FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-24126
FRONTIER AIRLINES, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1256945
----------------------------------------------------------- ----------------------------------
(State or other jurisdiction of incorporated or organization) (I.R.S. Employer Identification No.)
12015 E. 46th Avenue, Denver, CO 80239
------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number including area code: (303) 371-7400
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 period 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
The number of shares of the Company's Common Stock outstanding as of October 31, 2000 was 18,028,897.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Information
Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Item 3: Quantitative and Qualitative Disclosures About Market Risk 16
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FRONTIER AIRLINES, INC.
Balance Sheets
(Unaudited)
September 30, March 31,
2000 2000
--------------- ----------------
Assets
------
Current assets:
Cash and cash equivalents $ 118,891,103 $ 67,850,933
Short-term investments 2,000,000 15,760,000
Restricted investments 4,000,000 4,000,000
Trade receivables, net of allowance for doubtful accounts of $639,321
and $170,819 at September 30 and March 31, 2000, respectively 28,456,072 22,190,835
Maintenance deposits 24,606,257 19,637,128
Prepaid expenses and other assets 8,775,290 7,386,851
Inventories 2,916,390 2,235,183
Deferred tax assets 1,608,424 1,136,194
Deferred lease expense 101,649 163,527
--------------- ----------------
Total current assets 191,355,185 140,360,651
Security, maintenance and other deposits 25,111,103 17,613,122
Property and equipment, net 26,482,181 21,654,262
Deferred lease and other expenses 84,357 104,243
Restricted investments 11,144,260 7,813,760
--------------- ----------------
$ 254,177,086 $ 187,546,038
=============== ================
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 12,168,423 $ 14,407,913
Air traffic liability 55,655,605 44,518,837
Other accrued expenses 18,564,993 12,058,755
Income taxes payable 9,857,387 5,483,264
Accrued maintenance expense 26,976,554 21,893,316
Current portion of obligations under capital leases 119,110 113,029
--------------- ----------------
Total current liabilities 123,342,072 98,475,114
Accrued maintenance expense 9,503,528 7,214,167
Deferred tax liability 995,402 483,514
Obligations under capital leases, excluding current portion 267,934 328,702
--------------- ----------------
Total liabilities 134,108,936 106,501,497
--------------- ----------------
Stockholders' equity:
Preferred stock, no par value, authorized 1,000,000 shares;
none issued - -
Common stock, no par value, stated value of $.001 per share,
authorized 40,000,000 shares; 18,001,297 and 17,732,273 shares
issued and outstanding at September 30 and March 31, 2000, respectively 18,001 17,732
Additional paid-in capital 69,755,876 67,946,230
Unearned ESOP shares (285,837) (857,713)
50,580,110 13,938,292
--------------- ----------------
Total stockholders' equity 120,068,150 81,044,541
--------------- ----------------
$ 254,177,086 $ 187,546,038
=============== ================
FRONTIER AIRLINES, INC.
Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------- ---------------- --------------- ----------------
Revenues:
Passenger $ 128,403,974 $ 83,412,784 $ 239,371,369 $ 159,387,697
Cargo 2,046,754 1,477,492 3,272,248 2,918,576
Other 632,150 562,989 1,248,005 1,033,189
--------------- ---------------- --------------- ----------------
Total revenues 131,082,878 85,453,265 243,891,622 163,339,462
--------------- ---------------- --------------- ----------------
Operating expenses:
Flight operations 44,455,749 30,376,247 84,086,836 56,260,630
Aircraft and traffic servicing 14,840,730 12,025,644 28,488,515 22,870,783
Maintenance 18,199,777 12,608,651 32,590,660 26,046,742
Promotion and sales 15,359,093 12,535,279 27,820,866 24,226,789
General and administrative 6,415,869 4,170,915 12,645,487 7,858,538
Depreciation and amortization 1,218,440 633,441 2,292,782 1,207,652
--------------- ---------------- --------------- ----------------
Total operating expenses 100,489,658 72,350,177 187,925,146 138,471,134
--------------- ---------------- --------------- ----------------
Operating income 30,593,220 13,103,088 55,966,476 24,868,328
--------------- ---------------- --------------- ----------------
Nonoperating income (expense):
Interest income 2,148,164 1,122,479 3,772,598 1,947,122
Interest expense (17,491) (26,115) (34,950) (48,016)
Other, net (21,301) 136,587 (37,201) 15,021
--------------- ---------------- --------------- ----------------
Total nonoperating income, net 2,109,372 1,232,951 3,700,447 1,914,127
--------------- ---------------- --------------- ----------------
Income before income tax expense and
cumulative effect of change in method of
accounting for maintenance checks 32,702,592 14,336,039 59,666,923 26,782,455
Income tax expense 12,509,016 5,583,517 23,025,105 10,301,369
--------------- ---------------- --------------- ----------------
Income before cumulative effect of
change in accounting principle 20,193,576 8,752,522 36,641,818 16,481,086
Cumulative effect of change in method of
accounting for maintenance checks - - - 549,009
--------------- ---------------- --------------- ----------------
Net income $ 20,193,576 $ 8,752,522 $ 36,641,818 $ 17,030,095
=============== ================ =============== ================
(continued)
FRONTIER AIRLINES, INC.
Statements of Income, continued
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------- ---------------- --------------- ----------------
Earnings per share:
Basic:
Income before cumulative effect of a
change in accounting principle $1.13 $0.50 $2.06 $0.97
Cumulative effect of change in method of
accounting for maintenance checks - - - 0.03
--------------- ---------------- --------------- ----------------
Net income $1.13 $0.50 $2.06 $1.00
=============== ================ =============== ================
Diluted:
Income before cumulative effect of a
change in accounting principle $1.04 $0.46 $1.90 $0.88
Cumulative effect of change in method of
accounting for maintenance checks - - - 0.03
--------------- ---------------- --------------- ----------------
Net income $1.04 $0.46 $1.90 $0.91
=============== ================ =============== ================
Weighted average shares of
common stock outstanding
Basic 17,914,437 17,452,641 17,828,548 16,998,582
=============== ================ =============== ================
Diluted 19,487,621 19,090,549 19,298,229 18,637,440
=============== ================ =============== ================
See accompanying notes to financial statements.
FRONTIER AIRLINES, INC.
