Frontier ended 2021 with a total fleet of 110 aircraft, which is six percent higher than the corresponding prior year period and 12 percent higher than the comparable pre-COVID quarter in 2019. Frontier's fleet continues to be the most fuel-efficient of all major U.S. carriers when measured by ASMs per fuel gallon consumed, generating over 100 ASMs per gallon during the fourth quarter and the full year 2021, representing Frontier's commitment to continued fuel efficiency as the airline grows.
On November 13, 2021, Frontier executed an order of 91 additional A321neo aircraft that are scheduled for delivery between 2023 and 2029. These aircraft commitments will enable the airline to significantly increase in size by 2029 while advancing its industry-leading environmental efforts and fuel-efficiency advantage.
Frontier's capacity, measured by ASMs, was four percent higher in the fourth quarter compared to the corresponding 2019 quarter. Frontier continued its domestic and international expansion, opening four new stations and operating an average of over 450 flights per day. This was ten percent higher than the comparable 2019 quarter.
Total revenue per passenger in the fourth quarter was approximately $103. Of this amount, ancillary revenue was $63 per passenger, eight percent higher than the comparable 2019 quarter, supported by the economic recovery and the Company's innovative product offerings. Full year 2021 ancillary revenue per passenger was approximately $61, six percent higher than 2019. Despite the impact of the Delta and Omicron variants, and rising fuel prices, management remained financially disciplined and the Company ended the year in a strong financial position.
“Throughout 2021, Frontier displayed its operational and financial resiliency notwithstanding the persistent challenges from COVID-19 variants,” commented Barry Biffle, president and CEO. “During the fourth quarter, we increased our capacity, departures, fuel efficiency and level of ancillary revenue per passenger versus the comparable pre-COVID period. We continue to view the impact of COVID-19 as transient, and remain focused on getting the airline back to full utilization in 2022 while being nimble to counter any further COVID-19 impacts. I want to thank Team Frontier for providing safe and dependable travel to our valued customers, all while fulfilling our ‘Low Fares Done Right’ commitment.”
The following is a summary of the fourth quarter and full year 2021 select financial results, including both GAAP and adjusted (Non-GAAP) metrics.
| (unaudited, in millions, except for percentage and per share amounts) | ||||||||||||||||||||||||
| Three Months Ended December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||||||||||||
| As Reported (GAAP) | Adjusted (Non- GAAP) | As Reported (GAAP) | Adjusted (Non- GAAP) | As Reported (GAAP) | Adjusted (Non- GAAP) | |||||||||||||||||||
| Total operating revenues | $ | 609 | $ | 609 | $ | 267 | $ | 267 | $ | 655 | $ | 655 | ||||||||||||
| Total operating expenses | $ | 695 | $ | 695 | $ | 451 | $ | 456 | $ | 587 | $ | 565 | ||||||||||||
| Net income (loss) | $ | (53 | ) | $ | (52 | ) | $ | (127 | ) | $ | (133 | ) | $ | 56 | $ | 73 | ||||||||
| Net income (loss) margin | (8.7 | )% | (8.5 | )% | (47.6 | )% | (49.8 | )% | 8.5 | % | 11.1 | % | ||||||||||||
| Diluted earnings (loss) per share1 | $ | (0.25 | ) | $ | (0.24 | ) | $ | (0.64 | ) | $ | (0.67 | ) | $ | 0.26 | $ | 0.37 | ||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||||||||||||
| As Reported (GAAP) | Adjusted (Non- GAAP) | As Reported (GAAP) | Adjusted (Non- GAAP) | As Reported (GAAP) | Adjusted (Non- GAAP) | |||||||||||||||||||
| Total operating revenues | $ | 2,060 | $ | 2,060 | $ | 1,250 | $ | 1,250 | $ | 2,508 | $ | 2,508 | ||||||||||||
| Total operating expenses | $ | 2,177 | $ | 2,461 | $ | 1,615 | $ | 1,749 | $ | 2,199 | $ | 2,167 | ||||||||||||
| Net income (loss) | $ | (102 | ) | $ | (299 | ) | $ | (225 | ) | $ | (301 | ) | $ | 251 | $ | 276 | ||||||||
| Net income (loss) margin | (5.0 | )% | (14.5 | )% | (18.0 | )% | (24.1 | )% | 10.0 | % | 11.0 | % | ||||||||||||
| Diluted earnings (loss) per share1 | $ | (0.48 | ) | $ | (1.42 | ) | $ | (1.13 | ) | $ | (1.51 | ) | $ | 1.19 | $ | 1.38 | ||||||||
Recent Company Highlights Included:
- Completed IPO in April 2021.
- Executed an order of 91 additional A321neo aircraft in November 2021 which are scheduled for delivery between 2023 and 2029. These aircraft commitments will enable the airline to significantly increase in size by 2029 while advancing its industry-leading environmental efforts and fuel-efficiency advantage.
