Fuel Costs Sting Airtran

Fourth-quarter revenue rises nearly 45%, but fuel expenses lead to a small loss.
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AirTran Holdings

(AAI)

, the parent of low-fare carrier AirTran, reported a slight loss in the quarter ended Dec. 31 as rising fuel costs negated the effect of strong revenue growth.

The Orlando, Fla., carrier reported a loss of about $400,000, or less than a penny a share, compared with net income of $1.1 million and 1 cent a share in the same quarter a year earlier.

The fourth-quarter result beat expectations, as analysts surveyed by Thompson Financial had expected a loss of 5 cents a share.

Quarterly revenue climbed 44.8% to $408 million, as capacity grew 25% and traffic increased 28.9%. The carrier's load factor of 71.5% narrowly exceeded the breakeven load factor of 71.3%. AirTran also set a new record annual load factor of 73.5% on 28.3% capacity growth.

Additionally, AirTran reported net income of $2.7 million, or 3 cents a share, for the full year, compared with net income of $12.3 million, or 14 cents a share, in 2004.

"The year 2005 was extremely challenging on many fronts. Yet, AirTran was profitable for the seventh consecutive year while the industry is losing billions of dollars annually," said CEO Joe Leonard.

During the fourth quarter, AirTran's unit revenue increased 15.7% year over year. Average yield per revenue passenger mile in the quarter was 13.19 cents, up 12.4%.

"The record load factor and yield underscore the increasing demand for our product," said President Robert Fornaro.

AirTran's unit operating costs rose 17.3% in the fourth quarter, primarily as a result of a 96.5% increase in fuel costs year over year. Nonfuel unit costs increased 1.8% to 6.11 cents. Included in the fourth-quarter results is a charge of about $2.6 million related to a

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Coca-Cola

promotion representing the estimated fair value of the flights to be awarded under the program.

With 106 jets, AirTran operates more than 600 daily flights to 49 destinations.