Frontier Airlines (Nasdaq: FRNT ) today announced its sixth consecutive profitable quarter for the quarter ended Sept. 30, 1999. The airline reported net income for its fiscal second quarter of $9.0 million, or $0.47 per diluted common share, compared to net income of $9.9 million, or $0.64 cents per diluted common share, for the same time period last year. The airline`s fiscal second quarter operating income was $13.4 million, compared to $9.8 million for the same time period last year. The airline recorded $5.6 million of income tax expense during its second fiscal quarter. No tax expense was recorded during the same time period last year since the airline utilized tax loss carryforwards, which had not previously been recognized, to eliminate its tax liability.
Operating revenues increased 50.3 percent to $85.5 million for the quarter ended Sept. 30, 1999 on increased capacity of 47.8 percent, as compared to the same time period last year. Total revenue per available seat mile (RASM) for the airline`s fiscal second quarter increased to 9.49 cents from 9.33 cents, or a 1.7 percent increase over the same period last year. Total revenue per passenger mile (yield) for the quarter increased to 14.85 cents from 14.66 cents, or a 1.3 percent increase over the same period last year.
“Today`s announcement marks several milestones for Frontier,” said Frontier President Sam Addoms. “Effective with our fiscal second quarter, Frontier now carries retained earnings on its balance sheet. Prior to our fiscal second quarter, we carried an accumulated deficit, as reflected on past balance sheets. In addition, while we are pleased with our second quarter results, we recognize the need to implement more efficient capital planning. We recently announced an important strategic initiative by which we will transition our Boeing 737-200 and 737-300 fleet to Airbus A319 and A318 aircraft. Operating newer aircraft will provide significant cost savings for the company in such areas as flight operations and maintenance. This purchase plan will also provide positive financial benefits as a result of accelerated depreciation and the associated reduction in income taxes. From a marketing perspective, the new Airbus aircraft will provide more passenger comfort and fleet commonality.”
The airline`s operating expenses during the quarter ended Sept. 30, 1999 increased 53.1 percent to $72.1 million compared to $47.1 million for the same quarter last year. Cost per available seat mile (CASM) for the quarter increased to 8.01 cents from 7.73 cents for the same quarter last year. Fuel costs during the quarter increased 31.1 percent to 74.0 cents per gallon, compared to 56.4 cents for the same period last year. CASM excluding fuel costs were 6.83 cents, as compared to the same period last year when CASM excluding fuel costs were 6.81 cents. During the airline`s second quarter, it accrued $1.1 million for the Company`s employee performance bonus program. Excluding fuel and the accrual for the employee bonus program, CASM for the airline`s second quarter would have been 6.71 cents, or a year-over-year decrease of 1.5 percent. The airline did not accrue for this program during its fiscal second quarter 1999.
“Our focus during the September quarter included the continued task of rotating 13 aircraft throughout our fleet during calendar year 1999,” Addoms continued. “This process includes retiring and replacing our Stage 2 equipment and inducting three net new aircraft during calendar year 1999. We have replaced four of the five Stage 2 737-200 Basic aircraft and will replace the fifth Stage 2 aircraft during our third quarter. In addition, we plan to take delivery of our twentieth Boeing 737 in November.”
Cash, cash equivalents and short-term investments available for operations on Sept. 30, 1999 were $81.2 million.
Revenue enhancements impacting the quarter included:
* Enabling two of the four global distribution systems (Amadeus and Galileo) to provide electronic ticketing services for Frontier passengers,
* Signing the 2,949thcorporate account,
* Inaugurating service to Orlando, FL., which began Sept. 9.
Developments during the quarter included:
* Retiring four of the airline`s five Boeing 737-200 Basic aircraft, which were replaced with newer 737-200 Advanced aircraft and 737-300 aircraft,
* Appointing a new chief financial officer, Steve Warnecke,
* Announcing the relocation of the airline`s new corporate headquarters.
Milestones celebrated during the quarter included:
* Celebration of five years of service, typically the time when airlines are no longer classified as a “start-up” carrier,
* The addition of Frontier Airlines` stock to the Russell 2000® Index of small-capitalization stocks,
“This is a great time for the people of Frontier,” said Frontier President Sam Addoms. “Their hard work and diligent efforts to bring affordable fares to consumers in the communities we serve is paying off for shareholders, customers and employees. In addition, I am particularly pleased that our operating income of $25.0 million for the six months ended Sept. 30 already exceeds the total operating income we generated during the entire fiscal year 1999.”
The operating income number is a key driver for the Company`s new employee performance bonus program, dubbed S.O.A.R., or Success = Operate profitably, Arrive on time, Reduce costs.