- Ended the fourth quarter of 2021 with $918 million of unrestricted cash and cash equivalents.
- Repaid the $150 million Treasury Loan in February 2022.
- Continued the domestic and international network expansion, opening stations in Antigua, Belize, Costa Rica, and Newburgh/Stewart, NY during the fourth quarter.
- Generated $63 of ancillary revenue per passenger during the fourth quarter of 2021, eight percent higher than the comparable 2019 quarter.
- Frontier’s fleet continues to be the most fuel-efficient of all major U.S. carriers when measured by ASMs per fuel gallon consumed, generating 102 ASMs per gallon during the fourth quarter of 2021. The Company retired the last of the A319 aircraft from its fleet during the year, increasing the proportion of the more fuel-efficient A320neo family aircraft to 66 percent of its total fleet.
- The Company won first place for North America's Youngest Aircraft Fleet Award for 2022 by ch-aviation, a leading provider of airline data and intelligence, with an average aircraft age of four years, and was recognized as one of the safest low-cost airlines in the world by AirlineRatings.com, a forensic airline research publication.
- 13 fuel-efficient Airbus A320neo aircraft joined the fleet, bringing the total fleet to 110 aircraft, six percent higher than the prior year.
- Hired more than 550 flight attendants and 170 pilots in support of the growth of the airline.
- Added approximately 130 routes and 20 destinations.
Frontier ended the fourth quarter of 2021 with $918 million of unrestricted cash and cash equivalents. During February 2022, the Company repaid the $150 million outstanding under the Treasury Loan. The repayment of this loan unencumbered the Company’s co-branded credit card program and related brand assets that secured the Treasury obligation and makes those assets available to access substantial additional liquidity, if needed, based on similar debt financings by other airlines.
Revenue Performance
Total operating revenue for the fourth quarter of 2021 of $609 million was 93 percent of the revenue recognized in the comparable 2019 quarter, while total revenue per passenger of $103.41 was 96 percent of the revenue recognized in the comparable 2019 quarter. Total revenue per passenger included $63.00 of ancillary revenue, consistent with the third quarter of 2021 and eight percent higher than the $58.18 of ancillary revenue per passenger generated during the comparable 2019 quarter.
Capacity during the fourth quarter of 2021 demonstrated resilience at 7,836 million ASMs, which was approximately four percent higher than the capacity achieved in the fourth quarter of 2019. Full year 2021 capacity was approximately four percent lower compared to 2019, which, when contextualized with fourth quarter 2021 ASMs, highlights the recovery weighted to the back half of the year.
Frontier had 18 percent more average aircraft in service during the fourth quarter of 2021 compared to the fourth quarter of 2019. Frontier's average daily aircraft utilization continued to recover, improving from 10.6 hours per day in the third quarter of 2021 to 10.9 hours per day in the fourth quarter 2021. The fleet operated at a 74.2 percent load factor during the quarter, which was impacted by the Delta and Omicron variants. Further improvement is expected to the utilization and load factor levels achieved in fourth quarter of 2019 as the recovery from the COVID-19 pandemic continues.
Cost Performance
Total operating expenses for the fourth quarter of 2021, on both a GAAP and adjusted basis, were $695 million, including $186 million of fuel expenses at an average cost per gallon of $2.43. Frontier’s adjusted total operating expenses, excluding fuel, were $509 million, reflecting lower employee and station-related costs. On an Adjusted CASM (excluding fuel) basis, operating expenses were 6.50 cents during the quarter compared to 5.21 cents in the fourth quarter of 2019 and 6.55 cents during the third quarter of 2021, reflecting continued cost discipline while managing lower utilization.
Fleet
As of December 31, 2021, Frontier had a fleet of 110 Airbus single-aisle aircraft, consisting of 73 A320neos, 21 A321ceos and 16 A320ceos. All aircraft in the fleet are financed with operating leases that expire between 2022 and 2033. Frontier’s fleet is the most fuel-efficient of all major U.S. carriers when measured by ASMs per fuel gallon consumed. This fuel efficiency reflects Frontier’s operation of a large number of aircraft with new generation, fuel-efficient engines, lightweight seats, and an efficient seating layout.
Frontier completed an order of 91 additional A321neo aircraft in November 2021 that are scheduled for delivery between 2023 and 2029. These aircraft commitments bring the Company's total aircraft order as of December 31, 2021 to 234 aircraft to be delivered through 2029, including 76 A320neo aircraft and 158 A321neo aircraft. These aircraft commitments will enable the Company to significantly increase in size by 2029. In addition, the entry into service of the A321neo aircraft in the second half of 2022 will advance Frontier's structural advantage in fuel and operating expense efficiency versus the industry.
