Frontier Group Holdings Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Our discussion and analysis of fiscal year 2023 compared to fiscal year 2022 is included herein. For discussion of results for the fiscal year 2021 and analysis of year-to-year comparisons between 2022 and 2021, please refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 22, 2023.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Our discussion and analysis of fiscal year 2024 compared to fiscal year 2023 is included herein. For a discussion of the results of operations for fiscal year 2022 and comparisons between fiscal year 2023 and fiscal year 2022, please refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 20, 2024.

Previous wording

The following table provides select financial and operational information for the years ended December 31, 2023 and 2022 (in millions):

Current wording

The following table provides select financial and operational information for the years ended December 31, 2024 and 2023 (in millions, except percentages):

Previous wording

Total operating revenues for the year ended December 31, 2023 totaled $3,589 million, an increase of 8% compared to the year ended December 31, 2022. This was primarily due to a 19% increase in capacity, as measured by ASMs, partially offset by the 9% decrease in revenue per available seat mile (“RASM”). This RASM movement was driven by a decrease in total revenue per passenger driven by lower fares, partially offset by the favorable increase in load factor, as compared to the corresponding period in 2022.

Current wording

Total operating revenues for the year ended December 31, 2024 totaled $3,775 million, an increase of 5% compared to the year ended December 31, 2023. This was primarily due to the 5% increase in capacity, as measured by ASMs. Revenue per available seat mile (“RASM”) remained consistent for the year ended December 31, 2024 as compared to the year ended December 31, 2023, as the 5% decline in revenue per passenger and 4.6 point decrease in load factor was offset by an 11% decrease in average stage length as compared to the prior year period. The lower average stage length is primarily the result of a higher proportion of out-and-back flying in the current year to simplify our network and improve operational efficiency and recoverability.

Previous wording

Total operating expenses during the year ended December 31, 2023 totaled $3,592 million, resulting in a cost per available seat mile (“CASM”) of 9.50¢, compared to 10.62¢ for the year ended December 31, 2022. Fuel expense was 3% lower during the year ended December 31, 2023, as compared to the year ended December 31, 2022. The $30 million decrease in fuel expense for the year ended December 31, 2023, compared to the corresponding period in 2022, was primarily driven by a 17% decrease in fuel prices, largely offset by the 17% increase in fuel gallons consumed during the year ended December 31, 2023, as a result of our 19% increase in capacity. Our non-fuel expenses increased by 11% during the year ended December 31, 2023, 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, partly offset by increased sale-leaseback gains. While non-fuel expenses increased, CASM (excluding fuel), a measure that is not prepared using generally accepted accounting principles in the United States (“GAAP”), decreased 6% for the year ended December 31, 2023 to 6.51¢ on 19% capacity growth. The improvement was largely due to increased utilization, the decrease in aircraft rent resulting from lease extensions and an increase in sale-leaseback gains, partly offset by an increase in airport costs.

Current wording

Our non-fuel expenses increased by 9% during the year ended December 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 an increase in sale-leaseback gains, the cost benefit from our network simplification, and a legal settlement. CASM (excluding fuel), a non-GAAP measure, increased 3% to 6.71¢, on a 5% increase in capacity, for the year ended December 31, 2024, as compared to the corresponding prior year period, due to the aforementioned drivers of increased non-fuel expenses.

Previous wording

Adjusted (non-GAAP) CASM (excluding fuel), decreased from 6.90¢ for the year ended December 31, 2022 to 6.50¢ for the year ended December 31, 2023. For the year ended December 31, 2023, Adjusted (non-GAAP) CASM (excluding fuel) excludes the impact of $1 million in net transaction and merger-related costs incurred in connection with our terminated merger with Spirit Airlines, Inc. (“Spirit”) and $1 million in other operating costs associated with legal fees incurred due to the U.S. Department of Justice’s substantial requests for information and deposition testimony from us related to the contemplated merger of Spirit and JetBlue Airways. For the year ended December 31, 2022, Adjusted (non-GAAP) CASM (excluding fuel) excludes the impact of the $10 million in net transaction and merger-related costs, $7 million in asset impairment charges, and $2 million in collective bargaining contract ratification costs. 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

(excluding fuel) excludes $1 million in net transaction and merger-related costs incurred in connection with our terminated merger with Spirit Airlines, Inc. (“Spirit”) and $1 million in other operating costs associated with legal fees incurred due to the U.S. Department of Justice’s substantial requests for information and deposition testimony from us related to the contemplated merger of Spirit and JetBlue Airways (“JetBlue”).

