NEWS
FOR IMMEDIATE RELEASE
Frontier Airlines Reports Fiscal First Quarter 2005 Results
DENVER (July 29, 2004) - Frontier Airlines, Inc. (Nasdaq: FRNT) today reported a net loss of
$6.6 million, or $0.18 per diluted common share, for the airline's fiscal first quarter ended
June 30, 2004 compared to a net profit of $10.9 million, or $0.36 per diluted common share, for
the same period last year. Included in the net loss for the quarter ended June 30, 2004 were the
following special items before the effect of income taxes; a loss of $489,000 on the sale of two
Airbus A319 aircraft in a sale-leaseback transaction, a write down of $388,000 of the carrying
value of expendable Boeing 737 inventory, and a $477,000 unrealized loss on hedging derivatives.
These items net of income taxes increased the net loss by $.02 per share. The Company's net
income for the quarter ended June 30, 2003 included $15.0 million received under the Appropriations
Act, aircraft lease exit costs of $686,000, and an unrealized gain on hedging derivatives of $752,000.
The net effect of these items, net of income taxes and related profit sharing contributions, increased
net income by $0.29 per diluted share.
Chief Executive Officer's Comments
Frontier President and CEO Jeff Potter said, "We believe the quarter's results largely reflect the
impact of ongoing industry challenges, most notably historically high fuel prices and the continuing
depressed fare environment. With no relief in sight in both of these areas, we recognize that our
return to profitability will only be achieved by continuing to focus on our strategies of producing
the very best product in the industry, while reducing our unit costs. We made progress in both of
these areas in the quarter. The continuing positive customer response to our product was reflected in
the 39 percent increase in mainline traffic that outpaced 32 percent capacity growth for the quarter.
Our mainline unit costs excluding fuel declined 7.4 percent versus the same period last year.
"Our expansion during the quarter included our continued focus on our Denver hub, and the introduction
of Los Angeles as a focus city for Frontier. While the growth in the Denver hub met our expectations, the
services introduced in the Los Angeles market clearly did not perform to the level we had anticipated.
While we remain committed to the Los Angeles strategy, the disappointing financial performance of this
focus city, which contributed significantly to our loss, led us to adjust our August schedule to
appropriately reallocate our resources to better performing opportunities."
Operating Highlights
Mainline passenger revenue increased as mainline revenue passenger miles (RPMs) grew at a rate of 39.0
percent during the fiscal first quarter, out-pacing mainline capacity growth as measured by available seat
miles (ASMs), which increased 32.0 percent from the same time last year. As a result, the airline's mainline
load factor was 70.7 percent for its fiscal first quarter of 2005, 3.5 load factor points greater than the
airline's load factor of 67.2 percent during the same quarter last year. The airline's mainline breakeven
load factor for the fiscal first quarter 2005 increased 8.1 load factor points from 65.4 percent to 73.5
percent. Frontier's breakeven load factor increased from the prior comparable period as a result of a
decrease in our yield per RPM to 10.79 cents during the quarter ended June 30, 2004 from 12.30 cents, or
12.3 percent, during the quarter ended June 30, 2003, partially offset by a decrease in the airline's
mainline cost per available seat mile (CASM).
During the fiscal first quarter 2005, the airline's mainline passenger revenue per available seat mile
(RASM) decreased 7.6 percent to 7.63 cents from the same quarter last year. The decrease in RASM was due
to the 12.3 percent mainline yield per RPM drop on a year-over-year basis partially offset by the
comparative period load factor increase. Contributing to the yield decline was the introductory fares
offered in six new markets started in the June 2004 quarter and a 7.7 percent increase in average length
of haul on a year-over-year basis.
The airline's mainline CASM for the fiscal first quarter decreased .5 percent to 8.09 cents from 8.13 cents
for the same quarter last year. Mainline fuel cost per gallon during the quarter, including taxes and delivery
charges, increased 34.4 percent to $1.25, compared to $.93 for the same period last year. Mainline CASM excluding
fuel decreased 7.4 percent to 6.28 cents from the same period last year, when CASM excluding fuel was 6.78 cents.
