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2026.10.07 | TB | Airlines | Frontier Airlines Fuel Costs & Durability

原标题：Frontier Airlines – Recap of Fuel Cost Impacts & Business Durability

#transport

Third Bridge · 2026-10-07

Analyst-led • 1 Oct 2026

Companies: ULCC US, FLYY.Q US, UAL US, AAL US, DAL US

Gabriel Cristerna Valencia (GCV) Founder & President at Soliel Hospitality Group Ltd

Liam Dorsey (LD) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

LD [00:00:02]: Welcome to Third Bridge's Interview entitled Frontier Airlines – Recap of Fuel Cost Impacts & Business Durability. I'm Liam Dorsey. I'm facilitating today's Interview. Pleased to welcome Mr Gabriel Cristerna, former VP at Frontier Airlines.

Before we get started with today's Interview, would you please say I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

GCV [00:00:25]: I agree.

LD [00:00:27]: Would you mind beginning with a brief introduction to your background and your time at Frontier and the rest of the industry?

GCV [00:00:37]: I used to work for American Airlines for about 12 years doing most of the commercial functions that the airline has or very familiar with all those commercial functions. That means revenue management, sales, strategy, deep understanding of loyalty, network planning, etc. At Frontier, I was leading the revenue management department. Basically, in charge of all the pricing and yield management, the forecasting, the systems, processes, and everything that goes along with it.

Questions

00:01:14] The leisure market has seemingly remained somewhat resilient throughout 2026 amid higher fuel costs and fares. What are your biggest takeaways from that? Is that resiliency masked by the capacity reductions that many airlines have initiated over the past couple of months?

GCV [00:01:50]: I think a little bit of both. Let me start by saying I think the tide lifts all boats. ULCC airlines are what I'm going to call spill carriers. Why do I say this? It's because most of the demand is going to be captured by the legacy airlines, American, Delta, United, Southwest. Then the ULCC captures the demand that basically went unserved by these guys. That happens because of their pricing. When American, Delta, United are able to raise fares, that also happens at the Frontier. I wouldn't describe it as durability of the leisure demand rather than there's all this unserved or unmet demand because they simply cannot afford to pay a ticket with the legacy guys, and therefore, they stay with Frontier. Number two, the capacity rationalisation. Frontier's network overlapped by about one-third with Spirit. When you lose that capacity, it disproportionately benefits, of course, Frontier. For American, Delta, United, it's a drop in the bucket, yes, sure, it benefits in Orlando or benefit in Lauderdale or Vegas. Really, really, it's Frontier who is the primary beneficiary, at least immediately.

00:03:35] You mentioned the spill capacity or demand that ULCCs [ultra-low-cost carriers] are taking up. I'd imagine that sentiment or those demand dynamics aren't really changing even with Spirit Airlines leaving. How aggressively are network carriers still adding capacity even in the wake of Spirit shutting down?

GCV [00:04:12]: Let me try to break that down in little chunks. Number one, the days where the legacy carriers would not respond through either pricing or capacity to ULCCs are gone. They probably learned their lesson, I don't know, 15 years ago. That's part A of that question. B, they have their capacity plans. As long as that marginal capacity that is being introduced to the market is still contribution margin positive, you won't see them slowing down those plans. They have aircraft orders, they're committed, and they're going to continue adding it. American is not going to let United add, say, three points of capacity without them trying to add the same three points of capacity into the market. By the way, when they add three points of capacity, they basically create an airline the size of a ULCC, the size of a Spirit or Frontier. It's a ton of capacity even in those quote, unquote, smaller numbers.

LD [00:05:26]: There's no real change in the dynamics of spill capacity demand going to Frontier at all? What would be the factors for that sentiment or customer dynamics to materially or structurally change? Perhaps that's a longer-term view on the end consumer, but what are your broader thoughts?

GCV [00:05:55]: They have big order books. The only thing that slows down capacity is a permanent shift in cost structures that makes that marginal capacity uneconomical to add. Otherwise, it will keep coming. If oil prices were to remain at these levels for another year, of course, they're going to slow down. Of course, there's no way the market will continue absorbing that capacity. Typically, airline capacity grows with GDP. The economy continues doing well. Every quarter or whatever, there's always the gloomy version of, oh, the economy is not doing well, the economy is going to crash. Then the reports come out then and, surprise, it's stable, doing okay. The market will continue absorbing that capacity. It's surprising how correlated airline capacity with GDP is. You can basically use a rule of thumb and say if GDP grows 2%, airline capacity can grow 2%. It is that linear.

