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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __ to __
Commission File Number: 001-40304
https://cdn.kscope.io/aa516b6e827070082cbe4aa1c25b02dc-F9_corporate_FC-01.jpg
Frontier Group Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware46-3681866
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
4545 Airport Way
Denver, CO 80239
(720) 374-4490
(Address of principal executive offices, including zip code, and Registrant’s telephone number, including area code)
    
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.001 par value per shareULCCThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated 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 218,516,579 shares of common stock, $0.001 par value per share, outstanding as of April 28, 2023.



TABLE OF CONTENTS
Page
1


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


PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(unaudited, in millions, except share and per share amounts)
March 31, 2023December 31, 2022
Assets
Cash and cash equivalents$790 $761 
Accounts receivable, net96 90 
Supplies, net57 55 
Other current assets99 114 
Total current assets1,042 1,020 
Property and equipment, net242 226 
Operating lease right-of-use assets2,623 2,484 
Pre-delivery deposits for flight equipment348 371 
Aircraft maintenance deposits85 105 
Intangible assets, net28 28 
Other assets302 265 
Total assets$4,670 $4,499 
Liabilities and stockholders’ equity
Accounts payable$79 $89 
Air traffic liability424 313 
Frequent flyer liability12 13 
Current maturities of long-term debt, net215 157 
Current maturities of operating leases487 465 
Other current liabilities463 518 
Total current liabilities1,680 1,555 
Long-term debt, net212 272 
Long-term operating leases2,152 2,034 
Long-term frequent flyer liability32 32 
Other long-term liabilities106 97 
Total liabilities4,182 3,990 
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.001 par value per share, with 218,503,854 and 217,875,890 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively
  
Additional paid-in capital392 393 
Retained earnings109 122 
Accumulated other comprehensive income (loss)(13)(6)
Total stockholders’ equity488 509 
Total liabilities and stockholders’ equity$4,670 $4,499 

See Notes to Condensed Consolidated Financial Statements
3


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(unaudited, in millions, except per share amounts)
Three Months Ended March 31,
20232022
Operating revenues:
Passenger$830 $588 
Other18 17 
Total operating revenues848 605 
Operating expenses:
Aircraft fuel292 215 
Salaries, wages and benefits203 172 
Aircraft rent131 128 
Station operations124 105 
Sales and marketing40 32 
Maintenance, materials and repairs45 34 
Depreciation and amortization11 13 
Transaction and merger-related costs1 11 
Other operating26 48 
Total operating expenses873 758 
Operating income (loss)(25)(153)
Other income (expense):
Interest expense(6)(9)
Capitalized interest6 1 
Interest income and other8  
Total other income (expense)8 (8)
Income (loss) before income taxes(17)(161)
Income tax expense (benefit)(4)(40)
Net income (loss)$(13)$(121)
Earnings (loss) per share:
Basic$(0.06)$(0.56)
Diluted$(0.06)$(0.56)


See Notes to Condensed Consolidated Financial Statements
4


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited, in millions)
Three Months Ended March 31,
20232022
Net income (loss)$(13)$(121)
Unrealized gains (losses) and amortization from cash flow hedges, net of deferred tax benefit/(expense) of $2 for the three months ended March 31, 2023 and less than $1 million for the three months ended March 31, 2022. (Note 4)
(7) 
Other comprehensive income (loss)(7) 
Comprehensive income (loss)$(20)$(121)

See Notes to Condensed Consolidated Financial Statements
5


FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in millions)
Three Months Ended March 31,
20232022
Cash flows from operating activities:
Net income (loss)$(13)$(121)
Deferred income taxes(4)(40)
Depreciation and amortization11 13 
Gains recognized on sale-leaseback transactions(40)(7)
Loss on extinguishment of debt 7 
Stock-based compensation4 3 
Changes in operating assets and liabilities:
Accounts receivable19 (9)
Supplies and other current assets (13)
Aircraft maintenance deposits(4)(4)
Other long-term assets(37)(17)
Accounts payable(8)5 
Air traffic liability111 90 
Other liabilities(64)6 
Cash provided by (used in) operating activities(25)(87)
Cash flows from investing activities:
Capital expenditures(11)(7)
Pre-delivery deposits for flight equipment, net of refunds23 (25)
Other(2)(1)
Cash provided by (used in) investing activities10 (33)
Cash flows from financing activities:
Proceeds from issuance of debt, net of issuance costs36 97 
Principal repayments on debt(38)(165)
Proceeds from sale-leaseback transactions51  
Minimum tax withholdings on share-based awards(5)(3)
Cash provided by (used in) financing activities44 (71)
Net increase (decrease) in cash, cash equivalents and restricted cash29 (191)
Cash, cash equivalents and restricted cash, beginning of period761 918 
Cash, cash equivalents and restricted cash, end of period$790 $727 






See Notes to Condensed Consolidated Financial Statements
6



FRONTIER GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited, in millions, except share amounts)
Common StockAdditional
paid-in
capital
Retained
earnings
Accumulated other comprehensive income (loss)Total
SharesAmount
Balance at December 31, 2021217,065,096 $ $381 $159 $(10)$530 
Net income (loss)— — — (121)— (121)
Shares issued in connection with vesting of restricted stock units676,146 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(275,822)— (3)— — (3)
Stock option exercises34,461 — — — — — 
Stock-based compensation— — 3 — — 3 
Balance at March 31, 2022217,499,881 $ $381 $38 $(10)$409 
Balance at December 31, 2022217,875,890 $ $393 $122 $(6)$509 
Net income (loss)— — — (13)— (13)
Shares issued in connection with vesting of restricted stock units976,916 — — — — — 
Shares withheld to cover employee taxes on vested restricted stock units(402,814)— (5)— — (5)
Unrealized loss from cash flows hedges, net of tax— — — — (7)(7)
Stock option exercises53,862 — — — — — 
Stock-based compensation— — 4 — — 4 
Balance at March 31, 2023218,503,854 $ $392 $109 $(13)$488 
See Notes to Condensed Consolidated Financial Statements
7



