FlyerTalk Forums - Republic Q1 Results

I didn't have a chance to listen to the actual conference call but read the transcript this evening and pulled out some items that I wanted to comment on (As flyYX stated, there appeared to be some technical difficulties with the call and a lot of questions appeared to be cut-off).

1) The Q1 loss was expected and in-line with Republic's guidance (excluding special items). Republic is projecting profits for the rest of the year.

2) Republic's attempts at a fare premium strategy in January were "revenue negative" and subsequently abondoned.

3) The uncertainty in the marketplaces relating to the promotion of the two brands both independently and through the codeshare led to confusion and depressed revenue. However, improvements were noted in different parts of the network during the quarter and overall revenue is trending in the right direction.

Per Republic, "As we move through the quarter we tackled these issues and we saw results beginning to improve. Talking in terms of PRASM, January PRASM was down 8.2% versus the prior year. February was down 4.5% versus the prior year. March was actually up 4.4%.

"In particular, the west network turned from a PRASM negative of 2.5% to a PRASM positive in March of 10.8%, so a substantial traction in the west, and certainly we were very pleased with the direction we are seeing out of the Denver operation. And the east network saw load factors that were up 10 points in the quarter year-over-year 18% more ASMs, but the yield was down 29%, due both to increased competition and also impacted by 9% increase (inaudible) length of haul.

"For the east network we are expecting improved load factors in the 3 to 5 load factor point range versus last year, but yields will continue to be down versus last year, perhaps, not as much as we saw in the first quarter.

The pricing environment through the first quarter and so far into the second quarter reflects a generally healthier demand environment that we are seeing in which we just talked about. While there continues to be regular sale activity, the sale fare values that we are seeing are actually up versus where they had been in the fourth quarter and early first quarter, and apparently the industry is seeking a higher fares.

4) Fare increases are generally sticking, especially those initiated by LCCs.

"Since the beginning of the year, we have seen 11 significant fare increases which were accepted and which have stuck. Several such initiatives were led by the LCC carriers. At the level of demand, we are seeing today, frankly there is no reason why fares can’t continue to go up."

5) Despite the overall positive trends, the yield environment in Milwaukee is still not great.

"Mitchell Airport had its highest traffic numbers ever in March 2010, but an average fare that was $60 lower than the national average for a round trip."

6) Sales of Stretch Seating have been increasing and Republic will most likely raise the prices nominally in the coming months. It will be a good way to generate some more ancillary revenue.

"In February we sold 31% of our Stretch seats and that improved to 36% in March. We are currently selling the upgrade for $25 but we intent to start tinkering with the pricing over the next little while. Generally speaking we judge Stretch to be right on track and we’re expecting about a $1 million a month of revenue from this program."

7) Small regional jets work well in MKE and even operate profitably is some markets, specifically key feeder markets

"The small jets that we operate in the former Midwest network in Milwaukee, those are in markets that quite frankly needs small jets, I mean they are not markets that can absorb the amount of seats, places like Appleton or Green Bay to Milwaukee, Madison to Milwaukee and these are markets that need to be served in small jets and they’re actually being served profitably in small jets.

8) The revenue guidance wasn't that upbeat on MKE

"Well we won’t provide segment breakouts of Denver, Milwaukee or Kansas City. I think from the revenue guidance that we gave clearly the revenue environment in Denver is superior to the revenue environment in Milwaukee. So you can probably draw some conclusions from that."