FOR IMMEDIATE RELEASE
CONTACT: Elise Eberwein
(720) 374-4501
E-mail: corpcomm@flyfrontier.com
Frontier Airlines Reports Fiscal First Quarter 2004 Results
DENVER (July 31, 2003) - Frontier Airlines (Nasdaq: FRNT) today reported fiscal first quarter
2004 net income of $10.9 million, or $0.36 per diluted common share, compared with a net loss of $2.5
million, or $0.09 per common share, before the cumulative effect of change in method of accounting for
maintenance checks, for the airline's fiscal first quarter last year. The Company's fiscal first
quarter 2004 net income included $15.0 million received under the Emergency Wartime Supplemental
Appropriations Act and an unrealized gain on fuel hedges of $752,000, offset by aircraft lease exit
costs of $686,000. These items, net of income taxes and related profit sharing, total $0.29 per diluted
common share.
Chief Executive Officer's Comments
Frontier President and CEO Jeff Potter said, "We are very pleased with our fiscal first quarter results,
and applaud the efforts of our employees who worked diligently to return Frontier to profitability. Demand
for Frontier's services outpaced our capacity growth during the quarter, which led to a nearly four percent
increase in revenue per available seat mile. This increased demand, coupled with a three percent decrease
in cost per available seat mile, contributed to our positive results. Recently, we implemented a new,
simplified fare structure and launched a unique branding campaign, `A Whole Different Animal, and we believe
customer response to both of those initiatives is evidenced in our fiscal first quarter results."
Operating Highlights
Total revenues during the airline's fiscal first quarter increased 27.4 percent to $142.4 million from
$111.8 million in the fiscal first quarter of 2003, while operating expenses during the same time
increased 18.5 percent to $136.2 million from $114.9 million from the same period last year.
The airline's cost per available seat mile (CASM) for the quarter decreased 3.1 percent to 8.13 cents
from 8.39 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 14.7 percent to 95.7 cents per gallon, compared
to 83.4 cents for the same period last year. CASM excluding fuel decreased 5.3 percent to 6.74 cents from
the same period last year when CASM excluding fuel was 7.12 cents.
The airline's traffic, as measured by revenue passenger miles (RPMs), grew at a rate of 30.9 percent
during its fiscal first quarter, while capacity growth, as measured by available seat miles (ASMs),
increased by 22.3 percent, from the same time last year. As a result, the airline's load factor was 67.2
percent for its fiscal first quarter, 4.4 load factor points greater than the airline's load factor of
62.8 percent during the same time last year. During fiscal first quarter 2004, the airline's breakeven
load factor increased .9 load factor points from 65.0 percent to 65.9 percent.
During fiscal first quarter 2004, passenger revenue per passenger mile (yield) decreased 3.3 percent to
12.29 cents from 12.71 cents for the same period last year. The airline's average fare during its fiscal
first quarter 2004 was $105, a 2.8 percent decrease from its fiscal first quarter 2003, when the average
fare was $108.
Chief Financial Officer Paul Tate discussed the airline's year-over-year unit cost improvements, stating,
"During the quarter, we continued to reduce our unit costs, in part achieved by increasing the number of
owned aircraft from an average of three and a half to nine. In addition, bringing in newer Airbus A319
aircraft has decreased our overall maintenance costs, reduced our fuel burn per block hour, and enabled
us to increase average aircraft utilization from 9.9 hours, during the first fiscal quarter 2003, to 10.2
hours, during the fiscal first quarter 2004. We are also experiencing greater economies of scale associated
with slower indirect cost growth in relation to our 22.3 percent increase in ASMs during the quarter."
The airline's fleet on June 30, 2003 consisted of nine owned Airbus A319 aircraft, nine leased Airbus A319
aircraft and 18 leased Boeing 737 aircraft. Discussing fleet management activities since June 30, 2003, Tate
continued, "We have brought three additional Airbus aircraft into our fleet since the end of our fiscal first
quarter. Also, during our current quarter, which ends September 30, 2003, we plan to take a non-cash charge of
approximately $2.7 million, net of taxes, for the early retirement of our last two Boeing 737-200s,and the
closure of our El Paso, Texas maintenance facility."
