Frontier Group Holdings Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
ULCC$7.43+4.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0001670076-24-000079
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsGlossary of Airline TermsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001670076-24-000123
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsGlossary of Airline TermsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 152 previous paragraphs and 176 current paragraphs.
77 unchanged; 61 reworded; 28 added; 7 removed; 7 previous and 10 current paragraphs rearranged.
Tables are not compared: 11 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (28)
Current report
Total operating expenses during the three and six months ended June 30, 2024 totaled $948 million and $1,844 million, respectively, resulting in a cost per available seat mile (“CASM”) of 8.98¢ and 9.22¢, compared to 9.51¢ and 9.72¢ for the three and six months ended June 30, 2023, respectively. Fuel expense was 18% and 3% higher, respectively, as compared to the corresponding prior year periods. The $44 million increase in fuel expense for the three months ended June 30, 2024 as compared to the corresponding prior year period was primarily driven by a 13% increase in fuel gallons consumed as a result of our 13% capacity increase and a 6% increase in fuel cost per gallon. The $15 million increase in fuel expense for the six months ended June 30, 2024 as compared to the corresponding prior year period was primarily driven by a 9% increase in fuel gallons consumed as a result of our 10% increase in capacity partially offset by a 6% reduction in fuel cost per gallon.
Current report
We generated net income of $31 million and $5 million during the three and six months ended June 30, 2024, respectively, compared to net income of $71 million and $58 million for the three and six months ended June 30, 2023, respectively.
Current report
(b)This metric is not calculated in accordance with GAAP. See the reconciliation to the corresponding GAAP measure provided below.
Current report
(a)Cost per ASM figures may not recalculate due to rounding. During the three months ended June 30, 2024 and 2023, there were no non-GAAP adjustments.
Current report
Aircraft Fuel. Aircraft fuel expense increased by $44 million, or 18%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The increase was primarily due to an increase of 13% in fuel gallons consumed due to higher capacity and a 6% growth in fuel cost per gallon.
Current report
Aircraft Rent. Aircraft rent expense decreased by $1 million, or 1%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due a decrease in lease return costs caused by aircraft lease extension events that occurred in the current period as well as the ongoing benefit from extensions in prior periods, which was mostly offset by a larger fleet.
Current report
Station Operations. Station operations expense increased by $39 million, or 31%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to increased airport operations as a result of the 26% increase in departures and 17% increase in passengers.
Current report
Maintenance, Materials and Repairs. Maintenance, materials and repair expense decreased by $10 million, or 19%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. This decrease was primarily due to lower contract labor costs, partially offset by the 18% increase in average aircraft in service, resulting in higher aircraft maintenance costs.
Current report
Depreciation and Amortization. Depreciation and amortization expense increased by $6 million, or 50%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to an increase in capitalized maintenance depreciation due to the increase in fleet size as well as a gain on asset disposal during the comparable prior year period.
Current report
Results of Operations
Current report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Current report
Operating Revenues
Current report
Total operating revenue increased $23 million, or 1%, during the six months ended June 30, 2024 compared to the six months ended June 30, 2023. While capacity grew by 10%, as measured by ASMs, revenue was unfavorably impacted by the 8% reduction in RASM due to decreased total revenue per passenger as well as lower load factor. Revenue performance reflected weak domestic industry pricing and the above-average concentration of capacity allocated to new markets. The increase in capacity was driven by a 16% increase in average aircraft in service during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, partially offset by an 11% decrease in average stage length to 925 miles compared to 1,045 miles for the corresponding prior year period as well as a 4% decrease in average daily aircraft utilization to 10.9 hours per day compared to 11.4 hours per day for the corresponding prior year period.
Current report
Operating Expenses
Current report
N/M = Not meaningful
Current report
(a)Cost per ASM figures may not recalculate due to rounding. During the six months ended June 30, 2024, there were no non-GAAP adjustments.
