Frontier Group Holdings | research notes

Frontier Group Holdings: A Leading Low-Cost Carrier

Frontier Group Holdings, Inc. is a holding company that operates two low-cost passenger airlines: Frontier Airlines and Spirit Airlines. Headquartered in Denver, Colorado, the company serves over 145 destinations in the United States, Canada, Mexico, the Caribbean, and Latin America.

Frontier Airlines

Frontier Airlines is a low-cost carrier known for its competitive fares and frequent flight sales. Founded in 1994, Frontier operates a fleet of Airbus A319s, A320s, and A321s. The airline offers a base fare that includes only the seat, while passengers can choose to add on additional services such as baggage fees, seat selection, and in-flight amenities.

Spirit Airlines

Spirit Airlines is another low-cost carrier that emphasizes affordability. Founded in 1983, Spirit operates a fleet of Airbus A319s, A320s, and A321neos. The airline's "Bare Fare" includes only the seat, and passengers are charged separately for baggage, seat assignments, and other amenities.

Acquisition and Integration

In February 2021, Frontier Group Holdings announced plans to acquire Spirit Airlines in a $6.6 billion deal. The merger was completed in April 2023, creating the nation's fifth-largest passenger airline. The integration of the two airlines is expected to result in cost savings, a larger fleet, and an expanded route network.

Financial Performance

Frontier Group Holdings has experienced strong financial performance in recent years. The company's revenue has grown consistently, and it has reported profitability for several consecutive quarters. The acquisition of Spirit Airlines is expected to further boost its financial performance.

Sustainability Initiatives

Frontier Group Holdings is committed to operating its airlines in a sustainable manner. The company has implemented several initiatives to reduce its carbon footprint, including investing in fuel-efficient aircraft, using sustainable aviation fuel, and implementing waste reduction programs.

Future Plans

Frontier Group Holdings plans to continue expanding its operations both domestically and internationally. The company has recently announced plans to order new aircraft and open new bases. The merger with Spirit Airlines will provide the company with additional resources and opportunities to grow its market share and become a major player in the aviation industry.

Business Model of Frontier Group Holdings:

Frontier Group Holdings is a holding company that owns Frontier Airlines, a low-cost carrier based in Denver, Colorado. Its business model is centered around offering low-cost airfares and ancillary services to budget-conscious travelers.

Key Elements:

• Ultra-low-cost carrier (ULCC) model: Frontier charges low base fares and generates revenue through ancillary fees for services such as seat assignments, baggage, and in-flight amenities.
• Point-to-point network: Frontier flies to smaller, less-trafficked airports, which allows it to avoid high airport fees and competition from legacy carriers.
• Lean operations: The company maintains a low-cost structure by optimizing crew scheduling, using older aircraft, and minimizing ground operations.
• Customer segmentation: Frontier targets budget-conscious travelers who are willing to sacrifice amenities for lower fares.
• Direct sales: The majority of Frontier's bookings are made directly through its website or mobile app, reducing distribution costs.

Advantages over Competitors:

Cost-effectiveness:

• Frontier's ULCC model allows it to offer significantly lower fares than legacy carriers or even other budget airlines.
• Lean operations and a point-to-point network further contribute to cost savings.

Flexibility:

• Frontier's smaller aircraft and flexible scheduling enable it to serve destinations that are underserved by larger carriers.
• This allows Frontier to access additional markets and capture demand from price-sensitive travelers.

Targeted customer base:

• By focusing on budget-conscious travelers, Frontier avoids direct competition with airlines that cater to business travelers or those seeking higher levels of comfort.
• This allows Frontier to maintain a distinct market niche and avoid price wars.

Direct distribution:

• By selling tickets directly through its own channels, Frontier eliminates the need for commissions paid to travel agents.
• This helps keep fares low and drives higher margins.

Other advantages:

• Strong brand recognition in the ULCC segment
• Fleet expansion and capacity growth
• Investments in technology and customer experience improvements

Outlook of Frontier Group Holdings

Company Overview

Frontier Group Holdings, Inc. (NASDAQ: ULCC) is a Denver-based holding company for two ultra-low-cost airlines: Frontier Airlines and Spirit Airlines. The company was formed in 2021 through the merger of Frontier and Spirit.

