United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Period Ended June 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Transition Period From to
Commission file number 000-21642
AMTRAN, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1617970
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7337 West Washington Street
Indianapolis, Indiana 46231
(Address of principal executive offices) (Zip Code)
(317) 247-4000
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ______
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes ______ No ______
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, Without Par Value -12,101,607 shares outstanding as of
July 31, 2000
<PAGE>
<TABLE>
<CAPTION>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 30, December 31,
2000 1999
---------------- -------------
ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents ................................... $ 119,090 $ 120,164
Receivables, net of allowance for doubtful accounts
(2000 - $1,372; 1999 - $1,511) ......................... 58,521 52,099
Inventories, net ........................................... 45,688 36,686
Prepaid expenses and other current assets ................... 23,123 22,945
---------------- ---------------
Total current assets 246,422 231,894
Property and equipment:
Flight equipment ............................................ 823,759 781,171
Facilities and ground equipment ............................. 102,032 92,060
----------------- --------------
925,791 873,231
Accumulated depreciation .................................... (404,310) (361,399)
------------------ --------------
521,481 511,832
Goodwill ......................................................... 22,703 23,453
Deposits and other assets ........................................ 72,527 48,102
------------------ -------------
Total assets ..................................................... $ 863,133 $ 815,281
================== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt ........................ $ 13,801 $ 2,079
Accounts payable ............................................ 12,260 20,234
Air traffic liabilities ..................................... 106,043 93,507
Accrued expenses ............................................ 137,517 126,180
----------------- --------------
Total current liabilities ........................................ 269,621 242,000
Long-term debt, less current maturities .......................... 344,461 345,792
Deferred income taxes ............................................ 60,231 58,493
Other deferred items ............................................. 35,940 17,620
Commitments and contingencies
Shareholders' equity:
Preferred stock; authorized 10,000,000 shares; none issued .. - -
Common stock, without par value; authorized 30,000,000 shares;
issued: 2000 - 12,956,857; 1999 - 12,884,306 ............ 56,994 55,826
Additional paid-in-capital .................................. 12,695 12,910
Deferred compensation - ESOP ................................ - (533)
Treasury stock: 2000 - 835,355 shares; 1999 - 612,052 shares (14,397) (10,500)
Retained earnings ........................................... 97,588 93,673
------------------ -------------
152,880 151,376
------------------ -------------
Total liabilities and shareholders' equity ....................... $ 863,133 $ 815,281
================== =============
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
---------------------------------------- ----------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Operating revenues:
<S> <C> <C> <C> <C>
Scheduled service ......................... $ 196,387 $ 164,010 $ 364,873 $ 308,279
Charter ................................... 111,160 92,360 230,780 199,700
Ground package ............................ 15,225 16,131 37,311 31,689
Other ..................................... 10,762 12,213 21,936 22,955
----------------- ------------------- ------------------ ------------------
Total operating revenues ..................... 333,534 284,714 654,900 562,623
----------------- ------------------- ------------------ ------------------
Operating expenses:
Salaries, wages and benefits .............. 71,930 61,778 140,632 122,577
Fuel and oil .............................. 63,246 38,084 126,682 73,662
Depreciation and amortization ............. 30,781 24,200 62,353 45,858
Handling, landing and navigation fees ..... 23,681 22,912 49,066 45,311
Crew and other employee travel ............ 17,599 12,137 32,690 24,268
Aircraft maintenance, materials and repairs 17,296 14,390 36,975 28,131
Aircraft rentals .......................... 16,776 14,138 32,862 29,382
Ground package cost ....................... 13,036 12,413 31,931 25,635
Passenger service ......................... 12,252 8,889 23,422 18,461
Commissions ............................... 10,539 10,280 21,694 19,950
Other selling expenses .................... 9,194 7,153 17,484 13,348
Advertising ............................... 5,010 4,640 11,575 10,247
Facility and other rentals ................ 3,923 3,507 7,622 6,662
Other ..................................... 19,649 19,763 38,726 39,742
---------------- ------------------ ------------------ ------------------
Total operating expenses ..................... 314,912 254,284 633,714 503,234
---------------- ------------------ ------------------ ------------------
Operating income ............................. 18,622 30,430 21,186 59,389
Other income (expense):
Interest income ........................... 1,972 1,400 3,885 3,163
Interest (expense) ........................ (7,982) (5,044) (15,642) (10,118)
Other ..................................... (63) 41 49 1,836
----------------- -------------------- ---------------- -----------------
Other expense ................................ (6,073) (3,603) (11,708) (5,119)
----------------- -------------------- ---------------- -----------------
Income before income taxes ................... 12,549 26,827 9,478 54,270
Income taxes ................................. 6,680 10,122 5,563 21,025
----------------- -------------------- ---------------- -----------------
Net income ................................... $ 5,869 $ 16,705 $ 3,915 $ 33,245
================= ==================== ================ =================
Basic earnings per common share:
Average shares outstanding ................... 12,105,877 12,184,437 12,097,765 12,184,113
Net income per share ......................... $ 0.48 $ 1.37 $ 0.32 $ 2.73
================= ==================== ================ =================
Diluted earnings per common share:
Average shares outstanding ................... 12,820,088 13,488,056 12,878,678 13,521,459
Net income per share ......................... $ 0.46 $ 1.24 $ 0.30 $ 2.46
================= ==================== ================ =================
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Six Months Ended June 30,
2000 1999
---------------------- ---------------------
(Unaudited) (Unaudited)
Operating activities:
<S> <C> <C>
Net income ...................................... $ 3,915 $ 33,245
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization ............... 62,353 45,858
Deferred income taxes ....................... 1,738 11,468
Other non-cash items ........................ 9,344 1,563
Changes in operating assets and liabilities,
net of effects from business acquisitions:
Receivables ................................ (6,422) (7,832)
Inventories ................................ (10,508) (10,195)
Prepaid expenses ........................... (178) (1,932)
Accounts payable ........................... (7,974) 2,725
Air traffic liabilities .................... 12,536 1,979
Accrued expenses ........................... 12,532 8,605
--------------------- ---------------------
Net cash provided by operating activities .... 77,336 85,484
--------------------- ---------------------
Investing activities:
Proceeds from sales of property and equipment .... 54 223
Capital expenditures ............................. (68,540) (144,084)
Acquisition of businesses, net of cash acquired .. - 16,673
Additions to other assets ........................ (17,042) (19,955)
---------------------- ---------------------
Net cash used in investing activities ......... (85,528) (147,143)
---------------------- ---------------------
Financing activities:
Purchase of treasury stock ....................... (3,897) (3,364)
Issuance of common stock ......................... 679 2,216
Proceeds from long-term debt ..................... 11,500 7,942
Payments on long-term debt ....................... (1,164) (240)
---------------------- ----------------------
Net cash provided by financing activities ..... 7,118 6,554
---------------------- ----------------------
Decrease in cash and cash equivalents ............ (1,074) (55,105)
Cash and cash equivalents, beginning of period ... 120,164 172,936
----------------------- ----------------------
Cash and cash equivalents, end of period ......... $ 119,090 $ 117,831
======================= ======================
Supplemental disclosures:
Cash payments for:
Interest ...................................... $ 14,228 $ 11,996
Income taxes (refunds) ........................ (131) 7,270
Financing and investing activities not affecting cash:
Issuance of common stock associated with
business acquisitions ........................ $ - $ 1,735
</TABLE>
See accompanying notes.
<PAGE>
PART I - Financial Information
Item I - Financial Statements
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements of Amtran, Inc. and
subsidiaries (the "Company") have been prepared in accordance with
instructions for reporting interim financial information on Form 10-Q and,
therefore, do not include all information and footnotes necessary for a
fair presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles.
The consolidated financial statements for the quarters ended June 30, 2000
and 1999 reflect, in the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows for such periods.
Results for the six months ended June 30, 2000, are not necessarily
indicative of results to be expected for the full fiscal year ending
December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.
2. Earnings per Share
The following tables set forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
----------------- -----------------
Numerator:
<S> <C> <C>
Net income $5,869,000 $16,705,000
Denominator:
Denominator for basic earnings per
share - weighted average shares 12,105,877 12,184,437
Effect of dilutive securities:
Employee stock options 714,211 1,303,619
----------------- -----------------
Denominator for diluted earnings per
share - adjusted weighted average shares 12,820,088 13,488,056
----------------- -----------------
Basic earnings per share $ 0.48 $ 1.37
================= =================
Diluted earnings per share $ 0.46 $ 1.24
================= =================
Six Months Ended June 30,
2000 1999
----------------- ----------------
Numerator:
Net income $3,915,000 $33,245,000
Denominator:
Denominator for basic earnings per
share - weighted average shares 12,097,765 12,184,113
Effect of dilutive securities:
Employee stock options 780,913 1,337,346
---------------- ----------------
Denominator for diluted earnings per
share - adjusted weighted average shares 12,878,678 13,521,459
---------------- ----------------
Basic earnings per share $ 0.32 $ 2.73
================ ================
Diluted earnings per share $ 0.30 $ 2.46
================ ================
</TABLE>
3. Acquisition of Businesses
On January 26, 1999, the Company acquired all of the issued and out-
standing stock of T. G. Shown Associates, Inc., which had owned 50% of
the Amber Air Freight partnership. The Company had already owned the
other 50% of this air cargo operation.
On January 31, 1999, the Company purchased the membership interests of
Travel Charter International, LLC ("TCI"), a Detroit-based independent
tour operator. ATA had been providing passenger airline services to TCI
for over 14 years. TCI's results of operations, beginning February 1999,
were consolidated into the Company.
On April 30, 1999, the Company acquired all of the issued and outstanding
stock of Agency Access Training Center, Inc. ("AATC") and Key Tours Las
Vegas, Inc. ("KTLV"), and additionally purchased the majority of the
current assets and current liabilities of Keytours, Inc. ("KTI"), a
Canadian corporation. All three companies (AATC, KTLV and KTI) were
previously under common control and jointly operated an independent tour
business in the Detroit metropolitan area, using the brand name of Key
Tours. ATA had been providing passenger airline services to Key Tours for
over 15 years. The results of operations, beginning May 1999, of Key
Tours were consolidated into the Company. The Company combined the
operations of TCI, AATC, KTLV and KTI with its existing vacation package
brand, ATA Vacations, to form the ATA Leisure Corp. ("ATALC").
