NEWS
FOR IMMEDIATE RELEASE
Frontier Airlines Reports Fiscal Second Quarter 2005 Results
DENVER (October 28, 2004) - Frontier Airlines, Inc. (Nasdaq: FRNT) today reported a net loss of
$2.1 million, or $.06 per diluted common share, for the airline's fiscal second quarter ended September 30,
2004 compared to net income of $2.0 million, or $0.06 per diluted common share, for the same period last year.
Included in the net loss for the three months ended September 30, 2004 were the following special items on a
pre-tax basis: a write down of $4.3 million of the carrying value of Boeing expendable inventory, rotable parts
and a spare engine offset by an unrealized gain on fuel hedge derivatives of $4.1 million. These items, net of
income taxes, increased the airline's net loss by approximately $.01 per share. The Company's net income for
the three months ended September 30, 2003 included the following special items on a pre-tax and profit sharing
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 $4.7 million; a loss of $1.9 million on the sale of one Airbus aircraft in a sale-leaseback transaction, the
sale of a spare engine and other assets; and an unrealized derivative loss of $0.3 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, "As an industry, we continue to find ourselves in an environment
with record-high fuel prices and one of the most difficult yield environments that Frontier and the industry have
ever faced. In spite of these challenges, Frontier and its 4,500 employees continued to do what we have always
done in the face of adversity--we maintained focus on our costs and factors we can control, and we continue to make
improvements to our product. The results of those efforts included an industry-leading 12.8 percent year-over-year
decline in mainline unit costs excluding fuel and special items. This third straight quarter of cost declines excluding
fuel is a tangible indicator that we are doing the right things to better insulate ourselves during this extremely
challenging time."
Operating Highlights
Mainline passenger revenue increased as mainline revenue passenger miles (RPMs) grew at a rate of 31.9 percent during
the fiscal second quarter, while mainline capacity growth as measured by mainline available seat miles (ASMs) increased
38.5 percent from the same quarter last year. As a result, the airline's mainline load factor was 72.9 percent for its
fiscal second quarter of 2005, 3.7 load factor points less than the airline's mainline load factor of 76.6 percent during
the same quarter last year. The airline's mainline breakeven load factor for the fiscal second quarter 2005 increased 5.7
load factor points from 67.7 percent to 73.4 percent. Frontier's mainline breakeven load factor increased from the prior
comparable period as a result of a decrease in our mainline yield per RPM to 10.74 cents during the quarter ended September
30, 2004 from 12.09 cents, or 11.2 percent, partially offset by a decrease in the airline's mainline cost per available
seat mile (CASM).
During the fiscal second quarter 2005, the airline's mainline passenger revenue per available seat mile (RASM) decreased
15.3 percent to 7.84 cents from the same quarter last year. The decrease in mainline RASM was due to the combination of
a 11.2 percent mainline yield per RPM decrease on a year-over-year basis and the 3.7 point load factor reduction.
Contributing to the yield decline were introductory fares offered in six new markets started in the June 2004 quarter and
a 9.8 percent increase in average length of haul on a year-over-year basis.
The airline's mainline CASM for the fiscal second quarter, excluding special items, decreased 3.8 percent to 8.02 cents
from 8.35 cents for the same quarter last year. Mainline fuel cost per gallon during the quarter, excluding the unrealized
gain on fuel hedge derivatives, but including taxes and delivery charges, increased 39.6 percent to $1.41 compared to $1.01
for the same period last year. Mainline CASM, excluding fuel and special items, decreased 12.8 percent to 5.98 cents from
the same period last year, when CASM excluding fuel and special items was 6.86 cents.
Senior Vice President and Chief Financial Officer Paul Tate discussed the airline's year-over-year unit cost comparatives
stating, "Our fiscal second quarter generated continued improvement in our mainline CASM, both including and excluding
fuel, principally driven by a 12.0 percent improvement in mainline aircraft utilization and a 12.8 percent increase in
average mainline stage length, despite incurring costs associated with our continuing transition to an all-Airbus fleet
and a pilot salary increase in June, 2004."
The airline's current unrestricted cash and working capital position as of September 30, 2004 was $160.1 million and $67.3
million, respectively. This compares to the company's unrestricted cash and working capital position for the same period
last year of $201.3 million and $118.2 million, respectively.
