Airtran 1999 Annual Report Download

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Table of contents

  • Page 1

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    A i r T r a n H o l d i n g s, I n c. Annual Report 1999

  • Page 3
    A conversation with JOE LEONARD Chairman and Chief Executive Officer about inspiration, transformation and the year of the turnaround.

  • Page 4
    ... new aircraft and the 49 Boeing 717s that follow, embody AirTran Airways' transformation into an airline of the future. How does the Boeing 717 benefit the company? As the most passenger-friendly aircraft in its class, the Boeing 717 will add dramatic operating efficiencies to our already low cost...

  • Page 5
    ...; Klaus Goersch, VP-Flight Operations; Bob Fornaro, President & CFO; Loral Blinde, VP-Human Resources; Steve Kolski, Sr. VP-Operations; Joe Leonard, Chairman & CEO; Barry Carter, VP-Information Services & CIO; Marilyn Rogers, Sr. VP-Customer Service; Leslie Head, VP-General Counsel; Kevin Healy...

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  • Page 8
    ... Hartsfield Atlanta International Airport and the AirTran Airways' fleet. The plane entered revenue service on October 14 and flew its first flight between Hartsfield Atlanta International Airport and Dulles International Airport near Washington, D.C. Designed for AirTran Airways The new Boeing 717...

  • Page 9
    Our unique Business Class seating continues its incredible success as usage doubled from 1998 to 1999. Our Business Class passengers enjoy two-by-two, extra-wide seating, seven inches more legroom than coach, double A-Plus Rewards credits and two complimentary drinks.

  • Page 10
    ... Class at the time of booking and receive one A-Plus Rewards credit toward our frequent flier program. As an added convenience for business travelers, we began accepting the Air Travel Card as a form of payment for AirTran Airways flights. The Air Travel Card, or Universal Airline Travel Plan...

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  • Page 12
    Nearly six and a half million passengers flew with us in 1999. We achieved all-time record traffic, capacity and passenger enplanements as we focused on improving existing routes and adding flights to include new markets. 7

  • Page 13
    .... AirTran Airways' Internet vision continues to be focused solely on revenue generation. Travelers booking on our Web site are automatically presented with a range of departure-time and connection travel options, starting with the least expensive flights available. Business Class reservations are...

  • Page 14
    ... have been named the "Best Domestic Airline" by the Southeast chapter of the American Society of Travel Agents (ASTA) at the 1999 ASTA World Congress in Strasbourg, France. NEW GATES IN ATLANTA INVESTOR RELATIONS ON THE WEB With our solid financial and operational foundation, our investor base has...

  • Page 15
    ... Boeing 717s. For the third year in a row, we teamed up with American Express® to offer their card members an exclusive frequent flier program that has been a success since its inception in attracting new business to AirTran Airways. American Express® card members booking travel through AirTran...

  • Page 16
    ... Web site and that of Hertz is one of the most successful between any airline and car rental company. Hertz's special discount rates also apply to customers who choose to utilize our Net Escapes program to book their travel. Additionally, customers booking travel over the phone with AirTran Airways...

  • Page 17
    AirTran Airways expanded the number of our gates at Hartsfield Atlanta International Airport from 18 to 22.

  • Page 18
    ... Buffalo/Niagara Flint Moline/ Quad Cities Chicago (Midway) Akron/ Canton New York (LaGuardia) Newark Philadelphia Bloomington/ Dayton Normal Washington, D.C. (Dulles) Newport News/Williamsburg Greensboro/High Point/Winston-Salem Raleigh/Durham Memphis Atlanta Dallas/Ft. Worth Myrtle Beach...

  • Page 19
    ... Airways Corporation in November 1997. (e) Excludes a $68.0 million charge related to the shutdown of the airline in 1996, a $3.9 million gain on the sale of property, a $13.0 million arrangement fee for aircraft transfer and a $2.8 million gain on insurance recovery. Market Prices 1999 High Low...

