By Nandan Mandayam and Doyinsola Oladipo
July 29 (Reuters) – Ultra-low-cost carrier Frontier Airlines on Wednesday forecast third-quarter earnings above Wall Street estimates, betting on stronger pricing power following rival Spirit’s exit even as the Middle East conflict keeps jet fuel costs elevated.
The liquidation of Spirit Airlines has allowed Frontier to raise fares by more than 50% and limit the impact of a ballooning fuel bill on its margins, as U.S. carriers report success in passing on a portion of their higher costs to travelers.
Frontier CEO Jimmy Dempsey said he expects revenue per available seat mile, a proxy for pricing power, to increase 20% in the third quarter from a year earlier — the third consecutive quarter of double-digit growth.
Shares of the Denver-based carrier were up 1.8% in early morning trading.
“We are pleased to see macro conditions remain strong and I’m confident we have the right plan in place to restore sustainable earnings growth for the long term,” Dempsey said in a statement.
The carrier flew 14% more passengers during the second quarter compared to the same period last year, while fare revenue per passenger rose 54%.
Uncertainty around the war in the Middle East has made it difficult for airlines to accurately forecast earnings, but visibility is improving as fuel prices have moderated from their spring highs.
Frontier expects third-quarter earnings per share to range between a 10 cents loss and a 10 cents profit, compared with analysts’ expectations of a 29 cents loss, according to data compiled by LSEG.
It also forecast fourth-quarter profit between breakeven and 20 cents per share, while analysts expected a 24 cents per share profit.
The airline said revenue for the second quarter was a record $1.28 billion “driven by strong travel demand, favorable competitive capacity”.
However, its net income loss widened by 29% to $90 million dollars.
Frontier paid $4.17 per gallon of fuel in the three months ended June 30, 77% higher than the previous year, with total fuel costs nearly doubling to $436 million.
The carrier posted a quarterly loss of 10 cents per share , narrower than the 31 cents per share loss recorded a year earlier. Analysts had expected a 48 cents per share loss.
(Reporting by Nandan Mandayam in Bengaluru and Doyinsola Oladipo in New York; Editing by Jonathan Ananda)
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