AMERICA WEST HOLDINGS CORP - 8-K - 20041027 - EXHIBIT_99
Exhibit 99.1
Contacts: (Media) Elise Eberwein
480/693-5574
(Investors) Derek Kerr
480/693-5710
FOR IMMEDIATE RELEASE: Wednesday, Oct. 27, 2004
AMERICA WEST REPORTS THIRD QUARTER RESULTS
Highlights include:
•
Net loss for the Company’s third quarter 2004 was $47.1 million or
$1.30 per diluted share versus a net profit of $32.9 million or $0.60
per diluted share for the same period last year. Excluding special
items, the third quarter 2004 net loss was $44.2 million or $1.22 per
diluted share. Extraordinarily high fuel prices and a weak industry
revenue environment drove the year-over-year decline in earnings.
•
Passenger revenue per available seat mile (RASM) for the third
quarter 2004 decreased 9.3 percent to 7.09 cents versus the same period
last year primarily due to an increase in industry domestic capacity,
the airline’s 7.9 percent increase in aircraft utilization, and a 6.1
percent increase in the airline’s average stage length.
•
The airline’s operating cost per available seat mile (CASM) for the
third quarter 2004 increased 3.4 percent versus the same period last
year to 7.92 cents due to a 39.5 percent increase in the average price
of fuel per gallon. CASM excluding fuel and special items decreased 3.8
percent to 6.12 cents from 6.36 cents for the same period last year.
•
Cash and investments on Sept. 30, 2004 totaled $488.1 million of
which $416.8 million was unrestricted.
PHOENIX-America West Holdings Corporation (NYSE:AWA), parent company of America
West Airlines, Inc., today reported a third quarter 2004 net loss of $47.1
million or $1.30 per diluted share. This compares to a net profit of $32.9
million or $0.60 per diluted share for the same period last year. The Company’s
third quarter 2004 results include $1.6 million of special charges related to
the return of three Boeing 737-200 aircraft and $1.3 million for the write-off
of debt issue costs in connection with a term loan the airline refinanced
during the quarter. Excluding those special items, the airline’s third quarter
2004 loss was $44.2 million or $1.22 per diluted share compared to a $32.9
million profit or $0.60 per diluted share in the third quarter 2003 excluding
special items. See the accompanying notes in the Financial Tables section of
this press release for a reconciliation of Generally Accepted Accounting
Principles (GAAP) financial information to non-GAAP financial information.
Chairman and CEO Doug Parker stated, “We are disappointed to see our string of
profitable quarters come to an end. These results are driven by an
extraordinary increase in fuel prices and excess industry domestic capacity.
Despite the difficult environment, our 13,000 outstanding
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employees continued to do an excellent job generating record load factors and
building a loyal base of customers while continuing to drive down our non-fuel
unit costs. Our cash and investment balances remain strong at $488.1 million of
which $416.8 million is unrestricted.”
Parker continued, “With no expected relief in fuel prices in the near term, we
expect to report a significant loss for the current quarter and for the full
year 2004. In light of current fuel prices and the industry’s excess domestic
capacity, we have adjusted our 2005 growth plans. We now anticipate 2005 ASM
growth of three to five percent versus our previously announced eight to ten
percent.”
Revenue and Cost Performance
The airline’s operating revenues decreased 2.3 percent to $578.5 million during
its third quarter 2004 compared to the same period last year. Revenue passenger
miles (RPMs) during the third quarter increased 10.5 percent to a record 6.2
billion on 8.3 percent more capacity, as measured by available seat miles
(ASMs). This resulted in a record third quarter 2004 load factor of 81.4
percent versus the third quarter 2003 load factor of 79.8 percent. The
airline’s average daily aircraft utilization increased 7.9 percent to 10.9
hours from 10.1 hours during the same period last year. The airline’s increased
utilization, combined with a 6.1 percent increase in average stage length, an
increase in industry domestic capacity and a weak domestic revenue environment
contributed to a decrease in RASM during the third quarter 2004 of 9.3 percent
to 7.09 cents.
The estimated drivers of America West’s year-over-year RASM decline are
detailed in the table below:
Estimated Contribution to
Overall RASM Decline
Stage Length
(2.4
%)
Transcon Market Decline
(1.5
%)
Connecting Market Decline
(9.7
%)
Local Market
4.3
%
Total RASM Decline
(9.3
%)
America West’s 6.1 percent increase in stage length drove system RASM down an
estimated 2.4 percent. However, this increase in stage length also caused the
airline’s CASM to decline by a similar amount. Continued overcapacity and a
weak yield environment in the transcon markets led to an estimated 1.5 percent
decline in system RASM. The airline’s connecting market RASM declined 19
percent leading to an estimated 9.7 percent system RASM decline as a result of
excess industry domestic capacity, low-cost carrier growth and a more
aggressive price matching posture from the legacy carriers. Lastly, although
local market RASM was strong year over year, it was not enough to offset the
connecting market RASM decline. Looking forward, while the Company continues to
experience RASM pressure, management does see some modest positive revenue
movement which indicates the Company’s fourth quarter year-over-year RASM
performance decline should be less than it was in the third quarter.