  • Page 20
    ...rebranding and impairment charges, divided by available seat miles. (8) The average number of hours per day that an aircraft flown in revenue service is operated. Excluding the special items mentioned above, our operating income increased $47.2 million, to $56.1 million in 1999 from $8.9 million in...

  • Page 21
    ... to the decline of credit card chargebacks and communications costs. Our traffic, or revenue passenger miles (RPMs), increased 7.1% or 229.0 million on a 0.5% increase in capacity, or available seat miles (ASMs). For the year ended December 31, 1999, load factor increased 3.9 points to 63.5% versus...

  • Page 22
    .... This comes as a result of reduced service levels during the year of 1997, incremental costs incurred to reinitiate service to certain markets and to reactivate aircraft taken out of service, and the merger of Airways Corporation into our Company in November 1997. Our financial results include the...

  • Page 23
    ... of net assets acquired resulting from the acquisition of Airways Corporation. SFAS No. 121 requires that when a group of assets being tested for impairment was acquired as part of a business combination that was accounted for using the purchase method of accounting, any cost in excess of net assets...

  • Page 24
    ... good year for our airline. We will benefit from the travel agent commission reduction from 8% to 5%, reduced maintenance costs per block hour and reduced depreciation expense as a result of the impairment charge. We are exposed to high jet fuel prices without the benefit of a significant hedge. We...

  • Page 25
    ...-tax fleet disposition charge of $147.7 million during the fourth quarter of 1999. As of December 31, 1999, our debt related to asset financing totaled $265.7 million with respect to which aircraft and certain other equipment are pledged as security. We have contracted with Boeing for the purchase...

  • Page 26
    ... of services offered by our Company; • our ability to achieve and maintain acceptable cost levels; • fare levels and actions by competitors; • regulatory matters, general economic conditions; commodity prices; and • changing business strategy and results of litigation. Additional information...

  • Page 27
    ... in market risk is primarily due to our fuel hedging contracts covering significantly more fuel requirements in 1999 than in 2000. In 1999, we entered into fixed rate swap contracts and jet fuel purchase commitments in order to manage the price risk and utilization of fuel cost. At December 31, 1999...

  • Page 28
    ... of Operations Year ended December 31, Operating revenues: Passenger Cargo Other Total operating revenues Operating expenses: Salaries, wages and benefits Aircraft fuel Maintenance, materials and repairs Commissions Landing fees and other rents Marketing and advertising Aircraft rent Depreciation...

  • Page 29
    ..., less allowance for obsolescence of $2,260 and $4,259 at December 31, 1999, and 1998, respectively Prepaid expenses Total current assets Proper ty and equipment: Flight equipment Less: Accumulated depreciation Purchase deposits for flight equipment Other property and equipment Less: Accumulated...

  • Page 30
    ...' equity (deficit) : Preferred stock, $.01 par value per share, 5,000 shares authorized, no shares issued or outstanding Common stock, $.001 par value per share, 1,000,000 shares authorized, and 65,698 and 64,898 shares issued and outstanding at December 31, 1999, and 1998, respectively Additional...

  • Page 31
    ... plan Net loss Balance at December 31, 1998 Issuance of common stock for exercise of options Issuance of common stock under stock purchase plan Issuance of common stock in litigation settlement Net loss Balance at December 31, 1999 See accompanying notes to consolidated financial statements. Shares...

  • Page 32
    ... for acquisition, net of cash acquired Preacquisition advance to Airways Corporation Restricted funds for aircraft purchases Proceeds from disposal of equipment Net cash flows used for investing activities Financing activities: Issuance of long-term debt Payments of long-term debt Proceeds from sale...

  • Page 33
    ... of Business The Company offers affordable scheduled air transportation and mail service, serving short-haul markets primarily in the eastern United States. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires...

