AirTran Holdings, Inc., Reports Increase in Third Quarter Profit
ORLANDO, Fla., Oct. 22 - AirTran Holdings, Inc., (NYSE: AAI), the parent company of AirTran Airways, Inc., today reported a net profit of $36.3 million or $0.22 per diluted share for the third quarter of 2010. During the quarter, the Company reported operating income of $56.7 million.
Included in these third quarter results is a non-operating gain on derivative financial instruments of $15.3 million. This non-operating gain on derivative financial instruments was largely attributable to unrealized increases in the fair value of our future fuel-related derivative assets. During the same period in 2009, AirTran Airways reported net income of $10.4 million, and diluted earnings per common share of $0.08. Included in our third quarter 2009 results is a non-operating loss on derivative financial instruments of $10.3 million. The Company ended the third quarter with $424.5 million in unrestricted cash and the Company’s revolving line of credit remains undrawn.
During this period, the Company also achieved an all-time record for traffic (revenue passenger miles), and second highest load factor in Company history. AirTran Airways also established record setting operational metrics during the quarter, including the highest ever performance in on-time arrivals at 83.4 percent. In July alone, AirTran Airways served more than 2.4 million customers and achieved a load factor in excess of 88 percent. The Company continued to rank among the top of the industry in completion factor, mishandled baggage rate and the number of customer complaints the Department of Transportation receives.
“Each of our more than 8,500 AirTran Airways Crew Members played an important role in the summer operation of our airline. The continued improvement in our operational and solid financial performance is a testament to the can-do spirit and determination of our Crew Members,” said Bob Fornaro, AirTran Airways’ chairman, president and chief executive officer. “To post these outstanding operational metrics during such a peak travel period is a clear indication of our ability to provide an extremely high-quality product.”
Acquisition by Southwest Airlines
During the third quarter, AirTran Holdings, Inc., entered into a definitive merger agreement to be acquired by Southwest Airlines (NYSE: LUV). Completion of the transaction, which will require both regulatory and shareholder approvals, is expected to close by the first half of 2011. Commercial and operational integration is slated to culminate in 2012, with both carriers operating under Southwest Airlines’ Federal Aviation Administration (FAA) operating certificate in Dallas.
Until successful completion of this transaction, AirTran Holdings, Inc., will continue to operate as a separate, independent company.
AirTran Airways Highlights:
Other highlights of AirTran Airways’ accomplishments in the third quarter and year to date include:
— Reached a tentative agreement with the Air Line Pilots Association
(ALPA) representing 1,700 AirTran Airways pilots. If ratified, the
agreement would take effect December 1, 2010.
— Completed a seven-year master lease agreement for facilities at
Hartsfield-Jackson Atlanta International Airport.
— Repurchased $90.4 million in convertible notes strengthening the
financial position of the Company.
— Signed a new financing arrangement with Norddeutsche Landesbank
Girozentrale (NORD/LB) to provide permanent financing to the airline for
Boeing 737-700 deliveries in 2011.
— Announced the creation of a pilot base in Orlando. This base opened in
October 2010, and will initially employ 100 Boeing 717 and 737 pilots to
support continued growth in Central Florida.
— Received the FAA’s prestigious Aviation Maintenance Technician (AMT)
Diamond Award of Excellence for the 14th consecutive year.
— Continued Caribbean expansion by announcing plans to serve Punta Cana,
Dominican Republic, from Atlanta beginning in February 2011.
— Extended Caribbean reach from Baltimore/Washington by adding new flights
to San Juan in addition to existing flights to Nassau/Paradise Island,
Bahamas, and Montego Bay, Jamaica.
— Announced new service from Tampa to San Juan and Key West.
— Announced partnership with the world’s largest hotel group,
InterContinental Hotels Group (NYSE: IHG), for an affinity program with
the A+ Rewards frequent flier program. Members now earn flight credits
for stays at more than 4,500 hotels worldwide, including:
InterContinental®, Crowne Plaza®, Hotel Indigo®, Holiday Inn®,
Holiday Express®, Holiday Inn® Club Vacations, Staybridge® Suites and
Candlewood® Suites. IHG Priority Club Rewards members now also earn
points for flights on AirTran.
AirTran Airways, a subsidiary of AirTran Holdings, Inc. is a Fortune 1000 company and has been ranked the number one low-cost carrier in the Airline Quality Rating study for the past three years. AirTran is the only major airline with Gogo Inflight Internet on every flight and offers coast-to-coast service on North America’s newest all-Boeing fleet. Our low-cost, high-quality product also includes assigned seating, Business Class, and complimentary XM Satellite Radio on every flight. To book a flight, visit http://www.airtran.com.
AirTran Holdings, Inc.
