Republic Airways Net Income Takes OffPosted: Updated:
Indianapolis-based Republic Airways Holdings Inc. (Nasdaq: RJET) is reporting first quarter net income of $13.8 million, compared to $300,000 during the same period last year. The company says the March 2013 quarter included a more than $11 million loss from discontinued operations at Frontier Airlines. May 1, 2014
INDIANAPOLIS, Ind. - Republic Airways Holdings Inc. (NASDAQ: RJET) today reported financial results for the first quarter of 2014. Key points include:
Republic's pre-tax income from continuing operations was $22.8 million, or $0.42 per diluted share, an 18.1% increase over the March 2013 quarter. As of Dec. 31, 2013, Republic had a significant amount of federal net operating loss carryforwards and does not anticipate paying significant federal taxes for the next several years.
Republic's net income for the March 2014 quarter was $14.0 million, or $0.26 per diluted share. This is a $13.7 million increase from the prior year. The March 2013 quarter was negatively impacted by $11.1 million of losses from discontinued operations at Frontier Airlines.
Republic canceled more than 12,400 flights during the first quarter of 2014, primarily because of severe weather in January and February of 2014. That was a 145% increase from the number of canceled flights compared to the first quarter of 2013. These cancellations negatively impacted the pre-tax financial results by about $7.0 million during the first quarter of 2014.
On Feb. 11, 2014, Republic announced the early termination of its 44 to 50 seat fixed-fee agreements with United Airlines and American Airlines, which were scheduled to terminate in 2014. These agreements wind-down beginning in March 2014 through August 2014 and will result in the indefinite grounding of 27 small jet aircraft.
In the first quarter of 2014, Republic recorded an impairment of its owned E140 aircraft of $19.9 million and an $18.4 million gain on its Chautauqua restructuring asset. The Company also sold one E145 aircraft for a book gain of $1.8 million during the quarter. The net of these three items improved pre-tax earnings by $0.3 million.
On April 4, 2014, Republic announced that members of the International Brotherhood of Teamsters (IBT) Local 357 failed to ratify a proposed four-year pilot labor agreement. The agreement would have significantly improved pay and work rules for our pilots.
On April 7, 2014, Republic's Board of Directors authorized management to utilize up to $75 million of unrestricted cash to buy back common shares and/or early retire convertible debt during the next 12 months. Under the $75 million authorization, Republic may repurchase up to $50 million of common shares and early retire up to $50 million of convertible notes, or any combination thereof.
On April 7, 2014, Republic redeemed a $22.3 million convertible note, leaving $52.7 million remaining on the share repurchase and convertible debt retirement authorization. This will reduce the Company's dilutive share count by about 2.2 million shares going forward.
"I am pleased we were able to report improved first quarter financial results despite the most severe weather events in a single quarter I can recall in my 27 years of experience in the airline industry. Our results demonstrate the stability and strength within our core fixed-fee business," said Republic Airways Holdings Chairman, President and CEO Bryan Bedford. "We are committed to our guiding principles and strengthening our brand reliability and product quality for our partners, shareholders and employees," Bedford said.
Operating Revenue Highlights
Operating revenues increased $12.8 million, or 3.9%, from the first quarter of 2013 to $337.5 million in the first quarter of 2014. Fixed-fee service revenue increased $24.4 million, or 8.0%, to $328.4 million due to increased Q400 flying with United Airlines and increased E175 flying with American Airlines. Passenger service revenue decreased $15.2 million due to the removal of E190 aircraft operating under pro-rate agreement with Frontier Airlines in February 2014.
Operating Expense Highlights
Fuel expense for the first quarter of 2014 decreased $6.3 million, or 46.3%, to $7.3 million primarily due to a 47.3% decrease in gallons consumed related to the reduction in pro-rate flying for Frontier. Fuel expense is primarily attributable to our fixed-fee charter operations and is a pass-through to our partner.
Landing fees and airport rents decreased $8.8 million or 55.0%, primarily due to United Airlines beginning to pay all landing fees in June 2013, and the reduced pro-rate flying for Frontier.
Other impairment charges reflect the full impairment of the carrying value of our 11 owned E140 aircraft. The aircraft will be grounded indefinitely with the termination of our American Airlines 44-seat fixed-fee agreement.
The decrease in non-operating expenses relates to the $18.4 million fair value adjustment on the Chautauqua restructuring asset.
As of March 31, 2014, Republic operated a fleet of 247 aircraft. Within our fixed-fee and charter agreements, we operated 68 aircraft with 44-50 seats and 179 aircraft with 69-99 seats.
During the first quarter of 2014, the Company took delivery of five E175 aircraft related to its American Airlines E175 fixed-fee agreement bringing the total to 24 of the 47 aircraft deliveries. The Company expects to take delivery of 19 E175 aircraft during the remainder of 2014 and the remaining four aircraft in early 2015.
Balance Sheet and Liquidity
The Company's total cash balance increased $2.6 million to $303.3 million as of March 31, 2014, compared to Dec. 31, 2013. Restricted cash increased $3.1 million, to $27.1 million, from Dec. 31, 2013, due to the escrow requirements under our fixed-fee charter agreements. The Company's unrestricted cash balance decreased $0.5 million, to $276.2 million, from Dec. 31, 2013. A consolidated balance sheet and summary cash flow statement have been included in the tables section of this release.
The Company's debt increased to $2.22 billion as of March 31, 2014, compared to $2.17 billion at Dec. 31, 2013, primarily related to the financing of five new E175 aircraft purchased for our American Airlines fixed-fee agreement. As of March 31, 2014, about 96% of our debt is at a fixed interest rate. 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 sheet. At a 6% discount factor, the present value of these lease obligations was about $0.56 billion and $0.59 billion as of March 31, 2014, and Dec. 31, 2013, respectively.
Republic Airways Holdings Inc., based in Indianapolis, Indiana, is an airline holding company that owns Chautauqua Airlines, Republic Airlines and Shuttle America, collectively “the airlines.” The airlines operate a combined fleet of about 250 aircraft and offer scheduled passenger service on more than 1,300 flights daily to about 100 cities in the U.S. and Canada through fixed-fee flights operated under airline partner brands, including American Eagle, Delta Connection, United Express, and US Airways Express. The airlines currently employ about 6,300 aviation professionals. For more information on Republic Airways, please visit our website at www.rjet.com.
Source: Republic Airways Holdings Inc.