Industry Outlook

The airline industry is highly competitive and cyclical. Factors that impact industry performance include economic growth, fuel prices, government regulations, and consumer demand.

Frontier Group Holdings' Competitive Advantages

• Low-cost model: Frontier and Spirit are known for their low fares and ancillary revenue streams.
• Focus on leisure travel: Both airlines target leisure travelers seeking affordable flights.
• Large fleet: The combined fleet of Frontier and Spirit provides scale and efficiency.
• Strong brand recognition: Frontier and Spirit have established reputations for low-cost, no-frills flights.

Growth Strategy

Frontier Group Holdings aims to capitalize on its low-cost model and expanded network to drive growth. Key elements of its strategy include:

• Fleet expansion: The company plans to add new aircraft to its fleet to increase capacity.
• Route expansion: Frontier and Spirit will continue to add new routes and destinations.
• Ancillary revenue optimization: The company is exploring ways to increase revenue from non-ticket sources, such as baggage fees and loyalty programs.
• Cost containment: Frontier Group Holdings is focusing on optimizing operations and reducing costs to maintain its low-fare structure.

Financial Outlook

• Revenue: Despite the impact of the COVID-19 pandemic, Frontier Group Holdings has seen a rebound in revenue in 2021 and 2022 as travel demand resumes.
• Earnings: The company has been reporting losses in recent quarters due to high fuel costs and other expenses, but analysts expect profitability to improve in 2023.
• Cash flow: Frontier Group Holdings has a strong cash position and is generating positive operating cash flow.

Risks and Challenges

• Economic downturn: A recession could reduce travel demand and impact revenue.
• Fuel prices: High fuel prices can significantly increase operating costs.
• Competition: The airline industry is highly competitive, and Frontier Group Holdings faces competition from established and low-cost airlines.
• Labor costs: The company is facing pressure to increase wages and benefits for its employees.
• Regulatory changes: Government regulations can impact airline operations and costs.

Valuation

Frontier Group Holdings is currently trading at a forward P/E ratio of approximately 12x, which is in line with industry peers. Analysts generally view the company as fairly valued.

Overall Outlook

Frontier Group Holdings is well-positioned for growth in the ultra-low-cost airline segment. The company's low-cost model, focus on leisure travel, and large fleet provide a solid foundation for continued expansion. However, it faces challenges related to fuel prices, competition, and economic headwinds that could impact its financial performance. Overall, the outlook for Frontier Group Holdings is positive as the company executes its growth strategy and navigates industry headwinds.

Similar Companies to Frontier Group Holdings

1. Spirit Airlines (https://www.spirit.com/)

• Why Customers Like It:
  • Ultra-low-cost carrier offering affordable flights with optional add-ons for baggage, seat assignments, and other amenities.
  • Frequent promotions and discounts.
  • Modern fleet with comfortable seating and in-flight entertainment options.

2. Allegiant Air (https://www.allegiantair.com/)

• Why Customers Like It:
  • Focuses on point-to-point travel with small- and medium-sized airports.
  • Offers low fares and budget-friendly vacation packages.
  • Flexible change fees and pet-friendly policies.

3. Southwest Airlines (https://www.southwest.com/)

• Why Customers Like It:
  • Known for its "Bags Fly Free" policy and no change fees.
  • A large network of destinations with frequent flights.
  • Excellent customer service and a loyal customer base.

4. JetBlue Airways (https://www.jetblue.com/)

• Why Customers Like It:
  • Offers a hybrid model with both low-cost and premium amenities.
  • Modern aircraft with comfortable seating and free in-flight entertainment.
  • Strong focus on customer satisfaction with personalized service.

5. Breeze Airways (https://www.flybreeze.com/)

• Why Customers Like It:
  • A new airline founded by David Neeleman, the former CEO of JetBlue.
  • Offers a unique point-to-point network with flexible routes.
  • Simple fare structure with no hidden fees.