Senior Vice President and Chief Financial Officer Paul Tate discussed the airline's year-over-year unit
cost comparatives stating, "Our fiscal first quarter generated continued improvement in our mainline CASM, both
including and excluding fuel, as a result of a 14.7 percent improvement in mainline aircraft utilization and
a 10.1 percent increase in average mainline stage length, despite incurring costs associated with our transition
to an all-Airbus fleet. We received nine new aircraft during the quarter, which represents the largest quarter
number of aircraft scheduled for delivery through 2008."
Tate also described the airline's current cash and working capital position stating, "As of June 30, 2004, our
unrestricted cash position during the past 12 months has increased from $128.3 million to $193.6 million. In
the same period, our working capital has increased from $72.9 million to $75.8 million. Our cash position
remains near its all-time high."
The airline's fleet in service on June 30, 2004 consisted of 14 owned Airbus A319 and A318 aircraft, 23
leased Airbus A319 and A318 aircraft and nine leased Boeing 737 aircraft.
Business developments during the quarter included:
o Took delivery of seven new Airbus A319 and two A318 aircraft, and retired one Boeing 737 aircraft,
for a net increase of eight aircraft and a fleet total of 46 by quarter's end.
o Inaugurated "focus city" service from Los Angeles, offering the airline's first point-to-point
service, including non-stop service from Los Angeles to St. Louis, Kansas City, and Minneapolis/St.
Paul.
o Started service between Denver and Washington Dulles and received Department of Transportation (DOT)
authorization to provide two additional round-trip flights between Denver and Washington D.C.'s slot-
controlled Reagan National Airport. With the addition of Dulles service and the increase in Reagan
service, which began in July 2004, Frontier now serves three destinations in the Washington, D.C.
area with a total of seven daily flights to and from Denver.
o Started service from Denver to Anchorage, Denver to Nashville and Denver to Philadelphia.
o Began JetExpress service between Denver and Spokane and Denver and Billings.
o Inaugurated service from Los Angeles to Philadelphia, marking the airline's first non-stop,
transcontinental service.
o Expanded international service with new non-stop flights from Salt Lake and Kansas City to Cancun.
o Filed and subsequently received approval after the end of the quarter, to further expand the airline's
popular Cancun service with non-stop flights from Austin and Nashville.
o Signed a multi-year agreement with Sabre Airline Solutions for its SabreSonic passenger solution to
power the airline's reservations and check-in capabilities.
o Frontier's frequent-flyer program, EarlyReturns, reached the one million member milestone.
o Won national acclaim for popular "a whole different animal" advertising campaign, including The Denver
Advertising Federation's Fame and Fortune Award, four New York Festival Awards, nine Mobius Awards,
and one Cresta Award.
Potter concluded, "As we said at the end of the last quarter, we fully expect the mainline yield per RPM
comparative declines and favorable unit cost trends to continue into the foreseeable future. However, we know
that profitability can only be achieved by continuing to focus on our strategies of bringing the very best
product to the market, while keeping a vigilant eye on the costs we can control. In some cases that means
remaining agile enough to make the necessary changes in our schedule such as our Los Angeles reduction, or
moving our regional jets to an attractive route such as Denver to Little Rock.
"Our future bookings continue to look very strong and we are proud of all of our employees who contribute
to this airline on a daily basis, turning new customers into return customers and building loyalty towards
Frontier one passenger at a time."
Senior leadership will host a conference call to discuss Frontier's quarterly earnings on July 30, 2004 at
9:00 a.m. Mountain Standard 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/CEPage.asp?ID=88901.
