American ultra-low-cost-carrier (ULCC) Frontier Airlines filed for an initial public offering (IPO) on Monday. Seeking to be traded on the Nasdaq Global Select Market (Nasdaq) under the symbol “FRNT,” the ULCC is the second airline to seek an IPO this year and is looking to raise around $100 million from the offering.
Frontier Airlines files for an IPO
Frontier filed for an initial public offering on Monday, seeking to take the company public for the first time since the airline was taken private in 2013. In 2017, the airline had sought an IPO but ended up dropping those plans. Now, it is trying again.
Indigo Partners currently owns Frontier Airlines. This American private equity firm, which is separate from the Indian carrier, has stakes in airlines around the world. This includes Volaris in Mexico and Wizz Air in Europe.
Under Indigo Partners, Frontier moved beyond a rocky past to become a low-cost giant in the US. The airline offers a fully unbundled fare product, and this has worked well for it in the past.
As the pandemic wears on and leisure carriers are coming back stronger than the rest, Frontier is hopeful that the IPO can be successful and bring the airline a cash boost.
Details on Frontier Airlines
Frontier Airlines had a fleet of 104 Airbus A320 family aircraft at the end of 2020 with purchase commitments on 156 Airbus A320neo family of aircraft through the end of 2028. The airline also has an engine deal for the upcoming jets and has selected a new interior seat to be introduced on all upcoming planes.
Frontier serves approximately 110 airports and has plenty of room to grow. In 2019, the airline served 23 million passengers. However, impacted by the pandemic, the airline only served 11 million passengers in 2020.
One of the biggest metrics regarding a low-cost carrier that the industry looks at is the airline’s cost per available seat mile (CASM). CASM excluding fuel at the end of 2019 was 5.55 cents, which is an incredible number and is a goal another ULCC in the industry, Spirit Airlines, wants to reach. However, in 2020, the airline hit a CASM-ex fuel of 7.53 cents, which was mainly from reduced aircraft utilization due to the crisis.
The airline was no stranger to tough financials last year. At the end of 2020, the airline was burning approximately $2 million per day on average, though it has worked to bolster its liquidity and taken steps to improve the business. The airline’s net loss for 2020 was only $225 million, driven by a multitude of factors, with ancillary revenues proving to be key.
Frontier is the second carrier to seek an IPO this year
This year, Frontier Airlines is the second airline to seek an IPO. The first was Minnesota-based Sun Country Airlines. Sun Country sought to raise $100 million from its IPO initially, but that estimate on Monday was revised upwards to around $200 million or more.
Now may seem like an interesting time to file for an IPO, but the airline has some strengths going for it. First, ULCCS are rebounding faster and are more optimistic about the recovery as domestic leisure travel comes back strong, which benefits airlines like Frontier more so than the big three US airlines. Just a few weeks ago, Frontier launched a host of new routes and launched another set of new routes on March 8th.
Time will tell if investors are happy with Frontier and are in favor of the airline’s plans to go public. Nevertheless, if the airline moves forward with the IPO, it could prove to be beneficial for the airline.
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