Atul Maheswari

Atul Maheswari asked about the expected shape of fourth-quarter RASM, specifically if the implied slower performance for November and December, following positive September and improved October, was due to caution or current booking data.

Answer

Steve Johnson, Vice Chair and Chief Strategy Officer, clarified that he did not mention November and December's performance due to limited bookings at the time, but expressed encouragement regarding holiday period bookings. He reiterated that the flat year-over-year unit revenue for Q4 was their best estimate. Robert Isom, CEO, added that the full run rate of indirect channel recovery is not yet captured but will be built into next year's forecasts, with the objective to surpass historical share levels.

Atul Maheswari, on behalf of Tom Wadewitz, questioned the implied slower performance for November and December given September's positive RASM and October's improvement, asking if this is due to caution or current booking data.

Answer

Steve Johnson, Vice Chair and Chief Strategy Officer, clarified that he did not mention November and December trends due to limited bookings at the time, but noted that holiday periods were booking well. He reiterated the flat year-over-year unit revenue projection for Q4 as the best current estimate. Robert Isom, CEO, stated that the full run rate of revenue recovery from the prior sales and distribution strategy is not yet captured but will be built into 2026 forecasts. He highlighted American's outperformance in managed corporate travel (14% YoY better) as an indicator of progress, with the goal to surpass historical share levels.

Atul Maheswari noted that Frontier no longer expects a profitable second half and asked what changed from the prior quarter's outlook. He also requested the non-stage-adjusted RASM guidance.

Answer

CEO Barry Biffle explained that a significant sales slump from mid-June to mid-July negatively impacted bookings for July, a critical month for the quarter, making the previous forecast for a profitable second half less certain. CFO Mark Mitchell provided the expected Q3 average stage length of 915 miles to help calculate the non-adjusted RASM.

Atul Maheswari of UBS questioned whether the Q2 guidance miss was driven more by costs or a weaker RASM outlook, and also asked how the back-half profitability expectation compares to original plans.

Answer

CEO Barry Biffle and CFO Mark Mitchell explained that Q2 costs are higher due to the short lead time to adjust for capacity cuts, fewer aircraft deliveries, and the non-recurrence of a Q1 lease benefit. President James Dempsey clarified that they still expect positive year-over-year RASM in Q2. Biffle declined to give a full-year guide but confirmed they target H2 profitability, though it will be below original double-digit margin expectations for the year.

Atul Maheswari questioned the company's confidence in the forecasted Q4 RASM acceleration, asking if recent bookings supported such a ramp. He also asked if the strong 2023 EPS of over $7 was an anomaly or an achievable target, and what fundamental business elements have changed since then.

Answer

SVP & CCO Drew Wells confirmed an uptick in demand is visible but cautioned that with over 85% of Q4 left to book, it is a small sample size. President and CEO Gregory Anderson noted that 2023 had a very strong demand backdrop but also new pilot pay accruals. He expressed confidence that through current initiatives, the company has a path to return to and exceed historical earnings performance, without providing a specific timeline.