May 5 (Reuters) – Frontier Group, the parent of low-cost carrier Frontier, forecast a bigger-than-expected second-quarter loss on Tuesday, as the war in Iran drives jet fuel prices higher and erodes margins.
The airline’s shares dropped 3.6% in premarket trading.
Airlines around the world have cut capacity and raised fees for checked bags and added fuel surcharges to contend with sky-rocketing fuel expenses after Iran’s closure of the Strait of Hormuz drastically cut oil supplies.
Low-cost carriers, unlike their full-service counterparts, have fewer levers to raise ancillary revenue to weather a spike in fuel prices that typically form about a quarter of their operating expense.
Soaring fuel prices tied to the Iran war claimed their first victim in aviation last week, with Frontier’s nearest competitor, Spirit Airlines, shutting down after higher fuel expenses upended its plans to emerge from bankruptcy.
Spirit’s collapse removes Frontier’s fiercest price competitor on dozens of overlapping leisure routes, which could lift near‑term fares and give Frontier room to capture market share.
U.S. budget airlines have sought $2.5 billion in government aid to address the spike in fuel costs, but Transportation Secretary Sean Duffy said he does not think the government needs to bail them out as they “have access to cash.”
Frontier said it had about $974 million in liquidity in the first quarter and expects second-quarter liquidity in the range of $900 million to $950 million.
For the second quarter, Frontier expects a loss in the range of 45 cents to 60 cents, bigger than analysts’ expectation of a 43-cent loss, according to data compiled by LSEG.
The Denver-based airline’s adjusted loss per share widened to 30 cents in the three months to March 31 from 19 cents a year earlier, but came in above analysts’ expectation of a 36-cent loss.
It paid an average price of $2.88 per gallon of fuel in the first quarter, above the $2.5 it expected to pay before the war in Iran. For the second quarter, it expects to pay $4.25 per gallon of jet fuel.
(Reporting by Nandan Mandayam in Bengaluru; Editing by Maju Samuel)
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