Barclays Downgrades Frontier Group Holdings Inc (ULCC) to Underweight

Barclays analyst Brandon Oglenski downgraded Frontier Group Holdings Inc (NASDAQ: ULCC) from Overweight to Underweight with a price target of $4.00 (from $6.00).

The analyst comments: "We see a challenged path forward for material equity upside, driving our downgrade of the company's shares to Underweight, from Overweight. The era of Frontier booking sizable sale-leaseback gains on new aircraft deliveries (given prior favorable pricing with Airbus) is taking a breather as the company grapples with materially lower fleet utilization as core margins have deteriorated and new aircraft have been effectively delivered for the immediate SLB gains but then subsequently effectively parked given the airline’s lack of opportunities to profitably deploy the assets. This delivery and sale- leaseback gambit has resulted in upfront cash and capital for the low cost airline, but masked significant earnings and cash flow hemorrhaging from underlying airline operations. Further, with the carrier’s largest rival Spirit now likely set to emerge from a second bankruptcy later this summer, we see Frontier as out of easy options to quickly drive improvement in a network that bumps up against healthier larger competitors in US markets as the airline must seek to deploy large gauge aircraft in point-to-point service (Frontier A321s have 230/240 seats per departure). While new leadership under Jimmy Dempsey appears to be taking a more methodical approach to the company’s management, increasing utilization and thus improving cost efficiency through increased flying during off-peak periods is only likely to further exacerbate yield outcomes for the low cost carrier."

For an analyst ratings summary and ratings history on Frontier Group Holdings Inc click here. For more ratings news on Frontier Group Holdings Inc click here.

Shares of Frontier Group Holdings Inc closed at $4.44 yesterday.

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