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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 September 30, 2022
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
https://cdn.kscope.io/10bc15bc9ea6b864d324fdf448197daa-fron-20220930_g1.jpg
Frontier Group Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware46-3681866
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
4545 Airport Way
Denver, CO 80239
(720) 374-4550
(Address of principal executive offices, including zip code, and registrant’s telephone number, including area code)
    
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).        Yes ☒     No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated 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 13(a) of the Exchange Act.    ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐     No
The registrant had 217,763,933 shares of common stock, par value of $0.001, outstanding as of October 21, 2022.



TABLE OF CONTENTS
Page
1


Cautionary Statement Regarding 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on February 23, 2022. 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,” Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other factors set forth in other parts of this Quarterly Report on Form 10-Q. 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.
Summary Risk Factors
Our business is subject to a number of risks and uncertainties that may affect our business, results of operations and financial condition, or the trading price of our common stock or other securities. We caution the reader that these risk factors may not be exhaustive. We operate in a continually changing business environment, and new risks and uncertainties emerge from time to time. Management cannot predict such new risks and uncertainties, nor can it assess the extent to which any of the risk factors below or any such new risks and uncertainties, or any combination thereof, may impact our business. The risks identified below are more fully described in Part II, Item 1A, “Risk Factors.” Such factors include:
Risks Related to Our Industry
the impact the COVID-19 pandemic and measures to reduce its spread continue to have on our business, results of operations and financial condition and the timing and nature of the related recovery of the airline industry;
certain restrictions on our business in connection with accepting financial assistance under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and related legislation;
the termination of the proposed merger with Spirit Airlines, Inc.;
the ability to attract and retain qualified personnel at reasonable costs;
the ability to operate in an exceedingly competitive industry against legacy network airlines, low-cost carriers (“LCCs”) and other ultra low-cost carriers (“ULCCs”);
the price and availability of aircraft fuel;
any restrictions on or increased taxes applicable to charges for non-fare products and services paid by airline passengers or the imposition of burdensome consumer protection regulations or laws;
changes in economic conditions, including economic slowdowns, recessions, inflationary pressures, rising interest rates, financial market fluctuations and reduced credit availability;
competition from air travel substitutes;
threatened or actual terrorist attacks or security concerns;
2


factors beyond our control, including air traffic congestion at airports, air traffic control inefficiencies, government shutdowns, aircraft and engine defects, adverse weather conditions, increased security measures or outbreak of disease;
our presence in international emerging markets that may experience political or economic instability;
increases in insurance costs or inability to secure adequate insurance coverage;
decline or suspension in funding or operations of the U.S. federal government or its agencies; and
deployment of new 5G C-band service by wireless communications service providers.
Risks Related to Our Business
our failure to implement our business strategy successfully;
our ability to control our costs and maintain a competitive cost structure;
our ability to grow or maintain our unit revenues or maintain our non-fare revenues;
any increased labor costs, union disputes and other labor-related disruptions;
our inability to expand or operate reliably and efficiently out of airports where we operate or desire to operate;
any damage to our reputation or brand image;
our reputation and business being adversely affected in the event of an emergency, accident or similar public incident involving our aircraft or personnel;
any negative publicity regarding our customer service;
our inability to maintain a high daily aircraft utilization rate;
any changes in governmental regulation;
the impact of climate change and related regulations and consumer preferences;
our ability to obtain financing or access capital markets;
the long-term nature of our fleet order book and the unproven new engine technology utilized by the aircraft in our order book;
our maintenance obligations;
aircraft-related fixed obligations that could impair our liquidity; and
our reliance on third-party specialists and other commercial partners to perform functions integral to our operations.
3


PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(unaudited, in millions, except for share and per share data)
September 30, 2022December 31, 2021
Assets
Cash and cash equivalents$674 $918 
Accounts receivable, net65 50 
Supplies, net54 29 
Other current assets99 40 
Total current assets892 1,037 
Property and equipment, net213 186 
Operating lease right-of-use assets2,405 2,426 
Pre-delivery deposits for flight equipment346 260 
Aircraft maintenance deposits104 98 
Intangible assets, net28 29 
Other assets258 199 
Total assets$4,246 $4,235 
Liabilities and stockholders’ equity
Accounts payable$78 $86 
Air traffic liability296 273 
Frequent flyer liability13 13 
Current maturities of long-term debt, net193 127 
Current maturities of operating leases451 444 
Other current liabilities421 383 
Total current liabilities1,452 1,326 
Long-term debt, net228 287 
Long-term operating leases1,973 1,991 
Long-term frequent flyer liability33 41 
Other long-term liabilities92 60 
Total liabilities3,778 3,705 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, $0.001 par value per share, with 217,762,284 and 217,065,096 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
  
Additional paid-in capital389 381 
Retained earnings82 159 
Accumulated other comprehensive income (loss)(3)(10)
Total stockholders’ equity468 530 
Total liabilities and stockholders’ equity$4,246 $4,235 

See Notes to Condensed Consolidated Financial Statements
4


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(unaudited, in millions, except for per share data)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Operating revenues:
Passenger$883 $610 $2,361 $1,408 
Other23 20 59 43 
Total operating revenues906 630 2,420 1,451 
Operating expenses:
Aircraft fuel306 166 856 389 
Salaries, wages and benefits182 161 528 454 
Aircraft rent140 128 401 399 
Station operations101 108 326 285 
Sales and marketing42 33 120 80 
Maintenance, materials and repairs42 29 107 82 
Depreciation and amortization8 10 36 28 
CARES Act credits (72) (295)
Transaction and merger-related costs, net(12) 8  
Other operating41 24 128 60 
Total operating expenses850 587 2,510 1,482 
Operating income (loss)56 43 (90)(31)
Other income (expense):
Interest expense(4)(4)(16)(31)
Capitalized interest3 1 6 3 
Interest income and other3 1 5 1 
Total other income (expense)2 (2)(5)(27)
Income (loss) before income taxes58 41 (95)(58)
Income tax expense (benefit)27 18 (18)(9)
Net income (loss)$31 $23 $(77)$(49)
Earnings (loss) per share:
Basic$0.13 $0.10 $(0.36)$(0.23)
Diluted$0.13 $0.10 $(0.36)$(0.23)


See Notes to Condensed Consolidated Financial Statements
5


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited, in millions)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net income (loss)$31 $23 $(77)$(49)
Unrealized gains (losses) and amortization from cash flow hedges, net of deferred tax benefit (expense) of $(2) for the three and nine months ended September 30, 2022 and less than $(1) for the three and nine months ended September 30, 2021. (Note 5)
7  7 1 
Other comprehensive income (loss)7  7 1 
Comprehensive income (loss)$38 $23 $(70)$(48)




See Notes to Condensed Consolidated Financial Statements
6


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in millions)
Nine Months Ended September 30,
20222021
Cash flows from operating activities:
Net income (loss)$(77)$(49)
Deferred income taxes(18)(9)
Depreciation and amortization36 28 
Gains recognized on sale-leaseback transactions(49)(55)
Loss on extinguishment of debt7  
Warrant liability unrealized loss 22 
Stock-based compensation11 8 
Amortization of swaption cash flow hedges, net of tax1 1 
Changes in operating assets and liabilities:
Accounts receivable(6)(15)
Supplies and other current assets(35)13 
Aircraft maintenance deposits(14)(14)
Other long-term assets(68)(24)
Accounts payable(13)16 
Air traffic liability23 117 
Other liabilities30 57 
Cash provided by (used in) operating activities(172)96 
Cash flows from investing activities:
Capital expenditures(31)(20)
Pre-delivery deposits for flight equipment, net of refunds(86)28 
Other (4)
Cash provided by (used in) investing activities(117)4 
Cash flows from financing activities:
Proceeds from issuance of debt, net of issuance costs214 115 
Principal repayments on debt(215)(97)
Proceeds from sale-leaseback transactions49 43 
Proceeds from initial public offering, net of offering costs and underwriting discounts 266 
Minimum tax withholdings on share-based awards(3)(3)
Cash provided by financing activities45 324 
Net increase (decrease) in cash, cash equivalents and restricted cash(244)424 
Cash, cash equivalents and restricted cash, beginning of period918 378 
Cash, cash equivalents and restricted cash, end of period$674 $802 





