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Jan 25, 2007|
Frontier Airlines Reports Fiscal Third Quarter 2007 Results
DENVER, Jan. 25 /PRNewswire-FirstCall/ -- Frontier Airlines Holdings, Inc. (NASDAQ: FRNT) today reported a net loss of $14.4 million, or $0.39 per diluted share, for the airline's third fiscal quarter ended December 31, 2006 compared to a net loss of $10.3 million, or $0.28 per diluted share, for the same period last year. Included in the net loss for the quarter ended December 31, 2006 was non-cash mark to market derivative gains, which decreased fuel expense by $1.4 million. This item, net of income taxes, decreased Frontier's net loss by $0.02 per diluted share for the quarter ended December 31, 2006. Included in the net loss for the quarter ended December 31, 2005 were the following items before the effect of income taxes: unrealized losses on fuel hedges of $1.5 million and gains of $0.3 million related primarily to the sale of Boeing parts held for sale. These items, net of income taxes, increased Frontier's net loss by $0.03 per diluted share.
Two major snow storms in Denver, Colorado in December 2006 had a significant negative impact on Frontier's operating results for the quarter ended December 31, 2006. Frontier cancelled 875 flights affecting 105,000 passengers as a result of these storms. One storm completely shut down Frontier's primary operating hub, Denver International Airport (DIA), for almost 48 hours. The Company estimates that the snow storms reduced revenue by approximately $12.2 million from its mainline operation and by another $1.0 million from its regional jet service, operated by Horizon Air. In addition, the storms increased many variable costs including $1.2 million in additional glycol expenses over the prior year and $0.9 million in additional wages related to station personnel and flight crews, offset by a reduction of fuel, landing fees, maintenance expenses and catering expenses of $3.3 million. The net after-tax impact from the snowstorms on the December 2006 quarterly results was estimated to be $0.27 per diluted share.
Chief Executive Officer's Comments
Frontier President and CEO Jeff Potter said, "The irony of this quarter's disappointing loss is that it belies the fact that during a two-week window our employees engaged in some of the hardest work and put forth some of the greatest efforts on behalf of this Company we have ever seen. I am referring of course to the series of winter storms that laid siege to our hub over some of the busiest travel days of the year from just before Christmas through the heaviest travel days of the New Year holiday. Our employees, many of whom spent several consecutive days at the airport and at reservations, worked tirelessly to accommodate over 100,000 passengers that were displaced by DIA's closure. The end result of the storms was a pre-tax financial impact estimated to be approximately $11.9 million. However, if there is a silver lining, it is that our employees did what they do best when staring adversity in the face -- and this was probably the greatest challenge in our history as an airline excluding the events of September 11, 2001 -- they faced the challenges head on and became, in my eyes, the heroes of an otherwise dismal story.
"Looking beyond the immediate impact of the storms and a three percent year-over-year decrease in average fare attributable to the intensely competitive Denver market, we see a brighter picture on the horizon. We made several announcements during and since the quarter end that we believe will have a substantially positive impact on our future ability to generate incremental revenue through our hub. Specifically, we believe that our regional expansion with Republic Airlines, which will operate 17 Embraer 170 aircraft for us, and our new subsidiary, Lynx Aviation, which will operate ten 74-seat Q400 aircraft by the end of 2007, will further leverage the revenue generating capacity of our Denver hub complex and diversify our exposure to Denver origin and destination competition. In addition, our new marketing and referral partnership with AirTran is proving to be as successful as we had initially anticipated and we believe will provide additional revenue support during slower months."
During the quarter ending December 31, 2006, Frontier completed 96.67 percent of all domestic flights, down from 99.80 percent over the same period last year. 81.4 percent of all Frontier domestic flights arrived within the Department of Transportation's (DOT) established on-time criteria of 14 minutes within scheduled arrival time.