Current report
Sales and Marketing. Sales and marketing expense increased by $3 million, or 4%, during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily due to an increase in customer reservation system fees and paid media advertising, partially offset by less contract labor costs. The following table presents our distribution channel mix:
Current report
Other Income (Expense). Other income decreased by $3 million or 18% during the six months ended June 30, 2024, as compared the six months ended June 30, 2023. The decrease was primarily due to increased interest expense, driven mainly by higher interest rates and higher principal balances on our debt as well as lower interest income from lower balances in interest-bearing cash accounts, partially offset by greater capitalized interest due to higher interest rates.
Current report
The previous note related to our headquarters had a maturity date in June 2024 and we repaid the remaining outstanding balance, inclusive of any unpaid principal, interest, and other amounts, during the three months ended June 30, 2024. Subsequent to the payoff of the loan, we entered into a loan agreement in the amount of $6 million, with a maturity date in June 2031, which was outstanding on our condensed consolidated balance sheet as of June 30, 2024. Please refer to “Notes to Condensed Consolidated Financial Statements—6. Debt” for additional information.
Current report
During the three months ended June 30, 2024, we reached an agreement with one of our aircraft lessors which eliminated requirements to pay maintenance reserves held as collateral in advance of our required performance of major maintenance activities on its aircraft leases. As a result of the agreement, the lessor disbursed back to us previously paid aircraft maintenance deposits of approximately $104 million, resulting in us no longer having any aircraft maintenance deposits with any of our lessors as of June 30, 2024.
Current report
The $84 million of inflows from changes in operating assets and liabilities included:
Current report
•$82 million in decreases in our capitalized aircraft maintenance deposits;
Current report
The $79 million of outflows from changes in operating assets and liabilities included:
Current report
•$13 million in deferred tax expense;
Current report
•$1 million in amortization of cash flow hedges, net of tax.
Current report
During the six months ended June 30, 2023, net cash used in investing activities totaled $33 million, driven by:
Current report
•$9 million in net outflows for PDP activity; and
Current report
•$161 million in cash outflows from principal repayments on debt, which includes $145 million on our PDP Financing Facility and $16 million on our building note that reached maturity; and
Removed paragraphs (7)
Previous report
We generated a net loss of $26 million during the three months ended March 31, 2024, compared to a net loss of $13 million for the three months ended March 31, 2023.
Previous report
(e)Represents fixed maintenance reserve payments for aircraft including estimated amounts for contractual price escalations. See “Notes to Condensed Consolidated Financial Statements — 7. Operating Leases”.
Previous report
The $53 million of inflows from changes in operating assets and liabilities included:
Previous report
•$4 million in increases in accounts receivable; and
Previous report
The $17 million of inflows from changes in operating assets and liabilities included:
Previous report
•$4 million in deferred income tax benefits; partially offset by
Previous report
During the three months ended March 31, 2023, net cash provided by investing activities totaled $10 million, driven by:
Reworded paragraphs (61)
Previous wording
The following table provides select financial and operational information for the three months ended March 31, 2024 and 2023, respectively (in millions):
Current wording
The following table provides select financial and operational information for the three and six months ended June 30, 2024 and 2023, respectively (in millions):
Previous wording
Total operating revenues for the three months ended March 31, 2024 totaled $865 million, an increase of 2% compared to the three months ended March 31, 2023. This was primarily due to an 8% increase in capacity, as measured by ASMs, partially offset by a 5% decrease in revenue per available seat mile (“RASM”), which was driven primarily by a decrease in load factor.
Current wording
Total operating revenues for the three and six months ended June 30, 2024 totaled $973 million and $1,838 million, respectively, an increase of 1% compared to each of the three and six months ended June 30, 2023, respectively. This was primarily due to an increase in capacity, as measured by ASMs, partially offset by a reduction in revenue per available seat mile (“RASM”) for the three and six months ended June 30, 2024 as compared to the corresponding prior year periods.