See Notes to Condensed Consolidated Financial Statements
7



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, 2020199,438,098 $ $60 $261 $(11)$310 
Net income (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 
Net income (loss)— — — 19 — 19 
Shares issued in connection with vesting of restricted stock units18,259 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(8,015)— — — — — 
Amortization of swaption cash flow hedges, net of tax— — — — 1 1 
Stock-based compensation— — 2 — — 2 
Issuance of common stock upon initial public offering, net of offering costs, underwriting discounts and commissions15,000,000 — 266 — — 266 
CARES Act warrants (Note 2)— — 43 — — 43 
Balance at June 30, 2021215,427,043 $ $371 $189 $(10)$550 
Net income (loss)— — — 23 — 23 
Shares issued in connection with vesting of restricted stock units74,140 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(32,546)— — — — — 
Stock option exercises5,845 — — — — — 
Stock-based compensation— — 3 — — 3 
Balance at September 30, 2021215,474,482 $ $374 $212 $(10)$576 









See Notes to Condensed Consolidated Financial Statements
8


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders’ Equity (Continued)
(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, 2021217,065,096 $ $381 $159 $(10)$530 
Net income (loss)— — — (121)— (121)
Shares issued in connection with vesting of restricted stock units676,146 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(275,822)— (3)— — (3)
Stock option exercises34,461 — — — — — 
Stock-based compensation— — 3 — — 3 
Balance at March 31, 2022217,499,881 $ $381 $38 $(10)$409 
Net income (loss)— — — 13 — 13 
Shares issued in connection with vesting of restricted stock units96,078 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(10,472)— — — — — 
Amortization of swaption cash flow hedges, net of tax— — — — 1 1 
Unrealized loss from cash flows hedges, net of tax— — — — (1)(1)
Stock option exercises89,950 — — — — — 
Stock-based compensation— — 4 — — 4 
Balance at June 30, 2022217,675,437 $ $385 $51 $(10)$426 
Net income (loss)— — — 31 — 31 
Shares issued in connection with vesting of restricted stock units25,074 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(10,753)— — — — — 
Unrealized gain from cash flows hedges, net of tax— — — — 7 7 
Stock option exercises72,526 — — — — — 
Stock-based compensation— — 4 — — 4 
Balance at September 30, 2022217,762,284 $ $389 $82 $(3)$468 
See Notes to Condensed Consolidated Financial Statements
9



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

1. Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the United States (“GAAP”) and include the accounts of Frontier Group Holdings, Inc. (“FGHI” or the “Company”) and its wholly-owned direct and indirect subsidiaries, including Frontier Airlines Holdings, Inc. (“FAH”) and Frontier Airlines, Inc. (“Frontier”). All wholly-owned subsidiaries are consolidated, with all intercompany transactions and balances being eliminated.
The Company is an ultra low-cost, low-fare airline headquartered in Denver, Colorado that offers flights throughout the United States and to select international destinations in the Americas, serving approximately 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 consolidated financial statements of the Company and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 23, 2022 (the “2021 Annual Report”).
The interim results reflected in the unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for other interim periods or for the full year. The air transportation business is subject to significant seasonal fluctuations and is volatile and highly affected by economic cycles and trends.
Certain reclassifications of previously reported amounts have been made to conform to the current year presentation in Note 4. Other Current Assets and Note 10. Other Long-Term Liabilities. These reclassifications did not impact previously reported amounts in the Company’s audited consolidated balance sheets, consolidated statements of operations, consolidated statements of comprehensive income, consolidated statements of cash flows, or consolidated statements of stockholders’ equity.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.
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 the symbol “ULCC”. In April 2021, the Company received net proceeds of $266 million after deducting underwriting discounts and commissions of $14 million and offering
10



