AirTran Holdings Inc. (AAI) Q2 2010 Earnings Call July 21, 2010 9:30 AM ET Executives Jason Bewley – Director, Corporation Finance Bob Fornaro – Chairman, President and CEO Arne Haak – Chief Financial Officer Kevin Healy – Senior Vice President, Marketing and Planning Analysts Duane Pfennigwerth – Raymond James Bill Greene – Morgan Stanley Glenn Engel – Bank of America Gary Chase – Barclays Capital Michael Linenberg – Deutsche Bank Daniel McKenzie – Hudson Securities Kevin Crissey – UBS Investment Bank Steve O’Hara – Sidoti & Company Helane Becker – Dahlman Rose Michael Derchin – CRT Capital James Higgins – Soleil Securities Presentation Operator
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We will also be discussing several non-GAAP financial measures that we believe are helpful in gaining an understanding of our operating performance and providing a period-to-period comparison excluding special items. A copy of today’s press release, recent SEC filings and reconciliation of these non-GAAP financial measures are available in the Investor Relations section of the company’s website at airtran.com. Today we’ll be discussing our second quarter results and our outlook for the remainder of 2010. At the end of the call there will be a brief question-and-answer session.Now I’d like to turn the call over to Bob. Bob Fornaro Good morning, everyone and thank you for joining us today. After a challenging first quarter AirTran has delivered a solid performance here in the second quarter. From an operations perspective the results were the best we have ever delivered in the second quarter. Our on time performance was 83.8%, our completion factor was 99.5% and our industry leading baggage handling performance improved 4% to 1.5 mishandled bags per 1000 passengers. I want to personally thank all of our 8000 crew members for this accomplishment. This is truly a team effort. In the second quarter we reported a GAAP profit of [$12.4] million, which includes an unrealized loss of $26.4 million net of taxes on the reduction in value of our future hedge portfolio. Including, we reported an economic net income of $38.8 million or $0.23 a share, compared to last year’s economic net income of $46.6 million. During the quarter our capacity grew 4.9% year-over-year and we produced record second quarter revenues of $700.6 million, which represents a 60.1% increase. We achieved a record low factor of 83.1%, which was up 2 points year-over-year. Our business class load factor rose more than 5 points to over 83%, which also represents a new company record.
Typically, an increased in capacity load factors were stable and comes at the expense of yield. However, our second quarter passenger yield increased 9.4% the highest year-over-year yield growth in four years, despite a 3% year-over-year increase in average stage. Our other revenues are roughly flat year-over-year and Arne will give you a little more color on that during his remarks.Further development our total unit revenues increased 10.7% year-over-year. On our network front we continue to make a lot of progress on growing and diversifying our revenues. During the past year we’ve opened 12 new destinations from Orlando, mostly to small and midsized cities as well as in the Caribbean. The most significant progress in developing our network has been made in Milwaukee. While we have added only one main line destination year-over-year, we have grown our capacity here more significantly than any other city on our network. After a tough winter, Milwaukee has been solidly profitable for us in the second quarter despite significantly higher fuel costs. In fact, our unit revenue growth in Milwaukee far out paced our system average and during the second quarter was the best performing region in our network in terms as a year-over-year unit revenue growth. While absolute profitability still trails our system average trends here are very good, as you continue to improve as our own capacity growth begins to moderate and our newer roots continue to mature. All sides parts Milwaukee as having a bright future on our network. Finally just this week the Atlantic City Council voted unanimously to renew our lease at Hartsfield-Jackson International Airport for the next seven years, solidify our position at the world busiest airport. On the cost side, within our non-fuel cost expectations in the second quarter. Our adjusted non-fuel costs were up 2.5% year-over-year, well ahead of our initial second quarter non-fuel guidance of 4% to 4.5% and even better than our revised guidance of six weeks ago are up 3.5% to 4%. Fuel costs rose by over $68 million, a 43% increase. Read the rest of this transcript for free on seekingalpha.com