Frontier Group Holdings Inc.

10/28/2026 | Press release | Distributed by Public on 10/28/2026 06:02

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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 nine months ended September 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. In September 2026, we entered into a collective bargaining contract ratification with the union representing our aircraft technicians. Further, we are currently in negotiations with the unions which represent our pilots and flight attendants 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 nine months ended September 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.
Fleet. In March 2026, we entered into an agreement (the "Early Return Agreement") to terminate the leases associated with 24 A320neo aircraft. As of September 30, 2026, all 24 aircraft have been returned and removed from the fleet. For the three and nine months ended September 30, 2026, we recognized $3 million and $212 million, respectively, of expenses related to the Early Return Agreement, which includes one-time charges for lease return costs, costs related to the write-off of non-recoverable capitalized prepaid maintenance, accelerated depreciation of capitalized maintenance, and costs related to commitment fees.
In August 2026, we entered into an agreement (the "Second Early Return Agreement") to terminate the leases associated with 13 A320neo aircraft. As of October 2026, all 13 aircraft have been returned and removed from the fleet. For the three months ended September 30, 2026, we recognized $134 million of operating expenses related to the Second 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. For additional information related to the Early Return Agreement and the Second Early Return Agreement (collectively the "Early Return Agreements") please refer to "Notes to Condensed Consolidated Financial Statements - 6. Operating Leases." In addition, during the third quarter of 2026 and in conjunction with our fleet optimization strategy, we entered into 10 direct leases for A321neo aircraft.
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.
Overview
The following table provides select financial and operational information for the three and nine months ended September 30, 2026 and 2025 (in millions, except per share data):
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Total operating revenues $ 1,355 $ 886 $ 3,626 $ 2,727
Total operating expenses $ 1,463 $ 963 $ 4,114 $ 2,925
Pre-tax income (loss) $ (104) $ (76) $ (479) $ (186)
Adjusted pre-tax income (loss) $ 39 $ (76) $ (54) $ (186)
Available seat miles ("ASMs") 11,419 9,689 32,331 29,951
Earnings (loss) per share, diluted $ (0.45) $ (0.34) $ (2.03) $ (0.84)
Revenues
Total operating revenues for the three months ended September 30, 2026 totaled $1,355 million, an increase of 53% compared to the three months ended September 30, 2025. This was primarily due to the 30% increase in revenue per available seat mile ("RASM"), driven by a 30% increase in total revenue per passenger as compared to the corresponding prior year period. Capacity, as measured by ASMs, for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, increased by 18%.
Total operating revenues for the nine months ended September 30, 2026 totaled $3,626 million, an increase of 33% compared to the nine months ended September 30, 2025. This was primarily due to the 23% increase in RASM, driven by an 18% increase in total revenue per passenger and a 0.9-point increase in load factor for the nine months ended September 30, 2026, as compared to the corresponding prior year period. Capacity, as measured by ASMs, for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, increased by 8%.
Adjusted RASM, a non-GAAP measure, increased from 9.10¢ during the nine months ended September 30, 2025 to 11.44¢ during the nine months ended September 30, 2026. For the nine months ended September 30, 2026, Adjusted RASM excludes the impact of $73 million related to the TSA Reserve associated with prior periods. There
were no adjustments for the three months ended September 30, 2026 and the three and nine months ended September 30, 2025.
Operating Expenses
Total operating expenses during the three months ended September 30, 2026 increased to $1,463 million, resulting in a cost per available seat mile ("CASM") of 12.81¢, an increase of 29%, as compared to the three months ended September 30, 2025. Fuel expense for the three months ended September 30, 2026 was $191 million higher than the corresponding prior year period. The 82% increase in fuel expense for the three months ended September 30, 2026 was driven by a 56% increase in fuel cost per gallon and a 16% increase in fuel gallons consumed.
Our non-fuel expenses increased by 42% during the three months ended September 30, 2026, as compared to the corresponding prior year period, driven primarily by expenses related to the Second Early Return Agreement to terminate the leases associated with 13 A320neo aircraft. The 42% increase was also driven by higher operations, as measured by capacity and departures, as well as higher aircraft rent due to increased lease return costs, and a decrease in sale-leaseback transactions resulting in decreased sale-leaseback gains. CASM (excluding fuel), a non-GAAP measure, increased 21% to 9.09¢, on an 18% increase in capacity, for the three months ended September 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 7.53¢ for the three months ended September 30, 2025 to 7.84¢ for the three months ended September 30, 2026. For the three months ended September 30, 2026, Adjusted CASM (excluding fuel) also excludes the impact of $136 million in expenses related to the Early Return Agreements and the $6 million expense relating to the collective bargaining contract ratification. There were no adjustments for the three months ended September 30, 2025.
Total operating expenses during the nine months ended September 30, 2026 increased to $4,114 million, resulting in a CASM of 12.73¢, an increase of 30% compared to the nine months ended September 30, 2025. Fuel expense for the nine months ended September 30, 2026 was $427 million higher than the corresponding prior year period. The 61% increase in fuel expense for the nine months ended September 30, 2026 was driven by the 49% increase in fuel cost per gallon and an 8% increase in fuel gallons consumed.
Our non-fuel expenses increased by 34% during the nine months ended September 30, 2026, as compared to the corresponding prior year period, driven primarily by expenses related to the Early Return Agreements, higher aircraft rent due to increased lease return costs driven by a larger fleet, increased station, employee, and maintenance costs, and a decrease in sale-leaseback gains. CASM (excluding fuel), a non-GAAP measure, increased 24% to 9.23¢, on an 8% increase in capacity, for the nine months ended September 30, 2026, as compared to the corresponding prior period due to the aforementioned drivers of increased non-fuel expenses.
Adjusted CASM (excluding fuel), a non-GAAP measure, increased from 7.42¢ for the nine months ended September 30, 2025 to 8.15¢ for the nine months ended September 30, 2026. For the nine months ended September 30, 2026, Adjusted CASM (excluding fuel) also excludes the impact of $345 million in expenses relating to the Early Return Agreements and $6 million in expenses related to aircraft technicians collective bargaining contract ratification. There were no adjustments for the nine months ended September 30, 2025.
Net Income (Loss)
We generated a net loss of $104 million during the three months ended September 30, 2026, compared to a net loss of $77 million for the three months ended September 30, 2025. Considering the aforementioned non-GAAP adjustments, as well as $1 million of commitment fees related to the Early Return Agreement, and $1 million of related tax benefit, our adjusted net income, a non-GAAP measure, was $40 million for the three months ended
September 30, 2026. There were no non-GAAP adjustments to net loss during the three months ended September 30, 2025.