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 100 airports.
The Company is managed as a single business unit that provides air transportation for passengers. Management has concluded there is only one reportable segment.
The accompanying condensed consolidated financial statements include the accounts of the Company and reflect all normal recurring adjustments which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company for the respective periods presented. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form 10-Q. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 22, 2023 (the “2022 Annual Report”).
The interim results reflected in the unaudited condensed consolidated financial statements are not necessarily indicative of the results that may be expected for other interim periods or for the full year. The air transportation business is subject to significant seasonal fluctuations and is volatile and highly affected by economic cycles and trends.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.
2. Revenue Recognition
As of March 31, 2023 and December 31, 2022, the Company’s air traffic liability balance was $430 million and $328 million, respectively, which includes amounts classified in other long-term liabilities. During the three months ended March 31, 2023, 87% of the air traffic liability as of December 31, 2022 was recognized as passenger revenue within the Company’s condensed consolidated statements of operations. Of the air traffic liability balances as of March 31, 2023 and December 31, 2022, $76 million and $60 million, respectively, was related to unearned membership fees.
During the three months ended March 31, 2023 and 2022, the Company recognized $10 million and $22 million, respectively, in passenger revenues within the Company’s condensed consolidated statements of operations, related to expected and actual expiration of customer rights to book future travel.
8



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,
20232022
Passenger revenues:
Fare$303 $229 
Non-fare passenger revenues:
Baggage221 130 
Service fees217 162 
Seat selection72 54 
Other17 13 
Total non-fare passenger revenue527 359 
Total passenger revenues830 588 
Other revenues18 17 
Total operating revenues$848 $605 
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,
20232022
Domestic$781 $546 
Latin America67 59 
Total operating revenues$848 $605 
The Company attributes operating revenues by geographic region based upon the origin and destination of each passenger flight segment. The Company’s tangible assets consist primarily of flight equipment, which are mobile across geographic markets. Accordingly, assets are not allocated to specific geographic regions.
Frequent Flyer Program
The Company’s Frontier Miles frequent flyer program provides frequent flyer travel awards to program members based on accumulated mileage credits. Mileage credits are generally accumulated as a result of travel, purchases using the co-branded credit card and purchases from other participating partners. The Company defers revenue for mileage credits earned by passengers under its Frontier Miles program based on the equivalent ticket value a passenger receives by redeeming mileage credits for a ticket rather than paying cash.
The Company has a credit card affinity agreement with its credit card partner, Barclays Bank Delaware (“Barclays”), through 2029, which provides for joint marketing, grants certain benefits to co-branded credit cardholders (“Cardholders”) and allows Barclays to market using the Company’s customer database. Cardholders earn mileage credits under the Frontier Miles program and the Company sells mileage credits at agreed-upon rates to Barclays and earns fees from Barclays for the acquisition, retention and use of the co-branded credit card by Cardholders.
9



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

3. Other Current Assets
Other current assets consist of the following (in millions):
March 31, 2023December 31, 2022
Supplier incentives$53 $55 
Prepaid expenses27 20 
Derivative instruments9 24 
Income tax and other taxes receivable5 8 
Other5 7 
Total other current assets$99 $114 
4. Financial Derivative Instruments and Risk Management
The Company may be exposed to interest rate risk through aircraft and spare engine lease contracts for the time period between agreement of terms and commencement of the lease, when portions of rental payments can be adjusted and become fixed based on the swap rate. As part of its risk management program, the Company enters into contracts in order to limit the exposure to fluctuations in interest rates. During the three months ended March 31, 2023 and 2022, respectively, the Company did not enter into any swaps and, therefore, paid no upfront premiums. As of March 31, 2023 the Company hedged the interest rate exposure on $451 million of total aircraft and spare engine rent for 11 aircraft and 3 engines, respectively, to be delivered by the end of 2023.
Additionally, the Company is exposed to credit losses in the event of nonperformance by counterparties to its derivative instruments but does not expect that any of its counterparties will fail to meet their respective obligations. The amount of such credit exposure is generally the fair value of the Company’s outstanding contracts in a receivable position. To manage credit risks, the Company selects counterparties based on credit assessments and monitors the market position with each counterparty.
The assets associated with the Company’s derivative instruments are presented on a gross basis and include upfront premiums paid. These assets are recorded as a component of other current assets on the Company’s condensed consolidated balance sheets. There were $9 million and $24 million of assets outstanding as of March 31, 2023 and December 31, 2022, respectively.
Amortization of cash flow hedges, net of tax was less than $1 million for the three months ended March 31, 2023 and 2022, respectively, as reflected in aircraft rent expense within the Company’s condensed consolidated statements of operations.
The following table presents the net of tax impact of the overall effectiveness of derivative instruments designated as cash flow hedging instruments within the Company’s condensed consolidated statements of comprehensive income (loss) (in millions):
Three Months Ended March 31,
20232022
Derivatives designated as cash flow hedges
Interest rate derivative contract gains (losses), net of tax $(7)$ 
As of March 31, 2023, $13 million related to interest rate hedging instruments included in accumulated other comprehensive income (loss), a component of stockholders’ equity on the Company’s condensed consolidated balance sheets, is expected to be reclassified into aircraft rent within the Company’s condensed consolidated statements of operations over the aircraft or engine lease term.
10



