Frontier Airlines posts surprise profit after prices increase, rivals pull back

Airline operating costs and fuel prices are rising, and passengers could feel the impact as carriers raise ticket prices and manage capacity.

Frontier Airlines, however, appears to be benefiting from their current strategy. 

Frontier Airlines sees record revenue after price increases

Big picture view:

Frontier CEO James Dempsey said Wednesday that the budget airline has found a balance between ticket prices and passenger volume after reporting a surprise quarterly profit and forecasting a smaller-than-expected loss for the upcoming quarter.

Quarterly revenue climbed 53% to a ​record $1.36 billion – the strongest growth among U.S. airlines that have reported earnings so far, according to Reuters.  Its fare revenue per passenger rose 71% year-over-year ​to $67.82.

In addition, the company’s revenue per seat jumped 30% in the third quarter, helped by higher fares and the exit of rival Spirit Airlines. The budget carrier expects revenue per seat to continue growing in the final three months of the year.

Frontier’s ‘balance’ between higher fares and passenger volume

Dig deeper:

Higher fuel costs over the past year have pressured airlines across the industry, including Frontier, to raise fares, reduce flights or add fees. The airline expects to pay an average of $4.75 per gallon for fuel in the fourth quarter, up from $3.96 in the previous quarter. 

However, Dempsey said Wednesday that the airline is taking a measured approach to pricing rather than focusing solely on charging more for each ticket.

"At the moment, we have a nice balance between yield and volume in our business," Dempsey told analysts, referring to the relationship between ticket revenue and passenger demand.

"If other airlines are chasing yield over volume, that's something that's their prerequisite. We like volume," Dempsey added.

Frontier benefits from less competition

The backstory:

Frontier, one of the smallest major U.S. airlines, has been benefiting from rival airlines shutting down. 

In May, Spirit Airlines – a rival competitor to Frontier –  exited the business after 34 years of discounted fares.

RELATED: Frontier passengers tackle man who allegedly choked off-duty flight attendant, tried to open door mid-flight

Why It Matters: Frontier’s results show how airlines are balancing fares, passenger demand, fuel costs and capacity. However, higher fares at Frontier do not necessarily mean prices will rise across every airline or route.

Larger airlines such as Delta, American, United, Alaska Air and Southwest have previously emphasized cutting capacity and protecting margins over filling planes, Reuters reported.

Dempsey said Frontier is targeting 5% to 7% capacity growth in both 2027 and 2028.