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Jun 28, 2002
Frontier Airlines Applies for Federal Loan Guarantee
DENVER (June 28, 2002) - Frontier Airlines (Nasdaq: FRNT) today filed an application 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. The airline plans to put this line of credit into place in order to add to its liquidity. In its application, the airline cited its viable business plan as demonstrated by its ability to operate profitably both in the pre- and post-September 11 environments, now being adversely affected by irrational industry pricing behaviors.
"Frontier Airlines has earned four consecutive years of profitability for its shareholders, including the quarter immediately preceding September 11, when many carriers were posting losses due to a decrease in air travel and a general weakening of the economy. After September 11, Frontier implemented several aggressive cost saving initiatives, and those actions enabled Frontier to recover from the events of September 11 more quickly than we originally anticipated. Also, after September 11, the federal government provided $5 billion in government grant monies to aid the recovery of the airline industry by providing assistance for losses directly attributed to the events of September 11 through December 31, 2001. Frontier is proud to have recently returned approximately $4 million of the government grant monies that we received, and returning that taxpayer money to our federal government reflects the remarkable efforts of the Frontier team," said Frontier President and CEO Jeff Potter.
"However, business traffic has not returned as quickly as the industry had hoped, and some carriers continue to operate with unsustainable business models. This combination has created an irrational competitive environment. Many airlines are operating at extremely high breakeven load factor levels as a result of excess capacity and limited demand, with little or no apparent hope of near-term profitability. In order to compete with carriers that are selectively pricing fares well below their ability to breakeven, and because the dominant carrier in Denver has applied for a government loan guarantee of nearly $2 billion, Frontier is compelled to take this necessary step to ensure that the playing field is level as we go forward. While earlier this summer we anticipated we would breakeven for the current fiscal quarter, unfortunately, we now believe we will post a loss in this period.
"Frontier possesses a successful and sustainable business model as demonstrated by our ability to operate profitably both pre- and post-September 11 despite the substantial increase in aviation insurance and security costs, and we want to ensure we are able to withstand the competitive tactics we are currently experiencing. Having access to this line of credit will help to ensure that our business plan enables us to continue providing affordable fares to more communities and air travelers."
The airline will have additional information about its application for Federal loan guarantee assistance available later today. That information can be accessed by visiting the "news" section of Frontier's Web site at www.frontierairlines.com/pdf/support_state.pdf.
Denver-based Frontier Airlines is the second largest jet service carrier at Denver International Airport with a fleet of 33 aircraft and employing approximately 2,900 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 Magazine ranked Frontier one of two "Best Low-Fare Airlines," and in September 2001, Fortune Magazine 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.