Frontier Airlines' Profit Falls

Frontier Airlines Holdings Inc. said Thursday its second-quarter net income plunged to a small profit as it battled hefty fuel costs and lost business because of heightened airport security.

The discount carrier also said overall revenue rose as its aircraft occupancy rate rose to 77.5 percent and other industry measurements improved.

'I am very pleased to say that we were able to maintain profitability for a second consecutive quarter,' Frontier Airlines Chief Executive Officer Jeff Potter said in a statement.

Frontier released the results for the quarter ended Sept. 30 after the market closed, reporting net income of $509,000, or 1 cent a share, compared with $6.9 million, or 18 cents a share, in the second quarter of the previous fiscal year.

The latest quarter reflected derivative losses that increased fuel expenses by $3.5 million and a $300,000 net gain on the sale of aircraft assets. The special items, net of income taxes and bonuses, decreased net income by 5 cents a share.

The 2005 quarter included $900,000 in gains on fuel hedges and the sale of aircraft assets that, net of income taxes, increased net income by 2 cents a share.

Second-quarter revenue totaled $309.9 million up from $258.4 million for the 2005 second quarter.

Analysts surveyed by Thomson Financial, on average, had forecast earnings of 5 cents a share on revenue of $295.5 million.

The results were on the low end of guidance that Frontier provided earlier this month when it said passenger travel had been hurt by heightened security in the wake of an alleged terror plot in Britain.

At the time, Frontier had forecast second-quarter earnings from 1 cent to 5 cents a share down from a previous forecast of 10 cents a share excluding the impact of unrealized fuel derivative gains and losses.

'We estimate that the security scare out of London probably cost us $3 (million) to $4 million in the month of September of lost revenue,' Frontier Chief Financial Officer Paul Tate said in an interview with The Associated Press.

'We could very clearly see a significant drop in the bookings right on Aug. 10, which is the day that it happened,' he said.

Before the earnings were released, Calyon Securities aviation analyst Ray Neidl said the security restrictions, which he dubbed the 'hassle factor,' seemed to have hurt domestic airlines more than those that travel overseas because passengers could opt for automobiles or trains on short trips.

He also said many carriers have reported traffic is returning to normal levels. Tate said Frontier has seen a similar improvement.

Fuel cost in the second quarter averaged $2.43 per gallon, up 25 percent from the 2005 second quarter. Tate said the cost since has dropped to around $2 a gallon.

In the first six months, Frontier said net income totaled $4.5 million, or 12 cents a share, compared with $4.2 million, or 11 cents a share, in the first six months of 2005. Revenue totaled $611.9 million up from $494.8 million.

The company said the October-December quarter should end with break-even or near break-even results as fuel costs have dropped and its service to Mexico is picking up for the winter season.

Frontier's shares closed up 15 cents a share, or 1.8 percent, at $8.29 a share on the Nasdaq Stock Market. The price has ranged between $5.66 a share and $9.98 a share in the past year.

Denver-based Frontier operates a hub at Denver International Airport where its chief competitors are discount Southwest Airlines and United Airlines.

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