The airline's fleet in service on September 30, 2004 consisted of 14 owned Airbus A319 and A318 aircraft, 24 leased Airbus
A319 and A318 aircraft and six leased Boeing 737 aircraft. Given the current yield environment combined with on-going high
fuel prices, the company has elected to accelerate its transition to an all Airbus fleet by approximately four months to
April 11, 2005. As a result, the company will discontinue operation of its last three Boeing aircraft between two and 14
months prior to the original lease return dates.
Business developments during the quarter included:
o Celebrated 10 years of service on July 5, 2004.
o Celebrated 25 million passenger enplanements.
o Took delivery of two new Airbus A319 and retired three Boeing 737 aircraft, for a net decrease of one aircraft
and a fleet total of 45 available for revenue service by quarter's end.
o Announced plans to serve Little Rock, Arkansas with two daily round-trip flights.
o Received authorization to fly from Austin and Nashville to Cancun, Mexico, bringing the only scheduled non-stop
service to those markets.
o Entered into a three-year agreement as the official airline of the University of Wyoming's Athletic Department.
o Received Federal Aviation Administration approval to begin Category II/III certification, which allows the
airline's pilots to land in reduced visibility.
o Kicked off W!LD Blue Yonder Magazine and programming, an enhancement to the airline's on-board DIRECTV offering.
Potter concluded, "Operationally, we continued to run a great airline this past quarter. With a 31.9 percent increase
in mainline RPM, we continued to build a loyal customer base as we exceeded one million members in our EarlyReturns
frequent flyer program. Looking ahead, our future bookings appear strong and we remain hopeful that we'll continue to
see the positive customer response to our product as we head into the holiday period. However, we know that in this
challenging environment, we can never rest on our accomplishments, which is why I thank each of our employees for their
ongoing efforts in lowering our costs while maintaining the highest standard of service for our customers."
Senior leadership will host a conference call to discuss Frontier's quarterly earnings on October 29, 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=89680.
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 47 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 27 states spanning the nation from coast-to-coast and to five cities in Mexico and seasonal service to
Anchorage, Alaska. 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)
Quarter Ended Quarter Ended
September 30, September 30,
2004 2003
Balance Sheet Data (In thousands):
Cash, cash equivalents and
short-term investments $ 160,053 $ 203,332
Current assets 265,019 271,959
Total assets 784,122 741,615
Current liabilities 197,702 153,770
Long-term debt 292,049 279,379
Total liabilities 533,038 486,161
Stockholders' equity 251,084 255,453
Working capital 67,317 118,189
FRONTIER AIRLINES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(unaudited)
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
Revenues:
Passenger $188,173,402 $159,946,008 $357,610,883 $298,955,554
Passenger- regional partner 21,909,768 - 41,036,213 -
Cargo 1,246,009 2,369,222 2,673,504 4,058,247
Other 3,105,595 3,305,382 5,537,244 4,972,761
Total revenues 214,434,774 165,620,612 406,857,844 307,986,562
Operating expenses:
Flight operations 31,772,649 24,347,276 63,561,813 49,320,594
Aircraft fuel expense 44,715,069 25,900,551 84,718,251 48,501,320
Aircraft lease expense 22,307,400 17,920,718 41,198,226 35,112,721
Aircraft and traffic servicing 31,229,011 26,077,456 62,921,215 50,074,966
Maintenance 19,261,318 17,120,004 38,155,915 34,997,976