Consolidated Statements of Income
(In thousands, except per share data and statistical summary)
(Unaudited)
Three months ended Percent
September 30,
2010 2009 Change
---- ---- ------
Operating Revenues:
Passenger $602,712 $529,435 13.8
Other 65,222 67,967 (4.0)
------ ------
Total operating
revenues 667,934 597,402 11.8
Operating Expenses:
Aircraft fuel 211,115 190,235 11.0
Salaries,
wages and
benefits 130,913 122,895 6.5
Aircraft rent 60,576 60,632 (0.1)
Maintenance,
materials and
repairs 59,075 49,973 18.2
Distribution 27,929 25,306 10.4
Landing fees
and other
rents 36,651 37,573 (2.5)
Aircraft
insurance and
security
services 6,001 5,440 10.3
Marketing and
advertising 7,870 9,349 (15.8)
Depreciation
and
amortization 15,338 13,899 10.4
(Gain) on
asset
dispositions - (6,379) -
Other
operating 55,795 51,446 8.5
------ ------
Total
operating
expenses 611,263 560,369 9.1
Operating Income 56,671 37,033 53.0
Other (Income)
Expense:
Interest
income (522) (3,835) (86.4)
Interest
expense 17,625 20,089 (12.3)
Capitalized
interest (390) (179) -
Net (gains)
losses on
derivative
financial
instruments (15,264) 10,281 -
Loss on
extinguishment
of debt - 18 -
--- ---
Other (income)
expense, net 1,449 26,374 (94.5)
----- ------
Income Before
Income Taxes 55,222 10,659 -
Income tax
expense 18,959 233 -
------ ---
Net Income $36,263 $10,426 -
======= =======
Earnings per
Common Share
Basic $0.27 $0.09 -
Diluted $0.22 $0.08 -
Weighted-average
Shares
Outstanding
Basic 135,444 120,482 12.4
Diluted 173,443 140,625 23.3
Operating margin 8.5 percent 6.2 percent 2.3 pts.
Net margin 5.4 percent 1.7 percent 3.7 pts.
Net margin,
adjusted * 2.7 percent 1.8 percent 0.9 pts.
Three Months Ended Percent
September 30,
2010 2009 Change
---- ---- ------
Third Quarter
Statistical
Summary:
Revenue
passengers 6,538,710 6,533,184 0.1
Revenue passenger
miles (000s) 5,271,272 5,172,347 1.9
Available seat
miles (000s) 6,271,500 6,170,977 1.6
Passenger load
factor 84.1 percent 83.8 percent 0.3 pts.
Departures 64,963 65,559 (0.9)
Average aircraft
stage length
(miles) 767 749 2.4
Average fare
(excluding
transportation
taxes) $92.18 $81.04 13.7
Average yield per
RPM 11.43 cents 10.24 cents 11.6
Passenger revenue
per ASM 9.61 cents 8.58 cents 12.0
Total revenue per
ASM 10.65 cents 9.68 cents 10.0
Operating cost
per ASM 9.75 cents 9.08 cents 7.4
Operating cost
per ASM,
adjusted* 9.75 cents 9.18 cents 6.2
Non-fuel
operating cost
per ASM 6.38 cents 6.00 cents 6.3
Non-fuel
operating cost
per ASM,
adjusted* 6.38 cents 6.10 cents 4.6
Average cost of
aircraft fuel
per gallon $2.16 $1.98 9.1
Average economic
cost of aircraft
fuel per gallon $2.23 $2.02 10.4
Gallons of fuel
burned (000s) 97,517 96,098 1.5
Operating
aircraft in
fleet at end of
period 138 136 1.5
Average daily
aircraft
utilization
(hours) 11.2 11.4 (1.8)
Full-time
equivalent
employees at end
of period 7,742 7,717 0.3
* Statistical calculations for 2010 and 2009, on an adjusted basis,
exclude gains and losses as detailed in the attached Reconciliation
of GAAP Financial Information to Non-GAAP Financial Information.
AirTran Holdings, Inc.