Previous wording

We generated a net loss of $11 million and $37 million during the years ended December 31, 2023 and 2022, respectively. Considering the aforementioned non-GAAP operating adjustments along with the $37 million valuation allowance, primarily against our U.S. federal and state net operating loss deferred tax assets, recorded during the year ended December 31, 2023, our adjusted (non-GAAP) net income was $28 million for the year ended December 31, 2023. Considering the aforementioned non-GAAP operating adjustments along with the $7 million non-operating write-off of deferred financing costs during the year ended December 31, 2022, due to the repayment of the CARES Act loan and the related tax impacts of these adjustments, our adjusted (non-GAAP) net loss was $17 million for the year ended December 31, 2022. For the reconciliation to corresponding GAAP measures, see “Results of Operations—Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss), Pre-Tax Income (Loss) to Adjusted Pre-Tax Income (Loss) and Net Income to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR.”

Current wording

For the reconciliation to the corresponding GAAP measures of the aforementioned non-GAAP adjusted 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” and “Results of Operations — Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss), Pre-Tax Income (Loss) to Adjusted Pre-Tax Income (Loss), and Net Income (Loss) to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR”.

Previous wording

Competition. The airline industry is highly competitive. The principal competitive factors in the airline industry are the fare and total price, flight schedules, number of routes served from a city, frequent flyer programs, product and passenger amenities, customer service, fleet type and reputation. The airline industry is particularly susceptible to price discounting as once a flight is scheduled, airlines incur only nominal incremental costs to provide service to passengers occupying otherwise unsold seats. Price competition occurs on a route-by-route basis through price discounts, changes in pricing structures, fare matching, target promotions and frequent flyer initiatives. Airlines typically use discount fares and other promotions to stimulate traffic during normally slower travel periods to generate cash flow and to maximize RASM. The prevalence of discount fares can be particularly acute when a competitor has excess capacity that it is under financial pressure to sell. A key element of our competitive strategy is to maintain very low unit costs in order to permit us to compete successfully in price-sensitive markets. In addition, some of the legacy network carriers match LCC and ULCC pricing on portions of their network, including through the selective deployment of so-called “basic economy” fares. We believe that fare discounts, along with unbundled product offerings, have and will continue to stimulate demand for Frontier due to our Low Fares Done Right strategy.

Current wording

Competition. The airline industry is highly competitive. The principal competitive factors in the airline industry are the fare and total price, flight schedules, number of routes served from a city, frequent flyer programs, product and passenger amenities, customer service, fleet type and reputation. The airline industry is particularly susceptible to price discounting as once a flight is scheduled, airlines incur only nominal incremental costs to provide service to passengers occupying otherwise unsold seats. Price competition occurs on a route-by-route basis through price discounts, changes in pricing structures, fare matching, target promotions and frequent flyer initiatives. Airlines typically use discount fares and other promotions to stimulate traffic during normally slower travel periods to generate cash flow and to maximize RASM. The prevalence of discount fares can be particularly acute when a competitor has excess capacity that it is under financial pressure to sell. A key element of our competitive strategy is to maintain very low unit costs in order to permit us to compete successfully in price-sensitive markets. In addition, some of the legacy network carriers match LCC and ULCC pricing on portions of their network, including through the selective deployment of so-called “basic economy” fares. We believe that fare discounts, along with more customer optionality over product offerings, have and will continue to stimulate demand for Frontier due to our Low Fares Done Right strategy.