On April 30, 1999, the Company acquired all of the issued and outstanding
stock of Chicago Express Airlines, Inc. ("Chicago Express"). The Company
had a code-share agreement with Chicago Express since April 1997. Chicago
Express results of operations, beginning May 1999, were consolidated into
the Company.
4. Segment Disclosures
The Company identifies its segments on the basis of similar products and
services. The airline segment derives its revenues primarily from the
sale of scheduled service or charter air transportation. ATALC derives
its revenues from the sale of vacation packages, which, in addition to
air transportation, includes hotels and other ground arrangements. ATALC
purchases air transportation for its vacation packages from ATA and other
airlines.
Segment financial data for the periods indicated follows:
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 2000
-----------------------------------------------------------------------
Other/
Airline ATALC Eliminations Consolidated
------------- ------------- ---------------- -----------------
(In thousands)
<S> <C> <C> <C> <C>
Operating revenue (external) $ 293,704 $ 25,247 $ 14,583 $333,534
Inter-segment revenue 14,538 779 (15,317) -
Operating expenses (external) 283,939 17,088 13,885 314,912
Inter-segment expenses 1,026 11,865 (12,891) -
Operating income (loss) 23,277 (2,927) (1,728) 18,622
Segment assets 924,780 129,435 (191,082) 863,133
For the Three Months Ended June 30, 1999
-----------------------------------------------------------------------
Other/
Airline ATALC Eliminations Consolidated
------------- ------------- ---------------- -----------------
(In thousands)
Operating revenue (external) $ 246,672 $ 26,999 $ 11,043 $284,714
Inter-segment revenue 10,123 - (10,123) -
Operating expenses (external) 226,229 20,481 7,574 254,284
Inter-segment expenses 3,242 6,337 (9,579) -
Operating income 27,324 181 2,925 30,430
Segment assets 667,922 34,478 (10,802) 691,598
For the Six Months Ended June 30, 2000
-----------------------------------------------------------------------
Other/
Airline ATALC Eliminations Consolidated
------------- ------------- ---------------- -----------------
(In thousands)
Operating revenue (external) $ 561,130 $ 63,783 $ 29,987 $654,900
Inter-segment revenue 37,305 1,506 (38,811) -
Operating expenses (external) 564,345 40,988 28,381 633,714
Inter-segment expenses 4,755 29,026 (33,781) -
Operating income (loss) 29,335 (4,725) (3,424) 21,186
Segment assets 924,780 129,435 (191,082) 863,133
For the Six Months Ended June 30, 1999
-----------------------------------------------------------------------
Other/
Airline ATALC Eliminations Consolidated
------------- ------------- ---------------- -----------------
(In thousands)
Operating revenue (external) $ 487,747 $ 50,615 $ 24,261 $562,623
Inter-segment revenue 19,232 - (19,232) -
Operating expenses (external) 449,348 37,903 15,983 503,234
Inter-segment expenses 5,012 11,206 (16,218) -
Operating income 52,619 1,506 5,264 59,389
Segment assets 667,922 34,478 (10,802) 691,598
</TABLE>
5. Commitments and Contingencies
On May 4, 2000, the Company entered into a preliminary agreement to
obtain 37 Boeing 737-800 aircraft and 10 Boeing 757-300 aircraft. As part
of this agreement, the Company also received purchase rights for an
additional 50 aircraft. The Company also entered into preliminary
agreements with General Electric and Rolls Royce to supply engines to
power the Boeing 737-800 and 757-300 aircraft, respectively. The Company
has secured various financing commitments for all of the aircraft to be
obtained. These financing commitments are comprised of various operating
leases, leveraged leases, single investor leases and certain preferred
stock purchase commitments. Closing of the entire transaction is subject
to the completion of definitive documentation and customary closing
conditions.
On June 30, 2000, the Company signed a purchase agreement for the 10 new
Boeing 757-300s and 20 of the new Boeing 737-800s. These represent the
aircraft to be obtained directly from Boeing. The remaining 737-800s are
expected to be obtained from several potential lessors through operating
leases. Definitive agreements have not yet been formalized with respect
to these remaining aircraft and engines. The Company expects to finalize
these agreements in the third quarter of 2000.
<PAGE>
PART I - Financial Information
Item II - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Quarter and Six Months Ended June 30, 2000, Versus Quarter and Six Months Ended
June 30, 1999
Overview
Amtran, Inc. (the "Company") is a leading provider of targeted scheduled airline
services and charter airline services to leisure and other value-oriented
travelers. Amtran, through its principal subsidiary, American Trans Air, Inc.
("ATA"), has been operating for 27 years and is the eleventh largest U.S.
airline in terms of 1999 revenues. ATA provides scheduled service through
nonstop and connecting flights from the gateways of Chicago-Midway and
Indianapolis to destinations such as Hawaii, Las Vegas, Phoenix, Florida,
California, Mexico and San Juan, as well as to Philadelphia, Boston, Seattle,
Reagan Washington National, Denver, Dallas-Ft. Worth and New York City's
LaGuardia and John F. Kennedy (seasonal) airports. ATA also provides charter
service throughout the world to independent tour operators, specialty charter
customers and the U.S. military.
In the quarter and six months ended June 30, 2000, the Company recorded
operating income of $18.6 million and $21.2 million, respectively, as compared
to $30.4 million and $59.4 million in the same periods of 1999. The decline in
operating income in 2000 was primarily a result of higher fuel prices. In the
quarter and six months ended June 30, 2000, fuel expense increased $13.7 million
and $34.4 million, as compared to the same periods of 1999, net of fuel price
reimbursement earned under certain tour operator and military agreements.
Results of Operations
For the quarter ended June 30, 2000, the Company earned $18.6 million in
operating income, a decrease of 38.8% as compared to operating income of $30.4
million in the second quarter of 1999; and the Company earned $5.9 million in
net income in the second quarter of 2000, a decrease of 64.7% as compared to net
income of $16.7 million in the second quarter of 1999. Operating revenues
increased 17.1% to $333.5 million in the second quarter of 2000, as compared to
$284.7 million in the same period of 1999. Consolidated revenue per available
seat mile ("RASM") increased 5.5% to 8.25 cents in the second quarter of 2000,
as compared to 7.82 cents in the same period of 1999. Operating expenses
increased 23.8% to $314.9 million in the second quarter of 2000, as compared to
$254.3 million in the comparable period of 1999. Consolidated operating cost per
available seat mile ("CASM") increased 11.6% to 7.79 cents in the second quarter
of 2000, as compared to 6.98 cents in the second quarter of 1999.
For the six months ended June 30, 2000, the Company earned $21.2 million in
operating income, a decrease of 64.3% as compared to operating income of $59.4
million in the comparable period of 1999; and the Company earned $3.9 million in
net income in the six months ended June 30, 2000, a decrease of 88.3% as
compared to net income of $33.2 million in the same period of 1999. Operating
revenues increased 16.4% to $654.9 million in the six months ended June 30,
2000, as compared to $562.6 million in the same period of 1999. Consolidated
RASM increased 6.4% to 8.13 cents in the six months ended June 30, 2000, as
compared to 7.64 cents in the same period of 1999. Operating expenses increased
25.9% to $633.7 million in the six months ended June 30, 2000, as compared to
$503.2 million in the comparable period of 1999. Consolidated CASM increased
15.1% to 7.86 cents in the six months ended June 30, 2000, as compared to 6.83
cents in the same period of 1999.
<PAGE>
Results of Operations in Cents Per ASM
The following table sets forth, for the periods indicated, operating revenues
and expenses expressed as cents per available seat mile ("ASM").
<TABLE>
<CAPTION>
Cents Per ASM Cents Per ASM
Three Months Ended June 30, Six Months Ended June 30,
<S> <C> <C> <C> <C>
2000 1999 2000 1999
---- ---- ---- ----
Total operating revenues 8.25 7.82 8.13 7.64
Operating expenses:
Salaries, wages and benefits 1.78 1.70 1.74 1.66
Fuel and oil 1.56 1.05 1.57 1.00
Depreciation and amortization 0.76 0.66 0.77 0.62
Handling, landing and navigation fees 0.59 0.63 0.61 0.62
Crew and other employee travel 0.44 0.33 0.41 0.33
Aircraft maintenance, materials and repairs 0.43 0.39 0.46 0.38
Aircraft rentals 0.42 0.39 0.41 0.40
Ground package cost 0.32 0.34 0.40 0.35
Passenger service 0.30 0.24 0.29 0.25
Commissions 0.26 0.28 0.27 0.27
Other selling expenses 0.23 0.20 0.22 0.18
Advertising 0.12 0.13 0.14 0.14
Facility and other rentals 0.09 0.10 0.09 0.09
Other 0.49 0.54 0.48 0.54
---- ---- ---- ----
Total operating expenses 7.79 6.98 7.86 6.83
---- ---- ---- ----
Operating income 0.46 0.84 0.27 0.81
---- ---- ---- ----
ASMs (in thousands) 4,041,321 3,641,682 8,059,857 7,364,717
The following tables set forth, for the periods indicated, operating revenues
and expenses for each reportable segment, in thousands of dollars, and expressed
as cents per ASM:
For the Three Months Ended June 30,
2000 1999 Inc. (Dec)
----------------- --- ----------------- -- -----------------
Airline and Other
Operating revenue (000s) $307,508 $257,715 $49,793
RASM (cents) 7.61 7.08 0.53
Operating expense (000s) $285,959 $227,466 $58,493
CASM (cents) 7.08 6.25 0.83
ATA Leisure Corp. (ATALC)
Operating revenue (000s) $ 26,026 $ 26,999 $ (973)
RASM (cents) 0.64 0.74 (0.10)
Operating expense (000s) $ 28,953 $ 26,818 $ 2,135
CASM (cents) 0.71 0.73 (0.02)
For the Six Months Ended June 30,
2000 1999 Inc. (Dec)
----------------- --- ----------------- -- -----------------
Airline and Other
Operating revenue (000s) $589,611 $512,008 $ 77,603
RASM (cents) 7.32 6.95 0.37
Operating expense (000s) $563,700 $454,125 $109,575
CASM (cents) 6.99 6.17 0.82
ATA Leisure Corp. (ATALC)
Operating revenue (000s) $ 65,289 $ 50,615 $14,674
RASM (cents) 0.81 0.69 0.12
Operating expense (000s) $ 70,014 $ 49,109 $20,905
CASM (cents) 0.87 0.66 0.21
</TABLE>
ATALC operating revenues and expenses presented above include those from
external sources and those generated or incurred through another segment.
