Frontier could emerge from bankruptcy in late summer and has now made operating profits for five consecutive months and two consecutive quarters, according to President and CEO Sean Menke, who briefed reporters during the airline’s quarterly conference call.

For the month of March, Frontier reported a consolidated operating profit of $20.7 million and a total consolidated net loss of $129.9 million. Frontier also reported a consolidated operating profit of $25.1 million and a net loss of $161.0 million for the fourth quarter. The airline posted a margin of 17 percent in March, it’s highest since pre-9/11 days. For the quarter, ex-items it was 15.1 percent which is, said Menke, eight to 15 points ahead of the industry.

And, like Delta, special items cost it overall profitability. But, unlike Delta, where special charges lost the world’s largest carrier the opportunity to break even, Frontier would have posted a net profit of $15.2 million in March and a $7.5 million net profit for the quarter. Also unlike Delta, had it not been for those special items, Frontier would have joined those rare birds – JetBlue, Air Tran, Hawaiian and Allegiant – in profitability.

“Our restructuring efforts have positioned us to consistently make money in the most competitive market in the country and in the face of the most trying economic times,” Menke said, adding it proved that “maintaining our low cost structure allows the operation to buck industry trends and make money in a difficult revenue environment.”

The airline, which entered bankruptcy just a year ago, is now talking with potential investors as part of its efforts to emerge from bankruptcy and, according to Menke, could emerge in late summer. However, given the fact that the completion of such and effort would take 90 days, it could have an announcement within the next 30 to 40 days. It is currently talking to a number of parties that that are now in the due diligence process, he said.

“The level of engagement is definitely there,” he added. “We are still out in the market talking to potential investors both to emerge as a stand-alone entity or a strategic play.” He described most potential investors as being on the investment side but others could be strategic partners.

“They are looking at it from two perspectives,” he said. “Some are looking at the revenue environment and whether or not we are at the bottom. From my perspective things are not getting worse but I don’t see it improving because what we don’t see is the business traffic returning. Some are thinking this is the right time to be plan sponsors because the costs are so low but others are more cautious because of the economic environment.”

While Frontier, with its limited exposure to Mexican markets, has seen only a handful of cancellations relating to the flu scare. But, Menke pointed out the hit Asian and Canadian carriers took during the SARS crisis saying airlines have to take it very seriously. He noted that after SARS hit Canada carriers reported that traffic was down 30-40%.

Frontier reported the airline’s new fare structure – AirFairs – has been successful with many buying up to Classic and Classic Plus when they book through Frontier.com. Classic is only $20 more than economy accounting for the penetration into up-selling. However, other sites do not have access to the three-tiered fare level which gives passengers a choice of choosing only what they value including free baggage, part of Classic and Classic Plus, assigned seats and priority boarding.

Menke indicated it is difficult to calculate where the revenue is coming from since most passengers booking on the airline’s web site decide to trade up but those booking on travel sites end up paying for things a la carte. “We are willing to give up some of the revenues because the offering is better,” he said.

Comparing ancillary revenues between FY2008 (before last year’s bankruptcy filing) and FY2010, its current fiscal year, he said that two years ago ancillary fees contributed only $2.50 per passengers and now contributes $9 per passengers. He pointed out that the increase is despite the fact the carrier is a far smaller airline than it was two years ago and estimated that ancillary revenues account for $100 million.

Menke said that regional subsidiary, Lynx, is doing well but was only profitable in peak months, not for the entire year. He indicated that when he first joined the company in the fall of 2007, he was dubious about the Lynx product, especially because plans called for a turboprop and he was unconvinced about the acceptability of a turboprop. Today, however, he reported he was completely sold.

Noting, the Lynx markets do not have a lot of local traffic, Menke indicated the regional is making significant contribution to the mainline network. “When we look at it on a contribution basis, we are very pleased,” he said. “It is producing for the network. In fact, we are looking at putting it into mainline markets to free up the Airbus for other markets such as we are doing at Oklahoma City. We are looking at that to see if we can make it profitable on a year-round basis.”

In discussing the March and quarterly results Senior Vice President and Chief Financial Officer Ted Christie reported special items for the month of March included $149.0 million in reorganization expense, primarily attributable to a Republic Airways unsecured claim allowed by the bankruptcy court and non-cash, mark-to-market gains on fuel hedge contracts of $4.0 million. Similar costs were incurred in the quarter to the tune of $179.8 million in the quarter when it also incurred non-cash mark-to-market gains of $11.4 million on fuel hedging activity.

Mainline unit cost excluding fuel (CASM ex-fuel) of 5.80 cents, a reduction of 8.5 percent from the prior year Mainline total unit cost of 7.82 cents, a reduction of 25.2 percent compared to March 2008 Mainline passenger revenue (PRASM) of 9.53 cents, down 12.4 percent from the previous year Mainline total unit revenue (RASM) 10.31 cents, 10.0 percent lower than March 2008.

Operational results for the March quarter included a 20.3 percent year-over-year mainline capacity reduction and mainline unit cost excluding fuel (CASM ex-fuel) of 6.08 cents, a 7.3 percent reduction from the prior year. Mainline total unit cost was 8.32 cents, down 19.8 percent compared to March 2008 while mainline passenger revenue (PRASM) dropped 6.1 percent to of 8.71 cents, down 6.1 percent from the previous year. Mainline total unit revenue (RASM) dropped 9.50 cents, 3.4 percent from March 2008. Frontier's cash position increased to $71.8 million for the period ending March 2009.

"I am very proud of our March performance," said Menke. "Despite a near 20 percent reduction in capacity, we were able to achieve one of the lowest unit costs in the industry. At the same time, our AirFairs product and other revenue initiatives helped offset a decline in bookings and enabled us to produce a net profit and our highest operating margin for any March since 2000. Posting an operating profit of $21 million in the face of a double-digit unit revenue reduction is proof positive that our business model positions Frontier as a leader among low-cost carriers."

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