We generated a net loss of $466 million during the nine months ended September 30, 2026, compared to a net loss of $190 million for the nine months ended September 30, 2025. Considering the aforementioned non-GAAP adjustments, as well as $1 million of commitment fees related to the Early Return Agreement, and $9 million of related tax expense, our adjusted net loss, a non-GAAP measure, was $50 million for the nine months ended September 30, 2026. There were no non-GAAP adjustments to net loss during the nine months ended September 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.", "Results of Operations - 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 Adjusted Pre-Tax Income (Loss), and Net Income (Loss) to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR."
Liquidity
As of September 30, 2026, our total available liquidity was $1,178 million, consisting of $958 million of unrestricted cash and cash equivalents and availability under our revolving line of credit (the "Revolving Loan Facility").
Results of Operations
Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025
Operating Revenues
Three Months Ended September 30, Change
2026 2025
Operating revenues ($ in millions):
Passenger $ 1,327 $ 854 $ 473 55 %
Other 28 32 (4) (13) %
Total operating revenues $ 1,355 $ 886 $ 469 53 %
Operating statistics:
ASMs (millions) 11,419 9,689 1,730 18 %
Revenue passenger miles ("RPMs") (millions) 9,000 7,815 1,185 15 %
Average stage length (miles) 891 917 (26) (3) %
Load factor 78.8 % 80.7 % (1.9) pts N/A
RASM (¢) 11.87 9.14 2.73 30 %
Fare revenue per passenger ($) 67.82 39.74 28.08 71 %
Total revenue per passenger ($) 138.22 106.44 31.78 30 %
Passengers (thousands) 9,805 8,325 1,480 18 %
Total operating revenue increased $469 million, or 53%, during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Revenue was favorably impacted by the 30% increase to RASM, driven by a 30% increase in total revenue per passenger, led by fare revenue per passenger, and a 3% decrease in average stage length, supported by a 19% increase in departures, partially offset by a 1.9-point reduction in load factor, as compared to the corresponding prior year period. The 18% increase in capacity, as measured by ASMs, was primarily driven by an 18% increase in average daily aircraft utilization as compared to the corresponding prior year period.
Operating Expenses
Three Months Ended September 30, Change Cost per ASM Change
2026 2025 2026 2025
Operating expenses ($ in millions):(a)
Aircraft fuel $ 425 $ 234 $ 191 82 % 3.72 ¢ 2.42 ¢ 54 %
Salaries, wages and benefits 275 251 24 10 % 2.41 2.59 (7) %
Aircraft rent 301 181 120 66 % 2.64 1.87 41 %
Station operations 218 173 45 26 % 1.91 1.79 7 %
Maintenance, materials and repairs 89 52 37 71 % 0.78 0.54 44 %
Sales and marketing 49 38 11 29 % 0.43 0.39 10 %
Depreciation and amortization 59 24 35 146 % 0.52 0.25 108 %
Other operating 47 10 37 370 % 0.40 0.10 300 %
Total operating expenses $ 1,463 $ 963 $ 500 52 % 12.81 ¢ 9.95 ¢ 29 %
Operating statistics:
ASMs (millions) 11,419 9,689 1,730 18 %
Average stage length (miles) 891 917 (26) (3) %
Passengers (thousands) 9,805 8,325 1,480 18 %
Departures 59,703 50,141 9,562 19 %
CASM (excluding fuel) (¢)(b)
9.09 7.53 1.56 21 %
Adjusted CASM (excluding fuel) (¢)(b)
7.84 7.53 0.31 4 %
Fuel cost per gallon ($) 3.96 2.54 1.42 56 %
Fuel gallons consumed (thousands) 107,214 92,188 15,026 16 %
__________________
(a)Cost per ASM figures may not recalculate due to rounding.
(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 GAAP to Non-GAAP Financial Data."
Aircraft Fuel. Aircraft fuel expense increased by $191 million, or 82%, during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. The increase was primarily due to the 56% increase in fuel cost per gallon as well as a 16% increase in fuel gallons consumed, driven by higher capacity.
Salaries, Wages and Benefits. Salaries, wages and benefits expense increased by $24 million, or 10%, during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. The increase was primarily due to higher crew costs and costs related to the collective bargaining contract ratification with our aircraft technicians, as compared to the corresponding prior year period.
Aircraft Rent. Aircraft rent expense increased by $120 million, or 66%, during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, primarily due to higher aircraft lease return expense, driven by the Second Early Return Agreement.
Station Operations. Station operations expense increased by $45 million, or 26%, during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, primarily due to increased airport operations driven by an 18% increase in passengers and a 19% increase in departures as well as an increase in airport cost sharing arrangements.
Maintenance, Materials and Repairs. Maintenance, materials and repair expense increased by $37 million, or 71%, during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. This increase was primarily due to the write-off of non-recoverable prepaid maintenance balances related to the Second Early Return Agreement and higher engine repair costs.
Sales and Marketing. Sales and marketing expense increased by $11 million, or 29%, during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, primarily due to the increase in credit card fees as a result of the 55% increase in passenger revenue, partially offset by a decrease in third-party distribution channel fees. The following table presents our distribution channel mix:
Three Months Ended September 30, Change
Distribution Channel 2026 2025
Our website, mobile app and other direct channels
70 % 68 % 2 pts
Third-party channels
30 % 32 % (2) pts
Depreciation and Amortization. Depreciation and amortization expense increased by $35 million, or 146%, during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, primarily due to the accelerated depreciation on capitalized maintenance costs related to the Second Early Return Agreement.
Other Operating Expense. Other operating expenses increased by $37 million, or 370%, during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. This increase was primarily driven by the decrease in sale-leaseback gains as a result of four aircraft inductions compared to two aircraft inductions and six engine inductions in the corresponding prior year period.
Other Income (Expense). Other income increased by $3 million, or 300%, during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. The increase was primarily due to higher interest income from higher balances in interest-bearing cash accounts and decreased interest expense, driven by lower principal balances on our debt, partially offset by lower capitalized interest.
Income Taxes. Our effective tax rate for the three months ended September 30, 2026 was 0% on pre-tax loss, compared to an expense of 1.3% on a pre-tax loss for the three months ended September 30, 2025. The primary difference between the effective tax rate and the federal statutory rate was related to the increase in our valuation allowance relating to U.S. federal and state net operating loss. Please refer to "Notes to Condensed Consolidated Financial Statements - 10. Income Taxes" for additional information.
