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Nov 1, 2001|
Frontier Airlines Reports Fiscal Second Quarter Profit
DENVER ( Nov. 01, 2001 ) - Frontier Airlines (Nasdaq: FRNT )today reported fiscal second quarter net income of $7.3 million, or $.24 per diluted common share, a 64 percent decrease from the same period last year when the airline reported net income of $20.2 million, or $.69 per diluted common share. The airline's fiscal second quarter 2001 net income included an after tax gain from a federal grant of $5.5 million, which was a result of the passage of the Air Transportation Safety and System Stabilization Act. Excluding the federal grant, fiscal second quarter net income was $1.8 million, or $.06 per diluted common share.
Frontier President and Chief Operating Officer Jeff Potter said, "Prior to the events of September 11, and for the first five months of our current fiscal year, Frontier was experiencing sustained capacity growth of 17 percent. Despite a downturn in general economic conditions prior to September 11, we were pleased that our traffic during that same period had nearly kept pace with our growth as evidenced by only a slight year-over-year decrease in our load factor. We were especially pleased with those results because our revenue and traffic growth during the summer of 2000 benefited from a major competitor's significant operational difficulties in Denver.
"The events of September 11 altered the landscape, and we continue to keep the people directly impacted by those tragic events in our thoughts and prayers. We are grateful for the immediate and decisive steps taken by President Bush and Congress to preserve our country's air system. On behalf of Frontier's 2,300 employees, we appreciate the passage of the Air Transportation Safety and System Stabilization Act, which initially provided approximately $10.1 million before income taxes to Frontier in order to compensate for the immediate losses following September 11. We anticipate that Frontier will receive the majority of additional federal grant monies during our current quarter, and the amount we will be entitled to receive will be based on additional losses sustained through December 31, 2001, up to a maximum of $10.1 million before taxes."
Passenger revenues during the quarter ended Sept. 30, 2001 were $113.7 million, an 11.4 percent decrease from $128.4 million for the same period last year. The airline's total operating revenues during the quarter ended Sept. 30, 2001 were $116 million, an 11.5 percent decrease from $131.1 million for the same period last year.
The airline's capacity during its fiscal second quarter increased 11.8 percent to 1,200,608,000 available seat miles (ASMs) compared to the same period last year. The airline's load factor for its fiscal second quarter was 61.0 percent, a decrease of 9.9 points from the same period last year when the airline's load factor was 70.9 percent. Yield, or total revenue per passenger mile, decreased 8.1 percent to 15.84 cents from 17.23 cents for the same quarter last year. Revenue per available seat mile (RASM) during the airline's fiscal second quarter decreased 20.9 percent to 9.66 cents from 12.21 cents for the same period last year.
The airline's operating expenses during the quarter ended Sept. 30, 2001 increased 13.4 percent to $114 million compared to $100.5 million for the same quarter last year. Cost per available seat mile (CASM) for the quarter increased 1.5 percent to 9.50 cents from 9.36 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 12.2 percent to $.94 cents per gallon, compared to $1.07 for the same quarter last year. CASM excluding fuel increased 4.8 percent to 8.04 cents from 7.67 cents for the same quarter last year.
Effects of Sept. 11 and Fiscal Third Quarter Estimate
The company estimates that it incurred incremental operating losses of $8.8 million during the period of Sept. 11 through Sept. 30, 2001 due principally to the events of Sept. 11, including the cessation of operations from Sept. 11 through Sept. 13, and the subsequent decline in passenger demand. Additionally, the company was not able to reduce its costs as quickly as it reduced capacity, and the effects of the company's cost reduction initiatives will not be fully evident until its fiscal third quarter. Operating results for the period July 1, 2001 through Sept. 10, 2001 included a 6.5 point decrease in load factor, to 65.0 percent from 71.5 percent for the same period during 2000. The airline's RASM from July 1, 2001 until Sept. 10, 2001 was 10.29 cents, a 17.2 percent decrease from the same period last year when the airline's RASM was 12.43. Following the attacks of Sept. 11 and through the end of the quarter on Sept. 30, 2001, the airline's load factor was 40.4 percent and the airline's RASM was 6.44 cents, a decrease of 28.1 points and 43.6 percent, respectively, compared to the same period last year.
Operating expenses on a per unit basis prior to the Sept. 11 attacks were trending downward as evidenced by a 6.3 percent decrease in CASM to 9.14 cents for the period July 1, 2001 through Sept. 10, 2001 from 9.75 cents during the airline's fiscal first quarter ended June 30, 2001. CASM excluding fuel decreased 6.4 percent to 7.69 cents from 8.22 cents for the period July 1, 2001 through Sept. 10, 2001 as compared to the airline's fiscal first quarter ended June 30, 2001.
During the month of October 2001, the airline estimates that its load factor has averaged approximately 48.0 percent, a 15.3 point decrease from 63.3 percent for the same period last year. The airline estimates that its yield has averaged an estimated 16.74 cents during the month of October 2001, a 2.2 percent increase over the same period last year when the yield was 16.38 cents. Estimated RASM for the month of October 2001 is approximately 8.04 cents, a 22.5 percent decrease from the same period last year when the airline's RASM was 10.37 cents. With continued RASM week-over-week improvement, the airline anticipates to breakeven in its fiscal third quarter ending Dec. 31, 2001, including the anticipated additional federal grant monies.