Statement of Changes in Stockholders' Equity
For the Year Ended March 31, 2000 and the
Six Months Ended September 30, 2000
Common Stock Retained
-------------------------- Additional Unearned earnings Total
Stated paid-in ESOP (accumulated stockholders'
Shares value capital shares deficit) equity
------------ ----------- ------------- ------------ ------------- -------------
Balances,
March 31, 1999 16,141,172 $16,141 $58,054,844 $ (609,375) $ (13,070,961) $ 44,390,649
Exercise of common stock
warrants 1,147,726 1,148 4,758,969 4,760,117
Exercise of common stock
options 343,375 343 563,712 564,055
Tax benefit from exercises of
common stock options and
warrants
3,425,055 3,425,055
Contribution of common stock to
employees stock ownership
plan 100,000 100 1,143,650 (1,143,750) -
Amortization of employee stock
compensation 895,412 895,412
Net income 27,009,253 27,009,253
------------ ----------- ------------- ------------ ------------- -------------
Balances,
March 31, 2000 17,732,273 17,732 67,946,230 (857,713) 13,938,292 81,044,541
Exercise of common stock
warrants 18,524 19 70,102 70,121
Exercise of common stock
options 250,500 250 630,570 630,820
Tax benefit from exercises of
common stock options and
warrants
1,108,974 1,108,974
Amortization of employee stock
compensation
571,876 571,876
Net income
36,641,818 36,641,818
Balances, ------------ ----------- ------------- ------------ ------------- -------------
September 30, 2000 18,001,297 $ 18,001 $69,755,876 (285,837) $50,580,110 $120,068,150
============ =========== ============= ============ ============= =============
See accompanying notes to financial statements.
FRONTIER AIRLINES, INC.
Statements of Cash Flows
For the Six Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
--------------- ----------------
Cash flows from operating activities:
Net income $ 36,641,818 $ 17,030,095
Adjustments to reconcile net income to net cash
provided by operating activities:
Employee stock option plan compensation expense 571,876 406,250
Depreciation and amortization 2,374,546 1,356,016
Deferred tax expense 39,658 5,041,655
Changes in operating assets and liabilities:
Restricted investments (400,000) -
Trade receivables (6,265,237) 4,309,365
Security, maintenance and other deposits (6,779,311) (3,927,921)
Prepaid expenses and other assets (1,388,439) (1,447,044)
Inventories (681,207) (847,505)
Accounts payable (2,239,490) (31,291)
Air traffic liability 11,136,768 3,303,676
Other accrued expenses 6,506,238 (734,814)
Income taxes payable 4,374,123 4,564,708
Accrued maintenance expense 7,372,599 3,680,329
--------------- ----------------
Net cash provided by operating activities 51,263,942 32,703,519
--------------- ----------------
Cash flows from investing activities:
Decrease (increase) in short-term investments 13,760,000 (33,466,704)
Aircraft lease and purchase deposits, net (5,687,799) 1,833,916
Increase in restricted investments (2,930,500) (1,610,000)
Capital expenditures (7,120,701) (4,161,830)
--------------- ----------------
Net cash used by investing activities (1,979,000) (37,404,618)
--------------- ----------------
Cash flows from financing activities:
Net proceeds from issuance of common stock 1,809,915 5,148,079
Principal payments on obligations under capital leases (54,687) (52,325)
--------------- ----------------
Net cash provided by financing activities 1,755,228 5,095,754
--------------- ----------------
Net increase in cash and cash equivalents 51,040,170 394,655
Cash and cash equivalents, beginning of period 67,850,933 47,289,072
--------------- ----------------
Cash and cash equivalents, end of period $ 118,891,103 $ 47,683,727
=============== ================
See accompanying notes to financial statements.
FRONTIER AIRLINES, INC.
Notes to Financial Statements
September 30, 2000
(1) Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting principles for complete financial statements and
should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended March 31, 2000. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have
been included. The results of operations for the six months ended September 30, 2000 are not necessarily indicative of the
results that will be realized for the full year.
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that
describe the business and prospects of Frontier Airlines, Inc. ("Frontier" or the "Company") and the expectations of our Company and
management. All statements, other than statements of historical facts, included in this report that address activities, events or
developments that we expect, believe, intend or anticipate will or may occur in the future, are forward-looking statements. When used
in this document, the words "estimate," "anticipate," "project" and similar expressions are intended to identify forward-looking
statements. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with
accuracy and some of which might not even be anticipated. These risks and uncertainties include, but are not limited to: the timing
of, and expense associated with, expansion and modification of our operations in accordance with our business strategy or in response
to competitive pressures or other factors such as our commencement of passenger service and ground handling operations at several
airports and assumption of maintenance and ground handling operations at DIA with our own employees; general economic factors and
behavior of the fare-paying public; increased federal scrutiny of low-fare carriers generally that may increase our operating costs
or otherwise adversely affect us; actions of competing airlines, such as increasing capacity and pricing actions of United Airlines
and other competitors; the availability of suitable aircraft, which may inhibit our ability to achieve operating economies and
implement our business strategy; the unavailability of, or inability to secure upon acceptable terms, financing necessary to purchase
aircraft which we have ordered; and uncertainties regarding aviation fuel prices. Because our business, like that of the airline
industry generally, is characterized by high fixed costs relative to revenues, small fluctuations in our yield per RPM or expense per
ASM can significantly affect operating results. See "Risk Factors" in our Form 10-K for the year ended March 31, 2000 as they may be
modified by the disclosures contained in this report.
General
We are a scheduled airline based in Denver, Colorado. As of October 31, 2000, we operate routes linking our Denver hub to 22
cities in 18 states spanning the nation from coast to coast. We added Kansas City, Missouri to our route system on June 15, 2000. We
commenced service to Washington, D.C.'s Ronald Reagan International Airport on September 7, 2000 with one daily nonstop flight. On
December 14, 2000 we intend to add an additional daily round trip flight to both Orlando, Florida and San Diego, California.
We were organized in February 1994 and we began flight operations in July 1994 with two leased Boeing 737-200 jets. We have
since expanded our fleet to 25 leased jets, including seven Boeing 737-200s and 18 larger Boeing 737-300s. We currently use up to
nine gates at our hub, Denver International Airport ("DIA"), where we operate approximately 114 daily system flight departures.
Beginning in May 2001, we will commence a fleet replacement plan by which we will replace our Boeing equipment with new purchased and
leased Airbus jet aircraft, a transition we expect to complete by approximately the end of the calendar year 2004.
Small fluctuations in our yield per revenue passenger mile ("RPM") or expense per available seat mile ("ASM") can significantly
affect operating results because we, like other airlines, have high fixed costs in relation to revenues. Airline operations are
highly sensitive to various factors, including the actions of competing airlines and general economic factors, which can adversely
affect our liquidity, cash flows and results of operations.
