monkeybrains01
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DENVER, Jan. 26 /PRNewswire-FirstCall/ -- Frontier Airlines, Inc. (NASDAQ: FRNT) today reported a net loss of $10.3 million, or $0.28 cents per diluted common share, for the airline's third fiscal quarter ended December 31, 2005 compared to a net loss of $11.1 million, or $0.31 cents per diluted common share, for the same period last year. Included in the net loss for the three months ended December 31, 2005 were the following items before the effect of income taxes: unrealized losses on fuel hedges of $1.5 million and gains of $0.3 million related primarily to the sale of Boeing parts held for sale. These items, net of income taxes, increased Frontier's net loss by $.03 cents per diluted common share. Included in the net loss for the quarter ended December 31, 2004 were the following items before the effect of income taxes: a gain on the sale of assets of $0.1 million, a write down of $0.7 million of the carrying value of expendable Boeing 737 inventory, and an unrealized loss on fuel derivative hedges of $3.2 million. These items, net of income taxes, increased Frontier's net loss by $.07 cents per diluted common share.
Chief Executive Officer's Comments
Frontier President and CEO Jeff Potter said, "While this quarter's results are in stark contrast with the previous quarter's profits, we once again saw several promising indicators. Our mainline passenger revenue increased almost 20 percent as we carried 14 percent more passengers on capacity growth of only nine percent. In addition, our year-over-year mainline average fare improved for the fourth straight quarter, increasing almost two percent on a year-over- year basis. However, the resulting nine percent increase in mainline revenue per available seat mile (RASM), was overshadowed by three significant aberrations to our fiscal performance -- a 35 percent year-over-year increase in fuel cost per gallon; an estimated $4.8 million in lost revenue due to the disruption of our Cancun and Cozumel service as a result of Hurricane Wilma; and an estimated $1.2 million in lost revenue due to the discontinuation of service to New Orleans as a result of Hurricane Katrina."
"Outside of the significant fiscal impact of fuel and hurricanes, we did have several operational bright spots during the quarter including a number of record-breaking load factor days during the December holiday period. It has taken our company and all of our employees several years of hard work and effort to become the preferred carrier for an ever-increasing number of travelers in Denver, and we don't intend to cede that position. We have built our product to be the best in the industry and with our fares being on equal footing in the Denver market, we have every confidence that customers will continue to choose the superior product that offers them the greatest value, which is Frontier."
Operating Highlights
Mainline passenger revenue increased 19.4 percent as mainline revenue passenger miles (RPMs) grew at a rate of 9.2 percent during the fiscal third quarter, while mainline capacity growth as measured by mainline available seat miles (ASMs) increased 8.6 percent from the same quarter last year. As a result, the airline's mainline load factor was 72.1 percent for its fiscal third quarter of 2006, 0.4 load factor points more than the airline's mainline load factor of 71.7 percent during the same quarter last year. The airline's mainline breakeven load factor, excluding special items, for the fiscal third quarter 2006 decreased 1.3 load factor points from 76.0 percent to 74.7 percent. Frontier's mainline breakeven load factor, excluding special items, decreased from the prior comparable period as a result of an increase in our total mainline RASM of 10.3 percent, which was significantly offset by an increase in our mainline cost per available seat mile (CASM) to 9.32 cents during the quarter ended December 31, 2005, primarily due to increases in fuel costs, from 8.80 cents during the quarter ended December 31, 2004, a 5.9 percent increase.
During the fiscal third quarter 2006, the airline's mainline passenger RASM increased 9.2 percent to 8.68 cents from the same quarter last year. The increase in mainline RASM was due to the combination of the 8.5 percent increase in mainline yield per RPM and slightly improved year-over-year load factor. Mainline average length of haul decreased 4.1 percent on a year-over-year basis, primarily because the prior year included traffic from the Company's focus city, Los Angeles, which the Company subsequently discontinued.
Mainline fuel cost per gallon, excluding unrealized hedging losses, averaged $2.17 during the quarter ended December 31, 2005, compared to an average of $1.55 during the quarter ended December 31, 2004, an increase of 40 percent.