Commenting on the company's cost reduction and revenue strategies, Potter said, "After September 11, we took immediate action to minimize our losses and encourage Americans to fly. In an attempt to quickly minimize our costs, we reduced our capacity by 20 percent and took the very painful steps of implementing furloughs and unpaid leaves, thus reducing the number of employees at Frontier. Additionally, many remaining employees, including our senior management team, took pay cuts ranging from three to 40 percent. We are extremely grateful for all of the sacrifices the Frontier team has made since September 11, designed with the goal of ensuring Frontier's long-term survival and profitability. Other cost reduction initiatives have included deferring all nonessential capital spending and significantly reducing all nonessential operating expenses, including temporarily suspending food service on nearly all of our flights.
"To help instill confidence in air travel and encourage people to fly, we introduced several employee-conceived projects, including our very successful Colorado Seats for Sharing program that has provided complimentary travel to nearly 400 non-profit organizations in Colorado, including religious organizations, schools and various firefighter and police agencies."
Potter continued, "Although we are in the midst of economic uncertainty and global unrest, which continues to negatively impact our industry, we are managing Frontier for the future. On October 1, expansion plans that were announced and put into place before September 11 were implemented when we inaugurated service to Austin, Texas and Reno/Lake Tahoe, Nevada. On November 15, 2001, we will add flight frequencies into four markets, resulting in an increase in system capacity of three percent, and will also begin codesharing eight additional markets with Great Lakes Aviation, bringing the total number of Great Lakes codeshare markets to 16. We were recently very pleased to receive authority to resume our daily, non-stop service between Denver and Ronald Reagan Washington National Airport (DCA) and plan to begin that service on December 12. Lastly, our Airbus transition plan remains intact, with our next Airbus delivery occurring in February 2002.
"Over the past 45 days, we have had to make and implement decisions that we never would have imagined prior to September 11. Frontier's employees have continually demonstrated their tremendous will to succeed by successfully putting enhanced security measures into effect while maintaining Frontier's excellent reliability and on-time performance. I have never been so proud of the Frontier family and thank all involved for their outstanding efforts to adapt in this new environment. Frontier's ultimate survival and ability to emerge from this current challenging environment with a bright future are being advanced each day because of the generosity and unity our employees have demonstrated during this difficult time."
Cash Flow and Balance Sheet Highlights
Other Business Developments During the Quarter
The airline will host a conference call to discuss its quarterly earnings on Nov. 2, 2001 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.flyfrontier.com or using the following URL: http://web.servicebureau.net/conf/meta?i=1112300749&c=2343&m=was&u=/w_ccbn.xsl&date_ticker=11_7_2001_FRNT.
Denver-based Frontier Airlines is the second largest jet service carrier at Denver International Airport, serving 25 cities coast to coast with a fleet of 29 aircraft and employing approximately 2,300 aviation professionals. In June 2001, BusinessWeek ranked Frontier 14th on its list of Hot Growth Companies and in September 2001, Fortune magazine ranked Frontier 41st on its 100 Fastest Growing Companies list. Frontier provides capacity and other data and industry comparisons on its Web site, which may be viewed at www.frontierairlines.com.
Legal Notice Regarding Forward-Looking Statements
Frontier notes that this press release contains forward-looking statements and that certain information contained in this press release involves risks and uncertainties that could result in actual results differing materially from expected results. These statements include, but are not limited to, discussions pertaining to expanding Frontier's service into new markets. Forward-looking statements represent the Company's expectations and beliefs concerning future events, based on information available to the Company as of the date of this press release. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which 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: additional incidents that could cause the public to question the safety and/or efficiency of air travel; operational disruptions; industry consolidation; air traffic control-related difficulties; the impact of labor issues; actions of the federal and local governments; enhanced security requirements; changes in the government's policy regarding relief to the airline industry; the stability of the U.S. economy; the economic environment of the airline industry; the timing of, and expense associated with, expansion and modification of our operations in accordance with our business strategy or in response to competitive pressures or other factors; increased federal scrutiny of low-fare carriers generally that may increase our operating costs or otherwise adversely affect us; actions of competing airlines, such as increasing capacity and pricing actions of United Airlines and other competitors; the availability of suitable aircraft, which may affect our ability to achieve operating economies and implement our business strategy; the unavailability of, or inability to secure upon acceptable terms, financing necessary to purchase aircraft that we have ordered; issues relating to our transition to an Airbus aircraft fleet; uncertainties regarding aviation fuel prices; operational disruptions as a result of bad weather; air traffic control-related difficulties; the impact of labor issues; and actions of the US and local government and regulatory agencies. 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, 2001; the Company's Form 8-K filed May 7, 2001 and the Company's Form 8-K filed Jan. 22, 2001, as amended by the Company's Form 8-K/A filed July 11, 2001, and the Company's Form 10-Q for its fiscal quarter ended June 30, 2001.