Frontier Group Holdings, Inc. · NASDAQ:ULCC
Frontier — Investor Day (November 2022)
57 slides from Frontier's investor day presentation, Nov 15, 2022
Slide 1: Investor Day
Investor Day NOVEMBER 15, 2022
Slide 2: Welcome and Safe Harbor
Welcome and Safe Harbor DAVID ERDMAN SR. DIRECTOR, INVESTOR RELATIONS 2
Slide 3: Agenda
Agenda 9:00 – 10:45am ET Welcome & Safe Harbor David Erdman Sr. Director, Investor Relations Opening Remarks & Company Overview Barry Biffle President & CEO Finance and Fleet Jimmy Dempsey EVP & CFO Commercial Daniel Shurz SVP, Commercial Marketing Tyri Squyres VP, Marketing Operations Trevor Stedke
Slide 4: Disclaimer
Disclaimer This presentation (including the accompanying oral presentation) is being delivered on behalf of Frontier Group Holdings, Inc. ("Frontier") ("we", "our", "us", or the "Company"). Before you invest, you should read the documents that the Company has filed with the Securities and Exchange C
Slide 5: Disclaimer
Disclaimer Cautionary Statement Regarding Forward-Looking Statements and Information (continued) Actual results could differ materially from these forward-looking statements due to numerous factors including, without limitation, the following: the potential future impacts of the COVID-19 pandemic, i
Slide 6: Company Overview
Company Overview BARRY BIFFLE PRESIDENT & CEO 6
Slide 7: Video Presentation
Video Presentation COMPANY OVERVIEW 7
Slide 8: Frontier is Best Poised To Exploit Leisure Travel Boom
Frontier is Best Constrained industry Global ancillary leader; Poised To capacity presents growth opportunity continuous pipeline of growth Exploit Leisure Travel Boom A321neo orderbook Lowest total cost: captures opportunity structural advantage widens Robust pilot recruiting Lowest total cost + an
Slide 9: Frontier Has a Proven, High-Quality Leadership Team and Strong Financial Partner
Frontier Has a Proven, High-Quality Leadership Team and Strong Financial Partner Barry Biffle Jimmy Dempsey Howard Diamond Steve Schuller Brad Lambert President & CEO EVP, Chief Financial Officer SVP, General Counsel VP, Human Resources VP, Flight Operations 28 years industry exp 20 years industry e
Slide 10: Finance & Fleet
Finance & Fleet JIMMY DEMPSEY EVP & CFO 10
Slide 11: Frontier Has a Substantial Total Cost Advantage
Frontier Has a Substantial Total Cost Advantage Our cost advantage over the industry average is equivalent to ~$65/passenger today Pre-Pandemic Unit Costs 3Q 2022 Unit Costs Total Adj. CASM, 3Q 2019 (cents) Total Adj. CASM, 3Q 2022 (cents) Stage length adjusted to 1,000 miles Stage length adjusted t
Slide 12: Fleet Plan Drives Higher Gauge and Lower Fuel Burn per ASM
Fleet Plan Drives Higher Gauge and Lower 223 Fuel Burn per ASM seats 68% A321 Gauge 196 seats (seats / ac) 22% 114 % A321 A321 ASMs / gal 100% NEO Fuel efficiency 102 ASMs / gal (ASMs / gal) 272 261 73% 233 % NEO NEO 208 187 165 145 121 Expected aircraft at year-end, net of planned returns 2022 2023
Slide 13: Clear Path to a Meaningful Reduction in Adjusted CASM-ex in 2023
Clear Path to a Meaningful Reduction in Adjusted CASM-ex in 2023 Key Assumptions Significant unit cost benefits achieved from return to normal stage and utilization, A321neo and fundamental business shifts Net fleet growth of 24 aircraft A Normalizing average stage to ~1,050 miles 6.9 Increasing ave
Slide 14: Enhancing Liquidity through Improving Financial Performance
Enhancing Liquidity through Improving Financial Performance Unencumbered loyalty and brand assets provide access to substantial liquidity, if desired Leverage Ratio (1) Financing 12.4x All aircraft deliveries are financed for the next 12 months 8.6x 6.1x $280M PDP facility to 5.3x support growth Une
Slide 15: Commercial
Commercial DANIEL SHURZ SVP, COMMERCIAL 15
Slide 16: Constrained Industry Capacity Enhances Growth Opportunity
Constrained Industry Capacity Enhances Growth Opportunity 1.6T 21.0T Thousands Millions 1.4T 20.0T 1.2T 19.0T 1.0T Real US GDP Output Capacity (ASM) 0.8T 18.0T 22% below historical 0.6T COVID trajectory & Supply 8% below 17.0T Contraction 2019 0.4T 16.0T 0.2T 0.0T 15.0T 2013 2014 2015 2016 2017 2018