Consolidated Statements of Income
(In thousands, except per share data and statistical summary)
(Unaudited)
Nine months ended Percent
September 30,
2010 2009 Change
---- ---- ------
Operating Revenues:
Passenger $1,778,477 $1,552,507 14.6
Other 195,155 190,503 2.4
Total
operating
revenues 1,973,632 1,743,010 13.2
Operating
Expenses:
Aircraft
fuel 640,164 483,008 32.5
Salaries,
wages and
benefits 392,324 363,627 7.9
Aircraft
rent 181,722 181,621 0.1
Maintenance,
materials
and
repairs 176,158 145,884 20.8
Distribution 82,341 70,540 16.7
Landing
fees and
other
rents 115,607 108,722 6.3
Aircraft
insurance
and
security
services 17,651 15,756 12.0
Marketing
and
advertising 26,333 30,947 (14.9)
Depreciation
and
amortization 45,059 42,120 7.0
(Gain) on
asset
dispositions - (3,073) -
Other
operating 168,328 152,952 10.1
Total
operating
expenses 1,845,687 1,592,104 15.9
-- --
Operating
Income 127,945 150,906 (15.2)
Other
(Income)
Expense:
Interest
income (1,662) (5,212) (68.1)
Interest
expense 63,597 61,068 4.1
Capitalized
interest (1,423) (1,244) 14.4
Net
(gains)
losses on
derivative
financial
instruments 11,856 (17,944) -
Gain on
extinguishment
of debt - (4,278) -
--- ------
Other
(income)
expense,
net 72,368 32,390 -
------ ------
Income
Before
Income
Taxes 55,577 118,516 (53.1)
Income tax
expense 18,959 945 -
------ ---
Net Income $36,618 $117,571 (68.9)
======= ========
Earnings
per Common
Share
Basic $0.27 $0.98 (72.4)
Diluted $0.24 $0.86 (72.1)
Weighted-
average
Shares
Outstanding
Basic 135,265 120,158 12.6
Diluted 172,678 139,617 23.7
Operating
margin 6.5 percent 8.7 percent (2.2) pts.
Net margin 1.9 percent 6.7 percent (4.8) pts.
Net margin,
adjusted 2.0 percent 4.8 percent (2.8) pts.
Nine Months Ended Percent
September 30,
2010 2009 Change
---- ---- ------
Nine Month
Statistical
Summary:
Revenue passengers 18,600,092 18,086,257 2.8
Revenue passenger
miles (000s) 14,863,412 14,076,956 5.6
Available seat
miles (000s) 18,214,595 17,498,261 4.1
Passenger load
factor 81.6 percent 80.4 percent 1.2 pts.
Departures 190,115 188,576 0.8
Average aircraft
stage length
(miles) 763 740 3.1
Average fare
(excluding
transportation
taxes) $95.62 $85.84 11.4
Average yield per
RPM 11.97 cents 11.03 cents 8.5
Passenger revenue
per ASM 9.76 cents 8.87 cents 10.0
Total revenue per
ASM 10.84 cents 9.96 cents 8.8
Operating cost per
ASM 10.13 cents 9.10 cents 11.3
Operating cost per
ASM, adjusted* 10.13 cents 9.12 cents 11.1
Non-fuel operating
cost per ASM 6.62 cents 6.34 cents 4.4
Non-fuel operating
cost per ASM,
adjusted* 6.62 cents 6.36 cents 4.1
Average cost of
aircraft fuel per
gallon $2.26 $1.77 27.7
Average economic
cost of aircraft
fuel per gallon $2.28 $1.81 26.0
Gallons of fuel
burned (000s) 282,680 272,264 3.8
Operating aircraft
in fleet at end of
period 138 136 1.5
Average daily
aircraft
utilization
(hours) 11.2 11.0 1.8
Full-time
equivalent
employees at end
of period 7,742 7,717 0.3
* Statistical calculations for 2010 and 2009, on an adjusted basis,
exclude gains and losses as detailed in the attached Reconciliation
of GAAP Financial Information to Non-GAAP Financial Information.
Reconciliation of GAAP Financial Information to Non-GAAP Financial
Information
Three and Nine Months Ended September 30, 2010 and 2009
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 net income, as adjusted and net margin, as adjusted. Our disclosures may also exclude special or non-recurring items that we believe should be taken into consideration to more accurately measure and monitor our operating performance. 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 and non-fuel CASM, adjusted, provide a useful 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. Our press release also contains information regarding the components of GAAP fuel expense and net gains and losses on derivative financial instruments. These amounts have been included as supplemental information.
We disclose both the average cost of aircraft fuel per gallon and the average economic cost of aircraft fuel per gallon. Substantially all of our fuel related derivatives are not accounted for as hedges. Average cost of aircraft fuel per gallon is based on fuel expense as measured by GAAP, which includes realized gains and losses on fuel related derivative instruments, that are accounted for as hedges. Average economic cost of fuel per gallon includes realized gains and losses on all fuel related derivative instruments, including those which were not accounted for as hedges. Neither the average cost of aircraft fuel nor the average economic cost of aircraft fuel include unrealized gains and losses.
We consider our fuel derivative contracts an important tool in managing costs related to jet fuel purchases. We believe it is important to assess our financial performances by including the effect of the net cash settlements and excluding the mark-to-market adjustments for our unrealized gains and losses recorded in the income statement for contracts settling in future periods.
We believe that these above 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.