Previous wording

Our Low Fares Done Right strategy is underpinned by our low-cost structure, and has significantly reduced our cost base by increasing aircraft utilization, transitioning to larger and more fuel-efficient aircraft, maximizing seat density, renegotiating the majority of our distribution agreements, realigning our network, migrating to a self-service customer service model, enhancing our website and mobile app, boosting employee productivity and contracting with leading specialists to provide us with select operating and other services.

Current wording

Our Low Fares Done Right strategy is underpinned by our low-cost structure, and has significantly reduced our cost base by optimizing aircraft utilization with disciplined capacity deployment across peak and off peak periods to align capacity with expected travel demand patterns, transitioning to larger and more fuel-efficient aircraft, maximizing seat density, renegotiating the majority of our distribution agreements, realigning and simplifying our network, enhancing our website and mobile app, boosting employee productivity and contracting with leading specialists to provide us with select operating and other services.

Previous wording

Seasonality. Our results of operations for any interim period are not necessarily indicative of those for the entire year because the air transportation business and our route network are subject to seasonal fluctuations. We generally expect demand to be greater in the second and third quarters compared to the rest of the year. While we have, over recent years, reduced our concentration in Denver to decrease the impact of seasonality in our business, 24% of our flights during the year ended December 31, 2023 had Denver International Airport as either their origin or destination, as compared to 26% of our flights during the year ended December 31, 2022.

Current wording

Seasonality. Our results of operations for any interim period are not necessarily indicative of those for the entire year because the air transportation business and our route network are subject to seasonal fluctuations. We generally expect demand to be greater in the second and third quarters compared to the rest of the year. While we have, over recent years, reduced our concentration in Denver to decrease the impact of seasonality in our business, 23% of our flights during the year ended December 31, 2024 had Denver International Airport as either their origin or destination, as compared to 24% of our flights during the year ended December 31, 2023.

Previous wording

Labor. The airline industry is currently experiencing certain shortages of qualified personnel. The airline industry is also heavily unionized. The wages, benefits and work rules of unionized airline industry employees are determined by collective bargaining agreements (“CBAs”). Relations between air carriers and labor unions in the United States are governed by the United States Railway Labor Act (“RLA”). Under the RLA, CBAs generally contain “amendable dates” rather than expiration dates and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the National Mediation Board (“NMB”). This process continues until either the parties have reached an agreement on a new CBA or the parties have been released to “self-help” by the NMB. In most circumstances, the RLA prohibits strikes. However, after release by the NMB, carriers and unions are free to engage in self-help measures such as lockouts and strikes.

Current wording

Labor. The airline industry is heavily unionized. The wages, benefits and work rules of unionized airline industry employees are determined by collective bargaining agreements (“CBAs”). Relations between air carriers and labor unions in the United States are governed by the United States Railway Labor Act (“RLA”). Under the RLA, CBAs generally contain “amendable dates” rather than expiration dates and the RLA requires that a carrier maintain the existing terms and conditions of employment following the amendable date through a multi-stage and usually lengthy series of bargaining processes overseen by the National Mediation Board (“NMB”). This process continues until either the parties have reached an agreement on a new CBA or the parties have been released to “self-help” by the NMB. In most circumstances, the RLA prohibits strikes. However, after release by the NMB, carriers and unions are free to engage in self-help measures such as lockouts and strikes.

Previous wording

We have seven union-represented employee groups comprising approximately 86% of our employees as of December 31, 2023. Our pilots are represented by the Air Line Pilots Association (“ALPA”); our flight attendants are represented by the Association of Flight Attendants (“AFA-CWA”); our aircraft technicians, aircraft appearance agents, material specialists and maintenance controllers are all represented by the International Brotherhood of Teamsters (“IBT”); and our dispatchers are represented by the Transport Workers Union (“TWU”).

Current wording

We have seven union-represented employee groups comprising approximately 87% of our employees as of December 31, 2024. Our pilots are represented by the Air Line Pilots Association (“ALPA”); our flight attendants are represented by the Association of Flight Attendants (“AFA-CWA”); our aircraft technicians, aircraft appearance agents, material specialists and maintenance controllers are all represented by the International Brotherhood of Teamsters (“IBT”); and our dispatchers are represented by the Transport Workers Union (“TWU”). We are currently in negotiations with the ALPA, the AFA-CWA and the IBT regarding the next labor contract. Please refer to “Notes to Consolidated Financial Statements — 12. Commitments and Contingencies” for additional information.

