Ultralow-cost carrier Frontier Airlines, searching for a return to profitability, has charted a plan to pare back fleet expansion and reduce its annual growth rate to 10%.
Industry analysts, though, question whether capacity rationalization alone will solve Frontier's challenges.
"Frontier's deeply negative margins are second only to Spirit's and remain among the worst peacetime margins we've ever witnessed," J.P. Morgan investment analyst Jamie Baker wrote in an advisory following the airline's earnings call on Feb. 12. Slowing growth, Baker added, won't on its own enable Frontier to overcome the economic disadvantages that discount carriers have faced since the pandemic ended.
Last year, Frontier suffered net losses of $137 million and pretax operating losses of 3.2%, a continuation of the financial challenges it has faced throughout the post-Covid years.
The airline, though, is forecasting a better 2026, with the midrange of its full-year guidance showing earnings per share of five cents.
Jimmy Dempsey
Historically, Frontier has grown annually at a rate of mid- to high teens, CEO Jimmy Dempsey said on the earnings call. Dempsey, who was appointed in December, said that Frontier now views growth of 10% as a sweet spot because it should prevent the pricing erosion caused by faster buildup while leaving flexibility for growth into desirable new markets.
As part of its plan, Frontier has reached an agreement with lessor AerCap holdings for the early return of 24 Airbus A320s in the second quarter. The carrier has also reached an agreement with Airbus to delay the delivery window of 69 planes from 2027-2030 to 2031-2033.
Frontier said it still expects to take delivery of 24 new Airbus planes this year, ending 2026 with 176 planes, the same number of planes it had at the start of the year. The airline intends to accomplish its 10% growth this year through more aircraft-utilization hours, a move that should reduce per-seat costs.
Flying additions will be split roughly evenly between increasing frequencies on existing Frontier routes and adding new ones, Dempsey said. Growth markets will include Atlanta, where Southwest and Spirit have pulled back in the past year, and Las Vegas. A focus of the frequency increases will be Tuesdays, Wednesdays and Saturdays, the off-peak days Frontier drew back from as demand sagged last spring.
One dynamic working in Frontier's favor is the downsizing of ULCC competitor Spirit, which has delineated plans to slash its fleet to 94 planes from the 214 it had when it entered Chapter 11 bankruptcy restructuring last August. Dempsey said that Frontier sees an opportunity to fill routes that Spirit pulled back on.
Challenges to the plan
Still, industry analysts question whether Frontier is adequately addressing its root problems.
Consultant Bob Mann of R.W. Mann & Co. said that Frontier is primarily what's known as a spill carrier, reliant on excess flyers when demand exceeds dominant carrier supply in large markets.
Moving away from those types of routes would push the airline into smaller markets, but its fleet, which is increasingly composed of 240-seat A321Neo planes alongside its 186-seat A320s, isn't well suited for the task.
"They are trying to move away from competing with large carriers at their hubs, and that throws them into smaller markets, for which the smallest aircraft they have are entirely inappropriate," Mann said.
Frontier also faces a more macro issue. Since the pandemic, consumer preferences have tilted sharply toward premium airline seats and services, a dynamic helped along by the sharpening U.S. wealth gap, which many are now referring to as the K-shaped economy.
"The problem with a low-cost carrier is they're doing business almost exclusively at the bottom of the K-shaped economy," Mann said.
Frontier does plan to roll out first-class- style seats this year. And Dempsey, on the earnings call, stressed that the airline will emphasize improving its industry trailing on-time performance while modernizing its digital tools, distribution technology and its broader onboard experience.
Still, the airline is running out of time, Boyd Group president Mike Boyd wrote in his weekly Touch & Go newsletter.
"The fact is that Frontier is looking for places to fly. But they have a disturbingly capacity-ineffective fleet, and they need to convince the customer that they are a quality choice," he said.