Posted on: 30 April 2014 by Mark Howells
Republic Airways Holdings (RAH) has reported its financial results for the first quarter of 2014 (1Q14), including net income of $14.0 million, a $13.7 million increase from the first quarter of 2013 which was negatively impacted by $11.1 million of losses from discontinued operations at Frontier Airlines.
RAH’s 1Q14 pre-tax income from continuing operations was $22.8 million, an 18.1% increase over 1Q13 quarter. As of 31 December 2013, Republic had a significant amount of federal net operating loss carryforwards and does not anticipate paying significant federal taxes for the next several years.
RAH cancelled more than 12,400 flights during 1Q14, primarily because of severe weather in January and February. That was a 145% increase from the number of cancelled flights during 1Q13. These cancellations negatively impacted the pre-tax financial results by about $7.0 million during 1Q14.
On 11 February 2014, RAH announced the early termination of its 44 to 50 seat fixed-fee agreements with United Airlines and American Airlines, which were scheduled to terminate in 2014. These agreements are winding down between March and August 2014 and will result in the indefinite grounding of 27 small jet aircraft.
In 1Q14, RAH recorded an impairment of its owned ERJ 140 aircraft of $19.9 million and an $18.4 million gain on its Chautauqua restructuring asset. The company also sold one ERJ 145 for a book gain of $1.8 million during the quarter. The net of these three items improved pre-tax earnings by $0.3 million.
“I am pleased we were able to report improved first quarter financial results despite the most severe weather events in a single quarter I can recall in my 27 years of experience in the airline industry,” declared Republic Airways Holdings chairman, president and CEO, Bryan Bedford. “Our results demonstrate the stability and strength within our core fixed-fee business. We are committed to our guiding principles and strengthening our brand reliability and product quality for our partners, shareholders and employees.”
Operating revenues in 1Q14 increased $12.8 million, or 3.9%, from 1Q13 to $337.5 million. Fixed-fee service revenue increased $24.4 million, or 8.0%, to $328.4 million due to increased Q400 flying with United Airlines and increased E175 flying with American Airlines. Passenger service revenue decreased $15.2 million due to the removal of E190 aircraft operating under pro-rate agreement with Frontier Airlines in February 2014.
Fuel expense for 1Q14 decreased $6.3 million, or 46.3%, to $7.3 million primarily due to a 47.3% decrease in gallons consumed related to the reduction in pro-rate flying for Frontier. Fuel expense is primarily attributable to the fixed-fee charter operations and is a pass-through to RAH’s partners.
Landing fees and airport rents decreased $8.8 million or 55.0%, primarily due to United Airlines beginning to pay all landing fees in June 2013, and the reduced pro-rate flying for Frontier.
Other impairment charges reflect the full impairment of the carrying value of the company’s 11 owned ERJ 140s. The aircraft will be grounded indefinitely with the termination of the American Airlines 44-seat fixed-fee agreement.
The decrease in non-operating expenses relates to the $18.4 million fair value adjustment on the Chautauqua restructuring asset.
As of 31 March 2014, RAH operated a fleet of 247 aircraft. Within its fixed-fee and charter agreements, the company operated 68 aircraft with 44-50 seats and 179 aircraft with 69-99 seats.
During the first quarter of 2014, RAH took delivery of five Embraer 175s related to its American Airlines E175 fixed-fee agreement bringing the total to 24 of the 47 aircraft deliveries. The company expects to take delivery of 19 E175s during the remainder of 2014 and the remaining four aircraft in early 2015.