Results of Operations
We had net income of $36,642,000 or $1.90 per diluted share for the six months ended September 30, 2000 as compared to net
income of $17,030,000 or 91(cent)per diluted share for the six months ended September 30, 1999. We had net income of $20,194,000 or $1.04
per diluted share for the three months ended September 30, 2000 as compared to net income of $8,753,000 or 46(cent)per diluted share for
the three months ended September 30, 1999. During the six months ended September 30, 2000, as compared to the prior comparable
periods, we experienced higher average fares and load factors as a result of increases in the number of business travelers, a general
increase in fare levels including increases intended to offset increased fuel costs, and an increase in the number of passengers that
a major competitor directed to us because of an increase in the number of delays and cancellations that airline experienced. We
estimate that the additional passenger traffic received from that airline had the effect of increasing each of our average fare and
load factor for the six months ended September 30, 2000 by approximately 1%.
Our cost per ASM for the six months ended September 30, 2000 and 1999 were 8.99(cent)and 8.07(cent), respectively, an increase of .92(cent)
or 11.4%. Cost per ASM excluding fuel for the six months ended September 30, 2000 and 1999 were 7.42(cent)and 6.99(cent), respectively, an
increase of .43(cent)or 6.2%. Our cost per ASM increased during the six months ended September 30, 2000 principally because of increases
in the cost of fuel which accounted for .49(cent)per ASM, aircraft rentals for newer and larger aircraft of .15(cent)per ASM, general and
administrative expenses primarily due to accrued bonuses for all employees resulting from increased profitability and a higher level
of employee benefits of .15(cent)per ASM, offset by a .08(cent)reduction in cost per ASM in promotion and sales expense as a result of a
decrease in the travel agency commission rate from 8% to 5% commencing in November 1999, and decreased advertising and communication
expenses offset by an increase in credit card fees associated with the increase in our average fare. A general wage rate increase
effective in January 2000 and an increase in pilots' salaries effective in May 2000 also contributed to the increase in cost per ASM
during the six months ended September 30, 2000. Our cost per ASM during the six months ended September 30, 1999 included an
unanticipated engine repair expense due to a premature failure, which accounted for .08(cent)of cost per ASM. Our cost per ASM for the
six months ended September 30, 1999 adjusted for this expense would have been 7.99(cent)and our cost per ASM for the six months ended
September 30, 2000 would have represented a .12(cent)increase in cost per ASM over the prior comparable period. During the three months
ended September 30, 2000, two of our aircraft underwent an unusually extensive maintenance check. This was the first time we were
required to perform an annual maintenance check on these aircraft since they entered our fleet. During the three months ended
December 31, 1999, this accrual was reversed as the engine manufacturer agreed to repair the engine at no cost to us.
An airline's break-even load factor is the passenger load factor that will result in operating revenues being equal to
operating expenses, assuming constant revenue per passenger mile and expenses. For the six months ended September 30, 2000, our
break-even load factor was 51.2% compared to our achieved passenger load factor of 68.3%. For the six months ended September 30,
1999, our break-even load factor was 52.4% compared to our achieved passenger load factor of 63%. Our break-even load factor
decreased from the prior comparable period largely as a result of an increase in our average fare to $149 during the six months ended
September 30, 2000 from $131 during the six months ended September 30, 1999, and an increase in our total yield per RPM from 15.10(cent)
for the six months ended September 30, 1999 to 17.08(cent)for the six months ended September 30, 2000 offset by an increase in our
expense per ASM to 8.99(cent)for the six months ended September 30, 2000 from 8.07(cent)for the six months ended September 30, 1999.
The following table provides certain of our financial and operating data for the three month and six month periods ended
September 30, 2000 and 1999.
Three Months Ended September 30, Six Months Ended September 30,
2000 1999 2000 1999
------------------ ----------------- ------------------ -----------------
Passenger revenue (000s) (1) $128,404 $83,413 $239,371 $159,388
Revenue passengers carried (000s) 826 617 1,538 1,170
Revenue passenger miles (RPMs) (000s) 760,845 575,476 1,427,600 1,081,723
Available seat miles (ASMs) (000s) (3) 1,073,703 900,524 2,091,258 1,716,485
Passenger load factor (4) 70.9% 63.9% 68.3% 63.0%
Break-even load factor (5) 52.8% 52.9% 51.2% 52.4%
Block hours (6) 20,823 17,987 40,848 34,772
Departures 9,772 8,441 18,901 16,384
Average seats per departure 131 127 131 127
Average stage length 839 840 845 825
Average length of haul 921 933 928 925
Aircraft miles (000s) 8,196 7,091 15,964 13,516
Average daily block hour utilization (7) 9.2 10.2 9.3 10.3
Yield per RPM (cents) (8) 16.88 14.49 16.77 14.73
Total yield per RPM (cents) (9) 17.23 14.85 17.08 15.10
Total yield per ASM (cents) (10) 12.21 9.49 11.66 9.52
Expense per ASM (cents) 9.36 8.03 8.99 8.07
Expense per ASM excluding fuel (cents) 7.67 6.86 7.42 6.99
Average fuel cost per gallon $1.07 $ 0.74 $ 1.00 $ 0.68
Passenger revenue per block hour $6,166 $4,637 $5,860 $4,584
Average fare (11) $149 $130 $149 $131
Average aircraft in fleet 24.5 19.1 24.0 18.5
Aircraft in fleet at end of period 25.0 19.0 25.0 19.0
Average age of aircraft at end of period 10.9 11.1 10.9 11.1
Average full-time equivalent employees 1,869 1,514 1,818 1,464
EBITDAR (000s) (12) 46,925 25,518 88,125 48,659
EBITDAR as a % of revenue 35.8% 29.9% 36.1% 29.8%
(1) "Passenger revenue" includes revenues for non-revenue passengers, administrative fees, and revenue recognized for unused tickets
that are greater than one year from issuance date.
(2) "Revenue passenger miles," or RPMs, are determined by multiplying the number of fare-paying passengers carried by the distance
flown.
(3) "Available seat miles," or ASMs, are determined by multiplying the number of seats available for passengers by the number of
miles flown.
(4) "Passenger load factor" is determined by dividing revenue passenger miles by available seat miles.
