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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
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
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 Number)
4545 Airport Way
Denver, CO 80239
(720) 374-4200
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
    
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, $0.001 par valueULCCThe 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, if any, every Interactive Data File required to be submitted and posted 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 and post 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. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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 7(a)(2)(B) of the Securities 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 outstanding 215,427,043 shares of common stock, par value of $0.001, as of May 7, 2021.



TABLE OF CONTENTS
Page
1




FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(unaudited, in millions, except for share and per share data)

March 31, 2021December 31, 2020
Assets
Cash and cash equivalents$429 $378 
Accounts receivable, net48 28 
Supplies, net20 18 
Other current assets223 226 
Total current assets720 650 
Property and equipment, net177 176 
Operating lease right-of-use assets2,292 2,250 
Pre-delivery deposits for flight equipment212 224 
Aircraft maintenance deposits86 82 
Intangible assets, net29 29 
Other assets164 143 
Total assets$3,680 $3,554 
Liabilities and stockholders’ equity
Accounts payable$79 $71 
Air traffic liability230 135 
Frequent flyer liability12 13 
Current maturities of long-term debt, net110 101 
Current maturities of operating leases423 416 
Other current liabilities369 267 
Total current liabilities1,223 1,003 
Long-term debt, net242 247 
Long-term operating leases1,881 1,848 
Long-term frequent flyer liability50 50 
Other long-term liabilities65 96 
Total liabilities3,461 3,244 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, no par value, stated value of $0.001 per share, with 200,416,799 and 199,438,098 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
  
Additional paid-in capital60 60 
Retained earnings170 261 
Accumulated other comprehensive income (loss)(11)(11)
Total stockholders’ equity219 310 
Total liabilities and stockholders’ equity$3,680 $3,554 

See Notes to Condensed Consolidated Financial Statements

2


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(unaudited, in millions, except for per share data)
Three Months Ended March 31,
20212020
Operating revenues:
Passenger$262 $528 
Other9 16 
Total operating revenues271 544 
Operating expenses:
Aircraft fuel84 204 
Salaries, wages and benefits139 148 
Aircraft rent138 103 
Station operations70 96 
Sales and marketing17 30 
Maintenance materials and repairs26 26 
Depreciation and amortization8 8 
CARES Act credits(136) 
Other operating17 35 
Total operating expenses363 650 
Operating income (loss)(92)(106)
Other income (expense):
Interest expense(22)(2)
Capitalized interest1 2 
Interest income and other 3 
Total other income (expense)(21)3 
Income (loss) before income taxes(113)(103)
Income tax expense (benefit)(22)(39)
Net income (loss)$(91)$(64)
Earnings (loss) per share:
Basic$(0.46)$(0.32)
Diluted$(0.46)$(0.32)


See Notes to Condensed Consolidated Financial Statements
3


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited, in millions)
Three Months Ended March 31,
20212020
Net income (loss)$(91)$(64)
Unrealized losses from cash flow hedges net of adjustment for de-designation of fuel hedges, net of deferred tax benefit/(expense) of $11 million during the three months ended March 31, 2020 (Note 5)
 (26)
Other comprehensive income (loss) (26)
Comprehensive income (loss)$(91)$(90)

















See Notes to Condensed Consolidated Financial Statements
4


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in millions)
Three Months Ended March 31,
20212020
Cash flows from operating activities:
Net income (loss)$(91)$(64)
Deferred income taxes(22)(36)
Depreciation and amortization8 8 
Gains recognized on sale-leaseback transactions(15)(17)
Warrant liability unrealized loss20  
Stock-based compensation3 2 
Losses from de-designated derivative positions 56 
Cash flows from derivative instruments, net (42)
Cash flows from operating leases 17 
Changes in operating assets and liabilities:
Accounts receivable(20)31 
Supplies and other current assets(13)(11)
Aircraft maintenance deposits(4)(5)
Other long-term assets(8)(7)
Accounts payable6 4 
Air traffic liability95 25 
Other liabilities71 (141)
Cash provided by (used in) operating activities30 (180)
Cash flows from investing activities:
Capital expenditures(3)(2)
Pre-delivery deposits for flight equipment, net of refunds12 (9)
Other(2) 
Cash provided by (used in) investing activities7 (11)
Cash flows from financing activities:
Proceeds from issuance of debt26 56 
Principal repayments on debt(22)(43)
Proceeds from sale-leaseback transactions13 22 
Minimum tax withholdings on share-based awards(3) 
Cash provided by financing activities14 35 
Net increase (decrease) in cash, cash equivalents and restricted cash51 (156)
Cash, cash equivalents and restricted cash, beginning of period378 768 
Cash, cash equivalents and restricted cash, end of period$429 $612 

See Notes to Condensed Consolidated Financial Statements
5


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited, in millions, except for share data)
Common StockAdditional
paid-in
capital
Retained
earnings
Accumulated other comprehensive income (loss)Total
SharesAmount
Balance at December 31, 2019199,242,854 $ $52 $486 $4 $542 
Net loss— — — (64)— (64)
Unrealized loss from cash flows hedges net of adjustment for de-designation of fuel hedges, net of tax (Note 5)— — — — (26)(26)
Stock-based compensation— — 2 — — 2 
Balance at March 31, 2020199,242,854 $ $54 $422 $(22)$454 
Balance at December 31, 2020199,438,098 $ $60 $261 $(11)$310 
Net loss— — — (91)— (91)
Shares issued in connection with vesting of restricted stock units 505,438 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units (146,490)— (3)— — (3)
Restricted stock unit repurchases(20,368)— — — — — 
Stock option exercises640,121 — — — — — 
Stock-based compensation— — 3 — — 3 
Balance at March 31, 2021200,416,799 $ $60 $170 $(11)$219 
See Notes to Condensed Consolidated Financial Statements
6



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 accounting principles generally accepted 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. Prior to December 3, 2013, FAH was a wholly-owned subsidiary of Republic Airways Holdings, Inc. (“Republic”). On December 3, 2013, FGHI, formerly known as Falcon Acquisition Group, Inc., purchased from Republic all of FAH’s common stock for $52 million in cash and assumed all of its obligations. As a result of the acquisition, all of FAH’s assets and liabilities were remeasured to fair value as of the acquisition date.
The Company is headquartered in Denver, Colorado. Frontier is an ultra low-cost, low-fare airline that offers flights throughout the United States and to select international destinations in the Americas, serving approximately 110 airports.
The Company is managed as a single business unit that primarily 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 financial statements of the Company and notes thereto included in the Company's final prospectus, dated March 31, 2021, and filed with the SEC pursuant to Rule 424(b)(4) on April 2, 2021.
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. In addition, the Company experienced significant impacts from the novel strain of coronavirus (“COVID-19”) pandemic during the three months ended March 31, 2021, as well as during the comparable period in 2020.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.
Initial Public Offering
On March 31, 2021, the Company’s registration statement on Form S-1 relating to the Company’s initial public offering (“IPO”) was declared effective by the SEC, and the Company’s common stock began trading on the NASDAQ Global Select Market on April 1, 2021 under ticker symbol ULCC. The Company completed its IPO on April 6, 2021 at an offering price of $19.00 per share, pursuant to the Company’s registration statement. The Company issued and sold 15 million shares of common stock and the Company’s selling stockholders sold 15
7