Business developments during the quarter included:
o Launched an aggressive branding campaign in support of "A Whole Different Airline" tagline, which has
increased visibility in the Denver market.
o Contracted with Hahn Air Interline Services to provide Frontier with distribution in key foreign
markets, including marketing Frontier to travel agencies and enabling travelers to book travel on Frontier
from outside of the U.S.
o Introduced a co-branded Frequent Flyer MasterCard with Juniper Bank, which since its introduction two
months ago has contributed to a 10 percent increase in EarlyReturns membership.
o Generated 29.5 percent of flown revenue during the three months ended June 30, 2003 via the airline's
Web site, and 46.9 percent of flown revenue from all Web sites during the three months ended June 30, 2003.
o Signed a Letter of Intent with GE Capital Aviation Services (GECAS) to lease two additional Airbus 318
aircraft, scheduled for delivery in May 2004 and March 2005, and one additional Airbus 319 aircraft,
scheduled for delivery in February 2005.
o Obtained three arrival/departure slots at John Wayne (Orange County, Calif.) Airport.
Cash Comparisons
Cash, cash equivalents and short-term investments available for operations and investing activities on June 30,
2003 were $128.3 million. The increase in the Company's cash position is a result of its improved operating
results, which included government grant monies received under the Emergency Wartime Supplemental Appropriations
Act totaling $15.0 million, pretax. Cash provided by operating activities for the quarter ended June 30, 2003,
was $35.8 million, compared to $2.4 million for the same period last year when the airline repaid $4.0 million in
federal grant funds during its fiscal first quarter 2003. The airline reported working capital of $72.9 million
as of June 30, 2003, a 19.9 percent increase from the airline's working capital on March 31, 2003, when the
airline reported working capital of $60.8 million.
Cash activity since the conclusion of the airline's fiscal first quarter 2004 includes receipt of a $26.6 million
federal income tax refund, and as required by the Company's agreement with the Air Transportation Stabilization
Board ("ATSB"), the airline prepaid $10 million of its $70 million ATSB loan.
Potter concluded, "We have announced a variety of initiatives designed to build upon the momentum begun during
our fiscal first quarter 2004. These include initiating service to Milwaukee, Wisconsin and Orange County,
California at the end of August 2003; initiating service to St. Louis, Missouri in November 2003; opening two
additional Mexico destinations in November 2003; and, introducing airport-based kiosks and Internet check-in
options for customers this fall. In addition, we will continue to explore both mainline growth opportunities and
regional jet partnerships in order to build our expanding route system. We recently took delivery of the world's
first Airbus A318 aircraft, and given the tremendous drive of our 3,300 employees, it should come as no surprise
that the A318 transition into our fleet was seamless. Building the infrastructure to support the A318's induction
into our fleet occurred while carrying record passenger loads, as evidenced during June 2003, when our load
factor set an all-time record for Frontier of 75.6 percent. While we will continue to face revenue challenges
against a weak domestic economic backdrop, I am confident our employees will continue to demonstrate tremendous
perseverance as we work hard to bring Frontier's affordable fares to more cities across America."
Senior leadership will host a conference call to discuss Frontier's quarterly earnings on Aug. 1, 2003 at 9:00
a.m. Mountain Daylight Time. The call is available via the World Wide Web on the airline's Web site at
WWW.FRONTIERAIRLINES.COM or using the following URL: http://www.vcall.com/EventPage.asp?ID=82050.
Currently in its tenth year of operations, Denver-based Frontier Airlines is the second largest jet service
carrier at Denver International Airport with a fleet of 38 aircraft and employing approximately 3,300 aviation
professionals. Frontier and its affiliate Frontier JetExpress currently serve 37 U.S. cities with 190 daily
flights. Frontier's maintenance and engineering department has received the Federal Aviation Administration's
highest award, the Diamond Certificate of Excellence, in recognition of 100 percent of its maintenance and
engineering employees completing advanced aircraft maintenance training programs, for four consecutive years. In
April 2003, Entrepreneur ranked Frontier one of two "Best Low-Fare Airlines." Frontier provides capacity
information and other operating statistics on its Web site, which may be viewed at WWW.FRONTIERAIRLINES.COM.