Airline and Other operating revenues and expenses presented above include
intercompany eliminations.
<PAGE>
Consolidated Flight Operations and Financial Data
The following tables set forth, for the periods indicated, certain key operating
and financial data for the consolidated flight operations of the Company. Data
shown for "Jet" operations include the consolidated operations of Lockheed
L-1011, Boeing 727-200 and Boeing 757-200 aircraft in all of the Company's
business units. Data shown for "J31/SAAB" operations include the operations of
Jetstream 31 and SAAB 340B propeller aircraft operated by Chicago Express
Airlines, Inc. ("Chicago Express") as the ATA Connection.
<TABLE>
<CAPTION>
-------------------------------------- ----------------------------------------------------------------
Three Months Ended June 30,
----------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 1999 Inc (Dec) % Inc (Dec)
---------------- --------------- --------------- ---------------
Departures Jet 13,590 12,386 1,204 9.72
Departures J31/SAAB(a) 4,530 4,413 117 2.65
---------------- --------------- --------------- ---------------
Total Departures (b) 18,120 16,799 1,321 7.86
---------------- --------------- --------------- ---------------
Block Hours Jet 42,606 38,913 3,693 9.49
Block Hours J31/SAAB 4,595 4,484 111 2.48
---------------- --------------- --------------- ---------------
Total Block Hours (c) 47,201 43,397 3,804 8.77
---------------- --------------- --------------- ---------------
RPMs Jet (000s) 2,999,108 2,691,221 307,887 11.44
RPMs J31/SAAB (000s) 13,824 9,276 4,548 49.03
---------------- --------------- --------------- ---------------
Total RPMs (000s) (d) 3,012,932 2,700,497 312,435 11.57
---------------- --------------- --------------- ---------------
ASMs Jet (000s) 4,019,421 3,627,250 392,171 10.81
ASMs J31/SAAB (000s) 21,900 14,432 7,468 51.75
---------------- --------------- --------------- ---------------
Total ASMs (000s) (e) 4,041,321 3,641,682 399,639 10.97
---------------- --------------- --------------- ---------------
Load Factor Jet 74.62 74.19 0.43 0.58
Load Factor J31/SAAB 63.12 64.27 (1.15) (1.79)
---------------- --------------- --------------- ---------------
Total Load Factor (f) 74.55 74.16 0.39 0.53
---------------- --------------- --------------- ---------------
Passengers Enplaned Jet 1,982,169 1,768,184 213,985 12.10
Passengers Enplaned J31/SAAB 76,344 52,587 23,757 45.18
---------------- --------------- --------------- ---------------
Total Passengers Enplaned (g) 2,058,513 1,820,771 237,742 13.06
---------------- --------------- --------------- ---------------
Revenue $(000s) 333,534 284,714 48,820 17.15
RASM in cents (h) 8.25 7.82 0.43 5.50
CASM in cents (i) 7.79 6.98 0.81 11.60
Yield in cents (j) 11.07 10.54 0.53 5.03
-------------------------------------- ---------------- --------------- --------------- ---------------
See footnotes (a) through (j) on pages 13-14.
<PAGE>
-------------------------------------- ----------------------------------------------------------------
Six Months Ended June 30,
----------------------------------------------------------------
2000 1999 Inc (Dec) % Inc (Dec)
---------------- --------------- --------------- ---------------
Departures Jet 26,977 24,892 2,085 8.38
Departures J31/SAAB(a) 8,850 8,493 357 4.20
---------------- --------------- --------------- ---------------
Total Departures (b) 35,827 33,385 2,442 7.31
---------------- --------------- --------------- ---------------
Block Hours Jet 84,843 77,915 6,928 8.89
Block Hours J31/SAAB 8,982 8,650 332 3.84
---------------- --------------- --------------- ---------------
Total Block Hours (c) 93,825 86,565 7,260 8.39
---------------- --------------- --------------- ---------------
RPMs Jet (000s) 5,860,505 5,370,250 490,255 9.13
RPMs J31/SAAB (000s) 23,624 17,277 6,347 36.74
---------------- --------------- --------------- ---------------
Total RPMs (000s) (d) 5,884,129 5,387,527 496,602 9.22
---------------- --------------- --------------- ---------------
ASMs Jet (000s) 8,022,815 7,337,338 685,477 9.34
ASMs J31/SAAB (000s) 37,042 27,379 9,663 35.29
---------------- --------------- --------------- ---------------
Total ASMs (000s) (e) 8,059,857 7,364,717 695,140 9.44
---------------- --------------- --------------- ---------------
Load Factor Jet 73.05 73.19 (0.14) (0.19)
Load Factor J31/SAAB 63.78 63.10 0.68 1.08
---------------- --------------- --------------- ---------------
Total Load Factor (f) 73.01 73.15 (0.14) (0.19)
---------------- --------------- --------------- ---------------
Passengers Enplaned Jet 3,868,461 3,527,288 341,173 9.67
Passengers Enplaned J31/SAAB 132,696 98,920 33,776 34.14
---------------- --------------- --------------- ---------------
Total Passengers Enplaned (g) 4,001,157 3,626,208 374,949 10.34
---------------- --------------- --------------- ---------------
Revenue $(000s) 654,900 562,623 92,277 16.40
RASM in cents (h) 8.13 7.64 0.49 6.41
CASM in cents (i) 7.86 6.83 1.03 15.08
Yield in cents (j) 11.13 10.44 0.69 6.61
-------------------------------------- ---------------- --------------- --------------- ---------------
</TABLE>
See footnotes (e) through (j) on page 14.
(a) Chicago Express provides service between Chicago-Midway and the cities of
Indianapolis, Milwaukee, Des Moines, Dayton, Grand Rapids, Lansing and Madison
as the ATA Connection, using Jetstream 31 and SAAB 340B propeller aircraft.
(b) A departure is a single takeoff and landing operated by a single aircraft
between an origin city and a destination city.
(c) Block hours for any aircraft represent the elapsed time computed from the
moment the aircraft first moves under its own power from the origin city
boarding ramp to the moment it comes to rest at the destination city boarding
ramp.
(d) Revenue passenger miles (RPMs) represent the number of seats occupied by
revenue passengers multiplied by the number of miles those seats are flown. RPMs
are an industry measure of the total seat capacity actually sold by the Company.
<PAGE>
(e) Available seat miles (ASMs) represent the number of seats available for sale
to revenue passengers multiplied by the number of miles those seats are flown.
ASMs are an industry measure of the total seat capacity offered for sale by the
Company, whether sold or not.
(f) Passenger load factor is the percentage derived by dividing RPMs by ASMs.
Passenger load factor is relevant to the evaluation of scheduled service because
incremental passengers normally provide incremental revenue and profitability
when seats are sold individually. In the case of commercial charter and
military/government charter, load factor is less relevant because an entire
aircraft is sold by the Company instead of individual seats. Since both costs
and revenues are largely fixed for these types of charter flights, changes in
load factor have less impact on business unit profitability. Consolidated load
factors and scheduled service load factors for the Company are shown in the
appropriate tables for industry comparability, but load factors for individual
charter businesses are omitted from applicable tables.
(g) Passengers enplaned are the number of revenue passengers who occupied seats
on the Company's flights. This measure is also referred to as "passengers
boarded."
(h) Revenue per ASM (expressed in cents) is total operating revenue divided by
total ASMs. This measure is also referred to as "RASM." RASM measures the
Company's unit revenue using total available seat capacity. In the case of
scheduled service, RASM is a measure of the combined impact of load factor and
yield (see (j) below for the definition of yield).
(i) Cost per ASM (expressed in cents) is total operating expense divided by
total ASMs. This measure is also referred to as "CASM." CASM measures the
Company's unit cost using total available seat capacity.
(j) Revenue per RPM (expressed in cents) is total operating revenue divided by
total RPMs. This measure is also referred to as "yield." Yield is relevant to
the evaluation of scheduled service because yield is a measure of the average
price paid by customers purchasing individual seats. Yield is less relevant to
the commercial charter and military/government charter businesses because the
entire aircraft is sold at one time for one price. Consolidated yields and
scheduled service yields are shown in the appropriate tables for industry
comparability, but yields for individual charter businesses are omitted from
applicable tables.
<PAGE>
Operating Revenues
Scheduled Service Revenues. The following tables set forth, for the periods
indicated, certain key operating and financial data for the scheduled service
operations of the Company. Data shown for "Jet" operations include the combined
operations of Lockheed L-1011, Boeing 727-200 and Boeing 757-200 aircraft in
scheduled service. Data shown for "J31/SAAB" operations include the operations
of Jetstream 31 and SAAB 340B propeller aircraft operated by Chicago Express as
the ATA Connection.
