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Oct 31, 2003|
Frontier Airlines Reports Fiscal Second Quarter 2004 Results
DENVER (Oct. 30, 2003) - Frontier Airlines (Nasdaq: FRNT) today reported fiscal second quarter 2004 net income of $2.0 million, or $0.06 per diluted common share for the three months ended September 30, 2003, compared with a net loss of $3.1 million, or $0.10 per common share for the airline's fiscal second quarter last year. Included in the Company's fiscal second quarter 2004 net income were the following special items on a pre-tax basis; write-off of deferred loan costs of $8.7 million associated with the prepayment of all but $11.6 million remaining principal of the government guaranteed loan; a charge for Boeing aircraft and facility lease exit costs of $4.6 million; loss of $1.7 million on the sale of one Airbus aircraft in a sale-leaseback transaction and from the sale of a spare engine; and an unrealized derivative loss of $.3 million. These items, net of income taxes and profit sharing, totaled $0.27 per diluted share.
Chief Executive Officer's Comments
Passenger revenue increased as revenue passenger miles (RPMs), grew at a rate of 42.8 percent during its fiscal second quarter, while capacity growth, as measured by available seat miles (ASMs), increased by 10.3 percent, from the same time last year. As a result, the airline's load factor was 76.6 percent for its fiscal second quarter, 17.4 load factor points greater than the airline's load factor of 59.2 percent during the same time last year. During fiscal second quarter 2004, the airline's breakeven load factor increased 13.1 load factor points from 61.7 percent to 74.8 percent, which includes the effect of special items. These items, net of profit sharing, accounted for 6.2 load factor points of the breakeven load factor increase.
During fiscal second quarter 2004, the airline's passenger revenue per available seat mile (RASM) increased 1.82 cents or 24.5 percent to 9.26 cents from 7.44 cents for the same quarter last year. The increase in RASM was primarily due to a significant increase in load factor but was slightly offset by a decrease in revenue per passenger mile (yield) of 3.8 percent to 12.09 cents from 12.57 cents for the same period last year. The decline in yield can be attributed to a 3.2 percent decline in average length of haul as well as Frontier's simplified fare structure, which was implemented in February 2003.
The year-over-year increase in total revenues also reflects contributions from other revenues associated with Frontier's new U.S. mail contracts, LiveTV revenues and the positive operating margin contribution from Mesa's JetExpress service.
The airline's cost per available seat mile (CASM) including fuel for the September 2003 quarter increased 5.9 percent to 8.32 cents from 7.86 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, increased 9.8 percent to $1.01 per gallon, compared to 92.0 cents for the same period last year. CASM excluding fuel increased 5.1 percent to 6.82 cents from the same period last year when CASM excluding fuel was 6.49 cents.
Chief Financial Officer Paul Tate discussed the airline's year-over-year quarterly unit cost increase, stating, "Our CASM ex-fuel increased .33 cents during the quarter, principally as a result of an increase in passenger related expenses of .24 cents per ASM caused by a disproportionate increase in the number of passengers and U.S. Mail carried compared to the year-over-year quarterly ASM growth. In addition, we incurred an increase in general and administrative expenses of .15 cents as a result of a profit sharing accrual associated with our return to profitability and an increase in health insurance costs. These increases were offset by a decrease of .13 cents in maintenance expense, principally as a result of the reduction in our older Boeing fleet, which continues to be replaced with new Airbus aircraft."
Tate also described Frontier's current cash and short-term investment position, stating, "Our cash position of $203.3 million, which was substantially aided by our secondary offering of 5.05 million shares of common stock in September 2003, is the highest in the Company's history. A portion of the proceeds from the secondary offering were used to decrease our government guaranteed loan by $48.6 million and enabled us to increase our cash position by $32.5 million."
The airline's fleet in service on September 30, 2003 consisted of 12 owned Airbus A319 and A318 aircraft, 12 leased Airbus A319 aircraft and 14 leased Boeing 737 aircraft.
Business developments during the quarter included:
Potter concluded, "We began our fiscal year with several changes, including a simplified fare structure and the launch of our new branding campaign, and in the second quarter we built upon that momentum and simultaneously laid the foundation for future earnings growth. The result was record revenues of $165.6 million, three straight months of record load factors including a Company-best 80.1 percent in July and most importantly, we confirmed what started to become apparent in our first quarter--that we are stimulating air travel by offering travelers a superior product and service at an affordable price. With our road map in place, our dedicated employees working tirelessly to continually outperform themselves, and our operations achieving greater efficiencies each quarter as we continue our Airbus transition. We are eager to expand our service, bringing low fares and a superior flight experience to new customers by adding frequency in our current markets as well as new destinations in the future."
Senior leadership will host a conference call to discuss Frontier's quarterly earnings on October 31, 2003 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=84961.
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 39 aircraft and employing approximately 3,700 aviation professionals. Frontier, in conjunction with Frontier JetExpress operated by Mesa Air Group ("Mesa"), operates routes linking our Denver hub to 38 cities in 23 states spanning the nation from coast-to-coast and to two 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 four 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.
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