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Aug 2, 2002|
Frontier Airlines Reports Fiscal First Quarter 2003 Results
DENVER (Aug. 1, 2002) - Frontier Airlines (Nasdaq: FRNT) today reported a fiscal first quarter net loss of $2.9 million, or $0.10 per common share, compared with net income of $7.7 million, or $0.26 per diluted common share, for the airline's fiscal first quarter last year. Operating revenues during the airline's fiscal first quarter decreased 9.3 percent to $111.8 million from $123.3 million in the fiscal first quarter of 2002, while operating expenses during the same time increased 3.2 percent to $115.6 million from $112.0 million from the same period last year. The airline had positive cash flow from operations during its fiscal first quarter 2003, and earnings performance for the month of June 2002 was approximately breakeven.
Chief Executive Officer's Comments
Frontier President and CEO Jeff Potter said, "We are disappointed with our fiscal first quarter results, and we are clearly experiencing the revenue challenges that have befallen the rest of the industry. Although leisure traffic has rebounded this summer, business traffic has not returned as quickly. Those factors, when coupled with what we believe are the excess capacity and unsustainable pricing strategies that appear rampant in our industry, have reinforced our attention to continue lowering our unit costs. I am pleased to report that our unit cost reduction efforts have been productive as evidenced by our ability to operate at approximately breakeven during the month of June 2002, when our average fare was extremely depressed at $105. Because we do not know when unit revenues and yield will rebound, or how traffic will perform this fall, we must ensure our unit costs continue to trend favorably, reflecting the cost efficiencies of our new Airbus aircraft, continued scrutiny of capital expenditures and improved productivity.
"Improving our revenue outlook continues to be a key focus, and we plan to take necessary steps to allocate our resources appropriately this fall when travel historically weakens. In addition, we recently simplified our pricing and inventory structure, and are pleased with the apparent yield improvements resulting from that initiative.
"Looking forward to our fall performance, excluding pre-delivery deposits for new Airbus aircraft, we anticipate operating with positive cash flows during our fiscal second quarter, and estimate reporting a moderate loss for the period."
The airline's cost per available seat mile (CASM) for the quarter decreased 13.4 percent to 8.44 cents from 9.75 cents for the same quarter last year. Fuel cost per gallon during the quarter, including taxes and the cost of delivering fuel into the aircraft, decreased 13.9 percent to 83.4 cents per gallon, compared to 96.9 cents for the same period last year. CASM excluding fuel decreased 12.8 percent to 7.17 cents from the same period last year when CASM excluding fuel was 8.22 cents.
The airline's traffic, as measured by revenue passenger miles (RPMs), grew at a rate of 10.7 percent during its fiscal first quarter, while capacity growth, as measured by available seat miles (ASMs), increased by 19.2 percent, from the same time last year. As a result, the airline's load factor was 62.8 percent for its fiscal first quarter, 4.8 load factor points less than last year's load factor of 67.6 percent during the same time period. During fiscal first quarter 2003, the airline's breakeven load factor increased 4.8 load factor points from 60.6 percent to 65.4 percent.
Although the airline carried 9.7 percent more passengers during its fiscal first quarter 2003 over the same period last year, passenger revenue per passenger mile (yield) for the same time period decreased 18.2 percent to 12.71 cents from 15.54 cents for the same period last year. Passenger revenue per available seat mile (RASM) for the quarter decreased 24.1 percent to 7.98 cents from 10.51 cents for the same period last year. The airline's average fare during its fiscal first quarter 2003 was $108, a 19.4 percent decrease from its fiscal first quarter 2002, when the average fare was $134.
Potter continued, "We were very pleased with our unit cost performance during our fiscal first quarter even though only six Airbus aircraft were in the fleet at the beginning of the quarter. We anticipate continued improvements in this area as additional Airbus aircraft are brought into our fleet. In addition, our CASM improvements were achieved despite receiving benefits from the discontinuation of travel agent commissions only since June 1, 2002.
"For the last three quarters of our current fiscal year, we anticipate bringing a total of seven more Airbus A319 aircraft into our fleet, including advancing the delivery of one Airbus A319 to March 2003 that was originally scheduled to enter our system in December 2003. During the same period, we will return six leased Boeing aircraft, for a net gain of one aircraft.
"We are planning to modify our fall and winter flight schedules to reflect current industry challenges. We don't anticipate that these schedule changes will result in any more than a slight reduction in ASMs compared to earlier capacity forecasts that we've previously communicated on our Web site."
Business Developments During the Quarter Included:
Available Cash Comparisons
Cash, cash equivalents and short-term investments available for operations and investing activities on June 30, 2002 were $79.1 million. Cash provided by operating activities, excluding the repayment of $4.0 million in Federal grand funds for the quarter ended June 30, 2002, was $6.4 million, compared to $23.1 million for the same period last year. The airline reported working capital of $28.3 million as of June 30, 2002, a 29.0 percent decrease from the airline's working capital on March 31, 2002, when the airline reported working capital of $40.0 million.
Potter concluded, "During our fiscal first quarter 2003, we submitted our request with the Air Transportation Stabilization Board (ATSB) for a $70 million line of credit, of which 85 percent would be secured by a federal government guarantee. We took this step in order to ensure a level playing field as we compete with carriers that continue to operate excess capacity with fare levels below their breakeven costs, and because the dominant carrier in Denver has applied for a government loan guarantee of nearly $2 billion.
"Though we are operating in an extremely challenging environment, I am
proud of the Frontier team as our employees continue to offer outstanding customer
service and find ways to increase their productivity. Our past experience provides
an excellent example of what a group of people can do when they believe in a
company and its mission, and I have no doubt that this team will weather the
current environment and continue building a great airline."
Currently in its ninth year of operations, Denver-based Frontier Airlines is the second largest jet service carrier at Denver International Airport with a fleet of 34 aircraft and employing approximately 3,000 aviation professionals. Frontier and its affiliate Frontier JetExpress currently serve 34 U.S. cities with 170 daily flights. In 1999, 2000 and 2001, Frontier's maintenance and engineering department 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. In April 2002, Entrepreneur ranked Frontier one of two "Best Low-Fare Airlines," and in September 2001, Fortune ranked Frontier 41st on its 100 Fastest Growing Companies list. Frontier provides capacity information and other operating statistics on its Web site, which may be viewed at www.frontierairlines.com.
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