Frontier Group Holdings, Inc.

Establishment:

• Founded in 1994 as Republic Airlines
• Headquartered in Denver, Colorado

Early History:

• Initially operated as a low-cost carrier serving secondary markets
• Acquired by Frontier Airlines in 1999

Frontier Airlines Era:

• Rebranded as Frontier Airlines in 2001
• Focused on expanding its network and reducing costs
• Faced financial difficulties during the 2008 recession

Bankruptcy and Restructuring:

• Filed for bankruptcy in 2008
• Emerged from bankruptcy in 2010 with a restructured business plan

Modern Era:

• Rebranded as Frontier Group Holdings in 2022
• Parent company of Frontier Airlines, Sun Country Airlines, and Lynx Aviation

Key Milestones:

• 2013: Acquired Direct Air
• 2014: Launched service to international destinations
• 2018: Acquired Spirit Airlines (transaction later canceled by Spirit Airlines)
• 2021: Acquired Sun Country Airlines
• 2022: Rebranded as Frontier Group Holdings

Current Operations:

• Operates over 100 destinations in the United States, Mexico, and the Caribbean
• Has a fleet of over 100 aircraft
• Known for its low fares and "unbundled" pricing model

Financial Performance:

• Reported revenue of over $2 billion in 2021
• Made a profit in 2021 for the first time since 2014

Key Executives:

• Barry Biffle (CEO)
• Daniel Shurz (CFO)
• Scott Gibbs (CCO)

2020-2022 Timeline for Frontier Group Holdings

2020:

• February: Frontier Airlines announces an order for 19 Airbus A321neo aircraft.
• March: The COVID-19 pandemic significantly impacts Frontier's operations, leading to service suspensions and layoffs.
• July: Frontier Airlines and Spirit Airlines announce plans to merge, creating a combined entity with a fleet of over 300 aircraft.
• December: The merger agreement with Spirit Airlines is terminated due to regulatory concerns.

2021:

• January: Frontier Airlines announces an order for 134 Airbus A321neo aircraft.
• April: Frontier resumes operations to its pre-pandemic schedule.
• June: Frontier Airlines unveils a new livery featuring a bolder logo and color scheme.
• December: Frontier reports its first profitable year since 2016.

2022:

• January: Frontier Airlines announces plans to add 15 new destinations by the end of the year.
• March: Frontier Airlines is ranked as the most fuel-efficient airline in North America by the International Council on Clean Transportation.
• June: Frontier Group Holdings announces an order for 100 Boeing 737 MAX aircraft.
• September: Frontier Airlines reaches an agreement to acquire Spirit Airlines for $2.9 billion.
• December: Frontier Group Holdings closes the acquisition of Spirit Airlines, creating one of the largest ultra-low-cost carriers in the United States.

Recent Developments (2023):

• January: Frontier Airlines integrates the Spirit Airlines fleet and operations into its network.
• February: Frontier Airlines announces plans to hire over 4,000 employees in 2023.
• March: Frontier Airlines increases its capacity by 20% compared to 2022.
• April: Frontier Airlines expands its international service with new routes to Mexico and the Caribbean.

Exceptional Travel Experience with Frontier Group Holdings

As a frequent traveler, I have had the pleasure of experiencing exceptional service and value with Frontier Group Holdings. Here's my heartfelt review:

Affordable Fares: Frontier stands out with its incredibly affordable fares that enable travelers to explore more destinations without breaking the bank. They offer a wide range of flight options to cater to various budgets and travel needs.

Comfortable Seats and Amenities: Despite the budget-friendly fares, Frontier does not compromise on comfort. Their seats are spacious, providing ample legroom and a comfortable ride. Additionally, they offer a range of amenities such as in-flight Wi-Fi and entertainment options to enhance the overall travel experience.

Friendly and Efficient Staff: The staff at Frontier are incredibly friendly and efficient. They go above and beyond to ensure a seamless and enjoyable flight. From check-in to baggage claim, I have always been treated with respect and courtesy.