Mainline passenger revenue increased 9.2 percent as mainline revenue passenger miles (RPMs) grew at a rate of 8.2 percent during the fiscal third quarter, while mainline capacity growth as measured by mainline ASMs increased 9.5 percent from the same quarter last year. As a result, the airline's mainline load factor was 71.2 percent for its fiscal third quarter of 2007, 0.9 load factor points less than the mainline load factor of 72.1 percent during the same quarter last year. The airline's mainline break-even load factor, excluding special items, for the fiscal third quarter 2007 increased 2.8 load factor points from 74.7 percent in the fiscal third quarter of 2006 to 77.5 percent. This year over year increase was primarily the result of a 3.0 percent increase in mainline cost per available seat mile (CASM).
The negligible 0.1 percent increase in mainline RASM was driven by a year-over-year increase of 1.3 percent in mainline passenger yield per RPM, offset by the 0.9 load factor point decrease.
Mainline fuel cost per gallon, including non-cash mark to market derivative adjustments, was $2.12 during the quarter ended December 31, 2006, compared to $2.21 during the quarter ended December 31, 2005, a decrease of 4.1 percent.
The airline's mainline CASM for the fiscal third quarter, excluding fuel, was 6.57 cents compared to 6.17 cents for the same quarter last year, an increase of 6.5 percent. Mainline CASM, excluding fuel, for the quarter ended December 31, 2006 increased primarily due to 86.6 million un-flown mainline ASMs resulting from the snow storms, as well as approximately $0.9 million in start-up costs for Lynx Aviation and $1.0 million in a rent rate adjustment that Los Angeles International Airport applied retroactively from January 1, 2006 in December 2006.
The Company's current unrestricted cash and working capital as of December 31, 2006 was $191.6 million and $33.6 million, respectively. This compares to the Company's unrestricted cash and working capital for the same period last year of $222.7 million and $113.9 million, respectively.
The airline's fleet in service on December 31, 2006 consisted of 18 owned Airbus A319 and A318 aircraft and 37 leased Airbus A319 and A318 aircraft.
Business developments during the quarter and through January 2007 included:
* Frontier's flight attendants voted against union representation by the International Brotherhood of Teamsters (IBT) in November, 2006. This is the fifth time Frontier's flight attendants have voted against union representation. * Partnered with AirTran Airways to create the first ever low cost carrier referral and frequent flyer partnership in the industry that offers travelers the ability to reach more than 80 destinations across four countries. This partnership enables both airlines to increase destination options by linking phone and online reservations systems as well as enabling Frontier's EarlyReturns and AirTran's A+ Rewards members to earn and redeem mileage/travel credits on both airlines. * Frontier Airline Pilots Association ("FAPA") announced a tentative agreement on a new collective bargaining agreement shortly after quarter end in January, 2007. If approved by FAPA membership, the new four-year agreement would amend the previous five-year contract signed in May 2000. The tentative agreement was presented to the pilot group for ratification in mid-January with approval from the pilot group expected in mid-February. If approved, it is expected that the agreement would become effective around March 1, 2007. * Announced an agreement with Republic Airlines, Inc. ("Republic") shortly after quarter-end, under which Republic will operate for Frontier up to 17 Embraer 170 aircraft with capacity of 76-seats. The service is scheduled to begin on March 4, 2007 and will replace the Company's current agreement with Horizon Air, which will expire with the return of its last aircraft in December, 2007. * Distributed a Request for Proposal (RFP) to over 65 communities in an effort to target best prospects for regional expansion with Q400s and Embraer 170 aircraft. * Voted "Best Low Cost Carrier in the U.S." in Business Traveler Magazine's 18th annual Readers' Choice Business Travel Survey. * Announced new non-stop service between Denver and Hartford to begin March 2, 2007. * Announced new non-stop service between Denver and Vancouver to begin May 5, 2007. Vancouver is Frontier's second Canadian destination. * Announced new non-stop service from San Jose and Sacramento to Los Cabos, which is scheduled to start in March, 2007. * Began new service between San Francisco and Las Vegas. * Began new Mexico service between Los Angeles and Los Cabos, San Diego and Cancun and between Denver and Guadalajara, Frontier's eighth Mexican market and first interior Mexican destination. * Appointed Rita Cuddihy to Frontier's Board of Directors.
