SEC Info - Frontier Airlines Inc/CO - ‘10-Q’ for 6/30/97

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Frontier Airlines Inc/CO – ‘10-Q’ for 6/30/97

As of: Wednesday, 8/13/97 · For: 6/30/97 · Accession #: 927356-97-965 · File #: 0-24126

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/13/97  Frontier Airlines Inc/CO          10-Q        6/30/97    2:56K                                    Donnelley R R & S… 08/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Form 10-Q 2nd Quarter                                 19    103K 
 2: EX-27       Financial Data Schedule                                2      6K

10-Q — Form 10-Q 2nd Quarter
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Changes in Securities Exhibits and Reports on Form 8-K Financial Information Financial Statements Frontier Airlines, Inc. Balance Sheets Management's Discussion and Analysis of Financial Condition and Results of Operations Not applicable Proposed Merger with Western Pacific Airlines
1	1st Page - Filing Submission
2	Item 1. Financial Information
3	Item 1. Financial Statements Frontier Airlines, Inc. Balance Sheets
7	Item 2:. Management's Discussion and Analysis of Financial Condition and Results of Operations
8	Proposed Merger with Western Pacific Airlines
18	Item 1:. Not applicable
"	Item 2:. Changes in Securities
"	Item 6:. Exhibits and Reports on Form 8-K

10-Q 1st Page of 19 TOC ↑Top Previous Next ↓Bottom Just 1st
 
FORM 10-Q 

SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C.  20549 

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934                                                           
For the quarterly period ended June 30, 1997                          

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE    
ACT OF 1934                                                           

Commission file number:  0-24126                                                

FRONTIER AIRLINES, INC. 
----------------------- 
(Exact name of registrant as specified in its charter)  

     Colorado                                       84-1256945
------------------------------------------------  ------------------------------
(State or other jurisdiction of incorporated or          (I.R.S. Employer       
organization)                                            Identification No.)  

12015 E. 46th Avenue, Denver, CO        80239 
--------------------------------------    --------  
(Address of principal executive offices)  (Zip Code)  

Issuer's telephone number including area code:  (303) 371-7400                  

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was     
required to file such reports), and (2) has been subject to such filing         
requirements for the past 90 days.  Yes   X      No                             
                 -----       -----

The number of shares of the Company's Common Stock outstanding as of August 8,  
1997 was 9,091,563.                                                             

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TABLE OF CONTENTS 

PART I.  FINANCIAL INFORMATION  

                                                        Page
                                                        ----

ITEM 1.   FINANCIAL INFORMATION                                                 

Financial Statements                                      1 

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                     
CONDITION AND RESULTS OF OPERATIONS                       5 

PART II.  OTHER INFORMATION 

ITEM 2.   CHANGES IN SECURITIES                                    16           

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                         16           

10-Q 3rd Page of 19 TOC 1st Previous Next ↓Bottom Just 3rd
PART I.  FINANCIAL INFORMATION  

ITEM 1. FINANCIAL STATEMENTS                                                    
FRONTIER AIRLINES, INC.                                                         
BALANCE SHEETS                                                                  

                                                                [Download Table]

                                            JUNE 30,                  
                                             1997           MARCH 31, 
                                          (UNAUDITED)         1997    
                                          ------------   ------------ 
ASSETS                                                                
------                                                                
                                                                      
Current assets:                                                       
    Cash and cash equivalents             $  8,531,252   $ 10,286,453 
    Restricted investments                   2,000,000      2,000,000 
    Trade receivables, net of allowance                               
      for doubtful accounts of $115,097                               
      and $71,713 at June 30, 1997 and                                
      March 31, 1997                         7,067,713      7,451,342 
    Maintenance deposits                     8,275,474      6,968,379 
    Prepaid expenses and other assets        3,822,334      3,449,871 
    Inventories                                994,433        997,102 
    Deferred lease expenses                    293,868        289,579 
    Note receivable - current portion           27,838         27,288 
                                          ------------   ------------ 
            Total current assets            31,012,912     31,470,014 

Security, maintenance and other deposits     7,078,536      6,596,660 
Property and equipment, net                  4,634,014      4,340,982 
Note receivable - long-term portion             24,509         31,762 
Deferred lease and other expenses              923,966        918,994 
Restricted investments                         734,262        734,133 
                                          ------------   ------------ 
                                          $ 44,408,199   $ 44,092,545 
                                          ============   ============ 

LIABILITIES AND STOCKHOLDERS' EQUITY                                  
------------------------------------                                  
Current liabilities:                                                  
    Accounts payable                      $  6,790,625   $  8,045,533 
    Air traffic liability                   13,390,120     13,058,632 
    Other accrued expenses                   4,421,099      3,318,043 
    Accrued maintenance expense             10,104,288      8,277,115 
    Note payable                               152,300          9,812 
    Current portion of obligations                                    
     under capital leases                       36,728         35,700 
                                          ------------   ------------ 
            Total current liabilities       34,895,160     32,744,835 

Accrued maintenance expense                  1,669,925      1,408,363 
Obligations under capital leases,                                     
  excluding current portion                     46,868         56,444 
                                          ------------   ------------ 
            Total liabilities               36,611,953     34,209,642 
                                          ------------   ------------ 

Stockholders' equity                                                  
    Preferred stock, no par value,                                    
      authorized 1,000,000 shares;                                    
      none issued and outstanding                  -              -   
    Common stock, no par value, stated                                
      value of $.001 per share,                                       
      authorized 20,000,000 shares;                                   
      8,844,375 shares issued and                                     
      outstanding                                8,844          8,844 
    Additional paid-in capital              35,764,710     35,764,710 
    Accumulated deficit                    (27,977,308)   (25,890,651)
                                          ------------   ------------ 
            Total stockholders' equity       7,796,246      9,882,903 
                                          ------------   ------------ 
                                          $ 44,408,199   $ 44,092,545 
                                          ============   ============ 

See accompanying notes to financial statements.                                 