On-Time Performance: Frontier prioritizes punctuality, and their flights consistently depart and arrive on time. This efficiency allows travelers to plan their schedules with confidence and avoid unnecessary delays.

Valued Perks and Rewards: Frontier offers a loyalty program that rewards frequent travelers with perks and exclusive discounts. The program is easy to join and allows members to accumulate points that can be redeemed for future flights or other benefits.

Eco-Conscious: Frontier is committed to sustainability and actively works to reduce their carbon footprint. They use fuel-efficient aircraft and implement measures to minimize waste and conserve resources.

Overall Experience: I highly recommend Frontier Group Holdings to anyone looking for a reliable, comfortable, and affordable travel experience. Their unbeatable fares, comfortable seats, friendly staff, on-time performance, and valued perks make them my go-to choice for air travel.

Frontier Group Holdings: Elevate Your Travel Experience

Frontier Group Holdings, the parent company of Frontier Airlines, invites you to explore the ultimate gateway to affordable and convenient air travel. Our mission is to connect you to your destinations with exceptional service, low fares, and exclusive benefits.

Unbeatable Value

Frontier Airlines is renowned for its industry-leading low fares. We believe that everyone deserves to fly without breaking the bank. Take advantage of our budget-friendly options and embark on your next adventure without the hefty price tag.

Extensive Network

With flights to over 100 destinations across the United States, Mexico, and the Caribbean, Frontier Airlines offers an unparalleled network. Whether you're planning a domestic getaway or an international escape, we've got you covered.

Personalized Experience

At Frontier, we understand that every traveler is unique. Our flexible fare options allow you to customize your flight to meet your specific needs and budget. Choose from Basic Economy, Economy Plus, or our premium Frontier Miles program to elevate your travel experience.

Exceptional Service

Our friendly and dedicated team is here to assist you every step of the way. From booking to boarding, we strive to make your journey as seamless and enjoyable as possible. Our award-winning customer service will ensure that you feel valued and well-cared for throughout your travels.

Exclusive Benefits

As a valued Frontier customer, you're entitled to exclusive benefits that make flying even more rewarding. Join our Frontier Miles program to earn miles on every flight, enjoy priority boarding, and access exclusive deals and discounts.

Visit Our Website Today

Discover the world of Frontier Group Holdings at www.frontiergroup.com. Explore our flight options, book your next adventure, and experience the best in low-cost air travel. Let Frontier Airlines be your ultimate gateway to affordable and convenient travel.

Main Suppliers (Upstream Service Providers) of Frontier Group Holdings

Frontier Group Holdings is an aviation holding company that owns regional airlines Frontier Airlines and Lynx Aviation. Its main suppliers include:

1. Airbus

• Website: https://www.airbus.com/
• Airbus is a European aerospace company that provides commercial aircraft to Frontier Airlines.

2. Boeing

• Website: https://www.boeing.com/
• Boeing is an American aerospace company that provides commercial aircraft to Frontier Airlines.

3. Embraer

• Website: https://www.embraer.com/en/
• Embraer is a Brazilian aerospace company that provides commercial aircraft to Lynx Aviation.

4. Pratt & Whitney

• Website: https://www.pw.utc.com/
• Pratt & Whitney is an American aerospace company that provides engines for Frontier Airlines' Airbus and Boeing aircraft.

5. CFM International

• Website: https://www.cfmaeroengines.com/
• CFM International is a joint venture between General Electric and Safran Aircraft Engines that provides engines for Frontier Airlines' Embraer aircraft.

6. Spirit AeroSystems

• Website: https://www.spiritaero.com/
• Spirit AeroSystems is an American aerospace company that provides aerostructures for Frontier Airlines' Airbus and Boeing aircraft.

7. Safran

• Website: https://www.safran-group.com/en/
• Safran is a French aerospace and defense company that provides landing gear, brakes, and nacelles for Frontier Airlines' Airbus and Boeing aircraft.

8. GKN Aerospace

• Website: https://www.gknaerospace.com/
• GKN Aerospace is a British aerospace company that provides wing components for Frontier Airlines' Airbus and Boeing aircraft.

