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May 25, 2006|
Frontier Airlines Reports Fiscal Year 2006 Results
DENVER, May 25 /PRNewswire-FirstCall/ -- Frontier Airlines Holdings, Inc. formerly known as Frontier Airlines, Inc., (Nasdaq: FRNT - News) today reported a net loss of $14.0 million, or $0.39 per diluted common share, for its fiscal year ended March 31, 2006. This compares to a net loss of $23.4 million, or $0.66 per diluted common share for the previous fiscal year. The Company's fiscal year 2006 net loss included the following items before the effect of income taxes: aircraft lease and facility exit charges of $3.4 million primarily relating to three leased Boeing 737-300 aircraft that the Company ceased using during the first quarter; gains of $1.1 million related to the sale of Boeing parts held for sale and other assets; and an unrealized gain on fuel hedges of $1.0 million. These items, net of income taxes, increased the Company's net loss by $0.02 per diluted share. Included in the Company's net loss for the prior fiscal year ended March 31, 2005 were the following items before the effect of income taxes: a write down of $5.1 million of the carrying value of Boeing rotable spare parts which was offset by an unrealized gain on fuel hedges of $3.1 million. These items, net of income taxes, increased the Company's net loss by $0.04 per diluted share.
For Frontier's fiscal fourth quarter ended March 31, 2006, the airline reported a net loss of $7.9 million, or $0.22 per diluted common share, compared to a net loss of $3.7 million, or $0.10 per diluted common share, for the same period last year. The fiscal fourth quarter 2006 results, on a pre-tax basis, included a $0.5 million unrealized fuel derivative gain and a $0.2 million gain from the sale of spare parts and inventory. These items, net of income taxes, reduced the Company's net loss by $.01 per diluted share. The fiscal fourth quarter 2005 results, on a pre-tax basis, included a $3.8 million unrealized fuel derivative gain and a $0.4 million gain from the sale of spare parts and inventory. These items, net of income taxes, reduced the Company's net loss by $.08 per diluted share.
Chief Executive Officer's Comments
Frontier President and CEO Jeff Potter said, "Although we made progress in all facets of our business, it was not enough to offset the many challenges that face the industry and our company during our fiscal fourth quarter.
"In an industry that has trended towards overall reduced capacity, Denver International Airport (DIA) was an anomaly, adding the second greatest number of seats of the top 33 airports in the country on a year-over-year basis for the fiscal fourth quarter. Looking into the summer months, we expect to see year-over-year seat capacity growth at DIA, but at a lower percentage increase than in this year's March quarter.
"Against that backdrop, we made great progress with the fundamentals underlying our growth. In spite of the capacity additions and increased competition, our mainline revenue per available seat mile (RASM) increased 2.2 percent for the quarter and 10.3 percent for the year on a year-over-year basis. In addition, while we continue to absorb the impact of relentless fuel price increases, our mainline cost per available seat mile (CASM) excluding fuel fell 6.3 percent for the quarter and 2.7 percent for the year on a year-over-year basis.
"We are especially pleased that we now have secured the gates at DIA that are necessary to support our growth. With this development, we have more flexibility for current operations and future opportunities, which we expect will ultimately benefit our bottom line."
Fourth Quarter Operating Highlights
Compared to the same quarter last year, mainline passenger revenue increased 16.4 percent as mainline revenue passenger miles (RPMs) grew at a rate of 13.4 percent during the fiscal fourth quarter, while mainline capacity growth as measured by mainline available seat miles (ASMs) increased 13.6 percent. As a result, the airline's mainline load factor was 73.5 percent for its fiscal fourth quarter of 2006, 0.1 load factor points less than the airline's mainline load factor of 73.6 percent during the same quarter last year. The airline's mainline breakeven load factor, excluding special items, for the fiscal fourth quarter 2006 decreased 0.3 load factor points from 76.6 percent to 76.3 percent.