<TABLE>
<CAPTION>
-------------------------------------- ----------------------------------------------------------------
Three Months Ended June 30,
----------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 1999 Inc (Dec) % Inc (Dec)
---------------- --------------- --------------- ---------------
Departures Jet 9,804 8,925 879 9.85
Departures J31/SAAB(a) 4,530 4,413 117 2.65
---------------- --------------- --------------- ---------------
Total Departures (b) 14,334 13,338 996 7.47
---------------- --------------- --------------- ---------------
Block Hours Jet 28,916 26,411 2,505 9.48
Block Hours J31/SAAB 4,595 4,484 111 2.48
---------------- --------------- --------------- ---------------
Total Block Hours (c) 33,511 30,895 2,616 8.47
---------------- --------------- --------------- ---------------
RPMs Jet (000s) 2,013,034 1,753,968 259,066 14.77
RPMs J31/SAAB (000s) 13,824 9,276 4,548 49.03
---------------- --------------- --------------- ---------------
Total RPMs (000s) (d) 2,026,858 1,763,244 263,614 14.95
---------------- --------------- --------------- ---------------
ASMs Jet (000s) 2,462,036 2,189,212 272,824 12.46
ASMs J31/SAAB (000s) 21,900 14,432 7,468 51.75
---------------- --------------- --------------- ---------------
Total ASMs (000s) (e) 2,483,936 2,203,644 280,292 12.72
---------------- --------------- --------------- ---------------
Load Factor Jet 81.76 80.12 1.64 2.05
Load Factor J31/SAAB 63.12 64.27 (1.15) (1.79)
---------------- --------------- --------------- ---------------
Total Load Factor (f) 81.60 80.01 1.59 1.99
---------------- --------------- --------------- ---------------
Passengers Enplaned Jet 1,511,676 1,271,731 239,945 18.87
Passengers Enplaned J31/SAAB 76,344 52,587 23,757 45.18
---------------- --------------- --------------- ---------------
Total Passengers Enplaned (g) 1,588,020 1,324,318 263,702 19.91
---------------- --------------- --------------- ---------------
Revenues $(000s) 196,387 164,010 32,377 19.74
RASM in cents (h) 7.91 7.44 0.47 6.32
Yield in cents (j) 9.69 9.30 0.39 4.19
Rev per segment $ (k) 123.67 123.84 (0.17) (0.14)
-------------------------------------- ---------------- --------------- --------------- ---------------
See footnotes (a) through (j) on pages 13-14.
(k) Revenue per segment flown is determined by dividing total scheduled service
revenues by the number of passengers boarded. Revenue per segment is a broad
measure of the average price obtained for all flight segments flown by
passengers in the Company's scheduled service route network.
<PAGE>
-------------------------------------- ----------------------------------------------------------------
Six Months Ended June 30,
----------------------------------------------------------------
2000 1999 Inc (Dec) % Inc (Dec)
---------------- --------------- --------------- ---------------
Departures Jet 18,967 17,338 1,629 9.40
Departures J31/SAAB(a) 8,850 8,493 357 4.20
---------------- --------------- --------------- ---------------
Total Departures (b) 27,817 25,831 1,986 7.69
---------------- --------------- --------------- ---------------
Block Hours Jet 56,054 50,677 5,377 10.61
Block Hours J31/SAAB 8,982 8,650 332 3.84
---------------- --------------- --------------- ---------------
Total Block Hours (c) 65,036 59,327 5,709 9.62
---------------- --------------- --------------- ---------------
RPMs Jet (000s) 3,772,065 3,274,120 497,945 15.21
RPMs J31/SAAB (000s) 23,624 17,277 6,347 36.74
---------------- --------------- --------------- ---------------
Total RPMs (000s) (d) 3,795,689 3,291,397 504,292 15.32
---------------- --------------- --------------- ---------------
ASMs Jet (000s) 4,767,406 4,175,510 591,896 14.18
ASMs J31/SAAB (000s) 37,042 27,379 9,663 35.29
---------------- --------------- --------------- ---------------
Total ASMs (000s) (e) 4,804,448 4,202,889 601,559 14.31
---------------- --------------- --------------- ---------------
Load Factor Jet 79.12 78.41 0.71 0.91
Load Factor J31/SAAB 63.78 63.10 0.68 1.08
---------------- --------------- --------------- ---------------
Total Load Factor (f) 79.00 78.31 0.69 0.88
---------------- --------------- --------------- ---------------
Passengers Enplaned Jet 2,840,326 2,407,385 432,941 17.98
Passengers Enplaned J31/SAAB 132,696 98,920 33,776 34.14
---------------- --------------- --------------- ---------------
Total Passengers Enplaned (g) 2,973,022 2,506,305 466,717 18.62
---------------- --------------- --------------- ---------------
Revenues $(000s) 364,873 308,279 56,594 18.36
RASM in cents (h) 7.59 7.33 0.26 3.55
Yield in cents (j) 9.61 9.37 0.24 2.56
Rev per segment $ (k) 122.73 123.00 (0.27) (0.22)
-------------------------------------- ---------------- --------------- --------------- ---------------
</TABLE>
See footnotes (a) through (j) on pages 13-14. See footnote (k) on page 15.
Scheduled service revenues in the second quarter of 2000 increased 19.8% to
$196.4 million from $164.0 million in the second quarter of 1999; and scheduled
service revenues in the six months ended June 30, 2000, increased 18.4% to
$364.9 million from $308.3 million in the same period of 1999. Scheduled service
revenues comprised 58.9% and 55.7%, respectively, of consolidated revenues in
the quarter and six months ended June 30, 2000, as compared to 57.6% and 54.8%,
respectively, of consolidated revenues in the same periods of 1999.
The Company's second quarter 2000 scheduled service at Chicago-Midway accounted
for approximately 61.4% of scheduled service ASMs and 80.9% of scheduled service
departures, as compared to 57.7% and 77.7%, respectively, in the second quarter
of 1999. During the second quarter of 2000, the Company began operating nonstop
flights to Ronald Reagan Washington National Airport, Boston and Seattle. In
addition to this new service, the Company served the following existing jet
markets in both quarters: Dallas-Ft. Worth, Denver, Ft. Lauderdale, Ft. Myers,
Las Vegas, Los Angeles, New York's John F. Kennedy International Airport
(seasonal), New York's LaGuardia Airport, Orlando, Phoenix, St. Petersburg, San
Francisco, San Juan, and Sarasota. In April 1999, the Company acquired all of
the issued and outstanding stock of Chicago Express Airlines, Inc., which
operated 19-seat Jetstream 31 propeller aircraft between Chicago-Midway and the
cities of Indianapolis, Milwaukee, Des Moines, Dayton, Grand Rapids, Lansing and
Madison. During 2000, Chicago Express is replacing the 19-seat Jetstream 31
propeller aircraft with 34-seat SAAB 340B aircraft.
The Company anticipates that its Chicago-Midway operation will represent a focus
of growing significance for its scheduled service business in 2000 and beyond.
The Company operated 74 peak daily jet and commuter departures from
Chicago-Midway in the second quarter of 2000, as compared to 67 in the second
quarter of 1999, and served 25 destinations on a nonstop basis in the second
quarter of 2000, as compared to 22 nonstop destinations served in the second
quarter of 1999. The Company also presently expects to occupy 12 jet gates and
one commuter aircraft gate at the new Chicago-Midway terminal which is presently
scheduled for completion in 2004, as compared to the six jet gates currently
occupied in the existing terminal. In addition, the Company has begun
construction of a Federal Inspection Service facility at Chicago-Midway, with
which it plans to operate international services.
The Company's growing commitment to Chicago-Midway is consistent with its
strategy for enhancing revenues and profitability in scheduled service by
focusing primarily on low cost, nonstop flights from airports where it has
market or aircraft advantages in addition to its low-cost. The Company expects
its growing concentration of connecting flights at Chicago-Midway to provide
both revenue premiums and operating cost efficiencies, as compared to the
Company's other gateway cities.
The Company's Hawaii service accounted for 16.7% of scheduled service ASMs and
4.4% of scheduled service departures in the second quarter of 2000, as compared
to 18.3% and 4.6%, respectively, in the second quarter of 1999. The Company
provided nonstop services in both periods from Los Angeles, Phoenix and San
Francisco to both Honolulu and Maui, with connecting service between Honolulu
and Maui. The Company provides these services through a marketing alliance with
the largest independent tour operator serving leisure travelers to Hawaii from
the United States. The Company distributes the remaining seats on these flights
through normal scheduled service distribution channels. The Company believes it
has superior operating efficiencies in west coast-Hawaii markets due to the
relatively low ownership cost of the Lockheed L-1011 fleet and because of the
high daily hours of utilization obtained for both aircraft and crews.
The Company's Indianapolis service accounted for 12.9% of scheduled service ASMs
and 9.4% of scheduled service departures in the second quarter of 2000, as
compared to 14.4% and 10.9%, respectively, in the second quarter of 1999. In
both quarters, the Company operated nonstop to Cancun, Ft. Lauderdale, Ft.
Myers, Las Vegas, Los Angeles, Orlando, St. Petersburg, San Francisco and
Sarasota. The Company has served Indianapolis for 27 years through the
Ambassadair Travel Club and in scheduled service since 1986.
The Company continuously evaluates the profitability of its scheduled service
markets and expects to adjust its service from time to time. The Company has
announced new service between Chicago-Midway and Minneapolis-St. Paul beginning
July 10, 2000 and to Hawaii from Chicago O'Hare International Airport and New
York's John F. Kennedy Airport in the third and fourth quarters of 2000,
respectively. Chicago Express will begin service from Chicago-Midway to South
Bend on September 15, 2000.
Commercial Charter Revenues. The Company's commercial charter revenues are
derived principally from independent tour operators and specialty charter
customers. The Company's commercial charter product provides full-service air
transportation to hundreds of customer-designated destinations throughout the
world. Commercial charter revenues accounted for 17.6% and 20.3%, respectively,
of consolidated revenues in the quarter and six months ended June 30, 2000, as
compared to 22.8% and 24.6%, respectively, in the comparable periods of 1999.
During the last several years, the Company has deployed more Boeing 727-200 and
Boeing 757-200 aircraft into its rapidly-growing scheduled service markets,
reducing the availability of aircraft capacity for commercial and
military/government charter flying. The Company has addressed this capacity
limitation in the commercial and military/government charter business units
through the acquisition of five long-range Lockheed L-1011 series 500 aircraft.
