The air traffic control tower is seen as a Frontier flight pulls away from the gate at the Denver International Airport terminal, in Denver, Colorado, U.S., May 15, 2025. REUTERS/Megan Varner

By Nandan Mandayam and Doyinsola Oladipo

(Reuters) -Frontier Group Holdings, parent of U.S. low-cost carrier Frontier Airlines, forecast better-than-expected fourth-quarter profit on Wednesday, helped in part by improving air fares in markets where rival Spirit Airlines has exited amid its second bankruptcy.

The Denver-based airline has been betting on Spirit's exit and its own network changes, capacity cuts, as well as improved product offerings, to lift its earnings.

Frontier has the largest seat overlap with Spirit, though questions remain about whether ultra-low-cost carriers can sustain their business model as costs rise.

The discount carrier said it expects a fourth-quarter adjusted profit of 4 cents to 20 cents per share, with the midpoint of 12 cents coming in higher than analysts' average expectation of 10 cents per share, according to data compiled by LSEG.

Spirit Airlines is exiting 36 overlapping routes and reducing frequencies by 30% across 41 other routes in December, Frontier President James Dempsey said on a post-earnings call. This dynamic should drive sequential improvement in adjusted unit revenues, he added.

The discount airline reported a third-quarter loss of 34 cents per share, while total operating revenue dropped 5% to $886 million. Fare revenue per passenger rose 3% year-over-year, while non-fare passenger revenue per passenger fell 2% in the same period.

When asked on the move to cut air traffic by 10% at the top 40 U.S. airports, Frontier CEO Barry Biffle said he didn't expect a "major impact" from the decision.

The company expects delivery of seven A320neo aircraft, three A321neo aircraft and 10 PW1100 spare engines in the fourth quarter of 2025, all of which are expected to be financed with sale-leaseback transactions, the company said.

A sale and leaseback transaction includes a carrier selling its used or newly acquired jets to leasing firms and renting them back for their own use.

(Reporting by Nandan Mandayam in Bengaluru and Doyinsola Oladipo in New York; Editing by Alan Barona)