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UPS produces an operating profit of $1.5 billion in the first quarter, down $106 million due to harsh winter weather

UPS (United Parcel Service) (UPS Airlines) (Atlanta) today released first quarter 2014 results. Diluted earnings per share totaled $0.98, a $0.06 decline from first quarter 2013 adjusted results. Operating profit for the quarter was $1.5 billion, down $106 million from the prior-year’s adjusted results. Unusually harsh weather weighed on operating profit by approximately $200 million, due to increased expenses and slower revenue growth. Average daily shipments in the U.S. climbed 4.2% driven primarily by large e-commerce shippers using lightweight deferred shipping solutions.

The International segment operating margin expanded to 14.0% on daily volume growth of 7.9%. Supply Chain and Freight experienced improved operating profit and margin expansion.

For the first quarter of 2013, UPS reported diluted earnings per share of $1.08, which includes $36 million in after-tax gains related to the attempted acquisition of TNT.

“Much of the U.S. economy was negatively affected by the severe weather conditions in the first quarter, resulting in lower UPS operating results versus the prior year,” said Scott Davis, UPS chairman and CEO. “International and the Supply Chain and Freight segment benefitted from positive momentum during the quarter as customers utilized the strategic investments made by UPS to strengthen our portfolio.”

Cash Flow

For the three months ended March 31, UPS generated $1.9 billion in free cash flow. The company paid dividends of $596 million, up 8.1% per share over the prior year, and repurchased 6.8 million shares for approximately $660 million.

U.S. Domestic Package

U.S. Domestic revenue increased 2.6% over the prior-year period, to $8.5 billion. Daily volume improved 4.2%, led by UPS SurePost and UPS Second Day Air.

The segment generated $927 million in operating profit, down $158 million compared to the prior year, due to the impact of severe winter weather. The company experienced lost revenue and additional cost as a result of significant network disruptions on more than half of the operating days during the quarter. Overtime wages, purchased transportation and snow removal costs increased substantially over the prior year. Operating margin contracted 220 basis points to 10.9%.

Revenue per package declined 1.5% from the previous year due to changes in customer and product mix, as well as lower fuel surcharges. Product mix continues to be impacted by the rapid increase of UPS SurePost. More e-commerce retailers are choosing this product to serve their value-conscious customers.
International Package

The International segment revenue improved 5.0% and produced operating profit of $438 million, 12% more than the prior-year adjusted results. Operating margin expanded to 14% driven by improved network efficiency and in-country leverage.

On a reported basis, the segment recorded operating profit growth of 24% more than the prior-year result of $352 million. This reflects the operating profit impact of a $39 million net charge in 2013, related to the attempted acquisition of TNT.

Export shipments climbed 7.7% driven by 15% growth in Europe and modest gains in Asia and the Americas. Transborder shipments in Europe continue to expand rapidly as customers migrate to Pan-European distribution using UPS solutions.

To support strong Intra-European growth and intercontinental trade, the company announced the completed expansion of its Cologne, Germany, air hub. This $200 million investment increased facility capacity by 70%.
Non-U.S. Domestic deliveries increased 8.1%, driven by growth in Europe and Canada. Poland led the European countries with more than 20% growth, while Germany and the U.K. contributed strong gains.

Average revenue per package declined 2.1% due to product mix changes as non-premium Export products jumped almost 13%, overshadowing improved growth in premium products.

Supply Chain & Freight

Supply Chain and Freight operating profit increased 3.5% to $148 million. Operating margin expanded 30 basis points to 6.8%, driven by gains in the Forwarding and Distribution units.

The Forwarding business delivered improved operating profit and margin gains during the quarter as the unit adapted to market changes. International Air Freight growth in shipments and tonnage were offset by lower revenue per pound. Ocean Freight and Brokerage showed both improved revenue and operating profit.
Gains from retail and healthcare customers drove higher revenue growth in the Distribution business unit.

Operating profit improved more than 10% despite additional expansion costs during the quarter.

UPS Freight revenue increased slightly on a 3.1% increase in LTL revenue per hundredweight. Both tonnage and operating profit were negatively impacted by the severe winter weather.


“During the quarter, the momentum of the underlying business was masked by the disruption of inclement weather,” said Kurt Kuehn, UPS chief financial officer. “We are encouraged by the positive trends in our business and expect the remainder of the year to perform as we originally guided. However, due to the challenging start to 2014, we anticipate diluted earnings per share to be at the low end of our full-year guidance range of $5.05 to $5.30.”

