Frontier Group goes for IPO with initial $100 million offer
Staff Writer |
Frontier Group Holdings filed its IPO with initial registration of $100 million in common stock.
Article continues below
Underwriters include Citigroup, Deutsche Bank Securities, Evercore ISI, J.P. Morgan, BofA Merrill Lynch, Barclays, Cowen and Company, Credit Suisse Goldman, Sachs & Co., Raymond James, and UBS Investment Bank.
Frontier Airlines is an ultra low-cost carrier whose business strategy is focused on Low Fares Done Right.
The company offers flights throughout the United States and to select international destinations in Mexico and the Caribbean.
Its unique and sustainable strategy is underpinned by its low cost structure and superior ULCC brand.
As of December 31, 2016, Frontier Airlines operated a fleet of 66 narrow-body Airbus A320 family aircraft, which we expect to grow to 121, including 80 A320neo (New Engine Option) family aircraft, by the end of 2021.
In the year ended December 31, 2016, Frontier Airlines served approximately 14.9 million passengers across a network of 59 airports.
According to the DOT, the 25-year (1991 to 2016) compound annual growth rate for domestic passenger traffic in the United States was approximately 2.1%.
Based on this information, Frontier believes that over the next 25 years, low fare offerings, such as those offered by ULCCs, could stimulate growth for over 850 additional narrow body aircraft covering over 2,000 domestic and international routes the company can serve with A320 family aircraft.
Of these routes, Frontier believes there is an opportunity for over 650 new routes from medium-sized markets in the United States.
As an additional indication of potential domestic passenger growth in North America, Boeing’s “2016 Current Market Outlook†estimated that 2,620 new narrow body aircraft net of retirements would be added in North America by 2035, resulting in a total of 6,630 narrow body aircraft in operation.
Similarly, in Europe where the ULCC operating strategy is more mature, ULCCs have driven substantial increases in passenger volumes.
Over the 15-year period from 2000 to 2014, according to World Bank and public filings of other carriers, total passenger volumes in Europe had a compound annual growth rate of approximately 4%, of which approximately 80% was attributable to ULCC growth and stimulation.
According to World Bank and other public filings, over the same 15-year period, ULCCs in Europe grew their market share from approximately 5% of total domestic passengers in 2000 to approximately 38% of total domestic passengers in 2014, whereas in the United States, ULCCs only had a market share of approximately 3% of total domestic passengers in 2014. ■