00:07:09] Jet fuel has been hovering around high USD 3 to low USD 4 per gallon. How much room do you think Frontier Airlines and other LCCs have to push fares higher before structural demand declines? With airfares still structurally depressed post pandemic, how much room do you think there is to push fares higher in the current environment?

GCV [00:08:01]: Let me try to answer that question by going back to the spill capacity. Airlines like Frontier, or Spirit, or any other low-cost carrier for that matter, price at a discount to the legacies. These airlines don't really get to control how much higher they can price. They're pricing the highest they can. It's really that the ceiling is being set by the likes of American, Delta, United. When American is pricing, I'm going to make an example, USD 150. For a passenger to select Frontier, Frontier needs to be pricing USD 80-90, maybe USD 100. Once you cross a certain threshold, demand literally collapses, and the airline is unable to sell seats. Not surprisingly, if you look at these Q2 results, when you think of percentage terms, it would tell you that Frontier beat the industry because Frontier's, say, yield or RASM grew mid-20s, whereas the legacies only grew mid-teens. When you think about it in dollar terms, you're going to see that the story is much more nuanced. If you look at, say, American or United yield, their yield grew USD 0.027. If you look at absolute Frontier's yield, it grew, I want to say it was USD 0.021 or something around those lines. You can see the complete correlation between the legacies basically lift the ceiling by USD 0.02 and change. Unsurprisingly, that's much how Frontier was able to recapture.

Same if you think about revenue per passenger. I think United's revenue per passenger on the domestic system or not the system, it was USD 330, up USD 30, and Frontier's was up USD 21. When you think about it in dollar terms, it actually doesn't tell you a story that Frontier outperformed the industry. It's just the percentage base is so much higher because the denominator was so much lower. In that regard, very roundabout way of answering your question, I just don't know that the ULCCs or the LCCs determine when do they raise fares. It's really the legacies that determine that ceiling. As long as legacies keep going up, they will keep going up. These higher fares that we're seeing, they're usually correlated with fuel increases. The market tends to be quite efficient. They can pass fuel increases pretty fast. If fuel were to collapse, then they're going to come down, too, because they have an incentive to compete with each other.

00:11:20] I'd imagine LCCs will not be holding on to the higher fares for as long as Delta, United Airlines or American Airlines will be once fuel normalises. In terms of fare normalisation cadence, are LCCs going to drop much quicker?

GCV [00:12:05]: Only if it benefits them. At the end of the day, if I were a ULCC, this is me speaking, you wouldn't drop price and bring the legacy carrier down with you because you don't know what happens. You know that that ceiling is real. You'd rather keep eating those scraps, but a better quality of scraps, if you may. You're not going to be the one that says, "Oh, my God, fuel is cheaper, let me price cheaper and there's plenty more demand." You have everything to lose once these guys decide to come down and never really match your pricing, but just simply sit at a lower price on top of you. I've got to go back to the spill carrier nature, and that's it.

LD [00:13:04]: Regarding the spread between Frontier and the network carriers in terms of fare difference or discrepancy, you don't see that materially changing in the current environment – if anything, you think it could be expanding too? Given the early roll-out of premium products that LCCs are offering, could that gap be potentially narrowing or not necessarily?

GCV [00:13:47]: Again, let's break it down into two. There's nothing systemical that will say the gap will narrow. Introduction of premium products, and assuming they work as intended, yes, would change the mix of what you put in the plane. Let's use just Frontier's mix. Say, when they launch first class, I don't know, and I wouldn't tell you what configuration they're going to go with. Let's assume that they maintain what they're doing with UpFront Plus, which is eight seats. How much does that change the mix when you transform eight seats into eight first-class seats in a plane that carries 240, so say, an A321neo. It won't change it much. Then the other question is whether the first class has the capability of behaving like, say, a legacy first class, which is another thing. Because with a legacy, people are paying for more than just a seat. There's a bigger ecosystem that goes with it from airport services, and meals, and depending on the route, at times lounge access, etc. Will those things be present to enable Frontier to also price that thing like that? Will it be more like, yes, this is a big seat product. This is awesome, but the experience isn't all that different. All those things will play a part in how much they can really leverage that product to increase the overall yield and close that quote, unquote, gap to legacies.

