Republic Airways Holdings Inc. (RJET)
Q1 2010 Earnings Conference Call
May 5,2010 10:30 AM ET
Hal Cooper – EVP, CFO, Treasurer and Secretary
Bryan Bedford – Chairman, President and CEO
Greg Aretakis – VP, Revenue Production
Daniel Shurz – VP, Planning and Strategy
Duane Pfennigwerth – Raymond James
Jim Parker – Raymond James
Stephen O’Hara – Sidoti
Steven Marshall [ph]
Previous Statements by RJET
» Republic Airways Holdings Inc. Q3 2009 Earnings Call Transcript
» Republic Airways Holdings Inc. Q2 2009 Earnings Call Transcript
» Republic Airways Holdings Inc. Q1 2009 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the Q1 2010 Republic Airways Holdings, Inc. earnings conference call. At this time, all participants’ are in a listen-only mode. Later, we will conduct a question-and-answer session towards the end of this conference.
As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the call over to Mr. Hal Cooper, CFO. Please proceed.
Good morning everyone, and thank you for joining us for our first quarter 2010 call. Let me introduce the people are in the room here with me and that will be on the call. Of course, Bryan Bedford, our Chairman and CEO; Wayne Heller, our COO is with us; Joe Allman, our VP Controller; Tim Dooley, our VP of FP&A; Greg Aretakis, our Vice President of Revenue Production and joining us from Denver is Daniel Shurz, our Vice President of Planning and Strategy.
We will have some open comments from Bryan, from Greg, and from Daniel and then we will be happy to take your questions. But first let me start by covering our Safe Harbor please.
Please note that the information contained in our earnings release and this call contains forward-looking information as defined by United States securities laws. Forward-looking information is subject to risk and uncertainties, and we refer you to a summary of risk factors contained in our most recent filing with the SEC.
With that I will turn the call over to Bryan and he will turn it over to Greg and Daniel, then we will take your questions. Bryan?
Welcome to all of our listeners this morning. First I would like to start out by thanking all of our 11,000 co-workers in the Republic family for all of their hard work and professional efforts this last quarter. I think it goes without saying Q1 was one of the most challenging winter quarters that the industry has experienced in quite a while and we certainly were affected by it as well. I have to say though from my many travels throughout our system in this quarter certainly reinforced my feelings that we have some of the best people in the business who are fully committed to serving our customers and providing the best possible customer service experience.
So again to all of my co-workers, I just want to say thank you and please keep up the great team work.
Obviously our financial results are noisy. We told that they would be and we certainly didn’t let you down there. We are going to do our best to wade through that noise today and give you a sense of how our business fundamentals are actually performing and our outlook for the remainder of the year. But before I get into the numbers, I just like to make a few introductory remarks.
It should go without saying that we are disappointed with our Q1 financial performance. The last time Republic reported a quarterly loss was after 9/11. And since that time we posted 32 consecutive quarters of profitability, which I think is among the best track records in the industry. And even though it was clear to us during our due diligence process that the combined brand operation would lose money in Q1 of this. And even though we told everybody on the previous calls that we expected to post a sizeable loss for the quarter, frankly none of that makes any – make these results any easier to accept.
Having said that and especially in light of the recent merger announced between Continental United it seems clear to us though that the underlying rationale for the purchase of Frontier and Midwest is justified. We support consolidation, we support hub rationalization even though both of those processes could result in lower overall demand for our core fixed-fee flying.
But however as our partners who have struggled to maintain profitability in the last cycle, return to sustain profitability, the counter party risk on our CPA contracts also decreases. And since we have very long-term CPA contracts in place, that reduced financial risk is welcome.
If consolidation does lead as we speculated to 4% to 5% reduction in domestic capacity, then all domestic airlines will benefit including frontier. However, we can assume anything. In fact we have to assume the competition will be every bit as challenging it has been over the past years and we must work hard to position Frontier to return to sustain profitability on the harshest of environments.
I can tell you this management team and all of our employees are fully committed to restoring the company to long-term profitability. We expect to begin a new track record of consistent quarterly profits in the second quarter of this year and we expect our Frontier operation to contribute to both profits and cash flows in the second half of 2010.
I will give you more progress on how we are doing with the brand integration but let me just go through some of the highlights in the press release we put out last night and let me start with our results from our fixed-fee business. Our pretax income we reported $14.3 million for the quarter, which was a pretax margin of 5.7%. We did incur a $2 million negative impact for the winter storms; that’s basically reduced flying due to airport closures. We also had a $2 million negative effect for the final aircraft return cost for the last of the CRJs. Those aircrafts have now all been returned to the (inaudible) and we think we are past that.