Here's Why Shares in Frontier Group Flew Lower This Week

Shares in Frontier Airlines' parent company, Frontier Group (NASDAQ: ULCC), declined by almost 13% in the week to Thursday afternoon. The slump in the share price came in a week when the company issued an SEC filing announcing the abrupt departure of its CEO, Barry Biffle, to be replaced by the company's President James Dempsey, who will act as interim CEO.

What it means to investors

It's hard to decipher what these move means, not least because, although Biffle will "remain with the Company in an advisory capacity", that period will only last two weeks. Go figure.

On a more positive note, management reaffirmed the guidance it provided for the fourth quarter in early November.

Biffle's sudden departure comes at a difficult time for Frontier and the low-cost carriers in general. Budget airlines have been hit by rising labor and airport costs, which have a disproportionate impact on their ticket prices when compared to network carriers like Delta Air Lines and United Airlines. Moreover, it remains a highly price-competitive market for the budget carriers. All of which led to Frontier reporting a loss of $77 million in its third quarter.

Image source: Getty Images.

In response, Frontier is trying to follow the Delta/United's premium/loyalty playbook and introducing new first class seating and trying to grow loyalty revenues, amid keeping a tight control on capacity.

Still, it's never a good sign for an airline when the cost per available seat mile excluding fuel (CASM-Ex) is growing faster than the revenue per available seat mile (RASM), as is the case with Frontier in 2025 , and budget airlines continue to face a challenging environment.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.