DENVER (May 27, 2004) - Frontier Airlines, Inc. (Nasdaq: FRNT) today
reported net income of $12.6 million, or $0.36 per diluted common share, for
its fiscal year ended March 31, 2004. This compares to a net loss of $22.8 million,
or $0.77 per common share for the previous fiscal year. The Company's fiscal
year 2003 net loss included a $2.0 million after-tax credit for the cumulative
effect of a change in accounting for major aircraft overhauls from the accrual
method to the expense incurred method. The loss before the cumulative effect
of the change in accounting was $24.9 million or $0.84 per common share.
For the airline's fiscal fourth quarter ended March 31, 2004, the airline reported
a net loss of $5.8 million, or $0.16 per common share, compared to a net loss
of $13.0 million, or $0.44 per common share, for the same period last year.
The results of the fiscal fourth quarter 2004 include charges of $1.1 million
in flight crew training expenses related to the start-up of the Company's new
Frontier JetExpress regional jet relationship with Horizon Air, as well as $3.4
million for a write-down of Boeing spare parts. These items, net of income taxes,
totaled approximately $.08 per diluted common share.
Chief Executive Officer's Comments
Frontier President and CEO Jeff Potter said, "We are pleased to be one
of a small number of airlines to be profitable during this past fiscal year.
This is as a direct result of the hard work and commitment of Frontier's exceptional
employees. While our fiscal year 2004 marked a period of tremendous growth for
Frontier, it was also a year of significant challenges, including surging fuel
costs, depressed fares, and fierce industry-wide competition. While this quarter's
loss is frustrating, we are extremely pleased with the quarter's significant
year-over-year improvements in both unit costs and unit revenue. This quarter
produced an 8.3 percent improvement in mainline passenger unit revenue, combined
with a 4.9 percent decrease in our mainline cost per available seat mile (CASM),
excluding fuel. These positive trends, along with the continuing increased load
factors, indicate that our customers are responding favorably to our product
and new services."
Fourth Quarter Operating Highlights
Mainline passenger revenue increased as mainline revenue passenger miles (RPMs)
grew at a rate of 49.4 percent during the fiscal fourth quarter, far out-pacing
mainline capacity growth as measured by available seat miles (ASMs), which increased
24.5 percent from the same time last year. As a result, the airline's mainline
load factor was 70.1 percent for its fiscal fourth quarter of 2004, 11.7 load
factor points greater than the airline's load factor of 58.4 percent during
the same quarter last year. The airline's mainline breakeven load factor for
the fiscal fourth quarter 2004 increased 3.8 load factor points from 68.9 percent
to 72.7 percent. The write-down of Boeing spare parts and the Horizon start-up
costs accounted for 2.0 load factor points of the breakeven load factor increase.
During fiscal fourth quarter 2004, the airline's mainline passenger revenue
per available seat mile (RASM) increased 8.3 percent to 8.07 cents from the
same quarter last year. The increase in RASM was due to the significant increase
in load factor, which more than offset a decrease in mainline passenger revenue
per passenger mile (yield) of 9.6 percent to 11.53 cents from the same period
The airline's mainline cost per available seat mile (CASM) for the fiscal fourth
quarter decreased 3.4 percent to 8.48 cents from 8.78 cents for the same quarter
last year. Mainline fuel cost per gallon during the quarter, including taxes
and delivery charges, increased 3.5 percent to $1.17, compared to $1.13 for
the same period last year. Mainline CASM excluding fuel decreased 4.9 percent
to 6.79 cents from the same period last year, when CASM excluding fuel was 7.14
Senior Vice President and Chief Financial Officer Paul Tate discussed the airline's
year-over-year unit cost comparatives stating, "Our fiscal fourth quarter
demonstrated improvement in our mainline CASM, both including and excluding
fuel. We expect to see the trend toward lower CASM, excluding fuel, continuing
at least through the next quarter as we continue to improve our aircraft utilization
with longer haul flying such as our Anchorage to Denver and Los Angeles to Philadelphia
Tate also described the airline's current cash and working capital position
stating, "As of March 31, 2004, and on a year-over-year basis, our unrestricted
cash position has increased from $104.9 million to $190.6 million. In the same
period, our working capital has increased from $60.8 million to $87.0 million.
Our cash position remains near its all-time high."
The airline's fleet in service on March 31, 2004 consisted of 13 owned Airbus
A319 and A318 aircraft, 15 leased Airbus A319 aircraft and 10 leased Boeing
Year End Operating and Financial Highlights
The airline's mainline passenger revenues during its fiscal year 2004 increased
33.7 percent to $615.4 million from $460.2 million for the prior year. The airline's
mainline capacity, as measured by ASMs, increased 19.0 percent during fiscal
year 2004. During fiscal year 2004, the airline's mainline break-even load factor
increased 3.8 points to 68.8 percent. The airline's average fare during its
fiscal year 2004 decreased 4.6 percent to $104 from $109 from the prior year.