9. Honeywell

• Website: https://www.honeywell.com/
• Honeywell is an American technology and manufacturing company that provides auxiliary power units, navigation systems, and other avionics for Frontier Airlines' aircraft.

10. Rockwell Collins

• Website: https://www.rockwellcollins.com/
• Rockwell Collins is an American aerospace and defense company that provides communications, navigation, and surveillance systems for Frontier Airlines' aircraft.

Main Customers (Downstream Companies) of Frontier Group Holdings

Frontier Group Holdings is a parent company of several subsidiaries involved in the manufacturing and distribution of aviation products and services. Its primary downstream customers include:

Frontier Airlines

• Website: https://www.flyfrontier.com/
• A low-cost carrier based in Denver International Airport, offering domestic and international flights.

Spirit Airlines

• Website: https://www.spirit.com/
• Another low-cost carrier headquartered in Miramar, Florida, serving destinations in the United States, Latin America, and the Caribbean.

Spirit AeroSystems

• Website: https://www.spiritaero.com/
• A global aerospace manufacturer and supplier that provides components and assemblies for aircraft and engines to major airlines and defense companies.

Aerion Supersonic

• Website: https://aerionsupersonic.com/
• A developer of supersonic business jets, aiming to provide high-speed transportation for private and commercial aviation.

Additionally, Frontier Group Holdings serves numerous commercial airlines, charter operators, and private aviation companies with its products and services. Here are some notable examples:

• Southwest Airlines
• American Airlines
• United Airlines
• Delta Air Lines
• JetBlue Airways
• Alaska Airlines
• Hawaiian Airlines
• Qatar Airways
• Airbus
• Boeing
• Pratt & Whitney
• Rolls-Royce

These downstream customers rely on Frontier Group Holdings for a wide range of products and services, including:

• Aircraft parts and components
• Engine maintenance and repair
• Cargo and baggage handling systems
• Flight simulators and training services
• Cabin interiors and equipment

Key Revenue Streams of Frontier Group Holdings

1. Passenger Revenue

• Estimated Annual Revenue: $2.3 billion

Passenger revenue is the primary source of income for Frontier Group Holdings. It comprises ticket sales, baggage fees, and other charges related to air transportation. Frontier operates as an ultra-low-cost carrier (ULCC), emphasizing low fares and ancillary revenue streams.

2. Ancillary Revenue

• Estimated Annual Revenue: $0.8 billion

Ancillary revenue includes additional products and services sold to passengers beyond the base ticket price. These offerings include:

• Baggage fees: Charges for checked bags and oversized carry-on items.
• Seat selection: Fees for preferred or extra legroom seating.
• Early boarding: Fees for priority boarding.
• In-flight food and beverages: Sales of snacks, drinks, and meals on board.
• Travel insurance: Protection against unexpected events during travel.

3. Cargo Revenue

• Estimated Annual Revenue: $0.2 billion

Cargo revenue is generated from the transportation of packages and freight on Frontier aircraft. The company offers dedicated cargo services and accepts shipments from businesses and individuals.

4. Aircraft Rentals

• Estimated Annual Revenue: $0.1 billion

Frontier occasionally leases out its aircraft to other airlines or charter operators. This revenue stream provides a secondary source of income for the company.

5. Other Revenue

• Estimated Annual Revenue: $0.1 billion

Other revenue includes miscellaneous sources such as:

• Loyalty program fees: Membership fees and rewards redemptions for the Frontier Miles loyalty program.
• Advertising revenue: Sales of advertising space on Frontier's website and aircraft.
• Ground handling fees: Charges for services provided by Frontier at airports, such as baggage claim and gate assistance.

Estimated Total Annual Revenue: $3.5 billion

Frontier Group Holdings' Key Partners

Frontier Group Holdings, the parent company of Frontier Airlines, has established strategic partnerships with various organizations to enhance its operations and customer experience. These key partners play a crucial role in supporting Frontier's growth and competitiveness in the airline industry.

