Republic Airways Holdings Announces Third Quarter 2009 Results

November 4, 2009 6:23 PM EST

INDIANAPOLIS--(BUSINESS WIRE)-- Republic Airways Holdings Inc. (NASDAQ: RJET) today reported operating revenues of $359.6 million for the quarter ended September 30, 2009, a 6.7% decrease, compared to $385.2 million for the same period last year. The Company reported net income of $3.3 million for the quarter ended September 30, 2009, compared to $17.0 million reported in the prior year's third quarter. The Company also reported earnings per diluted share of $0.09, compared to $0.50 for the same period last year. The third quarter 2009 results include August and September results for Midwest Airlines, which was acquired on July 31, 2009.

Third Quarter Financial Highlights

Total fixed-fee service revenues declined $99.7 million from prior year's third quarter. However, excluding fuel reimbursement from our partners, fixed-fee service revenues decreased $17.6 million, or 6.2% for the third quarter of 2009 due to a reduction in block hour activity, which is the result of removing 22 aircraft from operations under our fixed-fee agreement with Continental. Seventeen of the aircraft removed were returned to the lessor, three were subleased offshore and two are expected to be subleased offshore in the first quarter of 2010. Income before taxes on the fixed-fee operations was $20.4 million for the quarter. Fixed-fee operating cost per ASM (CASM), including interest expense but excluding fuel, increased to 7.61 cents for the third quarter of 2009, from 7.57 cents for the same quarter of 2008.

Total revenues flown on our branded airlines were $73.9 million for the quarter. Load factor was 78.2% for the quarter and total revenue per ASM (TRASM) was 12.83 cents. The branded operations posted a loss before taxes of $15.9 million for the third quarter. Operating cost per ASM (CASM), excluding fuel, was 10.64 cents for the third quarter of 2009.

During the quarter, the Company added five E190 and five E135 aircraft on short-term leases. These aircraft will be operated in the Company's branded business replacing B717 and CRJ aircraft. At September 30, 2009, the Company's fleet consisted of 228 aircraft, including six B717 aircraft that are expected to be returned to the lessor by the end of 2009.

Balance Sheet Information

At September 30, 2009 the Company had $148.7 million in cash, of which $63.2 million was restricted. This compares to $130.9 million in cash, of which $1.2 million was restricted as of December 31, 2008. The Company's long-term debt decreased to $2.23 billion as of September 30, 2009, compared to $2.28 billion at December 31, 2008. As of September 30, 2009 all of the Company's aircraft-related debt is at fixed interest rates and is secured by the aircraft. The Company has significant long-term lease obligations for aircraft that are classified as operating leases and are not reflected as liabilities on the Company's consolidated balance sheets. At a 7.0% discount factor, the present value of these lease obligations was approximately $690 million as of September 30, 2009 compared to approximately $685 million reported as of December 31, 2008.

Business Developments

On July 31, 2009 the Company completed its acquisition of Milwaukee-based Midwest Airlines from TPG Capital, a Ft. Worth, Texas-based private equity firm. Republic paid TPG $6 million in cash and has issued a $25 million five-year, interest-only note, which may be converted to RJET stock at $10 per share.

On August 13, 2009 the Company announced that it had been declared the winning bidder in the auction to acquire Frontier Airlines. Pursuant to the investment agreement, Republic agreed to purchase 100% of the stock of Frontier Holdings upon its emergence from bankruptcy for $108.75 million. On October 1, 2009 the Company completed its acquisition of Frontier.

On October 14, 2009 the Company announced that it will acquire 10 Embraer 190AR jets from US Airways. Republic applied the full balance of its $35 million unsecured loan to US Airways toward the purchase of the aircraft and assumed the existing variable-rate debt on the aircraft. The aircraft are expected to enter into branded service between November 2009 and the second quarter of 2010.

On October 16, 2009 the Company entered into an agreement with Mesa Air Group, Inc. ("Mesa") to form Mo-Go, LLC, a new business partnership that will provide inter-island commercial airlines services in Hawaii. Pursuant to the Agreement, Mesa now owns 75% of Mo-Go and the former Mokulele shareholders own the remaining 25%. Additionally, the partners have agreed to capitalize the new business with up to $6.0 million, $1.5 million of which would be funded by Mokulele's former shareholders. Republic, which was the majority shareholder of Mokulele, cancelled Mokulele's $3.1 million outstanding debt to Republic, net of surrendered aircraft deposits. The Company expects to record a non-cash charge of approximately $5-$6 million in the 4th quarter to deconsolidate its investment in Mokulele.

