Transcript Frontier Airlines

Frontier Airlines
“A Whole Different Animal”
Mike Smith Nathan Galieti Matt Miller Jack Moutoux
Mission Statement
• “Our tagline "A whole different animal" means we approach our
business with four key principles in mind. These are the four legs
that we stand on. They're who we are. "A whole different animal"
represents our promise to you. Simply put, our goal is to do the
little things that make a big difference to you.”
• Four Principles Are:
–
–
–
–
Affordable
Flexible
Accommodating
Comfortable
Revamped Mission Statement
• “Our tagline "A whole different animal" means we approach our
business with four key principles in mind. These are the four legs
that we stand on. They're who we are. "A whole different animal"
represents our promise to you. Simply put, our goal is to do the
little things that make a big difference to you.”
• Five Principles Are:
–
–
–
–
Affordable
Flexible
Accommodating
Comfortable
– Commitment to Safety
Business Strategy
• “Provide air service at affordable fares to high volume markets from our
Denver hub and limited point-to-point routes outside of our Denver hub
while seeking ways to leverage our strong market position in Denver and
excellent product and service.”
– Stimulate demand by offering a combination of low fares, quality service and
frequent flyer credits in our frequent flyer program, EarlyReturns
– Continue filling gaps in flight frequencies to current markets from our Denver
hub.
– Continue to successfully defend our position in Denver against new entrants.
• Investment in the Community
– 99% of flights begin or end at Denver International
– 6000+ jobs in the Denver area
Important Officers
• Sean Menke – President and Chief Executive Officer
• Chris Collins – Executive Vice President and Chief Operations
Officer
• Ted Christie – Senior Vice President and Chief Financial
Officer
• Gerry Coady – Senior Vice President and Chief Information
Officer
• Ann Block – Senior Vice President – People
• Matt Henry – Vice President and General Counsel
• Cameron Kenyon – Vice President –Flight Operations
Financial Picture
Year Ended March 31
2008
2007
2006
2005
2004
Total Operating Revenue (000s)
$1,398,981
$1,170,949
$1,001,522
$837,585
$644,739
Total Operating Expenses (000s)
$1,434,311
$1,181,651
$1,009,419
$864,032
$617,257
(35,030)
(9,834)
(7,897)
(26,447)
27,482
Revenue Passenger Miles (000s)
10,175,220
8,532,577
7,436,830
6,587,589
5,120,587
Available Seat Miles (000s)
12,666,316
11,310,070
9,885,599
9,115,868
7,153,740
80.3%
75.4%
75.2%
72.3%
71.6%
$ 103.71
$ 102.59
$ 103.05
$ 102.31
$ 103.54
Net Income (Loss)
Passenger Load Factor
Average Fare
Letter from the CEO
Thank you for choosing to fly with us on Frontier Airlines. Please relax and enjoy your trip, and allow our people to show you
the one-of-a-kind customer service we have become known for over the years.
You may have heard our corporate slogan: A Whole Different Animal. Yes, that's a play on words with the animals on our
tails, but the message runs deeper than that. Our people show up to work each and every day set on the purpose of
delivering you a different, superior travel experience every time you fly Frontier. We want to earn your loyalty one
action at a time, no matter how big or how small.
As you no doubt know, these are challenging economic times for everybody, and the airline industry is no different. The
airlines have been hit particularly hard by the rising cost of oil. You feel the pain at the pump when you gas up your
automobiles. That pain is magnified significantly for us when we fuel our fleet of aircraft. In April of this year, Frontier and
its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Our goal is for this
move to have as little impact as possible upon you, our valued customer. Our mission and values have not changed,
and our people are as committed to you as ever.
We continue to work diligently to do everything possible to ensure that we are viable as an airline for the long-term. We
have recently secured a number of agreements that will give us a great deal of staying power. We want you to feel
confident when you book future flights on Frontier Airlines that we will be here for you; always willing to
go the extra mile to make sure you have an enjoyable trip.
Through our first 15 years of operation, we have enjoyed a loyalty and affection among our customers that is especially rare
in the airline industry. Never has that support been more appreciated than in the last several months. We know you have
put your faith in us, and we want to reward that faith by providing our passengers safe, high-quality,
affordable air service with an emphasis on customer service for many years to come.
We look forward to seeing you in the skies again very soon. Thank you again for flying Frontier Airlines.