Copyright Photo: Tony Storck/AirlinersGallery.com. Boeing 767-34AF ER N328UP (msn 27754) in Blended Winglets prepares to land at Philadelphia International Airport (PHL).

UPS Airlines: AG Slide Show


Republic Airways Holdings reports net income of $25.8 million

Republic Airways Holdings Inc. (Indianapolis) reported net income of $25.8 million, or $0.51 per diluted share, for the quarter ended September 30, 2012. This compares to net income of $9.0 million, or $0.18 per diluted share, for the same period last year. Operating revenues of $713.1 million, decreased 7.1%, compared to $767.9 million for last year’s third quarter, on a 5.7% decrease in consolidated capacity.

The Company reported the following key metrics for the third quarter and first nine months of 2012:

Three months ended September 30, Nine months ended September 30,
(Unaudited) 2012 2011 % Change 2012 2011 % Change
(in millions, except as noted)
Consolidated operating revenues $ 713.1 $ 767.9 -7.1 % $ 2,138.8 $ 2,166.7 -1.3 %
Consolidated ASMs 6,472 6,863 -5.7 % 19,234 19,936 -3.5 %
Consolidated operating margin 10.3 % 6.4 % 3.9 pts 7.5 % 2.8 % 4.7 pts
Consolidated net income $ 25.8 $ 9.0 186.7 % $ 38.7 $ (28.3 ) 236.7 %
Diluted Earnings per share (dollars) $ 0.51 $ 0.18 183.3 % $ 0.79 $ (0.59 ) 233.9 %
Consolidated EBITDAR $ 183.1 $ 166.6 9.9 % $ 490.2 $ 405.9 20.8 %
Consolidated EBITDAR margin 25.7 % 21.7 % 4.0 pts 22.9 % 18.7 % 4.2 pts
Frontier total revenue per ASM (cents) 12.33 11.70 5.4 % 11.98 11.22 6.8 %
Frontier operating income (loss) $ 31.1 $ 0.1 nm $ 26.4 $ (67.9 ) nm
Frontier operating margin 8.3 % 0.0 % 8.3 pts 2.4 % -6.8 % 9.2 pts

Business Segment Presentation

As announced in the fourth quarter of 2011, 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

Republic revenues for the quarter decreased 14.9%, or $58.9 million, compared to the prior year’s third quarter, due primarily to a decrease of $29.3 million in fuel reimbursement under its 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 remaining revenue decrease is due to lower block hour production on Republic, which decreased 3.7% from the prior year’s third quarter, due mainly to 50-seat aircraft that remained unassigned after being discontinued from pro-rate operations in Milwaukee.

Income before taxes for Republic was $12.6 million for the quarter, compared to a pre-tax income of $16.7 million for the third quarter of 2011. Pre-tax results on Republic were negatively impacted by $2.9 million, or 0.08 cents per ASM of other expenses comprised of a loss of $11.2 million associated with the sale of five E190 aircraft which was partially offset by an $8.3 million gain on the sale of slots.

Fuel costs for Republic were $25.4 million for the quarter, a decrease of $53.7 million from the prior year’s third quarter, due mainly to the removal of any fuel expense under fixed-fee agreements. The price per gallon decreased 4.2% from $3.35 to $3.21 year over year for the quarter. The Company has removed more than 20 aircraft from pro-rate operations over the last twelve months, which resulted in lower fuel consumption in the third quarter of 2012. The majority of these aircraft have been placed into fixed-fee service or subleased.

Cost per Available Seat Mile (“CASM”), including interest expense but excluding fuel, increased 7.3% to 8.74¢ for the third quarter of 2012, from 8.15¢ for the same quarter of 2011. The increase is mainly due to expenses for aircraft that were unassigned and not producing ASMs during the quarter, and reduced seat count on our 58 US Airways E-jets, which have been reconfigured with first class cabins and approximately 7% fewer seats.

As of September 30, 2012, Republic operated 63 aircraft with 44-50 seats and 131 aircraft with 69-80 seats to support its fixed-fee commercial agreements. Additionally, Republic operated one aircraft with 50 seats and 17 aircraft with 99 seats under pro-rate agreements with Frontier. Nine 37- to 76-seat aircraft remained unassigned as of September 30, 2012.

Frontier Segment Summary

Total Frontier revenues increased 1.1% to $375.7 million for the quarter, compared to $371.6 million for the same period in 2011. Capacity on Frontier, as measured by ASMs, decreased 4.0% from the prior year’s third quarter. Load factor for the third quarter was 91.6%, an increase of 0.8 points from the third quarter of 2011. Total revenue per ASM (“TRASM”) was 12.33¢ for the quarter, an increase of 5.4% from the same quarter in 2011.