Dollars in thousands,
unless otherwise noted Three months ended Nine months ended
September 30, September 30,
2010 2009 2010 2009
---- ---- ---- ----
The following table
Calculates net income,
adjusted and net
margin, adjusted:
Net income $36,263 $10,426 $36,618 $117,571
Gain on asset
dispositions,
net of taxes - (6,379) - (3,073)
(Gain) loss on
Extinguishment of
debt, net of taxes - 251 - (3,333)
Unrealized (gains)
Losses on derivative
Financial instruments,
net of taxes (17,903) 6,260 3,811 (27,663)
Net income,
adjusted $18,360 $10,558 $40,429 $83,502
======= ======= ======= =======
Total operating
revenues $667,934 $597,402 $1,973,632 $1,743,010
- - --- ---
Net margin,
adjusted 2.7% 1.8% 2.0% 4.8%
=== === === ===
The following table
calculates operating
expenses, adjusted and
operating cost per ASM,
adjusted:
Total operating
expenses $611,263 $560,369 $1,845,687 $1,592,104
Gain on asset
dispositions - 6,379 - 3,073
--- ----- --- -----
Operating
expenses,
adjusted $611,263 $566,748 $1,845,687 $1,595,177
======== ======== ========== ==========
ASMs (000s) 6,271,500 6,170,977 18,214,595 17,498,261
-- -- --- ---
Operating cost
per ASM (cents),
adjusted 9.75 9.18 10.13 9.12
==== ==== ===== ====
The following table
calculates non-fuel
operating cost per ASM
and non-fuel operating
cost per ASM, adjusted:
Total operating
expenses $611,263 $560,369 $1,845,687 $1,592,104
Aircraft fuel (211,115) (190,235) (640,164) (483,008)
- - - -
Non-fuel
operating costs $400,148 $370,134 $1,205,523 $1,109,096
======== ======== ========== ==========
ASMs (000s) 6,271,500 6,170,977 18,214,595 17,498,261
-- -- --- ---
Non-fuel
operating cost
per ASM (cents) 6.38 6.00 6.62 6.34
==== ==== ==== ====
Total operating
expenses $611,263 $560,369 $1,845,687 $1,592,104
Aircraft fuel (211,115) (190,235) (640,164) (483,008)
Gain on asset
dispositions - 6,379 - 3,073
--- ----- --- -----
Non-fuel
operating costs,
adjusted $400,148 $376,513 $1,205,523 $1,112,169
======== ======== ========== ==========
ASMs (000s) 6,271,500 6,170,977 18,214,595 17,498,261
-- -- --- ---
Non-fuel
operating cost
per ASM (cents),
adjusted 6.38 6.10 6.62 6.36
==== ==== ==== ====
The following table
Provides detail of
certain components of
aircraft fuel expense
and calculates average
economic cost of aircraft
fuel per gallon:
Aircraft fuel
expense per GAAP* $211,115 $190,235 $640,164 $483,008
Realized losses
on derivatives
that do not
qualify for hedge
accounting,
recorded in net
(gains) losses
on derivative
financial
instruments 6,561 4,021 5,666 9,719
Economic fuel
expense $217,676 $194,256 $645,830 $492,727
======== ======== ======== ========
Gallons of fuel
burned (000s) 97,517 96,098 282,680 272,264
------ ------
Average economic
cost of aircraft
fuel per gallon $2.23 $2.02 $2.28 $1.81
===== ===== ===== =====
The following table
calculates diluted
earnings per share,
adjusted:
Net income $36,263 $10,426 $36,618 $117,571
Gain on asset
dispositions,
net of taxes - (6,379) - (3,073)
(Gain) loss on
extinguishment
of debt, net of
taxes - 251 - (3,333)
Unrealized
(gains) losses
on derivative
financial
instruments, net
of taxes (17,903) 6,260 3,811 (27,663)
Net income,
adjusted $18,360 $10,558 $40,429 $83,502
======= ======= ======= =======
Plus income
effect of
assumed interest
on convertible
debt 1,548 957 4,644 2,867
Net income,
adjusted after
assumed
conversion,
diluted $19,908 $11,515 $45,073 $86,369
======= ======= ======= =======
Adjusted
weighted-
average shares
outstanding,
diluted 172,951 140,625 172,678 139,617
Diluted earnings
per share,
adjusted $0.12 $0.08 $0.26 $0.62
===== ===== ===== =====
* Aircraft fuel expense for the three months ended September 30, 2010 was
reduced by $10.1 million due to a claim for refund of fuel taxes
previously paid between 2007-2010. Aircraft fuel expense for the nine
months ended September 30, 2010 was reduced by $7.5 million due to a claim
for refund of fuel taxes previously paid between 2007-2009. This
reduction in fuel expense had been incorporated in the Company's previous
guidance.
Contact: Christopher White (Media)
678-254-7442
Jason Bewley (Investor Relations)
407-318-5188
SOURCE AirTran Holdings, Inc.
AirTran Holdings, Inc.
CONTACT: Christopher White (Media), +1-678-254-7442, or Jason Bewley (Investor Relations), +1-407-318-5188, both of AirTran Holdings, Inc.
Web Site: http://www.airtran.com