The airline’s operating expenses during its third quarter 2004 increased 11.9
percent compared to the prior year, driven primarily by a 48.8 percent increase
in total fuel expenses. The airline continued to drive productivity gains and
unit cost improvements by reducing its CASM excluding fuel and special items
3.8 percent to 6.12 cents from the same period last year. Including fuel and
special items, the airline’s CASM during the third quarter 2004 increased 3.4
percent to 7.92 cents. On average, the airline paid $1.18 per gallon for fuel
during the third quarter 2004, an increase of 39.5 percent over the price per
gallon paid in the same period last year. The airline hedged approximately
50 percent of its fuel during its third quarter 2004, which resulted in a reduction
in total fuel expense of $7.8 million.
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Page 3 of 10
Chief Financial Officer Derek Kerr said, “We continued to drive productivity
gains during our third quarter as evidenced by an 8.3 percent increase in ASMs
achieved with only a 5.2 percent increase in full-time equivalent employees and
our 3.8 percent improvement in CASM excluding fuel and special items. But fuel
price increases have more than offset the productivity gains, and continue to
be our number one cost concern. We anticipate record high fuel prices to
continue in the fourth quarter. To mitigate the increases, we currently have in
place costless collars hedging 65 percent of our fuel purchases in the fourth
quarter 2004, 61 percent in the first quarter 2005, 26 percent in the second
quarter 2005, and 15 percent in the third quarter 2005.”
Liquidity
As of Sept. 30, 2004, the Company had $488.1 million in cash and investments,
of which $416.8 million was unrestricted. During the quarter, the airline
financed a term loan with General Electric Capital Corporation (GECC) that
provided for loans in an aggregate amount of $110.6 million. The Company used
approximately $77.0 million of the proceeds to repay in full its term loan with
Mizuho Corporate Bank, Ltd. The Company intends to use the remaining proceeds
for general corporate purposes. The collateral securing the refinanced term
loan is substantially the same collateral that secured the Mizuho loan, with
the exception of the airline’s maintenance hangar in Phoenix, which does not
secure the new loan. Also during the quarter, the airline made its second loan
repayment of $42.9 million as part of its Airline Transportation Stabilization
Board loan.
Additional Marketing/Business Developments
•
Launched a new, credit-based distribution option “Bill Me
Later” that allows customers to buy tickets at www.americawest.com
on credit without the need for credit cards.
•
Entered into code-share relationships with Royal Jordanian and Virgin Atlantic.
•
Received ratification by the airline’s dispatchers of a new four-year contract.
•
Received the 2004 Finance Strategy Award from Airline Business Magazine.
Analyst Conference Call/Webcast Details
America West will conduct a live audio webcast of its earnings call today at
12:00 p.m. EDT, which will be available to the public on a listen-only basis at
www.americawest.com under the Public/Investor Relations tab. An archive of the
call/webcast will be available in the Public/Investor Relations portion of the
airline’s Web site through Nov. 24, 2004.
America West Holdings Corporation is an aviation and travel services company.
Wholly owned subsidiary America West Airlines, Inc. is the nation’s second
largest low-cost carrier with 13,000 employees serving 55,000 customers a day
in 96 destinations in the U.S., Canada, Mexico and Costa Rica.
This press release contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause
America West’s actual results and financial position to differ materially from these statements.
These forward looking statements may be identified by words such as “anticipate,” “believe,”
“estimate,” “expect,” “may,” “will,” “intend,” “plan,” “predict,” and similar terms used in
connection with statements regarding our outlook, expected fuel costs, the RASM environment
and our expected 2004 financial performance. The risks and uncertainties relating to forward
looking statements include, but are not limited to, the duration and extent of the current soft
economic conditions; the impact of global instability including the continuing impact of the
continued military presence in Iraq and Afghanistan and the terrorist attacks of Sept. 11, 2001
and the potential impact of future hostilities, terrorist attacks, infectious disease outbreaks or
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Page 4 of 10
other global events; limitations on our ability to obtain additional financing due to high levels of
debt and the financial and other covenants in our debt instruments; changes in federal and
state laws and regulations; changes in prevailing interest rates and the availability of and
terms of financing to fund our business; the ability to attract and retain qualified personnel; the
cyclical nature of the airline industry; competitive practices in the industry; the impact of
changes in fuel prices; relations with unionized employees generally and the impact and
outcome of the labor negotiations and other factors described from time to time in the
company’s publicly available SEC reports. We caution you that these risks may not be
exhaustive. We operate in a continually changing business environment, and new risks
emerge from time to time. The company undertakes no obligation to publicly update any
forward-looking statement to reflect events or circumstances that may arise after the date of
this press release.