Results of Operations
Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025
Operating Revenues
Nine Months Ended September 30, Change
2026 2025
Operating revenues ($ in millions):
Passenger $ 3,514 $ 2,636 $ 878 33 %
Other 112 91 21 23 %
Total operating revenues $ 3,626 $ 2,727 $ 899 33 %
Operating statistics:
ASMs (millions) 32,331 29,951 2,380 8 %
RPMs (millions) 25,601 23,451 2,150 9 %
Average stage length (miles) 895 928 (33) (4) %
Load factor 79.2% 78.3% 0.9 pts N/A
RASM (¢) 11.22 9.10 2.12 23 %
Fare revenue per passenger ($) 62.01 41.70 20.31 49 %
Total revenue per passenger ($) 130.17 110.56 19.61 18 %
Adjusted RASM (¢)(a)
11.44 9.10 2.34 26 %
Adjusted fare revenue per passenger ($)(a)
62.46 41.70 20.76 50 %
Adjusted total revenue per passenger ($)(a)
132.79 110.56 22.23 20 %
Passengers (thousands) 27,859 24,663 3,196 13 %
__________________
(a)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 GAAP to Non-GAAP Financial Data."
Total operating revenue increased $899 million, or 33%, during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Revenue was favorably impacted by the 23% increase in RASM, driven by an 18% increase in total revenue per passenger, led by fare revenue per passenger, a 4% decrease in average stage length, supported by an 11% increase in departures and a 0.9-point increase in load factor as compared to the corresponding prior year period. In addition, capacity, as measured by ASMs, for the nine months ended September 30, 2026, increased by 8% primarily due to the 8% increase in average aircraft in service as compared to the nine months ended September 30, 2025. Revenue was unfavorably impacted by the TSA Reserve related to prior periods of $73 million incurred during the nine months ended September 30, 2026.
Operating Expenses
Nine Months Ended September 30, Change Cost per ASM Change
2026 2025 2026 2025
Operating expenses ($ in millions):(a)
Aircraft fuel $ 1,129 $ 702 $ 427 61 % 3.50 ¢ 2.35 ¢ 49 %
Salaries, wages and benefits 812 754 58 8 % 2.51 2.52 - %
Aircraft rent 832 536 296 55 % 2.57 1.79 44 %
Station operations 607 531 76 14 % 1.88 1.77 6 %
Maintenance, materials and repairs 295 150 145 97 % 0.91 0.50 82 %
Sales and marketing 140 118 22 19 % 0.43 0.39 10 %
Depreciation and amortization 177 65 112 172 % 0.55 0.22 150 %
Other operating 122 69 53 77 % 0.38 0.23 65 %
Total operating expenses $ 4,114 $ 2,925 $ 1,189 41 % 12.73 ¢ 9.77 ¢ 30 %
Operating statistics:
ASMs (millions) 32,331 29,951 2,380 8 %
Average stage length (miles) 895 928 (33) (4) %
Passengers (thousands) 27,859 24,663 3,196 13 %
Departures 169,867 153,646 16,221 11 %
CASM (excluding fuel) (¢)(b)
9.23 7.42 1.81 24 %
Adjusted CASM (excluding fuel) (¢)(b)
8.15 7.42 0.73 10 %
Fuel cost per gallon ($) 3.70 2.48 1.22 49 %
Fuel gallons consumed (thousands) 304,965 282,827 22,138 8 %
__________________
(a)Cost per ASM figures may not recalculate due to rounding.
(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 GAAP to Non-GAAP Financial Data."
Aircraft Fuel. Aircraft fuel expense increased by $427 million, or 61%, during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The increase was due to a 49% increase in fuel cost per gallon as well as an 8% increase in fuel gallons consumed, driven by higher capacity.
Salaries, Wages and Benefits. Salaries, wages and benefits expense increased by $58 million, or 8%, during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The increase was primarily due to higher crew costs and costs related to the collective bargaining contract ratification with our aircraft technicians, as compared to the corresponding prior year period.
Aircraft Rent. Aircraft rent expense increased by $296 million, or 55%, during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, primarily due to additional lease return expense, in part related to the Early Return Agreements, and increased aircraft and engine rent due to a larger fleet.
Station Operations. Station operations expense increased by $76 million, or 14%, during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, primarily due to increased airport operations driven by a 13% increase in passengers and an 11% increase in departures as well as an increase in airport cost sharing arrangements.
Maintenance, Materials and Repairs. Maintenance, materials and repair expense increased by $145 million, or 97%, during the nine months ended September 30, 2026, as compared to the nine months ended September 30,
2025. This increase was primarily due to the write-off of non-recoverable prepaid maintenance balances related to the Early Return Agreements, as well as higher engine repair costs and the timing of aircraft inspections and related material costs, driven by an 8% increase in average aircraft in service.
Sales and Marketing. Sales and marketing expense increased by $22 million, or 19%, during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, primarily due to an increase in credit card fees as a result of the 33% increase in total operating revenue partially offset by a decrease in third-party distribution channel fees. The following table presents our distribution channel mix:
Nine Months Ended September 30, Change
Distribution Channel 2026 2025
Our website, mobile app and other direct channels
70 % 70 % - pt
Third-party channels
30 % 30 % - pt
Depreciation and Amortization. Depreciation and amortization expense increased by $112 million, or 172%, during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, primarily due to the accelerated depreciation on capitalized maintenance costs related to the Early Return Agreements and an increase in capitalized maintenance depreciation due to a larger fleet.
Other Operating Expense. Other operating expenses increased by $53 million, or 77%, during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The increase was primarily driven by the decrease in sale-leaseback gains, as a result of 17 aircraft inductions compared to 9 aircraft inductions and 8 engine inductions in the corresponding prior year period, and increased taxes, outside services, and travel costs.
Other Income (Expense). Other income decreased by $3 million, or 25%, during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, primarily due to lower capitalized interest, partially offset by higher interest income, driven by higher balances in interest-bearing cash accounts.
Income Taxes. Our effective tax rate for the nine months ended September 30, 2026 was a benefit of 2.7% on pre-tax loss, compared to an expense of 2.2% on pre-tax loss for the nine months ended September 30, 2025. The primary difference between the effective tax rate and the federal statutory rate was related to the increase in our valuation allowance relating to U.S. federal and state net operating loss. Please refer to "Notes to Condensed Consolidated Financial Statements - 10. Income Taxes" for additional information.
