Frontier Keeps Capacity Level Through New Leases, Early Terminations

Frontier Airlines has entered into previously announced early termination and lease agreements for Airbus A320-family aircraft, allowing it to maintain a certain level of capacity. 

The Denver-based carrier was in “advanced discussions” for both agreements by the end of July, it disclosed during a summer earnings call. Now confirmed in new filings, those transactions will see it terminate 13 A320neo leases by year-end, then substantially replace the capacity with direct leases for 10 A321neos from AerCap by the first quarter of 2027. The leases being terminated were due to expire within the next 6-7 years.

Frontier detailed that these early aircraft returns will result “in an expected reduction of approximately $260 million” in lease-related balance sheet items, while also eliminating “meaningful maintenance-related costs” that would have been “significantly in excess of the early lease termination costs.” 

Its return agreement is also projected to result in noncash charges of around $60-80 million and cash charges in the range of $90-120 million, Frontier said, which it expects to recognize largely in the third and fourth quarters of this year. The majority of cash charges owed to lessor Carlyle are expected to be settled in 2028-29, the filing notes.

Frontier is working through a fleet rightsizing effort, one piece of a plan to return the business to sustained profitability. The carrier aims to keep its fleet count flat over a two-year period, and during the second quarter completed a previously announced early return of 24 leased A320neos to AerCap. Frontier ended the summer with 165 aircraft, including the early returns and new deliveries.

The ULCC plans to operate a fleet of no more than 168 aircraft by the end of first quarter of 2027, and to remain at that level through the end of that year. Frontier said the recently confirmed move “maintains similar capacity with less aircraft, highlighting the productivity and flexibility of the A321neo aircraft.”