A drop in flight bookings after the terrorist threat in August and higher fuel costs cut into Frontier Airlines’ profit in the last quarter, the company reported today.
Profits for Frontier’s second fiscal quarter, which ended Sept. 30, were down to about $509,000, or 1 cent a share, compared with $6.9 million, or 18 cents a share, in the company’s second fiscal quarter of 2005.
“People were spooked about the Aug. 10 event” and decided to “sit on the sidelines” until after Sept. 11, said Frontier’s chief financial officer Paul Tate. Security was also tightened with restrictions on carry-on liquids. “We have a booking chart that shows a precipitous drop in our advanced bookings starting Aug. 10 and coming down over two or three days rapidly and plateauing at a pretty low level for the next month,” Tate said.
The results included a $3.5 million increase in fuel expenses due to non-cash fuel hedging losses.
“The price of fuel has come down quite significantly and so therefore your hedges are worth less than they would have been had fuel continued to rise,” Tate said. Frontier was 24 percent hedged for the September quarter and is 60 percent hedged for the December quarter.
Results also included $300,000 in net gains on the sale of Boeing assets. The two items decreased net income by 5 cents a share.
Other low-cost carriers lost money in the quarter, prompting Frontier chief executive Jeff Potter to state he was “very pleased to say that we were able to maintain profitability for a second consecutive quarter.”
Aside from fluctuating fuel costs and the terrorist threat, competition from Southwest Airlines’ entry into Denver this year has also had a negative effect on Frontier.
“The drums were beating quite loudly for the demise of Frontier when Southwest came in here, and it just simply has not happened that way,” Tate said.
Revenues in the September quarter increased to $309.9 million from $258.4 million in the year-ago quarter. Operating expenses increased to $306.8 million from $244.8 million from a year ago.
Frontier expects its December quarterly results to be “at or near break-even, a significant improvement over last year’s quarterly results,” due in part to its expansion of Mexico routes and the upcoming busy season for Mexico flights.
Tate expects the startup of Frontier’s new Lynx Aviation turbo-prop operation to cost about $3 million over the next year.
Staff writer Kelly Yamanouchi can be reached at 303-954-1488 or at kyamanouchi@denverpost.com .
