AirTran Holdings, Inc.
Consolidated Statements of Operations
(In thousands, except per share data and statistical summary)
(Unaudited)
Three Months Ended
June 30, Percent
2008 2007 Change
-------- -------- -------
Operating Revenues:
Passenger $658,634 $585,875 12.4
Cargo - 1,159 -
Other 34,746 26,492 31.2
-------- --------
Total operating revenues 693,380 613,526 13.0
Operating Expenses:
Salaries, wages and
benefits 123,392 110,972 11.2
Aircraft fuel 368,127 201,588 82.6
Aircraft rent 60,789 60,667 0.2
Distribution 27,685 23,874 16.0
Maintenance, materials and
repairs 43,441 38,190 13.7
Landing fees and other rents 33,681 30,268 11.3
Aircraft insurance and
security services 5,547 5,895 (5.9)
Marketing and advertising 9,698 10,151 (4.5)
Depreciation 14,649 11,547 26.9
Gain on sale of aircraft (7,292) (6,234) 17.0
Impairment of goodwill 8,350 - -
Other operating 50,837 48,746 4.3
------- -------
Total operating expenses 738,904 535,664 37.9
------- -------
Operating Income (Loss) (45,524) 77,862 -
Other (Income) Expense:
Interest income (2,682) (5,521) (51.4)
Interest expense 18,478 18,321 0.9
Capitalized interest (1,528) (2,361) (35.3)
Net (gains) losses on
derivative financial
instruments (43,560) 156 -
------- -------
Other (income) expense, net (29,292) 10,595 -
------- -------
Income (Loss) Before Income
Taxes (16,232) 67,267 -
Income Tax Expense (Benefit) (2,694) 25,208 -
-------- -------
Net Income (Loss) $(13,538) $42,059 -
======== =======
Income (Loss) per Common
Share
Basic $(0.12) $0.46 -
Diluted $(0.12) $0.42 -
Weighted-average Shares
Outstanding
Basic 109,097 91,524 19.2
Diluted 109,097 104,366 4.5
EBITDA $12,685 $89,253 (85.8)
EBITDA adjusted* $(20,454) $83,175 -
Operating margin (6.6) percent 12.7 percent (19.3) pts.
Operating margin adjusted* (6.4) percent 11.7 percent (18.1) pts.
Net margin (2.0) percent 6.9 percent (8.9) pts.
Net margin adjusted* (4.5) percent 6.2 percent (10.7) pts.
Second Quarter Statistical
Summary:
Revenue passengers 6,533,427 6,323,023 3.3
Revenue passenger miles
(000s) 5,128,676 4,527,372 13.3
Available seat miles
(000s) 6,457,117 5,747,975 12.3
Departures 69,071 66,836 3.3
Block hours 147,243 134,316 9.6
Passenger load factor 79.4 percent 78.8 percent 0.6 pts.
Break-even load factor 81.4 percent 69.7 percent 11.7 pts.
Average fare $100.81 $92.66 8.8
Average yield per RPM 12.84 cents 12.94 cents (0.8)
Passenger revenue per ASM 10.20 cents 10.19 cents 0.1
Operating cost per ASM 11.44 cents 9.32 cents 22.7
Operating cost per ASM
adjusted* 11.43 cents 9.43 cents 21.2
Non-fuel operating cost per
ASM 5.74 cents 5.81 cents (1.2)
Non-fuel operating cost per
ASM adjusted* 5.73 cents 5.92 cents (3.2)
Average cost of aircraft
fuel per gallon $3.75 $2.20 70.5
Average economic cost of
aircraft fuel per gallon $3.65 $2.20 65.9
Gallons of fuel burned 98,261,250 91,433,439 7.5
Weighted-average number
of aircraft 141 133 6.0
* Statistical calculations for 2008 exclude the gain related to the sale of two Boeing 737 aircraft of $7.3 million, a goodwill impairment charge of $8.4 million and unrealized gains on derivatives of $34.2 million and the related tax effect, where applicable. Statistical calculations for 2007 exclude the gain related to the sale of two Boeing 737 aircraft of $6.2 million and unrealized losses on derivatives of $0.2 million and the related tax effect.
