Frontier Group Holdings, Inc.ULCC
Frontier Group Holdings, Inc. Stock Compensation Disclosure
Stock-Based Compensation
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During the years ended December 31, 2025, 2024 and 2023, the Company recognized $21 million, $16 million and $14 million, respectively, in stock-based compensation expense, which is included as a component of salaries, wages and benefits within the Company’s consolidated statements of operations. The stock-based compensation expense is related to stock options, restricted stock units, and performance stock units. The total income tax benefit recognized in the income statement for stock-based compensation expenses was $5 million for each of the years ended December 31, 2025 and 2024, and $3 million for the year ended 2023. The Company also recognized additional income tax benefits of less than $1 million, $1 million and $5 million for each of the years ended December 31, 2025, 2024, and 2023, respectively, for which options were exercised or restricted shares vested.
Stock Options, Restricted Stock Units, and Performance Stock Units
In April 2014, FGHI approved the 2014 Equity Incentive Plan (the “2014 Plan”). Under the terms of the 2014 Plan, 38 million shares of FGHI common stock were reserved for issuance. Concurrently with the Company’s initial public offering (“IPO”), on April 1, 2021 the Company approved the 2021 Incentive Award Plan (the “2021 Plan”), which reserved 7 million shares of FGHI common stock, as well as the 11 million issued awards from the 2014 Plan that were still outstanding plus any subsequently forfeited awards or awards that lapse unexercised after April 1, 2021, to be available for future issuances of stock-based compensation awards to be granted to members of the Board of Directors and certain employees and consultants. Additionally, shares available for issuance under the 2021 Plan will be subject to an annual increase on the first day of each fiscal year beginning in 2022 and ending in 2031, equal to the lesser of (i) one percent (1%) of the shares of stock outstanding on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares of stock as determined by the Company’s Board of Directors; provided, however, that no more than 30 million shares of stock may be issued upon the exercise of incentive stock options. On January 1, 2025, 2,254,405 shares were added to the 2021 Plan as a result of the annual increase. As of December 31, 2025, there were 6 million shares available for issuance.
Stock Options
Stock option awards are granted with an exercise price equal to the fair market value of FGHI’s common stock on the date of grant, and generally vest evenly over four years of continuous service. Compensation expense related to stock options is recognized on a straight-line basis over the requisite service period, net of forfeitures, which are recognized on a specific-identification basis.
A summary of stock option activity during the year ended December 31, 2025 is presented below:
| Number of Shares | Weighted-Average Exercise Price | Aggregate Grant Date Fair Value (in millions) | |||||||||||||||
Outstanding at January 1, 2025 | 2,239,300 | $ | 5.27 | $ | 6 | ||||||||||||
| Issued | — | $ | — | — | |||||||||||||
| Exercised | (1,582,483) | $ | 3.57 | (3) | |||||||||||||
| Forfeited | (18,987) | $ | 11.10 | — | |||||||||||||
Outstanding at December 31, 2025 | 637,830 | $ | 9.32 | $ | 3 | ||||||||||||
Exercisable at December 31, 2025 | 637,830 | $ | 9.32 | $ | 3 | ||||||||||||
There were no stock options granted during the years ended December 31, 2025, 2024, and 2023. During the years ended December 31, 2025, 2024, and 2023, 1,582,483, 763,217 and 4,322,711 vested stock options were exercised, respectively, with an intrinsic value of $8 million, $4 million and $26 million, respectively. As of December 31, 2025, the aggregate intrinsic value of outstanding options was less than $1 million.
As of December 31, 2025, there were no unvested options remaining and therefore, there was no unrecognized compensation costs related to options. Additionally, as of December 31, 2025, exercisable options and outstanding options both have a remaining weighted-average contractual term of 2.8 years.
Restricted Stock Units
Restricted stock units (“RSUs”) in FGHI are valued at the fair value of FGHI’s common stock on the date of grant. Each RSU represents the right to receive one share of common stock upon vesting of such RSU. Vesting of RSUs is based on time-based service conditions, approximately one year of continuous service for the Company’s Board of Directors and to four years of continuous service for all other employees. In order to vest, the participant must still be employed by the Company, with certain contractual exclusions, at each vesting event. Generally, within 30 days after the vesting date, the shares underlying the RSU will be issued to the participant. Compensation expense, net of forfeitures as incurred on a specific identification basis, is recognized on a straight-line basis over the requisite service period.
A summary of RSU activity during the years ended December 31, 2025, 2024 and 2023 is presented below:
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Number of Shares | Weighted-Average Grant Date Fair Value | Number of Shares | Weighted-Average Grant Date Fair Value | Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||||||||||||||||||||||
| Outstanding at January 1 | 5,499,486 | $ | 5.98 | 6,778,588 | $ | 6.53 | 2,395,509 | $ | 12.24 | ||||||||||||||||||||||||||
| Issued | 3,183,136 | $ | 6.12 | 1,927,340 | $ | 5.40 | 6,176,938 | $ | 5.88 | ||||||||||||||||||||||||||
| Vested | (1,738,955) | $ | 6.38 | (1,678,489) | $ | 7.28 | (800,189) | $ | 11.55 | ||||||||||||||||||||||||||
| Forfeited | (430,026) | $ | 6.87 | (699,880) | $ | 5.44 | (549,950) | $ | 12.17 | ||||||||||||||||||||||||||
Repurchased (a) | (766,347) | $ | 6.09 | (828,073) | $ | 6.96 | (443,720) | $ | 12.21 | ||||||||||||||||||||||||||
| Outstanding at December 31 | 5,747,294 | $ | 5.86 | 5,499,486 | $ | 5.98 | 6,778,588 | $ | 6.53 | ||||||||||||||||||||||||||
(a) Represents withholdings to cover tax obligations on vested shares.
The total fair value of RSUs vested was $14 million, $16 million and $13 million, during the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, there was $23 million of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted-average period of 2.0 years.
Performance Stock Units
Performance stock units (“PSUs”) in FGHI are valued at the fair value of FGHI’s common stock on the date of grant for non-market-based performance condition awards and for market-based performance condition awards a Monte Carlo valuation model determines the fair value at the time of grant. Each PSU award is granted at a target number, which represents the right to receive one share of common stock that may be issued to the participant provided performance and service conditions are met. The number of shares of common stock awarded will be determined based on the achievement factor of the performance metric, ranging from 0% to 200% of the target shares. Vesting of PSUs also include time-based service conditions; approximately to three years of continuous service for employees. In order to vest, the participant must still be employed by the Company, with certain contractual exclusions, at each annual vesting event. Compensation expense related to PSUs is recognized on a straight-line basis over the requisite service period, net of forfeitures, which are recognized on a specific-identification basis. Compensation expense for non-market-based performance condition PSUs is adjusted in the period when it becomes probable that performance conditions will be achieved. Compensation expense for market-
based performance condition PSUs will not be adjusted based on probable or actual achievement of performance metrics.
There were 1,199,038 PSUs granted during the year ended December 31, 2025, of which 710,136 were issued with a non-market-based performance condition and the remaining 488,902 were issued with a market-based performance condition. The non-market-based and market-based awards were granted at a weighted-average fair value per share of $8.09 and $11.75, respectively. There were no PSUs granted during the years ended December 31, 2024 and 2023. During the years ended December 31, 2025, 2024, and 2023, no PSUs were vested or forfeited. As of December 31, 2025, there was $6 million of unrecognized compensation cost related to unvested PSUs which is expected to be recognized over a weighted-average period of 1.7 years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 22, 2023 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.