Legal Notice Regarding Forward-Looking Statements
Frontier notes that this press release contains forward-looking statements and that certain information contained
in this press release involves risks and uncertainties that could result in actual results differing materially
from expected results. These statements include, but are not limited to, the ability to conserve financial
resources while operating in a highly competitive hub, the ability to increase future revenues and the ability to
achieve additional unit cost reductions. Forward-looking statements represent the Company's expectations and
beliefs concerning future events, based on information available to the Company as of the date of this press
release. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be
predicted with accuracy and some of which might not even be anticipated. Some of the factors that could
significantly impact the forward-looking statements in this press release include, but are not limited to: the
uncertainty of leisure travel and corporate travel expenditures as we enter the historically weak period of
post-summer travel; further downward pressure on airfares; unanticipated decreases in the volume of passenger
traffic due to terrorist acts or additional incidents that could cause the public to question the safety and/or
efficiency of air travel; negative public perceptions associated with increased security wait times at various
domestic airports; the ability to secure adequate gate facilities at Denver International Airport and at other
airports where Frontier operates; weather, maintenance or other operational disruptions; air traffic
control-related difficulties; the impact of labor issues; actions of the federal and local governments; changes
in the government's policy regarding relief to the airline industry especially as it relates to war risk
insurance; and the stability of the U.S. economy and the economic environment of the airline industry. The
Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or
circumstances that may arise after the date of this press release. Additional information regarding these and
other factors may be contained in the Company's SEC filings, including without limitation, the Company's 10-K for
its fiscal year ended March 31, 2003, and the Company's Form 10-Q for the quarter ended June 30, 2003.
-Financial Tables To Follow-
FRONTIER AIRLINES, INC.
SELECTED BALANCE SHEET DATA
(In Thousands)
(unaudited)
June 30,
2003 2002
Balance Sheet Data:
Cash, cash equivalents and
short-term investments $128,267 $ 79,050
Current assets 220,573 142,694
Total assets 624,102 412,893
Current liabilities 147,699 116,032
Long-term debt, excluding current portion 258,757 112,854
Total liabilities 453,344 242,543
Stockholders' equity 170,758 170,350
Working capital $ 72,874 $ 26,662
FRONTIER AIRLINES, INC.
STATEMENTS OF OPERATIONS
(unaudited)
June 30, June 30,
2003 2002
Revenues:
Passenger $ 138,890,562 $ 109,291,882
Cargo 1,689,025 1,579,936
Other 1,786,363 940,589
Total revenues 142,365,950 111,812,407
Operating expenses:
Flight operations 42,165,321 37,083,404
Fuel expense 23,352,435 17,395,991
Aircraft and traffic servicing 23,997,510 19,349,109
Maintenance 17,877,972 16,442,071
Promotion and sales 14,719,997 14,719,308
General and administrative 8,935,636 6,121,871
Depreciation and amortization 5,187,198 3,798,412
Total operating expenses 136,236,069 114,910,166
Operating income (loss) 6,129,881 (3,097,759)
Nonoperating income (expense):
Interest income 413,363 706,962
Interest expense (3,834,393) (1,259,311)
Unrealized derivative gain 751,666 -
Emergency Wartime Supplemental
Appropriations Act compensation 15,024,188 -
Accelerated lease exit costs (686,295) -
Other, net (176,093) (151,550)
Total nonoperating income
(expense), net 11,492,436 (703,899)
Income (loss) before income tax expense (benefit)
and cumulative effect of change in method of
accounting for maintenance 17,622,317 (3,801,658)
Income tax expense (benefit) 6,688,627 (1,329,237)
Income (loss) before cumulative effect of
change in method of accounting for maintenance $ 10,933,690 $ (2,472,421)
Cumulative effect of change in method of
accounting for maintenance, net of tax - 2,010,672
Net income (loss) $ 10,933,690 $ (461,749)
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(continued)
FRONTIER AIRLINES, INC.
Statements of Operations
For the Three Months Ended June 30, 2003 and 2002
(Unaudited)
June 30, June 30,
2003 2002
Earnings (loss) per share:
Basic:
Income (loss) before cumulative effect of a
change in accounting principle $0.37 ($0.09)
Cumulative effect of change in method of
accounting for maintenance checks - 0.07
Net income (loss) $0.37 ($0.02)
=============== ================
Diluted:
Income (loss) before cumulative effect of a
change in accounting principle $0.36 ($0.09)
Cumulative effect of change in method of
accounting for maintenance checks - 0.07
Net income (loss) $0.36 ($0.02)
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Weighted average shares of
common stock outstanding
Basic 29,823,179 29,534,304
=============== ================
Diluted 30,172,499 29,534,304
=============== ================
FRONTIER AIRLINES, INC.
