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Hotel Industry News |
Saturday November 22nd, 2008 |
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AirTran Holdings, Inc., Reports Second Quarter Results |
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Record Revenues of $693 Million - Record 6.5 Million Customers Served - Fuel Costs Up More Than $166 Million from 2007 |
Click here for financial tables
AirTran Holdings, Inc., (NYSE:AAI) , the parent company of AirTran Airways, Inc., today reported a net loss of $13.5 million or $0.12 per diluted share for the second quarter. During the same quarter in 2007, AirTran reported net income of $42.1 million or $0.42 per diluted share. As with many other airlines, this quarter's loss is primarily attributable to the effects of record high fuel costs. Our loss also includes an impairment charge related to goodwill of $8.4 million.
AirTran ended June with its highest quarterly unrestricted cash and investment balance in the history of the Company of $445.9 million. The Company also successfully negotiated an extension of its primary credit card processing agreement through December 31, 2009. In addition, the Company has received a commitment for a letter of credit facility of up to $150 million available to satisfy potential holdback requirements with credit card processors.
Revenues for the second quarter grew 13.0 percent to $693.4 million, an all-time quarterly record. Second quarter traffic rose by 13.3 percent on a 12.3 percent increase in capacity, resulting in a record second quarter load factor of 79.4 percent, a 0.6 point increase over 2007. Unit revenues in the second quarter were up 0.1 percent to 10.20 cents per ASM.
Our fuel hedging program has helped mitigate the rising costs of fuel but has not prevented the adverse impact of higher fuel prices. The average price per gallon of fuel increased 70.5 percent to $3.75 in the second quarter compared to $2.20 in the second quarter of 2007. Total fuel expense was $368 million, up $167 million from the prior year. During the second quarter, AirTran recorded $51.0 million in net gains related to its fuel hedging program. AirTran realized $16.8 million of gains during the quarter of which $7.4 million reduced fuel expense and $9.4 million were recorded as non- operating gains. Additionally, AirTran recorded unrealized gains of $34.2 million which were recorded as non-operating gains. At quarter end, the estimated net asset fair value of AirTran's fuel related derivative financial instruments was $79.7 million.
Going forward, the Company has fuel hedge positions to cover approximately 70 percent of its fuel needs for the remainder of the year, which will reduce the price paid for crude oil by approximately $12 to $15 per barrel at current fuel price levels.
"As in recent quarters, AirTran Airways posted record revenues, but the steep increase of fuel costs is still an enormous challenge for the entire airline industry and revenue gains are not keeping pace with the all-time high fuel costs," said Bob Fornaro, AirTran Airways' chairman, president and CEO. "To combat the difficult fuel environment and carry us through future challenges, we are focused on creating a sustainable and profitable position for our airline. We outlined a five-point plan to achieve this back in April. We are maintaining our focus on the quality of our operation while reducing costs, deferring aircraft deliveries, cutting capacity, and improving efficiencies as well as raising capital. In addition, AirTran Airways Crew Members have demonstrated an admirable commitment this quarter to serving a record number of customers and maintaining a high operational standard as shown by our high on-time and customer service scores." AirTran was recently awarded the #1 ranking in the Airline Quality Rating for 2008, and AirTran ranked #1 in May for on-time performance among major carriers in the DOT Air Travel Consumer Report.
After completing a comprehensive review of the fleet and capacity in the current economic environment, AirTran has taken steps to reduce growth. In May, AirTran Airways announced that it would defer the delivery of 18 Boeing 737-700 aircraft originally scheduled for delivery between 2009 through 2011 to 2013 through 2014. A second agreement was recently reached with Boeing to defer four additional deliveries of 737-700 aircraft from 2009 to 2015. AirTran is now planning for capacity to be down seven to eight percent during the last four months of 2008. In addition, the Company is currently targeting a four to eight percent capacity reduction in 2009.
"We have taken significant actions to address the challenges of high fuel and a slowing economy," said Arne Haak, senior vice president of finance, treasurer and CFO for AirTran Airways. "During the quarter we further reduced our industry leading non-fuel CASM by 3.2 percent to 5.73 cents per seat mile. We are focused on cash preservation and liquidity and have made significant progress in strengthening our cash position. We continue to work towards additional actions on each front."
Recent highlights of AirTran Airways' accomplishments in the second quarter and to date include:
-- Raised capital of $147 million (net of fees) on a concurrent offering of common equity and convertible notes
-- Received a commitment for a letter of credit facility of up to $150 million
-- Renegotiated an agreement with our primary credit card processor that includes an extension of the term through December 31, 2009
-- Deferred 22 Boeing 737-700 aircraft deliveries from 2009-2011 to 2013- 2015
-- Sold two Boeing 737-700 aircraft in April and completed agreements to sell four additional Boeing 737-700 aircraft and an agreement in principle for a fifth Boeing 737-700 aircraft during the remainder of 2008
-- Reduced non-fuel CASM for the quarter by 3.2 percent due to strong operating performance and improved efficiency
-- Full-time equivalents (FTE) per aircraft improved 2.5 percent to 58.4
-- Commenced service to Burlington, VT on May 21 and San Antonio, TX on June 11
-- Ranked #1 in on-time performance among major carriers in May at 84.6 percent
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