Guidance
In consideration of the anticipated merger with Spirit Airlines, Inc. which was also announced today, the Company will not provide guidance for the first quarter or full year 2022 at this time.
Frontier Airlines is committed to “Low Fares Done Right.” Headquartered in Denver, Colorado, the Company operates more than 100 A320 family aircraft and has the largest A320neo fleet in the U.S. The use of these aircraft, Frontier’s seating configuration, weight-saving tactics and baggage process have all contributed to the airline’s average of 43 percent fuel savings compared to other U.S. airlines (fuel savings is based on Frontier Airlines’ 2019 ASMs per fuel gallon consumed compared to the weighted average of major U.S. airlines), which makes Frontier the most fuel-efficient U.S. airline. With over 230 new Airbus planes on order, Frontier will continue to grow to deliver on the mission of providing affordable travel across America.
End Notes
1 Share amounts included in the basic and diluted earnings (loss) per share calculations for the fourth quarter and full year 2021, as reflected in the consolidated statements of operations, include the impact of the 15 million shares issued and sold by the Company as part of its initial public offering that closed on April 6, 2021. The Company has 3.1 million warrants outstanding relating to CARES Act funding that are not included in the diluted share count in the fourth quarter and full year 2021 as the effect of their inclusion would be anti-dilutive. The warrants are expected to be part of the Company's diluted share count under the treasury stock method in future quarters. In addition, most of the Company's 7.7 million outstanding options are participating securities and are therefore not expected to be part of the Company's diluted share count under the two-class method until they are exercised, but in periods of net income, are included as an adjustment to the numerator of the Company's earnings per share calculation as they are eligible to participate in the Company's earnings.
| Frontier Group Holdings, Inc. Consolidated Statements of Operations (unaudited, in millions, except for per share data) | ||||||||||||||||||||||||||||||||||||
| Three Months Ended December 31, | Percent Change | Year Ended December 31, | Percent Change | |||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 vs. 2020 | 2021 vs. 2019 | 2021 | 2020 | 2019 | 2021 vs. 2020 | 2021 vs. 2019 | |||||||||||||||||||||||||||
| Operating revenues: | ||||||||||||||||||||||||||||||||||||
| Passenger | $ | 592 | $ | 257 | $ | 638 | 130 | % | (7 | )% | $ | 2,000 | $ | 1,207 | $ | 2,445 | 66 | % | (18 | )% | ||||||||||||||||
| Other | 17 | 10 | 17 | 70 | % | — | % | 60 | 43 | 63 | 40 | % | (5 | )% | ||||||||||||||||||||||
| Total operating revenues | 609 | 267 | 655 | 128 | % | (7 | )% | 2,060 | 1,250 | 2,508 | 65 | % | (18 | )% | ||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||
| Aircraft fuel | 186 | 57 | 172 | 226 | % | 8 | % | 575 | 338 | 640 | 70 | % | (10 | )% | ||||||||||||||||||||||
| Salaries, wages and benefits | 162 | 127 | 156 | 28 | % | 4 | % | 616 | 533 | 529 | 16 | % | 16 | % | ||||||||||||||||||||||
| Aircraft rent | 131 | 130 | 98 | 1 | % | 34 | % | 530 | 396 | 368 | 34 | % | 44 | % | ||||||||||||||||||||||
| Station operations | 99 | 75 | 84 | 32 | % | 18 | % | 384 | 257 | 336 | 49 | % | 14 | % | ||||||||||||||||||||||
| Sales and marketing | 29 | 16 | 34 | 81 | % | (15 | )% | 109 | 78 | 130 | 40 | % | (16 | )% | ||||||||||||||||||||||
| Maintenance materials and repairs | 37 | 24 | 26 | 54 | % | 42 | % | 119 | 83 | 86 | 43 | % | 38 | % | ||||||||||||||||||||||