During the fiscal fourth quarter 2006, the airline's mainline RASM increased 2.2 percent to 8.65 cents from the same quarter last year. The increase in mainline RASM was primarily due to the 2.4 percent mainline yield per RPM increase on a year-over-year basis. Mainline average length of haul decreased 4.1 percent on a year-over-year basis.
Mainline fuel cost per gallon during the quarter (excluding unrealized fuel hedging gains) increased 30.6 percent to $2.05 compared to $1.57 for the same period last year. Mainline CASM excluding fuel decreased 6.3 percent to 6.26 cents from the same period last year, when CASM excluding fuel was 6.68 cents.
Senior Vice President and Chief Financial Officer Paul Tate discussed the airline's year-over-year unit cost comparatives stating, "Our fiscal fourth quarter generated continued improvement in our mainline CASM excluding fuel, despite a 4.1 percent reduction in our average aircraft stage length and a 2.2 percent increase in RASM and associated increase in passenger related expenses per ASM. We continued to benefit from our operation of a single fleet type compared to the fleet transition costs we were incurring in last year's March quarter."
The Company's current unrestricted cash and working capital position as of March 31, 2006 was $272.8 million and $89.9 million, respectively. This compares to the Company's unrestricted cash (including short-term investments) and working capital position for the same period last year of $174.8 million and $41.7 million, respectively.
Year End Operating and Financial Highlights
The airline's mainline passenger revenues during its fiscal year 2006 increased 20.1 percent to $878.7 million from $731.8 million for the prior fiscal year. The airline's mainline capacity, as measured by ASMs, increased 8.4 percent during fiscal year 2006. During fiscal year 2006, the airline's mainline break-even load factor, excluding special items, increased 0.9 points to 75.7 percent. The airline's average fare during its fiscal year 2006 increased 0.7 percent to $103.05 from $102.31 from the prior fiscal year. The Company's mainline passenger RASM for fiscal year 2006 increased 10.3 percent to 8.79 cents from 7.97 cents for fiscal year 2005.
Mainline CASM for the fiscal year 2006 increased to 9.06 cents from 8.42 cents for fiscal year 2006. Mainline CASM excluding the airline's fuel costs decreased 2.7 percent to 6.21 cents during fiscal year 2006, compared to 6.38 cents during fiscal year 2005. During fiscal year 2006, the average cost per gallon of fuel was $1.99, a 41.1 percent increase from the last fiscal year. Daily aircraft utilization for fiscal year 2006 averaged 11.5 hours, an increase of 3.6 percent from fiscal year 2005.
Business developments during the quarter included: * Completed a corporate reorganization making Frontier Airlines, Inc., a Colorado corporation, a wholly-owned subsidiary of Frontier Airlines Holdings, Inc., a Delaware corporation, effective April 3, 2006. * Announced the firm order of six new Airbus A320 aircraft, as well as the exchange of eight existing A319 aircraft orders for four A318 and four A320 aircraft orders. The amended aircraft order introduces the A320 aircraft to Frontier's existing fleet plan and extends Frontier's growth plan into fiscal year 2011 from its previous last delivery date of March 2008. * Announced new non-stop service between Calgary and Denver, which began May 25th, 2006, making Frontier the first American low cost carrier (LCC) to enter Canada. * Began new non-stop service between Indianapolis and Cancun, Mexico * Announced a five-year renewal of Frontier's sponsorship of the Colorado Rockies. * Took delivery of one new Airbus A319 aircraft. * Launched a successful integrated marketing, advertising and PR campaign, "Flip to Mexico," in Denver, generating local and national interest as well as critical acclaim including a coveted Clio award. * Began allowing Portable Oxygen Containers (POCs) on all flights * Received seventh consecutive Diamond Award, the FAAs highest honor for maintenance and safety. Outlook
Potter concluded, "While we recognize that the unique competitive nature of the Denver market isn't likely to change in the near term, with the continuing strength in revenues and bookings heading into what we expect to be the busiest summer in the Company's history, combined with the progress we continue to achieve in our unit costs, we expect to return to profitability in the current June quarter."