Previous wording

As of December 31, 2023, the average age of our aircraft was approximately four years and all of the aircraft in our fleet were financed with operating leases, the last of which is scheduled to expire by the end of 2035. Please refer to “Notes to Consolidated Financial Statements—9. Operating Leases” for further discussion. We expect that these new aircraft will require less maintenance when they are first placed in service (sometimes called a “maintenance holiday”) because the aircraft will benefit from manufacturer warranties and also will be able to operate for a significant period of time, generally measured in years, before the most expensive scheduled maintenance obligations, known as heavy maintenance, are required. Once these maintenance holidays expire, these aircraft will require more maintenance as they age and our maintenance and repair expenses for each of our aircraft will be incurred at approximately the same intervals. When these more significant maintenance activities occur, this will result in out-of-service periods during which our aircraft are dedicated to maintenance activities and unavailable to generate revenue.

Current wording

As of December 31, 2024, the average age of our aircraft was approximately five years and all of the aircraft in our fleet were financed with operating leases, the last of which is scheduled to expire in 2036. Please refer to “Notes to Consolidated Financial Statements — 9. Operating Leases” for further discussion. We expect that these new aircraft will require less maintenance when they are first placed into service (sometimes called a “maintenance holiday”) because the aircraft will benefit from manufacturer warranties and also will be able to operate for a significant period of time, generally measured in years, before the most expensive scheduled maintenance obligations, known as heavy maintenance, are required. Once these maintenance holidays expire, these aircraft will require more maintenance as they age and our maintenance and repair expenses for each of our aircraft will be incurred at approximately the same intervals. When these more significant maintenance activities occur, this will result in out-of-service periods during which our aircraft are dedicated to maintenance activities and unavailable to generate revenue.

Previous wording

We account for heavy maintenance events under the deferral method. Accordingly, heavy maintenance is depreciated over the shorter of either the remaining lease term or the period until the next estimated heavy maintenance event. As a result, maintenance events occurring closer to the end of the lease term will generally have shorter depreciation periods than those occurring earlier in the lease term. This will create higher depreciation expense specific to any aircraft related to heavy maintenance during the final years of the lease as compared to earlier periods.

Current wording

We account for heavy maintenance under the deferral method. Accordingly, heavy maintenance is depreciated over the shorter of either the remaining lease term or the period until the next estimated heavy maintenance event. As a result, maintenance events occurring closer to the end of the lease term will generally have shorter depreciation periods than those occurring earlier in the lease term. This will create higher depreciation expense specific to any aircraft related to heavy maintenance during the final years of the lease as compared to earlier periods.

Previous wording

(b)These metrics are not calculated in accordance with GAAP. See the reconciliation to corresponding GAAP measures provided below.

Current wording

(b)These metrics are not calculated in accordance with GAAP. For the reconciliation to the corresponding GAAP measures of the aforementioned non-GAAP adjusted measures, see “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

Aircraft Fuel. Aircraft fuel expense decreased by $30 million, or 3%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022. The decrease was primarily due to a 17% decrease in fuel cost per gallon, substantially offset by the 17% increase in gallons consumed, driven by higher capacity.

Current wording

Aircraft Fuel. Aircraft fuel expense decreased by $89 million, or 8%, during the year ended December 31, 2024, as compared to the year ended December 31, 2023. The decrease was primarily due to a 12% decrease in fuel cost per gallon, partially offset by the 5% increase in gallons consumed, driven by higher capacity.

Previous wording

Salaries, Wages and Benefits. Salaries, wages and benefits expense increased by $143 million, or 20%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase was primarily due to growth in our fleet, higher crew costs, driven by elevated credit hours on higher capacity and other benefit costs, and an increased headcount of salaried support staff.