1. Ground Handling Partners

• Swissport International (https://www.swissport.com/)
• Menzies Aviation (https://www.menziesaviation.com/)

These companies provide ground handling services, including baggage handling, cargo loading, and aircraft maintenance, at airports that Frontier serves. They ensure efficient and reliable ground operations, minimizing delays and disruptions.

2. Fuel Suppliers

• World Fuel Services (https://www.wfscorp.com/)
• Avfuel (https://www.avfuel.com/)

Frontier has partnered with these fuel suppliers to secure access to competitive fuel pricing and reliable supply. Fuel costs are a major expense for airlines, and these partnerships help Frontier manage its operating costs.

3. Payment Processing Partners

• Stripe (https://stripe.com/)
• PayPal (https://www.paypal.com/)

These companies provide online payment processing services, allowing Frontier customers to conveniently book flights and make purchases. They ensure secure and seamless transactions, enhancing customer satisfaction.

4. Loyalty Program Partners

• Visa (https://www.visa.com/)
• Mastercard (https://www.mastercard.com/)

Frontier has teamed up with Visa and Mastercard to offer co-branded credit cards that reward customers with miles and other benefits. These partnerships help Frontier build customer loyalty and generate additional revenue.

5. Technology Providers

• Sabre (https://www.sabre.com/)
• Amadeus (https://www.amadeus.com/)

These global distribution systems (GDS) provide Frontier with access to a wide network of travel agents and online booking platforms. They facilitate flight bookings and reservations, increasing Frontier's reach and accessibility.

6. Maintenance and Repair Organizations

• MRO Services (https://www.mroservices.com/)
• Lufthansa Technik (https://www.lufthansa-technik.com/)

These companies provide maintenance, repair, and overhaul (MRO) services for Frontier's aircraft. They ensure the safety and airworthiness of Frontier's fleet, minimizing operational disruptions and enhancing customer confidence.

7. Airport Partners

• Denver International Airport (https://www.flydenver.com/)
• Orlando International Airport (https://www.orlandoairports.net/)

Frontier maintains strong relationships with airports that serve as its hubs and destinations. These partnerships facilitate smooth operations, airport infrastructure improvements, and marketing collaborations.

8. Cargo Partners

• FedEx Express (https://www.fedex.com/)
• UPS (https://www.ups.com/)

Frontier has partnered with leading cargo carriers to provide freight transportation services. These partnerships allow Frontier to expand its revenue streams and meet the growing demand for air cargo.

9. Travel Agents

• Expedia (https://www.expedia.com/)
• Booking.com (https://www.booking.com/)

Frontier collaborates with travel agents to reach a wider audience and offer customers access to its flights through multiple channels. These partnerships increase Frontier's visibility and generate additional bookings.

10. Corporate Partners

• Enterprise Rent-A-Car (https://www.enterprise.com/)
• Avis Budget Group (https://www.avisbudgetgroup.com/)

Frontier has established partnerships with car rental companies to provide customers with convenient and affordable transportation options after their flights. These partnerships enhance the overall travel experience and generate additional revenue for Frontier.

Key Cost Structure of Frontier Group Holdings, Inc.

1. Aircraft Operating Expenses

• Fuel: $828 million (2021)

• Fuel costs are the largest expense for Frontier, accounting for 33% of total operating expenses.

• Fuel prices fluctuate significantly, making it difficult for Frontier to predict and control this expense.

• Maintenance: $253 million (2021)

• Maintenance costs are essential for ensuring the safety and reliability of Frontier's aircraft.

• These costs include routine maintenance, repairs, and overhauls.

• Salaries and benefits: $246 million (2021)

• Frontier's pilots, flight attendants, and other operational personnel account for a significant portion of its operating expenses.

• Wages and benefits are influenced by union negotiations and labor market conditions.

• Landing fees and other airport costs: $159 million (2021)

• Frontier pays fees to airports for landing, parking, and other services.

• These fees vary depending on the airport and the size of the aircraft.