  • Page 34
    ...-9 fleet and related equipment as outlined below: 1997 Salvage Value Airframes Engines Aircraft parts 10% 10% 5 - 50% 1998 Salvage Value 40% 10% 5% 1997 Useful Life 10 -20 years 3 years 3 years 1998 Useful Life 10 -12 years 10 -12 years fleet life The carrying value of cost in excess of net assets...

  • Page 35
    ...of accounting, and accordingly, Airways' results of operations are included in the accompanying consolidated financial statements from the date of acquisition. The aggregate purchase price was approximately $68,374,000 comprised of the following; 9,094,937 shares of the Company's common stock valued...

  • Page 36
    ... resulting from business acquisitions Liabilities assumed Fair value of common stock and options issued Net cash paid for acquisition $ $ 45,709 58,029 (36,710) (66,664) 364 state courts in Florida and Texas. As all claims are handled independently by the Company's insurance carrier, the Company...

  • Page 37
    ... makes payments based on the difference between a fixed price and a variable price At December 31, 1999, the Company's contractual commitments consisted primarily of scheduled aircraft acquisitions. The Company has entered into a contract with The Boeing Company to purchase 50 new B717 aircraft, to...

  • Page 38
    ... based on the London Interbank Offered Rate ("LIBOR") (5.82% at December 31, 1999), plus a range of 1.50% to 3.73%. Certain aircraft, engines, computer and telephone equipment with a book value totaling approximately $218,028,000 serve as collateral on the Senior Secured 6. Long-Term Debt December...

  • Page 39
    ... power of all classes of the Company's stock, the exercise price per share shall not be less than 110% of the fair value of the shares on the date of grant. Total rental expense charged to operations for aircraft, facilities and office space for the years ended December 31, 1999, 1998 and 1997...

  • Page 40
    ...that the information be determined as if the Company has accounted for its employee stock options granted subsequent to December 31, 1994 under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with...

  • Page 41
    ... Weighted Average Exercise Price $ 0.17 3.13 5.41 10.75 19.08 $ 3.60 Options Exercisable At December 31, 1999, the Company had reserved a total of 12,519,330 shares of common stock for future issuance, upon exercise of stock options. 9. Income Taxes The income tax provision (benefit) is as follows...

  • Page 42
    ... tax Benefit of preacquisition net operating loss carryforwards Other Valuation reserve 1998 $(14,258) (606) 7,705 - 1997 $(41,803) (4,761) 89 - Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting...

  • Page 43
    ... the Airways Merger is $23,098,000. The use of pre-acquisition operating loss carryforwards is subject to limitations imposed by the Internal Revenue Code. The Company does not anticipate that these limitations will affect utilization of the carryforwards prior to expiration. For financial reporting...

  • Page 44
    ...with the loss of Flight 592 and the resulting excess costs related to the reduced schedule in 1997. Such costs consist of expenses directly related to the accident and the ensuing extensive FAA review of the Company's operations including legal fees, payments to the FAA, inspection related costs and...

  • Page 45
    ... service are eligible to make quarterly purchases of the Company's common stock at up to a 15% discount from the market value on the offering date. The Board of Directors determines the discount rate before each offering date. The Company is authorized to issue up to 4,000,000 shares of common stock...

  • Page 46
    ... resulted in increasing the loss before income taxes during the fourth quarter of 1999 by approximately $5,250,000. Of this amount, approximately $3,160,000 relates to the correction of revenue recorded in earlier quarters during 1999 and approximately $2,090,000 relates to changes in management...

  • Page 47
    ...financial position of AirTran Holdings, Inc. at December 31, 1999, and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Atlanta...

  • Page 48
    ... outstanding. The Company currently does not pay cash dividends. Form 10-K A copy of the Form 10-K and other financial reports filed with the Securities and Exchange Commission are available upon request by writing: AirTran Holdings, Inc. Attn: Investor Relations 9955 AirTran Blvd. Orlando, FL 32827

  • Page 49
    1999: turn around 2000: soaring ahead