Frontier Aims to Raise More Than $700 Million Amid Airline IPO Frenzy

Photo credit:  Denver Airport / Courtesy of Denver Airport

Frontier Airlines could raise as much as $725 million by going public in an effort to take advantage of a bull market and the strong investor appetite seen for Sun Country Airlines’ recent debut.

The Denver-based ultra low-cost carrier will sell 30 million shares at $19 to $21 per share under the ticker “ULCC” on the Nasdaq stock exchange, Frontier said Tuesday. The issue will include 15 million new shares and 15 million sold by existing investors. The banks managing the sale also will have the option of purchasing another 4.5 million shares.

All together, Frontier’s IPO could net it and existing investors — the airline will only receive proceeds from the new shares — up to $630 million, or up to $725 million if the banks exercise their options. The airline did not provide a date for when trading could begin.

The stock sale comes less than a week after Sun Country shares jumped 50 percent on their first day of trading on March 17. Stock in the Minneapolis-based carrier opened above guidance at $24 per share. Sun Country was the first U.S. airline to go public since regional carrier Mesa Air Group in 2018. Virgin America’s 2014 initial public offering was the last by a U.S. mainline carrier.

Wall Street has shown strong interest in travel companies despite the sector being hard hit by the coronavirus pandemic. Airbnb priced its stock at a $68 a share, a record valuation for the short-term rental company. The price more than doubled to $146 per share in first day trading.

All indications suggest Frontier’s IPO will attract similarly strong investor interest. For starters, U.S. airlines are already reporting a jump in leisure travel bookings — Frontier’s bread-and-butter market — this spring and summer. Most expect discount carriers to capture additional market share as the industry emerges from the Covid-19 crisis.

“When we look at the rollout of the vaccination policy in many developed countries, I think it’s compatible with the reopening plan that would allow the summer season to be, at least, a decent season for air transport,” IATA Director General Alexandre de Juniac said earlier in March. Both Europe and the U.S. domestic markets could see strong summer travel, he said.

In March, capacity at Frontier will be up slightly — 0.4 percent — compared to 2019, according to Cirium schedules. Capacity is scheduled to decrease 3 percent in June compared to two years ago, however, schedules are being adjusted as little as 30 days out.

Compared with Sun Country, Frontier is more than double the size. The latter has a fleet of 104 Airbus A320 family jets and flights to more than 100 destinations. In addition, Frontier has commitments for another 156 A320 Neo family aircraft. The main difference between the two is Sun Country’s new — and thriving — business flying freight for Amazon that helped it turn an operating profit in 2020.

Frontier unveiled plans to go public earlier in March. This is its second attempt after a failed IPO in 2017. The airline is owned by private equity firm Indigo Partners, known for successful investments in ultra low-cost carriers, including Europe’s Wizz Air, Mexico’s Volaris, and Chile’s JetSmart.

Citigroup, Barclays, Deutsche Bank Securities, Morgan Stanley and Evercore ISI are the lead banks on Frontier’s IPO.

The story has been updated with additional details of the sale.