Slide 17: Frontier Has a Significant Growth Runway
Frontier Has a Significant Growth Runway 64% of US capacity is operated … in a market where ULCCs are by competitors with 50%+ under-penetrated higher Total Adj CASM … Non-ULCC 62% Capacity 64% 90% 50%+ higher costs ULCC 38% Capacity 26% 15% to 49% higher costs 10% 7% Within 15% of cost base 3% US D
Slide 18: Frontier's Low-Cost Structure Creates Over 2,000 New Market Opportunities
Frontier’s Low-Cost Structure Creates Over 2,000 New Market Opportunities 0.80 0.70 F9 CASM Total Frontier Market Avg Yield Adj. CASM Frontier Total Adj. CASM & Market Yield 0.60 0.50 0.40 0.30 0.20 0.10 0.00 - 500 1,000 1,500 2,000 2,500 3,000 3,500 Stage (Miles) • Access organic channels to take a
Slide 19: 2023 Growth Is Expected to Be Modest Relative to Annualized Q4 2022 Baseline
2023 Growth Is Expected to Be Modest Relative to Annualized Q4 2022 Baseline Components of Growth +17% ~42 Bn ~36 Bn ~12% Departure Growth Q4 2022E ASMs Fleet Growth (24 net A/C) Normalized Utilization Stage ~1,050 Gauge ~200 2023E ASMs Annualized (1) (1) Q4-2022 based on midpoint of Y/3Y ASM growth
Slide 20: Frontier's RASM Growth Outpaced the Industry While Significantly Growing Capacity
Y/3Y Capacity vs Y/3Y RASM vs Y/3Y Total Revenue Growth Q2 + Q3 2022 Bubble size represents Y/3Y Total Revenue Growth 20% RASM Y/3Y Frontier’s RASM 15% ALGT SAVE Growth Outpaced 10% the Industry 5% While Significantly Capacity Y/3Y JBLU 0% Growing Capacity 0% 5% 10% 15% 20% 25% 30% LUV -5% ALK AAL -
Slide 21: Frontier's Ancillary Revenue Outperforms Peers
Frontier’s Ancillary Revenue Outperforms Peers… Ancillary Revenue per Passenger $USD(1),(2) $78 $65 $67 $38 $39 $23 $24 Ryanair Easyjet Wizz Volaris Allegiant Spirit (1) Source(s): Financials pulled from most recent, publicly available filings. Easyjet 6M ended March 2022; Ryanair & Wizz 6M ended Se
Slide 22: ...And We're Only Getting Better
…And We’re Only Getting Better Frontier Ancillary Revenue per Passenger $100 $85 $78 $57 FY 2019 Q3-2022 Q4-2023 goal 2026 Target 22
Slide 23: Robust Ancillary Roadmap
Robust Ancillary Roadmap The Path to $100 per Passenger • Equitable, consistent airport bag fee collection Revenue Integrity & • Automated bag fee enforcement at bag drop and gate Customer Equity • Comprehensive self-service capabilities, reducing agent touchpoints • Optimization capabilities across
Slide 24: Restoring Load Factor Will Drive RASM
Restoring Load Factor Will Drive RASM Multi-point Incremental Load Factor Opportunity Revenue mgt system enhancement Restoring Load Factor Continue automation and algorithm refinement to support total revenue 86% 86% Flights-as-a-Service (FLAAS) GoWild!™All-You-Can-Fly Pass Leverage otherwise empty
Slide 25: New Pilot Crew Bases in Large Markets Improve Network
New Pilot Crew Bases in Large Markets Improve Network • Opened 5 new pilot crew bases since 2019 PHL • Locations have significant route opportunities DEN • More bases have LAS supported the move to more efficient modular ATL network PHX DFW(1) MCO New pilot crew bases TPA MIA (1) DFW pilot crew base
Slide 26: Building Network Efficiency Lowers Costs and Improves Reliability
Building Network Efficiency Lowers Costs and Improves Reliability MDW 2023 Goals • Significant modularity aided by new crew bases Example of a fully- • Concentrated maintenance Pre-Pandemic modular solution • More complicated DFW • Increased average daily crew network design time flown to >6hrs/day
Slide 27: Marketing
Marketing TYRI SQUYRES VP, MARKETING 27
Slide 28: Fundamental Increase in Leisure Demand
Fundamental Increase in Leisure Demand Higher income and greater ability to travel 31% of customers plan to fly Frontier five or more times next year 2x the pre-pandemic rate (1) Flexibility Income 54% 39% of customers say of customers state that they have MORE they have MORE flexibility to money to
