Earnings Drop at Frontier

The airline believes results for the current quarter will improve sharply from 2005.
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Frontier Airlines

(FRNT)

said net income fell in its fiscal second quarter, but the airline predicted that results for the current quarter will improve sharply from 2005.

The Denver-based low-fare carrier reported net income of $500,000, or 1 cent per share, for the quarter ending Sept. 30, down from net income of $6.9 million or 18 cents per share, in the same period a year earlier. Revenue was $309.9 million.

Analysts surveyed by Thomson Financial had forecast earnings of 5 cents a share on revenue of $295.5 million.

Frontier said the results included a gain from an asset sale and one-time costs of 5 cents per share for derivative losses that increased fuel expenses. It said the 2005 quarterly results included a gain of 2 cents a share from special items. Frontier shares were down 1.8% to $8.14.

CEO Jeff Potter said the airline faced challenges from high fuel costs, a competitive environment in Denver and the August disclosure of a terrorist plot and subsequent changes in security regulations, the latter of which resulted in lost revenue of $3 million to $4 million during the quarter.

However, Potter said on a conference call that a boost in Mexico service means "results will show up at or near break-even," in the December quarter, which "will be similar to this quarter in terms of revenue improvement." The projections assume fuel costs at or below $60 a barrel. The carrier lost $10.3 million, or 28 cents per share, in the fiscal third quarter a year ago.

In the fiscal second quarter, mainline revenue per available seat mile grew 5.9%. Passenger revenue measured by revenue passenger miles grew 21.1%, while capacity measured by available seat miles rose 14.7%. On the expense side, cost per available seat mile, excluding fuel and items, was 6.14 cents, up 2.3%, primarily due to a reduction in average flight length.

During the quarter, Frontier had the industry's best domestic operational performance, with an 83.6% on-time rate and a 99.8% completion factor.