Six Months Ended
June 30, Percent
2008 2007 Change
--------- ---------- --------
Operating Revenues:
Passenger $1,225,063 $1,064,429 15.1
Cargo - 2,058 -
Other 64,708 51,105 26.6
--------- ---------
Total operating revenues 1,289,771 1,117,592 15.4
Operating Expenses:
Salaries, wages and benefits 242,299 218,689 10.8
Aircraft fuel 636,569 367,668 73.1
Aircraft rent 121,588 121,560 0.0
Distribution 50,224 42,803 17.3
Maintenance, materials and
repairs 84,773 71,724 18.2
Landing fees and other rents 68,794 59,180 16.2
Aircraft insurance and
security services 10,840 11,631 (6.8)
Marketing and advertising 21,166 21,280 (0.5)
Depreciation 27,890 21,788 28.0
Gain on sale of aircraft (7,292) (6,234) 17.0
Impairment of goodwill 8,350 - -
Other operating 105,321 96,702 8.9
-------- --------
Total operating expenses 1,370,522 1,026,791 33.5
--------- ---------
Operating Income (Loss) (80,751) 90,801 -
Other (Income) Expense:
Interest income (4,464) (10,498) (57.5)
Interest expense 37,182 34,983 6.3
Capitalized interest (4,112) (4,845) (15.1)
Net (gains) losses on
derivative financial
instruments (38,370) 156 -
-------- ------
Other (income) expense, net (9,764) 19,796 -
-------- ------
Income (Loss) Before Income
Taxes (70,987) 71,005 -
Income Tax Expense (Benefit) (22,636) 26,788 -
-------- -------
Net Income (Loss) $(48,351) $44,217 -
======== =======
Income (Loss) per Common
Share
Basic $(0.48) $0.48 -
Diluted $(0.48) $0.45 -
Weighted-average Shares
Outstanding
Basic 100,605 91,431 10.0
Diluted 100,605 104,244 (3.5)
EBITDA $(14,491) $112,433 -
EBITDA adjusted* $(42,440) $106,355 -
Operating margin (6.3)percent 8.1 percent (14.4)pts.
Operating margin adjusted* (6.2)percent 7.6 percent (13.8)pts.
Net margin (3.7)percent 4.0 percent (7.7)pts.
Net margin adjusted* (4.9)percent 3.6 percent (8.5)pts.
Six Month Statistical
Summary:
Revenue passengers 12,251,746 11,403,131 7.4
Revenue passenger miles
(000s) 9,476,075 8,175,491 15.9
Available seat miles
(000s) 12,228,154 10,955,107 11.6
Departures 132,641 128,438 3.3
Block hours 282,059 258,568 9.1
Passenger load factor 77.5 percent 74.6 percent 2.9 pts.
Break-even load factor 82.0 percent 69.6 percent 12.4 pts.
Average fare $99.99 $93.35 7.1
Average yield per RPM 12.93 cents 13.02 cents (0.7)
Passenger revenue per ASM 10.02 cents 9.72 cents 3.1
Operating cost per ASM 11.21 cents 9.37 cents 19.6
Operating cost per ASM
adjusted* 11.20 cents 9.43 cents 18.8
Non-fuel operating cost per
ASM 6.00 cents 6.02 cents (0.3)
Non-fuel operating cost per
ASM adjusted* 5.99 cents 6.07 cents (1.3)
Average cost of aircraft
fuel per gallon $3.39 $2.11 60.7
Average economic cost of
aircraft fuel per gallon $3.34 $2.11 58.3
Gallons of fuel burned 187,866,351 174,114,058 7.9
Weighted-average number of
aircraft 140 131 6.9
*Statistical calculations for 2008 exclude the gain related to the sale of two B737 aircraft of $7.3 million, a goodwill impairment charge of $8.4 million and unrealized gains on derivatives of $29.0 million and the related tax effect, where applicable. Statistical calculations for 2007 exclude the gain related to the sale of two B737 aircraft of $6.2 million and unrealized losses on derivatives of $0.2 million and the related tax effect.
Reconciliation of GAAP Financial Information to Non-GAAP Financial Information
Three Months and Six Months Ended June 30, 2008 and 2007
We prepare our financial statements in accordance with generally accepted accounting principles (GAAP). Within our press release, we make reference to certain non-GAAP financial measures including EBITDA. Earnings before income taxes, interest, depreciation and amortization ("EBITDA") is a supplemental non-GAAP financial measure used by management, as well as industry analysts, to evaluate operations and operating performance. We are also presenting EBITDA because it is used by some industry analysts and investors as a way to assess a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Our disclosure of non-fuel operating cost per available seat mile (non-fuel CASM) is consistent with financial measures reported by other airlines and analysts. We believe that non-fuel CASM provides a better understanding of our operations. Both the cost and availability of fuel are subject to many economic and political factors and are therefore beyond our control.
We disclose both the average fuel cost per gallon and the average economic fuel cost per gallon. Average fuel cost per gallon is based on fuel expense as measured by GAAP and includes realized gains and losses on fuel related derivative instruments which are accounted for as hedges. Average economic fuel cost per gallon also includes realized gains and losses on fuel related derivative instruments which were not accounted for as hedges.
We believe that these measures represent important internal measures of performance. Accordingly, where these non-GAAP measures are provided, it is done so that investors have the same financial data that management uses in evaluating performance with the belief that it will assist the investment community in assessing our underlying performance on a year-over-year and a quarter-over-quarter basis. However, because these measures are not determined in accordance with accounting principles generally accepted in the United States, such measures are susceptible to varying calculations and not all companies calculate the measures in the same manner. As a result the aforementioned measures as presented may not be directly comparable to similarly titled measures presented by other companies. The non-GAAP measures are presented as supplemental information and not as alternatives to any GAAP measurements.