Financial Tables to Follow
America West Holdings Corporation
Condensed Consolidated Statements of Operations
(in thousands except per share amounts)
(unaudited)
3 Months Ended
3 Months Ended
Percent
9 Months Ended
9 Months Ended
Percent
September 30, 2004
September 30, 2003
Change
September 30, 2004
September 30, 2003
Change
Operating revenues:
Passenger
$
542,167
$
552,564
(1.9
)
$
1,648,666
$
1,591,496
3.6
Cargo
6,290
6,201
1.4
20,010
21,101
(5.2
)
Other
30,166
33,537
(10.1
)
91,565
78,709
16.3
Total operating revenues
578,623
592,302
(2.3
)
1,760,241
1,691,306
4.1
Operating expenses:
Salaries and related costs
165,164
158,167
4.4
493,416
477,884
3.3
Aircraft rental
76,400
74,417
2.7
226,931
221,862
2.3
Rentals and landing fees
43,322
38,210
13.4
126,574
115,475
9.6
Aircraft fuel
136,297
91,595
48.8
375,825
271,481
38.4
Agency commissions
6,302
8,408
(25.0
)
19,305
26,564
(27.3
)
Aircraft maintenance materials and repairs
54,437
50,854
7.0
156,841
173,572
(9.6
)
Depreciation and amortization
13,296
16,572
(19.8
)
39,674
51,563
(23.1
)
Special charges, net
1,629
—
—
1,029
14,370
(92.8
)
Other
110,013
103,944
5.8
310,207
318,235
(2.5
)
Total operating expenses
606,860
542,167
11.9
1,749,802
1,671,006
4.7
Operating income (loss)
(28,237
)
50,135
—
10,439
20,300
(48.6
)
Nonoperating income (expenses):
Interest income
2,053
1,666
23.2
5,350
4,231
26.4
Interest expense, net
(19,931
)
(19,484
)
2.3
(58,920
)
(57,504
)
2.5
Federal Government Assistance
—
—
—
—
81,255
(100.0
)
Gain (Loss) on disposition of property and
equipment
(166
)
(170
)
(2.4
)
1,913
(552
)
—
Other, net
(786
)
795
—
1,021
2,878
(64.5
)
Total nonoperating income/(expenses), net
(18,830
)
(17,193
)
9.5
(50,636
)
30,308
—
Income (Loss) before income tax expense
(47,067
)
32,942
—
(40,197
)
50,608
—
Income tax expense
—
—
—
—
—
—
Net income (loss)
$
(47,067
)
$
32,942
—
$
(40,197
)
$
50,608
—
Income per share:
Basic
$
(1.30
)
$
0.94
—
$
(1.12
)
$
1.48
—
Diluted
$
(1.30
)
$
0.60
—
$
(1.12
)
$
1.18
—
Shares used for computation:
Basic:
36,111
35,037
3.1
35,989
34,161
5.4
Diluted:
36,111
59,285
(39.1
)
35,989
49,507
(27.3
)
America West Airlines, Inc.
