Republic Airways Holdings Inc. (Indianapolis) has reported first quarter 2013 net income of $0.3 million, or $0.01 per diluted share, compared to a net loss of $7.1 million, or $0.15 per diluted share, in the first quarter 2012.
“I am pleased that during our seasonally most challenging quarter, we were able to restore our consolidated results to profitability,” said Bryan Bedford, Chairman and CEO of Republic Airways Holdings. “This is the first time in four years that we have produced positive earnings during the first quarter and our results reflect the continued improvement in the business and the substantial efforts of my coworkers and our senior leadership team.”
Republic Segment Summary
Republic revenues decreased 8.6% from the first quarter of 2012 to $324.7 million in the first quarter of 2013. Republic passenger service revenue decreased $52.2 million due to operating 12 fewer Embraer ERJ 190 aircraft under pro-rate operations with Frontier Airlines (2nd) (Denver). Five of the aircraft were moved into fixed-fee charter service, five aircraft were sold over the last two quarters, and two aircraft were returned to lessors. Fixed-fee service revenues increased 9.4% to $304.0 million, despite the removal of fuel expense and the related reimbursement on our United Embraer ERJ 170 fixed-fee agreement, which accounted for $24.6 million of revenues in the prior year’s first quarter. This reduction was more than offset by revenue from the growth in our Bombardier Q400 operations at United and our new ERJ 190 fixed-fee charter service agreement.
Fuel costs for Republic decreased $46.2 million to $13.6 million for the quarter. The fuel cost per gallon, including into-plane taxes and fees, increased to $3.86 per gallon in the first quarter of 2013, compared to $3.33 per gallon in the prior year’s first quarter. The fuel cost per gallon related to our fixed-fee charter agreement is generally higher than our pro-rate operations and is treated as a pass through cost under the agreement.
Pre-tax income improved to $20.6 million, from $10.9 million in the prior year’s first quarter. The prior year’s first quarter included $5.3 million of expense for idled aircraft, and this year’s first quarter includes the benefit of our ERJ restructuring effort completed in late 2012.
As of March 31, 2013, Republic operated 70 aircraft with 44-50 seats and 152 aircraft with 69-99 seats to support its fixed-fee commercial agreements. Under the pro-rate agreement with Frontier, Republic operated five 99-seat ERJ 190 aircraft. Compared to March 31, 2012, this reflects a net increase of six aircraft for the Republic segment. The Company has returned or subleased three ERJ aircraft, placed 16 Q400 aircraft into service, sold five ERJ 190 aircraft, and returned two ERJ 190 aircraft to the lessor over the past year.
Frontier Segment Summary
Frontier total revenues decreased 9.2% to $310.9 million for the quarter, compared to $342.4 million for the same period in 2012. Capacity on Frontier, as measured by available seat miles (ASMs), was down 12.6% from the prior year’s first quarter, as a result of four fewer Airbus aircraft in operation. Load factor for the first quarter was 87.8%, an increase of 3.1 points from the first quarter of 2012. Total revenue per ASM (TRASM) increased 3.9% to 11.86 cents in the first quarter 2013 from 11.41 cents in the first quarter 2012.
Fuel costs for Frontier were $118.0 million for the quarter, a decrease of $13.9 million from the prior year’s first quarter. The fuel cost per gallon, including into-plane taxes and fees, increased to $3.41 per gallon in the first quarter 2013, compared to $3.39 per gallon in the prior year’s first quarter. The first quarter 2013 result included a gain on fuel hedges of $0.4 million.
The operating unit cost for Frontier, excluding fuel, was 8.08 cents for the first quarter 2013, a 5.2% increase compared to 7.68 cents for the same quarter 2012.
For the quarter ended March 31, 2013, Frontier posted a pre-tax loss of $20.1 million compared to a pre-tax loss of $21.6 million for the quarter ended March 31, 2012. Frontier recorded $5.9 million, or 0.23 cents per ASM and $0.07 per diluted share, of aircraft return costs associated with the return of five leased Airbus A318 and A319 aircraft during the first quarter of 2013.
As of March 31, 2013, Frontier operated 56 Airbus aircraft compared to 60 Airbus aircraft as of March 31, 2012. Frontier returned two A318 aircraft and three A319 aircraft and took delivery of one leased A320 aircraft.
Recent Business Developments
On March 12, 2013, the Company received bankruptcy court approval of its capacity purchase agreement (CPA), as amended, with American Airlines to operate 47 ERJ aircraft in fixed-fee operations. The first aircraft is expected to be delivered in July and is scheduled to enter service for American on August 1, 2013. The Company anticipates taking delivery of 18 new E175 aircraft in 2013.
Balance Sheet and Liquidity
The Company’s total cash balance increased $34.2 million to $428.5 million as of March 31, 2013, compared to December 31, 2012. Restricted cash increased $35.8 million, to $182.9 million, from December 31, 2012. The Company’s unrestricted cash balance decreased $1.6 million, to $245.6 million, from December 31, 2012. A condensed cash flow statement has been included in the tables section of this release.
The Company’s debt decreased to $2.0 billion as of March 31, 2013, compared to $2.1 billion at December 31, 2012. As of March 31, 2013, almost 90% of the debt is at a fixed interest rate. The Company has significant long-term lease obligations for aircraft that are classified as operating leases and are not reflected as liabilities on the Company’s consolidated balance sheet. At a 6.0% discount factor, the present value of these lease obligations was approximately $0.9 billion and $1.0 billion as of March 31, 2013 and December 31, 2012, respectively. A condensed consolidated balance sheet has been provided in the tables section of this release.
Copyright Photo: Norbert G. Raith. Frontier is now expected to retire the last two Airbus A318s by early August. Airbus A318-111 N809FR (msn 3092) prepares to land in Atlanta.