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

million shares of common stock in the IPO. The underwriters were granted an over-allotment option to purchase up to 4.5 million additional shares of common stock from the selling shareholders, at the IPO price of $19.00 per share, less the underwriting discount, for 30 days from the date of the prospectus, which was exercised in full in April 2021. The Company did not receive any of the proceeds from the sale of shares by the Company’s selling stockholders. In April 2021, the Company received net proceeds of $271 million after deducting underwriting discounts and commissions. Because the IPO did not close until April 6, 2021, the transaction is not reflected in the condensed consolidated financial statements provided herein.
Total common shares outstanding after the closing of the IPO was 215,416,799.
Prior to the IPO and as of March 31, 2021, deferred offering costs, which consist of direct incremental legal, accounting, consulting and other fees relating to the IPO, in the estimated amount of $6 million were capitalized in other current assets on the condensed consolidated balance sheets and were all unpaid.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also enhances the existing guidance for consistent application of Topic 740. The new guidance is effective for annual periods beginning after December 15, 2020 and interim reporting periods within those reporting periods. The Company adopted the new standard as of January 1, 2021, which did not have a material impact on the Company’s results of operations or financial position as of the adoption date.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instrument and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies the accounting and measurement of convertible instruments and also adds disclosure requirements. Further, ASU 2020-06 simplifies the settlement assessment performed to determine whether a contract in the Company’s own equity qualifies for equity classification. The Company early adopted the standard effective January 1, 2021 using the modified retrospective approach, which did not have a material impact on the Company’s results of operations or financial position as of the adoption date. Given the Company’s IPO in April 2021, and based in part on the provisions of ASU 2020-06, warrants issued in conjunction with the CARES Act that may be settled in the Company’s own equity if publicly traded, are expected to be treated as equity classified awards post IPO.

2. Impact of COVID-19
Impact of the COVID-19 Pandemic
Beginning in March 2020, the rapid spread of COVID-19, along with government mandated restrictions on travel, required stay-in-place orders, and other social distancing measures, resulted in a drastic decline in near-term air travel demand in the United States, and caused reductions in revenues and income levels as compared to corresponding pre-pandemic periods. The decline in demand for air travel has had a material adverse effect on the Company’s business and results of operations for the period ended March 31, 2021 and the comparable prior year period. Additionally, the Company is unable to predict the future spread of COVID-19 or any new strains of the virus along with resulting measures that may be introduced by governments or other parties and what impact they may have on the demand for air travel.
In response to the impacts of the COVID-19 pandemic, beginning in March 2020 and continuing through March 2021, the Company has taken measures to address the significant cash outflows experienced to date, which most
8



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

notably included aligning capacity to demand, and continues to evaluate options to align costs with expected demand.
Beginning in December 2020, the Food and Drug Administration issued emergency use authorizations for various vaccines for COVID-19. As the vaccines continue to be distributed, administered and made available to a broader range of the population, the Company expects confidence in travel to increase, particularly in the domestic leisure market on which the Company’s business is focused. While the Company has experienced a 14% increase in passenger volumes during the quarter ended March 31, 2021 as compared to the fourth quarter of 2020 as well as a meaningful increase in bookings during the first quarter of 2021 compared to the fourth quarter of 2020, the Company continues to closely monitor the COVID-19 pandemic and the need to adjust capacity and deploy other operational and cost-control measures as necessary to preserve short-term liquidity needs and ensure long-term viability of the Company and its strategies. Any anticipated adjustments to capacity and other cost savings initiatives implemented by the Company may vary from actual demand and capacity needs.
The Company continues to monitor covenant compliance with various parties, including, but not limited to, its lenders and credit card processors, as any noncompliance could have a material impact on the Company’s financial position, cash flows and results of operations. As of March 31, 2021 and through the date of this report, the Company is in compliance with all of its covenants, except the Company has obtained a waiver of relief for the covenant provisions through the second quarter of 2021 related to one of its credit card processors that represents less than 10% of total revenues, which may require future waivers or an amendment to the existing covenants to reflect any additional COVID-19 pandemic impacts.
COVID-19 Relief Funding
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) became law on March 27, 2020 and includes various provisions to protect the U.S. airline industry, its employees, and many other stakeholders. The CARES Act is a relief package intended to assist many aspects of the American economy, including providing the airline industry with up to $25 billion for a Payroll Support Program (“PSP”) to be used for employee wages, salaries, and benefits and up to $25 billion in loans. On April 30, 2020, the Company reached an agreement with the U.S. Department of the Treasury (the “Treasury”) under which the Company received $211 million of installment funding comprised of a $178 million grant (“PSP Grant”) for payroll support for the period from April 2020 through September 30, 2020, and a $33 million unsecured 10-year, low interest loan (“PSP Promissory Note”). During 2020, the Company received the full $178 million under the PSP Grant, which was recognized net of $1 million in deferred financing costs over the periods it was intended to support payroll, within CARES Act credits in the Company’s condensed consolidated statements of operations. In conjunction with the PSP Promissory Note, the Company issued to the Treasury warrants to acquire up to 522,576 shares of common stock of FGHI at an exercise price of $6.36 per share.
On January 15, 2021, as a result of the Consolidated Appropriations Act of 2021, which extended the PSP provisions of the CARES Act, the Company entered into an agreement with the Treasury for a minimum of $140 million of installment funding under a second Payroll Support Program (“PSP2”), comprised of a $128 million grant (“PSP2 Grant”) for the continuation of payroll support through March 31, 2021, and a $12 million unsecured 10-year low interest loan (“PSP2 Promissory Note”), all of which was received during the three months ended March 31, 2021. In conjunction with the PSP2 Promissory Note, the Company issued to the Treasury warrants to acquire up to 103,208 shares of common stock of FGHI at an exercise price of $11.65 per share. As of March 31, 2021, the $12 million PSP2 Promissory Note is presented net of unamortized discounts related to warrants and deferred financing costs totaling $1 million within long-term debt, net on the Company’s condensed consolidated balance sheet. Of the $128 million received under the PSP2 Grant, $125 million was recognized within CARES Act credits in the Company’s condensed consolidated statements of operations, and the remaining $3 million was deferred within other current liabilities on the Company's condensed consolidated balance sheet.
9



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

Subsequent to March 31, 2021, the Treasury provided the Company with an additional disbursement under the PSP2 Agreement of $21 million on April 29, 2021, comprised of an additional $15 million toward the PSP2 Grant and $6 million toward the PSP2 Promissory Note. In conjunction with this additional funding, the Company issued to the Treasury warrants to purchase up to 54,105 additional shares of common stock of FGHI at an exercise price of $11.65 per share.
The American Rescue Plan Act (“ARP”), enacted on March 11, 2021, provided for additional assistance to passenger air carriers that received financial relief under PSP2 ("PSP3"). On April 29, 2021, the Company entered into an agreement with the Treasury for approximately $150 million of installment funding under PSP3 (the “PSP3 Agreement”), comprised of a $135 million grant (“PSP3 Grant”) for the continuation of payroll support through September 30, 2021, and a $15 million unsecured 10-year low interest loan (“PSP3 Promissory Note”). In conjunction with funding from PSP3, the Company agreed to issue to the Treasury warrants to purchase up to 79,961 additional shares of common stock of FGHI at an exercise price of $18.85 per share. The impacts of PSP3 are not reflected within the Company’s March 31, 2021 condensed consolidated financial statements.
On September 28, 2020, the Company entered into a loan agreement with the Treasury for a term loan facility of up to $574 million pursuant to the secured loan program established under the CARES Act (“Treasury Loan”). As of March 31, 2021, the Company has borrowed $150 million under the Treasury Loan, which is presented net of unamortized discounts related to warrants and deferred financing costs, within long-term debt, net on the Company’s condensed consolidated balance sheets. Additional funding can be drawn on the loan through May 28, 2021 and includes a maximum of three total draws on the facility. In conjunction with the Treasury Loan, the Company issued to the Treasury warrants to acquire the common stock of FGHI, which have a five-year term and are settled in cash or shares. As of March 31, 2021, the Company had issued 2,358,090 warrants with an exercise price of $6.36 per share in conjunction with the first draw on the loan.
In connection with the Company’s participation in the PSP, PSP2, PSP3 and the Treasury Loan, the Company has been and will continue to be subject to certain restrictions and limitations, including, but not limited to:
Restrictions on repurchases of equity securities listed on a national securities exchange or payment of dividends until the later of September 30, 2022 or one year after the Treasury Loan facility is repaid;
Requirements to maintain certain levels of scheduled services through March 31, 2022 (including to destinations where there may currently be significantly reduced or no demand);
A prohibition on involuntary terminations or furloughs of employees (except for health, disability, cause, or certain disciplinary reasons) through September 30, 2021;
A prohibition on reducing the salary, wages or benefits of our employees (other than our executive officers or independent contractors, or as otherwise permitted under the terms of the PSP, PSP2 and PSP3) through September 30, 2021;
Limits on certain executive compensation, including limiting pay increases and severance pay or other benefits upon terminations, until the later of April 1, 2023 or one year after the Treasury Loan facility is repaid;
Limitations on the use of the grant funds exclusively for the continuation of payment of employee wages, salaries and benefits; and
Additional reporting and recordkeeping requirements.
As outlined above, as part of the PSP Promissory Note, the PSP2 Promissory Note and the Treasury Loan, and pursuant to the stipulations set forth within the CARES Act, the Company issued to the Treasury warrants to acquire shares of common stock of FGHI, which have a five-year term and are settled in cash or shares. The warrants do not have any voting rights and are freely transferable, with registration rights. The warrants issued in conjunction with the CARES Act financing have been classified as liability based awards within other current liabilities on the condensed consolidated balance sheets and, as of March 31, 2021 and December 31, 2020, the warrant liability was $39 million and $18 million, respectively. Given the liability based classification, at the end of each period the warrant liability is adjusted to its fair market value, calculated utilizing the Black Scholes option pricing model, with
10