Promotion and sales 19,250,304 16,269,951 39,088,980 30,989,948
General and administrative 12,033,531 9,784,376 22,327,775 18,720,012
Operating expenses - regional partner 23,568,339 - 44,861,774 -
Aircraft lease and facility exit costs - 4,659,058 - 5,345,353
Losses on sales of assets, net 74,404 1,883,466 604,231 1,902,055
Impairment and other related charges 4,213,565 - 4,601,200 -
Depreciation and amortization 6,606,142 5,870,300 13,224,581 11,057,498
Total operating expenses 215,031,732 149,833,156 415,263,961 286,022,443
Operating income (loss) (596,958) 15,787,456 (8,406,117) 21,964,119
Nonoperating income (expense):
Interest income 785,699 524,468 1,356,269 937,831
Interest expense (3,112,843) (4,034,387) (6,020,859) (7,868,780)
Early Extinguishment of debt - (8,742,489) - (8,742,489)
Emergency Wartime Supplemental
Appropriations Act compensation - - - 15,024,188
Other, net (103,353) (30,470) (168,717) (187,974)
Total nonoperating income
(expense), net (2,430,497) (12,282,878) (4,833,307) (837,224)
Income (loss) before income tax (benefit)
expense (3,027,455) 3,504,578 (13,239,424) 21,126,895
Income tax (benefit) expense (945,485) 1,506,855 (4,583,736) 8,195,482
Net income (loss) $(2,081,970) $1,997,723 $(8,655,688) $12,931,413
================================================================
Earnings (loss) per share:
Basic $ (0.06) $ 0.07 $ (0.24) $ 0.43
================================================================
Diluted $ (0.06) $ 0.06 $ (0.24) $ 0.40
================================================================
Weighted average shares of
common stock outstanding
Basic 35,609,942 30,440,589 35,606,702 30,133,571
================================================================
Diluted 35,609,942 33,620,352 35,606,702 32,514,599
================================================================
FRONTIER AIRLINES, INC.
COMPARATIVE OPERATING STATISTICS
(unaudited)
Three Months Ended September 30, Six Months Ended September 30,
2004 2003 2004 2003
Selected Operating Data:
Passenger revenue (000s)
Mainline $ 188,173 $ 159,946 $ 357,611 $ 298,956
Regional Partner (5) 21,910 - 41,036 -
System Combined 210,083 $ 159,946 $ 398,647 $ 298,956
Revenue passengers carried (000s)
Mainline 1,750 1,457 3,334 2,684
Regional Partner (5) 233 - 436 -
System Combined 1,983 1,457 3,770 2,684
Revenue passenger miles (RPMs) (000s)
Mainline 1,738,682 1,318,020 3,303,269 2,443,253
Regional Partner (5) 142,157 - 273,711 -
System Combined 1,880,839 1,318,020 3,576,980 2,443,253
Available seat miles (ASMs) (000s)
Mainline 2,383,573 1,721,397 4,595,225 3,396,447
Regional Partner (5) 190,771 - 368,349 -
System Combined 2,574,344 1,721,397 4,963,574 3,396,447
Passenger load factor
Mainline 72.9% 76.6% 71.9% 71.9%
Regional Partner (5) 74.5% - 74.3% -
System Combined 73.1% 76.6% 72.1% 71.9%
Mainline break-even load factor (1) 73.4% 67.7% 73.5% 66.6%
Mainline block hours 47,086 33,908 91,060 67,035
Mainline departures 18,937 15,078 36,587 29,688
Mainline average seats per departure 130 133 130 133
Mainline average stage length 968 858 966 860
Mainline average length of haul 994 905 991 910
Mainline average daily block hour utilization 11.2 10.0 11.4 10.1
Yield per RPM (cents) (2) (3)
Mainline 10.74 12.09 10.76 12.19
Regional Partner (5) 15.41 - 14.99 -
System Combined 11.10 12.09 11.09 12.19
Total yield per RPM (cents)
Mainline 11.07 12.57 11.07 12.61
Regional Partner (5) 15.41 - 14.99 -
System Combined 11.40 12.57 11.37 12.61
Yield per ASM (cents) (3)
Mainline 7.84 9.26 7.74 8.77
Regional Partner (5) 11.48 - 11.14 -
System Combined 8.11 9.26 7.99 8.77
Total yield per ASM (cents)
Mainline 8.08 9.62 7.96 9.07
Regional Partner (5) 11.48 - 11.14 -
System Combined 8.33 9.62 8.20 9.07
FRONTIER AIRLINES, INC.