00:15:33] What do you think full-year 2026 might look like for LCCs? Obviously, Spirit was still in the process of emerging from its second bankruptcy in January and February 2026. How much better or worse off the LCCs would have been if the fuel shock did not take place? Many carriers, at least the network carriers, were expecting closer to high-single-to-double-digit top-line growth.

GCV [00:16:36]: Again, a bunch of things in that question. One, let's remember that Q1 of '25 and even the beginning of Q2 was actually pretty bad. There was an economic slowdown brewing in Q1. Of course, it was very easy for everybody, the legacy saying, oh, yes, the environment is awesome. It's like, yes, the environment was basically going back to levels of Q1 of '24 plus. Q1 of '25 was pretty brutal. I don't think that that trend would have materialised for the remainder of '26. It was more an isolated Q1 comp that would have benefited everyone. Now, going back to specifically what would have happened with Frontier and Spirit, it's hard to say. Spirit had a lot of systemic issues, second bankruptcy. It needed a cash infusion. It was questionable whether they were going to get it or not, stay in business or not. They were planning to be a much smaller airline. Where would they have continued flying? All of those are big unknowns. Just hard to speculate on it.

Spirit was doing really poorly regardless. The fuel environment just was the straw that broke the camel's back with them, but maybe there would have been another straw. That's just very difficult to know. Going back to Frontier, I think they would have been a little bit more actually profitable because the underlying fundamentals would have been similar, but you would have seen, again, the tide that lifts all boats, in this case, the economy doing a little bit better than the year prior and therefore, legacy fares a little bit up, which would have given them a little bit more breathing room without the fuel expense bill. They would have done a little bit better. In fact, I don't even think that Q2 is the quarter where Frontier fully benefits from the NK bankruptcy. When they will fully benefit from it is when they reengineer their network to capitalise on that. We can talk about that later probably.

00:19:12] What do you make of Frontier's changes in terms of simplifying the fleet, giving back a lot of leases that were going to be terminated in 2026-28 and delaying some deliveries to later in the 2020s?

GCV [00:20:00]: More than simplification, I would call it upgauges. When you're getting rid of a bunch of A320s that have, I forget, 180 seats or so, and you replace it with A321s that have 240, it becomes quite efficient. Why is this? Because the cost per departure on an A320 vs an A321 isn't all that different, but you gain 60 seats. You can do so by basically burning a lot less fuel, having a lot less crew, a lot less maintenance, etc. You're growing the amount of seats or maintaining the amount of seats, but doing so with a lot fewer aeroplanes. That's part A. Part B is all the maintenance that is going to be saved because a lot of those planes were going to require a large amount of maintenance in the near term. Having been able to return those planes is actually very efficient for Frontier as well. I'm losing my train of thought on the other part that I wanted to tell you in this question. That's a big component. I think that's going to work out for them. I remember now, the utilisation component, that was a little trickier. How do we increase utilisation? It's not that Frontier has extremely low utilisation on Saturdays, or Fridays, or Sundays. Now those planes are working hard. It's that those planes have been utilised very sparsely on a Tuesday, Wednesday.

Frontier cannot go and add that much more utilisation into a Saturday, which is going to usually be very cash positive. It's whether they can grow that Tuesday. When you think about it in terms of the current fuel environment, that gets a little tricky. I'm going to ballpark some numbers and say, look, a per departure cost on an A321 is going to be around USD 14,000, say, USD 14,500. You go and divide that by the number of seats that that plane has and assume 240, and it's going to bring it to about USD 70 per seat. You need to generate USD 70 per seat. The easy math would say, "Oh, well, they're making USD 130 per passenger. Therefore, they need, say, 50% load to get cash break-even." The math is actually a little bit more nuanced because it's a Tuesday. The USD 130 that they're getting, it's the weighted average of what they're getting. In reality, a Saturday is doing much better than the USD 130 and a Tuesday is doing much worse than USD 130. The math of adding extra flying on Tuesdays and especially the amount of extra flying needed to bring it up to, say, 11 hours of utilisation is a lot of seats on the weakest days.

