Frontier Reports In; Guidance Down


Friday Frontier Airlines reported earnings. The airline reported net earnings of $4 million, or $0.10 a share, which was a considerable improvement over last year’s loss of $2.7 million or $0.08 a share.

However, looking at the airline’s operating statistics, while the airline’s CASM excluding fuel and special items was down 6.1% — a nice number — the airline’s PRASM, which was up 8.5%, lagged the industry 15.9% increase average for the quarter significantly. This is a direct reflection of the increased competition at Frontier’s home base of DIA.

Think United Airlines out of bankruptcy protection. Think Southwest building up its new service out of DIA.

Biggest negative from the airline’s call last week? The airline said that we should expect to see “similar” profitability in the airline’s second quarter (quarter ending Sept. 30.)

This was not good news, although it was also not unexpected. Considering consensus for the quarter, at the time of the call, was for the airline to report profits in the $0.19 a share range, essentially this means net earnings for the current quarter are now expected to be about half what analysts had forecast.

As a result, look for further reductions in earnings estimates here.

As we have written in PBB, with the airline generating about 90% of its revenue out of the Denver market — and with the airline now facing a full-frontal assault from Southwest (which will increase flights in Denver by 60% in the next two months), it would certainly seem that this revenue deterioration is only going to continue.

Our take this spring, when we very reluctantly put Frontier Airlines on our resurrected Titanic Watch is this — while the airline has enough cash for now ($296 million), the airline can’t continue doing what’s it’s doing. Or it’s going to be a slow and certain unhappy landing. Let’s just say the revenue trend is not the airline’s friend in this case. Something’s got to change.

The guidance for next quarter last week reaffirmed my reasons for putting the airline on our Watch list.