Airlines and Republic Airways and Fuel and Gas Prices and Oil and Transportation, Distribution & Logistics

Frontier Airlines cuts second-quarter capacity plans

March 7, 2011

Indianapolis-based Republic Airways Holdings Inc. said Monday that it is reducing growth plans for its Frontier Airlines unit because of uncertainty about future oil prices.

Frontier's seat capacity will be flat in the second quarter, rather than expanding by 1.5 percent to 2.5 percent as the airline had previously planned. The number of passenger bookings is ahead of last year and revenue is climbing, the company said. However, the price of jet fuel — the largest expense at most airlines — has been rising dramatically with the price of oil.

Oil hit a two-year high early in the day, nearing $107 a barrel, after forces loyal to Libyan leader Moammar Gadhafi launched airstrikes against opposition fighters at an oil port. The market has been shaken in recent weeks by the uprising in Libya and its effect on oil prices. A sustained rise in the price of oil could hurt the economic recovery by raising manufacturing and transportation costs.

Delta Air Lines Inc. and AMR Corp.'s American also have said they will scale back their capacity growth plans this year.

Frontier's February traffic rose 2 percent, to 852.6 million revenue passenger miles, or one paying passenger flown one mile. Capacity, or the number of seats available, fell 3 percent, to 1.11 billion available seat miles.

With traffic up and capacity down, its planes were fuller. Load factor rose 4 percentage points, to 77 percent.

For the first two months of the year, Frontier traffic is up 3 percent, to 1.76 billion revenue passenger miles. Capacity fell 3 percent, to 2.32 billion available seat miles. Load factor rose 5 percentage points, to 76 percent.

In addition to Frontier, Republic also flies under contract for major airlines. Republic's traffic across its whole operation, including Frontier, fell 1 percent in February, to 1.4 billion revenue passenger miles. Capacity also fell 1 percent, to 1.93 billion available seat miles, which helped lift load factor 1 percentage point, to 73 percent.

For January and February combined, Republic saw traffic fall 1 percent, to 2.9 billion revenue passenger miles. Capacity fell 3 percent, to 4.04 billion available seat miles. Load factor rose 2 percentage points, to 72 percent.

Republic shares fell 3 cents to close at $6.02 each.

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