Potter concluded, "Looking ahead, we have announced service to a number of new destinations that will begin in the next three to six months, including new service from San Jose and Sacramento to Los Cabos; Denver's first and only non-stop service to Louisville; and Denver service to Vancouver, our second Canadian destination. In addition, we are approaching peak travel season for our growing Mexico service, a solid revenue generator for Frontier which will represent approximately 13 percent of our capacity during the spring break peak of March. However, we continue to suffer some adverse effects from the winter storms of December, and subsequent storms which continue to impact our Denver hub, even as recently as this week."
Senior leadership will host a conference call to discuss Frontier's quarterly earnings on January 26, 2007, at 9:00 a.m. Mountain Standard Time. The call is available via the World Wide Web on the airline's Web site at http://www.frontierairlines.com/ or using the following URL: http://www.vcall.com/IC/CEPage.asp?ID=113217
About Frontier Airlines Holdings, Inc.
Frontier Airlines Holdings, Inc. is the parent company of Denver-based Frontier Airlines, Inc. Currently in its 13th year of operations, Frontier Airlines is the second largest jet service carrier at Denver International Airport, employing approximately 5,000 aviation professionals. With 55 aircraft and one of the youngest Airbus fleet in North America, Frontier offers 24 channels of DIRECTV® service in every seatback along with 33 inches of legroom in an all coach configuration. In conjunction with its regional jet fleet, operated by Horizon Air, Frontier offers routes linking its Denver hub to 55 destinations including 46 U.S. cities in 28 states spanning the nation from coast to coast, eight cities in Mexico and one city in Canada. In November of 2006, Frontier and AirTran announced a first-of-its-kind integrated marketing partnership that offers travelers the ability to reach more than 80 destinations across four countries with low fares, aboard two of the youngest fleets in the industry. In December of 2006 Frontier was designated "Best Low Cost Carrier" in the U.S. by the readers of Business Traveler magazine. For more in-depth information on Frontier Airlines, please visit our website at http://www.frontierairlines.com/.
Legal Notice Regarding Forward-Looking Statements
Statements contained in this press release that are not historical facts, including certain statements of belief by Mr. Potter and projections of future performance, may be considered forward-looking statements as that item is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Many of these risks and uncertainties cannot be predicted with accuracy and some might not even be anticipated. Some of the factors that could significantly impact the forward-looking statements in this press release include, but are not limited to: further downward pressure on airfares due to competition, demand or other factors; continuing adverse effects of high fuel costs; increased prices for fuel and the inability to recover these higher fuel costs in airfares; actions of competing airlines, such as increasing capacity and pricing actions of United Airlines, Southwest Airlines, and other competitors, particularly in some of our Mexico destinations due to the increase in the number of domestic airlines authorized to serve Mexican markets from the U.S.; unanticipated decreases in the volume of passenger traffic due to terrorist acts or additional incidents that could cause the public to question the safety and/or efficiency of air travel; negative public perceptions associated with increased security wait times at various domestic airports; the inability to secure adequate gate facilities at Denver International Airport and at other airports where Frontier operates; weather, maintenance or other operational disruptions; air traffic control-related difficulties; the impact of labor issues; actions of the federal and local governments; changes in the government's policy regarding relief to the airline industry, especially as it relates to war risk insurance; and the stability of the U.S. economy and the economic environment of the airline industry; and new business strategies such as the start-up of a new subsidiary using a different type of aircraft and operating in different markets and its ability to obtain the necessary regulatory approvals and licenses as and when planned. Any forward-looking statement is qualified by reference to these risks and factors. These risks and factors are not exclusive, and the Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release. Additional information regarding these and other factors may be contained in the Company's SEC filings, including without limitation, the Company's Form 10-K for its fiscal year ended March 31, 2006. The Company's filings are available from the Securities and Exchange Commission or may be obtained through the Company's website, http://www.frontierairlines.com/.