1 

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FRONTIER AIRLINES, INC.                                                         
STATEMENTS OF OPERATIONS                                                        
FOR THE THREE MONTHS ENDED JUNE 30,                                             
1997 AND 1996                                                                 
(UNAUDITED)                                                                     

                                                                [Download Table]


                                              1997           1996     
                                          ------------   ------------ 
                                                                      
Revenues:                                                             
    Passenger                             $ 33,621,450   $ 27,569,884 
    Cargo                                      627,809        415,203 
    Other                                      307,411        161,961 
                                          ------------   ------------ 

            Total revenues                  34,556,670     28,147,048 
                                          ------------   ------------ 

Operating expenses:                                                   
    Flight operations                       14,244,102     10,502,604 
    Aircraft and traffic servicing           6,788,493      5,853,791 
    Maintenance                              7,734,691      4,288,575 
    Promotion and sales                      6,299,522      5,055,123 
    General and administrative               1,378,766      1,108,921 
    Depreciation and amortization              349,588        200,254 
                                          ------------   ------------ 

            Total operating expenses        36,795,162     27,009,268 
                                          ------------   ------------ 

            Operating (loss) income         (2,238,492)     1,137,780 
                                          ------------   ------------ 

Nonoperating income:                                                  
    Interest income                            160,806        218,608 
    Other, net                                  (8,971)       (19,978)
                                          ------------   ------------ 

            Total nonoperating income,                                
             net                               151,835        198,630 
                                          ------------   ------------ 

Net (loss) income                         $ (2,086,657)  $  1,336,410 
                                          ============   ============ 

(Loss) income per common share and                                    
 share equivalent, note 2                 $      (0.24)  $       0.15 
                                          ============   ============ 

Weighted average number of common shares                              
 and common share equivalents                                         
 outstanding, note 2                         8,844,375      8,865,968 
                                          ============   ============ 

See accompanying notes to financial statements.                       

2 

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FRONTIER AIRLINES, INC.                                                         
CONDENSED STATEMENTS OF CASH FLOWS                                              
FOR THE THREE MONTHS ENDED JUNE 30,                                             
1997 AND 1996                                                                 
(UNAUDITED)                                                                     

                                                                [Download Table]


                                                         1997           1996    
                                                     -----------   ------------ 
                                                                                
Cash flows from operating activities:                                           
  Net (loss) income                                  $(2,086,657)   $ 1,336,410 
  Adjustments to reconcile net loss to net cash                                 
    used by operating activities:                                               
      Employee stock option plan compensation                                   
       expense                                                 -        124,998 
      Depreciation and amortization                      419,482        233,554 
      Changes in operating assets and liabilities:                              
         Restricted investments                             (129)    (2,138,758)
         Trade receivables                               383,629        903,833 
         Security, maintenance and other deposits     (1,641,471)    (1,904,693)
         Prepaid expenses and other assets              (451,618)      (607,723)
         Inventories                                       2,669        152,978 
         Note receivable                                   6,703              - 
         Accounts payable                             (1,254,908)      (553,716)
         Air traffic liability                           331,488      2,835,769 
         Other accrued expenses                        1,103,056        197,155 
         Accrued maintenance expense                   2,088,735      2,306,323 
                                                     -----------   ------------ 

           Net cash (used) provided by operating                                
            activities                                (1,099,021)     2,886,130 
                                                     -----------   ------------ 

Cash flows used by investing activities:                                        
  Increase in short-term investments                           -     (2,595,344)
  Aircraft lease deposits                               (147,500)    (1,184,750)
  Capital expenditures                                  (642,620)      (694,488)
                                                     -----------   ------------ 

           Net cash used in investing activities        (790,120)    (4,474,582)
                                                     -----------   ------------ 

Cash flows from financing activities:                                           
  Net proceeds from issuance of common stock                   -      6,562,118 
  Deferred offering costs                                      -          9,756 
  Proceeds from short-term borrowings                    170,318              - 
  Principal payments on short-term borrowings            (27,830)       (10,441)
  Principal payments on obligations                                             
   under capital leases                                   (8,548)       (30,286)
                                                     -----------   ------------ 

           Net cash provided by financing                                       
            activities                                   133,940      6,531,147 
                                                     -----------   ------------ 

           Net (decrease) increase in cash and                                  
            cash equivalents                          (1,755,201)     4,942,695 

Cash and cash equivalents, beginning of period        10,286,453      6,359,254 
                                                     -----------   ------------ 

Cash and cash equivalents, end of period             $ 8,531,252    $11,301,949 
                                                     ===========    =========== 


See accompanying notes to financial statements.                                 

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FRONTIER AIRLINES, INC.                                                         
CONDENSED NOTES TO FINANCIAL STATEMENTS                                         
JUNE 30, 1997                                                                   

(1)  BASIS OF PRESENTATION                                                      

The accompanying unaudited financial statements have been prepared in 
accordance with generally accepted accounting principles for interim  
     financial information and the instructions to Form 10-Q and Regulation S-X.
Accordingly, they do not include all of the information and footnotes 
     required by generally accepted accounting principles for complete financial
    statements. In the opinion of management, all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair      
  presentation have been included. The results of operations for the three
   months ended June 30, 1997 and 1996 are not necessarily indicative of the
   results that will be realized for the full year. For further information,
  refer to the audited financial statements and notes thereto for the year
     ended March 31, 1997 contained in the Form 10-KSB for the fiscal year ended
March 31, 1997.                                                       

(2)  PER SHARE DATA                                                             

 Primary earnings per share is based upon the weighted average number of
  shares of common stock outstanding and dilutive common stock equivalents
   (stock options and warrants). Common stock equivalents have been excluded
     from the June 30, 1997 calculation as they are considered antidilutive. The
number of weighted average shares outstanding includes common stock   
   outstanding and dilutive common stock equivalents. Fully diluted earnings
   per share is not materially different than primary earnings per share and
has not been presented.                                               

-4-   

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ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS                                                 

This report contains forward-looking statements that describe the business and  
prospects of Frontier Airlines, Inc. (the "Company") and the expectations of the
Company and management.  These statements are subject to certain risks and      
uncertainties that could cause actual results to differ materially from those   
set forth.  These risks and uncertainties include, but are not limited to:  the 
timing of, and expense associated with, expansion and modification of the       
Company's operations in accordance with its business strategy or in response to 
competitive pressures or other factors such as the Company's commencement of    
passenger service and ground handling operations at several airports and        
assumption of maintenance operations at DIA with its own employees; general     
economic factors and behavior of the fare-paying public and the federal         
government, such as the crash in May 1996 of another low-fare carrier's aircraft
that resulted in a federal investigation of the carrier, suspension of the      
carrier's operations and increased federal scrutiny of low-fare carriers        
generally that may increase the Company's operating costs or otherwise adversely
affect the Company; actions of competing airlines, such as increasing capacity  
and pricing actions of United Airlines, other competitors, and Western Pacific  
Airlines, Inc. ("Western Pacific") if the proposed merger with Western Pacific  
is not completed; the risk that the merger with Western Pacific is not          
completed; the current limited supply of Boeing 737 aircraft and the higher     
lease costs associated with such aircraft, which inhibits the Company's ability 
to achieve operating economies and implement its business strategy; the future  
impact of recently mandated changes in the air transportation excise tax        
effective October 1, 1997; and possible future increases in aviation fuel       
prices.  Because the Company's business, like that of the airline industry      
generally, is characterized by high fixed costs relative to revenues and low    
profit margins, small fluctuations in the Company's yield per RPM or expense per
ASM can significantly affect operating results.                                 