Previous wording
Total operating expenses during the three months ended March 31, 2024 totaled $896 million, resulting in a cost per available seat mile (“CASM”) of 9.49¢, compared to 9.95¢ for the three months ended March 31, 2023. Fuel expense decreased by $29 million, or 10%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily driven by a 15% reduction in fuel prices, partially offset by a 6% increase in fuel gallons consumed as a result of our 8% capacity increase. Our non-fuel expenses increased by 9% during the three months ended March 31, 2024, as 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 same period, partially offset by increased sale-leaseback gains. While non-fuel expenses increased by 9%, CASM (excluding fuel), a non-GAAP measure, increased only 1% to 6.71¢ for the three months ended March 31, 2024, on 8% capacity growth. The increase in CASM (excluding fuel) was largely due to increased rent expense as a result of a larger fleet and increases in salaries wages and benefits costs and station costs due to a lower stage length on higher departures, partially offset by increased sale-leaseback gains. For the reconciliation to corresponding GAAP measures, see “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.”
Current wording
Our non-fuel expenses increased by 2% and 6% during the three and six months ended June 30, 2024, respectively, as compared to the corresponding prior year periods, driven primarily by higher capacity and larger fleet size and the resulting increase in operations during the same periods partially offset by increased sale-leaseback gains, lower lease return costs and lower maintenance, materials and repairs costs. While non-fuel expenses increased by $16 million and $68 million, CASM (excluding fuel), a non-GAAP measure, decreased by 10% and 5% to 6.24¢ and 6.46¢ for the three and six months ended June 30, 2024, respectively. The decrease in CASM (excluding fuel) on increased ASMs of 13% and 10% for the three and six months ended June 30, 2024, respectively, as compared to the corresponding prior year periods, was due to an increase in sale-leaseback gains compared to the corresponding prior year periods as well as a decrease in aircraft rent expense due to lease extension events and a decrease in maintenance, materials and repairs primarily due to lower contract labor costs partially offset by an increase in station costs due to a lower stage length on higher departures. Additionally, for the six months ended June 30, 2024, CASM (excluding fuel) was unfavorably impacted by higher crew costs including other benefits and increased salaried support staff expenses. For the reconciliation to corresponding GAAP measures, see “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.”
Previous wording
As of March 31, 2024, our total available liquidity was $622 million, made up of cash and cash equivalents.
Current wording
As of June 30, 2024, our total available liquidity was $658 million, made up of cash and cash equivalents.
Previous wording
Total operating revenue increased $17 million, or 2%, during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by 8% capacity growth, as measured by ASMs. Further, revenue was unfavorably impacted by a 5% reduction in RASM due to lower load factors, mainly due to the transition of our network to high-fare, underserved markets as well as decreased total revenue per passenger, partially offset by shorter stage length. The increase in capacity was driven by a 13% increase in average aircraft in service during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, partially offset by a 6% decrease in average daily aircraft utilization to 10.6 hours per day compared to 11.3 hours per day for the corresponding prior year period.
Current wording
Total operating revenue increased $6 million, or 1%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. While capacity grew by 13%, as measured by ASMs, revenue was unfavorably impacted by the 11% reduction in RASM due to a 14% decline in total revenue per passenger as well as a 7.2 point reduction in load factor. Revenue per passenger reflected weak domestic pricing as seat growth outpaced seasonal demand and the above-average concentration of capacity allocated to new markets which also led to lower load factors. The increase in capacity was driven by an 18% increase in average aircraft in service during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, partially offset by a 13% decrease in average stage length to 899 miles compared to 1,038 miles for the corresponding prior year period.
Previous wording
Sales and Marketing. Sales and marketing expense remained consistent during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to a reduction in contract labor, offset by an increase in customer reservation system fees. The following table presents our distribution channel mix:
Current wording
Sales and Marketing. Sales and marketing expense increased by $3 million, or 7%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due an increase in customer reservation system fees and paid media advertising. The following table presents our distribution channel mix:
Previous wording
Other Operating. Other operating resulted in a net gain of $1 million during the three months ended March 31, 2024, compared to an expense of $27 million during the three months ended March 31, 2023. This movement was primarily driven by the increase in sale-leaseback gains compared to the corresponding prior year period as a result of six aircraft inductions subject to sale-leaseback transactions in the current period compared to three aircraft inductions and one engine induction subject to sale-leaseback transactions in the corresponding prior year period. This change was partially offset by increases in travel expenses relating to crew accommodations, driven by an increase in capacity.
