Here's a summary of key points from the notes I took of the conference call while sitting in CMH today waiting for my plane to arrive.

Comments on performance this quarter

--Financial performance for the past quarter exceeded expectations, both internal expectations and public guidance given earlier for this quarter.

--This quarter�s earnings per share (excluding special items) of about 40 cents per share surpassed the guidance range of 20-30 cents per share (ex-items).

--Guidance for the current quarter (Q3) is being raised to 65-70 cents per share (ex-items)

--Increased fuel costs created a �headwind� of about $40m compared to the same quarter as last year.

Comments on revenue improvements

--Branded unit revenue for the quarter (TRASM, the total revenue per available seat mile) was 10.76 cents per mile, better than the guidance range of 10.3 � 10.5 cents per mile given. Guidance given for Q2 was for a decline in TRASM of about 1-2 percent, but they beat that by about 4 percentage points with TRASM actually up over 2%.

--Milwaukee�s year-over-year TRASM for the quarter was down �a couple of points�, but in June it was higher than last year, the first time in a long time that TRASM was higher year-over-year.

--A significant part of Milwaukee�s decline in TRASM for the total quarter (lower in April and May and higher in June) is due to the expansion of high-volume long haul leisure flying to Seattle, San Francisco, Los Angeles and San Diego, none of which were in last year�s numbers. Long haul flying has reliably lower than average TRASM�as well as costs (CASM) so that alone brought averages down. .

-- Milwaukee�s �same store� comparison, meaning TRASM on routes which were in operation least a year, were up 11% for the quarter. For June, the year-over-year TRASM was more than 20% better than last June. Unit revenues are improving, and they said that this strengthening is continuing right through the 3rd quarter.

--Denver�s year-over-year TRASM for the quarter was up 15% year over year. Their goal is to increase business traffic and improve the local �to-connection traffic mix.

--They launched a push to sell the bundled Classic Plus fare which started in May and forward, and as a result the Classic Plus �take rate� increased five fold. Of the 15% year-over-year increase in TRASM in the Denver side of business, about � of that increased revenue came directly from Classic Plus increased take rate.

--They expect to see further significant revenue growth from the bundled fares because (a) this initiative only started mid-quarter, (b) the initiative was launched during the leisure-heavy, business-lighter summer period and should see more traction as business travel becomes a greater portion of the flow in fall, and (c) the entire Milwaukee system did not have access to bundled fares.

--When asked about the high load factor, they stated �We�re surprised at how full the planes are running�. The revenue management team keeps making adjustments in response to this demand, but the demand is still there: �We don�t see it weakening�.


When asked about the code share / frequent flyer deal

--Lots of conversations with potential partners, but potential players are �very distracted right now�
--�You can imagine who we�d be talking to�
--�There is interest out there because some of the things we do are unique�
--The lost DL cost share was not producing much revenue for them since Delta did not put their code on YX flights.
--The lost FF partnership with Delta did help them because of the very deep pools of Midwest and Northwest FF members in Milwaukee. There was �pretty good synergy with the frequent flyer relationship� so having it end is �a bit of a loss� for them. �We�re going to have to move forward�.


Comments on System and CASM

--18 new routes added this year, and they �very pleased with the general performance�

--Increasing average seats, with the corresponding improved CASM (cost) is an important initiative. Removing four A318 and one E170 later this year, and replacing them with six A320�s in the first half of 2011, helps in this direction.

--The winter schedule adjustment at Milwaukee will increase seats per departure from 64 this summer to 72. (Systemwide in the quarter just ended was 100 seats per departure, so DEN�s average is much higher.)

--The MKE winter schedule has 35 nonstop destinations, which is four more than last winter and 10 more than the next largest competitor. Reducing the MKE system to three major banks reduced the flying of high-cost resources (RJ) during the period of lower demand.


Comments specific to the E190/E195 Order

--The 24 E190/E195 will be used to remove �a substantial portion� of the E170 fleet. (FYI it looks like there are 16 lines of E170 flying this winter.) . They have a great deal of flexibility as the E190 or E195 arrive to retire more smaller aircraft and keep growth low, or retire fewer smaller aircraft and use them as a vehicle for growth.

--Daniel Shurz said of the E190 � Customers love these aircraft with good reason� but more importantly for Republic "We can achieve a CASM is much more competitive on an aircraft which is capable of reaching both coasts from both hubs"

--When questioned if the E190 is the "right" aircraft for an LCC, they responded that the E190/E195 costs "the most competitive cost structure" compared to other aircraft in the general 100+ seat range flown by competitors.

As usual, great recap Knope!

As positive as the call was, did you get the sense that they were disappointed with the progress of an EarlyReturns partnership? I felt a bit of dejection in the tone as they discussed the fact that they really don't have anything in the hopper at the moment with EarlyReturns. But, with the way demand, load factors, and TRASM is trending, they probably feel like they don't have to make many changes to either.

+1

What, no mention of the disappointing loss of a FF agreement with AirTran?

Yeah, the tone of voice that they don't have a replacement yet for Delta was evident. At least it seemed that way to me. It sounded like mild frustration at working at progress but ultimately having nothing to show for it yet, as compared to simple futility.

I still hold hope for a link with American, which seems like a great fit for both parties. With American not participating in this round of mergers (at least that's what they say) linking with Jetblue and hopefully Frontier expand AA's reach and penetration.

The name of that airline was never mentioned. They did refer a time or two to the largest competitor in Milwaukee.

That airline?

2nd quarter operating margin

AAI-9.74%
RJET-6.37%

2nd quarter net margin

AAI-1.77%
RJET-0.38%

Cash

RJET-416 million of which 257 million is restricted. No line of credit
AAI-535 million, no restricted cash. 125 million line of credit. None withdrawn.


TRASM

AAI-11.19
RJET(branded)-10.76


CASM

AAI-10.10
RJET(branded)-10.79

Average stage legnth

RJET-825 miles
AAI-765 miles