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

costs of $5 million, which consisted of direct incremental legal, accounting, consulting and other fees relating to the IPO.
2. Impact of COVID-19
Impact of the COVID-19 Pandemic
The COVID-19 pandemic, along with government-mandated restrictions on travel, required stay-in-place orders, and other social distancing measures, has continued to have a material adverse effect on the Company’s business and results of operations for the three and nine months ended September 30, 2022 and 2021. Although the Company has continued to experience a significant and sustained recovery during the three and nine months ended September 30, 2022 as compared to the three and nine months ended September 30, 2021, the Company is unable to predict the future spread and impact of COVID-19, including future variants of the virus such as the recent Omicron variant and its subvariants, or the efficacy and adherence rates of vaccines and other therapeutics and the resulting measures that may be introduced by governments or other parties and what impact those measures may have on the demand for air travel.
Widespread distribution of COVID-19 vaccines has led to increased confidence in travel, particularly in the domestic leisure market on which the Company’s business is focused. While the Company has experienced a meaningful increase in passenger volumes, as well as bookings, since the vaccines became widely available, demand recovery may continue to be hampered as a result of new variants or subvariants of the virus. The Company continues to closely monitor the COVID-19 pandemic and the need to adjust capacity as well as 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.
COVID-19 Relief Funding
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) became law on March 27, 2020, and provided the airline industry with up to $25 billion for a Payroll Support Program (the “PSP”) to be used for employee wages, salaries, and benefits and up to $25 billion in loans. Through 2020 and 2021, the Company participated in the PSP, as well as the second Payroll Support Program (the “PSP2”) and the third Payroll Support Program (the “PSP3,” and together with the PSP and the PSP2, the “PSPs”) offered by the U.S. Department of the Treasury (the “Treasury”), each of which included both a grant and an unsecured 10-year, low-interest promissory note. The grants were recognized within CARES Act credits in the Company’s condensed consolidated statements of operations over the periods they were intended to support payroll. See Note 7 for further information on the promissory notes entered into with the Treasury as a result of participation in the payroll support programs (collectively, the “PSP Promissory Notes”) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—COVID-19 Relief Funding” in the Company’s 2021 Annual Report for additional detail on the CARES Act and the PSPs.
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 (the “Treasury Loan”). As of December 31, 2021, the Company had borrowed $150 million under the Treasury Loan, for which the right to draw any further funds lapsed in May 2021. On February 2, 2022, the Company repaid the Treasury Loan, which included the $150 million principal balance along with accrued interest and associated fees of $1 million.
On January 15, 2021, pursuant to the Consolidated Appropriations Act, 2021 (the “PSP Extension Law”), which extended the PSP provisions of the CARES Act, the Company entered into an agreement with the Treasury for installment funding under the PSP2, under which the Company received $161 million, comprised of a $143 million grant (the “PSP2 Grant”) for the continuation of payroll support from the date of the agreement through March 31, 2021, and an $18 million unsecured 10-year, low-interest loan (the “PSP2 Promissory Note”), all of which was
11



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

received during the nine months ended September 30, 2021. The Company recognized the full $143 million of PSP2 Grant proceeds, net of deferred financing costs, which had been fully recognized prior to the three months ended September 30, 2021, during the nine months ended September 30, 2021, within CARES Act credits in the Company’s condensed consolidated statements of operations.
The American Rescue Plan Act (the “ARP”), enacted on March 11, 2021, provided for additional assistance to passenger air carriers that received financial relief under PSP2. On April 29, 2021, the Company entered into an agreement with the Treasury for installment funding under the PSP3, under which the Company received $150 million, comprised of a $135 million grant (the “PSP3 Grant”) for the continuation of payroll support through September 30, 2021, and a $15 million unsecured 10-year, low-interest loan (the “PSP3 Promissory Note”), all of which was received during the nine months ended September 30, 2021. The Company recognized $72 million and the full $135 million of PSP3 Grant proceeds, net of deferred financing costs, during the three and nine months ended September 30, 2021, respectively, within CARES Act credits in the Company’s condensed consolidated statements of operations.
In connection with the Company’s participation in the PSPs and the Treasury Loan, the Company has been and will continue to be, as applicable, 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 February 2, 2023;
requirements to have maintained certain levels of scheduled services through March 31, 2022 (including to destinations where there may have been 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 employees (other than executive officers or independent contractors, or as otherwise permitted under the terms of the PSPs) through September 30, 2021;
limits on certain executive compensation, including limiting pay increases and severance pay or other benefits upon terminations, until April 1, 2023;
limitations on the use of the grant funds exclusively for the continuation of payment of employee salaries, wages and benefits; and
additional reporting and recordkeeping requirements.
As part of the PSP Promissory Notes and the Treasury Loan, the Company issued to the Treasury warrants to purchase 3,117,940 shares of FGHI common stock at a weighted average price of $6.95 per share. The initial fair value of these warrants upon issuance was treated as a loan discount, which reduced the carrying value of the related Treasury Loan and PSP Promissory Notes, and is amortized utilizing the effective interest method as interest expense in the Company’s condensed consolidated statements of operations over the term of each loan. These awards were originally classified as liability-based awards within other current liabilities on the Company’s condensed consolidated balance sheets, with periodic mark to market remeasurements being included in interest expense in the Company’s condensed consolidated statements of operations given the Company only had the option of settling in cash prior to being publicly traded. As a result of the IPO, the Company has the intent and ability to settle the warrants issued to the Treasury in shares and as a result, as of April 6, 2021, the Company reclassified the warrant liability to additional paid-in capital on the Company’s condensed consolidated balance sheet and is no longer required to mark to market the warrants. The Company recorded no mark to market adjustments during the three and nine months ended September 30, 2022 or during the three months ended September 30, 2021, and recorded $22 million during the nine months ended September 30, 2021 to interest expense within the Company’s condensed consolidated statements of operations. The Treasury has not exercised any warrants as of September 30, 2022.
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,
12