As discussed in "Proposed Merger with Western Pacific Airlines" below, the      
Company signed a Merger Agreement with Western Pacific on June 30,1997.  The    
discussion contained in this report generally describes the historic business of
the Company and plans of the Company as an independent airline.  It does not    
discuss the pro forma effect of the Company's merger with Western Pacific or the
operations of a combined company.  As such, forward-looking information about   
the Company in this report relates to operations of the Company prior to        
consummation of the merger or operations of the Company if the merger does not  
occur.  Further information about the merger and the combined company will be   
provided in a proxy statement relating to approval of the merger by shareholders
of the Company.                                                                 

GENERAL                                                                         

The Company is a low-fare, full-service airline based in Denver, Colorado.  The 
Company's flight operations began on July 5, 1994 with two Boeing 737-200       
aircraft operating eight daily flights between Denver, Colorado and four North  
Dakota cities.  The Company leased three additional Boeing 737-200 aircraft in  
1994 and added four cities in Montana to its route system.  Since that time, the
Company has increased the number of markets it serves from its Denver hub to 13 
cities in 10 states spanning the western two-thirds of the United States.  The  
Company presently operates a fleet of 12 aircraft comprised of seven Boeing 737-
200 and five Boeing 737-300 aircraft.                                           

The Company significantly rescheduled its flights in 1995 and eliminated two of 
its original North Dakota cities and all four of its Montana destinations.      
Flights to Bismarck and Fargo, North Dakota, the last two of the Company's eight
original markets, were suspended on September 10, 1996. As of August 1, 1997 the
Company's current route system extends from Denver to Los Angeles, San Diego and
San Francisco, California; Chicago and Bloomington/Normal, Illinois;            
Seattle/Tacoma, Washington; Phoenix, Arizona; St. Louis, Missouri;              
Minneapolis/St. Paul, Minnesota; Salt Lake City, Utah; Omaha, Nebraska;         
Albuquerque, New Mexico; and El Paso, Texas. Further route expansion from Denver
to Boston, Massachusetts is scheduled to be implemented on September 16, 1997.  
At present, the Company utilizes four gates at Denver International Airport     
("DIA") for approximately 28 daily flight departures.                           

The Company has leased two more Boeing 737-300s, one to be delivered in late    
August 1997 and one in January 1998, at which time it plans to add new cities to
its route system or additional frequencies to markets presently being served.   
Subject to future aircraft availability, the Company plans to lease additional  
jets in the 737 series to permit the Company to further expand its lines of     
service. The Merger Agreement between the Company and                           

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Western Pacific requires Western Pacific's concurrence in any such additional   
leases. Demand and competition for Boeing 737 aircraft has increased            
significantly in the past two years.                                            

The Company expanded operations during the quarters ended June 30, 1996 and June
30, 1997. Therefore, the Company's results of operations for the quarters ended 
June 30, 1996 and 1997 are not necessarily comparable or indicative of future   
operating results. Effective in September 1996, the Company began performing    
scheduled maintenance on its aircraft using its own mechanics, with the         
exception of major maintenance cycles which continue to be performed by FAA     
approved contractors.                                                           

PROPOSED MERGER WITH WESTERN PACIFIC AIRLINES                                   

On June 30, 1997, the Company signed an Agreement and Plan of Merger (the       
"Merger Agreement") providing for the merger (the "Merger") of the Company with 
Western Pacific, a low fare airline based in Colorado Springs, Colorado. Western
Pacific commenced service from DIA on June 29, 1997 and currently provides 45   
daily departures from DIA. Western Pacific operates approximately 68 total      
departures per day from DIA and Colorado Springs with 19 Boeing 737 aircraft.   
Western Pacific also owns a majority interest in Mountain Air Express, a        
commuter airline that operates out of DIA and Colorado Springs. Western         
Pacific's common stock is quoted on the Nasdaq National Market under the symbol 
"WPAC". The following discussion is qualified in its entirety by reference to   
the Merger Agreement, which is included as an exhibit to this report. In        
addition, readers are advised to review the reports of Western Pacific filed    
with the Securities and Exchange Commission (File No. 0-27238).                 

Upon consummation of the Merger, each shareholder of the Company will receive   
.75 shares (subject to adjustment in certain circumstances) of common stock of
Western Pacific for each share of the Company's Common Stock held by such       
shareholder. The management of Western Pacific will retain managerial control of
Western Pacific after the Merger. Three members of the Company's board of       
directors will be granted seats on Western Pacific's board of directors, which  
will be increased to nine members. The Company's investment banking firm has    
issued an opinion to the Company's Board of Directors that the exchange ratio is
fair to the Company's shareholders from a financial point of view, and Western  
Pacific's board of directors has received a similar opinion from its investment 
banking firm with respect to Western Pacific.                                   

The Merger Agreement provides that prior to the completion of the Merger, or    
termination of the Merger Agreement if that occurs before the Merger is         
completed, the operations of the Company and Western Pacific will generally be  
conducted in the ordinary course of business. The Company is prohibited from    
leasing additional aircraft, raising capital through equity or debt financings  
(except under certain conditions) or making major capital expenditures without  
Western Pacific's consent. Certain limitations are placed on Western Pacific's  
operations as well. The Merger Agreement provides that each company must pay the
other a termination fee of $4 million in the event either company enters into a 
business combination with any other entity, and in certain other circumstances  
resulting in termination of the Merger Agreement.                               