Senior leadership will host a conference call to discuss Frontier's quarterly and annual results on May 26, 2006 at 9:00 a.m. Mountain Daylight Time. The call is available via the World Wide Web on the airline's Web site at FrontierAirlines.com or using the following URL: http://www.vcall.com/CEPage.asp?ID=92158.
Currently in its 12th year of operations, Denver-based Frontier Airlines is the second largest jet service carrier at Denver International Airport, employing approximately 4,800 aviation professionals. With 52 aircraft and 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 Frontier JetExpress operated by Horizon Air, Frontier operates routes linking its Denver hub to 55 destinations including 47 destinations in 29 states spanning the nation from coast to coast, seven cities in Mexico and Calgary, Canada. Frontier's maintenance and engineering department has received the Federal Aviation Administration's highest award, the Diamond Certificate of Excellence, in recognition of 100 percent of its maintenance and engineering employees completing advanced aircraft maintenance training programs, for seven consecutive years. In July 2005, Frontier ranked as one of the "Top 10 Domestic Airlines" as determined by readers of Travel & Leisure magazine. Frontier provides capacity information and other operating statistics on its Web site, which may be viewed at FrontierAirlines.com.
Legal Notice Regarding Forward-Looking Statements
Statements contained in this press release that are not historical facts 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, overcapacity, demand or other factors; continuing high fuel costs and the inability to recover these higher fuel costs in airfares; 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; 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 or assistance to the airline industry; the stability of the U.S. economy and the economic environment of the airline industry; and other factors detailed in the Company's public filings with the Securities and Exchange Commission. 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, 2005. The Company's filings are available from the Securities and Exchange Commission or may be obtained through the Company's website, FrontierAirlines.com.
FRONTIER AIRLINES, INC. SELECTED BALANCE SHEET DATA (unaudited) March 31, 2006 2005 Cash, cash equivalents and short-term investments 272,839 174,794 Current assets 390,957 275,550 Total assets 970,432 792,011 Current liabilities 301,012 233,850 Long-term debt 405,482 282,792 Total liabilities 741,656 544,090 Stockholders' equity 228,776 237,920 Working capital 89,946 41,700 FRONTIER AIRLINES, INC. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND YEAR ENDED MARCH 31, 2006 AND 2005 (unaudited) Three Months Ended Twelve Months Ended March 31, March 31, March 31, March 31, 2006 2005 2006 2005 Revenues: Passenger - mainline $223,404,437 $191,850,462 $878,680,878 $731,821,890 Passenger - regional partner 22,991,589 21,650,116 92,826,244 84,268,560 Cargo 1,623,306 1,095,713 5,676,883 4,957,731 Other 4,457,314 3,947,835 17,088,741 12,591,260 Total revenues 252,476,646 218,544,126 994,272,746 833,639,441 Operating expenses: Flight operations 37,218,529 35,933,047 141,315,684 132,022,593 Aircraft fuel 73,515,265 47,278,731 281,906,430 185,821,202 Aircraft lease 23,954,740 23,118,007 94,228,608 87,095,717 Aircraft and traffic servicing 37,441,648 34,261,116 138,491,985 129,469,952 Maintenance 20,222,825 19,097,242 77,238,247 76,678,749 Promotion