Frontier Airlines EarlyReturns - RJET Q3 2011 Earnings Conference Call

Call scheduled for 11/08/2011.

http://phx.corporate-ir.net/phoenix.zhtml?c=131107&p=irol-newsArticle&ID=1618510&highlight=

To register for access...http://edge.media-server.com/m/p/u5amje58/lan/en

Is it likely to be another loss?

News from call:

Bryan Bedford:


*As of yesterday, made final agreement w/key stakeholder
*Have made use this year of Seabury's APAS (Airline Performance Analysis System), which magnified need for restructuring of F9 (and apparently directed reductions at MKE) http://www.flightprof.com/
*Did not meet goal of liquidity, due to litigation with union, resulting in lower levels of unrestricted cash
*Due to litigation, cannot afford to take delivery now of future aircraft orders from Embraer, except delivery of two E190s, before Thanksgiving
*Looking at breaking off Frontier from unbranded ops and returning it to becoming a leading LCC

Controller Joe Allman:

*Continue to pursue liquidity issue
*Debt of $24 mil reduced by selling and leasing back two A318s
*Unrestricted cash of $150-$160 mil anticipated end of year


Daniel Shurz:

*By end of April 2012, down to three 170s
*Adding more capacity with Airbus
*MCI will become 2nd largest capacity as of Q1 2012
*MKE capacity levels down 9-10% Q4 and 11-13% Q1 2012
*Mention is made of MKE reductions helping improve financial results


Greg Aratakis:


*F9 online sales increased 3% Q3.
*New exit row fees bringing in millions in new revenue.



BB:

*Presence in MKE is shrinking
*Better off to park small regional jets in difficult financial times
*Will have fewer than 10 "small" aircraft operating in F9 brand in 2012
*Will focus on 99+ seat product and move F9 to become "ultra" low cost airline
*Projecting much smaller F9 footprint, due to removal of small aircraft
*Looking at "solidly profitable" Frontier business in 2012


Response to questions from investment community:

Frontier future - at this point board decided it's time to separate two businesses with Republic targeting business market and Frontier "attractive" to private shareholders, private equity, etc. and have a business that is "salable"; RJET has retained private advisors for process.

Current parent company guaranty for F9 BarclaysCard would disappear if/when F9 is separated from RJET.

BB closing remarks:

Looking forward to improved results.

As of 10:40 AM CST, shares in RJET have soared 33.83%.

So, does that mean F9 is going to become Denver/KC's Allegiant/Spirit? Are they going to kick seat pitch down to 30"? What about the fact that Embraer jets aren't quite as efficient (but definitely more comfortable) vs. CRJs?

As someone based in DEN, I'm glad cuts aren't coming here, but it's sad to see MKE fading fast (a roommate is from a place two hours from GRB, and around three from MKE).

So, does that mean F9 is going to become Denver/KC's Allegiant/Spirit? Are they going to kick seat pitch down to 30"? What about the fact that Embraer jets aren't quite as efficient (but definitely more comfortable) vs. CRJs?

They are looking at adding slimmer seats to the A320s and removing a lav from both the A319s and A320s for more seats, but there has been no mention of adjustments to pitch that I've heard. If anything they'd add more STRETCH seats, as reported in the call making exit rows STRETCH should provide an additions $5 million annual income.

As someone based in DEN, I'm glad cuts aren't coming here, but it's sad to see MKE fading fast (a roommate is from a place two hours from GRB, and around three from MKE).

Definitely sad, but I remain hopeful that once the WN/FL situation is figured out F9 can find a way to profitably restore some service there. My biggest fear is MKE ends up with no carrier flying to more than 5 destinations.

Definitely sad, but I remain hopeful that once the WN/FL situation is figured out F9 can find a way to profitably restore some service there. My biggest fear is MKE ends up with no carrier flying to more than 5 destinations.

Even if Southwest makes some meaningful cuts in MKE, I'm not sure how much backfilling Frontier can undertake (assuming they even want to) due to the limited amount of lift available.

Bedford has made it very clear that going forward the Frontier fleet will be comprised of the E190 and larger. Based on recent SEC filings, it appears as if most (if not all) of the sub 99 seat aircraft will be parked by May of next year. That likely means more route cuts for MKE are on the horizon.

How many of the current MKE ERJ routes can support an E190 or larger? I suspect that routes like EWR, PHL, BNA, CMH, IND, GRR, and perhaps OMA are in real danger of being cut. It's not hard to picture Frontier have a 15-20 flight operation in MKE in the not too distant future.

I suspect that Delta could be a big beneficiary in all of this. It wouldn't even be that surprising to see Delta add MKE-LGA.