Frontier Group Holdings, Inc. (ULCC)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 8. “Financial Statements and Supplementary Data” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, which was filed with the SEC on February 18, 2026 (the “2025 Annual Report”).

Recent Developments

Macroeconomic Conditions. Recent geopolitical tensions and military conflict in the Middle East, including developments involving Iran, have contributed to volatility in global energy markets. Higher crude oil prices can increase our jet fuel costs, which we experienced during the three and six months ended June 30, 2026. In addition, related instability may create supply chain challenges affecting aircraft parts and other operational inputs. Continued uncertainty or further escalation could pressure our operating costs and negatively affect our financial performance. We continue to monitor the situation and the related impacts to our business.

Financing. In June 2026, we amended our Credit Card Affinity Agreement with Barclays Bank Delaware (“Barclays”) to extend the term of both the co-branded credit card agreement and the pre-purchased miles facility from December 31, 2029 to June 30, 2037. The amendment also increased the pre-purchased miles facility from $200 million to $375 million. Please refer to “Notes to Condensed Consolidated Financial Statements — 2. Revenue Recognition” for additional information.

Labor. We are currently in negotiations with the unions which represent our pilots, flight attendants, and aircraft technicians regarding their next labor contracts. Please refer to “Notes to Condensed Consolidated Financial Statements — 8. Commitments and Contingencies” for additional information.

Legal/Regulatory. During 2025, we obtained a revised preliminary assessment in the amount of $133 million related to the applicability of federal excise tax to certain optional ancillary products and services. We established reserves for certain fees subject to the assessment where we believe a loss for this matter is probable and estimable and we are contesting the assessment.

We previously received an immaterial audit assessment from the U.S. Transportation Security Administration (the “TSA”) that covered the third quarter of 2016 through the fourth quarter of 2018 and related to the remittance of TSA fees where flight credits expired unused (the “2016-2018 Audit”). We appealed this assessment to the United States Tenth Circuit Court of Appeals. In addition, we are under audit by the TSA for the period from the fourth quarter of 2019 through the fourth quarter of 2022 (the “2019-2022 Audit”). In April 2026, we lost our appeal regarding the 2016-2018 Audit and received a preliminary assessment for the 2019-2022 Audit in the amount of $42 million, which mainly covered remittance of TSA fees where flight credits expired unused as well as for other passengers that purchased tickets and did not travel. During the six months ended June 30, 2026, we recorded a one-time charge related to prior periods of $73 million (the “TSA Reserve”) for the 2016-2018 Audit and 2019-2022 Audit periods, which is largely related to remittance of TSA fees for passengers that purchased tickets and did not travel and is included in other current liabilities and other long-term liabilities on our condensed consolidated balance sheets and in passenger revenues within our condensed consolidated statements of operations. We could be subject to further TSA audit examinations and resulting assessments.

Product. In July 2026, we announced that the first Starlink-equipped aircraft will launch in 2027 and deployment of high-speed Wi-Fi to the rest of our fleet will follow. Starlink will be our first offering of Wi-Fi and enhance the inflight experience for our customers.

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Fleet. In June 2026, we entered into an agreement with an existing lessor (the “Aircraft Sale Agreement”) to sell 11 A321neo aircraft at the time of delivery from our existing purchase agreement. The 11 aircraft include 3 deliveries expected in the fourth quarter of 2026 and 8 deliveries anticipated in the first half of 2027.

In March 2026, we entered into an agreement (the “Early Return Agreement”) to terminate the leases associated with 24 A320neo aircraft. As of June 30, 2026, all 24 aircraft have been returned and removed from the fleet. For the three and six months ended June 30, 2026, we recognized $70 million and $209 million, respectively, of operating expenses related to the Early Return Agreement, which includes one-time charges for lease return costs and costs related to the write-off of non-recoverable capitalized prepaid maintenance and accelerated depreciation of capitalized maintenance. Please refer to “Notes to Condensed Consolidated Financial Statements — 6. Operating Leases” for additional information.

Overview

The following table provides select financial and operational information for the three and six months ended June 30, 2026 and 2025 (in millions, except per share data):

Revenues

Total operating revenues for the three months ended June 30, 2026 totaled $1,279 million, an increase of 38% compared to the three months ended June 30, 2025. Revenue per available seat mile (“RASM”), increased by 28% driven by a 20% increase in total revenue per passenger as compared to the corresponding prior year period, alongside a 1.0-point increase in load factor. Capacity, as measured by ASMs, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, increased by 8%.

Total operating revenues for the six months ended June 30, 2026 totaled $2,271 million, an increase of 23% compared to the six months ended June 30, 2025. This was primarily due to the 20% increase in RASM, driven by a 12% increase in total revenue per passenger and a 2.2-point increase in load factor for the six months ended June 30, 2026, as compared to the corresponding prior year period. Capacity, as measured by ASMs, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, increased by 3%.