and sales 22,133,084 18,634,207 82,501,933 76,461,549 General and administrative 12,176,349 13,195,114 48,978,978 48,350,563 Operating expenses - regional partner 27,296,688 23,606,729 106,865,952 92,480,847 Aircraft lease and facility exit costs 49,417 -- 3,413,932 -- (Gains) losses on sales of assets, net (179,299) (400,054) (1,144,041) 84,610 Impairments -- (136,399) -- 5,123,224 Depreciation 7,292,776 6,714,328 28,372,292 26,497,930 Total operating expenses 261,122,022 221,302,068 1,002,170,000 860,086,936 Operating income (8,645,376) (2,757,942) (7,897,254) (26,447,495) Nonoperating income (expense): Interest income 3,530,749 1,351,410 9,365,958 3,757,596 Interest expense (6,887,253) (3,779,184) (21,758,135) (13,184,345) Other, net 24,101 (136,421) (179,340) 36,148 Total nonoperating income (expense), net (3,332,403) (2,564,195) (12,571,517) (9,390,601) Loss before income tax benefit (11,977,779) (5,322,137) (20,468,771) (35,838,096) Income tax benefit (4,124,949) (1,605,683) (6,497,325) (12,407,910) Net loss $(7,852,830) $(3,716,454) $(13,971,446) $(23,430,186) Loss per share: Basic $(0.22) $(0.10) $(0.39) $(0.66) Diluted $(0.22) $(0.10) $(0.39) $(0.66) Weighted average shares of common stock outstanding: Basic 36,287,483 35,729,769 36,166,972 35,641,370 Diluted 36,287,483 35,729,769 36,166,972 35,641,370 FRONTIER AIRLINES, INC. COMPARATIVE OPERATING STATISTICS (unaudited) Three months Ended Year Ended March 31, March 31, 2006 2005 2006 2005 Selected Operating Data - Mainline: Passenger revenue (000s) $223,404 $191,850 $878,681 $731,822 Revenue passengers carried (000s) 1,980 1,675 7,764 6,653 Revenue passenger miles (RPMs) (000s) 1,881,737 1,659,174 7,436,830 6,587,589 Available seat miles (ASMs) (000s) 2,559,519 2,252,957 9,885,599 9,115,868 Passenger load factor 73.5% 73.6% 75.2% 72.3% Break-even load factor (1) 76.3% 76.6% 75.7% 74.8% Block hours 52,977 45,795 202,300 182,581 Departures 21,540 18,165 82,878 72,888 Average seats per departure 129.4 129.6 129.4 130.1 Average stage length 918 957 922 961 Average length of haul 950 991 958 990 Average daily block hour utilization 11.9 11.0 11.5 11.1 Passenger yield per RPM (cents) (2), (3) 11.76 11.48 11.68 11.03 Total yield per RPM (cents) 12.20 11.87 12.12 11.38 Passenger yield per ASM (cents) 8.65 8.46 8.79 7.97 Total yield per ASM (cents) 8.97 8.74 9.12 8.22 Cost per ASM (cents) 9.14 8.77 9.06 8.42 Fuel expense per ASM (cents) 2.88 2.09 2.85 2.04 Cost per ASM excluding fuel (cents) 6.26 6.68 6.21 6.38 Average fare $101.97 $105.78 $103.05 $102.31 Average aircraft in service 49.4 46.1 48.2 44.9 Aircraft in service at end of period 50 47 50 47 Average age of aircraft at end of period 2.6 2.5 2.6 2.5 Average fuel cost per gallon $2.03 $ 1.46 $1.99 $1.41 Average fuel cost per gallon (excluding unrealized fuel hedging gains) (5) $2.05 $ 1.57 $2.00 $1.43 Fuel gallons consumed (000's) 36,144 32,423 141,474 131,906 Three months Ended Year Ended March 31, March 31, 2006 2005 2006 2005 Selected Operating Data - Regional Partner: Passenger revenue (000s) $22,992 $21,650 $92,826 $84,269 Revenue passengers carried (000s) 217 214 912 872 Revenue passenger miles (RPMs) (000s) 149,509 124,193 591,787 527,205 Available seat miles (ASMs) (000s) 213,050 182,265 821,244 736,287 Passenger load factor 70.2% 68.1% 72.1% 71.6% Passenger yield per RPM (cents) 15.38 17.43 15.69 15.98 Passenger yield per ASM (cents) 10.79 11.88 11.30 11.45 Cost per ASM (cents) 12.81 12.95 13.01 12.56 Average fare (15) $105.71 $101.01 $101.78 $96.66 