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F9: Smaller Than Expected Loss, 737s Gone 4/05

Fri Oct 29, 2004 11:15 am

Well, I stand very much corrected. Frontier did much better than I predicted on another thread... and they beat the Wall Street analysts' expectations. They posted a net loss of $.06/share or ~$2 million. Their operating loss was about $600,000. Details at http://www.frontierairlines.com/news/articleDisplay.asp?article=/general/2004/pr_10282004.news.

Of note: they announced that the 737 fleet is history about 4 months early, on 4/11/05.

Quick stats:

Load Factor: Mainline-72.9%, jetExpress-74.5%, Overall-73.1%
Breakeven load factor for mainline: 73.4% (didn't break out jetExpress)

CASM (with Fuel): Mainline 8.03cents, jetEx-12.35cents, Overall-8.35cents
Yield per ASM: Mainline 7.84cents, jetEx-11.48cents, Overall-8.11cents

Mainline CASM excluding fuel: 6.16cents

Other notes: Mainline avg stage length is up about 12% or so. Avg mainline seats/departure off a bit. Mainline utilization up about 12%, just like they said it would be. 1.98 million passengers carried systemwide last quarter, up about 23% or so. 233,000 pax on jetExpress, or about 11% of passengers. (Doing this math in my head, pardon my miscalculations.  Big grin )

Overall, not a bad quarter for Frontier at all. Much, much better than I expected. Now, I want to hear how they've hedged for fuel going forward. Anyone know for sure? And, what routes get the ax when the 737s leave early?

[Edited 2004-10-29 04:17:04]
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RE: F9: Smaller Than Expected Loss, 737s Gone 4/05

Fri Oct 29, 2004 11:32 am


The fuel hedge is both extremely simple and extremely sophisticated, all at the same time.

To put it in its simplest terms, Frontier took out a hedge for 25% of total fuel needs for (from memory) six months. It may have been nine months.

The average price was about $35 a barrel, but there is a price band. It is profitable (to Frontier) at over $38 per barrel and a loss maker if oil falls below (about) $32 a barrel.

It was taken out shortly after Frontier retained Solarc to manage their fuel. The drop in the price of oil (from about $40 to about $35) was unexpected and didn't last long. Since Frontier jumped in at that point, I have to assume it was Solarc's doing.

As to the quarter, even as a loyal Frontier supporter, I was very surprised at how small the loss was. Like the Wall Street analysts, I was expecting a bigger loss.

 Smile/happy/getting dizzy


aeternum nauta