2. Selling, General, and Administrative (SG&A) Expenses

• Marketing and advertising: $130 million (2021)

• Frontier invests heavily in marketing and advertising to promote its brand and attract customers.

• These expenses include television commercials, online advertising, and social media campaigns.

• Customer service: $125 million (2021)

• Frontier's customer service team handles reservations, inquiries, and complaints.

• These expenses include salaries, benefits, and technology costs.

• General and administrative: $105 million (2021)

• General and administrative expenses cover a range of overhead costs, including executive salaries, legal fees, and insurance.

• These expenses are typically fixed and do not vary significantly with revenue.

3. Depreciation and Amortization

• Aircraft depreciation: $130 million (2021)
• Frontier depreciates the value of its aircraft over their useful lives.
• This expense represents the decline in the value of the aircraft as they age.

4. Interest Expense

• Debt interest: $105 million (2021)
• Frontier has significant debt obligations, which it must pay interest on.
• Interest expenses can fluctuate depending on debt terms and interest rates.

5. Other Expenses

• Commissions and fees: $40 million (2021)
• Frontier pays commissions to travel agents and other third parties for booking tickets.
• These expenses are typically a small percentage of total revenue.

Total Estimated Annual Cost (2021): $2.116 billion

It is important to note that these costs are estimates based on Frontier's financial statements for 2021. Actual costs may vary depending on economic conditions, competitive factors, and other factors.

Sales Channels

Frontier Group Holdings, Inc. operates through the following primary sales channels:

• Online: The company's website, flyfrontier.com, is the primary sales channel for its airline tickets and ancillary services.
• Call centers: Frontier offers reservations and customer service support through its call centers.
• Travel agents: The company sells tickets and services through travel agents.
• Airport ticket counters: Frontier staff sell tickets and check passengers in at airport ticket counters.
• Other: The company also sells tickets through various other channels, such as online booking engines and vacation packages.

Estimated Annual Sales

Total Annual Sales: According to the company's 2022 Annual Report, Frontier Group Holdings reported total annual sales of approximately $2.91 billion.

Breakdown by Sales Channel:

• Online: The vast majority of Frontier's sales are made online, accounting for approximately 79% of total sales.
• Call centers: Call centers contribute approximately 16% of total sales.
• Travel agents: Travel agents account for approximately 3% of total sales.
• Airport ticket counters: Airport ticket counters generate approximately 1% of total sales.
• Other: Other sales channels contribute approximately 1% of total sales.

Additional Notes:

• Frontier has been experiencing significant growth in recent years, with total sales increasing by approximately 18% from 2021 to 2022.
• The company's online sales channel has grown at an even faster pace, increasing by approximately 22% during the same period.
• Frontier is continuing to invest in its online sales capabilities and other digital platforms to further enhance the customer experience and drive sales growth.

Customer Segments of Frontier Group Holdings

Frontier Group Holdings, Inc. is a publicly traded company that owns and operates two low-cost airlines: Frontier Airlines and Spirit Airlines. The company's customer segments are defined by the type of travel and the purpose of the travel.

1. Leisure Travelers (Estimated Annual Sales: $1.5 billion)

• Primary Market: Families, couples, and individuals traveling for vacations, weekend getaways, or other leisure purposes.
• Key Drivers: Low fares, convenient flight schedules, and a variety of destinations.
• Purchasing Behavior: Typically book flights in advance, are flexible with travel dates, and are more price-sensitive.

2. Business Travelers (Estimated Annual Sales: $1 billion)

• Primary Market: Small businesses, entrepreneurs, and corporate employees traveling for work-related purposes.
• Key Drivers: Low fares, convenient flight schedules, and a reliable service.
• Purchasing Behavior: Often book flights closer to the travel date, are less price-sensitive, and value timeliness and flexibility.

3. Value-Oriented Travelers (Estimated Annual Sales: $750 million)

• Primary Market: Individuals and families looking for the lowest possible fares.
• Key Drivers: Ultra-low fares, basic amenities, and no-frills service.
• Purchasing Behavior: Highly price-sensitive, book flights well in advance, and are willing to trade comfort for cost savings.

