Frontier Takes $10.4 Million Quarterly Loss

May 25, 2007
Weather disruptions, sagging demand and fierce competition contributed to a $10.4 million net loss

Weather disruptions, sagging demand and fierce competition contributed to a $10.4 million net loss for Frontier Airlines during the first three months of the year.

The Denver-based carrier, which released its fiscal fourth- quarter results Thursday, called the period "one of the toughest that we have faced financially."

Frontier "continued to suffer the impacts of the winter storms in Denver that began in December 2006 and carried through into January 2007," Jeff Potter, the company's president and chief executive officer, said in a release. "And we were hampered through the quarter by adverse weather around the country."

The loss amounted to 29 cents per common share, which includes special items that reduced losses by 14 cents per share. That compares with a deficit of $7.9 million, or 22 cents per common share, a year earlier. Revenue climbed to $282.4 million, up 11 percent from the year-ago period.

For the year, Frontier lost $20.4 million on $1.2 billion in revenues vs. a $14 million loss on $1 billion in revenues the previous year. It has lost money for three straight years.

The carrier is battling intense competition at its Denver hub, where fares on some routes have dropped substantially since Southwest Airlines arrived early last year. That's taken a bite out of Frontier's bottom line, though the carrier says it thinks fares on some routes have bottomed out.

"We're really pretty bullish in how we're doing vs. the competition," said Paul Tate, Frontier's chief financial officer. "We're seeing positive year-over- year revenue trends as we come into the June quarter in virtually all of the markets where we compete against Southwest."

Frontier was hit hard in December when back-to-back storms caused havoc for airlines, grounding thousands of flights at Denver International Airport. The carrier continued to feel the ripples in January, and it dealt with adverse weather across its system through March.

The carrier recorded $3.8 million in weather-related expenses and $1.5 million that went toward its new Lynx Aviation subsidiary, sending a key measure of costs up nearly 4 percent.

Frontier bolstered its overall capacity by 12.5 percent. Occupancy, though, slipped by two percentage points, meaning its planes were less full than a year earlier.

Still, Frontier said it has made numerous operational improvements, and it continues to diversify into new kinds of markets. The carrier's ancillary revenue from in-flight TV and other sources jumped 34 percent for the year. Frontier said it plans to announce a new vacation product this year that will further boost ancillary revenue.


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