What happened

Frontier Group Holdings (ULCC 5.90%) largely met expectations for the year-end quarter, but the discount airline warned headwinds would eat into growth in 2023. Investors were focused on the future, sending Frontier shares down 16.1% as of 2 p.m. Thursday afternoon.

So what

Last year was a good one for the airline industry, with pent-up demand for travel post-pandemic leading to strong demand and higher fares. The airlines were mostly able to fill every seat they flew.

Frontier earned $0.18 per share in the fourth quarter, just ahead of analyst expectations for $0.17 per share in earnings, on revenue of $906 million. The revenue figure was 38% above the same three months of 2019, prior to the pandemic, even though capacity was only up by 15%. The airline is also doing a good job building its nonticket revenue streams, with ancillary revenue 41% higher than in 2019.

Cost per available seat mile, or CASM, an industry metric designed to show how much it costs to fly one seat one mile, was at a post-pandemic low.

"Fourth-quarter results were strong, underpinned by record ancillary revenue and meaningful improvements in CASM and utilization," CEO Barry Biffle said in a statement. "Moving into 2023, we intend to bolster our competitive edge by driving further improvement in ancillary revenue per passenger and unit costs."

But not everything is working for Frontier right now. The airline warned that aircraft delivery delays and maintenance schedules would impact 2023 growth plans by about 5%. The delays will also impact Frontier's ability to bring down costs, as the Airbus A321neo aircraft that Frontier is waiting on are more fuel efficient than many of the planes currently in the fleet.

Now what

Frontier's ultra-discount model, which involves low fares and charges for many services that other airlines once provided for free, is the target of a lot of jokes, but the model seems to resonate with consumers. The airline has a growing cost advantage compared to much of the rest of the industry, and with plans to add 231 aircraft to its fleet by 2029, it also has ample opportunities to grow from here.

The only issue is the near term, and how quickly that growth can materialize in 2023. The delivery delays might take some of the momentum out of 2023, but for long-term-focused investors, this remains an intriguing aviation pick.