Corporate Information

Republic Airways Holdings, based in Indianapolis, Indiana is an airline holding company that owns Chautauqua Airlines, Frontier Airlines, Lynx Aviation, Midwest Airlines, Republic Airlines and Shuttle America, collectively "the airlines." The airlines offer scheduled passenger service on approximately 1,600 flights daily to 118 cities in 43 states, Canada, and Mexico under branded operations at Frontier and Midwest, and through fixed-fee airline services agreements with five major U.S. airlines. The fixed-fee flights are operated under an airline partner brand, such as AmericanConnection, Continental Express, Delta Connection, United Express, and US Airways Express. The airlines currently employ over 11,000 aviation professionals and operate 286 aircraft.

The Company will conduct a telephone briefing to discuss its third quarter results tomorrow, November 5th, at 10:00 a.m. EST. For those wishing to participate please call 866-804-6925 and for international calls please dial 857-350-1671, the passcode is 76791934. A live Webcast of this briefing will also be available online at www.rjet.com - investor relations.

Additional Information

In addition to historical information, this release contains forward-looking statements. Republic Airways may, from time-to-time, make written or oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements encompass Republic Airways' beliefs, expectations, hopes or intentions regarding future events. Words such as "expects," "intends," "believes," "anticipates," "should," "likely" and similar expressions identify forward-looking statements. All forward-looking statements included in this release are made as of the date hereof and are based on information available to Republic Airways as of such date. Republic Airways assumes no obligation to update any forward-looking statement. Actual results may vary, and may vary materially, from those anticipated, estimated, projected or expected for a number of reasons, including, among others, the risks discussed in our Form 10-K and our other filings made with the Securities and Exchange Commission, which discussions are incorporated into this release by reference.

 REPUBLIC AIRWAYS HOLDINGS INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF INCOME

 (Dollars and Shares in Thousands, Except per Share Amounts)

 (Unaudited)

 Financial       Three Months Ended September    Nine Months Ended September 30,
 Highlights      30,

                 2009        2008        Change  2009         2008         Change

 OPERATING
 REVENUES

 Fixed-fee       $ 281,415   $ 381,121   -26.2%  $ 913,524    $ 1,127,681  -19.0%
 service

 Passenger         64,876      -         NM        70,388       -          NM
 service

 Cargo and         13,336      4,127     223.1%    20,982       12,823     63.6%
 other

 Total
 operating         359,627     385,248   -6.7%     1,004,894    1,140,504  -11.9%
 revenues

 OPERATING
 EXPENSES

 Wages and         76,864      61,898    24.2%     207,446      190,627    8.8%
 benefits

 Aircraft fuel     39,477      97,613    -59.6%    100,179      279,974    -64.2%

 Landing fees
 and airport       20,026      15,340    30.5%     55,434       45,085     23.0%
 rents

 Aircraft and      33,592      33,422    0.5%      95,400       101,319    -5.8%
 engine rent

 Maintenance       58,852      45,630    29.0%     151,487      124,723    21.5%
 and repair

 Insurance and     6,648       6,255     6.3%      19,930       18,295     8.9%
 taxes

 Depreciation
 and               38,398      35,666    7.7%      112,002      99,149     13.0%
 amortization

 Promotion and     5,341       -         NM        5,341        -          NM
 sales

 Goodwill          -           -         0.0%      13,335       -          NM
 Impairment

 Other             43,834      29,220    50.0%     109,340      89,553     22.1%

 Total
 operating         323,032     325,044   -0.6%     869,894      948,725    -8.3%
 expenses

 OPERATING         36,595      60,204    -39.2%    135,000      191,779    -29.6%
 INCOME

 OTHER INCOME
 (EXPENSE)

 Interest          (34,862)    (33,762)  3.3%      (105,246)    (96,572)   9.0%
 expense

 Other income      2,779       1,280     117.1%    10,418       11,167     -6.7%

 Total other
 income            (32,083)    (32,482)  -1.2%     (94,827)     (85,405)   11.0%
 (expense)

 INCOME BEFORE     4,512       27,722    -83.7%    40,172       106,374    -62.2%
 INCOME TAXES

 INCOME TAX        1,864       10,715    -82.6%    23,894       40,786     -41.4%
 EXPENSE

 NET INCOME
 (INCLUDING        2,648       17,007    -84.4%    16,278       65,588     -75.2%
 NONCONTROLLING
 INTERESTS)

