Frontier Airlines 2005 Annual Report Download - page 65

2004 Compared to 2003
Operating revenue in 2004 increased by 31.3%, or $154.0 million, to $646.3 million compared to $492.3 million in 2003. The
increase was due to the 28 additional regional jets added to revenue service in 2004. Twenty regional jets were added for United,
including 11 Embraer 170 regional jets, five were added for Delta, one was added for US Airways and two were added for spares and
charters and were not currently assigned to any of our code-share partners. In February 2003, we and America West mutually agreed
to terminate our code-share agreement and we concurrently allocated the aircraft previously designated for America West to Delta.
The transition of these aircraft was completed during the second quarter of 2003. We recorded a breakage fee of $6.0 million from
America West in the second quarter of 2003 as a result of this transaction.
Total operating expenses increased by 35.5%, or $145.4 million, to $555.0 million in 2004 compared to $409.6 million in
2003 due to the increase in flight operations. Total operating and interest expenses increased by 34.9%, or $151.1 million, to
$583.4 million for 2004 compared to $432.4 million during 2003. The unit cost on total operating and interest expenses, excluding
fuel charges, remained unchanged at 8.9¢ per available seat mile in 2004 compared to 2003. Factors relating to the change in operating
expenses are discussed below.
Wages and benefits increased by 29.2%, or $25.4 million, to $112.3 million for 2004 compared to $86.9 million for 2003 due
to a 24.5% increase in full time equivalent employees to support the increased regional jet operations and an increase in the costs of
providing employee benefits. The cost per available seat mile remained unchanged at 2.4¢.
Aircraft fuel expense increased 63.1%, or $67.4 million, to $174.2 million for 2004 compared to $106.8 million for 2003 due
to a 30.4% increase in fuel consumption and a 25.5% increase in average fuel prices. The average price per gallon was $1.38 in 2004
and $1.10 in 2003. The unit cost increased to 3.8¢ in 2004 compared to 2.9¢ in 2003 due to the increase in average fuel prices.
Passenger fees and commissions decreased by 53.0%, or $3.3 million, to $2.9 million for 2004 compared to $6.3 million for
2003 due to the phase out and elimination of pro-rate operations by September 2004. There were no passenger fees and commissions
on any of the fixed-fee operations, including the turboprops operated for United. The unit cost decreased to 0.1¢ in 2004 compared to
0.2¢ in 2003.
Landing fees increased by 26.7%, or $5.1 million, to $24.2 million in 2004 compared to $19.1 million in 2003. The
increase was due to a 24.6% increase in departures. Our fixed-fee agreements provide for a direct reimbursement of landing fees. The
unit cost remained unchanged at 0.5¢.
Aircraft and engine rent increased by 10.6%, or $7.2 million, to $74.5 million in 2004 compared to $67.4 million in 2003 due
to the addition of four leased regional jets in 2004 and the full year effect of four regional jets leased in 2003. This increase was
partially offset by the termination of eight leased Saab 340 turboprops. The unit cost decrease of 12.5% to 1.6¢ for 2004 compared to
1.8¢ for 2003 was attributable to the increase in capacity from the regional jet operations and because we lease financed only four of
the 28 aircraft added to the regional jet fleet in 2004.
Maintenance and repair expenses increased by 31.4%, or $16.8 million, to $70.3 million in 2004 compared to $53.5 million
for 2003 due the increase in flying of the regional jets, an increase in the number of heavy airframe inspections, increase in regional jet
aircraft not covered under the manufacturer’s warranty. The unit cost remained unchanged at 1.5¢.
Insurance and taxes increased 2.5%, or $0.3 million, to $13.2 million in 2004 compared to $12.9 million in 2003. The
increase in operations and an increase in aircraft property taxes were mostly offset by a decline in insurance rates during 2004. The
unit cost decreased to 0.3¢ in 2004 compared to 0.4¢ in 2003 due to the decline in insurance rates.
Depreciation and amortization increased 44.1%, or $10.5 million, to $34.4 million in 2004 compared to $23.9 million in 2003
due to depreciation on 24 regional jet aircraft purchased in 2004, including 11 Embraer 170 regional jets. The unit cost increased to
0.8¢ in 2004 compared to 0.7¢ in 2003.
Impairment loss and accrued aircraft return costs decreased 47.7%, or $1.3 million to $1.4 million in 2004 compared to $2.8
million in 2003. In 2004, this charge consisted of a reduction of $0.2 million to reflect the estimated liability for Saab 340 aircraft
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 27, 2006 Powered by Morningstar® Document Research℠