Airbus has notified Frontier that nine A321neo deliveries previously expected this year will shift to 2024.
Denver-based Frontier Airlines has fingered Airbus delivery delays for forcing it to scale back its capacity ramp up.
“We’re disappointed, but it effectively represents a manageable one-quarter shift on average across the network,” said Frontier CEO Barry Biffle during the ULCC’s fourth-quarter (Q4) 2022 earnings call on Feb. 8.
The carrier’s CFO, Jimmy Dempsey, added that “significant delays” by the airframer that the airline was “previously unaware of” have extended from 4-6 weeks per aircraft out to 1-5 months.
Airbus has notified Frontier that nine A321neo deliveries previously expected this year will shift to 2024, “resulting in about 5% less capacity than we expected in 2023,” Frontier Chief Commercial Officer Daniel Shurz said. Capacity growth was dialed back to 17-19% for the first quarter (Q1) of 2023.
Unlocking the higher-gauge A321neo’s increased efficiency and lower unit cost is being hindered by the delay. The company does not believe the supply chain issues are a single-year event. Frontier indicated it could look to mitigate these headwinds by extending leases and looking at “distressed aircraft around the world.”
Frontier took delivery of two A320neo and three A321neo aircraft during Q4 2022, increasing the proportion of its “neo” fleet versus the legacy “ceo” fleet to 72% as of Dec 31, 2022. The ULCC’s fleet plan shows commitments for an additional 231 aircraft scheduled for delivery through 2029. Frontier has 67 A320neos and 154 A321neos on order, plus another 10 A321neos coming through direct leases.
Frontier is less exposed to the Pratt & Whitney Geared Turbofans (GTF) reliability problems plaguing peers Spirit Airlines and Hawaiian Airlines. Frontier’s current A320neo fleet is powered by CFM Leap 1As, for which the LCC placed an order of 160 back in October 2016 to power 80 aircraft. In January 2021, Frontier announced the selection of Pratt GTF engines to power 134 A320neo family aircraft: 49 A320neos, 67 A321neos, and 18 A321XLRs.
Aviation Week Network’s Fleet Discovery database confirms Frontier has taken delivery of six GTF-powered A321neos, all on lease. Four of these are currently in service with the other two only recently delivered.
Biffle said Frontier is largely past the early teething problems of the Leaps and noted that the GTF maladies seem to be from earlier production engines. Maintenance is an issue, however.
“We have seen, in many cases over the last several months, multiple instances with aircraft out five to seven days waiting on parts,” the CEO said.
Aviation Week Network’s Tracked Aircraft Utilization tool shows that over the last quarter, U.S.-operated Airbus narrowbodies powered by the Leap 1A flew on average 40 hr. more per month than those equipped with the GTF.
Compounding the supply-chain headaches is a shortage of mechanics among its MRO partners, particularly for outsourced line maintenance. Workforce is not an issue on the pilot side, Biffle said, downplaying the shortage as an issue for regional carriers to contend with. “In fact, we’ll have to slow our hiring to accommodate the Airbus delay,” Biffle said. The CEO denied the company was bringing up the rear in pilot pay as a new contract looms in 2024.
For Q4 2022, Frontier posted $40 million net profit on total operating revenues of $906 million, which were up 38% compared to the equivalent 2019 quarter. For fiscal 2022, the carrier generated $3.3 billion in total revenue, up 61% year-on-year, but suffered a net loss of $37 million.
Competing ULCCs Spirit and Allegiant were not immune to meager earnings or net loss results in Q4 and fiscal 2022, though Frontier has performed better. The U.S. ULCC sector’s once high-flying profit margins have been uncharacteristically under-performing those of the legacy carriers over the last year.
Frontier’s forward guidance forecast calls for a -2 to -6% operating margin in Q1 and a 23-28% capacity increase for 2023 as a whole.
Highlighting positive factors that will improve, Frontier noted record ancillary revenue of $82 per passenger, lower available seat mile costs of 6 cents, and a return to pre-pandemic fleet utilization of 11.5 hr. per day. Coupled with high demand, that “gives us a clear line of site to return the airline to pre-pandemic profit levels,” Biffle said. The company had modeled reduced revenue yields of the incremental seats from higher capacity, but with its falling unit costs, Dempsey proclaimed it can “withstand a mild-to-medium recession.”