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

5. Other Current Liabilities
Other current liabilities consist of the following (in millions):
March 31, 2023December 31, 2022
Passenger and other taxes and fees payable$138 $113 
Salaries, wages and benefits101 104 
Aircraft maintenance71 63 
Station obligations47 57 
Fuel liabilities31 34 
Leased aircraft return costs20 84 
Other current liabilities55 63 
Total other current liabilities$463 $518 
6. Debt
The Company’s debt obligations are as follows (in millions):
March 31, 2023December 31, 2022
Secured debt:
Pre-delivery credit facility(a)
$266 $277 
Floating rate building note(b)
17 17 
Unsecured debt:
Affinity card advance purchase of mileage credits(c)
80 71 
PSP Promissory Notes(d)
66 66 
Total debt429 431 
Less current maturities of long-term debt(215)(157)
Less debt acquisition costs and other discounts, net(2)(2)
Long-term debt, net$212 $272 
__________________
(a)The Company, through an affiliate, entered into the pre-delivery payment (“PDP”) facility with Citibank, N.A., as facility agent, in December 2014 (as amended, the “PDP Financing Facility”). The PDP Financing Facility is primarily collateralized by the Company’s purchase agreement for Airbus A320 family aircraft deliveries (see Note 9) through the term of the facility, which extends through December 2025. As of March 31, 2023, the PDP Financing Facility allows for total commitments up to $270 million.
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 expected to be in the fourth quarter of 2025.
(b)Represents a note with a commercial bank related to the Company’s headquarters building. Under the terms of the note, the Company began repaying the outstanding principal balance with quarterly payments beginning in January 2022 and continuing until the maturity date in December 2023. On the maturity date, one final balloon payment will be made to cover all unpaid principal, accrued unpaid interest and other amounts due. The interest rate of one-month London Interbank Offered Rate (“ LIBOR”) plus a margin is payable monthly.
(c)The Company entered into an agreement with Barclays in 2003 which, as amended, provides for joint marketing, grants certain benefits to Cardholders and allows Barclays to market using the Company’s customer database, through 2029. Cardholders earn mileage credits under the Frontier Miles program and the Company sells mileage credits at agreed-upon rates to Barclays and earns fees from Barclays for the acquisition, retention and use of the co-branded credit card by Cardholders. In addition, Barclays will pre-purchase miles if the Company meets certain conditions precedent. 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 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.
11



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

(d)As a result of the Company’s participation in the payroll support programs offered by the U.S. Department of the Treasury (the “Treasury”), the Company obtained a series of 10-year, low-interest loans from the Treasury (collectively, the “PSP Promissory Notes”) that are due between 2030 to 2031. The PSP Promissory Notes include an annual interest rate of 1.00% for the first five years and the SOFR plus 2.00% in the final five years, with bi-annual interest payments. The loans can be prepaid at par at any time without incurring a penalty.
In connection with the term loan facility entered into with the Treasury on September 28, 2020 (the “Treasury Loan”), which was repaid in full on February 2, 2022, and the PSP Promissory Notes, the Company issued to the Treasury warrants to purchase 3,117,940 shares of FGHI common stock at a weighted-average price of $6.95 per share. The Treasury has not exercised any warrants as of March 31, 2023.
Cash payments for interest related to debt was $6 million and $2 million for the three months ended March 31, 2023 and 2022, 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 March 31, 2023 and December 31, 2022, the Company did not have any outstanding letters of credit that were drawn upon.
As of March 31, 2023, future maturities of debt are payable as follows (in millions):
March 31, 2023
Remainder of 2023$127 
2024147 
20259 
2026 
2027 
Thereafter146 
Total debt principal payments$429 
The Company continues to monitor covenant compliance with various parties, including, but not limited to, its lenders and credit card processors, and as of March 31, 2023, the Company is in compliance with all of its covenants.
7. Operating Leases
The Company leases property and equipment under operating leases. For leases with initial terms greater than 12 months, the related operating lease right-of-use asset and corresponding operating lease liability are recorded at the present value of lease payments over the term on the Company’s condensed consolidated balance sheets. Some leases include rental escalation clauses, renewal options, termination options and/or other items that cause variability that are factored into the determination of lease payments, when appropriate. The Company does not separate lease and non-lease components of contracts, except for certain flight training equipment, for which consideration is allocated between lease and non-lease components.
Aircraft
As of March 31, 2023, the Company leased 125 aircraft with remaining terms ranging from one month to 12 years, all of which are under operating leases and are included within operating lease right-of-use assets and operating lease liabilities on the Company’s condensed consolidated balance sheets. In addition, as of March 31, 2023, the Company leased 30 spare engines which are all under operating leases, with the remaining term ranging from one month to 12 years. As of March 31, 2023, the lease rates for 12 of the engines depend on usage-based metrics which are variable and, as such, these leases are not recorded on the Company’s condensed consolidated balance sheets as operating lease right-of-use assets or as operating lease liabilities.
During the three months ended March 31, 2023 and 2022, the Company executed sale-leaseback transactions with third-party lessors for three and two new Airbus A320neo family aircraft, respectively, and also entered into
12



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

direct leases for three new Airbus A320neo family aircraft during the three months ended March 31, 2023. Additionally, the Company completed a sale-leaseback transaction for one engine during the three months ended March 31, 2023 and did not complete a sale-leaseback transaction for any engines during the three months ended March 31, 2022. All of the leases from the sale-leaseback transactions are accounted for as operating leases. The Company recognized net sale-leaseback gains from those sale-leaseback transactions of $40 million and $7 million during the three months ended March 31, 2023 and 2022, respectively, which are included as a component of other operating expenses within the Company’s condensed consolidated statements of operations.
Aircraft Rent Expense and Maintenance Obligations
During the three months ended March 31, 2023 and 2022, aircraft rent expense was $131 million and $128 million, respectively. Aircraft rent expense includes supplemental rent, which is made up of maintenance reserves paid or to be paid that are not probable of being reimbursed and probable lease return condition obligations. Supplemental rent expense (benefit) for maintenance-related reserves that were deemed non-recoverable, and any impact from changes in those estimates, was less than $1 million for each of the three months ended March 31, 2023 and 2022. The portion of supplemental rent expense related to probable lease return condition obligations was $2 million and $15 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, the Company’s total leased aircraft return cost liability was $47 million and $102 million, respectively, which are reflected in other current liabilities and other long-term liabilities within the Company’s condensed consolidated balance sheets.
Additionally, certain of the Company’s aircraft lease agreements require the Company to pay maintenance reserves to aircraft lessors to be held as collateral in advance of the Company’s required performance of major maintenance activities. As of March 31, 2023 and December 31, 2022, the Company had aircraft maintenance deposits that are expected to be recoverable of $121 million and $117 million, respectively, on the Company’s condensed consolidated balance sheets, of which $36 million and $12 million, respectively, are included in accounts receivable, net on the Company’s condensed consolidated balance sheets as the eligible maintenance has been performed. The remaining $85 million and $105 million are included within aircraft maintenance deposits on the Company’s condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.
A majority of these maintenance reserve payments are calculated based on a utilization measure, such as flight hours or cycles. Maintenance reserves collateralize the lessor for maintenance time run off the aircraft until the completion of the maintenance of the aircraft. As of March 31, 2023, fixed maintenance reserve payments for aircraft and spare engines, including estimated amounts for contractual price escalations, were expected to be $2 million for the remainder of 2023, $3 million per year for 2024 through 2026, $5 million for 2027 and $5 million thereafter, before consideration of reimbursements.
During the quarter ended March 31, 2023, the Company extended the term for certain aircraft operating leases that were slated to expire in the fourth quarter of 2023. For the three months ended March 31, 2023, the Company recorded an $18 million benefit to aircraft rent in the Company’s condensed consolidated statement of operations related to previously accrued lease return costs that were variable in nature associated with the anticipated utilization and condition of the airframes and engines at original return date, that given the extension of these leases, such variable return costs are no longer probable of occurrence.
Airport Facilities
The Company’s facility leases are primarily for space at approximately 100 airports that are primarily located in the United States. These leases are classified as operating leases and reflect the use of airport terminals, ticket counters, office space, and maintenance facilities. Generally, this space is leased from government agencies that control the use of the airport. The majority of these leases are short-term in nature and renew on an evergreen basis. For these leases, the contractual term is used as the lease term. As of March 31, 2023, the remaining lease terms vary from one month to 12 years. At the majority of the U.S. airports, the lease rates depend on airport operating costs or
13