Current wording
Other Operating. Other operating resulted in a net gain of $1 million during the three months ended June 30, 2024, as compared to an expense of $53 million during the three months ended June 30, 2023. This movement was primarily driven by the increase in sale-leaseback gains compared to the corresponding prior year period, as a result of six aircraft inductions and two engine inductions subject to sale-leaseback transactions in the current period compared to one aircraft induction and one engine induction subject to sale-leaseback transactions in the corresponding prior year period.
Previous wording
Other Income (Expense). We recognized $7 million in other income during the three months ended March 31, 2024, as compared to $8 million in other income during the three months ended March 31, 2023. The decrease was primarily due to increased interest expense, driven mainly by higher principal balances on our debt and lower interest income, partly offset by greater capitalized interest.
Current wording
Other Income (Expense). Other income decreased by $2 million, or 22%, during the three months ended June 30, 2024, as compared the three months ended June 30, 2023. The decrease was primarily due to lower interest income from lower balances in interest-bearing cash accounts and increased interest expense, driven mainly by higher interest rates and higher principal balances on our debt, partially offset by greater capitalized interest due to higher interest rates.
Previous wording
(c)Represents $1 million in employee retention costs incurred in connection with the terminated merger with Spirit Airlines, Inc., for the three months ended March 31, 2023.
Current wording
(c)Represents $1 million in employee retention costs incurred in connection with the terminated merger with Spirit Airlines, Inc., for the six months ended June 30, 2023.
Previous wording
Aircraft Fuel. Aircraft fuel expense decreased by $29 million, or 10%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The decrease was primarily due to a 15% reduction in fuel cost per gallon, partially offset by the 6% increase in gallons consumed, driven by higher capacity.
Current wording
Aircraft Fuel. Aircraft fuel expense increased by $15 million, or 3%, during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The increase was primarily due to a 9% increase in fuel gallons consumed, driven by higher capacity, partially offset by a 6% reduction in fuel cost per gallon.
Previous wording
Salaries, Wages and Benefits. Salaries, wages and benefits expense increased by $30 million, or 15%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase was primarily due to higher crew costs, driven by elevated credit hours on higher capacity, and an increased headcount of salaried support staff for the three months ended March 31, 2024, as compared to the corresponding prior year period.
Current wording
Salaries, Wages and Benefits. Salaries, wages and benefits expense increased by $63 million, or 15%, during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The increase was due to higher crew costs, driven primarily by elevated credit hours on higher capacity, an increased headcount of salaried support staff and increased other benefits for the six months ended June 30, 2024, as compared to the corresponding prior year period.
Previous wording
Aircraft Rent. Aircraft rent expense increased by $28 million, or 21%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to a larger fleet as well as an increase in lease return costs.
Current wording
Aircraft Rent. Aircraft rent expense increased by $27 million, or 10%, during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily due to a larger fleet, partially offset by a decrease in lease return costs.
Previous wording
Station Operations. Station operations expense increased by $13 million, or 10%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to increased airport operations and the resulting 14% increase in departures, partially offset by an increase of airport revenue sharing arrangements.
Current wording
Station Operations. Station operations expense increased by $52 million, or 21%, during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily due to increased airport operations as a result of the 20% increase in departures and 10% increase in passengers, partially offset by an increase in airport revenue sharing arrangements.
Previous wording
Maintenance, Materials and Repairs. Maintenance, materials and repair expense increased by $4 million, or 9%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. This was primarily due to a 13% increase in average aircraft in service, which resulted in higher maintenance costs, partly offset by lower contract labor costs.
Current wording
Maintenance, Materials and Repairs. Maintenance, materials and repair expense decreased by $6 million, or 6%, during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. This was primarily due to lower contract labor costs, partially offset by a 16% increase in average aircraft in service, which resulted in higher aircraft maintenance costs.