Closing of the Merger is subject to several conditions, including approval of   
the Merger by the shareholders of the Company and Western Pacific, regulatory   
approval of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act,  
effectiveness of a Registration Statement relating to the Western Pacific common
stock to be issued in the Merger, the continued effectiveness of the "fairness  
opinions" issued by each of the Company's and Western Pacific's investment      
banking firms and the Company obtaining required consents or waivers of consent 
to the Merger from aircraft lessors and other third parties. In addition, either
the Company or Western Pacific may terminate the Merger Agreement in the event  
of a material adverse change in the financial condition, business, operations or
prospects of the other party to the Merger. There can be no assurance that the  
conditions will be met or that the Merger will be consummated. The failure of   
the Company and Western Pacific to consummate the Merger could have a material  
adverse effect on the Company.                                                  

In connection with the Merger, the Company entered into a code share agreement  
(the "Code Share Agreement") with Western Pacific which provides that the       
parties will jointly market their flight schedules by permitting each party to  
assign its airline designator code to flights operated by the other party. The  
Code Share Agreement terminates on December 31, 1997; provided, however, that if
the Merger terminates under certain conditions then the Code Share Agreement    
will terminate on December 31, 1998.                                            

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RESULTS OF OPERATIONS                                                           

The Company incurred a net loss of $2,087,000 or $.24 per share for the quarter 
ended June 30, 1997 as compared to net income of $1,336,000 or $.15 per fully   
diluted share for the quarter ended June 30, 1996. During the quarter ended June
30, 1997 as compared to the prior comparable quarter, the Company experienced   
higher average aircraft lease expenses on its newer larger aircraft, higher     
maintenance expenses associated with its in-house maintenance operation which   
began in September 1996, increased maintenance expenses associated with the     
Boeing 737-200 aircraft, intensive increased competition from DIA's dominant    
carrier, United Airlines, and the return of the 10% passenger excise tax which  
was not in effect during the quarter ended June 30, 1996. Because of United     
Airlines' competitive activity, the Company was unable to adjust its fares to   
permit recovery of these increased expenses. Management believes alleged        
anticompetitive practices by United in the Denver market have had, and, to the  
extent they continue, will have a material adverse effect on the Company's      
revenues and results of operations. (See Part I, Item 3: Legal Proceedings of   
the Company's Form 10-KSB for the fiscal year ended March 31, 1997.)            

Small fluctuations in the Company's yield per RPM or expense per ASM can        
significantly affect operating results because the Company, like other airlines,
has high fixed costs and low operating margins in relation to revenues. Airline 
operations are highly sensitive to various factors, including the actions of    
competing airlines and general economic factors, which can adversely affect the 
Company's liquidity, cash flows and results of operations.                      

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The following table sets forth certain quarterly financial and operating data   
regarding the Company for the fifteen months of operations ended June 30, 1997. 

SELECTED FINANCIAL AND OPERATING DATA 

                                                        [Enlarge/Download Table]

                                                        QUARTER ENDED                                  
                                                       --------------                                  

                               JUNE 30,    SEPTEMBER 30,    DECEMBER 31,    MARCH 31,      JUNE 30,    
                                 1996          1996            1996           1997           1997      
                             ------------  -------------   -------------  -------------  ------------- 
                                                                                                       
Passenger revenue            $ 27,570,000   $ 29,518,000    $ 24,503,000   $ 32,167,000   $ 33,622,000 
Revenue passengers carried        271,000        308,000         272,000        329,000        339,000 
Revenue passenger                                                                                      
    miles (RPMs)(1)           190,541,000    220,982,000     193,316,000    235,100,000    249,436,000 
Available seat miles                                                                                   
  (ASMs)(2)                   313,216,000    363,667,000     354,103,000    388,734,000    405,395,000 
Passenger load factor(3)            60.8%          60.8%           54.6%          60.5%          61.5% 
Break-even load factor(4)           58.3%          66.0%           73.1%          66.9%          65.6% 
Block hours(5)                      7,297          8,384           8,089          8,689          9,087 
Average daily block hour                                                                               
  utilization(6)                    10.97          10.24            9.86          10.09          10.28 
Yield per RPM(7)                   14.47c         13.36c          12.68c         13.68c         13.48c 
Yield per ASM(8)                    8.80c          8.12c           6.92c          8.27c          8.29c 
Expense per ASM                     8.62c          8.98c           9.46c          9.39c          9.08c 
Passenger revenue per                                                                                  
  block hour                 $   3,778.27   $   3,520.75    $   3,029.18   $   3,702.04   $   3,700.01 
Average fare(9)              $         98   $         92    $         86   $         94   $         94 
Average aircraft in service           7.4            9.6            10.3           11.0           10.6 

Operating income (loss)      $  1,138,000    ($2,547,000)    ($8,318,000)   ($3,434,000)   ($2,238,000)
Net income (loss)            $  1,336,000    ($2,189,000)    ($8,043,000)   ($3,290,000)   ($2,087,000)


(1)  "Revenue passenger miles," or RPMs, are determined by multiplying the      
number of fare-paying passengers carried by the distance flown.       
(2)  "Available seat miles," or ASMs, are determined by multiplying the number  
of seats available for passengers by the number of miles flown.       
(3)  "Passenger load factor" is determined by dividing revenue passenger miles  
by available seat miles.                                              
(4)  "Break-even load factor" is the passenger load factor that will result in  
 operating revenues being equal to operating expenses, assuming constant
revenue per passenger mile and expenses.                              
(5)  "Block hours" represent the time between aircraft gate departure and       
aircraft gate arrival.                                                
(6)  "Average daily block hour utilization" represents the total block hours    
divided by the weighted average number of aircraft days in service.   
(7)  "Yield per RPM" is determined by dividing passenger revenues by revenue    
passenger miles.                                                      
(8)  "Yield per ASM" is determined by dividing passenger revenues by available  
seat miles.                                                           
(9)  "Average fare"  excludes revenue included in passenger revenue for non-    
    revenue passengers, administrative fees, and revenue recognized for unused
tickets that are greater than one year from issuance date.            

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The following table provides information regarding the Company's operating      
revenues and expenses for the quarter ended June 30, 1996.                      

