Frontier Airlines (Nasdaq: FRNT) announced this week its fourth consecutive profitable year with net income of $16.5 million, or $0.56 per diluted common share, for its fiscal year ended March 31, 2002. This represents a decrease of 69.9 percent from the previous fiscal year, when the airline reported net income of $54.9 million, or $1.90 per diluted common share. The Company`s fiscal year net income included an after-tax gain of $7.7 million from the Federal grant program; a $0.9 million write-down, net of taxes, for the carrying value of spare parts that support the Company`s Boeing 737-200A aircraft and an unusual charge of $3.0 million, net of taxes, for the early return of two Boeing 737-200 aircraft. Without these unusual items, the Company would have reported net income of $12.7 million, or $0.43 per diluted common share.
For the airline`s fiscal fourth quarter ended March 31, 2002, the airline reported net income of $0.6 million, or $0.02 per diluted common share, compared to net income of $7.9 million, or $0.27 per diluted common share, for the same period last year. Excluding the unusual charge of $3.0 million, net of taxes, for the early aircraft return, the Company would have reported fiscal fourth quarter net income of $3.6 million, or $0.12 per diluted common share.
“Reporting our fourth consecutive profitable year, particularly given the tremendous challenges of the past twelve months, speaks volumes about the incredible fortitude of Frontier`s employees,” said Frontier President and Chief Executive Officer Jeff Potter. “Frontier was in the midst of its most ambitious project to date, the conversion of our fleet from an all Boeing 737 fleet to an all Airbus fleet, when the tragic events of September 11 occurred. Our first rate employee team responded to the repercussions of those events swiftly and strategically. Through the implementation of immediate capacity cuts, swift cost reductions and by freezing all non-critical capital expenditures, we were able to manage our Company through this industry`s darkest hours. Additionally, the strength of Frontier`s balance sheet played a key role in our decision to preserve our Airbus delivery schedule after September 11, and to continue all normal business obligations related to our leased fleet. Lastly, we are grateful to the American people, who continue to play their part in our industry`s recovery by taking to the skies.”
The airline`s total revenues during its fiscal fourth quarter 2002 decreased 1.4 percent to $113.2 million from $114.8 million in the fourth quarter of the prior year. The airline`s capacity, as measured by available seat miles (ASMs), increased 12.4 percent during its fiscal fourth quarter 2002, while its traffic, as measured by revenue passenger miles (RPMs), increased 8.7 percent compared to fiscal fourth quarter 2001. This resulted in a load factor of 58.2 percent, a decrease of 2.0 load factor points from fiscal fourth quarter 2001. During fiscal fourth quarter 2002, the airline`s break-even load factor, excluding the Federal grant and other unusual items, increased 1.2 load factor points to 55.0 percent. The airline`s average fare during its fiscal fourth quarter 2002 decreased 12.1 percent to $128 from $146 from fiscal fourth quarter 2001. Revenue per passenger mile (yield) for fiscal fourth quarter 2002 decreased 8.9 percent to 15.43 cents from 16.94 cents for fiscal fourth quarter 2001. The airline`s passenger revenue per available seat mile (RASM) for fiscal fourth quarter 2002 decreased 11.9 percent to 8.99 cents from 10.20 cents for fiscal fourth quarter 2001.
Cost per available seat mile (CASM) for fiscal fourth quarter 2002 decreased 9.2 percent to 8.66 cents from 9.54 cents for fiscal fourth quarter 2001. CASM excluding the airline`s fuel costs decreased 5.3 percent to 7.50 cents, compared to 7.92 cents for fiscal fourth quarter 2001. During fiscal fourth quarter 2002, the cost per gallon of fuel was $0.77, a 26.0 percent decrease from last year`s fiscal fourth quarter. The airline`s year over year CASM reduction (excluding fuel) was primarily the result of reduced transition and operating costs associated with operating six new Airbus A319 aircraft, along with overall lower maintenance costs on the remaining 24 Boeing 737 aircraft. The airline`s reduced unit cost improvements were partially offset by an additional $2.1 million in passenger liability insurance costs.
The airline`s total revenues during its fiscal year 2002 decreased 5.9 percent to $445.1 million from $472.9 million for the prior year. The airline`s capacity, as measured by ASMs, increased 7.8 percent during fiscal year 2002, while its traffic, as measured by RPMs, decreased 0.6 percent. This resulted in a load factor of 60 percent, a decrease of 5.1 points from fiscal year 2001. During fiscal year 2002, the airline`s break-even load factor, excluding the Federal grant and other unusual items, increased 4.9 points to 57.6 percent. The airline`s average fare during its fiscal year 2002 decreased 9.6 percent to $132 from $146 from the prior year. Revenue per passenger mile (yield) for fiscal year 2002 decreased 5.3 percent to 15.78 cents from 16.66 cents for the prior year. The airline`s RASM for fiscal year 2002 decreased 12.7 percent to 9.47 cents from 10.85 cents for fiscal year 2001.
CASM for the fiscal year 2002 increased 1.4 percent to 9.33 cents from 9.20 cents for fiscal year 2001. CASM excluding the airline`s fuel costs increased 6.1 percent to 8.00 cents during fiscal year 2002, compared to 7.54 cents during fiscal year 2001. During fiscal year 2002, the cost per gallon of fuel was $0.87, an 18.7 percent decrease from last year. Excluding fuel, unit costs increased year over year primarily because of costs associated with the introduction of the Airbus A319 aircraft into the fleet as more fully described in the Company`s Form 10-Q for the quarter ended Dec. 31, 2001. The events of Sept. 11 also contributed to the increased year over year unit costs, caused by higher passenger liability insurance, increased security costs and a reduction of average daily aircraft utilization from 9.4 to 9.1 block hours on a year over year basis, a result of the temporary grounding of four aircraft shortly after the events of Sept. 11.
During fiscal year 2002 Frontier began converting its Boeing 737 fleet to an Airbus fleet that will consist of all Airbus A319 and A318 aircraft by 2006. Fiscal year 2002 represents the Company`s first year of this fleet transition, and during that time, the airline took delivery of six Airbus A319 aircraft, including three owned aircraft. Also during fiscal year 2002, Frontier amended its original Airbus A318 order for aircraft that were to be powered by Pratt and Whitney PW6000 engines, to Airbus A318 aircraft that will be powered by CFM56 engines, which are similar to the engines that power the airline`s Airbus A319 fleet. In February 2002, Frontier announced it had signed an agreement to amend leases on two 119-seat Boeing 737-200A aircraft, which will enable the airline to early return those aircraft to their lessor approximately 22 months prior to their original lease termination dates. The Company intends to replace these aircraft with two new Airbus A319 aircraft scheduled for delivery in December 2002.
During fiscal year 2003, the Company plans to take delivery of ten additional A319 aircraft. The airline has secured financing for all ten aircraft, including three that will be leased from General Electric Capital Aviation Services (GECAS).
Also during fiscal year 2003, the airline plans to return six of its Boeing 737 aircraft, including four Boeing 737-200 aircraft and two Boeing 737-300 aircraft. This will result in four net additional aircraft to Frontier`s fleet by the end of its fiscal year 2003, bringing its total fleet from 30 aircraft today, to 34 aircraft, including 16 Airbus A319 aircraft, 15 Boeing 737-300 aircraft and three Boeing 737-200 aircraft.
Cash, cash equivalents and short-term investments on March 31, 2002 were approximately $89.5 million, compared to $111.3 million at March 31, 2001.