Senior Vice President and Chief Financial Officer Paul Tate discussed unit costs for the airline's quarter ended December 31, 2005, stating, "Even with our more traditional hub and spoke model, we achieved a four percent decline in year-over-year CASM excluding fuel, to 6.17 cents from 6.43 cents, further strengthening our position as one of the industry's low cost producers. This cost savings was achieved despite a nine percent year-over-year mainline passenger unit revenue increase and a four percent length of haul decrease."
The airline's current unrestricted cash and short-term investments and working capital as of December 31, 2005 was $222.7 million and $113.9 million, respectively. This compares to the Company's unrestricted cash and short-term investments and working capital for the same period last year of $149.0 million and $55.9 million, respectively.
The airline's fleet in service on December 31, 2005 consisted of 16 owned Airbus A319 and A318 aircraft and 33 leased Airbus A319 and A318 aircraft.
Business developments during the quarter included: * Closed a $92 million convertible debt offering. * Frontier's maintenance personnel ratified a three-year contract. * Added Acapulco and Cozumel to Frontier's Mexico service, bringing the total number of Mexico cities served to seven. * Received approval to serve Cancun with non-stop service from Indianapolis beginning in March 2006. * Ranked number one in "On Time Arrival Performance" among all carriers at the 33 largest airports in America for the month of September and in the top five for on time arrival performance for four consecutive months. * Hired Chris Collins as new Senior Vice President of Operations. * Renewed contract with Intrawest Colorado to be the "Official and Exclusive Airline of Winter Park and Copper Mountain." * Expanded service to five of Frontier's top markets, including Salt Lake City, Dallas, Phoenix, Las Vegas and Chicago-Midway. * Received prestigious "Outstanding Corporation" award from Volunteers of America, recognizing Frontier's significant community contributions.Potter concluded, "As we enter the final quarter of our fiscal year, we have several challenges, principally in the form of record high fuel prices. However, we have an even greater number of opportunities in front of us. Specifically, we have announced our intention to enter the Canadian market. We will receive the first of six new aircraft deliveries for the calendar year that will provide the capacity for significant expansion with new frequencies and destinations. While we recognize that the increased competition in our hometown market of Denver will generate new pressures, we face that competition with the confidence that comes from knowing that we have a product that is second to none, a continued company-wide focus on cost containment that is yielding results, and an employee group that will accept nothing less than the very best from one another and from this company.
"In light of our positive momentum, and assuming fuel remains at an average of $2 per gallon, we anticipate that our coming quarter will produce better earnings results than last year's March quarter, with results expected to be approximately break-even."
Chief Executive Officer's Comments
Frontier President and CEO Jeff Potter said, "While this quarter's results are in stark contrast with the previous quarter's profits, we once again saw several promising indicators. Our mainline passenger revenue increased almost 20 percent as we carried 14 percent more passengers on capacity growth of only nine percent. In addition, our year-over-year mainline average fare improved for the fourth straight quarter, increasing almost two percent on a year-over- year basis. However, the resulting nine percent increase in mainline revenue per available seat mile (RASM), was overshadowed by three significant aberrations to our fiscal performance -- a 35 percent year-over-year increase in fuel cost per gallon; an estimated $4.8 million in lost revenue due to the disruption of our Cancun and Cozumel service as a result of Hurricane Wilma; and an estimated $1.2 million in lost revenue due to the discontinuation of service to New Orleans as a result of Hurricane Katrina."
"Outside of the significant fiscal impact of fuel and hurricanes, we did have several operational bright spots during the quarter including a number of record-breaking load factor days during the December holiday period. It has taken our company and all of our employees several years of hard work and effort to become the preferred carrier for an ever-increasing number of travelers in Denver, and we don't intend to cede that position. We have built our product to be the best in the industry and with our fares being on equal footing in the Denver market, we have every confidence that customers will continue to choose the superior product that offers them the greatest value, which is Frontier."