For the quarter ended September 30, 2012, Frontier posted pre-tax income of $29.8 million compared to a pre-tax loss of $1.5 million for the quarter ended September 30, 2011. The significant improvement in Frontier’s financial results was driven by solid unit revenue increases and lower unit costs as a result of the network and financial restructuring completed in 2011.

The operating unit cost for Frontier, excluding fuel, was 6.86¢ for the quarter, a 3.1% decrease compared to 7.08¢ for the same quarter in 2011. Frontier’s unit cost for the third quarter of 2012 includes approximately 0.34¢ related to expenses associated with pro-rate operations between Republic and Frontier.

Fuel costs for Frontier were $135.4 million for the quarter, a decrease of $11.3 million from the prior year’s third quarter. The fuel cost per gallon, including into-plane taxes and fees, decreased 3.2% to $3.31 for the third quarter of 2012, compared to $3.42 for last year’s third quarter. The third quarter results include a benefit on fuel hedges of $1.6 million, or $0.04 per gallon, while the 2011 results include an expense of $5.0 million, or $0.12 per gallon. Frontier currently has approximately ten percent of its anticipated Airbus fuel consumption hedged through March 31, 2013.

As of September 30, 2012, Frontier operated a total of 57 Airbus aircraft versus 59 Airbus aircraft as of September 30, 2011. One A319 aircraft was removed from operations during the quarter to prepare the aircraft for return to the lessor during the fourth quarter.

Recent Business Developments

On July 25, 2012, the Company announced the sale of five E190 aircraft to US Airways. Three of the aircraft will be delivered in the fourth quarter of 2012, and the remaining two aircraft are planned for delivery in the first quarter of 2013.

On October 25, 2012, the Company announced it had entered into a multi-year charter contract to operate five E190 aircraft on behalf of Caesars Entertainment Operating Company. The aircraft are expected to go into charter service in January 2013 and will be sourced through a reduction in E190 pro-rate operations between Republic and Frontier.

On October 26, 2012, the Company amended its contract with Delta Air Lines to operate an additional seven 50-seat E145 aircraft under its existing capacity purchase agreement for a one-year period. All seven aircraft are expected to be in service before the end of 2012. The Company does not expect to have any unassigned aircraft by the end of 2012.

On October 29, 2012, the Company finalized restructuring agreements with several key stakeholders on its 50-seat regional jet program. The agreements, combined with other business improvement initiatives, are expected to improve the operating cash flow of the Company by approximately $45 million annually over the next five years. However, the Company is still in negotiations with several other critical stakeholders which are necessary to complete the comprehensive restructuring effort for Chautauqua Airlines.

Balance Sheet and Liquidity

The Company’s total cash balance increased $46.6 million to $417.3 million as of September 30, 2012, compared to December 31, 2011. Restricted cash increased $38.7 million, to $190.1 million, from December 31, 2011. The Company’s unrestricted cash balance increased $7.9 million, to $227.2 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 $2.20 billion as of September 30, 2012, compared to $2.36 billion at December 31, 2011. As of September 30, 2012, approximately 85% 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 $1.07 billion and $1.20 billion as of September 30, 2012 and December 31, 2011, respectively. A condensed balance sheet as of September 30, 2012 and December 31, 2011 has been provided in the tables section of this release.

Corporate Information

Republic Airways Holdings, based in Indianapolis, Indiana, is an airline holding company that owns Chautauqua Airlines, Frontier Airlines, Republic Airlines and Shuttle America, collectively “the airlines.” The airlines operate a combined fleet of more than 280 aircraft and offer scheduled passenger service on nearly 1,500 flights daily to over 135 cities in the U.S. as well as to the Bahamas, Canada, Costa Rica, Dominican Republic, Jamaica, Mexico and the Turks and Caicos islands under branded operations at Frontier, and through fixed-fee flights operated under airline partner brands, including AmericanConnection, Continental Express, Delta Connection, United Express, and US Airways Express. The airlines currently employ approximately 10,000 aviation professionals.

Copyright Photo: Brian McDonough. Operated in the Republic Airways in-house brand, Embraer ERJ 170-100SU N806MD (msn 17000019) pictured departing from Philadelphia, is actually operated by subsidiary Republic Airlines (2nd).