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

the corresponding fair market value adjustment classified as interest expense within the Company’s condensed consolidated statements of operations, which was $20 million for the three months ended March 31, 2021. The initial fair value of these warrants upon issuance is treated as a loan discount, which reduces the carrying value of the loan, and is amortized utilizing the effective interest method as interest expense in the Company’s condensed consolidated statements of operations over the term of the loan.
The CARES Act also provided for an employee retention credit (“CARES Employee Retention Credit”), which is a refundable tax credit against certain employment taxes that the Company qualified for beginning on April 1, 2020. In December 2020, the CARES Employee Retention Credit program was extended and enhanced through June 30, 2021. Further, in March 2021, the ARP further extended the availability of the CARES Employee Retention Credit through December 31, 2021. The ARP increased the credit from 50% to 70% of qualified wages, increased the maximum wages per employee from $10,000 for the entire period to $10,000 per quarter, and expanded the gross receipts test for eligible employers from a 50% to an 80% decline in gross receipts as compared to the same calendar quarter in 2019. During the three months ended March 31, 2021, the Company recognized $11 million related to the CARES Employee Retention Credit within CARES Act credits in the Company’s condensed consolidated statements of operations and other current assets on the Company’s condensed consolidated balance sheets.
Income Taxes
The Company's effective tax rate for the three months ended March 31, 2021 was 19.5%, compared to 37.9% for the three months ended March 31, 2020. The effective tax rate for the three months ended March 31, 2021 deviates from the statutory rate primarily due to non-deductible interest from the mark to market adjustments from the warrants issued to the Treasury as part of the Company’s participation in the PSP, PSP2, and the Treasury Loan, partially offset by excess tax benefits associated with the Company’s stock-based compensation arrangements. The decrease in tax rate as compared to the prior year period is largely driven by the CARES Act benefit that allowed the 2020 net operating loss to be carried back to tax years in which a federal 35% tax rate applied, resulting in a permanent benefit of the 14% rate differential.

3. Revenue Recognition
As of December 31, 2020, the Company’s air traffic liability balance was $135 million. During the three months ended March 31, 2021, 41% of the air traffic liability as of December 31, 2020 has been recognized as passenger revenue. As of March 31, 2021, the Company’s current air traffic liability is $230 million, of which $44 million is related to customer rights to book future travel, which generally expire 12 months after issuance if not redeemed by the passenger. The amounts expected not to be redeemed are recognized over the historical pattern of rights exercised by customers.
During the three months ended March 31, 2021 and 2020, the Company recognized $10 million and $9 million of revenue, respectively, within passenger revenue within the condensed consolidated statements of operations, primarily related to expected and actual expiration of customer rights to book future travel.
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 (“ETV”) a passenger receives by redeeming mileage credits for a ticket rather than paying cash.
11



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

Mileage credits are also sold to participating companies, including credit card companies and other third parties. Sales to credit card companies include multiple promised goods and services, which the Company evaluates to determine whether they represent performance obligations. The Company determined these arrangements have three separate performance obligations: (i) mileage credits to be awarded, (ii) licensing of brand and access to member lists and (iii) advertising and marketing efforts. Total arrangement consideration is allocated to each performance obligation on the basis of the deliverables relative standalone selling price. For mileage credits, the Company considers a number of entity-specific factors when developing the best estimate of the standalone selling price, including the number of mileage credits needed to redeem an award, average fare of comparable segments, breakage and restrictions. For licensing of brand and access to member lists, the Company considers both market-specific factors and entity-specific factors, including general profit margins realized in the marketplace/industry, brand power, market royalty rates and size of customer base. For the advertising and marketing performance obligation, the Company considers market-specific factors and entity-specific factors, including the Company’s internal costs of providing services, volume of marketing efforts and overall advertising plan.
Consideration allocated based on the relative standalone selling price to both the brand licensing and access to member lists and advertising and marketing elements is recognized as other revenue in the Company’s condensed consolidated statements of operations over time as mileage credits are delivered. The consideration allocated to the transportation portion of these mileage credit sales is deferred and recognized as a component of passenger revenue in the Company’s condensed consolidated statements of operations at the time of travel for mileage credits redeemed. Mileage credits the Company estimates are not likely to be redeemed are subject to breakage and are recognized as a portion of passenger revenue in proportion to the pattern of rights exercised by customers. Management uses statistical models to estimate breakage based on historical redemption patterns. A change in assumptions as to the period over which mileage credits are expected to be redeemed, the actual redemption activity for mileage credits or the estimated fair value of mileage credits expected to be redeemed could have an impact on revenues in the year in which the change occurs and in future years. Redemptions are allocated between sold and flown mileage credits based on historical patterns.
12



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

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 March 31,
20212020
Passenger revenues:
Fare$100 $219 
Non-fare passenger revenues:
Baggage67 109 
Service fees62 141 
Seat selection24 43 
Other9 16 
Total non-fare passenger revenue162 309 
Total passenger revenues262 528 
Other revenues9 16 
Total operating revenues$271 $544 

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 March 31,
20212020
Domestic$259 $500 
Latin America12 44 
Total operating revenues$271 $544 
During the three months ended March 31, 2021 and 2020, no revenue from any one foreign country represented greater than 5% of the Company’s total passenger revenue. 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.