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

2020. In December 2020, the CARES Employee Retention Credit program was extended and enhanced through June 30, 2021. The ARP further extended the availability of the CARES Employee Retention Credit through December 31, 2021. As a result of the increase in revenues after the first quarter of 2021, the Company was no longer eligible for future credits due to the provisions of the gross receipt test applicable to this program. During the nine months ended September 30, 2021, the Company recognized $17 million related to the CARES Employee Retention Credit within CARES Act credits in the Company’s condensed consolidated statements of operations.
3. Revenue Recognition
As of September 30, 2022 and December 31, 2021, the Company’s air traffic liability was $296 million and $273 million, respectively. During the nine months ended September 30, 2022, substantially all of the air traffic liability as of December 31, 2021 has been recognized as passenger revenue within the Company’s condensed consolidated statements of operations. Of the air traffic liability balances as of September 30, 2022 and December 31, 2021, $9 million and $59 million, respectively, was related to customer rights to book future travel, which either expire within three or 12 months after issuance if not redeemed by the customer. The amounts expected not to be redeemed are recognized over the historical pattern of rights exercised by customers to fare revenues in passenger revenues within the Company’s condensed consolidated statements of operations.
During the three and nine months ended September 30, 2022 and 2021, the Company recognized $22 million, $67 million, $14 million and $31 million of revenue, respectively, in passenger revenues within the Company’s condensed consolidated statements of operations, related to expected and actual expiration of customer rights to book future travel.
Frequent Flyer Program
The Company’s Frontier Miles frequent flyer program provides frequent flyer travel awards to program members based on accumulated mileage credits. Mileage credits are generally accumulated as a result of travel, purchases using the co-branded credit card and purchases from other participating partners.
The Company defers revenue for mileage credits earned by passengers under its Frontier Miles program based on the equivalent ticket value a passenger receives by redeeming mileage credits for a ticket rather than paying cash.
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 and 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 that the Company estimates are not likely to be redeemed are subject to breakage and are
13