Although Lockheed L-1011 series 500 maintenance procedures and cockpit design
are similar to the Company's existing fleet of 14 Lockheed L-1011 series 50 and
series 100 aircraft, they differ operationally in that their 10-to-11 hour range
permits them to operate nonstop to parts of Asia, South America and Central and
Eastern Europe using an all-coach seating configuration preferred by the U.S.
military and most of the Company's commercial charter customers. The deployment
of these aircraft into the Company's fleet has increased the available seat
capacity for these charter business units, in addition to opening new long-range
market opportunities. These new aircraft also supply much of the additional seat
capacity which the Company needs to operate its expanded military/government
business for the contract year ending September 30, 2000.
The following tables set forth, for the periods indicated, certain key operating
and financial data for the commercial charter operations of the Company.
<TABLE>
<CAPTION>
------------------------------------- ---------------------------------------------------------------
Three Months Ended June 30,
---------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 1999 Inc (Dec) % Inc (Dec)
--------------- --------------- --------------- ---------------
Departures (b) 2,357 2,543 (186) (7.31)
Block Hours (c) 8,089 8,971 (882) (9.83)
RPMs (000s) (d) 584,187 738,735 (154,548) (20.92)
ASMs (000s) (e) 815,751 968,419 (152,668) (15.76)
Passengers Enplaned (g) 366,882 444,378 (77,496) (17.44)
Revenue $(000s) 58,605 64,857 (6,252) (9.64)
RASM in cents (h) 7.18 6.70 0.48 7.16
RASM excluding ATALC (l) 5.91 5.78 0.13 2.25
------------------------------------- --------------- --------------- --------------- ---------------
Six Months Ended June 30,
---------------------------------------------------------------
2000 1999 Inc (Dec) % Inc (Dec)
--------------- --------------- --------------- ---------------
Departures (b) 5,179 5,431 (252) (4.64)
Block Hours (c) 18,005 19,104 (1,099) (5.75)
RPMs (000s) (d) 1,374,128 1,657,021 (282,893) (17.07)
ASMs (000s) (e) 1,857,549 2,085,750 (228,201) (10.94)
Passengers Enplaned (g) 845,571 1,006,966 (161,395) (16.03)
Revenue $(000s) 132,633 138,191 (5,558) (4.02)
RASM in cents (h) 7.14 6.63 0.51 7.69
RASM excluding ATALC (l) 5.64 5.77 (0.13) (2.25)
------------------------------------- --------------- --------------- --------------- ---------------
</TABLE>
See footnotes (b) through (h) on pages 13-14.
(l) The air portion of air/ground package sales made by ATALC are included in
commercial charter revenues, although no ASMs are associated with these
revenues. RASM excluding ATALC revenues is provided to separately measure unit
revenue changes of the remaining commercial charter business unit.
The Company operates in two principal components of the commercial charter
business, known as "track charter" and "specialty charter." The larger track
charter business component is generally comprised of low- frequency but
repetitive domestic and international flights between city pairs, which support
high passenger load factors and are marketed through tour operators, providing
value-priced and convenient nonstop service to vacation destinations for the
leisure traveler. Since track charter resembles scheduled service in terms of
its repetitive flying patterns between fixed city pairs, it allows the Company
to achieve reasonable levels of crew and aircraft utilization (although less
than for scheduled service), and provides the Company with meaningful protection
from some fuel price increases through the use of fuel escalation reimbursement
clauses in tour operator contracts. Track charter accounted for approximately
$57.2 million and $104.9 million, respectively, in revenues in the quarter and
six months ended June 30, 2000, as compared to $46.2 million and $101.1 million,
respectively, in the comparable periods of 1999.
Specialty charter (including incentive travel programs) is a product which is
designed to meet the unique requirements of the customer and is a business
characterized by lower frequency of operation and by greater variation in city
pairs served than the track charter business. Specialty charter includes such
diverse contracts as flying university alumni to football games, transporting
political candidates on campaign trips and moving NASA space shuttle ground
crews to alternate landing sites. The Company also operates an increasing number
of trips in all-first-class configuration for certain corporate and high-end
leisure clients. Although lower utilization of crews and aircraft and infrequent
service to specialty destinations often result in higher average operating
costs, the Company has determined that the revenue premium earned by meeting
special customer requirements more than compensates for these increased costs.
The diversity of the Company's three fleet types also permits the Company to
meet a customer's particular needs by choosing the aircraft type which provides
the most economical solution for those requirements. Specialty charter accounted
for approximately $8.9 million and $15.3 million, respectively, in revenues in
the quarter and six months ended June 30, 2000, as compared to $10.4 million and
$18.9 million, respectively, in the comparable periods of 1999.
Military/Government Charter Revenues. The following tables set forth, for the
periods indicated, certain key operating and financial data for the military
flight operations of the Company.
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------------------------------
2000 1999 Inc (Dec) % Inc (Dec)
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Departures (b) 1,413 882 531 60.20
Block Hours (c) 5,530 3,431 2,099 61.18
RPMs (000s) (d) 396,986 191,038 205,948 107.80
ASMs (000s) (e) 734,411 458,055 276,356 60.33
Passengers Enplaned (g) 102,155 47,611 54,544 114.56
Revenue $(000s) 52,555 27,503 25,052 91.09
RASM in cents (h) 7.16 6.00 1.16 19.33
RASM excluding fuel (m) 6.87 6.03 0.84 13.93
--------------------------------- --------------- --------------- ---------------- ---------------
See footnotes (b) through (h) on pages 13-14. See footnote (m) on page 20.
<PAGE>
Six Months Ended June 30,
----------------------------------------------------------------
2000 1999 Inc (Dec) % Inc (Dec)
--------------- --------------- ---------------- ---------------
Departures (b) 2,815 2,063 752 36.45
Block Hours (c) 10,713 7,961 2,752 34.57
RPMs (000s) (d) 709,411 426,442 282,969 66.36
ASMs (000s) (e) 1,390,637 1,056,809 333,828 31.59
Passengers Enplaned (g) 181,108 105,935 75,173 70.96
Revenue $(000s) 98,147 61,509 36,638 59.57
RASM in cents (h) 7.06 5.82 1.24 21.31
RASM excluding fuel (m) 6.77 5.89 0.88 14.94
--------------------------------- --------------- --------------- ---------------- ---------------
</TABLE>
See footnotes (b) through (h) on pages 13-14
(m) Military unit revenue rates are calculated based upon a "cost plus" formula,
including an assumed average fuel price for each contract year. If actual fuel
prices differ from the contract rate, revenues are adjusted up or down to
neutralize the impact of the change on the Company. A separate RASM calculation,
excluding the impact of the fuel price adjustments, is provided on this line.
The Company participates in two related military/government charter programs
known as "fixed award" and "short-term expansion." Pursuant to the U.S.
military's fixed-award system, each participating airline is awarded certain
"mobilization value points" based upon the number and type of aircraft made
available by that airline for military flying. In order to increase the number
of points awarded, the Company has traditionally participated in contractor
teaming arrangements with other airlines. Under these arrangements, the team has
a greater likelihood of receiving fixed-award business and, to the extent that
the award includes passenger transport, the opportunity for the Company to
operate this flying is enhanced since the Company represents a majority of the
passenger transport capacity of the team. As part of its participation in this
teaming arrangement, the Company pays a commission to the team, which passes
that revenue on to all team members based upon their mobilization points.
Short-term expansion business is awarded by the U.S. military, first on a pro
rata basis to those carriers who have been provided fixed-award business and
then to any other carrier with aircraft availability. Expansion flying is
generally offered to airlines on very short notice.
The overall amount of military flying that the Company performs in any one year
is dependent upon several factors, including (i) the percentage of mobilization
value points represented by the Company's team as compared to total mobilization
value points of all providers of military service; (ii) the percentage of
passenger capacity of the Company with respect to its own team; (iii) the amount
of fixed-award and expansion flying required by the U.S. military in each
contract year; and (iv) the availability of the Company's aircraft to accept and
fly expansion awards.
Under its current teaming arrangement, the Company expects its
military/government charter revenues to increase to approximately $180.0 million
for the contract year beginning October 1999. This represents more than a 40.0%
increase over the Company's fiscal year 1999 military/government charter
revenues of $126.2 million.
<PAGE>
Ground Package Revenues. The Company earns ground package revenues through the
sale of hotel, car rental, cruise, train and other ground accommodations in
conjunction with the Company's air transportation product. The Company markets
these ground packages to its Ambassadair Club members and through its ATALC
subsidiaries to its charter and scheduled service passengers. In the second
quarter of 2000, ground package revenues decreased 5.6% to $15.2 million, as
compared to $16.1 million in the second quarter of 1999, and in the six months
ended June 30, 2000, ground package revenues increased 17.7% to $37.3 million,
as compared to $31.7 million in the same period of 1999.
As is more fully described in footnote 3, the Company acquired several
Detroit-based tour operators in January and April 1999, which were included in
the Company's consolidated results of operations for the entire first six months
of 2000. The majority of the increase in ground package revenues in the first
six months of 2000, as compared to the first six months of 1999, was
attributable to the full-period impact of these acquisitions in 2000. Although
ground revenue increased in the first six months of 2000, the margin on ground
packages decreased by approximately 10% between the quarter and six months ended
June 30, 1999 and 2000. This decrease is partially attributable to a substantial
decline in the number of train packages sold by ATALC, which typically generate
a high margin.
The number of ground packages sold and the average revenue earned by the Company
for a ground package sale are a function of the seasonal mix of vacation
destinations served, the quality and types of ground accommodations offered and
general competitive conditions in the Company's markets, all of which factors
can change from period to period.
