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Frontier - Not Lifting Off


  • Frontier is an ultra low-cost carrier which has been brought to the market.
  • Despite the pandemic, the market is ''open'' for such offerings amidst an anticipation of a recovery.
  • I like the operational performance outside of Covid-19, yet investing in the airline sector has traditionally been very hard.
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Frontier Group Holdings (NASDAQ:ULCC) went public in an offering which has not been a great success. For investors in the airline sector, it is a balancing act between dismal current operating conditions and potential for booming earnings in the near term, that is after the much anticipated reopening takes place. That said, it feels as if investors in the entire sector have priced in quite some good news already, perhaps a bit too much to my taste.

Low Fares

Frontier Group is a so-called ultra low-cost carrier which has a strategy called ''low fares done right''. The company focuses heavily on the US and near international destinations which it serves with 104 narrow-body Airbus 320 planes, with a real roadmap to expand the fleet in the coming decade.

The company was acquired by Indigo Partners back in 2013, which reshaped the company following a number of key replacements resulting in a rather dramatic improvement in the operating performance. That is of course until February 2020 when the arrival of Covid-19 hit the airline sector almost like no other segment of the economy.

The company has three main bases in Denver, Orlando and Las Vegas, drawing significant numbers of leisure travelers (up to 90% of the clientele) as it serves routes to more than 110 airports from these bases. While the company has been hit hard by the pandemic, like the rest of the industry, the airline expects to benefit in a big manner from the anticipated recovery.

The company has incurred relatively little debt during these times and the company believes that leisure will rebound in a big way. Management, furthermore, believes that new working patterns and a mixture of working life and regular life results in more frequent and shorter trips, benefiting the domestic low-cost airline carriers.

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This article was written by

The Value Investor profile picture

The Value Investor has a Master of Science with specialization in financial markets and a decade of experience tracking companies via catalytic company events.

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Comments (10)

OverTheHorizon profile picture
Went public at $19 in April—now $15. Time to get onboard.

Not sure about the airline executives who chose ULCC as Frontier's stock symbol instead of something like FRNT. Another example of being too cute. Well, they have the ability to change their stock symbol. Maybe they will. I know what ULCC stands for. Most people don't. They think it's a stock for an electrical parts maker.
The Value Investor profile picture
@southbuckeye Good point. I noticed the ticker as well of course, I guess it is telling indeed.
@southbuckeye Sorry, I don't get it, what does ULCC stand for?

Edit: wait. Is it "ultra low cost carrier"? Omg...
Frontier and Spirit are horrible airlines. Over the past year, all of my flights from these two have been changed. Of course, they've changed me (and all others) to flights I would never have chosen in the first place. Seems like a bait and switch to me. Offer a perfect flight (direct flight, middle day, to and back) then change everyone to 4-5 hour layovers or even an overnight. Flights suddenly leave early morning (6-8am) and arrive late at night (9-11pm) They have your money and although they will let you choose from the least inconvenient flight (usually of 2) they give NO refunds, only a credit if you give up in frustration and decide to pay for another airline. That way you can't easily go to the other airline you were looking at. The amount of negative PR fallout from this will be felt for years to come. I wouldn't go anywhere near these stocks. American, even under their current conditions, flights are FAR more reliable and much better experience. I will never fly either one of these two again, and I'm sure I'm not alone.
dave495 profile picture
@webchow I certainly agree with you in this. I have never had a good experience on either of these carriers. Wouldn’t trust them for anything.
@webchow @dave495 These ultra low cost flights are the dollar general stores of the skys. I would only buy a ticket on them if it were at least two thirds *off* the price of a legacy carrier ticket.
The Value Investor profile picture
@GuyRien1 At least, or max two-thirds?
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