Going back to the spill nature, right, it's on Tuesdays where you find the low fares on the legacies. It's not on Saturday, it's on Tuesdays. Are there opportunities to grow and fly more on Tuesday? Absolutely. I think they have opportunities. Whether those opportunities bring you to, hey, we added a couple more hours of utilisation to the fleet by flying those two days, that's the bigger question. The other part that is interesting around this is when Frontier had 100 planes, adding more hours, it was mostly a network planning exercise. When you have 200 planes, and they don't have 200, but I'm just making the distinction of scale, it's no longer just a network planning exercise. It's also an operating system exercise.

Frontier's network is complex because they're not a legacy hub-and-spoke model. They have focus cities where a lot of flying is concentrated at, but the planes are rotating constantly throughout the network. Disruptions for an airline like Frontier are something to watch out for is you build an operating system that is sufficiently resilient, that a big storm doesn't collapse the network, that you can reposition aircraft or crews in a timely fashion. That's the thing that I would also watch out for. It's can you increase that level of utilisation and still have a resilient network that doesn't eat up all the additional cash that you were able to generate? Not saying it's impossible, but it's definitely one of those hurdles they're going to have to figure out how to cross.

LD [00:25:23]: Just one clarifying question. Maybe we're just throwing out a round number – I'm not sure if this is still representative of the cost per departure for A320neo. You mentioned USD 14,000. Is that just the landing and the gate fees? Does that include the maintenance, crew and fuel costs as well?

GCV [00:25:54]: All the cash cost that is going to go into launching a flight with, say, an A321. On a typical 900-mile stage, you're probably going to be burning around USD 7,000 in fuel. Your crew costs are going to be, I don't know, USD 1,200 an hour. That's maybe two hours of crew cost, so that's USD 2,400. Then you add all the maintenance. There's real maintenance implications, your tyres, etc, there's cash that gets burned, and the airport fees, and the air traffic control, and this and that. It's representative of all the cash costs that you would incur assuming more or less current fuel prices.

00:26:43] Frontier is targeting about USD 200m in cost savings through the changes we mentioned by year-end 2027. I understand that a mix of delivery deposits and gate rental savings will be part of the USD 200m. Is there any reason to believe that this could be delayed, or that the company couldn't capture those savings by year-end 2027?

GCV [00:27:16]: Hard to tell. Much of that is going to be the aircraft stuff. There's real efficiency also, I'm speculating, but probably the USD 200m would also include fuel efficiencies and labour productivity, that goes with it. When I say fuel efficiency, it's like what fuel did you assume? Did you assume fuel at USD 100 a barrel or you're assuming fuel at USD 60 a barrel? All of those assumptions are hard to parse out. I assume that they're probably doing their homework. I don't see a reason to say that there could be some risk. You're returning planes, you're putting more efficient planes instead of those that you're getting rid of, etc. That should help. Now, I go back to the higher utilisation. The higher utilisation, in theory, should bring better fixed cost absorption. That only works if you have reliability in the network. If you have a network disaster, then you're going to be spending tons of money trying to recover the operation. That's the important part there on whether that part of the synergy can be realised.

00:28:55] Historically, new markets have represented about one-third of Frontier's capacity growth plans. As it stands today, about 50% of the company's capacity plans are new markets, perhaps largely driven by Spirit liquidating, which makes a lot of sense. Would you expect that new market split to continue? What do you see as the biggest risk in new market expansion, given that it's a much larger proportion of its capacity plans?

GCV [00:29:43]: Interesting question. Imagine network planning at a ULCC two years ago. In many ways, it was a little bit of a spaghetti at the wall exercise. You had these planes that you had to put somewhere. The number of markets that can support a 240-seater are few and far between these days. The obvious markets are gone. You would throw the spaghetti and then see which flights worked and then the others you pull, you pull them really quickly and you redeploy them elsewhere. This year, it's actually a very nice step change for them. Because there were many markets that Frontier obviously knew that worked well for Spirit. They just couldn't go and get into those markets because it would have been a bloodbath. By the way, that would have made those markets go from attractive to unattractive. Think a number of Lauderdale markets or a number of, let's say, Detroit markets. Frontier tends to do quite well in those legacy hubs, but there's no room for two ULCCs to fight it out.

