Frontier Airlines 2008 Annual Report Download - page 49

Results of Operations
2008 Compared to 2007
The following table sets forth information regarding the Company’s expense components for the years ended December 31,
2008 and December 31, 2007. Individual expense components are also expressed in cents per ASM.
Years ended December 31,
2008 2007
Amount
Cents
per ASM Amount
Cents
per ASM
(in thousands) (in thousands)
OPERATING EXPENSES:
Wages and benefits $ 252,336 1.91 $ 226,521 1.97
Aircraft fuel 327,791 2.48 296,573 2.58
Landing fees 59,891 0.45 53,684 0.47
Aircraft and engine rent 134,206 1.02 124,961 1.08
Maintenance and repair 169,425 1.28 130,237 1.13
Insurance and taxes 25,793 0.20 19,039 0.16
Depreciation and amortization 133,206 1.01 106,594 0.93
Other 122,012 0.92 104,790 0.91
Total operating expenses 1,224,660 9.27 1,062,399 9.25
Interest expense 131,856 1.00 107,323 0.93
Total operating expenses and interest expense $ 1,356,516 10.27 $ 1,169,722 10.16
Total operating expenses and interest expense less fuel $ 1,028,725 7.79 $ 873,149 7.58
Operating revenue in 2008 increased by 14.5%, or $187.1 million, to $1.48 billion compared to $1.29 billion in 2007.
Excluding reimbursement for fuel expense, which is a pass-through cost to our Partners, regional airline service revenues increased
15.6% for 2008. The increase was due primarily to fixed-fee revenue earned from the addition of 26 E175 aircraft that were placed
into service throughout 2008. Partially offsetting this increase was the removal of fifteen 37-seat aircraft from Delta, seven 50-seat
aircraft from Continental and two 37-seat aircraft from charter operations. These aircraft, which are being sold or returned to the
lessor, were removed during the last six months of 2008.
Total operating and interest expenses, excluding fuel increased by 17.8%, or $155.6 million, to $1.03 billion for 2008
compared to $873.1 million during 2007 due to the increase in flight operations. The cost per available seat mile on total operating and
interest expenses, excluding fuel charges, increased to 7.79¢ in 2008 compared to 7.58¢ in 2007. Factors relating to the change in
operating expenses are discussed below.
Wages and benefits increased by 11.4%, or $25.8 million, to $252.3 million for 2008 compared to $226.5 million for 2007
due primarily to a $20.7 million increase in flight crew and maintenance operations wage expenses to support the increase in regional
jet operations. Overhead and stock compensation expense increased $3.2 million while payroll taxes and benefits increased $2.2
million in 2008. The cost per available seat mile decreased to 1.91¢ for 2008 compared to 1.97¢ in 2007.
Aircraft fuel expense increased 10.5%, or $31.2 million, to $327.8 million for 2008 compared to $296.6 million for 2007 due
to a 34% increase in the average fuel price per gallon from $2.40 in 2007 to $3.21 in 2008, partially offset by a 17% decrease in
gallons consumed due to United paying for fuel directly for more locations in 2008. The unit cost decreased to 2.48¢ in 2008
compared to 2.58¢ in 2007.
Landing fees increased by 11.6%, or $6.2 million, to $59.9 million in 2008 compared to $53.7 million in 2007. The increase
is due mainly to a 10% increase in departures. Our fixed-fee agreements provide for a direct reimbursement of landing fees. The unit
cost was 0.45¢ in 2008 compared to 0.47¢ in 2007.
Aircraft and engine rent increased by 7.4%, or $9.2 million, to $134.2 million in 2008 compared to $125.0 million in 2007
due to a $6.2 million increase in aircraft rents of CRJ-200 aircraft, which are on short-term leases and a $3.2 million increase in
aircraft rents of 70-seat aircraft. The unit cost decreased to 1.02¢ for 2008 compared to 1.08¢ for 2007.
Maintenance and repair expenses increased by 30.1%, or $39.2 million, to $169.4 million in 2008 compared to $130.2
million for 2007 due mainly to the addition of 26 E175 aircraft in 2008, which resulted in a $12.9 million increase in long-term
maintenance agreement expenses. Long-term maintenance agreement expenses for the 50-seat jets increased $7.7
million. Additionally, repair expenses on parts not under warranty or not included under long term contracts increased $9.7 million
for the fleet. Scheduled heavy maintenance events for the fleet also increased by $5.4 million. The unit cost increased to 1.28¢ in
2008 compared to 1.13¢ in 2007.
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 16, 2009 Powered by Morningstar® Document Research℠