Current wording

Salaries, Wages and Benefits. Salaries, wages and benefits expense increased by $96 million, or 11%, during the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase was due to higher crew costs driven primarily by the growth in the business, as well as other employee benefit costs and increased salaried support staff costs, partially offset by efficiencies from our network simplification as compared to the corresponding prior year period.

Previous wording

Aircraft Rent. Aircraft rent expense decreased slightly by $2 million, during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to the reversal of $53 million of previously accrued lease return costs due to lease extensions of six of our aircraft and five engines, partially offset by a larger fleet.

Current wording

Aircraft Rent. Aircraft rent expense increased by $121 million, or 22%, during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to a larger fleet and increased aircraft lease return costs.

Previous wording

Station Operations. Station operations expense increased by $94 million, or 22%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to a 14% increase in departures and a 19% increase in passengers, partially offset by lower passenger reaccommodation expenses.

Current wording

Station Operations. Station operations expense increased by $121 million, or 23%, during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to increased airport operations as a result of the 15% increase in departures and 10% increase in passengers, partially offset by increased benefits from airport revenue and cost sharing arrangements.

Previous wording

Maintenance, Materials and Repairs. Maintenance, materials and repair expense increased by $33 million, or 23%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022. This was primarily due to more average aircraft in service and higher average daily utilization per aircraft, which resulted in higher maintenance costs, including higher airframe check and materials expenses, as well as associated contract labor costs.

Current wording

Maintenance, Materials and Repairs. Maintenance, materials and repair expense increased by $30 million, or 17%, during the year ended December 31, 2024, as compared to the year ended December 31, 2023. This increase was primarily due to a 16% increase in average aircraft in service, which resulted in higher aircraft repair and maintenance costs, partially offset by lower contract labor.

Previous wording

Sales and Marketing. Sales and marketing expense remained consistent during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to higher credit card fees, resulting from an 8% increase in revenue, offset by a decrease in customer reservation system fees, as well as a reduction in media advertising. The following table presents our distribution channel mix:

Current wording

Sales and Marketing. Sales and marketing expense increased by $14 million, or 9%, during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to increases in customer reservation system fees and credit card fees, as a result of increased bookings year over year. The following table presents our distribution channel mix:

Previous wording

Depreciation and Amortization. Depreciation and amortization expense increased by $5 million, or 11%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase in capitalized maintenance, partially offset by a $7 million asset impairment recorded during the year ended December 31, 2022.

Current wording

Depreciation and Amortization. Depreciation and amortization expense increased by $22 million, or 44%, during the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to an increase in capitalized maintenance depreciation due to our growing fleet.

Previous wording

(c)Represents $1 million inemployee retention costs incurred in connection with the terminated merger with Spirit for the year ended December 31, 2023. Represents$19 million in employee retention costs and$16 million in transaction costs, including banking, legal and accounting fees, incurred in connection with the terminated merger with Spirit, partially offset by $25 million received from Spirit for the reimbursement of incurred merger-related expenses for the year ended December 31, 2022.

Current wording

(d)Represents $1 million in employee retention costs incurred in connection with the terminated merger with Spirit for the year ended December 31, 2023.

Previous wording

(d)Represents $1 million of legal fees incurred due to the U.S. Department of Justice’s substantial requests for information and deposition testimony from us related to the contemplated merger of Spirit and JetBlue Airways.

Current wording

(e)Represents $1 million of legal fees incurred due to the U.S. Department of Justice’s substantial requests for information and deposition testimony from us related to the contemplated merger of Spirit and JetBlue.

Previous wording

(g)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 wording

(f)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.

Previous wording

(h)On February 2, 2022, we repaid the Treasury Loan, which resulted in a one-time write-off of the remaining $7 million in unamortized deferred financing costs related to the Treasury Loan. This amount is a component of interest expense.

Current wording

(g)In September 2024, we reduced the capacity of the PDP Financing Facility from $365 million to $135 million. The downsize of the facility resulted in a one-time write-off of $1 million in unamortized deferred financing costs. This amount is a component of interest expense within our consolidated statements of operations.

