Frontier forecasts stronger third-quarter profit outlook as Spirit exit lifts fares

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Frontier Q3 profit outlook

Highlights

Frontier forecasts third-quarter EPS between loss of 10 cents and profit of 10 cents, beating analysts' loss prediction of 29 cents per share.
Second-quarter revenue hits a record $1.28 billion, driven by Spirit’s exit boosting fares and capacity up 8%, with unit revenue rising 28%.
Fuel expenses climb 77% year-over-year to $4.17 per gallon, raising total fuel costs to $436 million and pressuring margins despite improved pricing.

Quarterly outlook improves on pricing gains

As reported by Reuters, Frontier projects third-quarter earnings per share in a range from a loss of 10 cents to a profit of 10 cents, compared with analysts' expectation of a 29 cents per share loss, according to LSEG data. The carrier also expects fourth-quarter profit from breakeven to 20 cents per share, while analysts had forecast a 24 cents per share profit.

The airline is benefiting from faster fare increases after the exit of rival Spirit Airlines, its closest competitor. Frontier is also trying to protect margins by deferring deliveries of newer Airbus aircraft and returning older planes early to lessors.

Frontier's shares rise 2.4% in premarket trading after the forecast. The company says second-quarter revenue reaches a record $1.28 billion, driven by strong travel demand and favorable competitive capacity after Spirit leaves the U.S. market in May.

Fuel costs remain a major pressure point

Pricing momentum is offset in part by elevated fuel expenses as uncertainty around the Middle East war makes earnings and fuel cost forecasting more difficult for airlines. Jet fuel typically accounts for about one-fourth of carriers' operating expenses, leaving profitability sensitive to geopolitical disruptions.

Frontier pays $4.17 per gallon of fuel in the three months ended June 30, up 77% from a year earlier, while total fuel costs nearly double to $436 million. Even so, unit revenue jumps 28% from a year earlier to 11.52 cents in the quarter, while capacity grows 8%.

For the second quarter, Frontier posts a loss of 10 cents per share, narrower than a loss of 31 cents per share a year earlier and better than analysts' expectation of a 48 cents per share loss.

Our earlier report on the FTSE 100’s modest rise highlighted how renewed Middle East tensions pushed oil prices higher and lifted energy shares, while investors stayed cautious ahead of key central bank rate decisions. We also noted that elevated energy costs can add to inflation uncertainty and complicate the policy outlook, factors that ripple through to fuel-sensitive sectors such as airlines.

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