Reconciliation of GAAP to Non-GAAP Financial Data
Three Months Ended September 30,
2026 2025
($ in millions) Per ASM (¢) ($ in millions) Per ASM (¢)
Non-GAAP financial data:(a)
CASM 12.81 9.95
Aircraft fuel (425) (3.72) (234) (2.42)
CASM (excluding fuel)(b)
9.09 7.53
Early Return Agreement(c)
(2) (0.03) - -
Second Early Return Agreement(d)
(134) (1.17) - -
Collective Bargaining Contract Ratification(e)
(6) (0.05) - -
Adjusted CASM (excluding fuel)(b)
7.84 7.53
Aircraft fuel 425 3.72 234 2.42
Adjusted CASM(f)
11.56 9.95
Net interest expense (income) (4) (0.03) (1) (0.01)
Early Return Agreement(g)
(1) (0.01) - -
Adjusted CASM + net interest(h)
11.52 9.94
CASM 12.81 9.95
Net interest expense (income) (4) (0.03) (1) (0.01)
CASM + net interest(h)
12.78 9.94
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(a)Cost per ASM figures may not recalculate due to rounding.
(b)CASM (excluding fuel) and Adjusted CASM (excluding fuel) are included as supplemental disclosures because we believe that excluding aircraft fuel is useful to investors as it provides an additional measure of management's performance excluding the effects of a significant cost item over which management has limited influence. The price of fuel, over which we have limited control, impacts the comparability of period-to-period financial performance, and excluding the price of fuel allows management an additional tool to understand and analyze our non-fuel costs and core operating performance, and increases comparability with other airlines that also provide a similar metric. CASM (excluding fuel) and Adjusted CASM (excluding fuel) are not determined in accordance with GAAP and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
(c)In connection with the Early Return Agreement to early terminate the leases associated with 24 A320neo aircraft, we incurred non-recurring charges of $2 million of lease return costs recorded in aircraft rent within the condensed consolidated statement of operations during the three months ended September 30, 2026. See "Notes to Condensed Consolidated Financial Statements - 6. Operating Leases" for additional information.
(d)We entered into the Second Early Return Agreement to early terminate the leases associated with 13 A320neo aircraft and as a result incurred non-recurring charges of $134 million within the condensed consolidated statement of operations during the three months ended September 30, 2026. The $134 million includes $84 million of lease return costs recorded in aircraft rent; $31 million of accelerated depreciation expense related to the remeasurement of useful lives of capitalized maintenance recorded in depreciation and amortization; $26 million related to the write-off of non-recoverable capitalized prepaid maintenance balances recorded in maintenance, materials and repairs; and $(7) million of a reversal of previously accrued lease return costs recorded in aircraft rent. See "Notes to Condensed Consolidated Financial Statements - 6. Operating Leases" for additional information.
(e)We entered into an agreement with the union representing our aircraft technicians effective September 2026, and as a result incurred a one-time charge of $6 million related to a contract ratification incentive recorded in salaries, wages and benefits within the condensed consolidated statement of operations during the three months ended September 30, 2026.
(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 our 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.
(g)In connection with the Early Return Agreement, we incurred charges of $1 million of commitment fees related to lease return costs payable in future years recorded in interest expense within the condensed consolidated statement of operations during the three months ended September 30, 2026.
(h)Adjusted CASM including net interest and CASM including net interest are included as supplemental disclosures because we believe they are useful metrics to properly compare our cost management and performance to other peers that may have different capital structures and financing strategies, particularly as it relates to financing primary operating assets such as aircraft and engines. Additionally, we believe Adjusted CASM including net interest is useful because it removes certain items that may not be indicative of our base operating performance or future results. Adjusted CASM including net interest and CASM including net interest are not determined in accordance with GAAP, may not be comparable across all carriers and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
Reconciliation of GAAP to Non-GAAP Financial Data
Nine Months Ended September 30,
2026 2025
($ in millions) Per ASM (¢) ($ in millions) Per ASM (¢)
Non-GAAP financial data:(a)
RASM 11.22 9.10
TSA Reserve(b)
73 0.22 - -
Adjusted RASM (¢)(c)
11.44 9.10
CASM 12.73 9.77
Aircraft fuel (1,129) (3.50) (702) (2.35)
CASM (excluding fuel)(d)
9.23 7.42
Early Return Agreement(e)
(211) (0.65) - -
Second Early Return Agreement(f)
(134) (0.41) - -
Collective bargaining contract ratification(g)
(6) (0.02) - -
Adjusted CASM (excluding fuel)(d)
8.15 7.42
Aircraft fuel 1,129 3.49 702 2.35
Adjusted CASM(h)
11.64 9.77
Net interest expense (income) (9) (0.03) (12) (0.04)
Early Return Agreement(i)
(1) - - -
Adjusted CASM + net interest(j)
11.61 9.73
CASM 12.73 9.77
Net interest expense (income) (9) (0.03) (12) (0.04)
CASM + net interest(j)
12.70 9.73
__________________
(a)Revenue and cost per ASM figures may not recalculate due to rounding.
(b)We received a court ruling relating to the remittance of TSA fees for unused travel covering the 2016-2018 Audit that resulted in a $73 million charge, the TSA Reserve, that covers probable losses in prior years subject to audit that were recorded in passenger revenue within the condensed consolidated statement of operations during the nine months ended September 30, 2026. See "Notes to the Condensed Consolidated Financial Statements - 8. Commitments and Contingencies" and "Reconciliation of Revenue to Adjusted Revenue" for additional information.
(c)Adjusted RASM is included as a supplemental disclosure because we believe it is a useful metric to properly compare our revenue performance to our peers, as RASM metrics 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 our base operating performance or future results. Adjusted RASM 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.
(d)CASM (excluding fuel) and Adjusted CASM (excluding fuel) are included as supplemental disclosures because we believe that excluding aircraft fuel is useful to investors as it provides an additional measure of management's performance excluding the effects of a significant
cost item over which management has limited influence. The price of fuel, over which we have limited control, impacts the comparability of period-to-period financial performance, and excluding the price of fuel allows management an additional tool to understand and analyze our non-fuel costs and core operating performance, and increases comparability with other airlines that also provide a similar metric. CASM (excluding fuel) and Adjusted CASM (excluding fuel) are not determined in accordance with GAAP and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
(e)We entered into the Early Return Agreement to early terminate the leases associated with 24 A320neo aircraft and as a result incurred non-recurring charges of $211 million within the condensed consolidated statement of operations during the nine months ended September 30, 2026. The $211 million includes $81 million of lease return costs recorded in aircraft rent; $73 million related to the write-off of non-recoverable capitalized prepaid maintenance balances recorded in maintenance, materials and repairs; $63 million of accelerated depreciation expense related to the remeasurement of useful lives of capitalized maintenance recorded in depreciation and amortization; and $(6) million of a reversal of previously accrued lease return costs recorded in aircraft rent. See "Notes to Condensed Consolidated Financial Statements - 6. Operating Leases" for additional information.