-Financial Tables To Follow- FRONTIER AIRLINES HOLDINGS, INC. CONSOLIDATED BALANCE SHEET DATA (unaudited) December 31, December 31, 2006 2005 (in thousands) Balance Sheet Data: Cash and cash equivalents $191,587 $222,680 Current assets 317,100 346,151 Total assets 975,702 916,986 Current liabilities 283,516 232,238 Long-term debt 437,191 410,866 Total liabilities 753,972 681,069 Stockholders' equity 221,730 235,917 Working capital 33,584 113,913 FRONTIER AIRLINES HOLDINGS, INC. CONSOLDIATED STATEMENTS OF OPERATIONS (Unaudited) FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2006 AND 2005 (in thousands, except per share data) Three Months Ended Nine Months Ended December 31, December 31, December 31, December 31, 2006 2005 2006 2005 Revenues: Passenger - mainline $237,912 $217,812 $783,996 $655,276 Passenger - regional partner 22,593 23,490 75,053 69,835 Cargo 1,653 1,462 5,234 4,054 Other 4,284 4,199 14,078 12,631 Total revenues 266,442 246,963 878,361 741,796 Operating expenses: Flight operations 39,111 35,188 118,094 104,097 Aircraft fuel 81,593 77,649 273,457 208,391 Aircraft and engine lease 27,553 23,371 80,761 70,274 Aircraft and traffic servicing 43,078 35,184 120,186 101,050 Maintenance 22,403 18,487 65,067 57,015 Promotion and sales 23,435 19,852 76,352 60,369 General and administrative 12,657 12,481 41,370 36,803 Operating expenses - regional partner 26,163 29,144 83,679 79,569 Aircraft lease and facility exit costs -- -- (14) 3,365 Gains on sales of assets, net (8) (274) (655) (965) Depreciation 8,923 7,545 24,759 21,080 Total operating expenses 284,908 258,627 883,056 741,048 Business interruption insurance proceeds -- -- 868 -- Operating income (loss) (18,466) (11,664) (3,827) 748 Nonoperating income (expense): Interest income 3,824 2,560 11,980 5,835 Interest expense (7,889) (5,709) (22,561) (14,871) Other, net (184) (53) (110) (203) Total nonoperating expense, net (4,249) (3,202) (10,691) (9,239) Loss before income tax expense (22,715) (14,866) (14,518) (8,491) Income tax benefit (8,309) (4,576) (4,578) (2,372) Net loss $(14,406) $(10,290) $(9,940) $(6,119) Loss per share: Basic and diluted $(0.39) $(0.28) $(0.27) $(0.17) Weighted average shares of common stock outstanding: Basic and diluted 36,617 36,188 36,602 36,128 FRONTIER AIRLINES HOLDINGS, INC. COMPARATIVE OPERATING STATISTICS (unaudited) Quarters Ended Nine Months Ended December 31, December 31, 2006 2005 Change 2006 2005 Change Selected Operating Data - Mainline: Passenger revenue (000s) $237,912 $217,812 9.2% $783,996 $655,276 19.6% Revenue passengers carried (000s) 2,086 1,872 11.4% 6,918 5,784 19.6% Revenue passenger miles (RPMs) (000s) 1,919,890 1,774,114 8.2% 6,443,388 5,555,093 16.0% Available seat miles (ASMs) (000s) 2,694,959 2,461,668 9.5% 8,373,036 7,326,080 14.3% Passenger load factor 71.2% 72.1% (0.9) pts. 77.0% 75.8% 1.2 pts. Break-even load factor(1) 77.5% 74.7% 2.8 pts. 77.4% 75.2% 2.2 pts. Block hours 56,761 50,968 11.4% 173,382 149,323 16.1% Departures 23,644 20,835 13.5% 72,431 61,338 18.1% Average seats per departure 129.7 129.4 0.2% 129.6 129.4 0.2% Average stage length 879 913 3.7% 892 923 (3.4%) Average length of haul 920 948 (3.0%) 931 960 (3.0%) Average daily block hour utilization 11.2 11.3 (0.9%) 11.8 11.4 3.5% Passenger yield per RPM (cents) (2), (3) 12.20 12.04 1.3% 12.05 11.65 3.4% Total yield per RPM (cents) 12.70 