| Depreciation and amortization | 10 | 10 | 11 | — | % | (9 | )% | 38 | 33 | 46 | 15 | % | (17 | )% | ||||||||||||||||||||||
| CARES Act credits | — | (5 | ) | — | N/M | N/M | (295 | ) | (193 | ) | — | 53 | % | N/M | ||||||||||||||||||||||
| Other operating | 41 | 17 | 6 | 141 | % | 583 | % | 101 | 90 | 64 | 12 | % | 58 | % | ||||||||||||||||||||||
| Total operating expenses | 695 | 451 | 587 | 54 | % | 18 | % | 2,177 | 1,615 | 2,199 | 35 | % | (1 | )% | ||||||||||||||||||||||
| Operating income (loss) | (86 | ) | (184 | ) | 68 | (53 | )% | N/M | (117 | ) | (365 | ) | 309 | (68 | )% | N/M | ||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||||||||||||
| Interest expense | (2 | ) | (11 | ) | (3 | ) | (82 | )% | (33 | )% | (33 | ) | (18 | ) | (11 | ) | 83 | % | 200 | % | ||||||||||||||||
| Capitalized interest | 1 | 1 | 3 | — | % | (67 | )% | 4 | 6 | 11 | (33 | )% | (64 | )% | ||||||||||||||||||||||
| Interest income and other | 1 | 1 | 4 | — | % | (75 | )% | 2 | 5 | 16 | (60 | )% | (88 | )% | ||||||||||||||||||||||
| Total other income (expense) | — | (9 | ) | 4 | N/M | N/M | (27 | ) | (7 | ) | 16 | 286 | % | N/M | ||||||||||||||||||||||
| Income (loss) before income taxes | (86 | ) | (193 | ) | 72 | (55 | )% | N/M | (144 | ) | (372 | ) | 325 | (61 | )% | N/M | ||||||||||||||||||||
| Income tax expense (benefit) | (33 | ) | (66 | ) | 16 | (50 | )% | N/M | (42 | ) | (147 | ) | 74 | (71 | )% | N/M | ||||||||||||||||||||
| Net income (loss) | $ | (53 | ) | $ | (127 | ) | $ | 56 | (58 | )% | N/M | $ | (102 | ) | $ | (225 | ) | $ | 251 | (55 | )% | N/M | ||||||||||||||
| Earnings (loss) per share: | ||||||||||||||||||||||||||||||||||||
| Basic (a) | $ | (0.25 | ) | $ | (0.64 | ) | $ | 0.26 | (61 | )% | N/M | $ | (0.48 | ) | $ | (1.13 | ) | $ | 1.19 | (58 | )% | N/M | ||||||||||||||
| Diluted (a) | $ | (0.25 | ) | $ | (0.64 | ) | $ | 0.26 | (61 | )% | N/M | $ | (0.48 | ) | $ | (1.13 | ) | $ | 1.19 | (58 | )% | N/M | ||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||||||||||||||||||
| Basic (a) | 216 | 199 | 199 | 9 | % | 9 | % | 211 | 199 | 199 | 6 | % | 6 | % | ||||||||||||||||||||||
| Diluted (a) | 216 | 199 | 200 | 9 | % | 8 | % | 211 | 199 | 200 | 6 | % | 6 | % | ||||||||||||||||||||||
__________________
(a) Reference End Note 1 within the previous section for discussion on basic and diluted shares.
| Frontier Group Holdings, Inc. Selected Operating Statistics (unaudited) | |||||||||||||||||||||||||||||
| Three Months Ended December 31, | Percent Change | Year Ended December 31, | Percent Change | ||||||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 vs. 2020 | 2021 vs. 2019 | 2021 | 2020 | 2019 | 2021 vs. 2020 | 2021 vs. 2019 | ||||||||||||||||||||
| Available seat miles (ASMs) (millions) | 7,836 | 4,280 | 7,560 | 83 | % | 4 | % | 26,867 | 16,955 | 28,120 | 58 | % | (4 | )% | |||||||||||||||
| Departures | 41,523 | 23,106 | 37,768 | 80 | % | 10 | % | 143,476 | 88,642 | 138,570 | 62 | % | 4 | % | |||||||||||||||
| Average stage length (statute miles) | 975 | 967 | 1,039 | 1 | % | (6 | )% | 968 | 999 | 1,051 | (3 | )% | (8 | )% | |||||||||||||||
| Block hours | 111,363 | 59,421 | 105,327 | 87 | % | 6 | % | 381,018 | 235,974 | 389,476 | 61 | % | (2 | )% | |||||||||||||||
| Average aircraft in service | 111 | 86 | 94 | 29 | % | 18 | % | 106 | 81 | 88 | 31 | % | 20 | % | |||||||||||||||
| Aircraft – end of period | 110 | 104 | 98 | 6 | % | 12 | % | 110 | 104 | 98 | 6 | % | 12 | % | |||||||||||||||
| Average daily aircraft utilization (hours) | 10.9 | 7.5 | 12.1 | 45 | % | (10 | )% | 9.8 | 8.0 | 12.2 | 23 | % | (20 | )% | |||||||||||||||
