Tag Archives: A318111

Republic Airways Holdings improves in the 1Q to a net profit of $300,000

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.

Frontier Airlines:

Denver Post: Indigo Partners is interested in acquiring Frontier Airlines

Frontier Airlines (2nd) (Denver) is currently a subsidiary of Republic Airways Holdings (Indianapolis). Republic has been preparing to spin off and sell Frontier since 2011.

According to the Denver Post and Dow Jones, Indigo Partners (Phoenix) and Anchorage Capital Group (New York) are now in discussions with Republic to possibly acquire Frontier.

Read the full Denver Post report: CLICK HERE

Read the WSJ report: CLICK HERE

According to CAPA, “Indigo Partners is a private equity firm established by Bill Franke in 2002 that pursues acquisitions and strategic investments in the air transportation and related industries. Headquartered in Phoenix, Arizona, with an office in Singapore, Indigo Partners has shown a preference for investing in low-cost carriers around the world. Low-cost carriers in which Indigo Partners has made investments in include Wizz Air, Avianova, Tiger Airways, Spirit Airlines and Mandala Airlines.”

If Indigo is successful in acquiring Frontier a merger with Spirit Airlines is very likely.

Meanwhile Southwest Airlines is gaining market share at Denver as Frontier adds routes away from the DEN hub.

Copyright Photo: Michael B. Ing. Are the colorful talking animal tails now an endangered species? Airbus A318-111 N803FR (msn 2017) approaches for landing at Los Angeles International Airport.

Frontier Airlines:

Republic Airways Holdings improves to a $51.3 million net profit in 2012

Republic Airways Holdings Inc. (Republic Airways) (Indianapolis) reported its full year 2012 net income of $51.3 million, or $1.02 per diluted share, a $203.1 million improvement from our full year 2011 results of a net loss of $151.8 million, or $3.14 per diluted share. The Company also reported fourth quarter 2012 net income of $12.6 million, or $0.25 per diluted share, a $136.1 million improvement over the fourth quarter 2011 net loss of $123.5 million, or $2.55 per diluted share.

“We’re pleased with the solid financial improvement we experienced in 2012,” said Republic Airways Holdings Chairman, President and CEO Bryan Bedford. “Our restructuring efforts in 2011 laid the foundation for Frontier to return to profitability in 2012, despite higher fuel costs. Our 50-seat RJ restructuring effort completed last October enabled us to return all of our idled aircraft to fixed-fee service with our partners and significantly reduced the financial burden associated with our Chautauqua operation.”

The Company incurred the following items in 2012:	Segment	Pre-tax amount	Period
* Loss on sale of E190s	Republic	$11.2 million	3Q-12
* Gain on sale of slots	Republic	($8.3) million	3Q-12
* Professional and legal fees related to restructuring	Republic	$4.3 million	4Q-12
* Restructuring and fleet transition expenses	Frontier	$15.5 million	4Q-12
* Frequent flyer adjustment to passenger revenue	Frontier	($9.8) million	4Q-12

The Company incurred the following items in 2011:	Segment	Pre-tax amount	Period
* Fleet transition expenses	Republic	$9.1 million	4Q-11
* Impairment of fleet asset values	Republic	$191.1 million	4Q-11
* Fleet transition expenses	Frontier	$32.3 million	4Q-11

Note: The amounts reported below for pre-tax income (loss) and net income (loss) exclude the impact of the items listed above. Please refer to the schedules at the end of this release for a tabular reconciliation of the Company’s GAAP pre-tax and after tax income (loss) to the ex-tem pre-tax and after-tax income (loss) and diluted earnings per share.

Consolidated Results (ex-items)

Excluding the items listed above, the Company reported 2012 full year net income of $59.0 million, or $1.15 per diluted share, as compared to a 2011 full year net loss of $6.2 million, or $0.13 per diluted share. For the fourth quarter of 2012 the Company reported net income of $18.5 million, or $0.35 per diluted share, as compared to the fourth quarter 2011 net income of $20.7 million, or $0.41 per diluted share.

Business Segment Presentation

The Company has adjusted its presentation of business segments in 2012 and has revised the prior year’s information to conform to the current period segment presentation. Reportable segments now consist of Republic and Frontier. The Republic segment includes all regional flying performed by sub-100-seat aircraft operating under either fixed-fee or pro-rate agreements, subleasing activities, regional charter operations as well as the cost of any unassigned regional aircraft. The Frontier segment includes passenger service revenues and expenses for operating Frontier’s Airbus fleet, as well as its charter and cargo operations.

Republic Segment Summary (ex-items)

Revenues for the year decreased 10.2% to $1,377.4 million. This was a result of a change in the mix of flying between pro-rate and fixed-fee operations and a $48.2 million reduction in fuel-related revenue under Republic’s fixed-fee agreements. Pre-tax income improved nearly 31% to $69.5 million for the year ended December 31, 2012, compared to $53.1 million for the prior year.

For the quarter, revenues decreased 8.9%, or $31.9 million to $327.4 million, compared to the prior year’s fourth quarter, due primarily to a decrease of $23.3 million in fuel reimbursement under Republic’s fixed-fee agreements. Effective July 1, 2012, Republic no longer records fuel expense and does not recognize fuel-related pass-through revenue under any of its fixed-fee agreements. The remainder of the decrease in revenue is due to the increase of Republic’s fixed-fee operations and reduction in pro-rate flying with Frontier.

