The news release that follows details Midwest Air Group's second quarter
financial results, including an operating loss of $2.9 million, a net loss
of $3.5 million and a per share loss of 20¢. The modest profit we had hoped
for in the quarter did not materialize, the result of rapidly escalating
fuel prices (up 32% from a year ago) and the continuing poor revenue yield
environment -- factors that are largely out of our control.
It's frustrating to report a negative bottom line when we are all working
so hard to return to profitability. Our efforts to boost revenue include
continually finetuning our schedules to increase traffic, strengthen yield
and improve aircraft utilization. On the cost side, our cost reduction
efforts of the past several years have had a profound effect and together
with our productivity improvements will serve us well going forward. We
should all be very proud of how far we've come, even if our efforts haven't
resulted in profitability.
Not only do we work in a challenging industry, but much of our business is
in markets with both excess capacity and irrational pricing. In such a
competitive environment, it's vitally important for us to differentiate
ourselves from other airlines. We all know that our competitors cannot
match our product, our schedule and our service. Thank you for everything
you do to help us make sure our customers know it, too.
MIDWEST AIR GROUP REPORTS SECOND QUARTER RESULTS
Summary: Second Quarter 2004 vs. Second Quarter 2003
Operating revenue increased 10% to $106.9 million
Operating loss of $2.9 million
Net loss of $3.5 million, a loss of $0.20 per share
Higher fuel prices negatively impacted operating results by $5.9
million, or $0.33 per share
Milwaukee, Wisconsin, July 27, 2004 -- Midwest Air Group, Inc. (NYSE: MEH)
today reported financial results for its Midwest Airlines and Skyway
Airlines (dba Midwest Connect) operations. Company management will discuss
the results in a conference call with industry analysts and institutional
investors at 1 p.m. Central time on Tuesday, July 27.
"We realized a 10% increase in revenue and continued to reduce non-fuel
unit costs in the quarter. Additionally, both Midwest Airlines Saver
Service and Midwest Connect contributed positively to our results," said
Timothy E. Hoeksema, chairman and chief executive officer. "Unfortunately,
our efforts to return to profitability were thwarted by escalating fuel
prices and the continuing poor revenue yield environment."
Comparing second quarter 2004 to second quarter 2003, operating revenue
increased 10.3% to $106.9 million. Operating results improved 47.8% to a
$2.9 million loss from a $5.6 million loss, while net results fell to a
$3.5 million loss from $3.6 million income in the same quarter a year ago.
Per share results fell to a $0.20 loss from $0.23 income in the second
quarter of 2003. Second quarter 2003 results include $11.4 million
(pre-tax) of income related to government reimbursement of security costs
and $4.6 million (pre-tax) of costs associated with DC-9 aircraft
disposition. Due to accumulated losses, Midwest Air Group stopped recording
income tax benefit on current and future book losses beginning with second
quarter 2004 results.
Year to date, operating revenue increased 9.0% to $208.2 million. Operating
results improved 44.1% to a $13.1 million loss from a $23.5 million loss in
2003, while net results fell to a $10.3 million loss from an $8.2 million
loss in the first six months last year. Results per share fell to a $0.59
loss from a $0.53 loss in the first half of 2003. First half 2004 results
include $1.2 million (pre-tax) in aircraft disposition costs; first half
2003 results include $11.4 million (pre-tax) income in security cost
reimbursements and $4.6 million (pre-tax) in aircraft disposition costs.
At Midwest Airlines, revenue per scheduled service available seat mile
decreased 12.5% in the quarter; a 0.8 percentage point increase in load
factor could not offset a 13.4% decrease in revenue yield. Load factor
improved despite a 27.9% increase in capacity, while yields were adversely
impacted by lower business fares, the overall depressed pricing
environment, increased competition and the effects of lower-yield Saver
Service. Saver Service accounted for 44% of capacity in the quarter.
Midwest Airlines' per-gallon fuel costs increased 33.3% in the quarter from
a year earlier. Into-plane fuel prices were $1.23 per gallon, up $0.31 per
gallon, resulting in a $5.1 million (pre-tax) unfavorable price variance
and increasing per share loss by $0.29 compared with the prior year.