With the exit of Spirit, I actually think it's one of the most sensible moves for Frontier, which is instead of flying the fifth, whatever Vegas to whatever trip, we'll redeploy into what used to be the top of the top Spirit-only markets, and that's going to be a proven thing. It's not like you're adding a flight into a market and seeing if it works. It's you're adding a flight into a market that has very proven demand. The ULCC road has been well travelled now. It's just you're replacing the capacity that Spirit vacated. I think this is one of those moves that will actually work really well for them this year. What happens next year, I don't think you can sustain 50%, because they have taken all the low-hanging fruit. It goes back to a more normal, okay, we saturated these ones, which of these can take a few more departures and they're going to put those additional departures and then which ones won't and then redeploy elsewhere.

00:32:12] I understand that Frontier tried to bid for the LaGuardia slots that JetBlue ended up winning. Does that provoke a rethinking of what markets actually work for Frontier? Does it make sense for the company to still try to pursue high-cost cities such as New York? What do you think that decision or bid ultimately means for rethinking its go-forward strategy around network planning?

GCV [00:33:05]: I'm going to use the word here. I'm going to call it strategic flying. The question is how much appetite does an airline like Frontier have for strategic flying? I just don't know that there is a path for a ULCC to truly make money in really high-cost airports like JFK or LaGuardia. Your cost per enplanement is insanely high. The fares are not all that high because there's a ton of legacy capacity and they're fighting it out like crazy in these markets. While the fares may seem a little bit higher, the cost per enplanement makes your cost structure basically highly inefficient. I just don't see a path. I actually think it's a blessing in disguise for them not having been able to fly those slots. It leaves a network gap.

Where this really goes, I'm going to start touching into other topics like loyalty is, hey, look, for you to win the loyalty game, you have to offer a relevant network. How do you want to win a business traveller's loyalty if you don't have a deep network and broad network, deep in terms of frequency and broad in terms of destinations? Obviously, New York is going to be one of those gaping holes. We're like, well, if you don't fly to New York, I need to go to New York, maybe I can't consider you. At the same time, it's like how much you want to strategically fly to LaGuardia and lose money on that flying in hopes that you're going to capture X, Y, and Z traveller when potentially, there's going to be other factors deterring you from fully capturing that traveller. We'll probably talk later if you hit on loyalty stuff. To me, if I were a ULCC, I would stay away from really high-cost airports.

00:35:16] Frontier is seemingly looking to grow capacity at high-single digits, with the fleet at 175-180 planes through the next 2-3 years or so. Obviously, most of that capacity growth would come from better utilisation. Do you think high-single digits are justified in the medium term? Is that dependent on where fuel goes, or is it mostly about increased utilisation for the company?

GCV [00:36:05]: Probably all of the above. We are getting a few more aircraft. Finding places where to put a plane on a Saturday will never be a problem with Frontier, at least not in the immediate term. Maybe Saturday is a bad example, but a Friday and a Sunday. Those are probably your strongest days. That will never be a problem for Frontier. They can always find places to put those planes and do so profitably. Absorbing the additional planes and putting them on peak days will not be a problem. That alone gets you quite a bit of that extra capacity being added. The bigger question goes to those Tuesdays, Wednesdays, and actually Saturdays, which tend to be the weakest days in the schedule. If fuel prices remain where they are, it's going to be very difficult to grow those days profitably, or at least cash positive. I also don't think that fuel price is going to stay at that level, at least knock on wood. Potentially, they'll have an avenue to do so. It really depends on what happens with fuel cost. At these prices, they wouldn't be able to add that capacity into a Tuesday, Wednesday, and Saturday. At USD 60 a barrel, they probably would find opportunities where it could be cash positive flying and therefore help them just have more efficient utilisation and better ex-fuel CASM.

00:37:51] To what extent do you think Frontier can drive a positive spread in 2027? Do you think this depends more on holding its RASM [revenue per available seat-mile] growth in 2026, given that it will be tougher comps next year? Or is it tied more to the company's ex-fuel costs being a lot better just because of better fleet utilisation?

GCV [00:38:29]: Going back to the spill carrier thing, the RASM growth that they're observing this year is an anomaly. It's correlated to fuel price going up and legacies raising fares. In fact, in absolute dollars, you wouldn't say that the RASM spread shrank. In absolute dollars, the RASM spread widened. I don't have the numbers in front of me, but if Frontier grew RASM to, what was it, 11.5 or SLA-adjusted 10.9, then United grew it by more in absolute sense. Don't let the percentages fool you. In absolute sense, that gap widened between the legacies. Anyway, that environment will not materialise next year, not even under these fuel prices because that's already being absorbed into the marketplace. You won't see RASM growth at those levels by any means.