(5) "Break-even load factor" is the passenger load factor that will result in operating revenues being equal to operating expenses,
assuming constant revenue per passenger mile and expenses
(6) "Block hours" represent the time between aircraft gate departure and aircraft gate arrival.
(7) "Average daily block hour utilization" represents the total block hours divided by the weighted average number of aircraft
days in service.
(8) "Yield per RPM" is determined by dividing passenger revenues by revenue passenger miles.
(9) "Total Yield per RPM" is determined by dividing total revenues by revenue passenger miles.
(10) "Total Yield per ASM" is determined by dividing passenger revenues by available seat miles.
(11) "Average fare" excludes revenue included in passenger revenue for non-revenue passengers, administrative fees, and revenue
recognized for unused tickets that are greater than one year from issuance date.
(12) "EBITDAR", or "earnings before interest, income taxes, depreciation, amortization and aircraft rentals," is a supplemental
financial measurement many airline industry analysts and we use in the evaluation of our business. However, EBITDAR should only
be read in conjunction with all of our financial statements appearing elsewhere herein, and should not be construed as an
alternative either to operating income (as determined in accordance with generally accepted accounting principles) as an
indicator of our operating performance or to cash flows from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of liquidity.
The following table provides our operating revenues and expenses expressed as cents per total ASMs and as a percentage of total
operating revenues, as rounded, for the three month and six month periods ended September 30, 2000 and 1999.
Three months ended September 30, Six months ended September 30,
-------------------------------- ------------------------------
2000 1999 2000 1999
------------------- -------------------- --------------------- ---------------------
Per % Per % Per % Per %
total of total of total of total of
ASM Revenue ASM Revenue ASM Revenue ASM Revenue
--- ------- --- ------- --- ------- --- -------
Revenues:
Passenger 11.96 97.9% 9.26 97.6% 11.45 98.2% 9.29 97.6%
Cargo 0.19 1.6% 0.17 1.7% 0.15 1.3% 0.17 1.8%
Other 0.06 0.5% 0.06 0.7% 0.06 0.5% 0.06 0.6%
---------- -------- ----------- -------- ----------- --------- ----------- ---------
Total revenues 12.21 100.0% 9.49 100.0% 11.66 100.0% 9.52 100.0%
========== ======== =========== ======== =========== ========= =========== =========
Operating expenses:
Flight operations 4.14 33.9% 3.37 35.5% 4.02 34.5% 3.28 34.5%
Aircraft and traffic servicing 1.38 11.3% 1.34 14.1% 1.36 11.7% 1.33 14.0%
Maintenance 1.70 14.0% 1.40 14.8% 1.56 13.4% 1.52 16.0%
Promotion and sales 1.43 11.7% 1.39 14.7% 1.33 11.4% 1.41 14.8%
General and administrative 0.60 4.9% 0.46 4.9% 0.61 5.2% 0.46 4.8%
Depreciation and amortization 0.11 0.9% 0.07 0.7% 0.11 0.9% 0.07 0.7%
---------- -------- ----------- -------- ----------- --------- ----------- ---------
Total operating expenses 9.36 76.7% 8.03 84.7% 8.99 77.1% 8.07 84.8%
========== ======== =========== ======== =========== ========= =========== =========
Total ASMs (000s) 1,073,703 900,524 2,091,258 1,716,485
Revenues
Our revenues are highly sensitive to changes in fare levels. Fare pricing policies have a significant impact on our revenues.
Because of the elasticity of passenger demand, we believe that increases in fares may at certain levels result in a decrease in
passenger demand in many markets. We cannot predict future fare levels, which depend to a substantial degree on actions of
competitors. When sale prices or other price changes are initiated by competitors in our markets, we believe that we must, in most
cases, match those competitive fares in order to maintain our market share. Passenger revenues are seasonal in leisure travel markets
depending on the markets' locations and when they are most frequently patronized.
Our average fare for the six months ended September 30, 2000 and 1999 was $149 and $131, respectively. We believe that the
increase in the average fare during the six months ended September 30, 2000 over the prior comparable period was a result of
increases in the number of business travelers, a general increase in fare levels including increases intended to offset increased
fuel costs, and an increase in the number of passengers that a major competitor directed to us because of an increase in the number
of delays and cancellations that airline experienced. We estimate that the additional passenger traffic received from that airline
had the effect of increasing each of our average fare and load factor for the six months ended September 30, 2000 by approximately
1%.
Passenger Revenues. Passenger revenues totaled $239,371,000 for the six months ended September 30, 2000 compared to
$159,388,000 for the six months ended September 30, 1999, or an increase of 50.2%, which exceeded the 21.8% increase in ASMs of
374,773,000. The number of revenue passengers carried was 1,538,000 for the six months ended September 30, 2000 compared to
1,170,000 for the six months ended September 30, 1999 or an increase of 31.5%. We had an average of 24 aircraft in our fleet during
the six months ended September 30, 2000 compared to an average of 18.5 aircraft during the six months ended September 30, 1999, an
increase of 29.7%. RPMs for the six months ended September 30, 2000 were 1,427,600,000 compared to 1,081,723,000 for the six months
ended September 30, 1999, an increase of 32%.
Cargo revenues, consisting of revenues from freight and mail service, totaled $3,272,000 and $2,919,000 for the six months
ended September 30, 2000 and 1999, respectively, representing 1.3% and 1.8%, respectively, of total operating revenues, an increase
of 12.1%. Cargo revenues, consisting of revenues from freight and mail service, totaled $2,047,000 and $1,477,000 for the three
months ended September 30, 2000 and 1999, representing 1.6% and 1.7% of total operating revenues, respectively, an increase of
38.6%. During July 2000 an audit was performed on our contract cargo sales and services provider. The audit disclosed that for a
15 month period between January 1, 1999 and March 31, 2000 both cash and credit card sales were remitted to us by our services
provider, even though we had collected for the cash sales directly from our customer. We therefore adjusted cargo revenue downward
$423,000 during the three months ended June 30, 2000. Excluding the effect of this adjustment, on the current and prior comparable
period, cargo revenue would have been $3,695,000 and $2,742,000 for the six months ended September 30, 2000 and 1999, respectively,
an increase of 34.8%. This adjunct to the passenger business is highly competitive and depends heavily on aircraft scheduling,
alternate competitive means of same day delivery service and schedule reliability.