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

recognized as a portion of passenger revenues in the Company’s condensed consolidated statements of operations 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.
As a result of the reduction in demand due to the COVID-19 pandemic, the Company extended the expiration dates of mileage credits issued under its frequent flyer program.
The Company has a credit card affinity agreement with its credit card partner Barclays Bank Delaware (“Barclays”) through 2029, which provides for joint marketing, grants certain benefits to co-branded credit card holders and allows Barclays to market using the Company’s customer database. Cardholders earn mileage credits under the Frontier Miles program and the Company sells mileage credits at agreed-upon rates to Barclays and earns fees from Barclays for the acquisition, retention and use of the co-branded credit card by consumers.
Operating revenues are comprised of passenger revenues, which includes fare and non-fare passenger revenues, and other revenues. Disaggregated operating revenues are as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Passenger revenues:
Fare$386 $254 $1,035 $568 
Non-fare passenger revenues:
Service fees220 164 583 368 
Baggage202 131 518 321 
Seat selection61 47 183 118 
Other14 14 42 33 
Total non-fare passenger revenue497 356 1,326 840 
Total passenger revenues883 610 2,361 1,408 
Other revenues23 20 59 43 
Total operating revenues$906 $630 $2,420 $1,451 
The Company is managed as a single business unit that provides air transportation for passengers. Operating revenues by principal geographic region, as defined by the U.S. Department of Transportation (the “DOT”), are as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Domestic$832 $595 $2,197 $1,376 
Latin America74 35 223 75 
Total operating revenues$906 $630 $2,420 $1,451 
During the three and nine months ended September 30, 2022 and 2021, no revenue from any one foreign country, other than Mexico, represented greater than 5% of the Company’s total operating 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.
14



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):
September 30, 2022December 31, 2021
Supplier incentives$45 $11 
Prepaid expenses25 14 
Derivative instruments17  
Income and other taxes receivable8 12 
Other4 3 
Total other current assets$99 $40 
5. Financial Derivative Instruments and Risk Management
The Company is exposed to variability in jet fuel prices. Aircraft fuel is one of the Company’s largest operating expenses. 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 may enter into derivative contracts in order to limit exposure to the fluctuations in jet fuel prices. During the three and nine months ended September 30, 2022 and 2021, the Company did not enter into fuel hedges and, therefore, paid no upfront premiums for fuel hedges.
Additionally, the Company may be exposed to interest rate risk through aircraft lease contracts for the time period between when an agreement of terms is executed and the commencement of the lease, when portions of rental payments can be adjusted and become fixed based on the seven- or nine-year swap rate. As part of its risk management program, the Company may enter into contracts in order to limit the exposure to fluctuations in interest rates. During the three months ended September 30, 2022, the Company did not enter into any swaps and, therefore, paid no upfront premiums. During the nine months ended September 30, 2022, the Company paid upfront premiums of $9 million for the option to enter into and exercise cash-settled swaps with a forward starting effective date for seven of the Company’s future aircraft deliveries. As of September 30, 2022 the Company hedged the interest rate exposure on $245 million of total aircraft rent for seven aircraft to be delivered by the end of 2023. During the three and nine months ended September 30, 2021, the Company did not enter into any swaps and therefore, paid no upfront premiums.
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 Company’s 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 within the Company’s condensed consolidated statements of operations in the period that the jet fuel subject to hedging is consumed. 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 within the Company’s condensed consolidated statements of operations over the period of the related aircraft lease. 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 assets and liabilities are recorded as a component of other current assets and other current liabilities, respectively, on the Company’s condensed consolidated balance sheets. The Company does not enter into derivative instruments for speculative purposes.
15



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

The following table presents the assets associated with derivative instruments, which is presented on a gross basis and includes upfront premiums paid (in millions):
Balance Sheet ClassificationSeptember 30, 2022December 31, 2021
Derivatives designated as cash flow hedges:
Interest rate hedge assetsOther current assets$17 $ 
The following table presents the net of tax impact of the overall effectiveness of derivative instruments designated as cash flow hedging instruments under ASC 815 to the Company’s condensed consolidated statements of comprehensive income (loss) (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Derivatives designated as cash flow hedges
Amortization of swaption cash flow hedges, net of tax$ $ $1 $1 
Unrealized gain from cash flows hedges, net of tax7  6  
Total$7 $ $7 $1 
As of September 30, 2022 and December 31, 2021, $3 million and $10 million, respectively, was included in AOCI/L, which includes both the expired interest rate hedging instruments that are expected to be reclassified into aircraft rent within the Company’s condensed consolidated statements of operations over the aircraft lease term as well as the fair value adjustments for any outstanding interest rate derivative hedging instruments.
The following table summarizes the effect of interest rate derivative instruments’ gains (losses) reflected in aircraft rent expense within the Company’s condensed consolidated statements of operations (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Derivatives designated as cash flow hedges
Amortization of swaption cash flow hedges, net of tax$ $ $(1)$(1)
6. Other Current Liabilities
Other current liabilities consist of the following (in millions):
September 30, 2022December 31, 2021
Salaries, wages and benefits$97 $89 
Passenger and other taxes and fees payable91 84 
Aircraft maintenance60 36 
Leased aircraft return costs51 25 
Station obligations48 64 
Fuel liabilities28 23 
Current portion of phantom equity units (Note 9) 26 
Other current liabilities46 36 
Total other current liabilities$421 $383 
16