Previous wording
Depreciation and Amortization. Depreciation and amortization expense increased by$5 million, or 45%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to an increase in capitalized maintenance depreciation due to our growing fleet.
Current wording
Depreciation and Amortization. Depreciation and amortization expense increased by$11 million, or 48%, during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily due to an increase in capitalized maintenance depreciation due to our growing fleet.
Previous wording
Income Taxes. Our effective tax rate for the three months ended March 31, 2024 was an expense of 8.3%, compared to a benefit of 23.5% for the three months ended March 31, 2023, on a pre-tax net loss for both periods. The primary difference between the effective tax rate and the federal statutory rate is related to nonrecognition of current period tax benefits due to the valuation allowance established for U.S. federal and state net operating losses as well as the impact of non-deductibility of certain executive compensation costs and other employee benefits in addition to net shortfalls related to the vesting and exercise of our share-based awards. Please refer to “Notes to Condensed Consolidated Financial Statements—11. Income Taxes” for additional information.
Current wording
Income Taxes. Our effective tax rate for the six months ended June 30, 2024 was an expense of 37.5%, compared to an expense of 18.3% for the six months ended June 30, 2023, on pre-tax net income for both periods. The primary difference between the effective tax rate and the federal statutory rate for thesix months ended June 30, 2024 is related to the impact of non-deductibility of certain executive compensation costs and other employee benefits in addition to net shortfalls related to the vesting and exercise of our share-based awards. Please refer to “Notes to Condensed Consolidated Financial Statements—11. Income Taxes” for additional information.
Previous wording
(b)During the three months ended March 31, 2024, we recorded a $5 million non-cash valuation allowance against our U.S. federal and state net operating loss deferred tax assets, which largely do not expire, mainly as a result of being in a three-year historical cumulative pre-tax loss position and due to the current quarter loss, which has no impact on cash taxes and is not reflective of our effective tax rate for deductible net operating losses generated or actual cash tax obligations created. Please refer to “Notes to Condensed Consolidated Financial Statements—11. Income Taxes” for additional information.
Current wording
(b)During the six months ended June 30, 2024, we recorded a $5 million non-cash valuation allowance against our U.S. federal and state net operating loss deferred tax assets, which largely do not expire, mainly as a result of being in a three-year historical cumulative pre-tax loss position and due to the loss generated during the three months ended March 31, 2024, which has no impact on cash taxes and is not reflective of our effective tax rate for deductible net operating losses generated or actual cash tax obligations created. Please refer to “Notes to Condensed Consolidated Financial Statements—11. Income Taxes” for additional information.
Previous wording
The following table sets forth our operating statistics for the three months ended March 31, 2024 and 2023. These operating statistics are provided because they are commonly used in the airline industry and, as such, allow readers to compare our performance against our results for the corresponding prior year period, as well as against the performance of our peers.
Current wording
The following table sets forth our operating statistics for the three and six months ended June 30, 2024 and 2023. These operating statistics are provided because they are commonly used in the airline industry and, as such, allow readers to compare our performance against our results for the corresponding prior year period, as well as against the performance of our peers.
Previous wording
As of March 31, 2024, we had $622 million in total available liquidity, made up of cash and cash equivalents. We had $466 million of total debt, net, of which $265 million is short-term and consists of amounts outstanding under our pre-delivery deposit payment (“PDP”) facility (as amended from time to time, the “PDP Financing Facility”) and secured indebtedness related to our headquarters building. Our total debt, net is comprised of $304 million outstanding under our PDP Financing Facility, $83 million outstanding under our pre-purchased miles facility with Barclays Bank Delaware (“Barclays”), $66 million in 10-year, low-interest loans from the U.S. Department of the Treasury (the “Treasury,” and such loans, the “PSP Promissory Notes”) and $16 million in secured indebtedness for our headquarters building, partially offset by $3 million in deferred debt acquisition costs.
