Posted on: 06 November 2013 by Mark Howells
Republic Airways Holdings has reported diluted earnings per share (EPS) from continuing operations for the third quarter of 2013 (3Q13) of $0.09, compared with $0.13 for the same period in 2012.
During 3Q13, the company recorded a non-cash impairment charge of $21.2 million, $13.0 million after-tax, to reduce the carrying value of seven owned Embraer E190s and write-off the maintenance deposits on three leased E190s. Income from continuing operations was $4.3 million compared with $6.3 million for the same period last year.
Excluding the E190 impairment charge, pre-tax income from continuing operations was $26.6 million, resulting in an adjusted pre-tax margin from continuing operations of 7.9%. Operating revenues in 3Q13 totalled $338.6 million, an increase of 0.4% compared with $337.4 million for 3Q12.
The company classified its Frontier Airlines business as discontinued operations due to the expected sale during the fourth quarter of 2013. Unless otherwise specified, all financial information disclosed in this release is from continuing operations.
On 1 October 2013, Republic reported that it had agreed to sell Frontier to an affiliate of Indigo Partners. On 6 November, Indigo informed the company that it had satisfied or waived certain key conditions to close under the transaction. The company expects the transaction to close later in November.
"The sale of Frontier will allow our management team to re-focus on our core business," explained Republic Airways chairman, president and chief executive officer Bryan Bedford. "We continue to be excited about the growth opportunities for our fixed-fee business and are focused on providing safe, reliable and low-cost solutions to each of our airline partner brands, including American Eagle, Delta Connection, United Express and US Airways Express.
"I'd like to personally thank each and every one of my Republic and Frontier co-workers for their outstanding service and dedication to customer service for our passengers and our partners. To all of you at Frontier, I wish you the very best," Bedford concluded.
In 3Q13 total operating revenues increased $1.2 million to $338.6 million. Fixed-fee service revenue increased by $51.6 million, or 19.2%, to $320.3 million due to an increase in Q400 flying with United Airlines, new fixed-fee E190 charter flying and new E175 flying with American Airlines. Passenger service revenue decreased $50.5 million due to a significant reduction in the number of E190 aircraft operating under the pro-rate agreement with Frontier.
Fuel costs for Republic decreased by $14.1 million to $11.3 million for 3Q13, due to a 4.7 million decrease in gallons consumed due to the reduced E190 pro-rate operations. The fuel cost per gallon, including into-plane taxes and fees, increased to $3.55 per gallon in 3Q13, compared with $3.21 per gallon in the prior year's third quarter. The fuel cost per gallon related to the fixed-fee charter agreement is generally higher than the pro-rate operations with Frontier and is treated as a pass through cost under the agreement.
Landing fees and airport rents decreased by $6.6 million to $7.9 million for the quarter. Beginning in June 2013, landing fee expense and the related pass-through reimbursement revenue were lower due to United paying airports directly for its associated landing fee costs.
At 30 September 2013, the company had a fleet of ten E190s, of which three were leased and seven were owned. Five of the aircraft operate within the fixed-fee charter agreement and the remainder were operating under the pro-rate agreement with Frontier. The company is working to sell, sublease or otherwise place into fixed-fee charter service the five aircraft operating in pro-rate service. During 3Q13, Republic recorded a non-cash impairment charge of $21.2 million to reduce the carrying value of owned E190s and expensed the deferred maintenance deposits on the leased E190s.
Income from discontinued operations, net of tax, increased by 52.8% from $19.5 million in 3Q12 to $29.8 million in 3Q13.