Other Revenues. Other revenues are comprised of the consolidated revenues of
certain affiliated companies, together with miscellaneous categories of revenue
associated with the scheduled, charter and ground package operations of the
Company. Other revenues decreased 11.5% to $10.8 million in the second quarter
of 2000, as compared to $12.2 million in the second quarter of 1999, and
decreased 4.8% to $21.9 million in the six months ended June 30, 2000, as
compared to $23.0 million in the same period of 1999. In both respective sets of
periods, the Company's other revenues decreased primarily due to a decline in
substitute service revenue. This decline is due to less aircraft available to
fly substitute service and fewer sublease agreements when compared to 1999. Also
contributing to the other revenues variance is a decrease in ATALC trip
protection revenue.
Operating Expenses
Salaries, Wages and Benefits. Salaries, wages and benefits include the cost of
salaries and wages paid to the Company's employees, together with the Company's
cost of employee benefits and payroll-related local, state and federal taxes.
Salaries, wages and benefits expense in the second quarter of 2000 increased
16.3% to $71.9 million, as compared to $61.8 million in the second quarter of
1999, and in the six months ended June 30, 2000 increased 14.7% to $140.6
million, as compared to $122.6 million in the same period of 1999.
The Company increased its average equivalent employees by approximately 19.6%
and 19.4%, respectively, between the quarter and six months ended June 30, 2000,
and the comparable periods of 1999 partially to appropriately staff the growth
in ASMs flown between periods. Some increase in headcount is also attributable
to the acquisition of Chicago Express and ATALC (See Note 3 to consolidated
financial statements) and the opening of new base stations in Boston, Seattle
and Ronald Reagan Washington National Airport. Also, prior to 2000, contract
employees performed the ramp handling function at Chicago-Midway; effective in
May of 2000, the Company hired its own employees to perform this function.
Offsetting these increases is a reduction in the amount of variable compensation
between periods. In the first six months of 1999, the Company recorded a charge
of approximately $5.7 million in variable compensation expected to be paid.
Estimates of variable compensation are based on anticipated Company
profitability, so no corresponding charge was recorded in the first six months
of 2000.
Fuel and Oil. Fuel and oil expense increased 65.9% to $63.2 million in the
second quarter of 2000, as compared to $38.1 million in the second quarter of
1999, and increased 71.9% to $126.7 million in the six months ended June 30,
2000, as compared to $73.7 million in the same period of 1999. The Company
consumed 11.0% and 10.0%, respectively, more gallons of jet fuel for flying
operations between the second quarters and six-month periods ended June 30, 2000
and 1999, which resulted in an increase in fuel expense of approximately $4.1
million and $7.1 million, respectively, between periods. Jet fuel consumption
increased primarily due to the increased number of block hours of jet flying
operations between periods. The Company flew 42,606 jet block hours in the
second quarter of 2000, as compared to 38,913 jet block hours in the second
quarter of 1999, and flew 84,843 jet block hours in the six months ended June
30, 2000, as compared to 77,915 jet block hours in the same period of 1999.
During the second quarter of 2000, the Company's average cost per gallon of jet
fuel consumed increased by 46.1% as compared to the second quarter of 1999,
resulting in an increase in fuel and oil expense of approximately $19.7 million
between periods. During the six months ended June 30, 2000, the average cost per
gallon of jet fuel increased by 60.4% as compared to the first six months of
1999, resulting in an increase in fuel and oil expense of approximately $47.2
million between periods. The Company records fuel escalation revenue from
certain commercial charter customers and the U.S. military, which partially
offset the impact of higher fuel prices. In the second quarter of 2000, the
Company recognized $5.8 million in fuel escalation revenue, as compared to
($0.2) million recognized in the same period of 1999. In the first six months of
2000, the Company recognized $11.9 million in fuel escalation revenue, as
compared to ($0.9) million recognized in the first six months of 1999.
During the first six months of 1999, the Company entered into fuel hedge
agreements to reduce the risk of fuel price volatility. The Company recorded
$2.1 million more in fuel and oil expense in the first six months of 1999, as
compared to the same period of 2000, when there were no such agreements in
place.
Depreciation and Amortization. Depreciation and amortization expense increased
27.3% to $30.8 million in the second quarter of 2000, as compared to $24.2
million in the second quarter of 1999, and increased 35.9% to $62.4 million in
the six months ended June 30, 2000, as compared to $45.9 million in the same
period of 1999.
Depreciation expense attributable to owned airframes, engines and leasehold
improvements increased $3.0 million and $7.0 million, respectively, in the
quarter and six months ended June 30, 2000, as compared to the same periods of
1999. Five L-1011-500s, and nine 727-200s previously financed by operating
leases, were added to the Company's fleet throughout 1999, contributing to the
increase in depreciation expense for airframes, engines and leasehold
improvements. The Company also increased its investment in rotable parts and
computer hardware and software and increased its provision for amortization of
inventory obsolescence and debt issue costs between years. The obsolescence
provision changed significantly year over year due to the increase of L-1011-500
inventory levels to service the new fleet. These changes resulted in an increase
in depreciation expense of $1.9 million and $3.5 million, respectively, in the
quarter and six months ended June 30, 2000, as compared to the same periods of
1999.
Amortization of capitalized engine and airframe overhauls increased $1.7 million
and $3.7 million, respectively, in the quarter and six months ended June 30,
2000, as compared to the same periods of 1999, after including amortization of
related manufacturers' credits. Changes to the cost of overhaul amortization
were partly due to the increase in total block hours and cycles flown between
comparable periods for the Lockheed L-1011 fleet, since such expense varies with
that activity, and partly due to the completion of more engine and airframe
overhauls between periods for this fleet type. Engine overhaul amortization on
Boeing 727-200s declined in the first six months of 2000, as compared to 1999,
primarily due to more favorable pricing obtained from a new vendor.
Rolls-Royce-powered Boeing 757-200 aircraft, eleven of which were delivered new
from the manufacturer between late 1995 and mid 2000, are not presently
generating any engine overhaul expense, since the initial post-delivery
overhauls for these engines are not yet due under the Company's maintenance
programs.
The cost of engine overhauls that become worthless due to early engine failures
and which cannot be economically repaired is charged to depreciation and
amortization expense in the period the engine fails. Depreciation and
amortization expense attributable to these write-offs decreased $0.1 million and
increased $1.5 million, respectively, in the quarter and six months ended June
30, 2000, as compared to the same periods of 1999. When these early engine
failures can be economically repaired, the related repairs are charged to
aircraft maintenance, materials and repairs expense.
Handling, Landing and Navigation Fees. Handling and landing fees include the
costs incurred by the Company at airports to land and service its aircraft and
to handle passenger check-in, security, cargo and baggage where the Company
elects to use third-party contract services in lieu of its own employees. Where
the Company uses its own employees to perform ground handling functions, the
resulting cost appears within salaries, wages and benefits. Air navigation fees
are incurred when the Company's aircraft fly over certain foreign airspace.
Handling, landing and navigation fees increased by 3.5% to $23.7 million in the
second quarter of 2000, as compared to $22.9 million in the second quarter of
1999, and increased 8.4% to $49.1 million in the six months ended June 30, 2000,
as compared to $45.3 million in the same period of 1999. The total number of
system-wide jet departures between the second quarters of 2000 and 1999
increased by 9.7% to 13,590 from 12,386, and the total number of system-wide jet
departures between the six-month periods ended June 30, 2000 and 1999 increased
by 8.4% to 26,977 from 24,892. The lower rate of growth in handling costs in the
second quarter of 2000, as compared to growth in departures for that quarter,
was primarily due to the implementation of self-handling on the ramp at
Chicago-Midway Airport beginning in May 2000, which was done with third-party
contractors in the second quarter of 1999. A corresponding increase in salaries,
wages and benefits attributable to self-handling was experienced during the
second quarter of 2000.
Crew and Other Employee Travel. Crew and other employee travel is primarily the
cost of air transportation, hotels and per diem reimbursements to cockpit and
cabin crewmembers incurred to position crews away from their bases to operate
Company flights throughout the world. The cost of crew and other employee travel
increased 45.5% to $17.6 million in the second quarter of 2000, as compared to
$12.1 million in the second quarter of 1999, and increased 34.6% to $32.7
million in the six months ended June 30, 2000, as compared to $24.3 million in
the same period of 1999.
The average cost of crew positioning per full-time equivalent crewmember
increased 52.8% in the second quarter of 2000 and increased 36.6% in the six
months ended June 30, 2000, as compared to the same periods in 1999. The average
hotel cost per full-time-equivalent crew member increased 54.4% in the second
quarter of 2000, as compared to the same period of 1999, and increased 34.1% in
the six months ended June 30, 2000, as compared to the same period in 1999.
Positioning and hotel costs increased significantly in 2000 due primarily to the
substantial increase in military departures in 2000, as compared to 1999.
Military flights often operate to and from remote points from the Company's crew
bases, thus requiring significant positioning expenditures for cockpit and cabin
crews on other airlines. Also, due to heavy airline industry load factors in the
first six months of 2000, the Company was obligated to pay higher average fares
to position crews. Average hotel costs are higher for military operations, since
hotel rates at international locations generally exceed domestic U.S. hotel
rates.
Aircraft Maintenance, Materials and Repairs. This expense includes the cost of
expendable aircraft spare parts, repairs to repairable and rotable aircraft
components, contract labor for maintenance activities, and other non-capitalized
direct costs related to fleet maintenance, including spare engine leases, parts
loan and exchange fees, and related shipping costs. Aircraft maintenance,
materials and repairs expense increased by 20.1% to $17.3 million in the second
quarter of 2000 and as compared to $14.4 million in the same period of 1999, and
increased 31.7% to $37.0 million in the six months ended June 30, 2000, as
compared to $28.1 million in the same period of 1999.
The Company performed a total of 40 maintenance checks on its fleet during the
first six months of 2000 as compared to 31 in the same period of 1999. The cost
of materials consumed and components repaired in association with such checks
and other maintenance activity increased by $2.2 million and $5.9 million,
respectively, between the quarter and six months ended June 30, 2000, and same
periods of 1999.
