Frontier turns a profit as Spirit's collapse lifts its fares

Frontier Airlines reported adjusted net income of $40mn, or $0.18 a share, for the third quarter on October 28, against a loss of $0.34 a share a year earlier, as record revenue of $1.36bn rose 53 per cent. Chief executive Jimmy Dempsey said the result was "meaningfully above the Company's guidance and Wall Street estimates", despite fuel averaging $0.26 a gallon more than Frontier had assumed.

The airline still reported a net loss of $104mn, or $0.45 a share, under standard accounting, because of $144mn of special items, almost all of them the $134mn cost of handing back 13 Airbus A320neos early under a second lease return agreement. Excluding those items, its pre-tax margin was 2.9 per cent, compared with minus 8.6 per cent a year earlier.

Unit revenue explains the turnaround, with revenue per available seat mile up 30 per cent to 11.87 cents on capacity that grew 18 per cent. Dempsey attributed the increase in roughly equal parts to better revenue management, the disappearance of Spirit Airlines, which ceased operations in May, and the higher fares that have followed fuel prices.

Frontier says about 30 per cent of its network overlapped with Spirit's earlier this year, and that it has backfilled about a quarter of the capacity Spirit left behind, or about half including other airlines. Management says it will choose routes by profitability rather than replace all of the lost seats, which helps explain why fares have held even as Frontier grew.

Fuel remains the main threat to that progress, since Frontier paid an average of $3.96 a gallon in the third quarter, 56 per cent more than a year earlier, adding about $150mn to costs. It expects about $4.75 in the fourth quarter, close to United's $4.80 and above Southwest's $4.55.

The fourth quarter guidance reflects that pressure, with adjusted earnings of between a loss of $0.15 a share and a profit of $0.05, on capacity up 5–6 per cent and unit revenue more than 20 per cent higher. Dempsey said he expects capacity growth of about 5–7 per cent in 2027.

The balance sheet has improved alongside the results, with liquidity of $1.18bn at September 30 and leverage down to just over four times adjusted earnings before interest, tax, depreciation, amortisation and rent, from seven times at the end of 2025. Frontier is also moving upmarket, with first class seats due on sale towards the end of the first quarter of 2027, Starlink wifi from the same quarter and its UpFront Plus extra-legroom seats already about 80 per cent sold on a paid basis.

Frontier's position contrasts with that of JetBlue, which lost $257mn in the third quarter while expanding by more than 65 per cent at Fort Lauderdale, Spirit's former base. The two airlines are competing for passengers Spirit left behind, and so far only Frontier has reached an adjusted profit.

What to watch: whether Frontier stays profitable in the fourth quarter at fuel near $4.75 a gallon, the effect of first class on unit revenue from early 2027, and how much more of Spirit's former capacity it chooses to replace.