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

7. Debt
The Company’s debt obligations are as follows (in millions):
September 30, 2022December 31, 2021
Secured debt:
Pre-delivery credit facility(a)
$268 $174 
Treasury Loan(b)
 150 
Floating rate building note(c)
18 18 
Unsecured debt:
PSP Promissory Notes(d)
66 66 
Affinity card advance purchase of mileage credits(e)
71 15 
Total debt423 423 
Less current maturities of long-term debt, net(193)(127)
Less long-term debt acquisition costs and other discounts(2)(9)
Long-term debt, net$228 $287 
__________________
(a)The Company, through an affiliate, entered into the pre-delivery payment (“PDP”) facility with Citibank, N.A. in December 2014 (the “PDP Financing Facility”). The PDP Financing Facility is collateralized by the Company’s purchase agreement for Airbus A320 family aircraft deliveries through the term of the facility (see Note 11). In December 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. In 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. In December 2021, the facility was amended and restated to extend the availability of the facility through December 2024 to include additional 2023 and 2024 aircraft deliveries, and in March 2022 the facility was further amended to re-align the PDP Financing Facility with the updated future aircraft deliveries. In June 2022, the facility was amended and restated to extend the availability of the facility through December 2025 to include additional 2025 aircraft deliveries, to increase the total available capacity to $280 million, and to include the flexibility to potentially obtain additional commitments from other lenders. No commitments have been secured from other lenders as of September 30, 2022.
Interest is paid every 90 days based on the Secured Overnight Financing Rate ("SOFR") plus a margin for each individual tranche. The PDP Financing Facility consists of separate loans for each PDP aircraft. Each separate loan matures upon the earlier of (i) delivery of that aircraft to the Company by Airbus, (ii) the date one month following the last day of the scheduled delivery month of such aircraft and (iii) if there is a delay in delivery of aircraft, depending on the cause of the delivery delay, up to six months following the last day of the scheduled delivery month of such aircraft. The PDP Financing Facility will be repaid periodically according to the preceding sentence with the last scheduled delivery of aircraft contemplated in the PDP Financing Facility, as currently in effect, expected to be in the fourth quarter of 2025.
(b)On September 28, 2020, the Company entered into the Treasury Loan with the Treasury for a term loan facility of up to $574 million, and had borrowed $150 million under the loan as of December 31, 2021. On February 2, 2022, the Company repaid the Treasury Loan in full, along with accrued interest and associated fees of $1 million. Additionally, the Company recognized a $7 million loss on the extinguishment of debt for the nine months ended September 30, 2022 from the write-off of unamortized deferred financing costs associated with the Treasury Loan. The repayment terminated the loan agreement with the Treasury and substantially unencumbered the Company’s co-branded credit card program and related brand assets that secured the Treasury Loan.
(c)Represents a note with a commercial bank related to the Company’s headquarters building. Under the terms of the agreement, the Company will repay the outstanding principal balance in quarterly payments beginning in January 2022 until the maturity date in December 2023. On the maturity date, one final balloon payment will be made to cover all unpaid principal, accrued unpaid interest and other amounts due. The interest rate of one-month LIBOR plus a margin is payable monthly.
(d)On April 30, 2020, the Company executed a promissory note under the PSP agreement with the Treasury from which the Company received a $33 million unsecured 10-year, low-interest loan (the “PSP Promissory Note”). Subsequently, the Company entered into the PSP2 with the Treasury in January 2021 and the PSP3 with the Treasury in April 2021, from which the Company received an additional $18 million and $15 million of proceeds, respectively, evidenced by promissory notes 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 SOFR plus 2.00% in the final five years. The loans can be prepaid at par at any time without incurring a penalty.
(e)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
17