Republic Airways-Republic Airlines (2nd): 

JetBlue Airways to introduce a new advertising campaign today

JetBlue Airways (New York) today (October 15) will debut a new marketing campaign. According to the airline: “The campaign is designed to position the iconic brand as a continued leader well into its second decade of operations. The campaign features the introduction of a newly articulated JetBlue brand promise – You Above All – a restatement of JetBlue’s commitment to putting people first that was founded on the company’s original and ongoing mission to bring humanity back to air travel.”

You Above All is designed to shine a light on the airline’s key competitive differences and to celebrate its crewmembers’ long-standing efforts to provide a superior travel experience – an experience that has been lauded as JetBlue has grown, over the past ten years, from its New York roots to now serve 61 cities in 12 countries throughout the Americas.

“In so many ways, this exciting new marketing campaign speaks to the core of who we are as a brand,” said Marty St. George, senior vice president of marketing and commercial strategy at JetBlue. “You Above All is authentic. It’s transparent. It’s understandable. Quite simply, it’s very JetBlue. As we move into our second decade of service, You Above All underscores our commitment to always put people first, to bring humanity back to air travel. That’s a message we can all relate to, whether we take to the skies once a year or once a week.”

The campaign, the first that JetBlue has developed in partnership with its new advertising and media agency-of-record Mullen, features a comprehensive mix of media including online, social media, in-flight, print, and out-of-home components.

The online portion features a series of hidden camera scenarios called Ground Rules. The unscripted videos point out the shortcomings of much of the airline industry by bringing other airlines’ service policies and procedures to light on the ground. They feature real people in real situations being deprived of things they’ve come to expect, such as legroom in a taxi, a full can of soda from a street vendor and free luggage storage in the trunk of a taxi. The videos will debut in a YouTube homepage takeover on Friday.

You Above All creative uses a colorful, modern, simple illustration style to depict travelers, the airline’s key product and service offerings, and its destinations. A key element of the creative is what the airline has dubbed “I-People,” a visual representation of the brand’s focus on humanity, that are used to create a flexible, identifiable look that is significantly different from other carriers.

In a first for JetBlue, the airline will also take advantage of so-called “Monster Media” technology in Boston, Los Angeles and New York. These interactive billboards respond to the motion of consumers passing by them, to create an animated experience which literally places consumers in the airline’s advertising.

The campaign includes a series of call-outs explaining JetBlue’s superior service offering, including the following lines:

“Overpack. Underpay. First bag flies for free.”

“Mix business with legroom. The most legroom in coach.”

“Room. With a view. The most legroom in coach and free DIRECTV®.”

“Someone has to stand-up for tall people. The most legroom in coach.”

“Our standards beat their extras. Unlimited brand-name snacks and soft drinks.”

You can view and download examples of the creative on the following site:


Copyright Photo: Tony Storck. Airbus A320-232 N569JB (msn 2075) in the special 10th Anniversary scheme soars high at Philadelphia.

SkyWest Airlines’ flight 3074 makes a left main gear-up landing at Milwaukee

SkyWest Airlines’ (St. George) flight 3074 being operated under the AirTran Airways code was forced to make a left main gear-up landing at Milwaukee last night on a flight from Omaha. The Bombardier CRJ200 registered N498CA (msn 7792) with 36 passengers and three crew on board landed safely on runway 07R with no injuries. The regional jet skidded on the runway with the left main gear retracted.

Read the full report (with a video newscast) from KETV Channel 7 in Omaha:


Top Copyright Photo: Joe Osciak. Sister ship CRJ200 (CL-600-2B19) N495CA (msn 7774) arrives at Philadelphia.

Bottom Copyright Photo: Joe G. Walker. CRJ200 (CL-600-2B19) N498CA (msn 7792) is pictured at Milwaukee before the incident.

Copyright Photo: Joe G. Walker.

Chautauqua Airlines paints its first ERJ in the Frontier Airlines brand

N271SK, originally uploaded by PHLAIRLINE.COM.

Chautauqua Alines (Indianapolis) has painted its first Embraer ERJ in the Frontier Airlines (2nd) brand.

Copyright Photo: Paul Kanagie/PHLAIRLINE.COM. ERJ 145LR (EMB-145LR) N271SK (msn 145305) prepares to land at Philadelphia on June 18.

SkyWest Airlines introduces a new house livery

SkyWest Airlines (St. George) in late 2009 introduced a new house livery.

Copyright Photo: Joe Osciak. Bombardier CRJ200 (CL-600-2B19) N495CA (msn 7774) prepares to land at Philadelphia in the new look.