Previous wording

(i)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 wording

(h)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.

Previous wording

Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss), Pre-Tax Income (Loss) to Adjusted Pre-Tax Income (Loss) and Net Income to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR

Current wording

Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss), Pre-Tax Income (Loss) to Adjusted Pre-Tax Income (Loss) and Net Income (Loss) to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR

Previous wording

(a)Adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA are included as supplemental disclosures because we believe they are useful indicators of our operating performance. Derivations of pre-tax income (loss), net income and EBITDA 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 our industry.

Current wording

(a)Adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA are included as supplemental disclosures because we believe they are useful indicators of our operating performance. Derivations of pre-tax income (loss), net income (loss) and EBITDA 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 our industry.

Previous wording

(b)In December 2023, we recorded a $37 million non-cash valuation allowance against our U.S. federal and state net operating loss deferred tax assets, which largely don't expire, mainly as a result of being in a three-year cumulative pre-tax loss position, 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.

Current wording

(b)During the years ended December 31, 2024 and 2023, we recorded $5 million and $37 million non-cash valuation allowances, respectively, against our U.S. federal and state NOL deferred tax assets, which largely do not expire, mainly as a result of being in a three-year cumulative pre-tax loss position, which has no impact on cash taxes and is not reflective of our effective tax rate for deductible NOLs generated or actual cash tax obligations created. Please refer to “Notes to Consolidated Financial Statements — 15. Income Taxes” for additional information.

Previous wording

As of December 31, 2023, we had $609 million in total available liquidity, made up of cash and cash equivalents. We had $470 million of total debt, net, of which $251 million was short-term and consisted of amounts outstanding under our pre-delivery deposit payment facility (“PDP Financing Facility”) and secured indebtedness related to our headquarters building. Our total debt, net was comprised of $312 million outstanding under our PDP Financing Facility, $80 million outstanding under our pre-purchased miles facility with Barclays Bank Delaware (“Barclays”), $66 million in 10-year, low-interest loans from the Treasury (collectively, the “PSP Promissory Notes”) and $16 million in secured indebtedness for our headquarters building, partially offset by $4 million in deferred debt acquisition costs.

Current wording

As of December 31, 2024, we had $935 million of total available liquidity, consisting of $730 million in unrestricted cash and cash equivalents and $205 million in total undrawn capacity on our Revolving Loan Facility. We had $502 million of total debt, net, of which $261 million was short-term and consisted primarily of amounts outstanding under our Pre-delivery Credit Facilities. Our total debt, net was comprised of $329 million outstanding under our PDP Financing Facility, $100 million outstanding under our pre-purchased miles facility with Barclays Bank Delaware (“Barclays”), $66 million in 10-year, low-interest loans (collectively, the “PSP Promissory Notes”) from the U.S. Department of the Treasury (the “Treasury”) and $12 million in secured indebtedness for our headquarters building, partially offset by $5 million in deferred debt acquisition costs.

Previous wording

On February 2, 2022, we repaid the Treasury Loan, which included the $150 million principal balance along with accrued interest and associated fees of $1 million. As a result, we recognized a $7 million non-cash charge from the write-off of unamortized deferred financing costs associated with the Treasury Loan for the year ended December 31, 2022. By repaying the amounts outstanding under the Treasury Loan, our co-branded credit card program and related brand assets that collateralized the Treasury Loan are now unencumbered.

Current wording

On February 2, 2022, we repaid the term loan facility entered into with the Treasury (the Treasury Loan”), which included the $150 million principal balance along with accrued interest and associated fees of $1 million. As a result, we recognized a $7 million non-cash charge from the write-off of unamortized deferred financing costs associated with the Treasury Loan for the year ended December 31, 2022.

Previous wording

In connection with the PSP Promissory Notes and Treasury Loan, we issued to the Treasury warrants to purchase 3,117,940 shares of FGHI common stock at a weighted-average price of $6.95 per share. 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 consolidated balance sheet. The Treasury has not exercised any warrants as of December 31, 2023.