(f)We entered into the Second Early Return Agreement to early terminate the leases associated with 13 A320neo aircraft and as a result incurred non-recurring charges of $134 million within the condensed consolidated statement of operations during the nine months ended September 30, 2026. The $134 million includes $84 million of lease return costs recorded in aircraft rent; $31 million of accelerated depreciation expense related to the remeasurement of useful lives of capitalized maintenance recorded in depreciation and amortization; $26 million related to the write-off of non-recoverable capitalized prepaid maintenance balances recorded in maintenance, materials and repairs; and $(7) million of a reversal of previously accrued lease return costs recorded in aircraft rent. See "Notes to Condensed Consolidated Financial Statements - 6. Operating Leases" for additional information.
(g)We entered into an agreement with the union representing our aircraft technicians effective September 2026, and as a result incurred a one-time charge of $6 million related to a contract ratification incentive recorded in salaries, wages and benefits within the condensed consolidated statement of operations during the nine months ended September 30, 2026.
(h)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 our 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.
(i)In connection with the Early Return Agreement, we incurred charges of $1 million of commitment fees related to lease return costs payable in future years recorded in interest expense within the condensed consolidated statement of operations during the nine months ended September 30, 2026.
(j)Adjusted CASM including net interest and CASM including net interest are included as supplemental disclosures because we believe they are useful metrics to properly compare our cost management and performance to other peers that may have different capital structures and financing strategies, particularly as it relates to financing primary operating assets such as aircraft and engines. Additionally, we believe Adjusted CASM including net interest is useful because it removes certain items that may not be indicative of our base operating performance or future results. Adjusted CASM including net interest and CASM including net interest are not determined in accordance with GAAP, may not be comparable across all carriers and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
Reconciliation of Revenue to Adjusted Revenue
Nine Months Ended September 30,
2026 2025
($ in millions) Per Passenger $ ($ in millions) Per Passenger $
Non-GAAP financial data:(a)(b)
Fare revenue:
1,727 62.01 1,028 41.70
TSA Reserve 13 0.45 - -
Adjusted fare revenue:(c)
1,740 62.46 1,028 41.70
Non-fare passenger revenue:
1,787 64.12 1,608 65.18
TSA Reserve 60 2.17 - -
Adjusted non-fare revenue:(c)
1,847 66.29 1,608 65.18
Other revenue: 112 4.04 91 3.68
TSA Reserve - - - -
Adjusted other revenue:(c)
112 4.04 91 3.68
Total ancillary revenue: 1,899 68.16 1,699 68.86
TSA Reserve 60 2.17 - -
Adjusted total ancillary revenue:(c)
1,959 70.33 1,699 68.86
Total revenue:
3,626 130.17 2,727 110.56
TSA Reserve 73 2.62 - -
Adjusted total revenue:(c)
3,699 132.79 2,727 110.56
__________________
(a)Revenue per passenger figures may not recalculate due to rounding.
(b)See "Reconciliation of GAAP to Non-GAAP Financial Data" above for discussion of adjusting items.
(c)Adjusted fare revenue, adjusted non-fare revenue, adjusted other revenue, adjusted total ancillary revenue and adjusted total revenue, and respective metrics per passenger, (collectively, "revenue per passenger") are included as supplemental disclosures because we believe they are useful metrics to properly compare our revenue performance to our peers, as revenue per passenger metrics 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 these metrics are useful because they remove certain items that may not be indicative of our base operating performance or future results. These metrics 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.
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
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
(in millions) (in millions)
Non-GAAP financial data:
Pre-tax income (loss)
$ (104) $ (76) $ (479) $ (186)
Net income (loss)
$ (104) $ (77) $ (466) $ (190)
Adjusted pre-tax income (loss)(a)
$ 39 $ (76) $ (54) $ (186)
Adjusted net income (loss)(a)
$ 40 $ (77) $ (50) $ (190)
EBITDA(a)
$ (49) $ (53) $ (311) $ (133)
EBITDAR(b)
$ 252 $ 128 $ 521 $ 403
Adjusted EBITDA(a)
$ 62 $ (53) $ 19 $ (133)
Adjusted EBITDAR(b)
$ 284 $ 128 $ 699 $ 403
__________________
(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.
Adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA have limitations as analytical tools. Some of the limitations applicable to these measures include: adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; EBITDA and adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; EBITDA, and adjusted EBITDA do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and adjusted EBITDA do not reflect any cash requirements for such replacements; and other companies in our industry may calculate adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA differently than we do, limiting their usefulness as comparative measures. Because of these limitations, adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA should not be considered in isolation from or as a substitute for performance measures calculated in accordance with GAAP. In addition, because derivations of adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA are not determined in accordance with GAAP, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result, derivations of pre-tax income (loss), net income (loss) and EBITDA, including adjusted pre-tax income (loss), adjusted net income (loss) and adjusted EBITDA, as presented may not be directly comparable to similarly titled measures presented by other companies.
For the foregoing reasons, each of adjusted pre-tax income (loss), adjusted net income (loss), EBITDA and adjusted EBITDA has significant limitations which affect its use as an indicator of our profitability. Accordingly, you are cautioned not to place undue reliance on this information.
(b)EBITDAR and adjusted EBITDAR are included as supplemental disclosures because we believe them to be useful solely as valuation metrics for airlines as their calculations isolate the effects of financing in general, the accounting effects of capital spending and acquisitions (primarily aircraft, which may be acquired directly, directly subject to acquisition debt, by capital lease or by operating lease, each of which is presented differently for accounting purposes), and income taxes, which may vary significantly between periods and for different airlines for reasons unrelated to the underlying value of a particular airline. However, EBITDAR and adjusted EBITDAR are not determined in accordance with GAAP, are susceptible to varying calculations and not all companies calculate the measure in the same manner. As a result, EBITDAR and adjusted EBITDAR, as presented, may not be directly comparable to similarly titled measures presented by other companies. In addition, EBITDAR and adjusted EBITDAR should not be viewed as measures of overall performance since they exclude aircraft rent, which is a normal, recurring cash operating expense that is necessary to operate our business. Accordingly, you are cautioned not to place undue reliance on this information.