LD [00:39:41]: What I was asking is, if the company were to see a positive RASM and cost per available seat-mile spread, would that be largely because of non-fuel costs being much lower or the growth being much less than what it has seen historically? Just trying to think about the push and pull of RASM and cost per available seat-mile spread improving.

GCV [00:40:14]: Correct. The only two things that will make RASM/CASM ratios improve for them are going to be better utilisation, which is going to help your ex-fuel CASM, or lower fuel prices, which is going to help your overall CASM. One of those has to be true for that to happen. Right now, I think their path to a more sustainable CASM will be definitely better utilisation, but better utilisation cannot happen with these fuel prices. You do need fuel to come down and then that will be a nice tailwind for them. If fuel prices come down then you do see better utilisation and therefore, both ex-fuel CASM and total CASM will be much better.

00:41:07] Would fuel have to come down to where it was pre-Middle East conflict – USD 2.50 per gallon – for Frontier's strategy to work out? I understand that other carriers have put out guidance and contingencies for fuel going to USD 3.20-3.50 until year-end 2026.

GCV [00:41:49]: It does. You think of their load factors. I haven't looked at the load factor comparison between Frontier and the industry. Frontier has had the lowest load factors of the industry by a mile. I think it was a 10-point gap to legacy almost. This year, they've been able to hold it flat to slightly up at about one point improvement. That's because part of it is Spirit left the market. The reality is not every flight is going at 80%. The flights on a Friday are going close to 100% and the flights on Tuesday are going at much lower than that. For that to be true, meaning that growth that comes because fuel comes down, if fuel comes down, and sorry, I keep going back to USD 2 a barrel because that's how my brain thinks, from USD 100 to USD 80, which would be probably that number that you said from basically USD 4 to USD 3.50 or so. You still need them to be able to get those load factors on a Tuesday north of 50-60% for the economics to materialise to get a positive cash contribution of that flying.

Even at USD 3.50, it's probably high. You need fuel to come down a little bit more for that to be true. Now, what has always been true of the oil industry, and I'm not an oil industry expert, but it's that fuel prices collapse. When you have the Middle East shut down, everybody else that had a pump that hadn't been exercising is going to exercise that pump. That capacity is coming online. When the Middle East truly reopens and everybody else has started pumping, fuel prices are going to go down. I think it will come down slow at first and then real fast. How fast we get there, I don't know. I think eventually, they'll benefit from sensible fuel prices that will allow them to grow on off-peak days of week.

00:44:10] Frontier is looking to grow utilisation to 11.5 hours by summer 2027, but the speed at which it is able to grow utilisation is seemingly slower. Obviously, it is dependent on fuel costs – the company can't really grow utilisation to 11.5-12 hours with where fuel is currently. What are your thoughts?

GCV [00:44:48]: They can't because the plane cannot fly any more on Friday and flying it on Tuesday would actually make them less profitable.

LD [00:44:56]: Let's say it gets to 11-12-hour utilisation with fuel coming down. As the fleet starts growing in 2028-29 or longer, I would assume that sustaining 11-12-hour utilisation is probably not feasible. What are the challenges with that? What would that require if it were to keep utilisation at 11-12 hours with the fleet growing?

GCV [00:45:32]: Let me try to answer that differently. For that utilisation to be true and be beneficial for them, it won't matter in which airports they're able to grow. There are places that are just incredibly profitable for Frontier. Sometimes those airports aren't the most friendly to them. Meaning they're usually gate constrained. It's not slots that prevent them from growing. The question is whether they can secure the gate space to grow in those airports that are great for them, whether the airport wants to play ball or the other incumbents in that airport want to play ball in letting them grow. If it's hard for them to get space in those profitable airports, it will be really hard to maintain high utilisation in three years from now when the fleet grows. If they're able to find additional space in those airports, it's more likely that they're going to be able to. It really just depends on what happens in those airports that are great for Frontier.

00:46:56] Let's say fuel stays sticky through year-end 2026 and early 2027. Could we expect further fleet changes? Do you think Frontier could be forced to prematurely give back some planes? How critical do you see fuel subsiding in the next couple of months being for the company not having to give back planes?