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

use of the facilities and are reset at least annually, and because of the variable nature of the rates, these leases are not recorded on the Company’s condensed consolidated balance sheets as right-of-use assets and lease liabilities.
Other Ground Property and Equipment
The Company leases certain other assets such as flight training equipment, building space, and various other equipment. Certain of the Company’s leases for other assets are deemed to contain fixed rental payments and, as such, are classified as operating leases and are recorded on the Company’s condensed consolidated balance sheets as a right-of-use asset and liability. The remaining lease terms ranged from one month to nine years as of March 31, 2023.
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 Company’s condensed consolidated statements of operations. The payback of all previous aircraft and engine rent deferrals was completed as of December 31, 2021, and, therefore, there was no impact to aircraft rent within the Company’s condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022.
The payback of station deferrals decreased operating cash flows and unfavorably impacted station operations within the Company’s results of operations by $1 million for the three months ended March 31, 2023. No payback of station deferrals occurred for the three months ended March 31, 2022. As of March 31, 2023, the Company had $7 million in station deferrals which will be recognized to station operations within the Company’s consolidated statements of operations in future periods as the deferrals are repaid.
Lease Costs
The table below presents certain information related to lease costs for operating leases during the three months ended March 31, 2023 and 2022 (in millions):
Three Months Ended March 31,
20232022
Operating lease cost(a)
$127 $117 
Variable lease cost(a)
74 55 
Total lease costs$201 $172 
______________
(a)Expenses are included within aircraft rent, station operations, maintenance, materials and repairs and other operating within the Company’s condensed consolidated statements of operations.
During the three months ended March 31, 2023 and 2022, the Company acquired, through new or modified operating leases, operating lease assets totaling $231 million and $61 million, respectively, which are included in operating lease right-of-use assets on the Company’s condensed consolidated balance sheets. During the three months ended March 31, 2023 and 2022, the Company paid cash of $127 million and $117 million, respectively, for amounts included in the measurement of lease liabilities.
14



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

8. Stock-Based Compensation
During the three months ended March 31, 2023 and 2022, the Company recognized $4 million and $3 million, respectively, in stock-based compensation expense, which is included as a component of salaries, wages and benefits within the Company’s condensed consolidated statements of operations.
Stock Options and Restricted Awards
There were no stock options granted during the three months ended March 31, 2023. During the three months ended March 31, 2023, 53,862 vested stock options were exercised with a weighted-average exercise price of $2.32 per share. As of March 31, 2023, the weighted-average exercise price of outstanding options was $1.96 per share.
During the three months ended March 31, 2023, 922,023 restricted stock units were issued with a weighted-average grant date fair value of $13.60 per share. During the three months ended March 31, 2023, 976,916 restricted stock units vested, of which 402,814 restricted stock units were withheld to cover employee taxes, with a weighted-average grant date fair value of $12.27 and $12.28 per share, respectively.
Phantom Equity Awards
On December 3, 2013, to give effect to the reorganization of the Company’s corporate structure, an agreement was reached to amend and restate a phantom equity agreement with the Company’s pilots. Under the terms of this agreement, when an amendment to the underlying collective bargaining agreement was approved, the Company’s pilots employed in June 2011 (the “Participating Pilots”), through their agent, FAPAInvest, LLC, received phantom equity units. Each unit represented the right to receive common stock or cash in connection with certain events, including a qualifying initial public offering, such stock to be distributed or cash paid to the Participating Pilots in 2020 and 2022 based on a predetermined formula. In accordance with the amended and restated phantom equity agreement, the obligation became fixed as of December 31, 2019 and was no longer subject to valuation adjustments. As of December 31, 2021, the remaining liability was $26 million and presented within other current liabilities on the Company’s condensed consolidated balance sheet. During the three months ended March 31, 2022, the remaining liability of $26 million was fully paid.
Stockholders’ Equity
As of March 31, 2023 and December 31, 2022, the Company had authorized common stock (voting), common stock (non-voting) and preferred stock of 750,000,000, 150,000,000 and 10,000,000 shares, respectively, of which only common stock (voting) were issued and outstanding. All classes of equity have a par value of $0.001 per share.
15