                                                        [Enlarge/Download Table]

                                                        REVENUE/                       
                                  AMOUNT     PERCENT   BLOCK HOUR  YIELD/ASM  YIELD/RPM
                                -----------  --------  ----------  ---------  ---------
                                                                                       
REVENUES                                                                               
--------                                                                               
Passenger                       $27,570,000     97.9%   $3,778.27      8.80c     14.47c
Cargo                               415,000      1.5%       56.87      0.13c      0.22c
Other                               162,000      0.6%       22.20      0.05c      0.09c
                                -----------     -----   ---------  ---------  ---------
Total operating revenues        $28,147,000    100.0%   $3,857.34      8.98c     14.78c
                                ===========     =====   =========  =========  =========

                                                        EXPENSE/   EXPENSE/            
                                  AMOUNT     PERCENT   BLOCK HOUR     ASM              
                                -----------  -------   ----------  ---------           
EXPENSES                                                                               
--------                                                                               
Flight operations               $10,503,000     37.3%   $1,439.36      3.35c           
Aircraft and traffic servicing    5,854,000     20.8%      802.25      1.87c           
Maintenance                       4,288,000     15.2%      587.63      1.38c           
Promotion and sales               5,055,000     18.0%      692.75      1.61c           
General and administrative        1,109,000      3.9%      151.98       .35c           
Depreciation and amortization       200,000      0.7%       27.41       .06c           
                                -----------     -----   ---------  ---------           
Total operating expenses        $27,009,000     95.9%   $3,701.38      8.62c           
                                ===========     =====   =========  =========           

The following table provides information regarding the Company's operating      
revenues and expenses for the quarter ended June 30, 1997.                      

                                                        [Enlarge/Download Table]

                                                        REVENUE/                       
                                  AMOUNT     PERCENT   BLOCK HOUR  YIELD/ASM  YIELD/RPM
                                -----------  --------  ----------  ---------  ---------
                                                                                       
REVENUES                                                                               
--------                                                                               
Passenger                       $33,622,000     97.3%   $3,700.01      8.29c     13.48c
Cargo                               628,000      1.8%       69.11      0.15c      0.25c
Other                               307,000      0.9%       33.79      0.08c      0.12c
                                -----------    -----    ---------  ---------  ---------
Total operating revenues        $34,557,000    100.0%   $3,802.91      8.52c     13.85c
                                ===========    =====    =========  =========  =========

                                                        EXPENSE/   EXPENSE/            
                                  AMOUNT     PERCENT   BLOCK HOUR     ASM              
                                -----------  -------   ----------  ---------           
EXPENSES                                                                               
--------                                                                               
Flight operations               $14,244,000     41.2%   $1,567.51      3.51c           
Aircraft and traffic servicing    6,788,000     19.7%      747.00      1.67c           
Maintenance                       7,735,000     22.4%      851.22      1.91c           
Promotion and sales               6,299,000     18.2%      693.19      1.56c           
General and administrative        1,379,000      4.0%      151.75       .34c           
Depreciation and amortization       350,000      1.0%       38.52       .09c           
                                -----------    -----    ---------  ---------           
Total operating expenses        $36,795,000    106.5%   $4,049.19      9.08c           
                                ===========    =====    =========  =========           

REVENUES                                                                        

General. Airline revenues are primarily a function of the number of passengers  
carried and fares charged by the airline. The Company believes that revenues    
will gradually increase in a new market over a 60 to 120 day period as market   
penetration is achieved. The Company added three new markets during the quarter 
ended June 30, 1996 and none during the quarter ended June 30, 1997.            

The Company's results are highly sensitive to changes in fare levels. Fare      
pricing policies have a significant impact on the Company's revenues. The       
Company's average fare for the quarters ended June 30, 1997 and 1996 were $94   

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and $98, respectively. Management believes that the decrease in the average fare
during the quarter ended June 30, 1997 was largely a result of the reinstatement
of the 10% excise tax on air transportation effective March 7, 1997 which was   
not in effect during the quarter ended June 30, 1996. Effective October 1, 1997,
the 10% excise tax is reduced initially to 9% and adds a per-flight-segment fee 
of $1 on domestic flights. The tax decreases to 8% October 1, 1998 and to 7.5%  
on October 1, 1999. The per-flight-segment fee increases to $2 effective October
1, 1998, $2.25 effective October 1, 1999 and thereafter increases in annual     
amounts of 25 cents until it reaches $3 October 1, 2002. Given the elasticity of
passenger demand, the Company believes that increases in fares will result in a 
decrease in passenger demand. To maintain passenger traffic in the face of an   
excise tax increase may require some downward adjustment in net fares realized  
by the Company. The Company cannot completely predict future fare levels, which 
depend to a substantial degree on actions of competitors. When sale prices or   
other price changes are made by competitors in the Company's markets, the       
Company believes that it must, in most cases, match these competitive fares in  
order to maintain its market share. Passenger revenues are seasonal in each     
market.                                                                         

Passenger Revenue.  Passenger revenues totaled $33,622,000 for the quarter ended
June 30, 1997 compared to $27,570,000 for the quarter ended June 30, 1996, or an
increase of 22%. The number of revenue passengers carried was 339,000 for the   
quarter ended June 30, 1997 compared to 271,000 for the quarter ended June 30,  
1996 or an increase of 25%.  The average fare for the quarter ended June 30,    
1997 was $94 compared to the average fare for the quarter ended June 30, 1996 of
$98.  The Company had an average of 10.6 aircraft in service during the quarter 
ended June 30, 1997 compared to an average of 7.4 aircraft in service during the
quarter ended June 30, 1996 for an increase in ASMs of 92,179,000 or 29%.       

An airline's break-even load factor is the passenger load factor that will      
result in operating revenues being equal to operating expenses, assuming        
constant revenue per passenger mile and expenses.  For the quarter ended June   
30, 1997, the Company's break-even load factor was 65.6% compared to a passenger
load factor of 61.5%.  For the quarter ended June 30, 1996 the Company's break- 
even load factor was 58.3% compared to a passenger load factor of 60.8%.  The   
Company's break-even load factor increased over the prior comparable period as  
increased competition kept the Company from increasing fares to compensate for  
the 10% excise tax, increased aircraft lease expenses and maintenance expenses  
associated with the Company's maintenance facility which began operations in    
September 1996 and increased maintenance expenses associated with the Boeing    
737-200 aircraft.                                                               

The Company's load factor increased from 60.8% to 61.5% for the quarter ended   
June 30, 1997 over the prior comparable period.  Management believes that its   
load factor for the quarter ended June 30, 1997 might have been higher but      
continued to be adversely affected by the public's reaction to two significant  
airline accidents which occurred during 1996.  One of the accidents involved a  
low fare carrier and the other involved a major national airline.  In both      
accidents the aircraft was destroyed and all passengers and crew were killed.   

Cargo revenues, consisting of revenues from freight and mail service, totaled   
$628,000 and $415,000 for the quarters ended June 30, 1997 and 1996,            
representing 1.8% and 1.5% of total operating revenues, respectively.  This     
adjunct to the passenger business is highly competitive and depends heavily on  
aircraft scheduling, alternate competitive means of same day delivery service   
and schedule reliability.                                                       

Other revenues, comprised principally of liquor sales and excess baggage fees,  
totaled $307,000 and $162,000 or less than 1% of total operating revenues for   
each of the quarters ended June 30, 1997 and 1996, respectively.                

