Below is a portion of the 10k you were referring to, please note that listing block hours expense without clarifying how it was calculated and what was left out does not paint the true picture. Note below that the operating expense listed does not include, maintenance, aircraft rent, insurance, and fuel. These are biggies, especially given the fact that World side of the house had an increase of 19.9 million in maintenance alone. Fuel, insurance, and rent is much higher on widebodies such as the md11 vs. 767 or 757. The picture becomes clearer when you take the above into account, clearly World's side didn't have the operating black that was alluded to. You are correct that block hrs shows in the red, but on the NA side it's mostly attributed to scheduled service, which was run very poorly by management. I can tell you this, prior to World's buyout of NA, NA had only 1 quarter in it's entire history where they lost money.
One of the reasons that GAL is now buying us out is because they are a vulture firm that looks for strong fundementals in a business that is poorly run due to weak management, and they hit the jackpot in World airways holdings, this is by far a very weak management team.
I firmly believe they will run each company seperately because should they need to part out the operations, it better to sell them as going concerns than to surrender a certificate without getting anything in return for it. I think ultimately it's going to take a lot of cooperation between the 3 pilot groups to ensure we don't get whipsawed in the process.
Year Ended December 31,
2006 2005* 2004
Block Hours
World Airways 56,102 58,515 47,759
North American Airlines 27,475 17,175 -
Total 83,577 75,690 47,759
Revenue per Block Hour
World Airways $ 9,978 $ 10,659 $ 10,551
North American Airlines $ 9,725 $ 9,510 $ -
Total $ 9,879 $ 10,400 $ 10,551
Operating Expense per Block Hour
World Airways $ 9,932 $ 9,742 $ 9,707
North American Airlines $ 9,869 $ 9,444 $ -
Total $ 9,888 $ 9,652 $ 9,707
Operating aircraft at year end
World Airways 17 17 16
North American Airlines 9 8 -
Average available aircraft per day
World Airways 16.6 16.6 16.0
North American Airlines 8.8 8.0 -
Average daily utilization (block hours flown per day
per aircraft)
World Airways 9.3 9.7 8.1
North American Airlines 8.6 8.7 -
* Financial and statistical data include the results of North American from April 28, 2005 to December 31, 2005.
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
Operating revenues increased $38.6 million, or 4.9%, to $825.7 million in 2006 from $787.1 million in 2005. The increase was primarily driven by the full year impact of North American offset by a decline in revenues at World Airways. The decline at World Airways was driven by lower flying under the World Airways contract with the USAF of $78.9 million partially offset by an increase of $16.4 million in full service and ACMI cargo and passenger flying. The majority of the decrease in USAF flying at World Airways was due to being placed on penalty status by the AMC during the second quarter. This occurred due to World Airways failing to maintain minimum performance standards in the prior quarter. AMC capacity was further reduced by the conversion of an aircraft from passenger to freighter service and the curtailment of troop movement during the fourth quarter of 2006.
Operating expenses increased $96.0 million or 13.1% to $826.5 million in 2006 from $730.5 million in 2005.
Flight operation expenses include all costs related directly to the operation of the aircraft other than maintenance, aircraft rent, insurance and fuel. Flight operations expense increased $15.5 million, or 7.1%, in 2006 to $234.0 million from $218.5 million in 2005. The full year impact of North American operations was partially offset by a cost decrease at World Airways of $16.5 million primarily due to an overall decrease in total block hours. The decrease in expense at World Airways was partially offset by a $2.6 million signing bonus paid to the cockpit crewmembers under the terms of the amended collective bargaining agreement. Maintenance expenses increased $33.4 million in 2006, or 29.3% to $147.2 million compared to $113.8 million in 2005. Maintenance cost at World Airways increased $19.9 million mainly driven by incremental vendor-based maintenance events and related parts and material costs which included airworthiness directive compliance costs primarily related to MD-11 engines and significant maintenance required on the airframe of a purchased DC-10 aircraft.
