Frontier Airlines Reports Fiscal Second Quarter 2004 Results

Frontier Airlines today reported fiscal second quarter 2004 net income of
$2.0 million, or $0.06 per diluted common share for the three months ended
September 30, 2003, compared with a net loss of $3.1 million, or $0.10 per
common share for the airline`s fiscal second quarter last year. Included
in the Company`s fiscal second quarter 2004 net income were the following
special items on a pre-tax basis; write-off of deferred loan costs of $8.7
million associated with the prepayment of all but $11.6 million remaining
principal of the government guaranteed loan; a charge for Boeing aircraft
and facility lease exit costs of $4.6 million; loss of $1.7 million on the
sale of one Airbus aircraft in a sale-leaseback transaction and from the
sale of a spare engine; and an unrealized derivative loss of $.3 million.
These items, net of income taxes and profit sharing, totaled $0.27 per
diluted share.
Chief Executive Officer`s Comments

Frontier President and CEO Jeff Potter said, “Our fiscal second quarter
results provide further evidence that our efforts of the previous year,
including our continued shift to an all Airbus fleet, the launch of a
high- impact branding campaign and the simplicity we brought to the market
with our new pricing structure, are now paying consistent dividends. This
past summer was notable as we carried a record number of passengers, and
achieved a record load factor for the fiscal second quarter 2004. Once
again our quarterly traffic growth far outpaced our capacity growth,
resulting in an industry leading year-over-year increase in passenger
revenue per available seat mile (RASM) of 24.5 percent. The culmination of
each of these trends in our business, allowed us to achieve an operating
margin of 13.5 percent for the quarter.”
Operating Highlights
Total revenues during the airline`s fiscal second quarter increased 38.9
percent to $165.8 million from $119.4 million in the fiscal second quarter
of 2003, while operating expenses during the quarter only increased 17.0
percent to $143.5 million from $122.6 million from the same period last

Passenger revenue increased as revenue passenger miles (RPMs), grew at a
rate of 42.8 percent during its fiscal second quarter, while capacity
growth, as measured by available seat miles (ASMs), increased by 10.3
percent, from the same time last year. As a result, the airline`s load
factor was 76.6 percent for its fiscal second quarter, 17.4 load factor
points greater than the airline`s load factor of 59.2 percent during the
same time last year. During fiscal second quarter 2004, the airline`s
breakeven load factor increased 13.1 load factor points from 61.7 percent
to 74.8 percent, which includes the effect of special items. These items,
net of profit sharing, accounted for 6.2 load factor points of the
breakeven load factor increase.
During fiscal second quarter 2004, the airline`s passenger revenue per
available seat mile (RASM) increased 1.82 cents or 24.5 percent to 9.26
cents from 7.44 cents for the same quarter last year. The increase in RASM
was primarily due to a significant increase in load factor but was
slightly offset by a decrease in revenue per passenger mile (yield) of 3.8
percent to 12.09 cents from 12.57 cents for the same period last year. The
decline in yield can be attributed to a 3.2 percent decline in average
length of haul as well as Frontier`s simplified fare structure, which was
implemented in February 2003.
The year-over-year increase in total revenues also reflects contributions
from other revenues associated with Frontier`s new U.S. mail contracts,
LiveTV revenues and the positive operating margin contribution from Mesa`s
JetExpress service.
The airline`s cost per available seat mile (CASM) including fuel for the
September 2003 quarter increased 5.9 percent to 8.32 cents from 7.86 cents
for the same quarter last year. Fuel cost per gallon during the quarter,
including taxes and the cost of delivering fuel into the aircraft,
increased 9.8 percent to $1.01 per gallon, compared to 92.0 cents for the
same period last year. CASM excluding fuel increased 5.1 percent to 6.82
cents from the same period last year when CASM excluding fuel was 6.49
Chief Financial Officer Paul Tate discussed the airline`s year-over-year
quarterly unit cost increase, stating, “Our CASM ex-fuel increased .33
cents during the quarter, principally as a result of an increase in
passenger related expenses of .24 cents per ASM caused by a
disproportionate increase in the number of passengers and U.S. Mail
carried compared to the year-over-year quarterly ASM growth. In addition,
we incurred an increase in general and administrative expenses of .15
cents as a result of a profit sharing accrual associated with our return
to profitability and an increase in health insurance costs. These
increases were offset by a decrease of .13 cents in maintenance expense,
principally as a result of the reduction in our older Boeing fleet, which
continues to be replaced with new Airbus aircraft.”
Tate also described Frontier`s current cash and short-term investment
position, stating, “Our cash position of $203.3 million, which was
substantially aided by our secondary offering of 5.05 million shares of
common stock in September 2003, is the highest in the Company`s history. A
portion of the proceeds from the secondary offering were used to decrease
our government guaranteed loan by $48.6 million and enabled us to increase
our cash position by $32.5 million.”