Slide 29: 2023 Network Makes Frontier More Relevant
Projected Destinations in 2023 2023 Network 18 30 Makes Frontier 69 Chicago (MDW/ORD) Philadelphia 57 Denver More Relevant; Las Vegas 28 Enhances Ability to Phoenix 19 42 Atlanta Retain Customers Dallas/Ft. Worth 66 23 Orlando More aspirational destinations Tampa 19 and growth in key markets Miami 9
Slide 30: 3 Products to Drive Bookings and Recurring Revenue
3 Products to Drive Bookings and Recurring Revenue TM Discount Den Travel Club Frontier Airlines World GoWild!™ All-You-Can-Fly Pass Mastercard • Lowest Fare Guaranteed • Use for an unlimited number of flights • Spend to status and family • $59.99 per year, plus $40 • Access to all our U.S. destinat
Slide 31: Operations
Operations TREVOR STEDKE SVP, OPERATIONS 31
Slide 32: Operations Organization
Operations Organization PDX Flight Operations MSP MKE ISP PHL TTN CLE LAS DEN DCA STL SNA Aircraft Technical Operations ATL SAN PHX DFW MCO AUS IAH MIA TPA RSW System Operations Control (SOC) Line maintenance stations Major maintenance SOC 32
Slide 33: Airbus A321neo is a Game Changer
Airbus A321neo is a Game Changer A320ceo 180 seats 88 ASMs per gallon A321neo 240 seats >120 ASMs per gallon 33
Slide 34: Frontier Generates the Highest ASMs per Gallon Among U.S. Airlines and It's Growing
Frontier Generates the Highest ASMs per Gallon Among U.S. Airlines and It’s Growing We operate differently and more efficiently than other airlines, providing a significant cost advantage over our competitors Available Seat Miles (ASMs) per Gallon, Sept 2022 YTD America’s Greenest Airline(1) 42% mor
Slide 35: Schedule Design Makes Frontier More Efficient While Improving Pilot Lifestyle
Schedule Design Makes Frontier More Efficient While Improving Pilot Lifestyle and Earnings Potential Average Working Days/Month and Pilot Block Hours/Duty Period Frontier gets more efficient 14 5.5 Schedule design improves crew 2019 working days Block productivity per month Hrs Pilots control their
Slide 36: Pilot Recruiting Flight Crew
Pilot Recruiting Flight Crew STEVE SCHULLER VP, HUMAN RESOURCES BRAD LAMBERT VP, FLIGHT OPERATIONS 36
Slide 37: Compelling Offer for Pilots Drives Strong Interest in Joining Team Frontier
Compelling Offer for Pilots Drives Strong Interest in Joining “Team Frontier” Quality of life and schedule flexibility Nine attractive crew PHL Nine locations base attractiveand pilot bases and growing growing DEN LAS Competitive 10-year W2 earnings ATL PHX Growth drives rapid MCO promotion opportun
Slide 38: Video Presentation
Video Presentation PILOT RECRUITING 38
Slide 39: We Will Control Our Pilot Hiring by Shifting to Frontier-Managed Recruiting Channels
We Will Control Our Pilot Hiring by Shifting to Frontier-Managed Recruiting Channels Estimated Percent of new hires by source based on current conditions Frontier-managed 2H 2022 2H 2023E 2024E recruiting 25% Flight school / university 50% partnerships Direct Hires & E3 89% Rotor transition 75% 50%
Slide 40: Our Company Managed Recruiting Channels Offer a Full Range of Entry Points
Our Company Managed Recruiting Channels Offer a Full Range of Entry Points for Aspiring Pilots Flight School/University Rotor Transition Partnerships Program • Relationship building with • Military-trained • Pathway to pilot career for students building baseline helicopter pilots with those with as
Slide 41: Customers
Customers JAKE FILENE SVP, CUSTOMERS 41
Slide 42: Customer Organization
Customer Organization Airport Sales & Customer Care Inflight Operations 42
Slide 43: Airport Operations and Call Centers are Labor Intensive and Subject to Inflationary Pressures
Airport Operations and Call Centers are Labor Intensive and Subject to Inflationary Pressures … Actual Example: DEN Customer 2022 Service Agent $19.66/hr 2015 $9.55/hr …Compelling a Change in the Way We Do Business 43
Slide 44: Ticket Counters Become Bag Drop Depots