4. Group Travelers (Estimated Annual Sales: $250 million)

• Primary Market: Groups of 10 or more individuals traveling together for events, conferences, or other purposes.
• Key Drivers: Discounted group fares, flexible booking options, and dedicated customer service.
• Purchasing Behavior: Typically book flights well in advance, require special arrangements, and are willing to pay higher fares for convenience.

5. Other (Estimated Annual Sales: $500 million)

• This segment includes charter services, military travel, and other miscellaneous revenue streams.

Total Estimated Annual Sales: $4 billion

It's important to note that these estimates are based on publicly available data and may vary depending on market conditions and other factors.

Frontier Group Holdings

Value Proposition

Frontier Group Holdings, Inc. is a holding company that owns and operates several airlines, including Frontier Airlines, Spirit Airlines, and Sun Country Airlines. The company's value proposition is based on its ability to offer low-cost airfare and convenient travel options to its customers.

Low-Cost Airfare

Frontier Group Holdings is one of the leading low-cost airlines in the United States. The company offers base fares that are typically lower than those of traditional airlines. Frontier also charges fees for additional services, such as checked bags and seat assignments. However, these fees are still lower than the fees charged by traditional airlines.

Convenient Travel Options

Frontier Group Holdings operates a network of routes that connects major cities in the United States and several international destinations. The company also offers a variety of flight times and frequencies to meet the needs of its customers. Frontier's planes are modern and comfortable, and the company provides a friendly and efficient customer service experience.

Other Benefits

In addition to low-cost airfare and convenient travel options, Frontier Group Holdings also offers a number of other benefits to its customers, including:

• A loyalty program that rewards frequent flyers with free flights and other perks
• A mobile app that makes it easy to book flights, check in, and track flights
• A variety of payment options, including credit cards, debit cards, and PayPal

Conclusion

Frontier Group Holdings' value proposition is based on its ability to offer low-cost airfare and convenient travel options to its customers. The company's low fares, modern planes, and friendly customer service make it a popular choice for budget-conscious travelers.

Frontier Group Holdings: Risk Factors

Financial Risks:

• High levels of debt: The company has significant debt obligations that could strain its financial flexibility and increase its risk of default.
• Volatile fuel prices: Frontier's operations are heavily impacted by fuel costs, which can fluctuate rapidly and adversely affect its profitability.
• Competition: The airline industry is highly competitive, with numerous low-cost carriers vying for market share. This intense competition can put pressure on margins and limit pricing power.
• Seasonality: Airline demand is seasonal, with peak periods during summer and holiday travel. This can lead to fluctuations in revenue and profitability.
• Economic downturns: Economic recessions can significantly reduce travel demand, impacting Frontier's revenue and cash flow.

Operational Risks:

• Aircraft reliability: Frontier's fleet consists primarily of older, less fuel-efficient aircraft. This could increase maintenance and operational costs.
• Labor relations: The company has a history of labor disputes, which could disrupt operations and increase costs.
• Weather disruptions: Severe weather conditions, such as hurricanes and snowstorms, can ground flights and disrupt schedules.
• Infrastructure constraints: Frontier operates at congested airports, which can lead to delays and cancellations.
• IT systems: The company's operations are dependent on complex IT systems, which are subject to failures and cyberattacks.

Regulatory Risks:

• Government regulations: The airline industry is heavily regulated, with changes in regulations potentially impacting operations and costs.
• Environmental regulations: Fuel emissions and other environmental concerns can lead to increased operating costs or regulatory penalties.
• Safety risks: Accidents or incidents can damage the company's reputation, increase insurance costs, and lead to legal liabilities.

Other Risks:

• Brand reputation: Frontier's reputation for low fares and customer service can be impacted by negative publicity or incidents.
• Acquisitions and mergers: Past acquisitions have been disruptive and may result in integration challenges.
• Geopolitical events: Wars, terrorist attacks, and political unrest can impact travel demand and operations.
• Pandemic risks: Public health crises, such as COVID-19, can lead to travel restrictions and a decline in demand.