the nine months ended September 30, 2022 due to the repayment of the CARES Act loan and the related tax impacts of these adjustments, our adjusted (non-GAAP) net income was $27 million for the nine months ended September 30, 2023, as compared to an adjusted (non-GAAP) net loss of $56 million for the nine months ended September 30, 2022. For the reconciliation to corresponding GAAP measures, see “Results of Operations—Reconciliation of Pre-Tax Income (Loss) to Adjusted Pre-Tax Income (Loss), Net Income (Loss) to Adjusted Net Income (Loss) and to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR.”
25

As of September 30, 2023, our total available liquidity was $640 million, made up of cash and cash equivalents. On February 2, 2022, we repaid the $150 million outstanding under our term loan facility (the “Treasury Loan”) with the U.S. Department of the Treasury (the “Treasury”). The repayment of this loan unencumbered our co-branded credit card program and related brand assets that secured the Treasury Loan obligation.
Results of Operations
Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022
Operating Revenues
Three Months Ended September 30,Change
20232022
Operating revenues ($ in millions):
Passenger$862 $883 $(21)(2)%
Other21 23 (2)(9)%
Total operating revenues$883 $906 $(23)(3)%
Operating statistics:
ASMs (millions)9,6978,0401,65721 %
Revenue passenger miles (“RPMs”) (millions)7,7556,6351,12017 %
Average stage length (miles)996974222 %
Load factor80.0 %82.5 %(2.5) ptsN/A
Total revenue per ASM (“RASM”) (¢)9.1011.27(2.17)(19)%
Total ancillary revenue per passenger ($)75.5477.63(2.09)(3)%
Total revenue per passenger ($)114.71135.20(20.49)(15)%
Passengers (thousands)7,6976,70499315 %
Total operating revenue decreased $23 million, or 3%, during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, as we experienced lower domestic fares, partially offset by increased capacity. Revenue was unfavorably impacted by the 19% decline in RASM due to the 15% decline in total revenue per passenger, which was mainly caused by a reduction in fare revenue per passenger and a decrease in load factor during the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. Revenue was favorably impacted by a 21% capacity growth, as measured by ASMs, during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, driven by a 14% increase in average aircraft in service during the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, as well as a 2% increase in average daily aircraft utilization to 11.3 hours per day for the three months ended September 30, 2023, as compared to the 11.1 hours per day for the corresponding prior year period.
26

Operating Expenses
Three Months Ended September 30,ChangeCost per ASM Change
2023202220232022
Operating expenses ($ in millions):(a)
Aircraft fuel$291 $306 $(15)(5)%3.00  ¢3.81  ¢(21)%
Salaries, wages and benefits 221 182 39 21 %2.28 2.26 1 %
Aircraft rent150 140 10 7 %1.55 1.74 (11)%
Station operations133 101 32 32 %1.37 1.26 9 %
Sales and marketing41 42 (1)(2)%0.42 0.52 (19)%
Maintenance, materials and repairs48 42 6 14 %0.49 0.52 (6)%
Depreciation and amortization 13 8 5 63 %0.13 0.10 30 %
Transaction and merger-related costs, net— (12)12 N/M— (0.15)N/M
Other operating expenses40 41 (1)(2)%0.42 0.51 (18)%
Total operating expenses $937 $850 $87 10 %9.66 ¢10.57 ¢(9)%
Operating statistics:
ASMs (millions) 9,697 8,040 1,657 21 %
Average stage length (miles) 996 974 22 2 %
Passengers (thousands)7,697 6,704 993 15 %
Departures 48,627 42,627 6,000 14 %
CASM (excluding fuel) (¢) (b)
6.66 6.76 (0.10)(1)%
Adjusted CASM (excluding fuel) (¢) (b)
6.66 6.90 (0.24)(3)%
Fuel cost per gallon ($)3.08 3.85 (0.77)(20)%
Fuel gallons consumed (thousands) 94,45979,56614,89319 %
__________________
N/M = Not meaningful
(a)Cost per ASM figures may not recalculate due to rounding.
(b)These metrics are not calculated in accordance with GAAP. See the reconciliation to corresponding GAAP measures provided below.
27

Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest
Three Months Ended September 30,
20232022
($ in millions)Per ASM (¢)($ in millions)Per ASM (¢)
Non-GAAP financial data:(a)
CASM9.66 10.57 
Aircraft fuel(291)(3.00)(306)(3.81)
CASM (excluding fuel)(b)
6.66 6.76 
Transaction and merger-related costs, net(c)
— — 12 0.15 
Collective bargaining contract ratification(d)
— — (1)(0.01)
Adjusted CASM (excluding fuel)(b)
6.66 6.90 
Aircraft fuel291 3.00 306 3.81 
Adjusted CASM(e)
9.66 10.71 
Net interest expense (income)(9)(0.10)(2)(0.03)
Adjusted CASM + net interest(f)
9.56 10.68 
CASM9.66 10.57 
Net interest expense (income)(9)(0.10)(2)(0.02)
CASM + net interest(f)
9.56 10.55 
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(a)Cost per ASM figures may not recalculate due to rounding.
(b)CASM (excluding fuel) and Adjusted CASM (excluding fuel) are included as supplemental disclosures because we believe that excluding aircraft fuel is useful to investors as it provides an additional measure of management’s performance excluding the effects of a significant cost item over which management has limited influence. The price of fuel, over which we have limited control, impacts the comparability of period-to-period financial performance, and excluding the price of fuel allows management an additional tool to understand and analyze our non-fuel costs and core operating performance, and increases comparability with other airlines that also provide a similar metric. CASM (excluding fuel) and Adjusted CASM (excluding fuel) are not determined in accordance with GAAP and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
(c)Represents $25 million received from Spirit for the reimbursement of incurred Merger-related expenses, partially offset by $9 million in employee retention costs and $4 million in transaction costs, including banking, legal and accounting fees, incurred in connection with the terminated Merger with Spirit.
(d)Represents $1 million of costs related to the collective bargaining contract ratification costs earned through May 2023 and committed to by us as part of an agreement with the union representing our aircraft technicians that was ratified and became effective in May 2022.
(e)Adjusted CASM is included as supplemental disclosure because we believe it is a useful metric to properly compare our cost management and performance to other peers, as derivations of Adjusted CASM are well-recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in the airline industry. Additionally, we believe this metric is useful because it removes certain items that may not be indicative of base operating performance or future results. Adjusted CASM is not determined in accordance with GAAP, may not be comparable across all carriers and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
(f)Adjusted CASM including net interest and CASM including net interest are included as supplemental disclosures because we believe they are useful metrics to properly compare our