Aircraft Rentals. Aircraft rentals expense for the second quarter of 2000
increased 19.1% to $16.8 million from $14.1 million in the second quarter of
1999, and in the six months ended June 30, 2000, increased 11.9% to $32.9
million, as compared to $29.4 million in the same period of 1999. The Company
leased four additional Boeing 757-200 aircraft in the first six months of 2000,
as compared to the same period of 1999, adding $2.0 million and $3.8 million,
respectively, to aircraft rentals expense in the quarter and six months ended
June 30, 2000, as compared to the same periods of the prior year. Aircraft rent
also increased nearly $0.6 million in the second quarter and $0.7 million in the
first six months as the Company's commuter operation replaced 19-seat Jetstream
31 aircraft with 34-seat SAAB 340B aircraft. These increases were partially
offset by $1.1 million in canceled leases for eight Boeing 727-200 aircraft,
which were purchased early in the first quarter of 1999.
Ground Package Cost. Ground package cost is incurred by the Company with hotels,
car rental companies, cruise lines and similar vendors who provide ground and
cruise accommodations to Ambassadair and ATALC customers. Ground package cost
increased 4.8% to $13.0 million in the second quarter of 2000, as compared to
$12.4 million in the second quarter of 1999 and increased 24.6% to $31.9 million
in the six months ended June 30, 2000, as compared to $25.6 million in the same
period of 1999. The six-month increase is consistent with the growth in ground
package revenues resulting from the acquisition of ATALC (See Note 3 to con-
solidated financial statements).
Passenger Service. Passenger service expense includes the onboard costs of meal
and non-alcoholic beverage catering, the cost of alcoholic beverages and
in-flight movie headsets sold, and the cost of onboard entertainment programs,
together with certain costs incurred for mishandled baggage and passengers
inconvenienced due to flight delays or cancellations. For the second quarters of
2000 and 1999, catering represented 76.5% and 84.8%, respectively, of total
passenger service expense, while catering represented 78.2% and 83.0%,
respectively, of total passenger service expense for the six month periods ended
June 30, 2000 and 1999.
The total cost of passenger service increased 38.2% to $12.3 million in the
second quarter of 2000, as compared to $8.9 million in the second quarter of
1999, and increased 26.5% to $23.4 million in the six months ended June 30,
2000, as compared to $18.5 million in the same period of 1999. The Company
experienced increases of approximately 10.1% and 8.8%, respectively, in the
average unit cost of catering each passenger between the quarters and six months
ended June 30, 2000, and the comparable periods of 1999, primarily because in
the first half of 2000 there were relatively more military passengers boarded in
the Company's business mix, who are provided a more expensive catering product
due to the longer stage-length of these flights. This resulted in a
price-and-business-mix increase of $0.8 million and $1.4 million, respectively,
in catering expense in the quarter and six months ended June 30, 2000, as
compared to the same periods of 1999. Total jet passengers boarded increased
12.1% and 9.7%, respectively, between the same time periods, resulting in
approximately $0.9 million and $1.4 million, respectively, in higher
volume-related catering expenses between the same sets of comparative periods.
In the second quarter and six months ended June 30, 2000, as compared to the
same periods of 1999, the Company experienced increased departure delays over 15
minutes of 35.4% and 25.7%, respectively. These irregular operations resulted in
higher costs to handle inconvenienced passengers and misconnected baggage. In
the second quarter and six months ended June 30, 2000, as compared to the same
periods of 1999, such costs were $1.6 million and $2.0 million higher,
respectively.
Commissions. The Company incurs commissions expense in association with the sale
by travel agents of single seats on scheduled service. In addition, the Company
incurs commissions to secure some commercial and military/government charter
business. Commissions expense increased 1.9% to $10.5 million in the second
quarter of 2000, as compared to $10.3 million in the second quarter of 1999, and
increased 8.5% to $21.7 million in the six months ended June 30, 2000, as
compared to $20.0 million in the same period of 1999.
Approximately $0.1 million and $1.8 million, respectively, of the increases in
commissions in the quarter and six months ended June 30, 2000, as compared to
the same periods of 1999, were attributable to commissions paid to travel agents
by ATALC. The Company also increased military commissions paid in the second
quarter and six months ended June 30, 2000 by $1.7 million and $3.2 million,
respectively, which is consistent with the growth in military revenues. These
increases were largely offset by decreases in scheduled service commissions paid
of $1.6 million and $3.2 million, respectively, in the second quarter and six
months ended June 30, 2000, as compared to the same periods of 1999, due to an
industry reduction in travel agency commission from 8.0% to 5.0% in the fourth
quarter of 1999.
Other Selling Expenses. Other selling expenses are comprised primarily of
booking fees paid to computer reservation systems ("CRS"), credit card discount
expenses incurred when selling single seats and ground packages to customers
using credit cards for payment, and toll-free telephone services provided to
single-seat and vacation package customers who contact the Company directly to
book reservations. Other selling expenses increased 27.8% to $9.2 million in the
second quarter of 2000, as compared to $7.2 million in the same period of 1999,
and increased 31.6% to $17.5 million in the six months ended June 30, 2000, as
compared to $13.3 million in the same period of 1999. Approximately $1.5 million
of this increase in the second quarter of 2000, and $3.2 million in the first
six months of 2000, resulted from an increase in CRS fees. This increase was
partially driven by booking volumes, but more significantly by an increase in
applicable rates pertaining to improved booking functionality.
Credit card discount expense increased $0.6 million and $1.3 million,
respectively, in the quarter and six months ended June 30, 2000, as compared to
the same periods of 1999, primarily due to higher volumes of scheduled service
tickets sold using credit cards.
Advertising. Advertising expense increased 8.7% to $5.0 million in the second
quarter of 2000, as compared to $4.6 million in the second quarter of 1999, and
increased 13.7% to $11.6 million in the six months ended June 30, 2000, as
compared to $10.2 million in the same period of 1999. The Company incurs
advertising costs primarily to support single-seat scheduled service sales and
the sale of air-and-ground packages. The Company increased advertising costs to
promote new scheduled service to Ronald Reagan Washington National Airport,
Boston and Seattle beginning in the second quarter of 2000, and also incurred
increased advertising expense in association with ATALC.
Facility and Other Rentals. Facilities and other rentals include the cost of all
ground facilities that are leased by the Company such as airport space, regional
sales offices and general offices. The cost of facilities and other rentals
increased 11.4% to $3.9 million in the second quarter of 2000, as compared to
$3.5 million in the second quarter of 1999, and increased 13.4% to $7.6 million
in the six months ended June 30, 2000, as compared to $6.7 million in the same
period of 1999. Growth in facilities costs between periods was primarily
attributable to the need to provide facilities at airport locations to support
new scheduled service destinations and expanded services at existing
destinations.
Other Operating Expenses. Other operating expenses decreased 1.0% to $19.6
million in the second quarter of 2000, as compared to $19.8 million in the
second quarter of 1999, and decreased 2.5% to $38.7 million in the six months
ended June 30, 2000, as compared to $39.7 million in the same period of 1999.
Decreases of $4.2 million and $7.8 million for the quarter and six months ended
June 30, 2000, respectively, as compared to the same periods of 1999, were
primarily attributable to the higher cost of passenger air transportation
purchased by ATALC from air carriers other than the Company during the first
half of 1999, whereas ATALC primarily used the Company's own air transportation
in the first half of 2000. Additionally, in the first half of 1999, prior to the
full impact of the Chicago Express acquisition, other operating expenses
included the Company's cost for the code-share agreement with Chicago Express,
which were approximately, $0.8 million in the second quarter of 1999 and $3.1
million in the first six months of 1999, with no corresponding expenses incurred
in 2000. These decreases in operating expenses were partially offset by
individually less significant increases in other operating expense categories.
Interest Income and Expense. Interest expense in the quarter and six months
ended June 30, 2000, increased to $8.0 million and $15.6 million, respectively,
as compared to $5.0 million and $10.1 million, respectively, in the same periods
of 1999. The increase in interest expense between periods was primarily due to
changes in the Company's capital structure resulting from the sale in December
1999 of $75.0 million in principal amount of 10.5% unsecured senior notes.
Interest expense of $2.0 million and $3.9 million, respectively, was recorded in
the quarter and six months ended June 30, 2000 for these notes, which was not
incurred in the first six months of 1999.
The Company invested excess cash balances in short-term government securities
and commercial paper and thereby earned $2.0 million and $3.9 million,
respectively, in interest income in the quarter and six months ended June 30,
2000, as compared to $1.4 million and $3.2 million, respectively, in the same
periods of 1999.
Other Income. Other income decreased 94.4% to $0.1 million in the first six
months of 2000 from $1.8 in the same period of 1999. The Company holds a
membership interest in the SITA Foundation ("SITA"), an organization which
provides data communication services to the airline industry. SITA's primary
asset is its ownership in Equant N.V. ("Equant"). In February 1999, SITA sold a
portion of its interest in Equant in a secondary public offering and distributed
the pro rata proceeds to certain of its members (including Amtran, Inc.) that
elected to participate in the offering. The Company recorded a gain of $1.7
million, or $1.0 million after tax, in the first quarter of 1999.
Income Tax Expense. In the quarter and six months ended June 30, 2000, the
Company recorded $6.7 million and $5.6 million, respectively, in income tax
expense applicable to $12.5 million and $9.5 million, respectively, of pre-tax
income for those periods, while in the quarter and six months ended June 30,
1999, income tax expense of $10.1 million and $21.0 million, respectively, was
recorded on pre-tax income of $26.8 million and $54.3 million, respectively. The
effective tax rates applicable to the quarter and six months ended June 30, 2000
were 53.2% and 58.7%, respectively, as compared to 37.7% and 38.7%,
respectively, for the same periods of 1999.
Income tax expense in both sets of comparative periods was affected by the
permanent non-deductibility for federal income tax purposes of a percentage of
certain amounts paid for crew per diem (40% in 2000 and 45% in 1999). The effect
of this and other permanent differences on the effective income tax rate for
financial accounting purposes is to increase the effective rate as amounts of
pre-tax income decrease.