Currently in its 11th year of operations, Denver-based Frontier Airlines is the second largest jet service
carrier at Denver International Airport with a fleet of 46 aircraft and employing approximately 4,500
aviation professionals. Frontier, in conjunction with Frontier JetExpress operated by Horizon Air, operates
routes linking our Denver hub to 43 destinations in 24 states spanning the nation from coast-to-coast and to
five cities in Mexico. 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 five
consecutive years. In July 2004, Frontier ranked as one of the "Top 10 Domestic Airlines" as determined by
readers of Travel & Leisure magazine. 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
Statements contained in this press release that are not historical facts may be considered forward-looking
statements as that item is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are inherently subject to risks and uncertainties that could cause actual results to differ
materially from these forward looking statements. Many of these risks and uncertainties cannot be predicted
with accuracy and some 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: further downward pressure on
airfares due to competition, demand or other factors; continuing adverse effects of high fuel costs; increased
prices for fuel and the inability to recover these higher fuel costs in 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 inability 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 status risk insurance; the stability of the U.S. economy and the economic environment of the
airline industry; and other factors detailed in the Company's public filings with the Securities and Exchange
Commission. Any forward-looking statement is qualified by reference to these risks and factors. These risks
and factors are not exclusive, and 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 Form 10-K for its fiscal year ended March 31, 2004. The Company's filings are
available from the Securities and Exchange Commission or may be obtained through the Company's website,
www.frontierairlines.com.
-Financial Tables To Follow-
FRONTIER AIRLINES, INC.
SELECTED BALANCE SHEET DATA
(unaudited)
Year Ended Quarters Ended
March 31, June 30, June 30,
2004 2004 2003
Balance Sheet Data (000s):
Cash, cash equivalents and
short-term investments $190,609 $193,558 $128,267
Current assets 269,733 278,030 220,573
Total assets 769,706 793,106 624,102
Current liabilities 181,659 202,240 147,699
Long-term debt 280,001 296,258 258,757
Total liabilities 511,764 540,631 453,344
Stockholders' equity 257,942 252,475 170,758
Working capital 88,074 75,790 72,874
FRONTIER AIRLINES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(unaudited)
June 30, June 30,
2004 2003
Revenues:
Passenger $ 169,437,481 $ 139,009,546
Passenger- regional partner 19,126,445 -
Cargo 1,427,495 1,689,025
Other 2,431,649 1,667,379
Total revenues 192,423,070 142,365,950
Operating expenses:
Flight operations 31,789,164 24,973,318
Aircraft fuel expense 40,003,182 22,600,769
Aircraft lease expense 18,890,826 17,192,003
Aircraft and traffic servicing 31,692,204 23,997,510
Maintenance 19,282,232 17,877,972
Promotion and sales 19,838,676 14,719,997
General and administrative 10,294,244 8,935,636
Operating expenses - regional partner 21,293,435 -
Loss on sale-leaseback of aircraft 488,889 -
Aircraft lease and facility exit costs - 686,295
Depreciation and amortization 6,618,439 5,187,198
Total operating expenses 200,191,291 136,170,698
Operating income (loss) (7,768,221) 6,195,252
Nonoperating income (expense):
Interest income 570,570 413,363
Interest expense (2,908,016) (3,834,393)
Emergency Wartime Supplemental
Appropriations Act compensation - 15,024,188
Other, net (106,302) (176,093)
Total nonoperating income
(expense), net (2,443,748) 11,427,065
Income (loss) before income tax
(benefit) expense (10,211,969) 17,622,317
Income tax (benefit) expense (3,638,251) 6,688,627
Net income (loss) $ (6,573,718) $ 10,933,690
============== ==============
Earnings (loss) per share:
Basic $ (0.18) $ 0.37
============== ==============
Diluted $ (0.18) $ 0.36
============== ==============
Weighted average shares of
common stock outstanding
Basic 35,603,426 29,823,179
============== ==============
Diluted 35,603,426 30,172,499
============== ==============
FRONTIER AIRLINES, INC.