COMPARATIVE OPERATING STATISTICS
Quarters Ended June 30,
2003 2002
Passenger revenue (000s) $ 138,891 $ 109,292
Revenue passengers carried (000s) 1,227 928
Revenue passenger miles (RPMs) (000s) 1,125,233 859,604
Available seat miles (ASMs) (000s) 1,675,050 1,369,399
Passenger load factor 67.2% 62.8%
Break-even load factor (1) 65.9% 65.0%
Block hours 33,127 27,680
Departures 14,610 12,184
Average seats per departure 132 132
Average stage length 869 851
Average length of haul 917 926
Average daily block hour utilization 10.2 9.9
Yield per RPM (cents) (2) (4) 12.29 12.71
Yield per ASM (cents) (3) (4) 8.26 7.98
Total yield per ASM (cents) 8.50 8.17
Cost per ASM (cents) 8.13 8.39
Fuel cost per ASM (cents) 1.39 1.27
Cost per ASM excluding fuel (cents) (5) 6.74 7.12
Average fare $ 105 $ 108
Average aircraft in fleet 35.6 30.6
Aircraft in fleet at end of period 36.0 33.0
Average age of aircraft at end of period 6.7 9.6
1. "Break-even load factor" is the passenger load factor that will result in passenger revenues being equal
to operating expenses adjusted for other revenues and net nonoperating income (expense) and excluding
unusual items, assuming constant yield per RPM and ASMs. See table below for calculation of adjusted
expenses. This may be deemed a non-GAAP financial measure under Regulation G issued by the Securities
and Exchange Commission. We believe that presentation of break-even load factor using certain
adjustments is useful to investors because the elimination of special and nonoperating items allows a
meaningful period-to-period comparison. Furthermore, in preparing operating plans and forecasts, we rely
on an analysis of break-even load factor exclusive of these special and nonoperating items. Our
presentation of non-GAAP results should not be viewed as a substitute for our financial or statistical
results based on GAAP, and other airlines may not necessarily compute break-even load factor in a manner
that is consistent with our computation.
2. "Yield per RPM" is determined by dividing passenger revenues excluding charter revenues by revenue
passenger miles. For purposes of calculating yield per RPM, charter revenue is excluded from passenger
revenue.
3. "Yield per ASM" is determined by dividing passenger revenues excluding charter revenues by available
seat miles.
4. For purposes of yield calculations, charter revenue is excluded from passenger revenue. See table below
for calculation of passenger revenue excluding charter revenue. This may be deemed a non-GAAP financial
measure under Regulation G issued by the Securities and Exchange Commission. We believe that
presentation of yield excluding charter revenue is useful to investors because charter flights are not
included in RPMs or ASMs. Furthermore, in preparing operating plans and forecasts, we rely on an
analysis of yield exclusive of charter revenue. Our presentation of non-GAAP results should not be
viewed as a substitute for our financial or statistical results based on GAAP.
5. This may be deemed a non-GAAP financial measure under Regulation G issued by the Securities and Exchange
Commission. We believe the presentation of financial information excluding fuel expense is useful to
investors because we believe that fuel expense tends to fluctuate more than other operating expenses, it
facilitates comparison of results of operations between current and past periods and enables investors
to better forecast future trends in our operations. Furthermore, in preparing operating plans and
forecasts, we rely, in part, on trends in our historical results of operations excluding fuel expense.
However, our presentation of non-GAAP results should not be viewed as a substitute for our financial
results determine in accordance with GAAP.
(In thousands)
Quarters Ended June 30,
2003 2002
Passenger revenues, as reported $ 138,891 $ 109,292
Charter revenue 614 58
Passenger revenues, excluding charter revenue $ 138,277 $ 109,234
================ ================
Operating expenses, as reported $ 136,236 $ 114,910
Less: charter revenue (614) (58)
Less: cargo revenue (1,689) (1,580)
Less: other revenue (1,786) (941)
Less: interest income (413) (707)
Add: interest expense 3,835 1,259
Add: nonoperating expense -- other,net 176 152
Adjusted expenses for break-even load factor
calculation $ 135,745 $ 113,035
================ ===============