Not All Budget Carriers Are Making Money

Frontier Airlines last week announced a net loss of $22.8 million, or $0.77 per common share, for its fiscal year ended March 31, 2003. This compares to net income of $16.5 million, or $0.56 per diluted common share from the previous fiscal year. The Company's fiscal year net loss included a $2.0 million after-tax credit for the cumulative effect of a change in accounting for major aircraft overhauls from the accrual method to the expense as incurred method. The loss before the cumulative effect of the change in accounting was $24.9 million, or $0.84 per common share.

For the airline's fiscal fourth quarter ended March 31, 2003, the airline reported a net loss of $13.0 million, or $0.44 per common share, compared to net income of $623,000, or $0.02 per diluted common share, for the same period last year. The results of the fiscal fourth quarter 2003 include $0.08 per share (after tax) of losses associated with unrealized losses on financial derivatives, a write-down of Boeing spare parts inventory and the impact of reduced revenue sharing credits associated with Denver International Airport's anticipated reserve for United Airlines' bad debt.

CEO: Loss Is "Dissapointing"

"Reporting our first annual loss in five years is a disappointment and reflects many of the challenges faced by our industry during the past year, including a weakened economy and, in this latest quarter, the recent unrest in the Middle East that culminated in the Iraq war. In addition, our fiscal year 2003 loss was exacerbated by the severe winter blizzard in March 2003 that shut down the Denver metro area for two days," said Frontier President and Chief Executive Officer Jeff Potter. "However, we believe we are doing all of the right things to continue to build upon our cost reduction accomplishments, maximize revenue and improve our liquidity. During the past year we realized year over year unit cost reductions of 10.8 percent, posting what we believe are some of the greatest cost management improvements among our peers. With the recent simplified fare structure implemented during February 2003, and launch of our new branding campaign, 'A Whole Different Animal,' we believe customer response will be favorable."

CASM Rises, But Still One Of Best In Industry

Cost per available seat mile (CASM) for fiscal fourth quarter 2003 increased 1.0 percent to 8.75 cents from 8.66 cents for fiscal fourth quarter 2002. CASM excluding the airline's fuel costs decreased 4.8 percent to 7.14 cents, compared to 7.50 cents for fiscal fourth quarter 2002. During the fiscal fourth quarter 2003, the airline paid 44.2 percent more per gallon for fuel as compared to the same period last year, as the average cost per gallon of fuel during the fiscal fourth quarter was $1.11. The airline's fiscal fourth quarter 2003 CASM was adversely affected by an estimated 0.39 cents as a result of the write-down of Boeing spare parts inventory and the impact of reduced revenue sharing credits associated with Denver International Airport's anticipated reserve for United Airlines' bad debt. The airline's year over year CASM reduction (excluding fuel) was achieved principally by continued efficiencies of the airline's Airbus fleet that increased from six aircraft at the end of fiscal year 2002 to 17 aircraft as of March 31, 2003. Utilization for fiscal fourth quarter 2003 averaged 9.7 hours, an increase of 2.0 percent from fiscal fourth quarter 2002.

Business Developments

• Unveiled a simplified domestic pricing structure, reducingbusiness and leisure fares and capping fares at $499 one-way;
• Completed installation of DIRECTV equipment in all Airbus aircraft
• Increased membership in the airline's frequent flyer program EarlyReturns 93 percent from approximately 276,000 on March 31, 2002 to approximately 533,000 as of March 31, 2003
• Increased the number of corporate and business accounts 38 percent from approximately 8,400 on March 31, 2002 to approximately 11,600 on March 31, 2003
• Increased passenger connection opportunities 37 percent to 11.5 over the same period last year, when the airline's passenger connection opportunities were 8.4;
• Increased the percentage of flown revenue generated from www.frontierairlines.com from 23 percent during March 2002 to 31 percent during March 2003;
• Increased the amount of e-tickets as a percentage of total revenue to approximately 87 percent for the year ended March 31, 2003, up from 83 percent for the year ended March 31, 2002;
• For the fourth consecutive year, received the Federal Aviation Administration's Diamond Award, which recognizes the airline's maintenance and engineering department for its advanced maintenance education and training efforts.

FMI: www.frontierairlines.com