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

9. Commitments and Contingencies
Flight Equipment Commitments
As of March 31, 2023, the Company’s firm aircraft and engine purchase orders consisted of the following:
A320neo
A321neo(a)
Total Aircraft(a)
Engines
Year Ending
Remainder of 2023 10 10 3 
2024 33 33 2 
202517 13 30 4 
202619 22 41 4 
202721 21 42 3 
Thereafter10 52 62 2 
Total67 151 218 18 
______________
(a)The schedule presented reflects the contractual delivery dates as of March 31, 2023 and does not reflect the notification of aircraft delivery delays communicated by Airbus on May 3, 2023 which delays the Company’s scheduled A321neo deliveries between the second quarter of 2023 and fourth quarter of 2024. Pursuant to this notification received from Airbus, seven aircraft deliveries expected in 2023 shifted by an average of one month, resulting in two A321neo aircraft shifting from 2023 into 2024 and also shifting 11 A321neo aircraft from 2024 to 2025. Such delays in the scheduled deliveries of Airbus aircraft may persist in future periods.
As of March 31, 2023, all of the aircraft under the original master purchase agreement with Airbus (“backlog aircraft”) have been received. During December 2017, the Company entered into an amendment to the previously existing master purchase agreement, under which the Company has a commitment to purchase a remaining incremental 67 A320neo and 60 A321neo aircraft (“incremental aircraft”), with the first delivery occurring in September 2022 and the remaining expected to be delivered through 2028, per the latest delivery schedule.
During October 2019, the Company entered into an amendment to the previously existing master purchase agreement that allows the Company the option to convert 18 A320neo aircraft to A321XLR aircraft. The conversion right is available until June 2023, per the latest amendment, and is not reflected in the table above as this option has not been exercised. Each of the Company’s amended agreements with Airbus provide for, among other things, varying purchase incentives for each aircraft type (e.g., A320neo versus A321neo), which are allocated proportionally by aircraft type over the remaining aircraft to be delivered so that each aircraft’s capitalized cost upon induction would be equal. Therefore, as cash paid for deliveries is greater than the capitalized cost due to the allocation of these purchase incentives, a deferred purchase incentive is recognized within other assets on the Company’s condensed consolidated balance sheets, which will ultimately be offset by future deliveries of aircraft with lower cash payments than their associated capitalized cost.
In November 2021, the Company entered into an amendment with Airbus to add an additional 91 A321neo aircraft (“supplemental aircraft”) to the committed purchase agreement, with deliveries expected to begin in 2025, continuing through 2029 per the latest delivery schedule.
In April 2022, the agreement with Pratt & Whitney, the provider of engines for the Company’s incremental order book, was amended to include additional spare engine commitments and adjust the timing of remaining deliveries, which has been reflected in the table above.
As of March 31, 2023, purchase commitments for these aircraft and engines, including estimated amounts for contractual price escalations and PDPs, were approximately $589 million for the remainder of 2023, $1,974 million in 2024, $1,767 million in 2025, $2,358 million in 2026, $2,448 million in 2027 and $3,759 million thereafter.
16



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

As of March 31, 2023, the Company had signed lease agreements with two of its leasing partners to add ten additional A321neo aircraft through direct leases. Three deliveries occurred in the first quarter of 2023, with the remainder continuing into the third quarter of 2023, based on the latest delivery schedule. None of these ten aircraft are reflected in the table above given these are not purchase orders.
Litigation and Other Contingencies
The Company is subject to commercial litigation claims and to administrative and regulatory proceedings and reviews that may be asserted or maintained from time to time. The Company regularly evaluates the status of such matters to assess whether a loss is probable and reasonably estimable in determining whether an accrual is appropriate. Furthermore, in determining whether disclosure is appropriate, the Company evaluates each matter to assess if there is at least a reasonable possibility that a loss or additional losses may have been incurred and whether an estimate of possible loss or range of loss can be made. The Company believes the ultimate outcome of such lawsuits, proceedings and reviews will not, individually or in the aggregate, have a material adverse effect on its condensed consolidated financial position, liquidity or results of operations and that the Company’s current accruals cover matters where loss is deemed probable and can be reasonably estimated.
The ultimate outcome of legal actions is unpredictable and can be subject to significant uncertainties, and it is difficult to determine whether any loss is probable or even possible. Additionally, it is also difficult to estimate the amount of loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Thus, actual losses may be in excess of any recorded liability or the range of reasonably possible loss.
Employees
The Company has seven union-represented employee groups that together represented approximately 87% of all employees as of March 31, 2023. The table below sets forth the Company’s employee groups and status of the collective bargaining agreements as of March 31, 2023:
Percentage of Workforce
Employee GroupRepresentative
Amendable Date(a)
March 31, 2023
PilotsAir Line Pilots Association (ALPA)January 202431%
Flight AttendantsAssociation of Flight Attendants (AFA-CWA)May 2024 51%
Aircraft TechniciansInternational Brotherhood of Teamsters (IBT)
May 2025
3%
Aircraft Appearance AgentsIBTOctober 20231%
DispatchersTransport Workers Union (TWU)
December 2021(b)
1%
Material SpecialistsIBT
March 2022(b)
<1%
Maintenance ControllersIBTOctober 2023
<1%
__________________
(a)    Subject to standard early opener provisions.
(b)The Company’s collective bargaining agreements with its dispatchers and material specialists, represented by TWU and IBT, respectively, were still amendable as of March 31, 2023 and negotiations are ongoing; however, each agreement is operating under its current arrangement until an amendment has been reached.
The Company is self-insured for health care claims, subject to a stop-loss policy, for eligible participating employees and qualified dependent medical and dental claims, subject to deductibles and limitations. The Company’s liabilities for claims incurred but not reported are determined based on an estimate of the ultimate aggregate liability for claims incurred. The estimate is calculated from actual claim rates and adjusted periodically as necessary. The Company had accrued $5 million for health care claims estimated to be incurred but not yet paid, as of March 31, 2023 and December 31, 2022, which are included as a component of other current liabilities on the Company’s condensed consolidated balance sheets.
17