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
(in millions) (in millions)
Adjusted net income (loss) reconciliation:
Net income (loss) $ (104) $ (77) $ (466) $ (190)
Non-GAAP Adjustments(a):
TSA Reserve - - 73 -
Early Return Agreement 3 - 212 -
Second Early Return Agreement 134 - 134 -
Collective Bargaining Contract Ratification 6 - 6 -
Pre-tax impact 143 - 425 -
Tax benefit (expense), related to non-GAAP adjustments 1 - (9) -
Net income (loss) impact $ 144 $ - $ 416 $ -
Adjusted net income (loss) $ 40 $ (77) $ (50) $ (190)
Adjusted pre-tax income (loss) reconciliation:
Income (loss) before income taxes $ (104) $ (76) $ (479) $ (186)
Pre-tax impact 143 - 425 -
Adjusted pre-tax income (loss) $ 39 $ (76) $ (54) $ (186)
EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR reconciliation:
Net income (loss) $ (104) $ (77) $ (466) $ (190)
Plus (minus):
Interest expense 12 15 34 34
Capitalized interest (5) (10) (19) (26)
Interest income and other (11) (6) (24) (20)
Income tax expense (benefit) - 1 (13) 4
Depreciation and amortization 59 24 177 65
EBITDA (49) (53) (311) (133)
Plus: Aircraft rent 301 181 832 536
EBITDAR $ 252 $ 128 $ 521 $ 403
EBITDA $ (49) $ (53) $ (311) $ (133)
Plus (minus)(a)
TSA Reserve - - 73 -
Early Return Agreement(b)
2 - 148 -
Second Early Return Agreement(b)
103 - 103 -
Collective Bargaining Contract Ratification 6 - 6 -
Adjusted EBITDA $ 62 $ (53) $ 19 $ (133)
Plus: Aircraft rent 301 181 832 536
Minus: Early Return Agreement(c)
(2) - (75) -
Minus: Second Early Return Agreement(c)
(77) - (77) -
Adjusted EBITDAR $ 284 $ 128 $ 699 $ 403
___________________
(a)See "Reconciliation of GAAP to Non-GAAP Financial Data" above for discussion of adjusting items.
(b)Represents lease termination costs and write-off of non-recoverable capitalized maintenance costs associated with the Early Return Agreements. See "Notes to Condensed Consolidated Financial Statements - 6. Operating Leases" for additional information.
(c)Represents lease termination costs related to aircraft rent associated with the Early Return Agreements. See "Notes to Condensed Consolidated Financial Statements - 6. Operating Leases" for additional information.
Comparative Operating Statistics
The following table sets forth our operating statistics for the three and nine months ended September 30, 2026 and 2025. These operating statistics are provided because they are commonly used in the airline industry and, as such, allow readers to compare our performance against our results for the corresponding prior year period, as well as against the performance of our peers.
Three Months Ended September 30,
Change
Nine Months Ended September 30, Change
2026 2025 2026 2025
Operating statistics(a)
ASMs (millions) 11,419 9,689 18 % 32,331 29,951 8 %
Departures 59,703 50,141 19 % 169,867 153,646 11 %
Average stage length (miles) 891 917 (3) % 895 928 (4) %
Block hours 154,241 131,019 18 % 442,277 407,904 8 %
Average aircraft in service 163 163 - % 171 159 8 %
Aircraft - end of period 164 166 (1) % 164 166 (1) %
Average daily aircraft utilization (hours) 10.3 8.7 18 % 9.5 9.4 1 %
Passengers (thousands) 9,805 8,325 18 % 27,859 24,663 13 %
Average seats per departure 213 209 2 % 212 208 2 %
RPMs (millions) 9,000 7,815 15 % 25,601 23,451 9 %
Load factor 78.8 % 80.7 % (1.9) pts 79.2 % 78.3 % 0.9 pts
Fare revenue per passenger ($) 67.82 39.74 71 % 62.01 41.70 49 %
Non-fare passenger revenue per passenger ($) 67.47 62.78 7 % 64.12 65.18 (2) %
Other revenue per passenger ($) 2.93 3.92 (25) % 4.04 3.68 10 %
Total ancillary revenue per passenger ($) 70.40 66.70 6 % 68.16 68.86 (1) %
Total revenue per passenger ($) 138.22 106.44 30 % 130.17 110.56 18 %
RASM (¢) 11.87 9.14 30 % 11.22 9.10 23 %
RASM, stage-length adjusted to 1,000 miles (¢) (c)
11.21 8.76 28 % 10.61 8.77 21 %
Adjusted fare revenue per passenger ($)(b)
67.82 39.74 71 % 62.46 41.70 50 %
Adjusted non-fare passenger revenue per passenger ($)(b)
67.47 62.78 7 % 66.29 65.18 2 %
Adjusted other revenue per passenger ($)(b)
2.93 3.92 (25) % 4.04 3.68 10 %
Adjusted total ancillary revenue per passenger ($)(b)
70.40 66.70 6 % 70.33 68.86 2 %
Adjusted total revenue per passenger ($)(b)
138.22 106.44 30 % 132.79 110.56 20 %
Adjusted RASM (¢)(b)
11.87 9.14 30 % 11.44 9.10 26 %
Adjusted RASM, stage-length adjusted to 1,000 miles (¢)(b)(c)
11.21 8.76 28 % 10.83 8.77 23 %
CASM (¢) 12.81 9.95 29 % 12.73 9.77 30 %
CASM (excluding fuel) (¢)(b)
9.09 7.53 21 % 9.23 7.42 24 %
CASM + net interest (¢)(b)
12.78 9.94 29 % 12.70 9.73 31 %
Adjusted CASM (¢)(b)
11.56 9.95 16 % 11.64 9.77 19 %
Adjusted CASM (excluding fuel) (¢)(b)
7.84 7.53 4 % 8.15 7.42 10 %
Adjusted CASM (excluding fuel), stage-length adjusted to 1,000 miles (¢)(b)(c)
7.40 7.21 3 % 7.71 7.15 8 %
Adjusted CASM + net interest (¢)(b)
11.52 9.94 16 % 11.61 9.73 19 %
Adjusted CASM + net interest, stage-length adjusted to 1,000 miles (¢)(b)(c)
10.87 9.52 14 % 10.98 9.37 17 %
Fuel cost per gallon ($) 3.96 2.54 56 % 3.70 2.48 49 %
Fuel gallons consumed (thousands) 107,214 92,188 16 % 304,965 282,827 8 %
Full-time equivalent employees 8,187 7,535 9 % 8,187 7,535 9 %
_______________
(a)Figures may not recalculate due to rounding. See "Glossary of Airline Terms" for definitions of terms used in this table.
(b)These metrics are not calculated in accordance with GAAP. For the reconciliation to corresponding GAAP measures, see "Results of Operations-Reconciliation of GAAP to Non-GAAP Financial Data."
(c)Stage-Length Adjusted (SLA) to 1,000 miles: Applicable Operating Statistic * Square root (stage length / 1,000).