12.60 0.8% 12.47 12.10 3.1% Passenger yield per ASM (cents) 8.69 8.68 0.1% 9.28 8.84 5.0% Total yield per ASM (cents) 9.05 9.08 (0.3%) 9.59 9.17 4.6% Cost per ASM (cents) 9.60 9.32 3.0% 9.55 9.03 5.8% Fuel expense per ASM (cents) 3.03 3.15 (3.8%) 3.27 2.84 15.1% Cost per ASM excluding fuel (cents)(4) 6.57 6.17 6.5% 6.28 6.19 1.5% Average fare $101.68 $104.72 (2.9%) $102.76 $103.42 (0.6%) Average aircraft in service 55.0 49.0 12.2% 53.5 47.8 11.9% Aircraft in service at end of period 55.0 49.0 12.2% 55.0 49.0 12.2% Average age of aircraft at end of period 3.1 2.4 29.2% 3.1 2.4 29.2% Average fuel cost per gallon $2.12 $2.21 (4.1%) $2.28 $1.98 15.2% Fuel gallons consumed (000's) 38,535 35,076 9.9% 119,935 105,329 13.9% FRONTIER AIRLINES HOLDINGS, INC. COMPARATIVE OPERATING STATISTICS (unaudited), Continued Quarters Ended Nine Months Ended December 31, December 31, 2006 2005 Change 2006 2005 Change Selected Operating Data - Regional Partner: Passenger revenue (000s) $22,593 $23,490 (3.8%) $75,053 $69,835 7.5% Revenue passengers carried (000s) 215 228 (5.7%) 720 695 3.6% Revenue passenger miles (RPMs) (000s) 140,401 156,565 (10.3%) 457,635 442,278 3.5% Available seat miles (ASMs) (000s) 203,705 215,077 (5.3%) 619,229 608,194 1.8% Passenger load factor 68.9% 72.8% (3.9)pts 73.9% 72.7% 1.2 pts Passenger yield per RPM (cents) (2) 16.09 15.00 7.3% 16.40 15.79 3.9% Yield per ASM (cents) 11.09 10.92 1.6% 12.12 11.48 5.6% Cost per ASM (cents) 12.84 13.55 (5.2%) 13.51 13.08 3.3% Average fare $105.31 $103.13 2.1% $104.19 $100.54 3.6% Aircraft in service at end of period 9 9 -- 9 9 -- Quarters Ended Nine Months Ended December 31, December 31, 2006 2005 Change 2006 2005 Change Selected Operating Data - Combined: Passenger revenue (000s) $260,505 $241,302 8.0% 859,049 $725,111 18.5% Revenue passengers carried (000s) 2,301 2,100 9.6% 7,638 6,479 17.9% Revenue passenger miles (RPMs) (000s) 2,060,291 1,930,679 6.7% 6,901,023 5,997,371 15.1% Available seat, (ASMs) (000s) 2,898,664 2,676,745 8.3% 8,992,265 7,934,274 13.3% Passenger load factor 71.1% 72.1% (1.0)pts. 76.7% 75.6% 1.1 pts. Passenger yield per RPM (cents) (2) 12.47 12.28 1.5% 12.34 11.96 3.2% Total yield per RPM (cents) 12.93 12.79 1.1% 12.73 12.37 2.9% Yield per ASM (cents) 8.86 8.86 -- 9.47 9.04 4.8% Total yield per ASM (cents) 9.19 9.23 (0.4%) 9.77 9.35 4.5% Cost per ASM (cents) 9.83 9.66 1.8% 9.82 9.34 5.1% 1. "Break-even load factor" is the passenger load factor that will result in operating revenues being equal to operating expenses, net of certain adjustments, assuming constant yield per RPM and no change in ASMs. Break-even load factor as presented above may be deemed a non-GAAP financial measure under regulations issued by the Securities and Exchange Commission. We believe that presentation of break-even load factor calculated after certain adjustments is useful to investors because the elimination of special or unusual items allows a meaningful period-to-period comparison. Furthermore, in preparing operating plans and forecasts we rely on an analysis of break-even load factor exclusive of these special and unusual items. Our presentation of non-GAAP results should not be viewed as a substitute for our financial or statistical results based on GAAP, and other airlines may not necessarily compute break-even load factor in a manner that is consistent with our computation.