13



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

4. Other Current Assets
Other current assets consist of the following (in millions):
March 31, 2021December 31, 2020
Prepaid expenses$17 $24 
Income tax receivable161 161 
Passenger and other taxes receivable20 26 
Other25 15 
Total other current assets$223 $226 

5. Financial Derivative Instruments and Risk Management
The Company is exposed to variability in jet fuel prices. Aircraft fuel generally represents the Company’s largest operating expense. Increases in jet fuel prices may adversely impact its financial performance, operating cash flow and financial position. As part of its risk management program, the Company enters into derivative contracts in order to limit exposure to the fluctuations in jet fuel prices. The types of instruments the Company utilized in its 2020 hedging program were call options and collar structures, which include both a purchased call option and sold put option. Although the use of collar structures can reduce the overall cost of hedging, these instruments carry more risk than purchased call options alone in that these instruments may result in a net liability for the Company upon settlement.
Additionally, the Company is exposed to interest rate risk through aircraft lease contracts for the time period between agreement of terms and commencement of the lease, where portions of the rental payments are adjusted and become fixed based on the seven or nine year 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 the three months ended March 31, 2021, the Company did not enter into any swaps and during the three months ended March 31, 2020, the Company paid upfront premiums of $4 million for the option to enter into and exercise cash settled swaps with a forward starting effective date.
The Company formally designates and accounts for derivative instruments that meet established accounting criteria under ASC 815, Derivatives and Hedging, as cash flow hedges. For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative instruments is recorded in accumulated other comprehensive income/loss (“AOCI/L”), a component of stockholders’ equity on the condensed consolidated balance sheets. The Company recognizes the associated gains or losses deferred in AOCI/L as well as the amounts that are paid or received in connection with the purchase or sale of fuel-related financial derivative instruments (i.e., premium costs of option contracts) as a component of aircraft fuel expense in the period that the jet fuel subject to hedging is consumed for its fuel derivative instruments. For interest rate derivatives, the Company recognizes the associated gains or losses deferred in AOCI/L as well as amounts that are paid or received in connection with the purchase or sale of interest rate derivative instruments (i.e., premium costs of swaption contracts) as a component of aircraft rent expense over the period of the related aircraft lease. The Company does not enter into derivative instruments for speculative purposes.
In March 2020, the Company determined that it was no longer probable that estimated future fuel consumption for gallons subjected to fuel hedges would occur, primarily related to second quarter 2020 settled trades as the Company reduced scheduled flights as a result of the decline in customer demand from the COVID-19 pandemic, and, therefore, the Company was required to de-designate certain fuel hedges associated with estimated future consumption declines. Fuel hedges with identified estimated future fuel consumption that were probable to still occur remained within AOCI/L. As a result of the de-designation, in March 2020 the Company recognized a $56 million loss within aircraft fuel in the condensed consolidated statements of operations.
14



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

As of March 31, 2021, the Company had no fuel cash flow hedges outstanding, and the Company has hedged the interest rate exposure on $327 million of total aircraft rent payments for eight aircraft to be delivered by the end of 2021.
The Company is exposed to credit losses in the event of nonperformance by counterparties to its derivative instruments but does not expect any of its counterparties will fail to meet their 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, limits its overall exposure to any single counterparty and monitors the market position with each counterparty. Based on the fair value of the Company’s fuel derivative instruments, its counterparties may require it to post collateral when the price of the underlying commodity decreases, and the Company may require its counterparties to provide collateral when the price of the underlying commodity increases. The amount of collateral posted, if any, is periodically adjusted based on the fair value of the hedge contracts. The Company’s policy is to offset the liabilities represented by these contracts with any cash collateral paid to the counterparties.
The assets and liabilities associated with the Company’s fuel and interest rate derivative instruments are presented on a gross basis and include upfront premiums paid. These are recorded as a component of other current assets and other current liabilities on the Company’s condensed consolidated balance sheets and as of March 31, 2021 and December 31, 2020, were less than $1 million.
The following table summarizes the effect of fuel and interest rate derivative instruments reflected in aircraft fuel and rent expense, respectively, in the condensed consolidated statements of operations (in millions):
Three Months Ended March 31,
20212020
Derivatives designated as cash flow hedges
Losses on fuel derivative contracts$ $(13)
Derivatives not designated as cash flow hedges
Losses on fuel derivative contracts$ $(56)
The following table presents the net of tax impact of the overall effectiveness of derivative instruments designated as cash flow hedging instruments in the condensed consolidated statements of comprehensive income (loss) (in millions):
Three Months Ended March 31,
20212020
Derivatives designated as cash flow hedges
Fuel derivative contract losses – net of tax impact$ $(26)
Fuel derivative losses reclassified to earnings due to de-designation – net of tax impact 9 
Interest rate derivative contract losses – net of tax impact (9)
Total$ $(26)

As of March 31, 2021, $11 million is included in AOCI/L related to interest rate hedging instruments that is expected to be reclassified over the aircraft lease term the hedging instrument is related to.
15



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

6. Other Current Liabilities
Other current liabilities consist of the following (in millions):
March 31, 2021December 31, 2020
Salaries, wages and benefits$85 $97 
Current portion of phantom equity units (Note 9)26  
Station obligations44 33 
Leased aircraft return costs14 20 
Aircraft maintenance36 22 
Passenger and other taxes and fees payable63 41 
Fuel liabilities16 6 
Warrant liability39 18 
Other current liabilities46 30 
Total other current liabilities$369 $267 

7. Debt
The Company’s debt obligations are as follows (in millions):
March 31, 2021December 31, 2020
Secured debt:
Pre-delivery credit facility(1)
$133 $141 
Floating rate building note(2)
18 18 
Treasury Loan(3)
150 150 
Unsecured debt:
Affinity card advance purchase of mileage credits(4)
15 15 
PSP Promissory Notes(5)
45 33 
Total debt361 357 
Less current maturities of long-term debt, net(110)(101)
Less long-term debt acquisition costs and other discounts(9)(9)
Long-term debt, net$242 $247 
__________________
(1)The Company, through an affiliate, entered into the pre-delivery payment (“PDP”) facility with Citibank, N.A. in December 2014 (“PDP Financing Facility”). The PDP Financing Facility is collateralized by the Company’s purchase agreement for Airbus A320neo and A321neo aircraft through 2023 (see Note 10). On December 22, 2020, the PDP Financing Facility was amended and restated to reduce the commitment of Citibank, N.A., as initial lender, to $150 million, remove the ability to draw further unsecured borrowings and to provide collateral for the borrowings not secured by aircraft outstanding as of that date. During May 2021, the Company amended the facility to increase the total available capacity to $200 million and expanded the number of financial institution participants as lenders.
Interest is paid every 90 days based on a three-month LIBOR, 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 last scheduled delivery of aircraft contemplated in the PDP Financing Facility expected to be in the fourth quarter of 2023.
(2)Represents a note with National Bank of Arizona related to the Company’s headquarters building. Under the terms of the agreement, the Company will repay outstanding principal balance in quarterly payments beginning in January 2022 until the maturity date in December
16



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

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 LIBOR plus a margin is payable monthly.
(3)On September 28, 2020, the Company entered into the Treasury Loan with the Treasury for a term loan facility of up to $574 million. The Treasury Loan has a five-year term and includes an annual interest rate based on adjusted LIBOR plus 2.5%. Additional funding can be drawn on the loan through May 28, 2021 and includes a maximum of three total draws on the facility, and it can be prepaid at par at any time without incurring a penalty. The Treasury Loan is collateralized by the Company’s co-branded credit card arrangement. As part of any funding under the loan program, the Company is required to comply with the relevant provisions of the CARES Act, which will apply until one year after the loan is repaid in full. In conjunction with the Treasury Loan, the Company issued to the Treasury warrants to acquire the common stock of FGHI, which have a five-year term and are settled in cash or shares upon notice from the Treasury. Such warrants are included in other current liabilities on the Company’s condensed consolidated balance sheets. As of March 31, 2021, the Company had issued 2,358,090 warrants to the Treasury in conjunction with the Treasury Loan.
(4)The Company entered into an agreement with Barclays in 2003 to provide for joint marketing, grant certain benefits to co-branded credit card holders (“Cardholders”), and allow 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 consumers. In addition, Barclays will pre-purchase miles if the Company meets certain conditions precedent. On September 15, 2020 the Company entered into a new agreement with Barclays to amend and extend the agreement to 2029. The pre-purchased miles facility amount 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, up to an aggregate maximum facility amount of $200 million. The facility amount cannot be extended above $15 million until full extinguishment of the Treasury Loan. The Company pays interest on a monthly basis, which is based on a one-month LIBOR plus a margin. Beginning March 31, 2028, the facility will be repaid in 12 equal monthly installments.
(5)On April 30, 2020, the Company executed the PSP Promissory Note with the Treasury as part of the original payroll support program in which the Company received a $33 million unsecured 10-year, low interest loan. Subsequently, as part of the PSP2 Agreement, in March 2021 the Company received an additional $12 million of proceeds with the same terms as the original PSP Promissory Note. The PSP Promissory Notes include an annual interest rate of 1.00% for the first five years and the Secured Overnight Financing Rate ("SOFR") plus 2.00% in the final five years. The loans can be prepaid at par any time without incurring a penalty. In conjunction with the PSP Promissory Notes, the Company issued to the Treasury warrants to acquire up to 625,784 shares of common stock of FGHI, which have a five-year term and are settled in cash or shares. Such warrants are included in other current liabilities on the Company’s condensed consolidated balance sheets.