COMPARATIVE OPERATING STATISTICS
(unaudited)
Quarters Ended June 30,
2004 2003
Selected Operating Data:
Passenger revenue (000s)
Mainline $ 169,438 $ 139,010
Regional Partner (5) 19,126 -
System Combined 188,564 139,010
Revenue passengers carried (000s)
Mainline 1,584 1,227
Regional Partner (5) 203 -
System Combined 1,787 1,227
Revenue passenger miles (RPMs) (000s)
Mainline 1,564,587 1,125,233
Regional Partner (5) 131,554 -
System Combined 1,696,141 1,125,233
Available seat miles (ASMs) (000s)
Mainline 2,211,652 1,675,050
Regional Partner (5) 177,578 -
System Combined 2,389,230 1,675,050
Passenger load factor
Mainline 70.7% 67.2%
Regional Partner (5) 74.1% -
System Combined 71.0% 67.2%
Mainline break-even load factor (1) 73.5% 65.4%
Mainline block hours 43,974 33,127
Mainline departures 17,650 14,610
Mainline average seats per departure 131 132
Mainline average stage length 957 869
Mainline average length of haul 988 917
Mainline average daily block hour utilization 11.7 10.2
Yield per RPM (cents) (2) (3)
Mainline 10.79 12.30
Regional Partner (5) 14.54 -
System Combined 11.08 12.30
Total yield per RPM (cents)
Mainline 11.08 12.65
Regional Partner (5) 14.54 -
System Combined 11.34 12.65
Yield per ASM (cents) (3)
Mainline 7.63 8.26
Regional Partner (5) 10.77 -
System Combined 7.86 8.26
Total yield per ASM (cents)
Mainline 7.84 8.50
Regional Partner (5) 10.77 -
System Combined 8.05 8.50
FRONTIER AIRLINES, INC.
Comparative operating statistics, unaudited
Continued
Quarters Ended June 30,
2004 2003
Selected Operating Data (continued):
Cost per ASM (cents)
Mainline 8.09 8.13
Regional Partner (5) 11.99 -
System Combined 8.38 8.13
Mainline fuel expense per ASM (cents) (4) 1.81 1.35
Mainline cost per ASM excluding
fuel (cents) 6.28 6.78
Mainline average fare $ 100 $ 105
Mainline average aircraft in service 41.4 35.6
Mainline aircraft in service at end of period 46 36
Mainline average age of aircraft at end of period 3.1 6.7
1. "Break-even load factor" is the passenger load factor that will result in operating
revenues being equal to operating expenses, net of certain adjustments, assuming constant
yield per RPM and no change in ASMs. Break-even load factor as presented above may be
deemed a non-GAAP financial measure under regulations issued by the Securities and Exchange
Commission. We believe that presentation of break-even load factor calculated after certain
adjustments is useful to investors because the elimination of special or unusual 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 unusual 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.