Condensed Statements of Operations
(in thousands)
(unaudited)
3 Months Ended
3 Months Ended
Percent
9 Months Ended
9 Months Ended
Percent
September 30, 2004
September 30, 2003
Change
September 30, 2004
September 30, 2003
Change
Operating revenues:
Passenger
$
542,167
$
552,564
(1.9
)
$
1,648,666
$
1,591,496
3.6
Cargo
6,290
6,201
1.4
20,010
21,101
(5.2
)
Other
29,996
33,367
(10.1
)
91,055
78,199
16.4
Total operating revenues
578,453
592,132
(2.3
)
1,759,731
1,690,796
4.1
Operating expenses:
Salaries and related costs
164,861
157,603
4.6
492,407
476,111
3.4
Aircraft rental
76,400
74,417
2.7
226,931
221,862
2.3
Rentals and landing fees
43,322
38,210
13.4
126,574
115,475
9.6
Aircraft fuel
136,297
91,595
48.8
375,825
271,481
38.4
Agency commissions
6,302
8,408
(25.0
)
19,305
26,564
(27.3
)
Aircraft maintenance materials and repairs
54,437
50,854
7.0
156,841
173,572
(9.6
)
Depreciation and amortization
13,296
16,572
(19.8
)
39,674
51,563
(23.1
)
Special charges, net
1,629
—
—
1,029
14,370
(92.8
)
Other
109,177
103,436
5.6
308,005
316,566
(2.7
)
Total operating expenses
605,721
541,095
11.9
1,746,591
1,667,564
4.7
Operating income (loss)
(27,268
)
51,037
—
13,140
23,232
(43.4
)
Nonoperating income (expenses):
Interest income
3,717
3,434
8.2
10,336
9,465
9.2
Interest expense, net
(21,661
)
(21,276
)
1.8
(64,071
)
(62,805
)
2.0
Federal Government Assistance
—
—
—
—
81,255
(100.0
)
Gain (Loss) on disposition of property
and equipment
(166
)
(170
)
(2.4
)
1,913
(552
)
—
Other, net
(786
)
795
—
1,021
2,878
(64.5
)
Total nonoperating income (expenses), net
(18,896
)
(17,217
)
9.8
(50,801
)
30,241
—
Income (Loss) before income tax expense
(46,164
)
33,820
—
(37,661
)
53,473
—
Income tax expense
—
—
—
—
—
—
Net income (loss)
$
(46,164
)
$
33,820
—
$
(37,661
)
$
53,473
—
America West Airlines, Inc.
Operating Statistics
3 Months Ended
3 Months Ended
Percent
9 Months Ended
9 Months Ended
Percent
September 30, 2004
September 30, 2003
Change
September 30, 2004
September 30, 2003
Change
Operating Statistics:
Number of aircraft at end of period
139
140
(0.7
)
139
140
(0.7
)
Available seat miles/ASMs (in millions)
7,646
7,062
8.3
22,550
20,887
8.0
Block hours
140,076
129,830
7.9
415,956
389,509
6.8
Average stage length (miles)
1,067
1,006
6.1
1,054
995
5.9
Average daily aircraft utilization (hours)
10.9
10.1
7.9
10.9
10.1
7.9
Revenue passenger miles/RPMs (in millions)
6,227
5,635
10.5
17,448
16,009
9.0
Load factor (%)
81.4
79.8
1.6
pts
77.4
76.6
0.8
pts
Passenger enplanements (000)
5,556
5,322
4.4
15,796
15,162
4.2
Passenger yield (cents)
8.71
9.81
(11.2
)
9.45
9.94
(4.9
)
Passenger revenue per ASM (cents)
7.09
7.82
(9.3
)
7.31
7.62
(4.1
)
Operating revenue per ASM (cents)
7.57
8.39
(9.8
)
7.80
8.09
(3.6
)
Operating cost per ASM (cents)
7.92
7.66
3.4
7.75
7.98
(3.0
)
Operating cost per ASM excluding special
items (cents)
7.90
7.66
3.1
7.74
7.92
(2.3
)
Operating cost per ASM excluding fuel (cents)
6.14
6.36
(3.5
)
6.08
6.68
(9.0
)
Operating cost per ASM excluding special
items and fuel (cents)
6.12
6.36
(3.8
)
6.07
6.62
(8.3
)
Average fuel cost per gallon (cents)
118.0
84.6
39.5
111.2
85.4
30.3
Fuel gallons consumed (in millions)
115.5
108.3
6.7
337.9
317.9
6.3
Average number of full-time equivalent employees
11,936
11,347
5.2
11,924
11,712
1.8
Reconciliation of GAAP Financial Information to Non-GAAP Financial Information
The Company believes that the presentation of certain non-GAAP financial
measures such as net income (loss) and CASM excluding special items is useful
to investors because it is more indicative of the Company’s true recurring
operating performance and more comparable to financial measures reported by
other major airlines that are submitted to the Department of Transportation.
The Company believes that the presentation of CASM excluding fuel is useful to
investors because it provides the ability to monitor the airline’s cost
performance absence fuel price volatility, which is subject to many economic
and political factors and therefore beyond the Company’s control.