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

General Indemnifications
The Company has various leases with respect to real property as well as various agreements among airlines relating to fuel consortia or fuel farms at airports. Under some of these contracts, the Company is party to joint and several liability regarding environmental damages. Under others, where the Company is a member of an LLC or other entity that contracts directly with the airport operator, liabilities are borne through the fuel consortia structure.
The Company’s aircraft, services, equipment lease and sale and financing agreements typically contain provisions requiring the Company, as the lessee, obligor or recipient of services, to indemnify the other parties to those agreements, including certain of those parties’ related persons, against virtually any liabilities that might arise from the use or operation of the aircraft or such other equipment. The Company believes that its insurance would cover most of its exposure to liabilities and related indemnities associated with the commercial real estate leases and aircraft, services, equipment lease and sale and financing agreements described above.
Certain of the Company’s aircraft and other financing transactions include provisions that require payments to preserve an expected economic return to the lenders if that economic return is diminished due to certain changes in law or regulations. In certain of these financing transactions and other agreements, the Company also bears the risk of certain changes in tax laws that would subject payments to non-U.S. entities to withholding taxes.
Certain of these indemnities survive the length of the related financing or lease. The Company cannot reasonably estimate the potential future payments under the indemnities and related provisions described above because it cannot predict (i) when and under what circumstances these provisions may be triggered, and (ii) the amount that would be payable if the provisions were triggered because the amounts would be based on facts and circumstances existing at such time.
10. Net Earnings (Loss) per Share
Basic and diluted earnings (loss) per share are computed pursuant to the two-class method. Under the two-class method, the Company attributes net income to common stock and other participating rights (including those with vested share-based awards). Basic net earnings per share is calculated by taking net income, less earnings allocated to participating rights, divided by the basic weighted-average common stock outstanding. Net loss per share is calculated by taking net loss divided by basic weighted-average common stock outstanding as participating rights do not share in losses. In accordance with the two-class method, diluted net earnings (loss) per share is calculated using the more dilutive impact of the treasury-stock method or from reducing net income for the earnings allocated to participating rights.
18



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

The following table sets forth the computation of net earnings (loss) per share on a basic and diluted basis pursuant to the two-class method for the periods indicated (in millions, except for share and per share amounts):
Three Months Ended March 31,
20232022
Basic:
Net income (loss)$(13)$(121)
Less: net income attributable to participating rights  
Net income (loss) attributable to common stockholders$(13)$(121)
Weighted-average common shares outstanding, basic218,181,386 217,264,414 
Net earnings (loss) per share, basic$(0.06)$(0.56)
Diluted:
Net income (loss)$(13)$(121)
Less: net income attributable to participating rights  
Net income (loss) attributable to common stockholders$(13)$(121)
Weighted-average common shares outstanding, basic218,181,386 217,264,414 
Effect of dilutive potential common shares  
Weighted-average common shares outstanding, diluted218,181,386 217,264,414 
Net earnings (loss) per share, diluted$(0.06)$(0.56)
Due to the net loss for the three months ended March 31, 2023 and 2022, diluted weighted-average shares outstanding are equal to basic weighted-average shares because the effect of all equity awards is anti-dilutive.
11. Fair Value Measurements
Under ASC 820, Fair Value Measurements and Disclosures, disclosures relating to how fair value is determined for assets and liabilities are required, and a hierarchy for which these assets and liabilities must be grouped is established, based on significant levels of inputs, as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes several valuation techniques in order to assess the fair value of its financial assets and liabilities.
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash are comprised of liquid money market funds, time deposits and cash, and are categorized as Level 1 instruments. The Company maintains cash with various high-quality financial institutions and holds restricted cash to secure medical claims paid. Cash, cash equivalents and restricted cash are carried at cost, which management believes approximates fair value. As of March 31, 2023 and 2022, the Company had less than $1 million of restricted cash.
19



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

Interest Rate Derivative Contracts
Interest rate derivative contracts are valued under an income approach based on data either readily observable in public markets, derived from public markets or provided by counterparties who regularly trade in public markets and, therefore, they are classified as Level 2 inputs. Given the swaptions will be cash-settled upon exercise and that the market value will be determined using overnight indexed swap (“OIS”) discounting, OIS discounting is applied to the income approach valuation.
Debt
The estimated fair value of the Company’s debt agreements has been determined to be Level 3 measurement, as certain inputs used to determine the fair value of these agreements are unobservable. The Company utilizes a discounted cash flow method to estimate the fair value of the Level 3 debt.
The carrying amounts and estimated fair values of the Company’s debt are as follows (in millions):
March 31, 2023December 31, 2022
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Secured debt:
Pre-delivery credit facility$266 $265 $277 $277 
Floating rate building note17 17 17 17 
Unsecured debt:
Affinity card advance purchase of mileage credits80 75 71 66 
PSP Promissory Note66 53 66 52 
Total debt$429 $410 $431 $412 
The tables below present disclosures about the fair value of assets and liabilities measured at fair value on a recurring basis on the Company’s condensed consolidated balance sheets (in millions):
Fair Value Measurements as of March 31, 2023
DescriptionBalance Sheet ClassificationTotalLevel 1Level 2Level 3
Cash and cash equivalentsCash and cash equivalents$790 $790 $ $ 
Interest rate derivative contractsOther current assets$9 $ $9 $ 
Fair Value Measurements as of December 31, 2022
DescriptionBalance Sheet ClassificationTotalLevel 1Level 2Level 3
Cash and cash equivalentsCash and cash equivalents$761 $761 $ $ 
Interest rate derivative contractsOther current assets$24 $ $24 $ 
The Company had no transfers of assets or liabilities between fair value hierarchy levels between December 31, 2022 and March 31, 2023.
12. Related Parties
Management Services
Indigo Partners LLC (“Indigo Partners”) manages an investment fund that is the controlling stockholder of the Company. The Company is assessed a quarterly fee by Indigo Partners for management services. The Company
20