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

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. Per the terms of the Treasury Loan, the facility amount could not be extended above $15 million until full extinguishment of the Treasury Loan, which occurred in February 2022, and, as a result, the Company borrowed an additional $56 million in the first quarter of 2022. 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 is scheduled to be repaid in 12 equal monthly installments.
Cash payments for interest related to debt was $9 million and $7 million for the nine months ended September 30, 2022 and 2021, respectively.
The Company has issued standby letters of credit and surety bonds to various airport authorities and vendors that are collateralized by a portion of the Company’s property and equipment and, as of September 30, 2022 and December 31, 2021, the Company did not have any outstanding letters of credit that were drawn upon.
As of September 30, 2022, future maturities of debt are payable as follows (in millions):
September 30, 2022
Remainder of 2022$55 
2023206 
202425 
2025 
2026 
Thereafter137 
Total debt principal payments$423 
The Company continues to monitor covenant compliance with various parties, including, but not limited to, its lenders and credit card processors, and as of September 30, 2022 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 third quarter of 2022 related to one of its credit card processors that represents less than 10% of total revenues.
8. Operating Leases
The Company leases property and equipment under operating leases. For leases with initial terms greater than 12 months, the related operating lease right-of-use asset and corresponding operating lease liability are recorded at the present value of lease payments over the term on the Company’s condensed consolidated balance sheets. Some leases include rental escalation clauses, renewal options, termination options, and/or other items that cause variability that are factored into the determination of lease payments when appropriate. The Company does not separate lease and non-lease components of contracts, except for certain flight training equipment, for which consideration is allocated between lease and non-lease components.
Aircraft
As of September 30, 2022, the Company leased 115 aircraft with remaining terms ranging from one month to twelve years, all of which are under operating leases and are included within right-of-use asset and lease liabilities on the Company’s condensed consolidated balance sheets. In addition, as of September 30, 2022, the Company leased 25 spare engines, which are all under operating leases, with the remaining terms ranging from one month to twelve years. As of September 30, 2022, the lease rates for eight of the engines depend on usage-based metrics which are variable, and as such, these leases are not recorded on the Company’s condensed consolidated balance sheets as a right-of-use asset and lease liability.
18



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

During the three and nine months ended September 30, 2022 and 2021, the Company executed sale-leaseback transactions with third-party lessors for three, eight, five and 13 new Airbus A320neo family aircraft, respectively. Additionally, the Company completed sale-leaseback transactions for one and three engines during the three and nine months ended September 30, 2022, respectively. The Company did not complete a sale-leaseback transaction for any engines during the three months ended September 30, 2021 and completed a sale-leaseback transaction for one engine during the nine months ended September 30, 2021. All of the leases from sale-leaseback transactions have been accounted for as operating leases. The Company recognized net sale-leaseback gains of $21 million, $49 million, $19 million and $55 million during the three and nine months ended September 30, 2022 and 2021, respectively, which are included as a component of other operating expenses within the Company’s condensed consolidated statements of operations.
In May 2021, the Company entered into an early termination and buyout agreement with one of its lessors for six aircraft previously owned by the Company, which stipulated that four A319 aircraft originally scheduled to be returned in December 2021 would be returned during the second and third quarters of 2021 and the two A320ceo aircraft would return as scheduled during the fourth quarter of 2021. The early returns of these aircraft retired the remaining A319 aircraft in the Company’s fleet. As a result of this early termination and buyout arrangement, the Company recorded a $1 million and $10 million charge included as a component of rent expense within the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2021, respectively, related to the accelerated rent and lease return obligations of the A319 aircraft returned early.
Aircraft Rent Expense and Maintenance Obligations
During the three and nine months ended September 30, 2022 and 2021, aircraft rent expense was $140 million, $401 million, $128 million and $399 million, respectively. Aircraft rent expense includes supplemental rent, which is made up of maintenance reserves paid or to be paid that are not probable of being reimbursed and probable lease return condition obligations. Supplemental rent expense (benefit) for maintenance-related reserves that were deemed non-recoverable and any impact from changes in those estimates, was less than $