Cash payments for interest related to debt was $1 million and $2 million for the three months ended March 31, 2021 and 2020, respectively.
The Company has issued standby letters of credit and surety bonds to various airport authorities and vendors that are collateralized by restricted cash and as of March 31, 2021 and December 31, 2020, the Company did not have any outstanding letters of credit that were drawn upon.
As of March 31, 2021, future maturities of debt are payable as follows (in millions):
March 31, 2021
Remainder of 2021$79 
202252 
202320 
2024 
2025150 
Thereafter60 
Total debt principal payments$361 

8. Operating Leases
The Company leases property and equipment under operating leases. For leases with initial terms greater than 12 months, the related asset and obligation is recorded at the present value of lease payments over the term. 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
17



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

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 March 31, 2021, the Company leased 107 aircraft, all of which are under operating leases with remaining terms ranging from three months to 12 years. In addition, as of March 31, 2021, the Company leased 17 spare engines, which are all under operating leases. As of March 31, 2021, the remaining terms for engines included within right-of-use asset and lease liability range from five months to 12 years.
During the three months ended March 31, 2021 and 2020, the Company executed sale-leaseback transactions with third-party lessors for three new Airbus A320 family aircraft. Additionally, the Company completed a sale-leaseback transaction for one engine during the three months ended March 31, 2021 and did not complete any sale-leaseback transactions for engines during the three months ended March 31, 2020. All of the leases from the sale-leaseback transactions are accounted for as operating leases. During the three months ended March 31, 2021 and 2020, the Company acquired, through new operating leases, aircraft and engines totaling $120 million and $96 million, respectively, which are included in operating lease right-of-use assets on the condensed consolidated balance sheets and also recognized net sale-leaseback gains of $15 million and $17 million, respectively, from those sale-leaseback transactions which are included as a component of other operating expenses within the condensed consolidated statements of operations.
In March 2020, the Company entered into two amendments with one lessor that were treated as one combined contract. One amendment extended the remaining lease terms on two aircraft from three to five years. The other included the return of $17 million in previously unrecoverable maintenance reserves for two aircraft. This amount has been included within the Company’s right-of-use assets as a lessor incentive as of March 31, 2021, as it was negotiated as a combined contract.
In May 2021, the Company entered into an early termination and buyout agreement with one of its lessors for six aircraft that were previously owned by the Company, which stipulates that four A319 aircraft originally slated to be returned in December 2021 will be returned during the second and third quarters of 2021. The early returns of these aircraft will retire the remaining A319 aircraft in the Company’s fleet. As a result of this early termination and buyout arrangement the Company recorded a $6 million charge included as a component of rent expense within the condensed consolidated statements of operations for the three months ended March 31, 2021 related to the change in expected lease return obligations of which $4 million was related to the A319 aircraft returning in the second quarter.
Aircraft Rent Expense and Maintenance Obligations
Aircraft rent expense was $138 million and $103 million during the three months ended March 31, 2021 and 2020, 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 or are probable lease return condition obligations. Supplemental rent expense for maintenance-related reserves that were deemed non-recoverable during the years ended March 31, 2021 and 2020 totaled $1 million and less than $1 million, respectively. The portion of supplemental rent expense related to probable lease return condition obligations was $14 million and $4 million for March 31, 2021 and 2020, respectively.
Additionally, certain of the Company’s aircraft and spare engine 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 March 31, 2021 and December 31, 2020, the Company had aircraft maintenance deposits that are expected to be recoverable of $92 million and $82 million, respectively, on its condensed consolidated balance sheets of which $6 million and less than $1 million, respectively, are included in accounts receivable, net as the eligible maintenance has been performed. The remaining $86 million and $82 million
18



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

are included within aircraft maintenance deposits on the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, 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 March 31, 2021, fixed maintenance reserve payments for aircraft and spare engines, including estimated amounts for contractual price escalations, were expected to be approximately $3 million per year for the remainder of 2021 through 2025 and $11 million thereafter before consideration of reimbursements.
Airport Facilities
The Company’s facility leases are primarily for space at approximately 110 airports that are served and 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, cargo warehouses 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 March 31, 2021, the remaining lease terms vary from one month to eight 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. Because of the variable nature of the rates, these leases are not recorded on the condensed consolidated balance sheets as a right-of-use asset and lease liability.
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 condensed consolidated balance sheets as a right-of-use asset and liability. The remaining lease terms range from one month to eight years as of March 31, 2021.
Lessor Concessions
In response to the COVID-19 pandemic, beginning in 2020, the Company was granted payment deferrals on leases included in the Company’s right-of-use assets for certain aircraft and engines from lessors along with airport facilities and other vendors that are not included in the Company’s right-of-use assets. As these deferred payments are made, the Company will recognize the deferred payments in aircraft rent or station operations, as applicable, in the condensed consolidated statements of operations. These deferrals decreased operating cash flows and unfavorably impacted the Company’s results of operations by $11 million for the three months ended March 31, 2021, including a $19 million unfavorable impact to aircraft rent and an $8 million favorable impact to station operations. As of March 31, 2021, the Company has $22 million of rent payment deferrals that have yet to be recognized, including $12 million and $10 million related to aircraft rent expense and station operations, respectively, which will be recognized throughout the rest of 2021 and future years as such amounts are paid.
19



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 months ended March 31, 2021 and 2020 (in millions):
Three Months Ended March 31,
20212020
Operating lease cost(1)
$107 $98 
Variable lease cost(1)
65 45 
Total lease costs$172 $143 
______________
(1)    Expenses are included within aircraft rent, station operations, maintenance materials and repairs and other operating in the Company’s condensed consolidated statements of operations.

During the three months ended March 31, 2021 and 2020, the Company paid cash of $108 million and $99 million, respectively, for amounts included in the measurement of lease liabilities.

