To: All Midwest and Skyway Airlines Employees
Date: July 28, 2005
From: T.E. Hoeksema
Subject: Second Quarter Financial Results
The news release that follows details Midwest Air Group's second quarter financial results. Although the bottom line -- an $8.2 million net loss and a 47¢ per-share loss -- is disappointing, we are making significant progress in reaching our 2005 goal of ending the year with the same amount of cash we had at the beginning and, ultimately, returning to profitability.
The quarter was positive on many levels. We posted record highs for second quarter operating revenue (up 23%), passenger traffic (up 31%) and load factors (74.7% for Midwest Airlines and 64.4% for Midwest Connect, a nearly 7 percentage point increase for both operations) -- while adding 19% capacity. We also achieved considerable gains in market share in Milwaukee and Kansas City in the quarter.
These improvements are critical indicators that our total revenue pricing strategy and our schedule and service enhancements are working as planned, driving up load factors and increasing revenue. It's heartening to see our revenue efforts come to fruition, just as our efforts to cut costs are having significant positive impact.
You will also be interested to hear that we have met with Boeing, the manufacturer of our 717 aircraft and agreed to an accelerated schedule for our final four aircraft deliveries. Instead of one, we will now receive two aircraft in the last half of 2005 and the last three in the first half of 2006, completing our 717 fleet of 25 aircraft by mid-2006 -- a couple months earlier than originally planned.
The momentum we gained in the second quarter will serve us well as we work to achieve our 2005 strategic plan: reduce costs, generate revenue, improve productivity and better serve our customers. We have a lot on our plates -- the redesigned dining services program and onboard entertainment, the combined Midwest/Skyway ground services operations in Milwaukee, and continuing schedule enhancements. Although operational issues such as the transition on our Milwaukee ramp may at times seem overwhelming, continuing to aggressively pursue our strategic plan is vital to our efforts to meet our cash neutral goal for 2005.
Finally, I'd like to again thank you for providing the excellent customer service that earned us recognition as "World's Best Domestic Airline" by Travel+Leisure magazine -- the seventh time in 10 years, a record no other airline can claim! Now more than ever, we must work together to restore and maintain the level of service that has earned us this recognition.
MIDWEST AIR GROUP REPORTS SECOND QUARTER RESULTS
Summary: Second Quarter 2005 vs. Second Quarter 2004
Operating revenue increased 23.1% to $131.6 million
Scheduled service revenue passenger miles increased 31.2% to 848.6 million on a 19.0% increase in capacity
Operating loss of $8.2 million vs. $2.9 million
Net loss of $8.2 million vs. $3.5 million
A per-share loss of $0.47 (includes $0.17 in unusual items related to engine overhauls and capitalized expense write-offs) vs. loss of $0.20
Higher fuel prices negatively impacted operating results by $11.7 million, or $0.67 per share
[Edited 2005-07-28 18:58:30]