 Net loss
 (income)
 attributable
 to                (623)       -         NM        (3,270)      -          NM
 noncontrolling
 interest in
 MFSI

 NET INCOME OF     3,271       17,007    -80.8%    19,548       65,588     -70.2%
 THE COMPANY

 PER SHARE,      $ 0.09      $ 0.50      -82.0%  $ 0.57       $ 1.87       -69.5%
 BASIC

 PER SHARE,      $ 0.09      $ 0.50      -82.0%  $ 0.57       $ 1.86       -69.4%
 DILUTED

 Weighted
 Average Common
 Shares

 Basic             34,449      34,169    0.8%      34,449       35,084     -1.8%

 Diluted           34,529      34,169    1.1%      34,462       35,196     -2.1%

 Unaudited
 Operating
 Highlights

 Operating   Three Months Ended                Nine Months Ended
 Highlights  September 30,                     September 30,
 - Fixed Fee

             2009         2008         Change  2009          2008          Change

 Fixed-fee
 service
 revenues,   $ 265,899    $ 283,508    -6.2%   $ 839,473     $ 847,707     -1.0%
 excluding
 fuel (000)

 Passengers    4,881,571    4,884,439  -0.1%     14,365,238    14,418,453  -0.4%
 carried

 Revenue
 passenger     2,510,784    2,456,925  2.2%      7,359,971     7,394,022   -0.5%
 miles (000)

 Available
 seat miles    3,242,019    3,290,132  -1.5%     9,930,228     9,957,376   -0.3%
 (000)

 Passenger     77.4%        74.7%      2.7       74.1%         74.3%       -0.2
 load factor                           pts                                 pts

 Cost per
 available
 seat mile,
 including     8.09         10.54      -23.2%    8.55          10.26       -16.7%
 interest
 expense
 (cents) (1)

 Fuel cost
 per
 available     0.48         2.97       -83.8%    0.75          2.81        -73.3%
 seat mile
 (cents)

 Cost per
 available
 seat mile,
 including
 interest      7.61         7.57       0.5%      7.80          7.45        4.7%
 and
 excluding
 fuel
 expense
 (cents) (1)

 Operating
 Aircraft at
 period end:
 (3)

 37-50 seat    79           101        -21.8%    79            101         -21.8%
 jets

 70-86 seat    113          119        -5.0%     113           119         -5.0%
 jets

 Block hours   165,779      183,293    -9.6%     518,255       565,208     -8.3%

 Departures    97,897       107,072    -8.6%     304,905       321,268     -5.1%

 Average
 daily
 utilization   9.4          10.0       -6.0%     9.8           10.2        -3.9%
 of each
 aircraft
 (hours)

 Average
 length of
 aircraft      500          496        0.8%      495           508         -2.6%
 flight
 (miles)

 Average
 seat          66           62         6.5%      66            61          8.2%
 density

                                                   Three Months   Nine Months
 Operating Highlights - Branded(2)                 Ended          Ended
                                                   September 30,  September 30,

                                                   2009           2009

 Total revenues                                    73,892         79,904

 Passengers carried                                669,901        757,933

 Revenue passenger miles (000)                     450,437        462,598

 Available seat miles (000)                        575,785        607,183

 Passenger load factor                             78.2%          76.2%

 Total revenue per ASM (cents)                     12.83          13.16

 Passenger revenue per ASM (cents)                 11.27          11.59

 Cost per available seat mile (cents) (1)          14.78          15.67

 Fuel cost per available seat mile (cents)         4.14           4.26

 Cost per available seat mile, excluding fuel      10.64          11.41
 expense (cents) (1)

 Operating Aircraft at period end: (3)

 37-50 seat jets (including ten aircraft operated  12             12
 by regional partner)

 70-99 seat jets                                   25             25

 Block hours                                       23,346         25,660

 Departures                                        15,422         18,695

 Average daily utilization of each aircraft        10.0           10.0
 (hours)

 Average length of aircraft flight (miles)         551            476

 Average seat density                              68             68

(1) Costs (in all periods) exclude expenses not attributable to either fixed-fee or branded segments (e.g. subleased aircraft and amortization of slots).

(2) Includes Mokulele from April 2009 to September 2009 and Midwest from August and September 2009.

(3) Excludes six idle 37-50 seat aircraft and three idle 70-99 seat aircraft.

    Source: Republic Airways Holdings Inc.

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