A reconciliation of the components of the calculation of break-even load factor is as follows:
Three months Ended Nine Months Ended December 31, December 31, 2006 2005 2006 2005 (In thousands) (In thousands) Net loss $14,406 $10,290 $9,940 $6,119 Income tax benefit 8,309 4,576 4,578 2,372 Passenger revenue 237,912 217,812 783,996 655,276 Revenue - regional partner 22,593 23,490 75,053 69,835 Charter revenue (3,688) (4,251) (7,293) (7,959) Operating expenses - regional partner (26,163) (29,144) (83,679) (79,569) Passenger revenue - mainline (excluding charter and regional partner revenue) required to break even (based on GAAP amounts) $253,369 $222,773 $782,595 $646,074 Non-GAAP adjustments: Aircraft and facility lease exit costs -- -- -- (3,365) Gain on sales of assets 8 274 656 965 Mark to market derivative gains/(losses) on fuel contracts 1,394 (1,529) (2,306) (2,254) Passenger revenue - mainline (excluding charter and regional partner revenue) required to break-even (based on adjusted amounts) $254,771 $221,518 $780,945 $641,420 Three months Ended Nine Months Ended December 31, December 31, 2006 2005 2006 2005 (In thousands) (In thousands) Calculation of mainline break-even load factor using GAAP amounts: Passenger revenue- mainline (excluding charter and regional partner revenue) required to break even (based on GAAP amounts) ($000s) $253,369 $222,773 $782,595 $646,074 Mainline yield per RPM (cents) 12.20 12.04 12.05 11.65 Mainline revenue passenger miles (000s) to break even assuming constant yield per RPM 2,076,795 1,850,274 6,494,564 5,545,700 Mainline available seat miles (000's) 2,694,959 2,461,668 8,373,036 7,326,080 Mainline break-even load factor using GAAP amounts 77.1% 75.2% 77.6% 75.7% Calculation of mainline break-even load factor using non-GAAP amounts: Passenger revenue (excluding charter and regional partner revenue) required to break even (based on adjusted amounts) ($000s) $254,771 $221,518 $780,945 $641,420 Mainline yield per RPM (cents) 12.20 12.04 12.05 11.65 Mainline revenue passenger miles (000s) to break even assuming constant yield per RPM 2,088,287 1,839,851 6,480,872 5,505,751 Mainline available seat miles (000's) 2,694,959 2,461,668 8,373,036 7,326,080 Mainline break-even load factor using non-GAAP amounts 77.5% 74.7% 77.4% 75.2% 2. "Passenger yield per RPM" is determined by dividing passenger revenues (excluding charter revenue) by revenue passenger miles. 3. For purposes of these yield calculations, charter revenue is excluded from passenger revenue. These figures may be deemed non-GAAP financial measures under regulations issued by the Securities and Exchange Commission. We believe that presentation of yield excluding charter revenue is useful to investors because charter flights are not included in RPMs or ASMs. Furthermore, in preparing operating plans and forecasts, we rely on an analysis of yield exclusive of charter revenue. Our presentation of non-GAAP financial measures should not be viewed as a substitute for our financial or statistical results based on GAAP. The calculation of passenger revenue excluding charter revenue is as follows: Three Months Ended Nine Months Ended December 31, December 31, 2006 2005 2006 2005 Passenger revenue - mainline, as reported $237,912 $217,812 $783,996 $655,276 Less: charter revenue 3,688 4,251 7,293 7,959 Passenger revenue - mainline excluding charter 234,224 213,561 776,703 647,317 Add: Passenger revenue - regional partner 22,593 23,490 75,053 69,835 Passenger revenue, system combined $256,817 $237,051 $851,756 $717,152 4. This may be deemed a non-GAAP financial measure under regulations issued by the Securities and Exchange Commission. We believe the presentation of financial information excluding fuel expense is useful to investors because we believe that fuel expense tends to fluctuate more than other operating expenses, it facilitates comparison of results of operations between current and past periods and enables investors to better forecast future trends in our operations. Furthermore, in preparing operating plans and forecasts, we rely, in part, on trends in our historical results of operations excluding fuel expense. However, our presentation of non-GAAP financial measures should not be viewed as a substitute for our financial results determined in accordance with GAAP.
SOURCE: Frontier Airlines Holdings, Inc.
CONTACT: Joe Hodas of Frontier Airlines, +1-720-374-4504,
Web site: http://www.frontierairlines.com/