Frontier Airlines 2007 Annual Report Download - page 51

2006 Compared to 2005
The following table sets forth information regarding the Company’s expense components for the years ended December 31,
2006 and December 31, 2005. Individual expense components are also expressed in cents per ASM.
Years ended December 31,
2006 2005
Amount
Cents
per ASM Amount
Cents
per ASM
(in thousands) (in thousands)
OPERATING EXPENSES:
Wages and benefits $ 175,483 1.92 $ 143,826 2.19
Aircraft fuel 325,500 3.55 278,923 4.25
Landing fees 41,993 0.46 30,376 0.46
Aircraft and engine rent 94,773 1.03 77,725 1.18
Maintenance and repair 105,198 1.15 76,481 1.17
Insurance and taxes 17,652 0.19 16,117 0.25
Depreciation and amortization 92,228 1.01 64,877 0.99
Impairment loss and accrued aircraft return costs (1) (2,050) (0.02) (4,218) (0.06)
Other 79,708 0.87 62,195 0.95
Total operating expenses 930,485 10.16 746,302 11.38
Interest expense 91,128 1.00 63,503 0.97
Total operating expenses and interest expense $ 1,021,613 11.16 $ 809,805 12.35
Total operating expenses and interest expense less fuel $ 696,113 7.61 $ 530,882 8.10
(1) In 2005, we reversed a $4.2 million reserve after an agreement to return all the Saab turboprop aircraft to lessors was executed and
all liabilities were settled. In 2006, we recorded a $2.1 million gain relating to the disposition of Saab aircraft and spare parts.
Operating revenue in 2006 increased by 26.3%, or $238.1 million, to $1.1 billion compared to $905.0 million in 2005. The
increase was due primarily to fixed-fee revenue earned from twenty-nine 70-seat aircraft added to revenue service in 2006. Eighteen
aircraft were added for US Airways, seven were added for Delta, and four were placed on short-term assignment in late 2006 with
current Partners and will begin service for Frontier in the spring of 2007. Other operating revenue increased $6.4 million due to a full
year of sublease revenue on aircraft and payments from US Airways for the use of aircraft take-off and landing slots in 2006 which we
began recording in September 2005.
Total operating expenses increased by 24.7%, or $184.2 million, to $930.5 million in 2006 compared to $746.3 million in
2005 due to the increase in flight operations. Total operating and interest expenses increased by 26.2%, or $211.9 million, to
$1,021.6 million for 2006 compared to $809.8 million during 2005 due to the increase in flight operations. The cost per available seat
mile on total operating and interest expenses, excluding fuel charges, decreased to 7.6¢ in 2006 compared to 8.1¢ in 2005. Factors
relating to the change in operating expenses are discussed below.
Wages and benefits increased by 22.0%, or $31.7 million, to $175.5 million for 2006 compared to $143.8 due primarily to a
$25.3 million increase in flight crew and maintenance operations wage expenses to support the increase in 70-seat regional jet
operations and a $8.7 million increase in related employee benefit costs resulting from the additional wage expense and stock
compensation expense recognition of $1.3 million in 2006. These increases were partially offset by a $4.4 million decrease in the
wage expense for Customer Service employees due to the elimination of ground handling operations for American in St. Louis in
March 2006. The cost per available seat mile decreased to 1.9¢ for 2006 compared to 2.2¢ in 2005.
Aircraft fuel expense increased 16.7%, or $46.6 million, to $325.5 million for 2006 compared to $278.9 million for 2005 due
to a 10% increase in the average fuel price per gallon and a 6% increase in gallons consumed. Beginning in May 2005, we no longer
record fuel expense and the related revenue for US Airways operations because US Airways pays for fuel directly. The average price
per gallon was $2.16 in 2006 and $1.98 in 2005. The unit cost decreased to 3.6¢ in 2006 compared to 4.3¢ in 2005 due to the increase
in the 70-seat US Airways operations, for which no fuel expense is recorded.
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Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 21, 2008 Powered by Morningstar® Document Research℠