OPERATING EXPENSES                                                              

Operating expenses include those related to flight operations, aircraft and     
traffic servicing, maintenance, promotion and sales, general and administrative 
and depreciation and amortization.  Total operating expenses increased to 106.5%
of revenue for the quarter ended June 30, 1997 compared to 95.9% of revenue for 
the quarter ended June 30, 1996. Operating expenses increased as a percentage of
revenue as the Company experienced higher average aircraft lease expenses on its
newer larger aircraft, higher maintenance expenses associated with its in-house 
maintenance operation which began in September 1996, and increased maintenance  
expenses associated with the Boeing 737-200 aircraft.                           

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Flight Operations. Flight operations expenses of $14,244,000 and $10,503,000    
were 41.2% and 37.3% of total revenue for the quarters ended June 30, 1997 and  
1996, respectively. Flight operations expenses include all expenses related     
directly to the operation of the aircraft including fuel, lease and insurance   
expenses, pilot and flight attendant compensation, in flight catering, crew     
overnight expenses, flight dispatch and flight operations administrative        
expenses.                                                                       

Aircraft fuel expenses include both the direct cost of fuel including taxes as  
well as the cost of delivering fuel into the aircraft.  Aircraft fuel costs of  
$5,520,000 for 7,169,000 gallons used and $4,586,000 for 5,802,000 gallons used 
resulted in an average fuel cost of 77c and 79c per gallon and represented 38.8%
and 43.7% of total flight operations expenses for the quarters ended June 30,   
1997 and 1996, respectively.  The average fuel cost per gallon decreased for the
quarter ended June 30, 1997 from the comparable prior period due to an overall  
decrease in the cost of fuel.  Fuel prices are subject to change weekly as the  
Company does not purchase supplies in advance for inventory.  Fuel consumption  
for the quarters ended June 30, 1997 and 1996 averaged 789 and 795 gallons per  
block hour, respectively.  Fuel consumption per block hour decreased as a result
of more fuel efficient aircraft.                                                

Aircraft lease and insurance expenses, excluding short-term aircraft lease      
expenses, totaled $5,251,000 (15.2% of total revenue) and $3,060,000 (10.9% of  
total revenue) for the quarters ended June 30, 1997 and 1996, respectively, or  
an increase of 71.6%.  The increase is partially attributable to the increase in
the average number of aircraft in service to 10.6 from 7.4 for the quarters     
ended June 30, 1997 and 1996, respectively, and partially due to higher lease   
expenses on larger newer aircraft fleet additions.                              

Pilot and flight attendant salaries totaled $1,967,000 and $1,530,000 or 5.9%   
and 5.6% of passenger revenue for each of the quarters ended June 30, 1997 and  
1996, or an increase of 28.6%.  Pilot and flight attendant compensation         
increased principally as a result of a 43.2% increase in the average number of  
aircraft in service and an increase of 24.5% in block hours.  During the quarter
ended June 30, 1997, the Company added one leased aircraft to its fleet in May  
1997.  During the quarter ended June 30, 1996 the Company added two leased      
aircraft to its fleet in June 1996.   The Company pays pilot and flight         
attendant salaries for training consisting of approximately six and three weeks,
respectively, prior to scheduled increases in service, causing the compensation 
expense for the quarters ended June 30, 1997 and 1996 to appear high in         
relationship to the average number of aircraft in service.  When the Company is 
not in the process of adding aircraft to its system, it expects that pilot and  
flight attendant expense per aircraft will normalize.  With a scheduled         
passenger operation, and with salaried rather than hourly crew compensation, the
Company's expenses for flight operations are largely fixed, with flight catering
and fuel expenses the principal exception.                                      

Aircraft and Traffic Servicing. Aircraft and traffic servicing expenses were    
$6,788,000 and $5,854,000 for the quarters ended June 30, 1997 and 1996,        
respectively, and represented 19.7% and 20.8% of total revenue.  These include  
all expenses incurred at airports served by the Company, as well as station     
operations administration and flight operations ground equipment maintenance.   
Station expenses include landing fees, facilities rental, station labor and     
ground handling expenses.  Station expenses as a percentage of revenue decreased
during the quarter ended June 30, 1997 over the quarter ended June 30, 1996 as a
result of the Company's rental costs (in particular, the gate rentals at DIA)   
which are largely fixed costs, remaining relatively constant as compared to the 
increase in revenue and more of its "above wing" (including passenger check-in  
at ticket counters, concourse gate operations and cabin cleaning) operations    
were performed by Company personnel rather than by third party suppliers. The   
Company began its own "above wing" operations at Los Angeles International      
Airport in June 1996, Chicago (Midway) in July 1996, Seattle-Tacoma in August   
1996, and El Paso, Texas effective October 1996.  Aircraft and traffic servicing
expenses will increase with the addition of new cities; however, the increased  
existing gate utilization at DIA is expected to reduce per unit expenses.       

Maintenance.  Maintenance expenses of $7,735,000 and $4,288,000 were 22.4% and  
15.2% of total revenue for the quarters ended June 30, 1997 and 1996,           
respectively. These include all maintenance, labor, parts and supplies expenses 
related to the upkeep of the aircraft. Routine maintenance is charged to        
maintenance expense as incurred while major engine overhauls and heavy          
maintenance checks are accrued each quarter.  Maintenance cost per block hour   
was $851 and $588 per block hour for the quarters ended June 30, 1997 and 1996, 
respectively.  Continental Airlines had been providing routine aircraft         
maintenance services for the Company at Denver.  Continental discontinued this  
service in mid-September 1996.  As a result of the discontinued service, the    
Company hired its                                                               

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own aircraft mechanics to perform routine maintenance and subleased a portion of
a hangar from Continental at DIA in which to perform this work. The performance 
of this work by the Company, together with the cost of leasing adequate hangar  
space, increased the Company's maintenance cost per block hour. Management      
believes that these costs will normalize as it adds additional aircraft to its  
fleet. Additionally, maintenance expenses have increased with respect to routine
maintenance on the Boeing 737-200 aircraft.                                     