Current wording

In connection with the PSP Promissory Notes and the Treasury Loan, 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 consolidated balance sheet. These warrants will expire between May 2025 and June 2026. No warrants have been exercised as of December 31, 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

We expect to meet our cash requirements for the next twelve months through use of our available cash and cash equivalents, our PDP Financing Facility and cash flows from operating activities. We expect to meet our long-term cash requirements with cash flows from operating and financing activities, including, but not limited to, potential future borrowings on our credit facility and/or potential issuances of debt or equity. We also have unencumbered loyalty and brand-related assets which we believe could generate significant additional liquidity, if desired. Our primary uses of cash are for working capital, aircraft PDPs, debt repayments and capital expenditures.

Current wording

We expect to meet our cash requirements for the next twelve months through use of our available cash and cash equivalents, our Pre-delivery Credit Facilities, and cash flows from operating activities. We expect to meet our long-term cash requirements with cash flows from operating and financing activities, including, but not limited to, potential future borrowings under the Pre-delivery Credit Facilities, our undrawn Revolving Loan Facility and/or potential issuances of debt or equity. The Revolving Loan Facility also permits us to enter into additional indebtedness secured by our loyalty program and brand-related assets, to the extent such indebtedness is pari passu to that of the Revolving Loan Facility. Our primary uses of cash are for working capital, aircraft PDPs, debt repayments and capital expenditures.

Previous wording

Our single largest capital commitment relates to the acquisition of aircraft. As of December 31, 2023, we operated all of our 136 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 December 31, 2023, we had $407 million of PDPs held by Airbus which have been partially financed by our PDP Financing Facility. As of December 31, 2023 our PDP Financing Facility, which allows us to draw up to an aggregate of $365 million, had $312 million outstanding. As of December 31, 2023, we had a firm obligation to purchase 210 A320neo family aircraft and 15 additional spare engines to be delivered by 2029. Of our aircraft commitments, four had committed operating leases for 2024 deliveries, and 12 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 December 31, 2024, we operated all of our 159 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 December 31, 2024, our Pre-delivery Credit Facilities, which allow us to draw up to an aggregate of $478 million, had $329 million outstanding. As of December 31, 2024, we had $404 million of PDPs held by Airbus, which have been partially financed by our Pre-delivery Credit Facilities.

Previous wording

(a)Includes principal commitments only associated with our PDP Financing Facility with borrowings as of December 31, 2023 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 through 2031. See “Notes to Consolidated Financial Statements — 8. Debt”.

Current wording

(a)Includes principal commitments only associated with our Pre-delivery Credit Facilities with borrowings as of December 31, 2024, our affinity card unsecured debt due through 2029, our building notes through September 2031 and the PSP Promissory Notes through 2031. See “Notes to Consolidated Financial Statements — 8. Debt”.

Previous wording

(b)Represents interest on debt obligations.

Current wording

(b)Represents interest and commitment fees on debt obligations and our undrawn Revolving Loan Facility.

Previous wording

(c)Represents gross cash payments related to our operating lease obligations that are not subject to discount as compared to the obligations measured on our consolidated balance sheets. See “Notes to Consolidated Financial Statements — 9. Operating Leases”.

Current wording

(c)Represents gross cash payments related to our operating fixed lease obligations that are not subject to discount as compared to the obligations measured on our consolidated balance sheets. See “Notes to Consolidated Financial Statements — 9. Operating Leases”.

Previous wording

During the year ended December 31, 2022, net cash used in operating activities totaled $78 million, which was driven by a $37 million net loss, $14 million of outflows from changes in operating assets and liabilities and non-cash adjustments totaling $27 million.

Current wording

During the year ended December 31, 2024, net cash used in operating activities totaled $82 million, which was driven by non-cash adjustments of $204 million, partially offset by $85 million of net income and $37 million of inflows from changes in operating assets and liabilities.

Previous wording

•$94 million in increases in other long-term assets driven by increases in prepaid maintenance and capitalized maintenance;

Current wording

•$190 million in increases in other long-term assets primarily driven by increases in capitalized maintenance, prepaid maintenance and deferred purchase incentives; and