Ticket Counters Become Bag Drop Depots Today: High-touch Tomorrow: Self-service • Bag Tag Printing • Seat Assignments Website & A Mobile App • Check In • International Document Check • Military Bag Waivers Bag Drop A • Ancillary Sales and Waivers Depot • DOT-Mandated Checked Bag Waivers 44
Slide 45: Call Centers: Customers Migrate to Self-Service
Call Centers: Customers Migrate to Self-Service Today: High-touch Tomorrow: Self-service Digitized • Unscalable, inefficient and expensive Improved customer experience 1-to-1 voice calls Additional web self-service • Avenue for customer negotiation Chatbot efficiently answers questions, • Manual, la
Slide 46: Self-Service Delivers Reduced Labor Hours and Better Customer Experience
Self-Service Delivers Reduced Labor Hours and Better Customer Experience 1,200 575 Ticket Counter Customer Care ~60% ~40% Reduction Reduction ~500 ~350 46
Slide 47: Long-term Airport Efficiency and Utilization Enhanced by Dual-Door Ground Loading
Long-term Airport Efficiency and Utilization Enhanced by Dual-Door Ground Loading Denver 14-gate facility opens by 2024 2x Efficiency vs single door Expected to reduce ground time by 40% At systemwide deployment, adds one incremental flight per aircraft per day 47
Slide 48: Why Frontier Will Win
Why Frontier Will Win BARRY BIFFLE PRESIDENT & CEO 48
Slide 49: Controllable Tailwinds Suppress Crosswinds Enabling Pre-Pandemic Profit per Plane by 2H2023
Controllable Tailwinds Suppress Crosswinds Enabling Pre-Pandemic Profit per Plane by 2H2023 Ancillary Load Factor Revenue $85 86% per passenger 2H2023 $3M in Q4-2023 Profit per plane CASM-ex 1 Fuel Burn annualized run rate Costs < 6 105 cents ASMs/gallon in 2023 in 2023 Assuming current conditions p
Slide 50: Q&A Session
Q&A Session 50
Slide 51: Appendix
APPENDIX 51
Slide 52: Fourth-Quarter 2022 Guidance
Fourth-Quarter 2022 Guidance The fourth quarter 2022 guidance provided below is based on the Company's current estimates as of the date of this presentation and is not a guarantee of future performance. This guidance is subject to significant risks and uncertainties that could cause actual results t
Slide 53: Terms and Definitions
Terms and Definitions Ancillary Revenue – sum of non-fare passenger revenue and other revenue Gauge (Seat/Aircraft) – Average seats per aircraft for entire fleet at end of period Global Ancillary Leader – Major U.S. and non-U.S. Ultra-Low-Cost-Carriers around the world to include Easyjet, Ryanair, W
Slide 54: CASM to Adjusted CASM (excluding fuel), Adjusted CASM and Total Adjusted CASM, Non-GAAP Reconciliation
CASM to Adjusted CASM (excluding fuel), Adjusted CASM and Total Adjusted CASM, Non-GAAP Reconciliation The Company is providing below a reconciliation of GAAP financial information to the non-GAAP financial information provided. The non-GAAP financial information is included to provide supplemental
Slide 55: Footnotes to Accompany CASM to Adjusted CASM Non-GAAP Reconciliation
Footnotes to Accompany CASM to Adjusted CASM (excluding fuel), Adjusted CASM and Total Adjusted CASM, Non-GAAP Reconciliation (a) Cost per ASM figures may not tie due to rounding. Figures included in this reconciliation were sourced from applicable historical 10-Q and 10-K filings. (b) Represents $9
Slide 56: Leverage Ratio Non-GAAP Reconciliation
Leverage Ratio Non-GAAP Reconciliation Twelve Months Ended $ in millions December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 Non-GAAP financial data (unaudited) (a): Net income (loss), as reported $ (102) $ (132) $ (138) $ (130) Plus (minus): Interest expense 33 20 18 18 Capitalized in
Slide 57: Footnotes to Accompany Leverage Ratio Non-GAAP Reconciliation
Footnotes to Accompany Leverage Ratio Non-GAAP Reconciliation (a) Income statement activity for purposes of calculating trailing twelve months adjusted EBITDAR was compiled utilizing historical 10-Q & 10-K filings. (b) EBITDA and adjusted EBITDA are included as supplemental disclosures because the C
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