Frontier Shares Tumble After 3Q Net Loss

Jan. 30, 2006
The net loss was equal to about 28 cents a share, which included a 3-cent-per-share loss for special items.

DENVER_Shares of Frontier Airlines Inc. stock tumbled Friday after its $10.1 million net loss in the third quarter showed improvement yet missed analyst expectations.

The net loss was equal to about 28 cents a share, which included a 3-cent-per-share loss for special items. Analysts surveyed by Thomson Financial had forecast a loss of 19 cents a share.

Frontier said higher passenger revenue helped offset a jump in fuel prices and about $6 million in lost revenue as a result of service disrupted by hurricanes.

Frontier's stock fell 69 cents, or 8.9 percent, to close at $7.10 on the Nasdaq Stock Market, at the low end of a 52-week range of $6.97 $13.01.

Although the airline industry as a whole is hurt because of rising jet fuel costs, Frontier also is facing competition from low-cost Southwest Airlines Co. and UAL Corp.'s United Airlines, as it emerges from bankruptcy.

"You can tell the pressure's on Frontier," aviation analyst Ray Neidl of Calyon Securities said. "It's more than just Southwest. It's probably fuel more than anything else."

During a conference call with analysts, Frontier Senior Vice President John Happ said passenger traffic had risen 38 percent since Southwest started service Jan. 3 to Las Vegas, Phoenix and Chicago's Midway Airport.

"Since they entered the market, we have seen fares decrease about $10 to $30 depending on the market and the month," he said. "As you might expect, the lower fares have stimulated the market."

The Dallas-based Southwest's service overlaps about 11 percent of Frontier's mainline capacity, which will increase to 15.5 percent when Southwest starts flights from Denver to Baltimore and Salt Lake City, Happ said.

Reservations for February and March are ahead of last year's figures, which Happ credited to lower ticket fares. "While we are encouraged by the demand in traffic, it is too early to determine the net impact on unit revenues," he said.

Southwest Airlines spokeswoman Brandy King declined to release specific numbers on bookings or load factors for competitive reasons but said traffic has been higher than the carrier originally forecast. Full fares to the cities it serves from Denver International Airport have declined as much as 50 percent since Jan. 3, she said.

In the earnings released late Thursday, Frontier said the third-quarter results compared with a loss of $11.1 million, or 31 cents a share, for the comparable period of 2004.

The most recent results reflected $1.5 million in unrealized losses on fuel hedges and a $300,000 gain from the sale of Boeing aircraft parts. Special items in the previous quarter totaled a 7-cent-per-share loss.

Third-quarter revenue totaled $246.9 million, up from $208.2 million in the comparable quarter of the previous year.

Frontier flies to 47 cities in 28 states and seven cities in Mexico from its Denver hub.


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