AirTran Holdings, Inc., (NYSE: AAI), the parent company of AirTran Airways, Inc., today reported a net loss of $12.0 million or $0.09 per diluted share for the first quarter of 2010. Excluding $4.7 million in unrealized gains on future fuel hedges, the Company’s net loss for the quarter would have been $16.7 million dollars or $0.12 per diluted share. The impact of historic winter snowstorms along the Eastern Seaboard and more than a 50 percent increase in fuel expenses offset record total revenues for the first quarter.
AirTran Airways experienced significant revenue improvement that accelerated through the quarter with total unit revenues increasing by a solid double-digit margin year-over-year in March.
The Company posted record first quarter total revenues of $605.1 million on a record load factor of 77.2 percent. Operating costs increased 21.8 percent or $107.8 million as compared to the same period last year. Fuel was the single largest contributor to the cost increase, accounting for over 60 percent or $67.3 million of the increase. Last year, crude oil averaged $41 per barrel in the first quarter but has risen to $78 this year. Winter storms further pressured unit costs due to reduced capacity and additional expenses related to extreme weather during the quarter.
"This winter proved to be one of historic inclement weather for much of the East Coast and particularly for some of our busiest operations like Baltimore/Washington and Atlanta," said Bob Fornaro, AirTran Airways’ chairman, president and chief executive officer. "Even though the weather was tough this winter, we are experiencing significant revenue growth and passenger demand. We are well positioned for the future and are beginning to reap the rewards of our diversification efforts and the broader economic recovery."
AirTran Airways was also selected as the top low-cost carrier for the third consecutive year in the prestigious Airline Quality Rating (AQR). This independent rating is conducted by professors at Purdue University’s Department of Aviation Technology and the W. Frank Barton School of Business at Wichita State University. The AQR evaluates airlines in four major areas: on-time performance, denied boardings, mishandled baggage and customer complaints.
"We pride ourselves on providing a very consistent, high-quality, low-cost product to our customers," said Fornaro. "The AQR recognized the efforts of our 8,500 dedicated Crew Members and because of their hard work, we have again been named the best low-cost carrier in America."
Network Diversification:
The Company continued to diversify its network. To support this diversification, AirTran Airways opened pilot and flight attendant bases at General Mitchell International Airport in Milwaukee and announced new service to Dallas/Ft. Worth while adding service to Akron/Canton, Ohio, Des Moines, Iowa, and Omaha, Neb. In February, AirTran achieved a 30 percent market share in Milwaukee for the first time.
AirTran Airways also continued to offer flights to more destinations from Orlando than any other airline, announcing new flights to: Grand Rapids, Mich., San Antonio, Huntsville/Decatur, Ala., and Wichita, Kan. from the vacation paradise while operating new flights to Montego Bay, Jamaica, Aruba, Lexington, Ky., and Des Moines, Iowa.
In Baltimore/Washington, the airline also enhanced its offering, announcing new flights to Grand Rapids, Mich., San Antonio, Jacksonville, Fla., and Huntsville/Decatur, Ala. while operating new flights to Montego Bay, Jamaica.
Completing the re-optimization of the Atlanta hub in 2009 also contributed to the overall success of this diversification effort. AirTran Airways operates the world’s largest low-cost carrier hub at Hartsfield-Jackson Atlanta International Airport. Since the first quarter of 2009, the Company has expanded service to three Caribbean destinations (Aruba, Montego Bay, Jamaica, and Nassau/Paradise Island, Bahamas), five domestic destinations (Atlantic City, Branson, Mo., Portland, Me., Harrisburg, Penn., and Gulfport/Biloxi, Miss.) and has announced new service to Tunica, Miss., and Allentown, Penn., from the world’s busiest airport.
"We have largely completed the re-optimization of our network. We are seeing the benefits from broader geographic diversity while extending our reach on a national scale and establishing a solid base for future growth," said Kevin Healy, AirTran Airways’ senior vice president, marketing and planning. "The result of this effort is a more balanced network, reaching more passengers than ever with our award-winning, high-quality, low-cost product."
Financial Performance and Outlook:
AirTran Airways continues to lead the industry with the lowest non-fuel operating cost per mile among major airlines on a stage-length adjusted basis. The Company has been able to maintain this advantage by operating North America’s newest all-Boeing fleet, efficiently utilizing its aircraft and other assets, and driving cost-savings from all levels of the operation.
"Our ability to maintain a unit cost advantage over the competition is a direct result of effort from all levels of the airline," said Arne Haak, AirTran Airways’ senior vice president of finance, treasurer and chief financial officer. "It is critically important that every Crew Member work together and remain focused on maintaining that advantage."
AirTran Airways’ unrestricted cash position at quarter’s end was $534 million and its revolving line of credit was undrawn. Based on current cost and revenue trends, AirTran Airways’ outlook for the second quarter 2010 relative to the prior year is as follows:
Available seat miles (ASMs): increase approximately 4.0 percent
Total unit revenue per ASM (TRASM): increase 13.0 to 14.0 percent
Average economic cost per gallon of fuel, all-in: $2.37 to $2.42
Non-Fuel unit operating cost per ASM: increase 4.0 to 4.5 percent
Non-Fuel unit operating cost per ASM, Full Year 2010: increase 4.0 to 5.0 percent