Current wording
As of June 30, 2024, we had $658 million in total available liquidity, made up of cash and cash equivalents. We had $452 million of total debt, net, of which $263 million is short-term and consists primarily of amounts outstanding under our pre-delivery deposit payment (“PDP”) facility (as amended from time to time, the “PDP Financing Facility”). Our total debt, net is comprised of $300 million outstanding under our PDP Financing Facility, $83 million outstanding under our pre-purchased miles facility with Barclays Bank Delaware (“Barclays”), $66 million in 10-year, low-interest loans from the U.S. Department of the Treasury (the “Treasury,” and such loans, the “PSP Promissory Notes”) and $6 million in secured indebtedness for our headquarters building, partially offset by $3 million in deferred debt acquisition costs and other discounts.
Previous wording
In connection with the PSP Promissory Notes and the term loan facility entered into with the Treasury on September 28, 2020, which was repaid in full on February 2, 2022, we issued to the Treasury warrants to purchase 3,117,940 shares of our common stock at a weighted-average price of $6.95 per share. We have the intent and ability to settle the warrants issued to the Treasury in common shares and we have classified the warrant liability to additional paid-in-capital on our condensed consolidated balance sheet. The Treasury has not exercised any warrants as of March 31, 2024.
Current wording
In connection with the PSP Promissory Notes and the term loan facility entered into with the Treasury on September 28, 2020, which was repaid in full on February 2, 2022, we issued warrants to purchase 3,117,940 shares of our common stock at a weighted-average price of $6.95 per share. We have the intent and ability to settle the warrants issued in common shares and we have classified the warrant liability to additional paid-in-capital on our condensed consolidated balance sheet. These warrants will expire between May 2025 and June 2026. No warrants have been exercised as of June 30, 2024.
Previous wording
The following table presents the major indicators of our financial condition and liquidity:
Current wording
The following table presents the major indicators of our financial condition and liquidity as of:
Previous wording
Our single largest capital commitment relates to the acquisition of aircraft. As of March 31, 2024, we operated all of our 142 aircraft under operating leases. PDPs relating to future deliveries under our agreement with Airbus are required at various times prior to each aircraft’s delivery date. As of March 31, 2024, we had $394 million of PDPs held by Airbus which have been partially financed by our PDP Financing Facility. As of March 31, 2024, our PDP Financing Facility, which allows us to draw up to an aggregate of $365 million, had $304 million outstanding. As of March 31, 2024, we had a firm obligation to purchase 204 A320neo family aircraft and 15 additional spare engines to be delivered by 2029. Of our aircraft commitments, nine had committed operating leases for 2024 deliveries, and seven were subject to non-binding letters of intent to provide operating lease financing for 2024 deliveries. We intend to evaluate financing options for the remaining aircraft.
Current wording
Our single largest capital commitment relates to the acquisition of aircraft. As of June 30, 2024, we operated all of our 148 aircraft under operating leases. PDPs relating to future deliveries under our agreement with Airbus are required at various times prior to each aircraft’s delivery date. As of June 30, 2024, we had $392 million of PDPs held by Airbus which have been partially financed by our PDP Financing Facility. As of June 30, 2024, our PDP Financing Facility, which allows us to draw up to an aggregate of $365 million, had $300 million outstanding. As of June 30, 2024, we had a firm obligation to purchase 198 A320neo family aircraft and 14 additional spare engines to be delivered by 2029. Of our aircraft commitments, 13 had committed operating leases for 2024 and 2025 deliveries, and 15 were subject to non-binding letters of intent to provide operating lease financing for 2025 and 2026 deliveries. We intend to evaluate financing options for the remaining aircraft.
Previous wording
(a)Includes principal commitments only associated with our PDP Financing Facility with borrowings as of March 31, 2024 pertaining to aircraft with deliveries through 2025, our floating rate building note through June 2024, our affinity card unsecured debt due through 2029 and the PSP Promissory Notes due through 2031. See “Notes to Condensed Consolidated Financial Statements — 6. Debt”.