| Passengers (thousands) | 5,896 | 2,865 | 6,110 | 106 | % | (4 | )% | 20,709 | 11,238 | 22,823 | 84 | % | (9 | )% | |||||||||||||||
| Average seats per departure | 193 | 192 | 192 | 1 | % | 1 | % | 193 | 191 | 192 | 1 | % | 1 | % | |||||||||||||||
| Revenue passenger miles (RPMs) (millions) | 5,818 | 2,796 | 6,406 | 108 | % | (9 | )% | 20,380 | 11,443 | 24,203 | 78 | % | (16 | )% | |||||||||||||||
| Load Factor (%) | 74.2 | % | 65.3 | % | 84.7 | % | 8.9 | pts | (10.5 | ) pts | 75.9 | % | 67.5 | % | 86.1 | % | 8.4 | pts | (10.2 | ) pts | |||||||||
| Fare revenue per passenger ($) | 40.41 | 35.55 | 49.12 | 14 | % | (18 | )% | 38.94 | 48.78 | 52.80 | (20 | )% | (26 | )% | |||||||||||||||
| Non-fare passenger revenue per passenger ($) | 60.00 | 54.13 | 55.31 | 11 | % | 8 | % | 57.65 | 58.66 | 54.33 | (2 | )% | 6 | % | |||||||||||||||
| Other revenue per passenger ($) | 3.00 | 3.42 | 2.87 | (12 | )% | 5 | % | 2.90 | 3.79 | 2.78 | (23 | )% | 4 | % | |||||||||||||||
| Total revenue per passenger ($) | 103.41 | 93.10 | 107.30 | 11 | % | (4 | )% | 99.49 | 111.23 | 109.91 | (11 | )% | (9 | )% | |||||||||||||||
| Total revenue per available seat mile (RASM) (¢) | 7.78 | 6.23 | 8.67 | 25 | % | (10 | )% | 7.67 | 7.37 | 8.92 | 4 | % | (14 | )% | |||||||||||||||
| Cost per available seat mile (CASM) (¢) | 8.87 | 10.52 | 7.78 | (16 | )% | 14 | % | 8.10 | 9.53 | 7.82 | (15 | )% | 4 | % | |||||||||||||||
| CASM (excluding fuel) (¢) | 6.50 | 9.18 | 5.51 | (29 | )% | 18 | % | 5.96 | 7.53 | 5.55 | (21 | )% | 7 | % | |||||||||||||||
| CASM + net interest (¢) | 8.88 | 10.73 | 7.73 | (17 | )% | 15 | % | 8.21 | 9.57 | 7.76 | (14 | )% | 6 | % | |||||||||||||||
| Adjusted CASM (¢) | 8.87 | 10.65 | 7.48 | (17 | )% | 19 | % | 9.16 | 10.32 | 7.71 | (11 | )% | 19 | % | |||||||||||||||
| Adjusted CASM (excluding fuel) (¢) | 6.50 | 9.31 | 5.21 | (30 | )% | 25 | % | 7.02 | 8.63 | 5.44 | (19 | )% | 29 | % | |||||||||||||||
| Adjusted CASM + net interest (¢) | 8.88 | 10.68 | 7.43 | (17 | )% | 20 | % | 9.18 | 10.31 | 7.65 | (11 | )% | 20 | % | |||||||||||||||
| Fuel cost per gallon ($) | 2.43 | 1.44 | 2.24 | 69 | % | 8 | % | 2.17 | 2.08 | 2.22 | 4 | % | (2 | )% | |||||||||||||||
| Fuel gallons consumed (thousands) | 76,555 | 39,735 | 76,736 | 93 | % | — | % | 265,558 | 162,241 | 288,510 | 64 | % | (8 | )% | |||||||||||||||
| Employees (FTE) | 5,481 | 4,974 | 4,935 | 10 | % | 11 | % | 5,481 | 4,974 | 4,935 | 10 | % | 11 | % | |||||||||||||||
Reconciliation of Non-GAAP Financial Information
The Company is providing below a reconciliation of GAAP financial information to the non-GAAP financial information provided. The non-GAAP financial information is included to provide supplemental disclosures because the Company believes they are useful additional indicators of, among other things, its operating and cost performance. Derivations of net income and CASM are well-recognized performance measurements in the airline industry that are frequently used by the Company’s management, as well as by investors, securities analysts and other interested parties in comparing the operating performance of companies in the airline industry. These non-GAAP financial measures have limitations as analytical tools. Because of these limitations, determinations of the Company’s operating performance or CASM excluding unrealized gains and losses, special items or other items should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. These non-GAAP financial measures may be presented on a different basis than other companies using similarly titled non-GAAP financial measures.
Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)
($ in millions) (unaudited)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |||||||||||||||||||
| Net income (loss), as reported | $ | (53 | ) | $ | (127 | ) | $ | 56 | $ | (102 | ) | $ | (225 | ) | $ | 251 | ||||||||
| Non-GAAP Adjustments: | ||||||||||||||||||||||||
| Fuel expense | ||||||||||||||||||||||||
| Derivative de-designation and mark-to-market adjustment (a) | — | — | — | — | 52 | — | ||||||||||||||||||
| Aircraft Rent | ||||||||||||||||||||||||
| Early lease termination costs(b) | — | — | — | 10 | — | — | ||||||||||||||||||
| Salaries, wages and benefits | ||||||||||||||||||||||||
| Pilot phantom equity(c) | — | — | 18 | — | — | 5 | ||||||||||||||||||
| Collective bargaining contract ratification(d) | — | — | 4 | — | — | 22 | ||||||||||||||||||
| Flight attendant early out program(e) | — | — | — | — | — | 5 | ||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||
| Early lease termination costs(b) | — | — | — | 1 | — | — | ||||||||||||||||||
| Other operating expenses | ||||||||||||||||||||||||
| Cares Act – grant recognition and employee retention credits(f) | — | (5 | ) | — | (295 | ) | (193 | ) | — | |||||||||||||||
| Write-off of deferred registration statement costs due to significant market uncertainty(g) | — | — | — | — | 7 | — | ||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| CARES Act – mark-to-market impact for warrants(h) | — | 8 | — | 22 | 9 | — | ||||||||||||||||||
| Pre-tax impact | — | 3 | 22 | (262 | ) | (125 | ) | 32 | ||||||||||||||||
| Tax benefit (expense) related to non-GAAP adjustments(i) | 1 | (9 | ) | (5 | ) | 65 | 49 | (7 | ) | |||||||||||||||
| Net income (loss) impact | 1 | (6 | ) | 17 | (197 | ) | (76 | ) | 25 | |||||||||||||||
| Adjusted net income (loss), non-GAAP | $ | (52 | ) | $ | (133 | ) | $ | 73 | $ | (299 | ) | $ | (301 | ) | $ | 276 | ||||||||
__________________
(a) Due to the significant reduction in demand resulting from the COVID-19 pandemic, future anticipated consumption of fuel dropped significantly and the Company therefore de-designated hedge accounting in March 2020 on the derivative positions where the future consumption was not deemed probable, which primarily related to the written put options on costless collars. The $52 million represents the charge from de-designation and the resulting mark to market impact on the quantities where consumption was not deemed probable.
(b) As a result of an early termination and buyout agreement executed in May 2021 with one of the Company’s lessors, Frontier was able to accelerate the removal of the remaining four A319 aircraft from its fleet. These aircraft were originally scheduled to return in December 2021 and were instead returned during the second and third quarters of 2021. The Company incurred $11 million in aircraft rent and depreciation costs during the year ended December 31, 2021 relating to the acceleration and resulting changes to its lease return obligations.
(c) Represents the impact of the change in value and vesting of phantom equity units pursuant to the Pilot Phantom Equity Plan. In accordance with the amended and restated phantom equity agreement, the remaining phantom equity obligation became fixed as of December 31, 2019 and is no longer subject to valuation adjustments.
(d) Represents $15 million of costs related to a one-time contract ratification incentive, plus $3 million in payroll-related taxes and certain other compensation and benefits-related accruals earned through March 31, 2019 and committed to by the Company as part of a tentative agreement with the union representing the Company's flight attendants that was reached in March 2019 for a contract that was ratified and became effective in May 2019, in addition to $4 million in pilot vacation accrual adjustments during the fourth quarter of 2019 as a result of the ratified agreement with the union representing the Company's pilots specifically tied to the implementation of a preferred bidding system.
(e) Represents expenses associated with an early out program agreed to in 2019 with the Company's flight attendants, payable throughout 2019, 2020 and 2021.
(f) Represents the recognition of $278 million of grant funding received from the U.S. government for payroll support pursuant to PSP2 and PSP3 during the year ended December 31, 2021 in addition to $17 million in employee retention credits qualified for under the CARES Act during the year ended December 31, 2021. In addition, for the year ended December 31, 2020, the Company recognized $177 million in net grant funding recognized from the U.S. government for payroll support pursuant to the PSP, along with $5 million and $16 million in employee retention credits qualified for under the CARES Act for the three and twelve months ended December 31, 2020, respectively.
(g) Represents the write-off of deferred initial public offering preparation costs during the first quarter 2020 due to the impact of the COVID-19 pandemic and the resulting uncertainty on the Company’s ability to access the capital markets.
(h) Represents the mark to market adjustment to the value of the warrants issued as part of the funding provided under the CARES Act. This amount is a component of interest expense. As a result of the IPO and the resulting reclassification of warrants from liability based awards to equity based awards, as of April 6, 2021, the Company no longer uses mark to market accounting for the warrants.
(i) Represents the tax impact of the non-GAAP adjustments, taking into consideration the non-deductibility of the warrant mark to market adjustments for tax purposes. The tax expense reflected for the fourth quarter of 2021 includes the impact of the update to the effective tax rate for the full year 2021 on the first, second and third quarter 2021 underlying results.