Income before taxes was $24.1 million for the quarter, compared to pre-tax income of $23.3 million for the prior year’s fourth quarter. Fuel costs for Republic were $21.8 million for the quarter, a decrease of $38.5 million from the prior year’s fourth quarter, due to both the removal of fuel expense under Republic’s fixed-fee agreement with United and a reduction in pro-rate operations with Frontier. The price per gallon increased 9.1% from $3.19 in the fourth quarter of 2011 to $3.48 in the fourth quarter of 2012.

As of December 31, 2012, Republic operated 70 aircraft with 44-50 seats and 143 aircraft with 69-80 seats to support its fixed-fee commercial agreements. Additionally, Republic operated one aircraft with 50 seats and 12 aircraft with 99 seats under pro-rate agreements with Frontier.

Frontier Airlines Segment Summary (ex-items)

Frontier Airlines’ (2nd) (Denver) revenues for the year increased 7.0% to $1,423.7 million. On a 1.1% increase in capacity, unit revenues increased 5.8% to 11.96¢ from 11.30¢. Frontier’s pre-tax income improved $92.6 million to $29.6 million of income for 2012 compared to a pre-tax loss of $63.0 million for 2011.

For the quarter, decreased 1.1% to $334.9 million, compared to $338.5 million for the same period in 2011. Total revenue per ASM (“TRASM”) was 11.88¢, an increase of 2.9% from the same quarter in 2011, while capacity on Frontier decreased 4.0% from the prior year’s fourth quarter. Load factor for the fourth quarter was 88.9%, an increase of 0.7% from the fourth quarter of 2011.

For the quarter, Frontier posted pre-tax income of $7.3 million compared to pre-tax income of $10.1 million for the prior year’s fourth quarter. Fuel costs for Frontier were $128.2 million for the quarter, a decrease of $0.8 million from the prior year’s fourth quarter. The fuel cost per gallon, including into-plane taxes and fees, increased 6.5% to $3.42 for the fourth quarter of 2012, compared to $3.21 for last year’s fourth quarter. The fourth quarter results include an expense on fuel hedges of $0.5 million, or $0.01 per gallon, while the 2011 results include a benefit of $3.5 million, or $0.09 per gallon. Frontier has approximately 15% of its anticipated fuel consumption hedged through the second quarter of 2013.

Frontier’s operating unit cost was 7.03¢ for the quarter, a 3.4% increase compared to 6.80¢ for the same quarter in 2011.

As of December 31, 2012, Frontier operated a total of 55 Airbus aircraft versus 60 Airbus aircraft as of December 31, 2011.

Recent Business Developments

During the fourth quarter of 2012, the Company completed the restructuring of its 50-seat platform, Chautauqua Airlines, Inc. (Indianapolis). As a result of the restructuring, the Company expects to realize, on average, $45.0 million of cash flow improvement per year for the next five years and has reduced its aircraft rent and depreciation expense on its 50-seat aircraft. In addition, in order to finalize the restructuring, the Company issued a $25.0 million convertible note to one of the third parties involved in the restructuring. The note bears interest at a rate of 6.0% per annum and is convertible into 2.5 million shares of Republic Airways Holdings Inc. common stock.

On January 24, 2013, the Company entered into a capacity purchase agreement (“CPA”) with American Airlines which is subject to bankruptcy court approval. American filed a motion for approval of the CPA to be heard before the court on February 14, 2013. The hearing on that motion was subsequently adjourned until February 26, 2013. On February 14, 2013, US Airways and American Airlines announced a merger agreement. On February 21, 2013, the hearing on American’s motion to approve the CPA between the Company and American was adjourned to March 12, 2013.

On February 8, 2013, the Company announced the transition of nine ERJ 145 aircraft flying on Chautauqua Airlines, Inc. from US Airways to Delta Air Lines under separate amendments. The US Airways amendment provides for termination of the current aircraft operating under the Jet Service Agreement by July 2013. The Delta amendment extends the current term for certain aircraft, as well as adds ten aircraft into service during 2013.

Balance Sheet and Liquidity

The Company’s total cash balance increased $23.6 million to $394.3 million as of December 31, 2012, compared to December 31, 2011. Restricted cash decreased $4.3 million, to $147.1 million, from December 31, 2011. The Company’s unrestricted cash balance increased $27.9 million, to $247.2 million, from December 31, 2011. A condensed cash flow statement has been provided in the tables section of this release.

The Company’s debt decreased to $2.12 billion as of December 31, 2012, compared to $2.36 billion at December 31, 2011. As of December 31, 2012, almost 90% of the total 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 $1.0 billion and $1.2 billion as of December 31, 2012 and 2011, respectively.

Copyright Photo: Bruce Drum. Despite an expanding route map, Frontier’s Airbus fleet actually shrank from 60 aircraft on December 31, 2011 to 55 aircraft on December 31, 2012 as the airline began the phase out of the shorter Airbus A318s (now down to two aircraft). The higher-tail A318 cannot taxi under the Concourse A-Terminal connector at Denver International Airport. Now departed, A318-111 N801FR (msn 1939) arrives at Seattle-Tacoma International Airport from the Denver hub.

Republic Airways:

Frontier Airlines-Chautauqua Airlines:

Frontier Airlines (2nd):

Frontier Airlines will outsource its jobs at all stations except the Denver hub

Frontier Airlines (2nd) (Denver) according to the Denver Post will outsource 700 jobs at all of its outlying stations except the Denver hub. This will impact gate agents, ticket counter agents and ramp employees.

Read the full story: CLICK HERE

Copyright Photo: Bruce Drum. Frontier is also phasing out the remaining Airbus A318s. A318-111 N807FR (msn 2276) approaches the runway at Minneapolis-St. Paul International Airport.

Frontier Airlines: