Despite reporting $165.8 million in operating revenues for the first quarter, a rise of 10 percent, and a $16 million swing in net profits, Midwest Air Group (MEH) CEO Timonthy Hoeksema said the results fell short of expectations. He noted the first quarter was historically weak but the airline was encouraged by continuing improvements in load factor and yield, leading to solid revenue per available seat mile performance that compared favorably to the domestic airline industry in the quarter.
Net income was $8 million compared to a $8.7 million loss in the first quarter 2006. Operating income improved to $6.7 million from a $9.3 million loss in the first quarter of 2006.
The company said winter weather cost Midwest Airlines $800,000 during the quarter and Midwest Connect $300,000. In addition, crew shortages at Midwest Connect resulted in increased expenses $500,000 in lost revenues and incremental training costs which will not be rectified until mid May. The airline took some Connect pilots and lost others to other airlines.
The new SkyWest (SKYW) Midwest Connect program, just 30 days old, has met or exceeded plan. As part of its plan to spin out its Beech 1900 aircraft, Skyway Airlines announced it would not renew its bid to provide EAS service to Iron Mountain, Iron Wood, Escanaba and Manastee, Mich. DOT awarded the routes to Great Lakes which will serve them as part of a code-share relationship with Midwest Airlines.
The revenue increase reflects a 9.5 percent increase in revenue passengers miles one billion on a 6.3 percent increase in capacity, resulting in a 2.2 percentage point increase in load factor to 73.7 percent. Revenue per available seat mile increased 4.7 percent to 11.71 cents. It reported that defense costs against AirTran’s unsolicited takeover bid cost the airlines $2.6 million.
A 0.7 percent increase in revenue yield was driven by industry-wide price increases and improvements in the company’s revenue management processes. Total operating expenses decreased 0.6 percent, due primarily to the recording of a $19.9 million gain for the fair value of fixed fuel contracts entered into in first quarter 2007. This was largely offset by an increase in operating expenses resulting from the 6.3 percent increase in capacity and increased flight operations, which led to increases in fuel expense; salary, wages and benefits; station rental, landing and other fees; aircraft maintenance; and commissions. The company ended the quarter with $171.3 million in cash, of which $110.2 million was unrestricted.
At Midwest Airlines, passenger revenue per scheduled service available seat mile increased 5.3 percent to 9.37 cents in first quarter 2007 compared with the same quarter a year earlier. Load factor increased 2.1 percentage points to 74.3 percent owing to 10.2 percent increase in passenger traffic to 895,225 on a 7.1 percent increase in scheduled capacity to 1.3 billion. Revenue yield increased 2.3 percent while RPMs jumped to 976.3 million.
In the first quarter, cost per available seat mile at Midwest Airlines decreased $0.0076 to $0.1006, or 7.0 percent, compared with first quarter 2006. Excluding fuel, cost per available seat mile decreased $0.0099 to $0.0613, or 13.9 percent.
At Midwest Connect, passenger revenue per scheduled service available seat mile increased 2.3 percent to 24.17 cents in the first quarter. Passenger traffic decreased 1.1 percent to 190,074 on a 4.1 percent decrease in capacity to 90 million. Load factor rose two points to 64.0 percent, while revenue yield decreased 0.8 percent to 37 cents. Cost per available seat mile increased $0.0308 to $0.3300, or 10.3 percent (excluding fuel, increased $0.0276 to $0.2594, or 11.9 percent) compared with first quarter 2006. Excluding fuel, the increase resulted primarily from an increase in aircraft maintenance, materials and repairs resulting from a major engine rebuild.