Comparative operating statistics, unaudited
Continued
Three Months Ended September 30, Six Months Ended September 30,
2004 2003 2004 2003
Selected Operating Data (continued):
Cost per ASM (cents)
Mainline 8.03 8.70 8.06 8.42
Regional Partner (5) 12.35 - 12.18 -
System Combined 8.35 8.70 8.37 8.42
Mainline fuel expense per ASM (cents) (4) 1.87 1.50 1.84 1.43
Mainline cost per ASM excluding
fuel (cents) 6.16 7.20 6.22 6.99
Mainline average fare $ 100.05 $ 103.40 $ 100.26 $ 103.98
Mainline average aircraft in service 45.5 37.0 43.5 36.3
Mainline aircraft in service at end of period 44.0 38.0 44.0 38.0
Mainline average age of aircraft at end of period 2.7 4.6 2.7 4.6
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:
Three Months Six Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
(In thousands) (In thousands)
Net (income) loss $ 2,082 $ (1,998) $ 8,656 $ (12,931)
Income tax (expense) benefit 945 (1,507) 4,584 (8,195)
Passenger revenue 188,173 159,946 357,611 298,956
Revenue - regional partner 21,910 - 41,036 -
Charter revenue (1,384) (580) (2,040) (1,194)
Operating expenses - regional partner (23,568) - (44,862) -
Passenger revenue - mainline (excluding
charter and regional partner revenue)
required to break even (based on GAAP amounts) $ 188,158 $ 155,861 $ 364,985 $ 276,636
Non-GAAP adjustments:
Emergency Wartime Supplemental Appropriations
Act compensation, net of bonuses - - - 13,842
Aircraft and facility lease exit costs,
net of bonuses - (4,292) - (4,924)
Early retirement of debt costs, net of bonuses - (8,624) - (8,624)
Losses on sales of assets, net of bonuses (74) (1,735) (604) (1,752)
Impairment and other related charges (4,214) - (4,601) -
Unrealized derivative gain (loss), net
of bonuses 4,111 (254) 3,634 438
Passenger revenue- mainline (excluding charter
and regional partner revenue) required to
break-even (based on adjusted amounts) $ 187,981 $ 140,956 $ 363,414 $ 275,616
==================================================
The calculation of the break-even load factor follows:
Three Months Six Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
(In thousands) (In thousands)
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) $ 188,158 $ 155,861 $ 364,985 $ 276,636
Mainline yield per RPM (cents) 10.74 12.09 10.76 12.19
Mainline revenue passenger miles (000s) to
break even assuming constant yield per RPM 1,751,937 1,289,173 3,392,054 2,269,368
Mainline available seat miles (000's) 2,383,573 1,721,397 4,595,225 3,396,447
==================================================
Mainline break-even load factor using
GAAP amounts 73.5% 74.9% 73.8% 66.8%
==================================================
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) $ 187,981 $ 140,956 $ 363,414 $ 275,615
Mainline yield per RPM (cents) 10.74 12.09 10.76 12.19
Mainline revenue passenger miles (000s) to
break even assuming constant yield per RPM 1,750,289 1,165,889 3,377,454 2,260,993
Mainline available seat miles (000's) 2,383,573 1,721,397 4,595,225 3,396,447
==================================================
Mainline break-even load factor using
non-GAAP amounts 73.4% 67.7% 73.5% 66.6%
==================================================
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 September 30, Six Months Ended September 30,
2004 2003 2004 2003
Passenger revenues - mainline, as
reported $ 188,173 $ 159,946 $ 357,611 $ 298,956
Less: charter revenue 1,384 580 2,040 1,194
Passenger revenues - mainline
excluding charter 186,789 159,366 355,571 297,762
Add: Passenger revenues -
regional partner 21,910 - 41,036 -
Passenger revenues, system combined $ 208,699 $ 159,366 $ 396,607 $ 297,762
============== ============== ============== ==============
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.
Three Months Ended September 30, Six Months Ended September 30,
2004 2003 2004 2003
Mesa revenues (000s) $ - $ 9,795 $ - $ 17,642
Mesa expenses (000s) - (8,261) - (16,036)
Net amount included in other revenues $ $ 1,534 $ - $ 1,606
=====================================================================
Mesa's revenue passenger miles (RPMs) and available seat miles (ASMs) for the three months ended September
30, 2004 and 2003 were as follows:
Three Months Ended September 30, Six Months Ended September 30,
2004 2003 2004 2003
Mesa RPMs (000s) - 56,756 - 104,529
Mesa ASMs (000s) - 69,660 - 138,302