Other revenues, comprised principally of interline handling fees, liquor sales and excess baggage fees, totaled $1,248,000 and
$1,033,000, or .5% and .6% of total operating revenues for the six months ended September 30, 2000 and 1999, respectively, an
increase of 20.8%
Operating Expenses
Operating expenses include those related to flight operations, aircraft and traffic servicing, maintenance, promotion and
sales, general and administrative and depreciation and amortization. Total operating expenses were $187,925,000 and $138,471,000 for
the six months ended September 30, 2000 and 1999 and represented 77.1% and 84.8% of revenue, respectively. Total operating expenses
for the three months ended September 30, 2000 and 1999 were $100,490,000 and $72,350,000 and represented 76.7% and 84.7% of revenue,
respectively. Operating expenses decreased as a percentage of revenue during the three and six months ended September 30, 2000 as a
result of the 50.2% increase in passenger revenues attributable to a 31.5% increase in passengers and a 13.7% increase in the average
fare offset by a 48.2% increase in the average cost per gallon of fuel, a general wage rate increase which became effective in
January 2000, an increase in pilots' salaries effective in May 2000, and an increase in accrued bonuses based on increased
profitability.
Flight Operations. Flight operations expenses of $84,087,000 and $56,261,000 were 34.5% of total revenue for each of the six
months ended September 30, 2000 and 1999. Flight operations expenses of $44,456,000 and $30,376,000 were 33.9% and 35.5% of total
revenue for the three months ended September 30, 2000 and 1999, respectively. Flight operations expenses include all expenses
related directly to the operation of the aircraft including fuel, lease and insurance expenses, pilot and flight attendant
compensation, in-flight catering, crew overnight expenses, flight dispatch and flight operations administrative expenses.
Aircraft fuel expenses include both the direct cost of fuel, including taxes, as well as the cost of delivering fuel into the
aircraft. Aircraft fuel expense of $32,727,000 for 32,695,000 gallons used and $18,512,000 for 27,404,000 gallons used resulted in
an average fuel cost of $1 and 67.6(cent)per gallon, for the six months ended September 30, 2000 and 1999, respectively. Aircraft fuel
expense represented 38.9% and 32.9% of total flight operations expenses and 13.4% and 11.3% of total revenue for the six months ended
September 30, 2000 and 1999, respectively. Aircraft fuel expense of $18,190,000 for 16,995,000 gallons used and $10,557,000 for
14,275,000 gallons used resulted in an average fuel expense of $1.07 and 74(cent)per gallon for the three months ended September 30, 2000
and 1999, respectively. Aircraft fuel expenses represented 40.9% and 34.8% of total flight operations expenses for the three months
ended September 30, 2000 and 1999, and 13.9% and 12.4% of total revenue, respectively. Fuel prices are subject to change weekly as we
do not purchase supplies in advance for inventory. Fuel consumption for the six months ended September 30, 2000 and 1999 averaged 800
and 788 gallons per block hour, respectively. Fuel consumption increased over the prior comparable period because of an increase in
our load factor from 63% to 68.3%. During the six months ended September 30, 2000, a major competitor directed passengers to us
because of an increase in the number of delays and cancellations that airline experienced. Because of this we increased the speeds
we flew our aircraft to mitigate flight delays, which increased our fuel burn rate. Additionally, we returned five aircraft to the
lessor during the year ended March 31, 2000 and replaced them with four aircraft that are larger and have a higher fuel burn rate.
Aircraft lease expenses totaled $29,903,000 (12.3% of total revenue) and $22,019,000 (13.5% of total revenue) for the six
months ended September 30, 2000 and 1999, respectively, an increase of 35.8%. Aircraft lease expenses totaled $15,135,000 (11.6% of
total revenue) and $11,644,000 (13.6% of total revenue) for the three months ended September 30, 2000 and 1999, respectively, an
increase of 30%. The increase is largely due to higher lease expenses for larger and newer Boeing 737-300 aircraft added to the
fleet and an increase in the average number of aircraft to 24 from 18.5, or 29.7%, during the six month period ended September 30,
2000 compared to the same period in 1999. The average age of our fleet decreased from 11.1 years as of September 30, 1999 to 10.9
years as of September 30, 2000.
Aircraft insurance expenses totaled $1,616,000 (.7% of total revenue) for the six months ended September 30, 2000. Aircraft insurance expenses
for the six months ended September 30, 1999 were $1,317,000 (.8% of total revenue). Aircraft insurance expenses were .11(cent)and .12(cent)
per RPM for the six months ended September 30, 2000 and 1999, respectively. Aircraft insurance expenses totaled $814,000 (.6% of
total revenue) for the three months ended September 30, 2000. Aircraft insurance expenses for the three months ended September 30,
1999 were $711,000 (.8% of total revenue). Aircraft insurance expenses were .11(cent)and .12(cent)per RPM for the six months ended September
30, 2000 and 1999, respectively.
Pilot and flight attendant salaries before payroll taxes and benefits totaled $10,322,000 and $7,230,000 or 4.3% and 4.5% of
passenger revenue for each of the six months ended September 30, 2000 and 1999, an increase of 42.8%. Pilot and flight attendant
salaries before payroll taxes and benefits totaled $5,399,000 and $3,777,000 or 4.2% and 4.5% of passenger revenue for each of the
three months ended September 30, 2000 and 1999, an increase of 42.9%. In November 1998, our pilots voted to be represented by an
independent union, the Frontier Airline Pilots Association. The first bargaining agreement for the pilots, which has a 5-year term,
was ratified and made effective in May 2000. Pilot and flight attendant compensation increased principally as a result of a 29.7%
increase in the average number of aircraft in service, general wage rate increases, and an increase of 17.5% in aircraft block hours.
We pay pilot and flight attendant salaries for training, consisting of approximately six and three weeks, respectively, prior to
scheduled increases in service which can cause the compensation expense during such period to appear high in relationship to the
average number of aircraft in service. When we are not in the process of adding aircraft to our system, we expect pilot and flight
attendant expense per aircraft to normalize. With a scheduled passenger operation, and with salaried rather than hourly crew
compensation, our expenses for flight operations are largely fixed, with fuel expenses and flight catering the principal exception.
We expect pilot and flight attendant salary expense to increase over approximately the next two years as a result of the Airbus
transition and related training required for that transition.