Sincerely,
Sean E. Menke
President & CEO
Frontier Airlines
Competition
• Major Competition out of Denver International
Airport (DIA)
– United Airlines
– Ted (Low Cost Carrier owned by United)
– Southwest Airlines
• Market Share of DIA (March, 2008)
– United Airlines, Ted, and Affiliates: 49.8%
– Southwest Airlines: 6.6%
– Frontier Airlines & Lynx Aviation: 26.7%
Fare Comparison
Airline
Price
American Airlines
$281
United Airlines
$154
Frontier Airlines
$154
• Chicago, Illinois to Denver, Colorado
– Flight Leaving Today, November 20
– Flights searched off of www.priceline.com
– *Frontier’s Flight from Midway, not O’Hare
Fleet
No. of Aircraft
(* leased)
Year of
Manufacture
Approx. Seating
Capacity
A319
36*
01-07
136
A319
11
01-06
136
A318
2*
04
114
A318
9
03-07
114
A320
2
07
162
3.9 years
132 seats
Aircraft Model
Average
• Operate a mainline fleet of 60 jets, 38 leased and 22
owned
• Regional fleet of 10 Bombardier Q400 turboprops
operated by Lynx Aviation
Maintenance and Repairs
• Perform majority of line and long interval MX at
our subleased hanger at DIA
• Maintain additional facilities in: Phoenix, AZ and
Kansas City, MO
• Contract MX at spoke cities, when we can’t meet
demand: facility, staff, or MX needs
• 9 consecutive years: received FAAs Diamond
Certificate of Excellence
– 100% of MX and engineering staff completed
advanced training programs
Aircraft and Engines
• Common Airbus fleet with GE engines
• MX cost/hour agreement with GE
– 12 month contracts
– Monthly payments: (Flat Rate) × (Engine Hours)
• Aircraft Cost savings:
– Standardized crew training
– Simplified MX issues
– Reduced spare parts inventory
– More efficient scheduling
Fleet and Maintenance
• Dependent on single manufacturers
• Airbus unable to manufacture aircraft or spare
parts, we would incur substantial costs if forced
to acquire Boeing aircraft
• Business significantly disrupted resulting from
FAA airworthiness directive or service bulletin
that grounded Airbus fleet or GE engines
• Public perception of safety, due to accident or
incident involving Airbus aircraft or GE engines
Fuel
Fiscal Year Ended
Average Fuel Price/Gallon
June 23, 2008*
$4.22
March 31, 2008
$2.45
March 31, 2007
$2.12
March 31, 2006
$1.99
• Based on current fleet and capacity, an
estimated 1¢ increase in fuel price/gallon,
increases annual operating expenses by $1.9
Million
Salary Cuts
• August-September 2007
– Compensation committee approved salary
increases 5.3%-25%
• Salaries at or below 50th percentile in the
market
• Bankruptcy Filing on April 10, 2008
– Salary reduction program
– CEO Sean Menke
• 20% Reduction in Base Salary
– Other officers 10% Reduction in Base Salary
Salary
Name and Principal Position
Sean Menke
President and CEO
Jeff S. Potter
former President and CEO
Paul Tate
former Chief Financial Officer
Christopher L. Collins
Executive VP and COO
Ann E. Block
Sr. VP People
Gerard A. Coady
Senior VP and CIO
John B. Happ
former Sr. VP Marketing & Planning
Year
Salary ($)
Stock
Awards ($)
Option
Awards ($)
All Other
Compensation ($)
Total ($)
2008
183,542
161,100
310,520
527,526
1,182,688
2008
2007
161,623
311,250
110,826
100,304
221,000
200,595
7,500
10,680
500,949
622,829
2008
2007
267,839
213,542
120,690
50,003
233,191
99,998
26,771
11,835
648,491
375,378
2008
2007
263,828
194,917
82,218
47,503
160,346
94,996
18,606
57,321
524,998
347,862
2008
2007
195,833
183,125
64,848
35,000
121,258
69,997
21,914
10,665
403,853
289,788
2008
199,785
16,513
38,767
1,905
256,970
2008
2007
182,107
225,000
136,800
56,251
248,278
112,495
188,125
3,742
755,310
397,488
Severance plan
• “In June 2008, the United States Bankruptcy
Court for the Southern District of New York
approved a severance plan…payments to each
of our executive officers cannot exceed
(approx) $144,000”
Commitment to the Future
References
http://www.frontierairlines.com/secfilings/10k063008/10k063008.pdf
http://www.frontierairlines.com/frontier/who-we-are/company-info/ourdifference.do
http://www.frontierairlines.com/frontier/who-we-are/company-info/emailsfrom-sean.do
http://www.frontierairlines.com/frontier/pdf/Annual_Report_2007.pdf
www.priceline.com
www.airliners.net