Current wording
(a)Includes principal commitments only associated with our PDP Financing Facility with borrowings as of June 30, 2024 pertaining to aircraft with deliveries through 2025, our affinity card unsecured debt due through 2029, our building note through June 2031 and the PSP Promissory Notes due through 2031. See “Notes to Condensed Consolidated Financial Statements — 6. Debt”.
Previous wording
(d)Represents purchase commitments for aircraft and engines. See “Notes to Condensed Consolidated Financial Statements — 9. Commitments and Contingencies”.
Current wording
(d)Represents purchase commitments for aircraft and engines. In August 2024, Airbus agreed to an amended delivery schedule which delays previously scheduled firm aircraft delivery dates from 2025 through 2028 to later years. The table above reflects our commitments as of June 30, 2024 and does not reflect our aircraft purchase commitments after giving effect to this revised delivery schedule. See “Notes to Condensed Consolidated Financial Statements — 9. Commitments and Contingencies” and “Notes to Condensed Consolidated Financial Statements — 14. Subsequent Events” for further detail.
Previous wording
The following table presents information regarding our cash flows in the three months ended March 31, 2024 and 2023 (in millions):
Current wording
The following table presents information regarding our cash flows in the six months ended June 30, 2024 and 2023 (in millions):
Previous wording
During the three months ended March 31, 2023, net cash used in operating activities totaled $25 million, which was driven by a $13 million net loss, and non-cash adjustments totaling $29 million, partially offset by $17 million of inflows from changes in operating assets and liabilities.
Current wording
During the six months ended June 30, 2024, net cash used in operating activities totaled $13 million, which was driven by non-cash adjustments of $102 million partially offset by $5 million of net income and $84 million of inflows from changes in operating assets and liabilities.
Previous wording
•$75 million in increases in our air traffic liability driven by increased bookings;
Current wording
•$70 million in increases in our air traffic liability driven by increased bookings;
Previous wording
•$25 million in increases in other liabilities driven primarily by passenger taxes payable;
Current wording
•$28 million in increases in other liabilities driven primarily by passenger taxes payable;
Previous wording
•$5 million in increases in accounts payable; and
Current wording
•$9 million in increases in accounts payable; and
Previous wording
•$4 million in decreases in supplies and other current assets; partially offset by
Current wording
•$1 million in decreases in supplies and other current assets; partially offset by
Previous wording
•$37 million in increases in other long-term assets driven by increases in prepaid maintenance and capitalized maintenance;
Current wording
•$105 million in increases in other long-term assets primarily driven by increases in prepaid maintenance, capitalized maintenance, and supplier incentives; and
Previous wording
Additionally, we are required by some of our aircraft lease agreements to pay maintenance reserves to the applicable aircraft lessors in advance of the performance of major maintenance activities; these payments act as collateral for the lessors to ensure aircraft are returned in the agreed-upon condition at the end of the lease period. Qualifying payments that are expected to be recovered from lessors are recorded as aircraft maintenance deposits on our condensed consolidated balance sheets. The amount we have deposited as maintenance reserves is, therefore, unavailable until after we have completed the scheduled maintenance in accordance with the terms of the operating leases. We made $4 million in maintenance deposit payments to our lessors for each of the three months ended March 31, 2024 and 2023. As of March 31, 2024, we had $98 million in recoverable aircraft maintenance deposits on our condensed consolidated balance sheet, of which $11 million was included in accounts receivable because the eligible maintenance had been performed and the remaining $87 million was included within net aircraft maintenance deposits.
Current wording
•$1 million in increases in accounts receivable.
Previous wording
Our net loss of $26 million was also adjusted by the following non-cash items to arrive at cash used in operating activities:
Current wording
Our net income of $5 million was also adjusted by the following non-cash items to arrive at cash used in operating activities:
Previous wording
•$71 million in gains recognized on sale-leaseback transactions; partially offset by
Current wording
•$148 million in gains recognized on sale-leaseback transactions; partially offset by
Previous wording
•$16 million in depreciation and amortization;
Current wording
•$34 million in depreciation and amortization;
Previous wording
•$4 million in stock-based compensation expense; and
Current wording
•$9 million in stock-based compensation expense; and
Previous wording
•$2 million in deferred income tax expense.