9. Stock-Based Compensation
During the three months ended March 31, 2021 and 2020, the Company recognized $3 million and $2 million, respectively, in stock-based compensation expense, which is included as a component of salaries, wages and benefits within the condensed consolidated statements of operations.
Stock Options and Restricted Awards
In April 2014, FGHI approved the 2014 Equity Incentive Plan (the “2014 Plan”). Under the terms of the 2014 Plan, 38 million shares of FGHI common stock are reserved for issuance. Concurrently with the Company’s initial public offering on April 1, 2021, the Company approved the 2021 Incentive Award Plan (the “2021 Plan”), which reserved 7 million shares of FGHI common stock, as well as the 11 million issued awards from the 2014 Plan that are still outstanding plus any subsequently forfeited awards or awards that lapse unexercised after April 1, 2021, to be available for future issuances of stock-based compensation awards to be granted to members of the Board of Directors and certain employees and consultants. Additionally, shares available for issuance under the 2021 Plan will be subject to an annual increase on the first day of each fiscal year beginning in 2022 and ending in 2031, equal to the lesser of (A) one percent (1%) of the shares of stock outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of shares of stock as determined by the Company’s Board of Directors; provided, however, that no more than 30 million shares of stock may be issued upon the exercise of incentive stock options.
There were no options granted during the three months ended March 31, 2020 and 2021. In connection with the Company initial public offering, 640,121 of vested stock options were exercised with a weighted average stock price of $0.64 per share during the three months ended March 31, 2021. The weighted average exercise price of outstanding options as of March 31, 2021 was $2.02 per share.
During the three months ended March 31, 2021, 695,742 restricted stock units were issued with a weighted average grant date fair value of $13.84 per share and an aggregate fair value of $10 million. Additionally, during the three months ended March 31, 2021, the Company withheld 146,490 restricted stock units with a weighted average grant date fair value of $10.98 per share to cover employee taxes upon award vesting.
20



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

Liability-Classified Awards
On December 3, 2013, to give effect to the reorganization of the Company’s corporate structure in connection with the acquisition by FGHI (see Note 1), an agreement was reached to amend and restate a phantom equity agreement that was in place with Frontier prior to the acquisition. Under the terms of this agreement, when an amendment to the underlying collective bargaining agreement was approved, the Company’s pilots employed by Frontier 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, 2019, the final associated liability was $137 million, of which $111 million was paid in March 2020 and the remaining $26 million is to be paid in the first quarter of 2022 and, as such, is presented within other long-term liabilities and other current liabilities on the Company’s condensed consolidated balance sheets as of December 31, 2020 and March 31, 2021, respectively.

10. Commitments and Contingencies
Flight Equipment Commitments
As of March 31, 2021, the Company’s firm aircraft and engine orders consisted of the following:
A320neoA321neoTotal
Aircraft
Engines
Year Ending
Remainder of 202110  10 2 
20229 5 14 4 
2023 19 19 2 
2024 19 19 2 
202517 8 25 3 
Thereafter50 16 66 9 
Total86 67 153 22 
During December 2017, the Company entered into an amendment to the previously existing master purchase agreement with Airbus. Pursuant to the amendment, the Company had a commitment to purchase an incremental 100 A320neo and 34 A321neo aircraft (“incremental aircraft”) which were scheduled to be delivered through 2026. During July 2019, the Company entered into an amendment to the previously existing master purchase agreement that included the conversion of 15 A320neo aircraft to A321neo aircraft and, in December 2020, the Company entered into an amendment to convert an additional 18 A320neo aircraft to A321neo aircraft, each of which also updated the timing of original scheduled delivery dates as reflected in the table above. Additionally, the Company entered into an amendment that allows it the option to convert 18 A320neo aircraft to A321XLR aircraft and therefore, the conversion is not reflected in the table above. The amended agreements provide for varying purchase incentives, which have been allocated proportionally and are accounted for as an offsetting reduction to the cost of the backlog aircraft and incremental aircraft. As a result, cash paid for backlog aircraft will be more than the associated capitalized cost of the aircraft and results in the recognition of a deferred purchase incentive within other assets on the condensed consolidated balance sheets, which will ultimately be offset by the lower cash payments in connection with the purchase of the incremental aircraft.
21



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

On April 13, 2020, the Company entered into an agreement with Pratt & Whitney for a purchase commitment to supply all engines and the related maintenance services for the Company’s incremental order book. These deliveries will begin in 2022 and are expected to occur through 2027. In addition, Pratt & Whitney will supply a certain number of spare engines from 2022 through 2029. These commitments are reflected within the table above and in the future commitments below.
As of March 31, 2021, purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and PDPs, were approximately $522 million in the remainder of 2021, $765 million in 2022, $1,095 million in 2023, $1,144 million in 2024, $1,422 million in 2025 and $3,906 million thereafter.
Litigation and Other Contingencies
On March 12, 2021, the DOT advised the Company that it was in receipt of information indicating that the Company had failed to comply with certain DOT consumer protection requirements relating to consumer refund and credit practices and requested that the Company provide certain information to the DOT. The DOT request for information is focused on the Company’s refund practices on Frontier initiated flight cancellations and/or significant changes in flights as a result of the COVID-19 pandemic. The Company is fully cooperating with the DOT request.
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 represent approximately 87% of all employees at March 31, 2021. The table below sets forth the Company’s employee groups and status of the collective bargaining agreements as of March 31, 2021:
Percentage of Workforce
Employee GroupRepresentativeAmendable DateMarch 31, 2021
PilotsAir Line Pilots Association (ALPA)January 202432%
Flight AttendantsAssociation of Flight Attendants (AFA-CWA)
May 2024
51%
Aircraft TechniciansInternational Brotherhood of Teamsters (IBT)March 20242%
Aircraft AppearanceIBTOctober 2023
<1%
Material SpecialistsIBTMarch 2022
<1%
DispatchersTransport Workers Union (TWU)December 2021
<1%
Maintenance ControlIBTOctober 2023
<1%

22



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

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 has accrued $4 million for health care claims estimated to be incurred but not yet paid as of March 31, 2021 and December 31, 2020, which is included as a component of other current liabilities on the 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 us, 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 (1) when and under what circumstances these provisions may be triggered, and (2) 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.

11. 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 (loss) per share is calculated by taking net income, less earnings allocated to participating rights, divided by the basic weighted average common stock outstanding. Diluted net earnings (loss) per share is calculated using the more dilutive of the treasury-stock method and the two-class
23



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

method. 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 data):
Three months ended March 31,
20212020
Basic:
Net income (loss)$(91)$(64)
Less: net income attributable to participating rights  
Net income (loss) attributable to common stockholders$(91)$(64)
Weighted average common shares outstanding, basic199,482,701 199,187,260 
Net earnings (loss) per share, basic$(0.46)$(0.32)
Diluted:
Net income (loss)$(91)$(64)
Less: net income attributable to participating rights  
Net income (loss) attributable to common stockholders$(91)$(64)
Weighted-average common shares outstanding, basic199,482,701 199,187,260 
Effect of dilutive potential common shares  
Weighted average common shares outstanding, diluted199,482,701 199,187,260 
Net earnings (loss) per share, diluted$(0.46)$(0.32)
Due to the net loss for the three months ended March 31, 2021 and 2020, diluted weighted-average shares outstanding are equal to basic weighted-average shares outstanding because the effect of all equity awards is anti-dilutive.

12. 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.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents as of March 31, 2021 and December 31, 2020 were 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. Within restricted cash, the Company also maintains certificates of deposit
24



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

that secure certain letters of credit issued for workers’ compensation claim reserves and certain airport authorities. Cash, cash equivalents and restricted cash are carried at cost, which management believes approximates fair value.
Warrants
The estimated fair value of the warrants issued in conjunction with the loans from the CARES Act, described in Note 2, was determined to be Level 3 measurement. The primary inputs to the warrant valuation are driven by FGHI’s share price as well as assumptions about the expected share price volatility and estimated term the warrants will remain outstanding. These inputs are largely impacted by internal forecasts, discount rates and other internal assumptions as well as assumptions used by the participating underwriters to establish the initial offering price related to the Company’s IPO, which were unobservable as of March 31, 2021. For the three months ended March 31, 2021, the Company’s warrant liability increased by $21 million, which was driven by mark to market adjustments of $20 million and $1 million of additional warrants issued in conjunction with PSP2 funding obtained during the three months ended March 31, 2021.
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 long-term debt.
The carrying amounts and estimated fair values of the Company’s debt are as follows (in millions):
March 31, 2021December 31, 2020
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Secured debt:
Pre-delivery credit facility$133 $131 $141 $139 
Floating rate building note18 18 18 18 
Treasury Loan 150 153 150 148 
Unsecured debt:
Affinity card advance purchase of mileage credits15 14 15 11 
PSP Promissory Note45 35 33 25 
Total debt$361 $351 $357 $341 
25



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 in the Company’s financial statements (in millions):
Fair Value Measurements as of March 31, 2021
TotalLevel 1Level 2Level 3
Cash and cash equivalents$429 $429 $ $ 
Warrants$39 $ $ $39 
Fair Value Measurements as of December 31, 2020
TotalLevel 1Level 2Level 3
Cash and cash equivalents$378 $378 $ $ 
Warrants$18 $ $ $18 
The Company had no transfers of assets or liabilities between any of the above levels during the three months ended March 31, 2021 and the year ended December 31, 2020.