Liquidity and Capital Resources
Cash Flows. In the six months ended June 30, 2000 and 1999, net cash provided by
operating activities was $77.3 million and $85.5 million, respectively. The
decrease in cash provided by operating activities between periods was
attributable to lower earnings and less growth in accounts payable, partially
offset by higher depreciation and amortization charges and growth in advance
ticket sales as reflected in air traffic liability.
Net cash used in investing activities was $85.5 million and $147.1 million,
respectively, in the six months ended June 30, 2000 and 1999. Such amounts
primarily included capital expenditures totaling $68.5 million and $144.1
million, respectively, for engine and airframe overhauls, airframe improvements,
the purchase of rotable parts, and for purchase deposits made for Boeing
757-200, Boeing 757-300, and Boeing 737-800 aircraft scheduled for future
delivery. Capital expenditures in the first six months of 1999 were higher
primarily due to the acquisition of certain L-1011-500 aircraft and parts, and
due to the purchase of nine previously-leased Boeing 727-200 aircraft.
Net cash provided by financing activities was $7.1 million and $6.6 million,
respectively, in the six months ended June 30, 2000 and 1999. During the first
six months of 2000, the Company issued a note for $11.5 million, collateralized
by one L-1011-500. During the first six months of 1999, the Company issued a
note for $8.0 million, receiving proceeds after issuance costs of $7.9 million,
collateralized by the newly-constructed Maintenance and Operations Center at the
Indianapolis Airport and issued $2.2 million in stock to complete the
acquisition of Chicago Express.
Aircraft and Fleet Transactions. In November 1994, the Company signed a purchase
agreement for six new Boeing 757-200s which, as subsequently amended, now
provides for 13 total aircraft to be delivered between 1995 and 2000. As of June
30, 2000, the Company had accepted delivery of the first 11 aircraft under these
agreements, all of which were financed under leases accounted for as operating
leases. The aggregate purchase price for the remaining two aircraft is
approximately $52.0 million per aircraft, subject to escalation. The final two
deliveries are scheduled for October 2000 and November 2000. Advance payments
totaling approximately $13.8 million ($6.9 million per aircraft) are required
prior to delivery of the two remaining aircraft, with the remaining purchase
price payable at delivery. As of June 30, 2000 and 1999, the Company has
recorded fixed asset additions for $13.8 million and $16.3 million,
respectively, in advanced payments applicable to aircraft scheduled for future
delivery. The Company intends to finance the remaining two deliveries under this
agreement through sale/leaseback transactions accounted for as operating leases.
As further described in Note 5 to the Consolidated Financial Statements, on June
30, 2000, the Company concluded a purchase agreement with the manufacturer to
acquire 10 new Boeing 757-300s and 20 new Boeing 737-800s. The manufacturer's
list price under this agreement is $73.1 million for each 757-300 and $52.4
million for each 737-800, subject to escalation. The Company's purchase price of
each aircraft is subject to various discounts. The deliveries of these aircraft
are scheduled between June 2001 and April 2003. Advance payments are required
for these purchases and the Company has preliminary agreements in place to fund
these advance deposits through long-term debt collateralized by the deposits and
certain issuances of preferred stock. As of June 30, 2000, the Company had made
$2.5 million in advanced payments for these aircraft.
In January 2000, Chicago Express Airlines, Inc., a wholly owned subsidiary of
Amtran, entered into an agreement to purchase nine SAAB 340B aircraft, including
spare engines, spare parts and crew training, for an aggregate purchase price of
approximately $30.0 million. These aircraft are being placed into service
throughout 2000 in conjunction with the retirement of the current fleet of
Jetstream J31s, all of which are currently leased. As of June 30, 2000, Chicago
Express had taken delivery of seven of these aircraft, all of which had been
placed into revenue service, and financed them through sale/leaseback
transactions accounted for as operating leases. The Company expects to place the
remaining two aircraft into revenue service during the third quarter of 2000.
Between the third quarter of 1998 and the fourth quarter of 1999, the Company
accepted delivery of five L-1011-500 aircraft, which are powered by Rolls-Royce
RB211-524B4-02 engines. Upon delivery of each aircraft, the Company completed
certain modifications and improvements to the airframes and interiors in order
to qualify them to operate in a standard coach-seating configuration of 307
seats. Modifications were completed on the last aircraft, and it was placed into
service in the first quarter of 2000. The total costs of the five aircraft,
together with spare engines and spare parts, was approximately $100.0 million.
The Company financed these aircraft primarily through the issuance of unsecured
notes in December 1998.
Significant Financings. In July 1997, the Company sold $100.0 million principal
amount of 10.5% unsecured senior notes. In December 1999, the Company sold an
additional $75.0 million principal amount of 10.5% senior notes. The $75.0
million notes sold in 1999 were issued as a private placement under Rule 144A.
The Company is obligated to complete an exchange offer in which the new notes
will be exchanged for registered notes having the same terms. On January 25,
2000, the Company filed a registration statement with the SEC in connection with
this pending exchange offer, and this exchange offer is expected to be complete
in the third quarter of 2000.
In December 1998, the Company sold $125.0 million principal amount of 9.625%
unsecured senior notes in a public offering.
In the second quarter of 1999, the Company completed the construction of a
120,000 square foot Maintenance and Operations Center immediately adjacent to
the Company's maintenance hangar at Indianapolis International Airport. In June
1999, the Company financed this facility with an $8.0 million 15-year mortgage
loan.
In December 1999, ATA issued $17.0 million principal amount of special facility
revenue bonds to finance the construction of certain facilities at
Chicago-Midway Airport. The bonds are payable from and secured by a pledge and
assignment of special facility revenues, including certain of the City of
Chicago's rights under a special facility financing agreement between the City
of Chicago and the Company. Payment of the bonds is guaranteed by the Company.
In December 1999, the Company revised its revolving credit facility to provide a
maximum of $100.0 million, including up to $50.0 million for stand-by letters of
credit. The facility matures January 2, 2003, and borrowings under the facility
bear interest, at the option of ATA, at either LIBOR plus 1.25% to 2.50% or the
agent bank's prime rate. This facility is subject to certain restrictive
covenants, and is collateralized by certain L-1011-50 and Boeing 727-200
aircraft. As of June 30, 2000 and 1999, the Company had no borrowings against
this credit facility, but did have outstanding letters of credit secured by this
facility aggregating $32.7 million as of June 30, 2000 and $21.1 million as of
June 30, 1999.
In February 2000, the Company borrowed $11.5 million for operating cash
purposes. This five-year note is collateralized by one Lockheed L-1011-500
aircraft.
Future Accounting Changes
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This accounting standard, which is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000,
requires that all derivatives be recognized as either assets or liabilities at
fair value. The Company is evaluating the new statement's provisions and
currently expects to adopt SFAS No. 133 in the first quarter of 2001. Although
the Company currently does not have any significant derivatives subject to the
accounting provisions of SFAS No. 133, the Company has engaged in certain fuel
price hedging contracts in recent years to which accounting or disclosure
provisions of this statement might have applied. The Company cannot predict what
impact, if any, adoption of the statement will have.
In December 1999, the Securities and Exchange Commission ("SEC") published Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). This guidance clarifies the SEC's position on certain policies of revenue
recognition. Most of the Company's revenue recognition policies are already
consistent with SAB 101. The Company expects to adopt SAB 101 in the fourth
quarter of 2000, at which time it will implement some accounting changes as a
result of SAB 101, none of which is expected to have a material effect on the
financial statements.
Forward-Looking Information
Information contained within "Management's Discussion and Analysis of Financial
Condition and Results of Operations" includes forward-looking information which
can be identified by forward-looking terminology such as "believes," "expects,"
"may," "will," "should," "anticipates," or the negative thereof, or other
variations in comparable terminology. Such forward-looking information is based
upon management's current knowledge of factors affecting the Company's business.
The differences between expected outcomes and actual results can be material,
depending upon the circumstances. Where the Company expresses an expectation or
belief as to future results in any forward-looking information, such expectation
or belief is expressed in good faith and is believed to have a reasonable basis.
The Company can provide no assurance that the statement of expectation or belief
will result or will be achieved or accomplished.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause actual results to be materially different. Such
factors include, but are not limited to, the following:
o economic conditions;
o labor costs;
o aviation fuel costs;
o competitive pressures on pricing;
o weather conditions;
o governmental legislation;
o consumer perceptions of the Company's products;
o demand for air transportation in markets in which the Company operates; and
o other risks and uncertainties listed from time to time in reports the
Company periodically files with the Securities and Exchange Commission.
The Company does not undertake to update its forward-looking statements to
reflect future events or circumstances.
<PAGE>
PART II - Other Information
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities
None.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
On May 9, 2000, the Company held its Annual Meeting of Shareholders, during
which the following matters were submitted to a vote of shareholders.
(1) The following individuals were elected as Directors of the Company.
Director Name Votes For Votes Against
J. George Mikelsons 10,910,503 818,222
John P. Tague 10,905,438 823,287
Kenneth K. Wolff 10,695,719 1,033,006
James W. Hlavacek 10,905,754 822,971
William P. Rogers, Jr. 10,910,128 818,597
Robert A. Abel 10,909,928 818,797
Andrejs P. Stipnieks 10,908,728 819,997
(2) The 2000 Incentive Stock Plan for Key Employees of Amtran, Inc. was
approved; 9,436,613 votes were cast for; 1,596,476 votes were cast against;
and 3,289 votes were withheld.
(3) The accounting firm of Ernst & Young LLP was retained as independent
auditors of the Company for the 2000 fiscal year; 11,719,869 votes were cast
for; 7,444 votes were cast against; and 1,411 votes were withheld.
Item 5 - Other Information
None.
Item 6 - Exhibits and Reports of Form 8-K
(a) None.
(b) None.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Amtran, Inc.
-----------------------------------
(Registrant)
Date: August 14, 2000 Kenneth K. Wolff
---------------------------------------
Kenneth K. Wolff
Executive Vice President and Chief Financial Officer
Director
Date: August 14, 2000 David M. Wing
---------------------------------------
David M. Wing
Vice President and Controller
Chief Accounting Officer