The airline's passenger RASM for fiscal year 2004 increased 12.2 percent to
8.56 cents from 7.63 cents for fiscal year 2003.
Mainline CASM for the fiscal year 2004 decreased to 8.31 cents from 8.33 cents
for fiscal year 2003. Mainline CASM excluding the airline's fuel costs decreased
1.6 percent to 6.79 cents during fiscal year 2004, compared to 6.90 cents during
fiscal year 2003. During fiscal year 2004, the average cost per gallon of fuel
was $1.04, an 8.3 percent increase from last year. Daily aircraft utilization
for fiscal year 2004 averaged 10.4 hours, an increase of 6.1 percent from fiscal
Business developments during the quarter included:
- Began service to our fifth Mexico destination, Ixtapa/Zihuatanejo.
- Began Frontier JetExpress operation with Horizon Air.
- Capped all domestic fares to and from Denver (excluding Alaska) at $315
($299 plus fuel surcharge where applicable).
- Announced new Denver service, which began on May 23, 2004, to/from Philadelphia
(PHL), Spokane (GEG) and Billings (BIL) as well as Frontier's first transcontinental
service, which began May 23, 2004 from Los Angeles International Airport (LAX)
- Announced new service to Nashville International Airport (BNA) to start
June 20, 2004.
- Added mainline and regional jet (RJ) frequency to eight cities.
- Opened a new maintenance base in Kansas City.
- Earned fifth consecutive FAA Diamond Award for enhanced maintenance training.
- Became exclusive airline of the Colorado Crush, Colorado's professional
Arena Football League (AFL) team.
Cash, cash equivalents and short-term investments available for operations and
investing activities on March 31, 2004 were $190.6 million compared to $104.9
million available on March 31, 2003. The increase in our cash and working capital
from March 31, 2003 is largely a result of cash provided by our operating activities
for the year ended March 31, 2004 adjusted for reconciling items to net cash
and cash equivalents; the common stock offering in September 2003, which netted
$81.1 million after offering expenses; an income tax refund from the Internal
Revenue Service totaling $26.6 million and the net proceeds from a sale-leaseback
transaction of one of our aircraft purchase commitments. These were offset by
required prepayments of principal on our government guaranteed loan totaling
$58.4 million as a result of the income tax refund and a portion of the proceeds
from the stock offering, our decision to pay the remaining balance due of $11.6
million on the government guaranteed loan after the required prepayments, and
an increase in restricted investments totaling $10.6 million which was largely
a result of the increase in our collateral requirements to our bankcard processor
associated with the increase in our air traffic liability.
Potter concluded, "The fourth quarter was a challenge as we experienced
much higher fuel costs than we anticipated. Even with this additional cost,
we had a significant improvement in our results compared to last year. While
we continue to see record high fuel costs as the greatest challenge for Frontier
and the industry, the ongoing depressed fare environment is equally as challenging.
Further reducing our unit costs, which is our primary goal for the upcoming
year, will allow us to continue our expansion plan, bringing low fares and the
quality product our customers have come to expect, to both new and existing
Frontier cities across North America.
"Although our bookings are strong for the summer and we are seeing further
reductions in our unit costs, excluding fuel, the fuel price increases we've
seen just since the end of the March quarter, as well as a continued weak yield
environment, have led us to believe that we will most likely report a loss in
the upcoming June quarter."
Senior leadership will host a conference call to discuss Frontier's quarterly
earnings on May 28, 2004 at 9:00 a.m. Mountain Standard Time. The call is available
via the World Wide Web on the airline's Web site at www.frontierairlines.com
or using the following URL: http://www.vcall.com/CEPage.asp?ID=88275.
Currently in its tenth year of operations, Denver-based Frontier Airlines is
the second largest jet service carrier at Denver International Airport with
a fleet of 42 aircraft and employing approximately 4,300 aviation professionals.
Frontier, in conjunction with Frontier JetExpress operated by Horizon Air, operates
routes linking our Denver hub to 42 destinations in 23 states spanning the nation
from coast-to-coast and to five cities in Mexico. 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 five consecutive years. In August 2003, 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 www.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, 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; 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 status risk insurance; 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, 2003, the Company's Form 10-Q for the quarter ended December
31, 2003 and the Company's Form 8-K filed September 19, 2003. The Company's
filings are available from the Securities and Exchange Commission or may be
obtained through the Company's website, www.frontierairlines.com.
FRONTIER AIRLINES, INC. SELECTED
BALANCE SHEET DATA
Year Ended March 31,
|Cash and cash equivalents