Aircraft in service at end of period 9 9 9 9 Three months Ended Year Ended March 31, March 31, 2006 2005 2006 2005 Selected Operating Data - Combined: Passenger revenue (000s) $246,396 $213,500 $971,507 $816,091 Revenue passengers carried (000s) 2,197 1,889 8,676 7,525 Revenue passenger miles (RPMs) (000s) 2,031,246 1,783,367 8,028,617 7,114,794 Available seat miles (ASMs) (000s) 2,772,569 2,435,222 10,706,843 9,852,155 Passenger load factor 73.3% 73.2% 75.0% 72.2% Passenger yield per RPM (cents) (2), (3) 12.03 11.90 11.98 11.39 Total yield per RPM (cents) 12.43 12.25 12.38 11.72 Passenger yield per ASM (cents) 8.81 8.71 8.98 8.23 Total yield per ASM (cents) 9.11 8.97 9.29 8.46 Cost per ASM (cents) 9.42 9.09 9.36 8.73 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 Year Ended March 31, March 31, 2006 2005 2006 2005 (in thousands) (in thousands) (Income) loss before cumulative effect of accounting change $7,853 $3,716 $13,971 $23,430 Income tax (expense) benefit 4,125 1,606 6,497 12,408 Passenger revenue 223,404 191,850 878,681 731,822 Regional partner expense (27,297) (23,607) (106,866) (92,481) Regional partner revenue 22,992 21,650 92,826 84,269 Charter revenue (2,052) (1,336) (10,011) (5,381) Passenger revenue mainline (excluding charter and regional partner revenue required to break even (based on GAAP amounts) $229,025 $193,879 $875,098 $754,067 Non-GAAP adjustments: Gain on fuel hedging 509 3,769 976 3,139 Aircraft and facility lease exit costs (49) -- (3,414) -- Impairments -- 136 -- (5,123) Gain (losses) on sale of assets 179 400 1,144 (85) Passenger revenue (excluding charter and regional partner revenue) required to break-even (based on adjusted amounts) $229,664 $198,184 $873,804 $751,998 The calculation of the break-even load factor follows: Three Months Ended Year Ended March 31, March 31, 2006 2005 2006 2005 (in thousands) (in thousands) Calculation of 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) $229,025 $193,879 $875,098 $754,067 Mainline yield per RPM (cents) 11.76 11.48 11.68 11.03 Mainline revenue passenger miles (000s) to break even assuming constant yield per RPM 1,947,491 1,688,841 7,492,277 6,836,510 Mainline available seat miles (000's) 2,559,519 2,252,957 9,885,599 9,115,868 Mainline break-even load factor using GAAP amounts 76.1% 75.0% 75.8% 75.0% Calculation of 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) $229,664 $198,184 $873,804 $751,998 Mainline yield per RPM (cents) 11.76 11.48 11.68 11.03 Mainline revenue passenger miles to break even assuming constant yield per RPM 1,952,925 1,726,341 7,481,199 6,817,752 Mainline available seat miles (000's) 2,559,519 2,252,957 9,885,599 9,115,868 Mainline break-even load factor using non-GAAP amounts 76.3% 76.6% 75.7% 74.8% 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 Year Ended March 31, March 31, 2006 2005 2006 2005 Passenger revenues - mainline, as reported $223,404 $191,850 $878,681 $731,822 Less: charter revenue 2,052 1,336 10,011 5,381 Passenger revenues - mainline excluding charter 221,352 190,514 868,670 726,441 Add: Passenger revenues - regional partner 22,992 21,650 92,826 84,269 Passenger revenues, system combined $244,344 $212,164 $961,496 $810,710 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. 5. "Average fuel cost per gallon" excludes unrealized fuel hedge gains of $510,000 and $3,769,000 for the three months ended March 31, 2006 and 2005, respectively, and $976,000 and $3,139,000 for the years ended March 31, 2006 and 2005, respectively.