GCV [00:47:28]: I wouldn't expect them to give back planes because then you get into a Catch-22 situation. You keep giving back planes and then at some point, your ex-fuel CASM becomes uncontrollable. There's probably a fine line that they need to balance. If Frontier saw really big opportunities to say, well, fuel is going to be USD 100 a barrel for the next three years, how many more planes can we get back? They probably already gave back all that they could without really hurting their fixed CASM base. Otherwise, you keep giving planes back and then you're no longer a ULCC, you're something else. No, I just don't see them giving more planes back because then they lose efficiency. Right now they're a big airline. They have a lot of stations, they have this and that. Retrenching would make their fixed CASM side a disadvantage for them.

00:48:35] Do you think Frontier's overall fleet profile, including the A320neos and A321neos, is still too large for the company, given the typical customer demographic, or is it somewhat justified for its market?

GCV [00:49:10]: Tough one. When NK was around… Sorry, Spirit, it was really difficult to find any place where you can go and put a 240-seater. It was really difficult. Again, not on a Friday, yes, on a Tuesday. Just difficult on a Tuesday. The challenge is there aren't that many planes that have this level of efficiency. The ULCC model is predicated on real efficiency on the aircraft. If you go to a smaller gauge, your pilots aren't all that much cheaper than the legacy pilots. Your flight attendants aren't all that much cheaper. The airport costs are the same. Your real advantage is where density and with density, fuel efficiency. The smaller the gauge, the smaller the advantage you have. Say you started flying, I'm going to make it up, A220s. Then what? Now you have half the gauge of what you have today, but then your pilot costs are going to be high, the rest of the crew is high, the airport cost, etc. Are there markets that can sustain that flying? Hell yes. The question is whether your cost structure is still ideal once you have that type of aircraft? I cannot give you a straightforward answer there. It's being tried by Avelo and I'm forgetting the name of the other airline, Breeze. I'm not sure how well it's working for them.

00:51:12] Where do you see Frontier's loyalty and credit card programme progressing through 2027 and beyond, especially with the June 2026-announced expanded partnership with Barclays? What does a successful integration of the loyalty programme look like, and how do you view the product roadmap?

GCV [00:51:52]: This is the one initiative that I'm probably most sceptical about of them being able to execute. The reason is I don't know what airline you're loyal to, but think about your own behaviours in terms of when you're loyal to an airline or a hotel company for that matter because they're going to have similar dynamics. There's just table stakes that need to be met. What are those table stakes? It starts with a dense accrual network. I live in Denver. If I live in Denver, I'm not going to be loyal to Frontier because they fly Kansas City to Cancún, who cares? I'm going to be loyal to an airline in Denver because they have a broad network and a deep frequency. If I'm a business traveller and I travel 3-4 times a month and my travels take me to four or five cities in the US, I want convenience. I don't want to sacrifice time with my family or having to wake up at 3:00 to catch a 6:00 flight. Those are not things that a business traveller is really looking forward to do.

Table stakes is you need that dense network and schedule. That hasn't been the case for Frontier, not even in one of the biggest markets like Denver is because the frequency is sparse, you don't fly every day of week to X, Y, and Z destination and the schedules aren't deep. The best destinations, maybe you fly three times a day, not much more. Typically at times that are highly inconvenient for those travellers that are the most profitable in the loyalty space. That's table stakes one. Table stakes two is aspirational destinations. I don't accrue points because then it's like I'm not going to be flying Denver-Dallas, Denver-Dallas to then say, awesome. I want my points to keep going to Dallas. Now Dallas is where I go for business. I want to go to Hawaii or I want to go to Europe. Frontier lacks aspirational destinations. Aspirational destinations come in the form of you fly to Hawaii, you fly to Europe, or you get partners to do that for you. They don't have either. They don't have the aspirational destination themselves. Certainly, they don't have the international partner ecosystem where people could use those points for that aspirational destination.

Lastly, you need aspirational premium products. People do aspire to fly sexy first class, and then go to the lounge, and get in the special line at the airport and this and that, and get an upgrade. When you're going to be adding, say, the current fleet with eight first-class, sorry, UpFront Plus seats, there isn't a lot of room for an upgrade. Those seats have high demand and they're going to be sold. By the time you get your chance for an upgrade, that's going to be tough. That is different at the legacy. On the same A321 that Frontier has 240 seats and eight, call it, first-class seats, American doesn't have that many seats. American has 180 and they have 20 or at times 24 first-class seats. The chances for an upgrade are higher. All those four things that I mentioned, I think, are going to be working against Frontier into truly being able to make deep inroads in the loyalty space.