Aircraft and Traffic Servicing. Aircraft and traffic servicing expenses were $28,489,000 and $22,871,000 (an increase of 24.6%)
for the six months ended September 30, 2000 and 1999, respectively, and represented 11.7% and 14.0% of total revenue. Aircraft and
traffic servicing expenses were $14,841,000 and $12,026,000 (an increase of 23.4%) for the three months ended September 30, 2000 and
1999, respectively, and represented 11.3% and 14.1% of total revenue. Aircraft and traffic servicing expenses include all expenses
incurred at airports including landing fees, facilities rental, station labor, ground handling expenses, and interrupted trip
expenses associated with delayed or cancelled flights. Interrupted trip expenses are amounts paid to other airlines to reaccomodate
passengers as well as hotel, meal and other incidental expenses. Aircraft and traffic servicing expenses increased with the addition
of new cities and departures to our route system. During the six months ended September 30, 2000, we served 23 cities compared to 20
during the six months ended September 30, 1999, or an increase of 15%. During the six months ended September 30, 2000, our
departures increased to 18,901 from 16,384 or 15.4%. Aircraft and traffic servicing expenses were $1,507 per departure for the six
months ended September 30, 2000 as compared to $1,396 per departure for the six months ended September 30, 1999, or an increase of
$111 per departure. During the three months ended September 30, 2000, our departures increased to 9,772 from 8,441 or 15.8%.
Aircraft and traffic servicing expenses were $1,519 per departure for the three months ended September 30, 2000 as compared to $1,425
per departure for the three months ended September 30, 1999, or an increase of $94 per departure. Aircraft and traffic servicing
expenses increased as a result of a general wage rate increase effective in January 2000, contract ground handling services in
certain of the cities we serve as a result of increased frequencies in existing markets and introduction of service to new cities,
and increased per passenger charges as a result of the greater number of passengers we carried. These increases were offset by a
decrease in interrupted trip expenses as a result of an improvement in our completion factor from 98.9% for the six months ended
September 30, 1999 to 99.4% for the six months ended September 30, 2000.
Maintenance. Maintenance expenses of $32,591,000 and $26,047,000 were 13.4% and 16% of total revenue for the six months ended
September 30, 2000 and 1999, respectively. Maintenance expenses of $18,200,000 and $12,609,000 were 14% and 14.8% of total revenue
for the three months ended September 30, 2000 and 1999, respectively. These include all labor, parts and supplies expenses related
to the maintenance of the aircraft. Routine maintenance is charged to maintenance expense as incurred while major engine overhauls
and heavy maintenance check expense is accrued monthly with variances from accruals recognized at the time of the check. Maintenance
cost per block hour for the six months ended September 30, 2000 and 1999 were $798 and $749, respectively. During the six months
ended September 30, 1999, we accrued for an unanticipated engine repair expense as a result of a premature failure totaling
$1,500,000. During the quarter ended December 31, 1999, this accrual was reversed as the engine manufacturer agreed to repair the
engine at no cost to us. Maintenance cost per block hour for the six months ended September 30, 1999 would have been $706 excluding
this engine repair expense and the maintenance cost per block hour for the six months ended September 30, 2000 compared to the six
months ended September 30, 1999 would have represented a 13% increase. Maintenance costs per block hour increased as a result of
increased facilities rentals to satisfy additional space requirements for the increase in aircraft coupled with an increase in the
number of aircraft simultaneously out of service for heavy maintenance, and a general wage rate increase effective January 2000.
Because of the increase in the number of aircraft out of service for heavy maintenance, our average daily block hour utilization
decreased from 10.3 for the six months ended September 30, 1999 to 9.3 for the six months ended September 30, 2000. Maintenance cost
per block hour for the three months ended September 30, 2000 and 1999 were $874 and $701, respectively, or an increase of 24.7%.
During the three months ended September 30, 2000, two of our aircraft underwent an unusually extensive maintenance check. This was
the first time we were required to perform a heavy annual maintenance check on these aircraft since they entered our fleet. We also
incurred increased costs in personnel, training and information technology expenses for implementation of new maintenance and
engineering software and in preparation for the Airbus transition.
Promotion and Sales. Promotion and sales expenses totaled $27,821,000 and $24,227,000 and were 11.4% and 14.8% of total
revenue for the six months ended September 30, 2000 and 1999, respectively. These include advertising expenses, telecommunications
expenses, wages and benefits for reservationists and reservations supervision as well as marketing management and sales personnel,
credit card fees, travel agency commissions and computer reservations costs. Promotion and sales expenses decreased as a percentage
of revenue for the six months ended September 30, 2000 over the prior comparable period largely as a result of the increase in
revenue and a decrease in travel agency commissions.
During the six months ended September 30, 2000, promotion and sales expenses per passenger decreased to $18.09 compared to
$20.71 for the six months ended September 30, 1999. Promotion and sales expenses decreased largely as a result of a decrease in
travel agency commissions from 8% to 5% effective in November 1999, matching a decrease instituted by our competitors. Travel agency
commissions and interline service charges and handling fees, as a percentage of passenger revenue, before non-revenue passengers,
administrative fees and breakage (revenue from expired tickets), decreased to 3.5% for the six months ended September 30, 2000
compared to 5% for the six months ended September 30, 1999. The decrease in travel agency commissions was offset by increased
commission expense associated with the increase in our average fare as we do not cap commissions. With increased activity on our web
site, our calls per passenger have decreased. Because of the increase in web site activity, as well as a decrease in long distance
rates, we experienced a decrease in communications expense. These cost savings were offset by an increase in credit card fees
associated with the increase in our average fare from $131 for the six months ended September 30, 1999 to $149 for the six months
ended September 30, 2000.
General and Administrative. General and administrative expenses for the six months ended September 30, 2000 and 1999 totaled
$12,645,000 and $7,859,000 and were 5.2% and 4.8% of total revenue, respectively, an increase of 60.9%. During the six months ended
September 30, 2000 and 1999, we accrued for employee performance bonuses totaling $4,293,000 and $1,875,000, respectively, which were
1.8% and 1.2% of total revenue, an increase of 129%. Employee performance bonuses increased over the prior comparable period as a
result of our increased profitability and an enhancement to the bonus program. General and administrative expenses include the wages
and benefits for several of our executive officers and various other administrative personnel including legal, accounting,
information technology, aircraft procurement, corporate communications, training and human resources and other expenses associated
with these departments. Employee health benefits, accrued vacation and bonus expenses, general insurance expenses including worker's
compensation, and write-offs associated with uncollectible accounts are also included in general and administrative expenses. We
experienced increases in our human resources, training and information technology expenses as a result of an increase in employees
from approximately 1,763 in September 1999 to approximately 2,273 in September 2000, an increase of 28.9%. We also experienced
personnel increases in the area of aircraft procurement as a result of the purchase and lease agreements for Airbus aircraft.