Adjusted RASM, a non-GAAP measure, increased from 9.08¢ during the six months ended June 30, 2025 to 11.21¢ during the six months ended June 30, 2026. For the six months ended June 30, 2026, this excludes the impact of $73 million related to the TSA Reserve associated with prior periods. There were no adjustments for the three months ended June 30, 2026 and the three and six months ended June 30, 2025.

Operating Expenses

Total operating expenses during the three months ended June 30, 2026 increased to $1,376 million, resulting in a cost per available seat mile (“CASM”) of 12.39¢, an increase of 27%, as compared to the three months ended June 30, 2025. Fuel expense for the three months ended June 30, 2026 was $206 million higher than the corresponding prior year period. The 90% increase in fuel expense for the three months ended June 30, 2026 was driven by a 77% increase in fuel cost per gallon and an 8% increase in fuel gallons consumed.

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Our non-fuel expenses increased by 21% during the three months ended June 30, 2026, as compared to the corresponding prior year period, driven primarily by expenses related to the Early Return Agreement to terminate the leases associated with 24 A320neo aircraft. The 21% increase was also driven by higher rent and maintenance expenses due to a larger fleet, and increased station operations expense due to increased airport operations, partially offset by an increase in sale-leaseback transactions. CASM (excluding fuel), a non-GAAP measure, increased 13% to 8.46¢, on an 8% increase in capacity, for the three months ended June 30, 2026, as compared to the corresponding prior year period, due to the aforementioned drivers of increased non-fuel expenses.

Adjusted CASM (excluding fuel), a non-GAAP measure, increased from 7.50¢ for the three months ended June 30, 2025 to 7.84¢ for the three months ended June 30, 2026. For the three months ended June 30, 2026, this excludes the impact of $70 million in expenses relating to the Early Return Agreement. There were no adjustments for the three months ended June 30, 2025.

Total operating expenses during the six months ended June 30, 2026 increased to $2,651 million, resulting in a CASM of 12.68¢, an increase of 31% compared to the six months ended June 30, 2025. Fuel expense for the six months ended June 30, 2026 was $236 million higher than the corresponding prior year period. The 50% increase in fuel expense for the six months ended June 30, 2026 was driven by the 45% increase in fuel cost per gallon and a 4% increase in fuel gallons consumed.

Our non-fuel expenses increased by 30% during the six months ended June 30, 2026, as compared to the corresponding prior year period, driven primarily by expenses related to the Early Return Agreement, increased aircraft rent due to a larger fleet, and increased maintenance, employee and station costs. CASM (excluding fuel), a non-GAAP measure, increased 26% to 9.31¢, on a 3% increase in capacity, for the six months ended June 30, 2026, as compared to the corresponding prior year due to the aforementioned drivers of increased non-fuel expenses.

Adjusted CASM (excluding fuel), a non-GAAP measure, increased from 7.37¢ for the six months ended June 30, 2025 to 8.31¢ for the six months ended June 30, 2026. For the six months ended June 30, 2026, this excludes the impact of $209 million in expenses relating to the Early Return Agreement. There were no adjustments for the six months ended June 30, 2025.

Net Income (Loss)

We generated a net loss of $90 million during the three months ended June 30, 2026, compared to a net loss of $70 million for the three months ended June 30, 2025. Considering the aforementioned non-GAAP adjustments and related $2 million of tax impacts, our adjusted net loss, a non-GAAP measure, was $22 million for the three months ended June 30, 2026. There were no non-GAAP adjustments for the three months ended June 30, 2025.

We generated a net loss of $362 million during the six months ended June 30, 2026, compared to a net loss of $113 million for the six months ended June 30, 2025. Considering the aforementioned non-GAAP adjustments and related $10 million of tax impacts, our adjusted net loss, a non-GAAP measure, was $90 million for the six months ended June 30, 2026. There were no non-GAAP adjustments during the six months ended June 30, 2025.

For the reconciliation to the corresponding GAAP measures of the aforementioned non-GAAP adjusted measures, see “Results of Operations — Reconciliation of GAAP to Non-GAAP Financial Data.”, “Reconciliation of Revenue to Adjusted Revenue”, and “Results of Operations — Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss), Pre-Tax Income (Loss) to Adju

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 2025 compared to fiscal year 2024 is included herein. For a discussion of the results of operations for fiscal year 2023 and comparisons between fiscal year 2024 and fiscal year 2023, 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, 2024, which was filed with the SEC on February 18, 2025.

Overview

The following table provides select financial and operational information for the years ended December 31, 2025 and 2024 (in millions, except percentages):

Revenues

Total operating revenues for the year ended December 31, 2025 totaled $3,724 million, a decrease of 1% compared to the year ended December 31, 2024. Revenue per available seat mile (“RASM”) decreased by 1% driven by a 1% decrease in total revenue per passenger, as compared to the corresponding prior year period.

