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Nov 7, 2002|
Frontier Airlines Reports Fiscal Second Quarter 2003 Results
DENVER (Nov. 6, 2002) - Frontier Airlines, Inc. (Nasdaq: FRNT) today reported a fiscal second quarter 2003 net loss of $4.0 million, or $0.13 per common share, compared with net income of $7.3 million, or $0.24 per diluted common share, for the airline's fiscal second quarter last year. The airline's fiscal second quarter 2002 results included U.S. government compensation received as part of the Air Transportation Safety and System Stabilization Act totaling $8.8 million, pre-tax. Excluding government compensation received during fiscal second quarter 2002, the airline's fiscal second quarter 2002 net income totaled $1.8 million, or $0.06 per diluted common share.
Chief Executive Officer's Comments
Frontier President and CEO Jeff Potter said, "Frontier's challenges during our fiscal second quarter are reflected in the results we are communicating today. Although leisure traffic rebounded slightly this summer, business traffic did not return as quickly. Our results reflect our country's ongoing economic slowdown, a weak revenue environment, high fuel costs, added insurance costs and ongoing excess capacity in our industry relative to demand. However, I am pleased to note that our focus on decreasing our cost per available seat mile is producing favorable improvements as evidenced by a year over year September quarter reduction in unit costs of 18.2 percent, excluding fuel, and 16.3 percent, including fuel. These year over year unit cost improvements are largely attributable to increased utilization of our aircraft, the induction of six brand-new Airbus aircraft into our fleet and the elimination of travel agent commissions, which occurred June 1, 2002.
"Looking forward, although we are pleased thus far with our holiday bookings, we currently expect a moderate loss for the fiscal third quarter ended December 31, 2002."
The airline's traffic, as measured by revenue passenger miles (RPMs), grew at a rate of 26.0 percent during its fiscal second quarter, while capacity growth, as measured by available seat miles (ASMs), increased by 29.9 percent, from the same time last year. As a result, the airline's load factor was 59.2 percent for its fiscal second quarter, 1.8 load factor points less than last year's load factor of 61.0 percent during the same time period. During fiscal second quarter 2003, the airline's breakeven load factor increased 7.7 load factor points from 55.1 percent to 62.8 percent.
Passenger revenue per passenger mile (yield) for the airline's second fiscal quarter 2003 decreased 19.0 percent to 12.57 cents from 15.51 cents for the same period last year. Passenger revenue per available seat mile (RASM) for the quarter decreased 21.4 percent to 7.44 cents from 9.46 cents for the same period last year. The airline's average fare during its fiscal second quarter 2003 was $109, a 17.4 percent decrease from its fiscal second quarter 2002, when the average fare was $132.
The airline's cost per available seat mile (CASM) for the quarter decreased 16.3 percent to 7.95 cents from 9.50 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 1.7 percent to 92.1 cents per gallon, compared to 93.7 cents for the same period last year. CASM excluding fuel decreased 18.2 percent to 6.58 cents from the same period last year when CASM excluding fuel was 8.04 cents.
Business Developments During the Quarter Included:
Potter continued, "During our fiscal second quarter 2003, we signed a letter of intent with LiveTV to bring DIRECTV AIRBORNETM satellite programming to every seatback in our Airbus fleet, and in October we signed a purchase and long-term services agreement with LiveTV for that system. We recently completed the installation of the LiveTV system on our first Airbus aircraft, and we plan to have all of our Airbus aircraft equipped with the LiveTV system by next spring. The installed systems will become operational upon receipt of regulatory approval, which we anticipate to be sometime in the current quarter. We plan to offset the installation and usage costs for the system by implementing a $5 per segment usage charge for access to the system. We also believe the DIRECTVTM product represents a significant value to our customers, encouraging more customers to choose Frontier over our competitors."
Available Cash Comparisons
Cash, cash equivalents and short-term investments available for operations and investing activities on Sept. 30, 2002 totaled $44.6 million. The airline reported working capital of $5.4 million as of Sept. 30, 2002, an 80.9 percent decrease from the airline's working capital on June 30, 2002, when the airline reported working capital of $28.3 million. The airline had a net increase of approximately $12.1 million of pre-delivery payments for new aircraft during its fiscal second quarter 2003. In addition, the airline made $6.9 million in down payments on one new, owned aircraft.
Frontier's Chief Financial Officer Paul Tate noted, "We are mindful of the Company's diminished cash position from June 30, 2002, which is primarily due to continuing to execute our fleet improvement/transition plan that includes ownership of some of the Airbus aircraft. We are taking action to replenish the Company's liquidity and, as we announced yesterday, have received conditional approval from the Air Transportation Stabilization Board (ATSB) for a $63 million federal loan guarantee of a $70 million commercial loan facility. Subject to satisfaction of the conditions imposed by the ATSB and obtaining the necessary internal approvals, we expect to obtain funds from the ATSB supported loan transaction, perhaps as soon as our fiscal third quarter. In addition, we recently signed a letter of intent for the sale/leaseback of two Airbus A319 aircraft."
Potter concluded by noting the accomplishments of Frontier's employees, stating, "Reporting a loss for the September quarter is disappointing to the Frontier team, and while we face ongoing revenue challenges, I commend the people of Frontier for their impressive actions with respect to decreasing costs at our airline. We look forward to introducing LiveTV to our customers and inaugurating service to Mexico during our fiscal third quarter."
Senior leadership will host a conference call to discuss the airline's quarterly earnings on Nov. 7, 2002 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/EventPage.asp?ID=82604.
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