Now, I don't say they're going to fail. They won't fail, but they also won't realise the aspirations that they might have right now. You may get a little bit more people to take on the card. You may get a little bit more people to spend more on the card. The reality is, it's a niche programme unless they figure out how to crack the code on those four things that I mentioned right now that they just don't have, and I do believe are big table stakes for a massive loyalty programme legacy style. Even when you think of an airline like Southwest, what are they doing now? They are adding international partners. The reason is they figured out that they need those aspirational places where their customers spend their currency. That's the only way they get their loyalty programmes to the levels of Delta, United, American.

00:56:39] How big do you think Frontier can grow ancillary or non-fare revenue vs fares? It has been about 50/50 in 2026. Perhaps it's more dependent on where fuel goes, but how big can non-fare revenue get for the company per passenger?

GCV [00:57:13]: I think we've been poorly trained in thinking of these two components as separate components. They're not. A passenger thinks in terms of total price. Ultimately, the cost of the ticket, the cost of the bag, the cost of the seat. What is that total cost compared to the total cost at a different carrier? 10 years ago, yes, passengers weren't that savvy. Oh, my God, a USD 19 ticket, this is awesome. Holy crap, I had to pay USD 100 for a bag? I think those days are gone. I think passengers are much more savvy these days. In terms of non-fare revenue and specifically to the non-fare part of the revenue that is related to bags and seats, I think that thing is very much maxed out. You just have to say, look, 60 plus 70 equals 130, which is the worth of pax. That's going to be an immutable math. Unless legacy prices go up, their prices will go up in a similar proportion. Otherwise, non-fare is what it is. In fact, you see it flat YoY. That tells you why. The only thing that we were able to capitalise on was total price going up, but the revenue realised from bags and seats remain flat.

00:58:49] What is your RASM and broader outlook for Frontier in Q4 2026 and 2027? I think most of the market has been at break-even.

GCV [00:59:26]: Let's talk more about profitability outlook, not RASM outlook because ultimately, RASM is up blah, blah, blah percent, but at the end of the day, they made less money, then that's not great. Let's really think of profitability. I think, look, if fuel prices come down, and I think eventually they will, and they're able to execute what they say they want to execute, they will be better off. It really hinges on their ability to grow utilisation. That is their single biggest opportunity, and do so without disruptions to the network. If you're able to build the operating system that allows them to go from 9-11 hours and that operating system is resilient, and they're able to grow in the airports where it's profitable to grow. Because you cannot go fly Tuesday from whatever city to Orlando or Cancún. There's no demand. You need the more business-type markets to do so. They're going to do well. It really depends on those things. Build the operating system, grow Tuesday and Wednesday resiliently, where you can operate the schedule and recover when there's disruptions and grow in the airports that are better primed for you to grow. I think your DFW, Atlanta, Denver, Detroit, it has to be that type of business-type market that enables you to do so.

LD [01:01:01]: To clarify, when you say it's going to do well, is that relative to it actually turning a profit or keeping earnings flat from what it has done historically? It was just barely negative from an earnings perspective in 2025, and again, it's expected to be break-even in 2026-27.

GCV [01:01:32]: Assume everything else stays the same next year. Fuel at the current price, fares at the current level, nothing else changes but you're able to add for now, go along with me, cash positive flying to a Tuesday and a Wednesday. That's going to improve your ex-fuel CASM. That brings you from marginally negative to marginally positive. Now, assume fuel prices do come down, your ability to grow into those days becomes far more realistic, and you're going to do so profitably. Now whether that means that they're going to do well for the next 10 years now, no, I'm not saying that. I'm saying it will be good for them in the next 12-18 months, then all bets are off. This industry always has something that comes and haunts you.

LD [01:02:29]: I appreciate your time. Thank you so much for hopping on. We'll be in touch, but I appreciate you taking the time. Have a great rest of day and a great week.

GCV [01:02:43]: Thank you. Appreciate your time, too. Bye.

LD [01:02:47]: Thanks so much. Have a good one.

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