Promotion and Sales. Promotion and sales expenses totaled $6,299,000 and        
$5,055,000 and were 18.2% and 18.0% of passenger revenue for the quarters ended 
June 30, 1997 and 1996, respectively. These include advertising expenses,       
telecommunications expenses, wages and benefits for reservationists and         
reservations supervision as well as marketing management and sales personnel.   
Credit card fees, travel agency commissions and computer reservations costs are 
included in these costs. The promotion and sales expenses per passenger were    
$18.58 and $18.65 for the quarters ended June 30, 1997 and 1996, respectively.  
Promotion and sales expenses per passenger decreased as a result of a decrease  
in computer reservation system costs, travel agency commissions, and interline  
service charges offset by an increase in advertising expenses.                  

The Company's promotion and sales expenses per passenger decreased by $1.23,    
largely as a result of its new electronic ticket product introduced in January  
1997. The Company's travel agency sales and interline revenue decreased 4.5% and
3.6%, respectively, during the quarter ended June 30, 1997 from the prior       
comparable period with a corresponding increase in direct sales.                

Advertising expenses of $725,000 were 2.2% of passenger revenue for the quarter 
ended June 30, 1997, compared to approximately $480,000 or 1.7% of passenger    
revenue for the quarter ended June 30, 1996. Advertising expenses increased as a
percentage of passenger revenue as the Company increased advertising in response
to increased fare competition from United Airlines and the entry of Western     
Pacific, which began flight operations from DIA on June 29, 1997.               

General and Administrative. General and administrative expenses for the quarters
ended June 30, 1997 and 1996 totaling $1,379,000 and $1,109,000 were 4.0% and   
3.9% of total revenue, respectively. These expenses include the wages and       
benefits for the Company's executive officers and various other administrative  
personnel. Legal and accounting expenses, supplies and other miscellaneous      
expenses are also included in this category.                                    

Depreciation and Amortization. Depreciation and amortization expense of $350,000
and $200,000 were approximately one percent of total revenue for the quarters   
ended June 30, 1997 and 1996, respectively. These expenses include depreciation 
of office equipment, ground station equipment, and other fixed assets of the    
Company. Amortization of start-up and route development costs are not included  
as these expenses have been expensed as incurred.                               

Nonoperating Income (Expenses). Total net nonoperating income totaled $152,000  
for the quarter ended June 30, 1997 compared to $199,000 for the quarter ended  
June 30, 1996, or a decrease of 23.6%, principally a result of a decrease in    
interest income. Interest income decreased from the prior comparable period as a
result of a decrease in cash associated with the net loss incurred during the   
quarter ended June 30, 1997.                                                    

Expenses per ASM. The Company's expenses per ASM for the quarters ended June 30,
1997 and 1996 were 9.08c and 8.62c, respectively, or an increase of 5.3%.       
Expenses per ASM increased over the comparable period as a result of increased  
flight operation expenses resulting from an increase in the average aircraft    
lease expense associated with newer aircraft, increased maintenance expenses    
largely a result of the Company's start-up of its own maintenance facility, and 
increased maintenance expenses associated with the Boeing 737-200 aircraft,     
offset in part by economies of scale as the fixed costs were spread across a    
larger base of operations.                                                      

Expenses per ASM are influenced to some degree by the utilization of aircraft   
and by the seating configuration that each airline employs. For example, with   
the 108 seat all coach seating configuration selected by the Company on five of 
its Boeing 737-200 aircraft, the expenses per ASM of the Company are higher by  
11% when compared with the 120 seat alternative used by many carriers.          

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LIQUIDITY AND CAPITAL RESOURCES                                                 

The Company's balance sheet reflected cash and cash equivalents of $8,531,000 at
June 30, 1997 and $10,286,000 at March 31, 1997. At June 30, 1997, total current
assets were $31,013,000 as compared to $34,895,000 of total current liabilities,
resulting in a working capital deficit of $3,882,000. At March 31, 1997, total  
current assets were $31,470,000 as compared to $32,745,000 of total current     
liabilities, resulting in a working capital deficit of $1,275,000.              

Cash used by operating activities for the quarter ended June 30, 1997 was       
$1,099,000. This is largely attributable to the Company's net loss for the      
period, increases in maintenance deposits and prepaid expenses, offset by       
decreases in trade receivables and increases in air traffic liability and       
accrued maintenance expenses. Cash provided by operating activities for the     
quarter ended June 30, 1996 was $2,886,000. This is attributed primarily to the 
Company's net income for the period, decreases in trade receivables, increases  
in air traffic liability, other accrued expenses, and accrued maintenance       
expenses, offset by increases in restricted investments to secure credit card   
transactions, maintenance and other deposits and a decrease in accounts payable.

Cash used in investing activities for the quarter ended June 30, 1997 was       
$790,000 largely a result of capital expenditures for rotable aircraft          
components and aircraft leasehold costs and improvements for the aircraft       
delivered in May 1997. Cash used in investing activities for the quarter ended  
June 30, 1996 was $4,475,000, which included additional capital expenditures for
the Boeing 737-300s and the two additional Boeing 737-200s leased during the    
quarter ended June 30, 1996, spare parts, ground equipment, computer equipment, 
and leasehold improvements. The Company invested $2,595,000 in short-term       
investments comprised of government backed agencies with maturities of one year 
or less. The Company used cash of $1,185,000 for initial lease acquisition      
security deposits for the Boeing 737-200 aircraft delivered in June 1996.       

Cash provided by financing activities for the quarter ended June 30, 1997 and   
1996 was $134,000 and $6,531,000, respectively. During the quarter ended June   
30, 1996, the Company completed a private placement of its Common Stock that    
resulted in net proceeds of approximately $2,721,000 in April 1996. In May 1996,
the Company notified the warrant holders of the Company's intent to exercise its
redemption rights with respect to warrants not exercised on or before June 28,  
1996. The Company received net proceeds from the exercise of these warrants of  
approximately $13,278,000, $3,841,000 of which was recorded during the quarter  
ended June 30, 1996.                                                            

Five of the Company's Boeing 737-200 aircraft are leased under operating leases 
which originally expired in 1997. The leases provide for up to two renewal terms
of two years each with no increase in basic rent. The Company renewed the leases
for the first two-year renewal period and these leases now expire in 1999. Under
these leases, the Company was required to make security deposits and makes      
deposits for maintenance of these leased aircraft. These deposits totaled       
$625,000 and $4,069,000, respectively, at June 30, 1997.                        