Current wording
•$3 million in deferred income tax expense.
Previous wording
During the three months ended March 31, 2024, net cash used in operating activities totaled $22 million, which was driven by a $26 million net loss, and non-cash adjustments totaling $49 million, partially offset by $53 million of inflows from changes in operating assets and liabilities.
Current wording
During the six months ended June 30, 2023, net cash used in operating activities totaled $34 million, which was driven by $79 million of outflows from changes in operating assets and liabilities and non-cash adjustments totaling $13 million, partially offset by $58 million of net income.
Previous wording
•$48 million in increases in other long-term assets driven by increases in prepaid maintenance, capitalized maintenance and deferred purchase incentives;
Current wording
•$93 million in increases in other long-term assets driven by increases in capitalized maintenance, prepaid maintenance, prepaid bonuses and capitalized interest;
Previous wording
•$64 million in decreases in other liabilities driven primarily by leased aircraft return payments and decreased return costs, and other related accruals;
Current wording
•$60 million in decreases in other liabilities driven primarily by leased aircraft return payments and decreased return costs, and other related accruals; and
Showing the first 40 of 61 pairs. Open the source sections for the rest.
Rearranged current paragraphs (10)
Current report — wording carried from elsewhere
(c)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 substitute for performance measures calculated in accordance with GAAP.
Current report — wording carried from elsewhere
(d)Adjusted CASM including net interest and CASM including net interest are included as supplemental disclosures because we believe they are useful metrics to properly compare our 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, we believe these metrics are useful because they remove certain items that may not be indicative of base operating performance or future results. Adjusted CASM including net interest and CASM including net interest are 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.
Current report — wording carried from elsewhere
Salaries, Wages and Benefits. Salaries, wages and benefits expense increased by $33 million, or 16%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The increase was primarily due to higher crew costs, driven by elevated credit hours on higher capacity and other benefit costs, as well as increased headcount of salaried support staff, as compared to the corresponding prior year period.
Current report — wording carried from elsewhere
Income Taxes. Our effective tax rate for the three months ended June 30, 2024 was an expense of 3.1%, compared to an expense of 19.3% for the three months ended June 30, 2023, on pre-tax net income for both periods. The primary difference between the effective tax rate and the federal statutory rate is related to a decrease in our valuation allowance relating to federal and state net operating losses. Please refer to “Notes to Condensed Consolidated Financial Statements—11. Income Taxes” for additional information.
Current report — wording carried from elsewhere
Reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest
Current report — wording carried from elsewhere
(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.
Current report — wording carried from elsewhere
Other Operating. Other operating resulted in a net gain of $2 million during the six months ended June 30, 2024, compared to an expense of $80 million during the six months ended June 30, 2023. This movement was primarily driven by the increase in sale-leaseback gains compared to the corresponding prior year period as a result of twelve aircraft inductions and two engine inductions subject to sale-leaseback transactions in the current period compared to four aircraft inductions and two engine inductions subject to sale-leaseback transactions in the corresponding prior year period.
Current report — wording carried from elsewhere
•$9 million in decreases in supplies and other current assets; and
Current report — wording carried from elsewhere
•$6 million in increases in accounts payable.
Current report — wording carried from elsewhere
•$23 million in cash outflows for capital expenditures;
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
•$8 million in decreases in accounts payable; and
Previous report — wording carried elsewhere
•$4 million in increases in aircraft maintenance deposits.
Previous report — wording carried elsewhere
•$23 million in net proceeds for PDP activity; partially offset by
Previous report — wording carried elsewhere
•$11 million in cash outflows for capital expenditures; and
Previous report — wording carried elsewhere
•$38 million in cash outflows from principal repayments on our PDP Financing Facility; and
Previous report — wording carried elsewhere
“A320 family” means, collectively, the Airbus series of single-aisle aircraft, including the A320ceo, A320neo, A321ceo and A321neo aircraft.
Previous report — wording carried elsewhere
“Treasury” means the U.S. Department of the Treasury.