13. Related Parties
Management Services
The Company pays a quarterly fee to Indigo Partners for management services, plus expense reimbursements and the annual fees of each member of the Company’s board of directors that is affiliated with Indigo Partners. Indigo Partners manages an investment fund that is the controlling stockholder in FGHI. The Company paid Indigo Partners $1 million and less than $1 million of management fees, expense reimbursements, and director compensation for the three months ended March 31, 2021 and 2020, respectively.
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, under which sales began in July 2018. Two of the Company’s directors are members of the board of directors of Volaris. Indigo Partners holds approximately 18% of the total outstanding Common Stock shares of Volaris.
In August 2018, the Company and Volaris began operating scheduled codeshare flights. The codeshare agreement provides for codeshare fees and revenue sharing for the codeshare flights. Each party bears its own costs and expenses of performance under the agreement, is required to indemnify the other party for certain claims and losses arising out of or related to the agreement and is responsible for complying with certain marketing and product display guidelines. The codeshare agreement also establishes a joint management committee, which includes representatives from both parties and generally oversees the management of the transactions and relationships contemplated by the agreement. The codeshare agreement will remain effective for a period of three years from its effective date, is subject to automatic renewal and may be terminated by either party at any time upon the satisfaction of certain conditions.

26


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains 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"), which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical factors are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “should,” “could,” “would,” “expect,” “intends,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “targets,” “predict,” “potential,” and similar expressions intended to identify forward-looking statements. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. 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 prospectus, dated March 31, 2021, filed with the Securities and Exchange Commission (“SEC”) in accordance with Rule 424(b) of the Securities Act on April 2, 2021 (the “Prospectus”) in connection with our initial public offering (“IPO”). 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 II, Item 1A, “Risk Factors” and other factors set forth in other parts of this Quarterly Report on Form 10-Q. 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.

Overview
Frontier Airlines 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 near international destinations in the Americas. Our unique strategy is underpinned by our low-cost structure and superior low-fare brand.
In December 2013, we were acquired by an investment fund managed by Indigo, an affiliate of Indigo Partners, an experienced and successful global investor in ULCCs. Following the acquisition, Indigo reshaped our management team to include experienced veterans of the airline industry with a significant history operating ULCCs. Working with Indigo and supported by a highly productive workforce, our management team developed and implemented our unique Low Fares Done Right strategy, which significantly reduced our unit costs, introduced low fares, provided the choice of optional services to our customers, enhanced our operational performance and improved the customer experience. Through the implementation of our operating model, we have positioned our brand as a leading low-fare airline and had seen a dramatic improvement to our profitability prior to the COVID-19 pandemic.
The implementation of Low Fares Done Right has significantly reduced our cost base by increasing aircraft utilization (prior to the COVID-19 pandemic), transitioning our fleet to larger aircraft, maximizing seat density, renegotiating the majority of our distribution agreements, realigning our network, replacing our reservation system, enhancing our website, boosting employee productivity and contracting with third-party specialists to provide us with select operating and other services. As of March 31, 2021, we had a fleet of 107 narrow-body Airbus A320 family aircraft, and a commitment to purchase 153 A320neo (New Engine Option) family aircraft by the end of 2028.

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Impact of the COVID-19 Pandemic and Outlook
Beginning in March 2020, and as a result of the COVID-19 pandemic, we experienced a significant decline in customer demand that impacted the remaining portion of 2020 and has persisted into the first quarter of 2021. While we experienced an uptick in demand and capacity during the second half of the first quarter of 2021, this uptick in demand is still below the demand levels experienced prior to the COVID-19 pandemic. Due to the impact of the COVID-19 pandemic on our business that began late in the first quarter of 2020, we experienced a decline in operating revenues of 50% period over period, and our capacity, as measured by ASMs, decreased by 36% period over period. The continued progression of COVID-19, which includes new variants and the resulting governmental restrictions put in place in response, as well as changes in consumer behavior, including rates of vaccination, continues to be an ever changing situation that we are closely monitoring.