A reconciliation of the components of the calculation of the mainline break-even load
factor is as follows:
Quarters Ended June 30,
2004 2003
(In thousands)
Net (income) loss $ 6,574 $(10,934)
Income tax (expense) benefit 3,638 (6,689)
Passenger revenue 169,437 139,010
Revenue - regional partner 19,126 -
Charter revenue (656) (614)
Operating expenses - regional partner (21,293) -
Passenger revenue - mainline (excluding charter and
regional partner revenue) required to break even
(based on GAAP amounts) $ 176,826 $ 120,773
Non-GAAP adujstments:
Emergency Wartime Supplemental Appropriations
Act compensation, net of bonuses - 13,842
Aircraft and facility lease exit costs, net of bonuses - (632)
Early retirement of debt costs, net of bonuses - -
Loss on sale-leaseback of aircraft, net of bonuses (489) -
Loss on sale of aircraft engine, net of bonuses - -
Impairment of Boeing engine and rotable parts, net of
bonuses - -
Provision for Boeing spare parts inventory, net of bonuses (388) -
Horizon start-up costs, net of bonuses - -
Unrealized derivative gain (loss), net of bonuses (477) 693
Passenger revenue - mainline (excluding charter and regional
partner revenue) required to break-even (based on
adjusted amounts) $ 175,472 $ 134,676
========================
The calculation of the break-even load factor follows:
Quarters Ended June 30,
2004 2003
Calculation of mainline break-even load factor using GAAP amounts:
Passenger revenue - mainline (excluding charter and
regional partner revenue) required to break even (based
on GAAP amounts) ($000s) $ 176,826 $ 120,773
Mainline yield per RPM (cents) 10.79 12.30
Mainline revenue passenger miles (000s) to break even assuming
constant yield per RPM 1,638,795 981,894
Mainline available seat miles (000s) 2,211,652 1,675,050
========================
Mainline break-even load factor using GAAP amounts 74.1% 58.6%
========================
Calculation of mainline break-even load factor using Non-GAAP amounts:
Passenger revenue (excluding charter and regional partner
revenue) required to break even (based on adjusted
amounts) ($000s) $ 175,472 $ 134,676
Mainline yield per RPM (cents) 10.79 12.30
Mainline revenue passenger miles (000s) to break even assuming
constant yield per RPM 1,626,247 1,094,926
Mainline available seat miles (000s) 2,211,652 1,675,050
=======================
Mainline break-even load factor using non-GAAP amounts 73.5% 65.4%
=======================
2. "Yield per RPM" is determined by dividing passenger revenues (excluding charter revenue) by
revenue passenger miles.
3. For purposes of these yield calculations, charter revenue is excluded from passenger revenue.
These figures may be deemed non-GAAP financial measures under regulations 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 financial measures should not be viewed as a substitute
for our financial or statistical results based on GAAP. The calculation of passenger revenue
excluding charter revenue is as follows:
Quarters Ended June 30,
2004 2003
Passenger revenues - mainline, as reported $ 169,437 $ 139,010
Less: charter revenue 656 614
Passenger revenues - mainline excluding charter 168,781 138,396
Add: Passenger revenues - regional partner 19,126 -
Passenger revenues, system combined $ 187,907 $ 138,396
========================
4. This may be deemed a non-GAAP financial measure under regulations 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 financial measures
should not be viewed as a substitute for our financial results determined in accordance with GAAP.
5. In September 2003, we signed a 12-year agreement with Horizon, under which Horizon operates up
to nine 70-seat CRJ 700 aircraft under our Frontier JetExpress brand. The service began on January 1,
2004 and replaced our codeshare with Mesa Airlines which terminated on December 31, 2003. In accordance
with Emerging Issues Task Force No. 01-08, "Determining Whether an Arrangement Contains a Lease"
("EITF 01-08"), we have concluded that the Horizon agreement contains leases as the agreement conveys
the right to use a specific number and specific type of aircraft over a stated period of time.
Therefore, we began recording revenues and expenses related to the Horizon agreement gross. Under
the Mesa agreement, we recorded JetExpress revenues reduced by related expenses net in other
revenues. JetExpress operations under the Mesa agreement from April 1, 2003 to December 31, 2003
are not included in regional partner statistics in 2003 as the Mesa arrangement was effective prior
to May 28, 2003, the effective date of EITF 01-08.
Amounts included in other revenues for Mesa for the year ended March 31, 2004, and for the three months
ended June 30, 2004 and 2003 were as follows:
Quarters Ended June 30,
2004 2003
Mesa revenues (000s) $ - $ 7,847
Mesa expenses (000s) - (7,775)
Net amount included in other revenues $ - $ 72
========================
Mesa's revenue passenger miles (RPMs) and available seat miles (ASMs) for the year ended March 31,
2004 and for the three months ended June 30, 2004 and 2003 were as follows:
Quarters Ended June 30,
2004 2003
Mesa RPMs (000s) - 47,773
Mesa ASMs (000s) - 68,642