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

recorded less than $1 million for each of the three months ended March 31, 2023 and 2022 for these fees, which are included as other operating expenses within the Company’s condensed consolidated statements of operations.
Codeshare Arrangement
The Company entered into a codeshare agreement with Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (an airline based in Mexico doing business as “Volaris”) during 2018, under which sales began in July 2018. Two of the Company’s directors are members of the board of directors of Volaris and one is an alternate director. As of March 31, 2023, Indigo Partners holds approximately 18% of the total outstanding common stock of Volaris.
In August 2018, the Company and Volaris began operating scheduled codeshare flights. 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 is subject to automatic renewals and may be terminated by either party at any time upon the satisfaction of certain conditions.
13. The Proposed Merger with Spirit Airlines, Inc. (“Spirit”)
On February 5, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Top Gun Acquisition Corp. (“Merger Sub”), a direct wholly-owned subsidiary of the Company, and Spirit. The Merger Agreement provided that, among other things, the Merger Sub would be merged with and into Spirit (the “Merger”), with Spirit surviving the Merger and continuing as a wholly-owned subsidiary of the Company. On July 27, 2022, the Company and Spirit mutually terminated the Merger Agreement.
During the three months ended March 31, 2023, the Company recorded $1 million in expenses related to the proposed Merger within transaction and merger-related costs in the Company’s condensed consolidated statement of operations. These costs included $1 million of retention bonus expense, which represent merger-related retention costs for all eligible employees who were subject to CARES Act compensation restrictions. During the three months ended March 31, 2022, the Company recorded $11 million in expenses related to the proposed Merger within transaction and merger-related costs in the Company’s condensed consolidated statement of operations. These costs included $8 million in transaction costs, which are made up of banking, legal and accounting fees, among others, charged in connection with the merger and $3 million of retention bonus expense.
In the event that Spirit, within twelve months following the termination of the Merger Agreement, consummates an acquisition with another acquiror or enters into a definitive written agreement providing for an acquisition with another acquiror, which is ultimately consummated, the Company will be owed an additional $69 million, as provided for in the Merger Agreement.
21


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 8. “Financial Statements and Supplementary Data” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 22, 2023 (the “2022 Annual Report”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” section of our 2022 Annual Report and other factors set forth in other parts of this Quarterly Report on Form 10-Q and our other reports and documents filed with the SEC.
Overview
Frontier Airlines 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.
The following table provides select financial and operational information for the three months ended March 31, 2023 and 2022:
Three Months Ended March 31,Percent Change
202320222023 vs. 2022
(in millions)
Total operating revenues$848 $605 40 %
Total operating expenses$873 $758 15 %
Income (loss) before income taxes$(17)$(161)(89)%
Available seat miles (ASMs)8,775 7,442 18 %
Total operating revenues for the three months ended March 31, 2023 totaled $848 million, an increase of 40% compared to the three months ended March 31, 2022, primarily due to a 19% increase in total revenue per available seat mile (“RASM”) as compared to the corresponding period in 2022, along with an 18% increase in capacity, as measured by available seat miles (“ASMs”).
Total operating expenses during the three months ended March 31, 2023 totaled $873 million, resulting in a cost per available seat mile (“CASM”) of 9.95¢, compared to 10.19¢ for the three months ended March 31, 2022. Fuel expense was 36% higher during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, with the $77 million increase in fuel expense driven by a 17% increase in fuel consumption associated with the 18% increase in our capacity and a 15% increase in fuel rates. Our non-fuel expenses increased by 7% compared to the corresponding prior year period, driven primarily by higher capacity and a larger fleet size and the resulting increase in operations during the three months ended March 31, 2023 as compared to the corresponding prior year period. CASM (excluding fuel), a non-GAAP measure, decreased 9% from 7.30¢ for the three months ended March 31, 2022 to 6.62¢ for the three months ended March 31, 2023, which was favorably impacted by higher sale-leaseback gains and lower lease return costs. Adjusted (non-GAAP) CASM (excluding fuel), which excludes the impact of $1 million in transaction and merger-related costs for the three months ended March 31, 2023, and excludes the $11 million in transaction and merger-related costs for the three months ended March 31, 2022, decreased from 7.15¢ to 6.61¢. For the reconciliation to corresponding GAAP measures, see “—
22


Results of Operations—Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest.”
We generated a net loss of $13 million and $121 million during the three months ended March 31, 2023 and 2022, respectively. Our results for the three months ended March 31, 2023 included $1 million of transaction and merger-related costs. Our results for the three months ended March 31, 2022 included $11 million of transaction and merger-related costs within operating expenses and $7 million in other non-operating expenses related to the write-off of unamortized deferred financing costs due to the paydown of the term loan facility (the “Treasury Loan”) with the U.S. Department of the Treasury (“Treasury”) for up to $574 million pursuant to the secured loan program established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Considering these aforementioned non-GAAP adjustments and the related tax impacts, our adjusted (non-GAAP) net loss was $12 million for the three months ended March 31, 2023, as compared to an adjusted (non-GAAP) net loss of $109 million for the three months ended March 31, 2022. For the reconciliation to corresponding GAAP measures, see “—Results of Operations—Reconciliation of Net income (loss) to Adjusted net income (loss) and to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR.”
As of March 31, 2023, our total available liquidity was $790 million, made up of cash and cash equivalents. On February 2, 2022, we repaid the $150 million outstanding under the Treasury Loan. The repayment of this loan unencumbered our co-branded credit card program and related brand assets that secured the Treasury Loan obligation.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic had a material adverse effect on our business and results of operations for the three months ended March 31, 2022. Although we have continued to experience a significant and sustained recovery during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, we are unable to predict the future spread and impact of COVID-19, 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 the overall impact may be to consumer behavior and the resulting demand for air travel.
In connection with the financial assistance from the Treasury under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and the Payroll Support Program (“PSP”), second Payroll Support Program (“PSP2”) and third Payroll Support Program (“PSP3”) (collectively, the “PSPs”), we have been subject to certain restrictions and limitations related to our operations, our use of the grant funds, our ability to terminate or furlough employees and executive compensation and dividends, of which we have been compliant with through March 31, 2023, as applicable. While most of the restriction periods have lapsed, as of March 31, 2023 we were still subject to additional reporting and recordkeeping requirements as well as subject to limitations on certain executive compensation, including limiting pay increases and severance pay or other benefits upon terminations, until April 1, 2023.
The Proposed Merger with Spirit Airlines, Inc.
On February 5, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Top Gun Acquisition Corp. (“Merger Sub”), a direct wholly-owned subsidiary of ours, and Spirit Airlines, Inc. (“Spirit”). The Merger Agreement provided that, among other things, the Merger Sub would be merged with and into Spirit (the “Merger”), with Spirit surviving the Merger and continuing as a wholly-owned subsidiary of ours. On July 27, 2022, we and Spirit mutually terminated the Merger Agreement.
During the three months ended March 31, 2023, we recorded $1 million in retention bonus expense related to the proposed Merger within transaction and merger-related costs in our condensed consolidated statement of operations. In the event that Spirit, within twelve months following the termination of the Merger Agreement, consummates an acquisition with another acquiror or enters into a definitive written agreement providing for an acquisition with another acquiror, which is ultimately consummated, we will be owed an additional $69 million, as provided for in the Merger Agreement.
23