Operating Highlights
Mainline passenger revenue increased 19.4 percent as mainline revenue passenger miles (RPMs) grew at a rate of 9.2 percent during the fiscal third quarter, while mainline capacity growth as measured by mainline available seat miles (ASMs) increased 8.6 percent from the same quarter last year. As a result, the airline's mainline load factor was 72.1 percent for its fiscal third quarter of 2006, 0.4 load factor points more than the airline's mainline load factor of 71.7 percent during the same quarter last year. The airline's mainline breakeven load factor, excluding special items, for the fiscal third quarter 2006 decreased 1.3 load factor points from 76.0 percent to 74.7 percent. Frontier's mainline breakeven load factor, excluding special items, decreased from the prior comparable period as a result of an increase in our total mainline RASM of 10.3 percent, which was significantly offset by an increase in our mainline cost per available seat mile (CASM) to 9.32 cents during the quarter ended December 31, 2005, primarily due to increases in fuel costs, from 8.80 cents during the quarter ended December 31, 2004, a 5.9 percent increase.
During the fiscal third quarter 2006, the airline's mainline passenger RASM increased 9.2 percent to 8.68 cents from the same quarter last year. The increase in mainline RASM was due to the combination of the 8.5 percent increase in mainline yield per RPM and slightly improved year-over-year load factor. Mainline average length of haul decreased 4.1 percent on a year-over-year basis, primarily because the prior year included traffic from the Company's focus city, Los Angeles, which the Company subsequently discontinued.
Mainline fuel cost per gallon, excluding unrealized hedging losses, averaged $2.17 during the quarter ended December 31, 2005, compared to an average of $1.55 during the quarter ended December 31, 2004, an increase of 40 percent.
Senior Vice President and Chief Financial Officer Paul Tate discussed unit costs for the airline's quarter ended December 31, 2005, stating, "Even with our more traditional hub and spoke model, we achieved a four percent decline in year-over-year CASM excluding fuel, to 6.17 cents from 6.43 cents, further strengthening our position as one of the industry's low cost producers. This cost savings was achieved despite a nine percent year-over-year mainline passenger unit revenue increase and a four percent length of haul decrease."
The airline's current unrestricted cash and short-term investments and working capital as of December 31, 2005 was $222.7 million and $113.9 million, respectively. This compares to the Company's unrestricted cash and short-term investments and working capital for the same period last year of $149.0 million and $55.9 million, respectively.
The airline's fleet in service on December 31, 2005 consisted of 16 owned Airbus A319 and A318 aircraft and 33 leased Airbus A319 and A318 aircraft.
Business developments during the quarter included: * Closed a $92 million convertible debt offering. * Frontier's maintenance personnel ratified a three-year contract. * Added Acapulco and Cozumel to Frontier's Mexico service, bringing the total number of Mexico cities served to seven. * Received approval to serve Cancun with non-stop service from Indianapolis beginning in March 2006. * Ranked number one in "On Time Arrival Performance" among all carriers at the 33 largest airports in America for the month of September and in the top five for on time arrival performance for four consecutive months. * Hired Chris Collins as new Senior Vice President of Operations. * Renewed contract with Intrawest Colorado to be the "Official and Exclusive Airline of Winter Park and Copper Mountain." * Expanded service to five of Frontier's top markets, including Salt Lake City, Dallas, Phoenix, Las Vegas and Chicago-Midway. * Received prestigious "Outstanding Corporation" award from Volunteers of America, recognizing Frontier's significant community contributions.Potter concluded, "As we enter the final quarter of our fiscal year, we have several challenges, principally in the form of record high fuel prices. However, we have an even greater number of opportunities in front of us. Specifically, we have announced our intention to enter the Canadian market. We will receive the first of six new aircraft deliveries for the calendar year that will provide the capacity for significant expansion with new frequencies and destinations. While we recognize that the increased competition in our hometown market of Denver will generate new pressures, we face that competition with the confidence that comes from knowing that we have a product that is second to none, a continued company-wide focus on cost containment that is yielding results, and an employee group that will accept nothing less than the very best from one another and from this company.
"In light of our positive momentum, and assuming fuel remains at an average of $2 per gallon, we anticipate that our coming quarter will produce better earnings results than last year's March quarter, with results expected to be approximately break-even."