Operating Expenses

Total operating expenses during the year ended December 31, 2025 increased to $3,873 million, resulting in a cost per available seat mile (“CASM”) of 9.74¢, an increase of 5% compared to the year ended December 31, 2024. Fuel expense was $112 million lower, as compared to the corresponding prior year period. This 11% decrease in fuel expense for the year ended December 31, 2025 was primarily driven by a 10% decrease in fuel cost per gallon, as well as the 2% decrease in fuel gallons consumed.

Our non-fuel expenses increased by 10% during the year ended December 31, 2025, as compared to the corresponding prior year period, driven primarily by increased aircraft rent due to a larger fleet, increased station costs due to station mix and rate inflation, increased employee costs, and the benefit from a legal settlement in the prior period, partially offset by lower lease return costs during the same period. CASM (excluding fuel), a non-GAAP measure, increased 10% to 7.41¢, while capacity remained consistent, for the year ended December 31, 2025, as compared to the corresponding prior year period, due to the aforementioned drivers of increased non-fuel expenses.

Adjusted CASM (excluding fuel), a non-GAAP measure, increased from 6.81¢ for the year ended December 31, 2024 to 7.41¢ for the year ended December 31, 2025. There were no adjustments for the year ended December 31, 2025. For the year ended December 31, 2024, Adjusted CASM (excluding fuel) excludes the impact of $38 million related to a legal settlement.

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Net Income (Loss)

We generated a net loss of $137 million during the year ended December 31, 2025, compared to a net income of $85 million for the year ended December 31, 2024. There were no non-GAAP adjustments for the year ended December 31, 2025. Considering the aforementioned non-GAAP adjustments and the $5 million valuation allowance and the write-off of $1 million in unamortized deferred financing costs for the year ended December 31, 2024, our adjusted net income, a non-GAAP measure, was $53 million for the year ended December 31, 2024.

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.”

Liquidity

As of December 31, 2025, our total available liquidity was $874 million, consisting of $654 million of unrestricted cash and cash equivalents and availability of $220 million under our revolving line of credit (the “Revolving Loan Facility”).

Trends and Uncertainties Affecting Our Business

We believe our operating and business performance is driven by various factors that typically affect airlines and their markets, including trends which affect the broader travel industry, as well as trends which affect the specific markets and customer base that we target. The following key factors may affect our future performance:

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 and enhancements to our frequent flyer program, have and will continue to stimulate demand for Frontier.

Our strategy is underpinned by our low-cost structure, and has significantly reduced our cost base by optimizing aircraft utilization 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.

We believe that we are well positioned to maintain our low unit operating costs relative to our competitors through on-going strategic initiatives, including continuing our cost optimization efforts, planned increases in aircraft utilization and further realizing economies of scale. To the extent that we are unable to maintain our low-cost structure, our ability to compete effectively may be impaired. In addition, if our competitors engage in fare wars or similar behavior, our financial performance could be adversely impacted.

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Aircraft Fuel. Fuel expense represents one of the single largest operating expense for most airlines, including ours. Aircraft fuel prices and availability are subject to market fluctuations, refining capacity, periods of market surplus and shortage and demand for heating oil, gasoline and other petroleum products, as well as meteorological, economic and political factors and events occurring throughout the world, which we can neither control nor accurately predict. The future cost and availability of aircraft fuel cannot be predicted with any degree of certainty.

Volatility. The air transportation business is volatile and highly affected by economic cycles and trends. Global pandemics and related health scares, consumer confidence and discretionary spending, fear of terrorism or war, weakening economic conditions, fare initiatives, fluctuations in fuel prices, labor actions, changes in governmental regulations on taxes and fees, weather and other factors have resulted in significant fluctuations in revenue and results of operations in the past.

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 summer months and less in the winter months, apart from the holiday season. As we increase our routes in other markets, we have reduced our concentration in Denver to decrease the impact of seasonality in our business. During the year ended December 31, 2025, 21% of our flights had Denver International Airport as either their origin or destination, as compared to 23% of our flights during the year ended December 31, 2024.

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.

We have seven union-represented employee groups comprising approximately 86% of our employees as of December 31, 2025. 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, AFA-CWA, and aircraft technicians represented by IBT regarding the next labor contract. Please refer to “Notes to Consolidated Financial Statements — 11. Commitments and Contingencies” for additional information.

Maintenance, Materials and Repairs and Maintenance Reserve Obligations. The amount of total maintenance costs and related depreciation of heavy maintenance expense is subject to variables such as estimated usage, government regulations, the size, age and makeup of the fleet in future periods, and the level of unscheduled maintenance events and their actual costs. Accordingly, we cannot reliably quantify future maintenance-related expenses for any significant period of time.

As of December 31, 2025, 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 2037. Please refer to “Notes to Consolidated Financial St

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