Results of Operations
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
Operating Revenues
Three Months Ended March 31,Change
202320222023 vs. 2022
Operating revenues ($ in millions):
Passenger$830 $588 $24241 %
Other18 17 1%
Total operating revenues$848 $605 $24340 %
Operating statistics:
ASMs (millions) 8,7757,4421,33318 %
Revenue passenger miles (millions)7,2625,5241,73831 %
Average stage length (miles)1,05399558%
Load factor82.8%74.2%8.6 ptsN/A
RASM (¢)9.678.131.5419 %
Total ancillary revenue per passenger ($)79.9569.2810.6715 %
Total revenue per passenger ($)124.28111.4812.8011 %
Passengers (thousands) 6,826 5,4281,39826 %
Total operating revenue increased $243 million, or 40%, during the three months ended March 31, 2023 compared to the three months ended March 31, 2022, as we experienced increased demand for leisure travel on strong pricing. Revenue was favorably impacted by the 19% increase in RASM during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, due to an 11% increase in total revenue per passenger, including a 15% increase in ancillary revenue per passenger and a 5% increase in fare revenue per passenger, alongside a 8.6 point increase in load factor as compared to the corresponding prior year period. In addition, total operating revenue was favorably impacted by an 18% capacity growth, as measured by ASMs. This was driven by a 10% increase in average aircraft in service during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, as well as an increase in average daily aircraft utilization to 11.3 hours per day for the three months ended March 31, 2023, as compared to 10.8 hours per day for the corresponding prior year period.
24


Operating Expenses
Three Months Ended March 31,ChangeCost per ASMChange
202320222023 vs. 2022202320222023 vs. 2022
Operating expenses ($ in millions):(a)
Aircraft fuel $292 $215 $77 36 %3.33  ¢2.89  ¢15 %
Salaries, wages and benefits 203 172 31 18 %2.31 2.31 — %
Aircraft rent131 128 %1.49 1.72 (13)%
Station operations124 105 19 18 %1.41 1.41 — %
Sales and marketing40 32 25 %0.46 0.43 %
Maintenance, materials and repairs45 34 11 32 %0.51 0.46 11 %
Depreciation and amortization 11 13 (2)(15)%0.13 0.17 (24)%
Transaction and merger-related costs11 (10)(91)%0.01 0.15 (93)%
Other operating expenses26 48 (22)(46)%0.30 0.65 (54)%
Total operating expenses $873 $758 $115 15 %9.95 ¢10.19 ¢(2)%
Operating statistics:
ASMs (millions)8,775 7,442 1,333 18 %
Average stage length (miles)1,053 995 58 %
Passengers (thousands) 6,826 5,428 1,398 26 %
Departures42,712 38,584 4,128 11 %
CASM (excluding fuel) (¢) (b)
6.62 7.30 (0.68)(9)%
Adjusted CASM (excluding fuel) (¢) (b)
6.61 7.15 (0.54)(8)%
Fuel cost per gallon ($)3.45 2.99 0.46 15 %
Fuel gallons consumed (thousands)84,587 71,993 12,594 17 %
_________________
N/M = Not meaningful
(a)Cost per ASM figures may not recalculate due to rounding.
(b)These metrics are not calculated in accordance with GAAP. See the reconciliation to corresponding GAAP measures provided below.
25


Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest
Three Months Ended March 31,
20232022
($ in millions)Per ASM (¢)($ in millions)Per ASM (¢)
Non-GAAP financial data (unaudited):(a)
CASM9.95 10.19 
Aircraft fuel(292)(3.33)(215)(2.89)
CASM (excluding fuel)(b)
6.62 7.30 
Transaction and merger-related costs(c)
(1)(0.01)(11)(0.15)
Adjusted CASM (excluding fuel)(b)
6.61 7.15 
Aircraft fuel2923.33 215 2.89 
Adjusted CASM(d)
9.94 10.04 
Net interest expense (income)(8)(0.09)0.10 
CARES Act - write-off of deferred financing costs due to paydown of loan(e)
— — (7)(0.09)
Adjusted CASM + net interest(f)
9.85 10.05 
CASM9.95 10.19 
Net interest expense (income)(8)(0.09)0.10 
CASM + net interest(f)
9.86 10.29 
__________________
(a)Cost per ASM figures may not recalculate due to rounding.
(b)CASM (excluding fuel) and Adjusted CASM (excluding fuel) are included as supplemental disclosures because we believe that excluding aircraft fuel is useful to investors as it provides an additional measure of management’s performance excluding the effects of a significant cost item over which management has limited influence. The price of fuel, over which we have limited control, impacts the comparability of period-to-period financial performance, and excluding the price of fuel allows management an additional tool to understand and analyze our non-fuel costs and core operating performance, and increases comparability with other airlines that also provide a similar metric. CASM (excluding fuel) and Adjusted CASM (excluding fuel) are not determined in accordance with GAAP and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
(c)Represents $1 million in employee retention costs incurred in connection with the proposed Merger with Spirit within transaction and merger-related costs for the three months ended March 31, 2023. Represents $8 million in transaction costs, including banking, legal and accounting fees, and $3 million in employee retention costs incurred in connection with the proposed Merger with Spirit for the three months ended March 31, 2022.
(d)Adjusted CASM is included as supplemental disclosure because we believe it is a useful metric to properly compare our cost management and performance to other peers, as derivations of Adjusted CASM are well-recognized performance measurements in the airline industry that are frequently used by our management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in the airline industry. Additionally, we believe this metric is useful because it removes certain items that may not be indicative of base operating performance or future results. Adjusted CASM is not determined in accordance with GAAP, may not be comparable across all carriers and should not be considered in isolation or as a subs