Republic Airways reports small profit for 3Q11

Republic Airways Holdings has reported key financial results for the third quarter of 2011 (3Q11) to the end of September, including net income of $9.0 million, compared with net income of $21.2 million in 3Q10.

The total operating revenues for 3Q11 amounted to $767.9 million, up by 7.9% from the $711.9 million in the same period last year. Operating income was down by 32.9% at $48.9 million from $72.9 million, with an operating margin in 3Q11 of 6.4%, a fall of 3.8 percentage points from 3Q10’s figure of 10.2%. The EBITDAR for 3Q11 was $166.7 million compared with $184.7 million in 3Q10, a 9.7% decrease.

“We are pleased to report ex-item profitability on each of our business segments for the quarter, especially in light of stubbornly high oil prices,” declared Bryan Bedford, chairman and CEO of Republic Airways Holdings. “We are also pleased to announce that, as of today, we have finalised agreements with substantially all of our key stakeholders in the Frontier restructuring effort, and estimate that we have now substantially achieved our target of $120 million of annual improvements. We are beginning to see the benefits of our network restructuring efforts, and our team remains focused on optimising the fleet at Frontier to produce a sustainable and profitable network.”

On an ex-item basis, the company reported net income of $20.4 million, compared with an ex-item net income of $25.9 million for the three month periods ended September 2011 and 2010, respectively.

In the fixed-fee segment, revenues – excluding fuel reimbursement from partners – increased by 1.2% compared with 3Q10’s figure with essentially no change in block hours. Income before taxes on the fixed-fee operations was $17.3 million for the quarter compared with a pre-tax income of $22.7 million for 3Q10. Cost per available seat mile (CASM), including interest expense but excluding fuel, increased to 7.95¢ for 3Q11, from 7.52¢ for the same quarter of 2010, primarily as a result of signficantly higher heavy check maintenance for all aircraft and engine restoration costs on the company’s 50-seat regional jets.

Republic completed the transition of 14 Embraer 170s from its Frontier branded operation to its fixed-fee operations, flying on behalf of Delta during the third quarter. The company also removed three ERJ 145s from its Continental programme, as planned. As of 30 September 2011, the company operated 58 aircraft with 44-50 seats and 126 aircraft with 70-86 seats under fixed-fee commercial agreements.

During 3Q11, the company began a programme to install first-class seating on 58 E-170/E-175 aircraft operating on behalf of US Airways. During the programme, operations for US Airways were significantly reduced to allow for the fleet configuration changes. The programme was completed in October, and a full schedule is now being operated on behalf of US Airways with 20 dual-class, 69-seat E-170s and 38 dual-class, 80-seat E-175s.

In the company’s branded business segment – which includes all operations flown as Frontier Airlines and Frontier Express – the total revenues increased by 9.0% to $485.9 million in 3Q11, compared with $445.9 million for the same period in 2010. Total revenue per ASM (TRASM) was 12.26¢, up 10.0% from the same quarter in 2010. For the quarter ended September 2011, Frontier posted ex-items pre-tax income of $15.3 million compared with $19.4 million for the quarter ended September 2010.

The unit cost for Frontier, excluding fuel, was 7.23¢ for the quarter, a 0.8% increase from 7.17¢ for the same metric for 3Q10. The unit cost in 3Q11 was negatively impacted by integration and fleet transition expenses as well as the July hailstorm in Denver, which reduced ASMs and increased expenses. Also, 3Q11’s results include only limited benefit from the company’s restructuring efforts.

The company’s “Other” business segment includes revenues from aircraft subleases, licence fees on slots at DCA airport and expenses associated with those activities, as well as any unassigned aircraft expenses. The company reported pre-tax income of $1.9 million in the third quarter compared with a pre-tax income of $0.7 million for the third quarter of 2010.

As of 7 November 2011, Republic had finalised agreements with its A319 aircraft lessors that will provide for an annual reduction in lease expense of more than $26 million in 2012. These agreements also provide for the return of four A319s during the first quarter of 2012.

The company has finalised its agreement with Airbus to purchase 80 A319/320neos to be powered by CFM LEAP-X1A engines. These aircraft will be operated by Frontier and are expected to be placed into service from the second half of 2016.

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