In response to the impacts of the COVID-19 pandemic, beginning in March 2020 and continuing through March 2021, we have taken measures to address the significant cash outflows experienced to date, which have most notably included aligning capacity to demand and implementing cost saving initiatives to better align costs with expected demand. We will continue to evaluate the need to adjust capacity and deploy other operational and cost control measures as necessary to preserve short term liquidity needs and ensure the long term viability of our business. Any anticipated adjustments to capacity and other cost saving initiatives implemented by us may vary from actual demand and capacity needs.
COVID-19 Relief Funding
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) became law on March 27, 2020 and includes various provisions to protect the U.S. airline industry, its employees, and many other stakeholders and, on April 30, 2020, we reached an agreement with the U.S. government under which we received $211 million of installment funding comprised of a $178 million grant (“PSP Grant”) for payroll support for the period from April 2020 through September 30, 2020, and a $33 million unsecured 10-year, low interest loan (“PSP Promissory Note”). During 2020, we received the full $178 million under the PSP Grant, which was recognized net of $1 million in deferred financing costs over the periods it was intended to support payroll, within CARES Act credits in our condensed consolidated statements of operations. In conjunction with the PSP Promissory Note, we issued to the U.S. Department of the Treasury (the “Treasury”) warrants to acquire up to 522,576 shares of common stock of FGHI at an exercise price of $6.36 per share.
On January 15, 2021, as a result of the Consolidated Appropriations Act of 2021, which extended the Payroll Support Program (“PSP”) provisions of the CARES Act, we entered into an agreement with the Treasury for a minimum of $140 million of installment funding under a second Payroll Support Program (“PSP2”), comprised of a $128 million grant (“PSP2 Grant”) for the continuation of payroll support through March 31, 2021, and a $12 million unsecured 10-year low interest loan (“PSP2 Promissory Note”), all of which was received during the three months ended March 31, 2021. In conjunction with the PSP2 Promissory Note, we issued to the Treasury warrants to acquire up to 103,208 shares of common stock of FGHI at an exercise price of $11.65 per share. Of the $128 million received under the PSP2 Grant, $125 million was recognized within CARES Act credits in our condensed consolidated statements of operations, and the remaining $3 million was deferred as a credit within other current liabilities on our condensed consolidated balance sheet.
Subsequent to March 31, 2021, the Treasury provided us with an additional disbursement under the PSP2 Agreement of $21 million on April 29, 2021, comprised of an additional $15 million toward the PSP2 Grant, and $6 million toward the PSP2 Promissory Note. In conjunction with this additional funding, we issued to the Treasury warrants to purchase up to 54,105 additional shares of common stock of FGHI at an exercise price of $11.65 per share.
The American Rescue Plan Act (“ARP”), enacted on March 11, 2021, provided for additional assistance to passenger air carriers that received financial relief under PSP2 ("PSP3"). On April 29, 2021, we entered into an agreement with the Treasury for approximately $150 million of installment funding under PSP3 (the “PSP3 Agreement”), comprised of a $135 million grant (“PSP3 Grant”) for the continuation of payroll support through
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September 30, 2021, and a $15 million unsecured 10-year low interest loan (“PSP3 Promissory Note”). In conjunction with funding from PSP3, we agreed to issue to the Treasury warrants to purchase up to 79,961 additional shares of common stock of FGHI at an exercise price of $18.85 per share. The impacts of PSP3 are not reflected within our March 31, 2021 condensed consolidated financial statements.
On September 28, 2020, we entered into a loan agreement with the Treasury for a term loan facility of up to $574 million pursuant to the loan program established under the CARES Act (“Treasury Loan”). As of March 31, 2021, we had borrowed $150 million under the Treasury Loan, which is presented net of unamortized discounts related to warrants and deferred financing costs, within long-term debt, net on our condensed consolidated balance sheet. Additional funding can be drawn on the loan through May 28, 2021. In conjunction with the Treasury Loan, we issued to the Treasury warrants to acquire the common stock of FGHI, which have a five-year term and may be settled in cash or shares. As of March 31, 2021, we issued 2,358,090 warrants in conjunction with the first draw on the loan with an exercise price of $6.36 per share.
In connection with our participation in the PSP, PSP2, PSP3 and the Treasury Loan, we are and continue to be subject to certain restrictions and limitations, including, but not limited to:
Restrictions on repurchases of equity securities listed on a national securities exchange or payment of dividends until the later of September 30, 2022 or one year after the Treasury Loan facility is repaid;
Requirements to maintain certain levels of scheduled services through March 31, 2022 (including to destinations where there may currently be significantly reduced or no demand);
A prohibition on involuntary terminations or furloughs of employees (except for health, disability, cause, or certain disciplinary reasons) through September 30, 2021;
A prohibition on reducing the salary, wages or benefits of our employees (other than our executive officers or independent contractors, or as otherwise permitted under the terms of the PSP, PSP2 and PSP3) through September 30, 2021;
Limits on certain executive compensation, including limiting pay increases and severance pay or other benefits upon terminations, until the later of April 1, 2023 or one year after the Treasury Loan facility is repaid;
Limitations on the use of the grant funds exclusively for the continuation of payment of employee wages, salaries and benefits; and
Additional reporting and recordkeeping requirements.
The CARES Act also provided for an employee retention credit (“CARES Employee Retention Credit”), which is a refundable tax credit against certain employment taxes that we qualified for beginning on April 1, 2020. In December 2020, the CARES Employee Retention Credit program was extended and enhanced through June 30, 2021. Further, in March 2021, the ARP further extended the availability of the CARES Employee Retention Credit through December 31, 2021. ARP increased the credit from 50% to 70% of qualified wages, increased the maximum wages per employee from $10,000 for the entire period to $10,000 per quarter, and expanded the gross receipts test for eligible employers from a 50% to an 80% decline in gross receipts as compared to the same calendar quarter in 2019. During the three months ended March 31, 2021, we recognized $11 million related to the CARES Employee Retention credit within CARES Act Credits in our condensed consolidated statements of operations and other current assets on our condensed consolidated balance sheet.
Initial Public Offering
On March 31, 2021, our registration statement on Form S-1 relating to our initial public offering (“IPO”) was declared effective by the SEC and on April 1, 2021 our common stock began trading on the NASDAQ Global Select
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Market under ticker symbol ULCC. The IPO was completed on April 6, 2021 at an offering price of $19.00 per share, pursuant to our registration statement. As part of the IPO, we issued and sold 15 million shares of common stock and our selling stockholders sold 15 million shares of common stock in the IPO. The underwriters were granted an over-allotment option to purchase up to 4.5 million additional shares of common stock from the selling shareholders, at the IPO price of $19.00 per share, less the underwriting discount, for 30 days from the date of the prospectus, which was exercised in full in April 2021. We did not receive any of the proceeds from the sale of shares by our selling stockholders. Net proceeds of $271 million were received in April 2021 after deducting underwriting discounts and commissions of $14 million and prior to an estimated $6 million in offering expenses.

Cash Management and Liquidity
As a result of the measures we have taken to reduce costs and manage liquidity as outlined above, we believe our financial position and available liquidity as of the date of this report will enable us to continue to navigate through any short-term demand declines and that we are well positioned to recover as the demand for air travel continues to increase. As of March 31, 2021, we had $853 million of total available liquidity, including $429 million of cash and cash equivalents and an additional $424 million available to borrow under the Treasury Loan facility through May 28, 2021. Additionally, we raised an incremental $271 million in April 2021 from our initial public offering (which closed on April 6, 2021) net of underwriting discounts and commissions of $14 million and prior to an estimated $6 million in offering expenses. We also received $21 million of additional PSP2 funding and $75 million of PSP3 funding in April 2021, expect to receive $75 million of additional PSP3 funding, and have a current income tax receivable of $161 million primarily resulting from our net operating losses generated during 2020.

A combination of our management over liquidity and the uptick in customer demand in the first quarter of 2021, both of which are explained below, has led to a reduced cash burn, as defined, of $1 million per day on average for the three months ended March 31, 2021 compared to $2 million per day on average during the year ended December 31, 2020. Additionally, during March 2021, we moved from a cash burn position to a cash positive position. There can be no assurance that this trend will continue. We continue to monitor the impacts of the pandemic on our operations and financial condition and believe that our plans intended to mitigate these conditions and events will help alleviate liquidity risks presented.

Results of Operations
Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
Our capacity, as measured by ASMs, decreased by 36% during the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, and our total revenue per available seat mile declined by 22% from 7.62¢ to 5.91¢ over the same period due to the COVID-19 pandemic. As a result, our total operating revenue decreased by $273 million, or 50%, during the three months ended March 31, 2021 as compared to the corresponding prior year period. Fuel expense was 59% lower during the three months ended March 31, 2021 as compared to the corresponding prior year period, as fuel consumption decreased 37% as a result of lower capacity, fuel cost per gallon decreased 35% due to reduced fuel rates and the $56 million in losses from fuel hedging during the three months ended March 31, 2020 compared to none in 2021. Our non-fuel expenses decreased by 37%, driven primarily by the $136 million benefit from the recognition of the CARES Act credits under the PSP2 Agreement, of which the grant portion covered substantially all of our salaries, wages and benefits expense for the first quarter of 2021. Further decreases to non-fuel expenses were driven by lower capacity period over period. This activity was partly offset by increases in rent expense due to the recognition of $19 million in vendor deferrals from 2020, costs related to early termination of the leases related to our remaining A319 aircraft, and the impact of a larger fleet during the three months ended March 31, 2021 as compared to the corresponding prior year period. CASM (excluding fuel) decreased by 3% from 6.24¢ for the three months ended March 31, 2020 to 6.07¢ for the three months ended March 31, 2021, and Adjusted CASM (excluding fuel), which excludes the impact of the CARES Act credits and early lease termination costs for the A319 aircraft set to return in the second quarter of 2021, increased from 6.15¢ to 8.96¢ from the three months ended March 31, 2020 to the three months ended March 31, 2021.
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We generated a net loss of $91 million during the three months ended March 31, 2021 and a net loss of $64 million during the three months ended March 31, 2020, as a result of the significant reduction in demand beginning in March 2020 caused by the COVID-19 pandemic. Our results for the three months ended March 31, 2021 include CARES Act credits and other charges that reduced our operating expenses by $132 million, including $136 million related to funding recognized from the PSP2 Grant and the recognition of CARES Employee Retention Credits, offset by $4 million in costs incurred with the early termination of certain of our A319 leased aircraft, and $20 million in other non-operating expenses related to mark to market adjustments associated with the warrants issued as part of the Treasury Loan and PSP Promissory Notes. Our results for the three months ended March 31, 2020 include certain items that increased our operating expenses by $63 million and include $56 million in expenses resulting from the de-designation of certain derivative contracts as a result of the estimated future fuel consumption for gallons subjected to fuel hedges no longer deemed probable due to the decline in demand from the impact of the COVID-19 pandemic and the subsequent mark to market adjustments, and $7 million relating to a one-time write-off of deferred registration statement costs