Reconciliation of Total Operating Expenses to Adjusted Total Operating Expenses
($ in millions) (unaudited)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |||||||||||||||||
| Total operating expenses, as reported(a) | $ | 695 | $ | 451 | $ | 587 | $ | 2,177 | $ | 1,615 | $ | 2,199 | ||||||||||
| Early lease termination costs | — | — | — | (11 | ) | — | — | |||||||||||||||
| Cares Act – grant recognition and employee retention credits | — | 5 | — | 295 | 193 | — | ||||||||||||||||
| Write-off of deferred registration statement costs due to significant market uncertainty | — | — | — | — | (7 | ) | — | |||||||||||||||
| Derivative de-designation and mark to market adjustment | — | — | — | — | (52 | ) | — | |||||||||||||||
| Pilot phantom equity | — | — | (18 | ) | — | — | (5 | ) | ||||||||||||||
| Collective bargaining contract ratification | — | — | (4 | ) | — | — | (22 | ) | ||||||||||||||
| Flight attendant early out program | — | — | — | — | — | (5 | ) | |||||||||||||||
| Adjusted total operating expenses, non-GAAP | $ | 695 | $ | 456 | $ | 565 | $ | 2,461 | $ | 1,749 | $ | 2,167 | ||||||||||
__________________
(a) See “Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)” above for discussion on adjusting items.
Reconciliation of EBITDA to EBITDAR and EBITDA to Adjusted EBITDAR
($ in millions) (unaudited)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | ||||||||||||||||||
| EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR reconciliation (unaudited): | |||||||||||||||||||||||
| Net income (loss) | $ | (53 | ) | $ | (127 | ) | $ | 56 | $ | (102 | ) | $ | (225 | ) | $ | 251 | |||||||
| Plus (minus): | |||||||||||||||||||||||
| Interest expense | 2 | 11 | 3 | 33 | 18 | 11 | |||||||||||||||||
| Capitalized interest | (1 | ) | (1 | ) | (3 | ) | (4 | ) | (6 | ) | (11 | ) | |||||||||||
| Interest income and other | (1 | ) | (1 | ) | (4 | ) | (2 | ) | (5 | ) | (16 | ) | |||||||||||
| Income tax expense (benefit) | (33 | ) | (66 | ) | 16 | (42 | ) | (147 | ) | 74 | |||||||||||||
| Depreciation and amortization | 10 | 10 | 11 | 38 | 33 | 46 | |||||||||||||||||
| EBITDA | (76 | ) | (174 | ) | 79 | (79 | ) | (332 | ) | 355 | |||||||||||||
| Plus: Aircraft rent | 131 | 130 | 98 | 530 | 396 | 368 | |||||||||||||||||
| EBITDAR | $ | 55 | $ | (44 | ) | $ | 177 | $ | 451 | $ | 64 | $ | 723 | ||||||||||
| EBITDA | $ | (76 | ) | $ | (174 | ) | $ | 79 | $ | (79 | ) | $ | (332 | ) | $ | 355 | |||||||
| Plus (minus)(a): | |||||||||||||||||||||||
| Early lease termination costs | — | — | — | 10 | — | — | |||||||||||||||||
| Cares Act – grant recognition and employee retention credits | — | (5 | ) | — | (295 | ) | (193 | ) | — | ||||||||||||||
| Write-off of deferred registration statement costs due to significant market uncertainty | — | — | — | — | 7 | — | |||||||||||||||||
| Derivative de-designation and mark to market adjustment | — | — | — | — | 52 | — | |||||||||||||||||
| Pilot phantom equity | — | — | 18 | — | — | 5 | |||||||||||||||||
| Collective bargaining contract ratification | — | — | 4 | — | — | 22 | |||||||||||||||||
| Flight attendant early out program | — | — | — | — | — | 5 | |||||||||||||||||
| Adjusted EBITDA | (76 | ) | (179 | ) | 101 | (364 | ) | (466 | ) | 387 | |||||||||||||
| Plus: Aircraft rent(b) | 131 | 130 | 98 | 520 | 396 | 368 | |||||||||||||||||
| Adjusted EBITDAR | $ | 55 | $ | (49 | ) | $ | 199 | $ | 156 | $ | (70 | ) | $ | 755 | |||||||||
__________________
(a) See “Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)” above for discussion on adjusting items.
(b) Represents aircraft rent expense included in Adjusted EBITDA. Excludes aircraft rent expense of $10 million for the year ended December 31, 2021 for costs incurred due to the early termination of the Company's A319 leased aircraft. See footnote (b) under the caption “Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)."