Liquidity and Capital Resources
Overview
As of September 30, 2026, our total available liquidity was $1,178 million, consisting of $958 million of unrestricted cash and cash equivalents and $220 million of funds available under our undrawn Revolving Loan Facility. As of September 30, 2026, we had $482 million of total debt, net, of which $160 million is short-term and consists primarily of amounts outstanding under our Pre-delivery Credit Facilities. Our total debt, net as of September 30, 2026 is comprised of $180 million outstanding under our Pre-delivery Credit Facilities, $140 million outstanding under our pre-purchased miles facility with Barclays, $100 million of class A-1 enhanced equipment trust certificates (the "2025-1 EETCs") and $66 million in 10-year notes (collectively, the "PSP Promissory Notes") from the U.S. Department of the Treasury (the "Treasury"), partially offset by $4 million in deferred debt acquisition costs.
In connection with the term loan facility entered into with the Treasury in September 2020, which was repaid in full in February 2022, and the PSP Promissory Notes, we issued warrants (the "Warrants") to purchase 3,117,940 shares of FGHI common stock at a weighted-average price of $6.95 per share. In June 2024, the Treasury sold all such Warrants to a financial institution. During the nine months ended September 30, 2026, 237,274 warrants expired and as of September 30, 2026, no warrants remain outstanding.
We continue to monitor our covenant compliance with various parties, including, but not limited to, our lenders and credit card processors. As of the date of this report, we are in compliance with all of our covenants.
The following table presents the major indicators of our financial condition and liquidity as of:
September 30, 2026 December 31, 2025
($ in millions)
Cash and cash equivalents $ 976 $ 671
Total current assets, excluding cash and cash equivalents $ 375 $ 287
Total current liabilities, excluding current maturities of long-term debt, net and operating leases $ 1,284 $ 1,023
Current maturities of long-term debt, net $ 160 $ 301
Long-term debt, net $ 322 $ 313
Stockholders' equity $ 37 $ 491
Debt to capital ratio 93 % 56 %
Debt to capital ratio, including operating lease obligations 99 % 92 %
Use of Cash and Future Obligations
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, cash flows from operating activities and sale-leaseback financing. 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.
Our single largest capital commitment relates to the acquisition of aircraft. As of September 30, 2026, we operated a total of 164 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 September 30, 2026, our Pre-delivery Credit Facilities, which allow us to draw up to an aggregate of $285 million, had $180 million outstanding. As of September 30, 2026, we had $272 million of PDPs held by Airbus which have been partially financed by our Pre-delivery Credit Facilities.
As of September 30, 2026, we had a firm obligation to purchase 151 A320neo family aircraft and 20 additional spare engines to be delivered by 2033. Of our remaining aircraft commitments, 12 had committed operating leases for deliveries occurring between 2026 and 2029. We intend to evaluate financing options for the remaining aircraft, excluding the 11 aircraft included within the Aircraft Sale Agreement.
The following table summarizes current and long-term material cash requirements as of September 30, 2026, which we expect to fund primarily with operating and financing cash flows (in millions):
Material Cash Requirements
Remainder of 2026 2027 2028 2029 2030 Thereafter Total
Debt obligations(a)
$ 62 $ 102 $ 39 $ 9 $ 42 $ 232 $ 486
Interest commitments(b)
10 26 20 19 17 63 155
Operating lease obligations(c)
208 757 781 737 645 3,188 6,316
Flight equipment purchase obligations(d)
318 533 1,224 1,045 1,557 5,510 10,187
Total $ 598 $ 1,418 $ 2,064 $ 1,810 $ 2,261 $ 8,993 $ 17,144
__________________
(a)Includes principal commitments only associated with our Pre-delivery Credit Facilities with borrowings as of September 30, 2026, the PSP Promissory Notes through 2031, our class A-1 enhanced equipment certificate through 2032 and our affinity card unsecured debt due through 2037. See "Notes to Condensed Consolidated Financial Statements - 5. Debt."
(b)Represents interest and commitment fees on debt obligations and our undrawn Revolving Loan Facility.
(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 condensed consolidated balance sheets. Also includes lease return obligations related to the Early Return Agreements. See "Notes to Condensed Consolidated Financial Statements - 6. Operating Leases."
(d)Represents purchase commitments for aircraft and engines. See "Notes to Condensed Consolidated Financial Statements - 8. Commitments and Contingencies."
Cash Flows
The following table presents information regarding our cash flows in the nine months ended September 30, 2026 and 2025 (in millions):
Nine Months Ended September 30,
2026 2025
Net cash provided by (used in) operating activities $ 150 $ (434)
Net cash provided by (used in) investing activities 120 (158)
Net cash provided by financing activities 35 418
Net increase (decrease) in cash, cash equivalents and restricted cash 305 (174)
Cash, cash equivalents and restricted cash at beginning of period 671 740
Cash, cash equivalents and restricted cash at end of period $ 976 $ 566
Operating Activities
During the nine months ended September 30, 2026, net cash provided by operating activities totaled $150 million, which was driven by $140 million of non-cash adjustments and $476 million of inflows from changes in operating assets and liabilities, partially offset by a $466 million net loss.
The $476 million of inflows from changes in operating assets and liabilities included:
•$615 million in increases in other liabilities primarily driven by increased leased aircraft return accruals including the impacts from the Early Return Agreements, the prepaid loyalty program consideration received, the TSA Reserve, cash received for supplier incentives, and increases to other operational related accruals; and
•$148 million in increases in our air traffic liability primarily driven by increased bookings on higher average fares; partially offset by
•$164 million in increases in other long-term assets primarily driven by increases in capitalized maintenance and prepaid maintenance;
•$81 million in increases in accounts receivable;
•$25 million in decreases in accounts payable; and
•$17 million in increases in supplies and other current assets.
Our net loss of $466 million was also adjusted by the following non-cash items to arrive at cash provided by operating activities:
•$180 million in adjustments for the Early Return Agreements primarily related to non-cash impacts from non-recoverable capitalized prepaid maintenance and accelerated depreciation;
•$83 million in depreciation and amortization; and
•$15 million in stock-based compensation expense; partially offset by
•$126 million in gains recognized on sale-leaseback transactions; and
•$12 million in deferred income tax benefit.
During the nine months ended September 30, 2025, net cash used in operating activities totaled $434 million, which was driven by a $190 million net loss, $172 million of outflows from changes in operating assets and liabilities, and $72 million of non-cash adjustments.
The $172 million of outflows from changes in operating assets and liabilities included:
•$179 million in increases in other long-term assets primarily driven by increases in capitalized maintenance, prepaid maintenance and capitalized interest;
•$28 million in increases in supplies and other current assets;
•$20 million in increases in accounts receivable;
•$7 million in decreases in other liabilities primarily driven by leased aircraft return accruals and other operational related accruals, partially offset by an increase in manufacturer credits; partially offset by
•$31 million in increases in accounts payable; and
•$31 million in increases in our air traffic liability primarily driven by increased bookings on higher volume and average fares, as well as increased sales in our membership programs.