Cost per available seat mile (unit costs) at Midwest Airlines decreased
15.8% (20.5% holding fuel price constant) compared with second quarter
2003, due to the introduction of lower-unit cost Saver Service and
cost-reduction initiatives, as well as a reduction in aircraft disposition
At Midwest Connect, revenue per scheduled service available seat mile
increased 24.1% in the quarter. Capacity decreased 13.5% as schedule
changes were implemented to reduce average flight lengths on the regional
jet aircraft and better align capacity with demand. These changes were the
primary drivers of a 3.4 percentage point improvement in load factor and a
16.6% increase in revenue yield. Cost per available seat mile increased
15.8% (11.0% holding fuel price constant) compared with second quarter
2003, as cost reduction initiatives were offset by the impact of the
capacity decline and shorter flight lengths. Midwest Connect into-plane
fuel prices were $1.27 per gallon in the second quarter, up $0.28 per
gallon, generating an unfavorable $0.8 million (pre-tax) price variance and
increasing per share loss by $0.04 compared with the prior year.
Note: Cost per available seat mile holding fuel price constant is an
industry measurement that provides management and investors the ability to
track changes in cost absent fuel price volatility. (See reconciliation
During the quarter, Midwest Airlines placed into service one additional
Boeing 717 aircraft and completed the phase-out of its DC-9 fleet. Midwest
Connect removed two Beech 1900D aircraft from service and terminated the
The company ended the quarter with $103.2 million in unrestricted cash,
compared with $101.3 million at March 31, 2004. Capital spending in the
quarter totaled $1.8 million and was primarily associated with the
acquisition of additional spare aircraft parts. The company projects total
2004 capital spending at $7.0 million.
In the second quarter:
Midwest Airlines celebrated its 20th anniversary on June 11 with a
nostalgic look at its humble beginnings and a renewed sense of optimism
going forward. The airline took to the skies with 83 employees and two
aircraft flying to four cities. Today, Midwest Airlines and its regional
carrier Midwest Connect employ 3,000 people, operate 50 aircraft and fly
to 49 cities, offering traditional Signature Service, Saver Service with
low-fare flights to leisure destinations, and regional Midwest Connect
Midwest Airlines placed an additional Boeing 717 aircraft in service,
bringing the total number of 717s in its fleet to 15.
Readers of Travel+Leisure magazine honored Midwest Airlines as "Top
Domestic Airline for Service" for 2004 -- an award the airline has won
both years it has been given.
Midwest Airlines was awarded the Diamond award in the Federal Aviation
Administration's Aviation Maintenance Technician awards program. Midwest
has received the award, which recognizes exemplary training of
maintenance technicians, for four consecutive years.
In separate elections, Midwest Airlines mechanics and related employees
and Midwest Airlines stock clerks voted to reject union representation.
In recognition of Midwest Airlines' service to the community, the
Downtown Exchange Club of Milwaukee dedicated a Freedom Shrine at
General Mitchell International Airport, on display at Gate D-39 -- the
departure point for most Midwest Airlines flights to Ronald Reagan
Washington National Airport. The shrine is a permanently mounted
collection of important historic American documents.
Skyway Airlines confirmed that it was in discussions with Delta Air
Lines, Inc. to operate the Fairchild 328JET fleet of Delta Connection,
Inc. The discussions are a step toward expansion of Skyway's business
model to operate aircraft for airlines in addition to Midwest Airlines.
The U.S. Department of Transportation accepted Skyway Airlines' bid to
provide Essential Air Service between Milwaukee and Escanaba, Mich.
Skyway currently provides service in this market; the DOT order is
retroactive to August 2003.
In the third quarter:
On July 1, Midwest Airlines implemented its most significant schedule
enhancement since September 11, 2001. Extensive frequency additions
impacted key business markets and significantly improved the total
number of connection opportunities to other Midwest flights.
On July 12, Travel+Leisure named Midwest Airlines "Best Domestic
Airline" in its 2004 World's Best Awards competition. Midwest Airlines
has won the coveted title six of the nine years it has been awarded.
In September, Midwest Airlines will acquire its 16th Boeing 717
"We are focused on returning to profitability," Hoeksema concluded. "Our
balanced efforts to increase revenue, lower costs and retain our liquidity
position will allow us to provide shareholders with the increased value
they desire, while continuing to provide our customers with the superior
service they expect."