Reconciliation of CASM to Adjusted CASM (excluding fuel) and Adjusted CASM including net interest
(unaudited)
| Three Months Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| ($ in millions) | Per ASM (¢) | ($ in millions) | Per ASM (¢) | ($ in millions) | Per ASM (¢) | ||||||||||||
| CASM(a)(b) | 8.87 | 10.52 | 7.78 | ||||||||||||||
| Aircraft fuel | (186 | ) | (2.37 | ) | (57 | ) | (1.34 | ) | (172 | ) | (2.27 | ) | |||||
| CASM (excluding fuel) | 6.50 | 9.18 | 5.51 | ||||||||||||||
| Cares Act – grant recognition and employee retention credits | — | — | 5 | 0.13 | — | — | |||||||||||
| Pilot phantom equity | — | — | — | — | (18 | ) | (0.25 | ) | |||||||||
| Collective bargaining contract ratification | — | — | — | — | (4 | ) | (0.05 | ) | |||||||||
| Adjusted CASM (excluding fuel) | 6.50 | 9.31 | 5.21 | ||||||||||||||
| Aircraft fuel | 186 | 2.37 | 57 | 1.34 | 172 | 2.27 | |||||||||||
| Adjusted CASM | 8.87 | 10.65 | 7.48 | ||||||||||||||
| Net interest expense (income) | — | 0.01 | 9 | 0.21 | (4 | ) | (0.05 | ) | |||||||||
| CARES Act – mark to market impact for warrants | — | — | (8 | ) | (0.18 | ) | — | — | |||||||||
| Adjusted CASM + net interest | 8.88 | 10.68 | 7.43 | ||||||||||||||
| CASM | 8.87 | 10.52 | 7.78 | ||||||||||||||
| Net interest expense (income) | — | 0.01 | 9 | 0.21 | (4 | ) | (0.05 | ) | |||||||||
| CASM + net interest | 8.88 | 10.73 | 7.73 | ||||||||||||||
__________________
(a) Cost per ASM figures may not recalculate due to rounding
(b) See “Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)” above for discussion on adjusting items.
| Year Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| ($ in millions) | Per ASM (¢) | ($ in millions) | Per ASM (¢) | ($ in millions) | Per ASM (¢) | ||||||||||||
| CASM(a)(b) | 8.10 | 9.53 | 7.82 | ||||||||||||||
| Aircraft fuel | (575 | ) | (2.14 | ) | (338 | ) | (2.00 | ) | (640 | ) | (2.27 | ) | |||||
| CASM (excluding fuel) | 5.96 | 7.53 | 5.55 | ||||||||||||||
| Early lease termination costs | (11 | ) | (0.04 | ) | — | — | — | — | |||||||||
| Cares Act – grant recognition and employee retention credits | 295 | 1.10 | 193 | 1.14 | — | — | |||||||||||
| Write-off of deferred registration statement costs due to significant market uncertainty | — | — | (7 | ) | (0.04 | ) | — | — | |||||||||
| Pilot phantom equity | — | — | — | — | (5 | ) | (0.02 | ) | |||||||||
| Collective bargaining contract ratification | — | — | — | — | (22 | ) | (0.07 | ) | |||||||||
| Flight attendant early out program | — | — | — | — | (5 | ) | (0.02 | ) | |||||||||
| Adjusted CASM (excluding fuel) | 7.02 | 8.63 | 5.44 | ||||||||||||||
| Aircraft fuel | 575 | 2.14 | 338 | 2.00 | 640 | 2.27 | |||||||||||
| Derivative de-designation and mark to market adjustment | — | — | (52 | ) | (0.31 | ) | — | — | |||||||||
| Adjusted CASM | 9.16 | 10.32 | 7.71 | ||||||||||||||
| Net interest expense (income) | 27 | 0.11 | 7 | 0.04 | (16 | ) | (0.06 | ) | |||||||||
| CARES Act – mark to market impact for warrants | (22 | ) | (0.09 | ) | (9 | ) | (0.05 | ) | — | — | |||||||
| Adjusted CASM + net interest | 9.18 | 10.31 | 7.65 | ||||||||||||||
| CASM | 8.10 | 9.53 | 7.82 | ||||||||||||||
| Net interest expense (income) | 27 | 0.11 | 7 | 0.04 | (16 | ) | (0.06 | ) | |||||||||
| CASM + net interest | 8.21 | 9.57 | 7.76 | ||||||||||||||
__________________
(a) Cost per ASM figures may not recalculate due to rounding
(b) See “Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)” above for discussion on adjusting items.
The calculation of Adjusted CASM including net interest provided in the tables above reflects the sum of Adjusted CASM and net interest expense (income) excluding special items per ASM. Adjusted CASM including net interest is included as a supplemental disclosure because the Company believes it is a useful metric to properly compare its cost management and performance to other peers that may have different capital structures and financing strategies particularly as it relates to financing primary operating assets such as aircraft and engines. Additionally, the Company believes this metric is a useful comparator because it removes certain items that may not be indicative of base operating performance or future results. Adjusted CASM including net interest is not determined in accordance with GAAP, may not be comparable across all carriers and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.%
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