Amounts in '000's
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
---------------------- ----------------------
The following table reconciles
net (gains) losses on
derivative financial
instruments per GAAP to net
(gains) losses on derivative
financial instruments
adjusted
Net (gains) losses on
derivative financial
instruments $(43,560) $156 $(38,370) $156
Less:
Realized gains on
derivatives that do
not qualify for hedge
accounting, previously
recorded in net (gains)
losses on derivative
financial instruments (9,363) - (9,363) -
--------------------- ---------------------
Net (gains) losses on
derivative financial
instruments adjusted $(34,197) $156 $(29,007) $156
====================== =====================
The following table reconciles
net income (loss) to EBITDA
and EBITDA adjusted:
Net income (loss) $(13,538) $42,059 $(48,351) $44,217
Add back:
Income tax expense
(benefit) (2,694) 25,208 (22,636) 26,788
Interest expense, net 14,268 10,439 28,606 19,640
Depreciation 14,649 11,547 27,890 21,788
--------------------- ---------------------
EBITDA $12,685 $89,253 $(14,491) $112,433
Less:
Gain on aircraft sale (7,292) (6,234) (7,292) (6,234)
Impairment of goodwill 8,350 - 8,350 -
Net (gains) losses on
derivative financial
instruments adjusted (34,197) 156 (29,007) 156
--------------------- ---------------------
EBITDA adjusted $(20,454) $83,175 $(42,440) $106,355
===================== =====================
The following table calculates
operating income (loss) adjusted
and operating margin adjusted:
Operating income (loss) $(45,524) $77,862 $(80,751) $90,801
Less:
Gain on aircraft sale (7,292) (6,234) (7,292) (6,234)
Impairment of goodwill 8,350 - 8,350 -
--------------------- ---------------------
Operating income (loss)
adjusted $(44,466) $71,628 $(79,693) $84,567
===================== =====================
Total operating
revenues 693,380 613,526 1,289,771 1,117,592
Operating margin,
adjusted -6.4% 11.7% -6.2% 7.6%
===================== =====================
The following table calculates
net income (loss) adjusted
and net margin adjusted:
Net income (loss) $(13,538) $42,059 $(48,351) $44,217
Less:
Gain on aircraft sale,
after tax (4,558) (3,896) (4,558) (3,896)
Impairment of goodwill 8,350 - 8,350 -
Net (gains) losses on
derivative financial
instruments adjusted,
after tax (21,373) 99 (18,129) 99
--------------------- ---------------------
Net income (loss),
adjusted $(31,119) $38,262 $(62,688) $40,420
===================== =====================
Total operating revenues 693,380 613,526 1,289,771 1,117,592
Net margin adjusted -4.5% 6.2% -4.9% 3.6%
===================== =====================
The following table calculates
operating cost per ASM
adjusted:
Total operating expenses $738,904 $535,664 $1,370,522 $1,026,791
Less: gain on sale of
aircraft (7,292) (6,234) (7,292) (6,234)
Less: impairment of goodwill 8,350 - 8,350 -
-------------------- ---------------------
Operating cost $737,846 $541,898 $1,369,464 1,033,025
==================== =====================
ASMs (000) 6,457,117 5,747,975 12,228,154 10,955,107
Operating cost per
ASM (cents) adjusted 11.43 9.43 11.20 9.43
==================== =====================
The following table shows the
calculation of non-fuel
operating cost per ASM and
non-fuel operating cost
per ASM adjusted:
Total operating expenses $738,904 $535,664 $1,370,522 $1,026,791
Less: aircraft fuel 368,127 201,588 636,569 367,668
-------------------- ---------------------
Non-fuel operating cost $370,777 $334,076 $733,953 $659,123
==================== =====================
ASMs (000) 6,457,117 5,747,975 12,228,154 10,955,107
Non-fuel operating
cost per ASM (cents) 5.74 5.81 6.00 6.02
==================== =====================
Total operating expenses $738,904 $535,664 $1,370,522 $1,026,791
Less: aircraft fuel 368,127 201,588 636,569 367,668
Less: gain on sale of
aircraft (7,292) (6,234) (7,292) (6,234)
Less: impairment of goodwill 8,350 - 8,350 -
-------------------- ---------------------
Non-fuel operating cost $369,719 $340,310 $732,895 $665,357
==================== =====================
ASMs (000) 6,457,117 5,747,975 12,228,154 10,955,107
Non-fuel operating
cost per ASM (cents)
adjusted 5.73 5.92 5.99 6.07
==================== =====================
The following table shows the
calculation of average
economic cost of aircraft
fuel per gallon:
Aircraft fuel- including
taxes and into-plane
costs and excluding
gains (losses) on fuel
derivative financial
instruments $375,563 $648,057
Realized (gains) losses
on derivatives that
qualify for hedge
accounting (7,436) (11,488)
---------- ---------
Aircraft fuel per GAAP $368,127 $201,588 $636,569 $367,668
========== =========
Realized gains on
derivatives that do
not qualify for hedge
accounting, previously
recorded in unrealized
gains (losses) on
derivatives $(9,363) (9,363)
---------- ---------
Economic fuel expense $358,764 $627,206
========== =========
Gallons of fuel burned 98,261,250 91,433,439 187,866,351 174,114,058
Economic fuel
expense per gallon 3.65 2.20 3.34 2.11
==================== =====================
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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