Reconciliation of Net Income (Loss) Excluding Special Items
3 Months Ended
3 Months Ended
9 Months Ended
9 Months Ended
September 30, 2004
September 30, 2003
September 30, 2004
September 30, 2003
(in millions except per share amounts)
Net income (loss) as reported
$
(47.1
)
$
32.9
$
(40.2
)
$
50.6
Special Items:
Special charges (1)
1.6
—
1.6
15.5
Revision of estimated special charges (2)
—
—
(0.6
)
(1.1
)
Debt issue costs related to refinancing the
term loan (3)
1.3
—
1.3
—
Gain on airframe exchange (4)
—
—
—
(4.4
)
Federal government assistance (5)
—
—
—
(81.3
)
Net income (loss), as adjusted for special items
$
(44.2
)
$
32.9
$
(37.9
)
$
(20.7
)
Basic income
(loss) per share
Net income (loss) as reported
$
(1.30
)
$
0.94
$
(1.12
)
$
1.48
Special Items:
Special charges
0.04
—
0.04
0.45
Revision of estimated special charges
—
—
(0.02
)
(0.03
)
Debt issue costs related to refinancing the
term loan
0.04
—
0.04
—
Gain on airframe exchange
—
—
—
(0.13
)
Federal government assistance
—
—
—
(2.38
)
Net income (loss) excluding special items
$
(1.22
)
$
0.94
$
(1.06
)
$
(0.61
)
Diluted income (loss) per share
Net income (loss) as reported
$
(1.30
)
$
0.60
$
(1.12
)
$
1.18
Special Items:
Special charges
0.04
—
0.04
—
Revision of estimated special charges
—
—
(0.02
)
—
Debt issue costs related to refinancing the
term loan
0.04
—
0.04
—
Gain on airframe exchange
—
—
—
—
Federal government assistance
—
—
—
—
Net income (loss) excluding special items
$
(1.22
)
$
0.60
$
(1.06
)
$
1.18
Basic shares
36,111
35,037
35,989
34,161
Diluted shares
36,111
59,285
35,989
49,507
(1) The 2004 period includes $1.6 million of special charges related to the
return of certain Boeing 737-200 aircraft. This amount includes termination
payments of $2.1 million, the write-down of leasehold improvements and aircraft
rent balances of $1.7 million, offset by the reversal of maintenance reserves
of $2.2 million. The 2003 period includes $11.1 million of special charges
related to the elimination of AWA’s hub operations in Columbus, Ohio; $2.6
million for the impairment loss of three owned Boeing 737-200 aircraft that
have been grounded; and $2.3 million related to reductions-in-force in April
and a $0.5 million reduction related to the revision of estimated costs
associated with the sale and leaseback of certain aircraft.
(2) The 2004 period includes a credit of $0.6 million related to the revision
of the estimated costs associated with the sale and leaseback of certain
aircraft recorded in the first quarter. The 2003 period includes a credit of
$1.1 million due to a revision of the estimated costs related to the early
termination of certain aircraft leases.
(3) The 2004 period includes $1.3 million for the write-off of debt issue costs
in connection with the refinancing of the term loan.
(4) The 2003 period includes a $4.4 million gain related to the purchase and
subsequent exchange of an A320 airframe.
(5) The 2003 period includes the receipt of $81.3 million representing the
Company’s proportional share of passenger security and air carrier fees paid or
collected as of April 2003.
Reconciliation of Operating Cost per ASM Excluding Special Items and Fuel
3 Months Ended
3 Months Ended
9 Months Ended
9 Months Ended
September 30, 2004
September 30, 2003
September 30, 2004
September 30, 2003
(in millions)
Operating Expenses
$
605.7
$
541.1
$
1,746.6
$
1,667.6
Special Items:
Special charges
(1.60
)
—
(1.6
)
(15.5
)
Revision of estimated special charges
—
—
0.6
1.1
Gain on airframe exchange
—
—
—
4.4
Operating Expenses, excluding special items
604.1
541.1
1,745.6
1,657.6
Fuel expense
(136.3
)
(91.6
)
(375.8
)
(271.5
)
Operating expenses, excluding special items
and fuel expense
$
467.8
$
449.5
$
1,369.8
$
1,386.1
3 Months Ended
3 Months Ended
9 Months Ended
9 Months Ended
September 30, 2004
September 30, 2003
September 30, 2004
September 30, 2003
(in cents)
Operating cost per ASM
$
7.92
$
7.66
$
7.75
$
7.98
Special Items:
Special charges
(0.02
)
—
(0.01
)
(0.07
)
Revision of estimated special charges
—
—
—
0.01
Gain on airframe exchange
—
—
—
0.02
Operating cost per ASM, excluding special items
7.90
7.66
7.74
7.94
Fuel expense
(1.78
)
(1.30
)
(1.67
)
(1.30
)
Operating cost per ASM, excluding special items
and fuel expense
$
6.12
$
6.36
$
6.07
$
6.64
America West Holdings Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
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