Because of the increase in personnel, our health insurance benefit expenses and accrued vacation expense increased accordingly.
During the six months ended September 30, 2000, our accrued vacation expense increased as a result of the increase in pilot salaries
and vacation benefits due to a collective bargaining agreement concluded with the pilots' union effective in May 2000. General and
administrative expenses for the three months ended September 30, 2000 and 1999 totaled $6,416,000 and $4,171,000 and were 4.9% of
total revenue for each of these periods, an increase of 53.8%. During the three months ended September 30, 2000, we reduced our
health insurance liability by $507,000 because our benefit claim payments have been less than actuarially developed expected costs.
Depreciation and Amortization. Depreciation and amortization expenses of $2,293,000 and $1,208,000 were approximately .9% and
.7% of total revenue for the six months ended September 30, 2000 and 1999, an increase of 89.9%. These expenses include depreciation
of office equipment, ground station equipment, spare parts, aircraft leasehold improvements, and other fixed assets. Amortization of
start-up and route development costs are not included as these expenses have been expensed as incurred. Depreciation and
amortization expenses increased over the prior year as a result of an increase in our spare parts inventory including a spare engine,
leasehold improvements associated with 14 aircraft (eight additional and six replacement) added to our fleet during the past 18
months, ground handling equipment, and computers to support new employees as well as replacement computers for those with dated
technology.
Nonoperating Income (Expense). Net nonoperating income totaled $3,700,000 for the six months ended September 30, 2000 compared
to $1,914,000 for the six months ended September 30, 1999. Interest income increased from $1,947,000 to $3,773,000 during the six
months ended September 30, 2000 from the prior period due to an increase in cash balances as a result of an increase in cash provided
by operating activities and proceeds from stock option and warrant exercises.
Income Tax Expense. We accrued income taxes of $23,025,000 and $10,301,000 at 39% and 38.25% of taxable income during the six
months ended September 30, 2000 and 1999, respectively.
Liquidity and Capital Resources
Our balance sheet reflected cash and cash equivalents and short-term investments of $120,891,000 and $83,611,000 at September
30, 2000 and March 31, 2000, respectively. At September 30, 2000, total current assets were $191,355,000 as compared to
$123,342,000 of total current liabilities, resulting in working capital of $68,013,000. At March 31, 2000, total current assets were
$140,361,000 as compared to $98,475,000 of total current liabilities, resulting in working capital of $41,886,000. The increase in
our working capital is largely a result of cash flows provided by operating activities and proceeds from exercises of common stock
options and warrants during the six months ended September 30, 2000. We believe that our existing cash balances, combined with
improved operating results, are and will be adequate to fund our operations for the foreseeable future. However, as discussed below,
we will require financing in order to fund our intended purchase of Airbus A319 and A318 aircraft.
Cash provided by operating activities for the six months ended September 30, 2000 was $51,264,000. This is attributable to our
net income for the period, increases in air traffic liability, other accrued expenses, income taxes payable, and accrued
maintenance expense, offset by increases in trade receivables, security, maintenance and other deposits, prepaid expenses and
inventories, and a decrease in accounts payable. Cash provided by operating activities for the six months ended September 30, 1999
was $32,704,000. This is attributable to our net income for the period, the utilization of deferred tax assets, decreases in trade
receivables, increases in our air traffic liability, other accrued expenses, and accrued maintenance expenses, offset by increases in
security, maintenance and other deposits, prepaid expenses and inventories.
Cash used by investing activities for the six months ended September 30, 2000 was $1,979,000. We had maturities of $13,760,000
in short-term investments, net of purchases, comprised of certificates of deposit and government-backed agencies with maturities of
one year or less. During the six months ended September 30, 2000, we made cash security deposits and pre-delivery payments totaling
$5,688,000 associated with two leased Boeing 737-300 aircraft delivered during the six months ended September 30, 2000, the 16 Airbus
aircraft we have agreed to lease with delivery dates beginning in June 2001, and the 12 Airbus aircraft we have agreed to purchase
with delivery dates beginning in May 2001. During the six months ended September 30, 2000, we used $7,121,000 for capital
expenditures for rotable aircraft components, maintenance equipment and tools, aircraft leasehold costs and improvements, computer
equipment and software for enhancements to our internet booking site, our reservation system and a replacement maintenance system.
Cash used by investing activities for the six months ended September 30, 1999 was $37,405,000. We invested $33,467,000 in short-term
investments, net of maturities, comprised of government-backed agencies with maturities of one year or less. During the six months
ended September 30, 1999, cash security deposits for aircraft totaling $1,834,000 were returned to us. We had issued to certain of
our aircraft lessors warrants to purchase 395,000 shares of our Common Stock at an aggregate purchase price of $2,391,600. During May
1999 and June 1999, aircraft lessors exercised all of these warrants and we received $2,391,600. To the extent that the aircraft
lessors were able to realize certain profit margins on their subsequent sale of our Common Stock, they were required to refund a
portion of the cash security deposits they were holding. As a result of their sales of our Common Stock, $1,024,000 in cash security
deposits were returned to us during the six months ended September 30, 1999. Other cash security deposits were replaced with letters
of credit and these deposits were returned to us. We also received $500,000 in cash security deposits for aircraft returned to the
lessor during the six months ended September 30, 1999. Additionally, we secured five aircraft delivered during the six months ended
September 30, 1999 with letters of credit totaling $1,610,000. Our restricted investments increased $1,610,000 to collateralize these
letters of credit. We used $4,162,000 for capital expenditures for rotable aircraft components, maintenance equipment and tools,
aircraft leasehold costs and improvements, and computer equipment during the six months ended September 30, 1999.
Cash provided by financing activities for the six months ended September 30, 2000 and 1999 was $1,755,000 and $5,096,000,
respectively. During the six months ended September 30, 2000 and 1999 we received $1,810,000 and $5,148,000, respectively, from the
exercise of common stock options and warrants.
As of October 31, 2000, we lease 25 Boeing 737 type aircraft under operating leases with expiration dates ranging from 2002 to
2006. Under these leases, we were required to make cash security deposits or issue letters of credit to secure our lease
obligations. At September 30, 2000, we had made cash security deposits and had arranged for issuance of letters of credit totaling
$3,858,000 and $10,215,000, respectively. Accordingly, our restricted cash balance includes $10,215,000 that collateralize the
outstanding letters of credit. Additionally, we make deposits for maintenance of these aircraft. At September 30 and March 31, 2000,
we had made maintenance deposits of $33,659,000 and $26,912,000, respectively.