Our net loss of $190 million was also adjusted by the following non-cash items to arrive at cash used in operating activities:
•$157 million in gains recognized on sale-leaseback transactions; partially offset by
•$65 million in depreciation and amortization;
•$16 million in stock-based compensation expense; and
•$4 million in deferred income tax expense.
Investing Activities
During the nine months ended September 30, 2026, net cash provided by investing activities totaled $120 million, driven by:
•$156 million in net inflows for PDP activity; partially offset by
•$35 million in cash outflows for capital expenditures; and
•$1 million in cash outflows for other investing activity.
During the nine months ended September 30, 2025, net cash used in investing activities totaled $158 million, driven by:
•$105 million in net outflows for PDP activity; and
•$53 million in cash outflows for capital expenditures.
Financing Activities
During the nine months ended September 30, 2026, net cash provided by financing activities was $35 million, driven by:
•$172 million in net proceeds received from sale-leaseback transactions; and
•$77 million in cash proceeds from debt issuances, consisting of $38 million drawn on our Pre-delivery Credit Facilities and $39 million in draws on our Barclays facility; partially offset by
•$211 million in cash outflows from principal repayments on debt related to our Pre-delivery Credit Facilities and 2025-1 EETCs; and
•$3 million in cash outflows for payments related to tax withholdings of share-based awards.
During the nine months ended September 30, 2025, net cash provided by financing activities was $418 million, driven by:
•$354 million in cash proceeds from debt issuances, consisting of $205 million drawn on our Revolving Loan Facility, $148 million drawn on our Pre-delivery Credit Facilities, and $1 million drawn on our Barclays facility;
•$248 million in net proceeds received from sale-leaseback transactions; and
•$6 million in proceeds from the exercise of stock options; partially offset by
•$188 million in cash outflows from principal repayments on debt, which includes $130 million on our Revolving Loan Facility and $58 million on our Pre-delivery Credit Facilities; and
•$2 million in cash outflows for payments related to tax withholdings of share-based awards.
As of September 30, 2026, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our results of operations, financial condition or cash flows.
Critical Accounting Policies and Estimates
There have been no material changes in our critical accounting policies and estimates during the nine months ended September 30, 2026. For information regarding our critical accounting policies and estimates, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates" included in Part II, Item 7 of our 2025 Annual Report.
Recently Adopted Accounting Pronouncements
See "Notes to Consolidated Financial Statements -1. Summary of Significant Accounting Policies" included in Part II, Item 8 of our 2025 Annual Report for a discussion of recent accounting pronouncements.
GLOSSARY OF AIRLINE TERMS
Set forth below is a glossary of industry terms:
"A320 family" means, collectively, the Airbus series of single-aisle aircraft, including the A320ceo, A320neo, A321ceo and A321neo aircraft.
"A320neo family" means, collectively, the Airbus series of single-aisle aircraft that feature the new engine option, including the A320neo and A321neo aircraft.
"Adjusted CASM" is a non-GAAP measure and means operating expenses, excluding special items, divided by ASMs. For a discussion of such special items and a reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations."
"Adjusted CASM including net interest" or "Adjusted CASM + net interest" is a non-GAAP measure and means the sum of Adjusted CASM and net interest expense (income) excluding special items divided by ASMs. For a discussion of such special items and a reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations."
"Adjusted CASM (excluding fuel)" is a non-GAAP measure and means operating expenses less aircraft fuel expense, excluding special items, divided by ASMs. For a discussion of such special items and a reconciliation of CASM to CASM (excluding fuel), Adjusted CASM (excluding fuel), Adjusted CASM, Adjusted CASM including net interest and CASM including net interest, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations."
"Adjusted RASM" is a non-GAAP measure and means total revenues, excluding special items, divided by ASMs. For a discussion of such special items and a reconciliation of RASM to adjusted RASM, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations."
"Air traffic liability" means the value of tickets, unearned membership fees, customer rights to book future travel and other related fees sold in advance of travel.
"Ancillary revenue" means the sum of non-fare passenger revenue and other revenue.
"Available seat miles" or "ASMs" means seats (empty or full) multiplied by miles the seats are flown.
"Average aircraft in service" means the average number of aircraft used in flight operations, as calculated on a daily basis.
"Average daily aircraft utilization" means block hours divided by number of days in the period divided by average aircraft in service.
"Average stage length" means the average number of miles flown per flight segment.
"Block hours" means the number of hours during which the aircraft is in revenue service, measured from the time of gate departure before take-off until the time of gate arrival at the destination.
"CASM" or "unit costs" means operating expenses divided by ASMs.
"CASM (excluding fuel)" is a non-GAAP measure and means operating expenses less aircraft fuel expense, divided by ASMs.
"CASM including net interest" or "CASM + net interest" is a non-GAAP measure and means the sum of CASM and net interest expense (income) divided by ASMs.
"DOT" means the U.S. Department of Transportation.
"Fare revenue" consists of base fares for air travel, including miles redeemed under our frequent flyer program, unused and expired passenger credits, and revenue derived from charter flights.
"Fare revenue per passenger" means fare revenue divided by passengers.
"Load factor" means the percentage of aircraft seat miles actually occupied on a flight (RPMs divided by ASMs).
"Net interest expense (income)" means interest expense, capitalized interest, interest income and other.
"Non-fare passenger revenue" consists of fees related to certain ancillary items such as baggage, service fees, seat selection, and other passenger-related revenue that is not included as part of base fares for travel.
"Non-fare passenger revenue per passenger" means non-fare passenger revenue divided by passengers.
"Other revenue" consists primarily of services not directly related to providing transportation, such as the advertising, marketing and brand elements of the FRONTIER Miles affinity credit card program, and commissions revenue from the sale of items such as rental cars and hotels.
"Other revenue per passenger" means other revenue divided by passengers.
"Passengers" means the total number of passengers flown on all flight segments.
"Passenger revenue" consists of fare revenue and non-fare passenger revenue.
"PDP" means pre-delivery deposit payments, which are payments required by aircraft manufacturers in advance of delivery of the aircraft.
"RASM" or "unit revenue" means total revenue divided by ASMs.
"Revenue passenger miles" or "RPMs" means the number of miles flown by passengers.
"Total ancillary revenue per passenger" means ancillary revenue divided by passengers.
"Total revenue per passenger" means the sum of fare revenue, non-fare passenger revenue, and other revenue (collectively, "Total Revenue") divided by passengers.
"TSA" means the U.S. Transportation Security Administration.
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