ExpressJet Holdings, Inc. News
ExpressJet Reports First Quarter 2008 Results
"The first quarter results reflect the increasingly challenging airline industry environment. Despite these challenges, we continue to make progress in all lines of business due to the hard work of ExpressJet's employees. They remain focused on providing first-rate customer service and running an excellent operation," said President and CEO
Operational Overview
In the first quarter, ExpressJet operated 215 aircraft under capacity purchase agreements with Continental Airlines and Delta Air Lines and generated 2.0 billion revenue passenger miles and 181,161 block hours across both systems. ExpressJet expects to continue operating 215 aircraft under these contracts throughout 2008.
For the first quarter, ExpressJet operated nine aircraft within its charter division. The charter division's revenue almost doubled versus revenue generated last year, and developing opportunities will require three additional aircraft in the charter fleet by
In the branded segment, which includes operations branded as ExpressJet Airlines and a pro-rate agreement with Delta, the company ended the first quarter with 498 million revenue passenger miles and a load factor of 61%. As ExpressJet gains increased visibility within communities and extends its brand, booking patterns and results for the ExpressJet Airlines branded segment are steadily improving. The company is experiencing higher demand levels and improved market share in short-haul markets, creating opportunities for ExpressJet to better revenue manage its inventory.
Although improvement continues, in response to higher fuel prices and a slowing economy, ExpressJet Airlines branded flying will be reduced from 193 average daily departures in the first quarter to 166 by
Financial Overview
ExpressJet continues to negotiate 2008 rates for its Continental capacity purchase agreement. Under the current agreement, ExpressJet is reimbursed at cost plus a 10% operating margin. Continental advised ExpressJet in February that if the companies were unable to reach agreement by
ExpressJet ended first quarter 2008 with
The cash balance above includes
As previously announced, during the first quarter, Holdings purchased
For the branded segment, including Delta pro-rate and ExpressJet branded flying, ExpressJet is currently contracted for 87% of its expected second quarter 2008 fuel needs at
Capital expenditures totaled
In light of the recent announcement concerning the formation of a Special Committee of the Board of Directors in response to a proposed acquisition of the company by SkyWest, Inc., as disclosed in the company's report on Form 8-K dated
CORPORATE BACKGROUND
ExpressJet Holdings operates several divisions designed to leverage the management experience, efficiencies and economies of scale present in its subsidiaries, including ExpressJet Airlines, Inc. and ExpressJet Services, LLC. ExpressJet Airlines serves 166 destinations in
Some of the statements in this document are forward-looking statements that involve a number of risks and uncertainties. Many factors could affect actual results, and variances from current expectations regarding these factors could cause actual results to differ materially from those expressed in the forward-looking statements. Some of the known risks that could significantly impact revenues, operating results and capacity include, but are not limited to: the company's continued dependence on Continental for the majority of its revenue; Continental's ability to terminate the capacity purchase agreement with the company; potential loss of access to aircraft, facilities and regulatory authorizations, as well as any airport-related services that Continental currently provides to the company; the company's new operations are less profitable than historical results; competitive responses to the company's branded entry into new markets; certain tax matters; reliance on technology and third-party service providers; flight disruptions as a result of operational matters; regulatory developments and costs, including the costs and other effects of enhanced security measures and other possible regulatory requirements; competition and industry conditions. Additional information concerning risk factors that could affect the company's actual results are described in its filings with the Securities and Exchange Commission, including its 2007 annual report on Form 10-K. The events described in the forward-looking statements might not occur, or might occur to a materially different extent than described herein. The company undertakes no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIES FINANCIAL SUMMARY (In thousands, except per share data) Three Months Ended March 31, Increase/ 2008 2007 (Decrease) Operating Revenue Passenger $437,029 $ 404,973 7.9% Ground handling and other 11,139 7,585 46.9% 448,168 412,558 8.6% Operating Expenses: Wages, salaries and related costs 114,606 104,983 9.2% Aircraft rentals 86,758 84,583 2.6% Aircraft fuel and related taxes 97,986 53,586 82.9% Maintenance, materials and repairs 55,646 48,553 14.6% Other rentals and landing fees 29,687 28,377 4.6% Ground handling 26,011 24,224 7.4% Outside services 16,719 14,892 12.3% Marketing and distribution 11,891 2,920 nm Depreciation and amortization 8,638 6,512 32.6% Other operating expenses 35,209 29,588 19.0% 483,151 398,218 21.3% Operating Income / (Loss) (34,983) 14,340 nm Nonoperating Income / (Expense): Impairment charge on investment (13,661) - nm Interest expense (2,355) (1,800) 30.8% Interest income 2,363 3,894 (39.3%) Capitalized interest 400 175 nm Equity investments loss, net (685) (98) nm Other, net 80 (58) nm (13,858) 2,113 nm Income / (Loss) before Income Taxes (48,841) 16,453 nm Income Tax Benefit / (Expense) 17,534 (6,286) nm Net Income / (Loss) $(31,307) $10,167 nm Basic Earnings / (Loss) per Common Share $(0.61) $0.19 nm Diluted Earnings / (Loss) per Common Share $(0.61) $0.18 nm Shares Used in Computing Basic Earnings / (Loss) per Common Share 51,278 53,956 (5.0%) Shares Used in Computing Diluted Earnings / (Loss) per Common Share 51,278 61,713 (16.9%) EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIES PRELIMINARY STATISTICS Three Months Ending March 31, 2008 Contract(1) Branded System Revenue Passenger Miles (millions) 2,012 498 2,531 Available Seat Miles (ASM)(millions) 2,618 813 3,475 Passenger Load Factor 76.9% 61.3% 72.8% Block Hours 181,161 47,666 231,856 Departures 93,663 24,402 120,124 Stage Length (miles) 577 669 593 (1) Excludes charter since statistics on charter aircraft do not provide meaningful load factor data because pricing is based on operating cost versus expected passenger count. Non-GAAP Financial Measures Three Months Ended March 31, 2008 2007 Net Income Reconciliation: Net income / (loss) $(31.3) $10.2 Adjustments for special charges / (gains) net of tax: Add: Impairment charge on investment (1) 8.7 — Net income / (loss) excluding special charges (2) $(22.6) $10.2 Earnings / (Loss) Per Share Reconciliation: Diluted earnings / (loss) per share $(0.61) $0.18 Adjustments for special items, net of tax 0.17 — Diluted earnings / (loss) per share, excluding special charges (2) $(0.44) $0.18 (1) In February 2008, ExpressJet invested in $65 million of auction rate securities which are classified as short-term securities and reflected at fair value. During first quarter 2008, auctions for these securities failed. At March 31, 2008, the company continued to hold these investments, as they have continued to fail. Since the company cannot predict when the market will recover and needs to allow for the flexibility to sell these securities in the next 12 months, including at a discount, if necessary, ExpressJet has evaluated and classified them, in accordance with accounting guidance, as current assets and recognized an impairment charge, net of taxes, of $8.7 million. (2) By excluding special non-recurring items, these financial measures provide management and investors the ability to measure and monitor ExpressJet's performance on a consistent year-over-year basis.
SOURCE ExpressJet Holdings, Inc.
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