In March 2000, we entered into an agreement, amended in July 2000, to purchase up to 29 new Airbus aircraft. We have agreed to
firm purchases of 12 of these aircraft, and have options to purchase up to an additional 17 aircraft. This order contemplates a fleet
replacement plan by which we will phase out our Boeing 737 aircraft and replace them with a combination of Airbus A319 and A318
aircraft. The aggregate additional amounts due under this purchase commitment and estimated amounts for buyer-furnished equipment and
spare parts for both the purchased and leased aircraft was approximately $374,046,000 as of October 2000. Under the terms of the
purchase agreement, we are required to make scheduled pre-delivery payments. These payments are non-refundable with certain
exceptions. As of October 31, 2000, the Company has made pre-delivery payments totaling $11,488,000 to secure these aircraft and
option aircraft. As a complement to this purchase, in April and May 2000 we signed two agreements to lease 16 new Airbus aircraft. As
of September 30, 2000, we have made cash security deposits and had arranged for issuance of letters of credit totaling $200,000 and
$3,089,000, respectively, to secure these aircraft. Upon completion of our fleet transition, we expect our owned and leased fleet to
be comprised of approximately two-thirds A319 aircraft and one-third A318 aircraft. We expect to take delivery of our first
purchased Airbus aircraft in May 2001 and our first leased Airbus aircraft in June 2001, and plan to complete our fleet transition by
the end of 2004. The A319 and A318 aircraft will be configured with 132 and 114 passenger seats, respectively, with a 33-inch seat
pitch. In order to complete the purchase of these aircraft we must secure acceptable aircraft financing. The amount of financing
required will depend on the number of aircraft purchase options we exercise and the amount of cash generated by operations prior to
delivery of the aircraft. We continue to explore various financing alternatives, including but not limited to, domestic and foreign
bank financing, public debt financing such as enhanced equipment trust certificates, and leveraged lease arrangements. While we
believe that such financing will be available to us, there can be no assurance that financing will be available when required, or on
acceptable terms. The inability to secure such financing could have a material adverse effect on us and result in delays in or our
inability to take delivery of Airbus aircraft we have agreed to purchase.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
The risk inherent in our market risk sensitive position is the potential loss arising from an adverse change in the price of
fuel as described below. The sensitivity analysis presented does not consider either the effect that such an adverse change may have
on overall economic activity or additional action management may take to mitigate our exposure to such a change. Actual results may
differ from the amounts disclosed. At the present time, we do not utilize fuel price hedging instruments to reduce our exposure to
fluctuations in fuel prices.
Our earnings are affected by changes in the price and availability of aircraft fuel. Market risk is estimated as a
hypothetical 10 percent increase in the average cost per gallon of fuel for the year ended March 31, 2000. Based on fiscal year 2000
actual fuel usage, such an increase would have resulted in an increase to aircraft fuel expense of approximately $4,442,000 in that
fiscal year. Comparatively, based on projected fiscal year 2001 fuel usage, such an increase would result in an increase to aircraft
fuel expense of approximately $5,343,000 in fiscal year 2001. The increase in exposure to fuel price fluctuations in fiscal year
2001 is due to the increase of our average aircraft fleet size during the year ended March 31, 2000, projected increases to our fleet
during the year ended March 31, 2001 and related gallons purchased.
The price of aviation fuel has recently increased substantially more than the foregoing hypothetical example as our average
cost per gallon of fuel for the six months ended September 30, 2000 increased 47.9% over our average cost for fuel during the same
period ended September 30, 1999. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -
Operating Expenses."
PART II. OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The annual meeting of shareholders of the Company was held on September 7, 2000, at which a quorum for the transaction of
business was present. One matter was voted upon, as described below.
Members of the Company's Board of Directors elected at the meeting were Samuel D. Addoms, D. Dale Browning, Paul S.
Dempsey, William B. McNamara, B. Larae Orullian, , and James B. Upchurch. The votes cast with respect to each nominee
were as follows:
10,982,378 "For" Mr. Addoms; 11,096 "Withheld"
10,978,831 "For" Mr. Browning; 14,643 "Withheld"
10,980,612 "For" Mr. Dempsey; 12,862 "Withheld"
10,980,435 "For" Mr. McNamara; 13,039 "Withheld"
10,977,332 "For" Ms. Orullian; 16,142 "Withheld"
10,979,487 "For" Mr. Upchurch; 13,987 "Withheld"
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
Exhibit
Numbers
-------
(a) Exhibits
10.11(b) Aircraft Lease Extension and Amendment Agreement (MSN23257) dated as of September 29, 2000, between General
Electric Capital Corporation and Frontier Airlines, Inc. (1)
10.12(a) Aircraft Lease Extension and Amendment Agreement (MSN22733) dated as of September 29, 2000, between Polaris
Holding Company and Frontier Airlines, Inc. (1)
10.13(b) Aircraft Lease Extension and Amendment Agreement (MSN22734) dated as of September 29, 2000, between Polaris
Holding Company and Frontier Airlines, Inc. (1)
10.51(a) Amendment No. 1 to Airbus A318/A319 Purchase Agreement dated as of March 10, 2000 between AVSA, S.A.R.L., Seller,
and Frontier Airlines, Inc., Buyer. Portions of this exhibit have been excluded from the publicly available
document and an application for an order granting confidential treatment of the excluded material has been
made. (1)
10.59 Aircraft Lease Agreement dated as of August 14, 2000 between Frontier Airlines, Inc., Lessee, and International
Lease Finance Corporation, Lessor, in respect to one Boeing 737-300 aircraft (MSN26301). Portions of this exhibit
have been excluded from the publicly available document and an application for an order granting confidential
treatment of the excluded material has been made. (1)
10.60 General Terms Agreement No. 6-13616 between CFM International and Frontier Airlines, Inc. Portions of this
exhibit have been excluded from the publicly available document and an application for an order granting
confidential treatment of the excluded material has been made. (1)
27.1 Financial Data Schedule (1)
(1) Filed herewith.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
FRONTIER AIRLINES, INC.
Date: November 2, 2000 By: /s/ Steve B. Warnecke
----------------------------------------------
Steve B. Warnecke, Vice President and
Chief Financial Officer
Date: November 2, 2000 By: /s/ Elissa A. Potucek
----------------------------------------------
Elissa A. Potucek, Vice President, Controller,
Treasurer and Principal Accounting Officer