The Company in November 1995 leased two Boeing 737-300 aircraft under operating 
leases which expire in the year 2000. The Company was required to make security 
deposits and makes deposits for maintenance of these leased aircraft. Security  
and maintenance deposits for these aircraft totaled $1,505,000 and $3,195,000,  
respectively, at June 30 1997. These aircraft are compliant with FAA Stage 3    
noise regulations. The Company has issued to each of the two Boeing 737-300     
aircraft lessors a warrant to purchase 100,000 shares of the Company's Common   
Stock at an aggregate purchase price of $500,000. These warrants, to the extent 
not earlier exercised, expire upon the expiration dates of the aircraft leases. 

In June 1996, the Company leased two additional Boeing 737-200 aircraft under   
operating leases which expire in the year 2001. The Company was required to make
security deposits for these aircraft totaling $858,000. Commencing July 1996 the
Company was required to make monthly deposits for maintenance of these leased   
aircraft. At June 30, 1997, these deposits totaled $1,881,000. These aircraft   
were "hush-kitted" by the lessor at its expense during 1996 making them         
compliant with FAA Stage 3 noise regulations. The Company has issued to the     
aircraft lessor two warrants, each of which entitles the lessor to purchase     
70,000 shares of the Company's Common Stock at an aggregate purchase price of   
$503,300 per warrant.                                                           

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In November 1996, the Company took delivery of a leased Boeing 737-300 aircraft 
which it placed in scheduled service in December 1996. The lease term for this  
aircraft is eight years from date of delivery. The Company was required to      
secure the aircraft lease with a letter of credit totaling $600,000. The Company
is also required to make monthly cash deposits for maintenance of this aircraft.
As of June 30, 1997, the Company had made maintenance deposits associated with  
this leased aircraft totaling $546,000.                                         

During the fiscal year ended March 31, 1997, the Company entered into four      
operating lease agreements for four additional new Boeing 737-300 aircraft with 
scheduled deliveries during the Company's fiscal year ended March 31, 1998. The 
Company took delivery of two of these aircraft in May 1997 and August 1997, one 
has a scheduled delivery in late August 1997 and the fourth is scheduled for    
delivery in January 1998. Delivery of the January 1998 aircraft is subject to   
the Company maintaining certain financial covenants which, if not met, permit   
the lessor to terminate the lease prior to delivery. In connection with the     
Boeing 737-300 aircraft to be delivered in late August 1997, the Company has    
issued to the lessor a warrant to purchase 55,000 shares of Common Stock at an  
aggregate purchase price of $385,000. At June 30, 1997, the Company had made    
security deposits totaling $1,971,000 with respect to these aircraft and is     
required to make additional security deposits between July 1997 and April 1998  
totaling $1,145,000 with respect to these aircraft leases. Two each of these    
lease agreements have seven and eight year terms from date of delivery,         
respectively. Two of these leases have up to two one year renewal terms and a   
third may be renewed for up to three one year terms. The Company is required to 
pay monthly cash deposits to each aircraft lessor based on flight hours and     
cycles operated to provide funding of future scheduled maintenance costs. As of 
June 30, 1997, the Company had deposits associated with the aircraft delivered  
in May 1997 totaling $94,000.                                                   

Management is continuing to take steps designed to improve the Company's        
operating performance. Effective January 28, 1997, the Company introduced       
electronic ticketing. Passengers who call the Company directly are presently    
given the option of receiving a paper ticket or a confirmation number in lieu of
a paper ticket. Electronic ticketing will decrease certain costs including      
postage and handling costs, ticket stock, and reduced revenue accounting fees   
because the accounting for electronic ticketing is automated. The Company plans 
to offer its passengers the option of booking flight reservations through the   
Company's Internet site starting in the fall of 1997.                           

The Company is exploring various means to reduce expenses. These include further
reductions in credit card fees and addition of an in-house revenue accounting   
system. The Company believes that it can reduce its airport operating expenses  
at certain cities by performing its own "above wing" operations rather than     
continuing to contract out these services. Since April 1996, conversions to the 
Company's own "above wing" operations occurred at nine of the Company's 14      
airport stations.                                                               

The Company has a contract with a credit card processor that requires the       
Company to provide a letter of credit to match the total amount of air traffic  
liability associated with credit card customers if the Company does not meet    
certain financial covenants and if the credit card processor requests that the  
collateral be increased. There can be no assurance that the Company will be able
to meet these financial covenants. If it had been in default under this contract
as of August 8, 1997, the Company could have been required to increase the      
collateral amount from its present level of $2,000,000 to approximately         
$5,233,000, which would increase the Company's current restricted investment    
balance accordingly.                                                            

The Company's suppliers currently provide goods, services and operating         
equipment on open credit terms. If such terms were modified to require immediate
cash payments, the Company's cash position would be materially and adversely    
affected.                                                                       

Under the terms of the Merger Agreement with Western Pacific, additional        
aircraft leases by the Company would require Western Pacific's approval. The    
Company's goal is to lease a number of additional aircraft to serve additional  
cities from Denver. The Company believes that such a route system would         
facilitate a greater volume of connecting traffic as well as a stable base of   
local traffic and offset the impact of higher DIA-related operating costs       
through more efficient gate utilization. The proceeds from the private placement
completed in April 1996 and the exercise of the warrants in June 1996 have      
provided additional working capital for the Company and, subject to aircraft    
availability, will enable it to further expand its operations through the       
leasing of additional aircraft. The expansion of the Company's operations will  
entail the hiring of additional employees to staff flight and ground operations 
in its new markets and significant initial costs such as deposits for airport   
and aircraft leases. Because of                                                 

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the expansion of the Company's business, and competition within the airline     
industry, which often requires quick reaction by management to changes in market
conditions, the Company may require additional capital to maintain or further   
expand its business.                                                            

Effective February 11, 1997, United Airlines commenced service using its low    
fare United "Shuttle" between Denver and Phoenix, Arizona, a market in which the
Company provides service, as well as additional United Airlines flights in      
certain of the Company's other markets. United Airlines has announced its       
intention to use "Shuttle" between Denver and Salt Lake City, Utah effective in 
late October 1997. Additionally, effective June 29, 1997, Western Pacific began 
operations at DIA. This additional competition, as well as other competitive    
activities by United and other carriers, have had and could continue to have a  
material adverse effect on the Company's revenues and results of operations.    

The Company has incurred substantial operating losses in 1997 and 1996 and has a
working capital deficit at June 30, 1997. In addition, the Company has          
substantial contractual commitments for leasing and maintaining aircraft. The   
Company believes that its existing cash and cash generated from operations will 
be adequate to fund the Company's operations at least through March 31, 1998.   
There can be no assurances, however, that the Company will be successful in     
improving its operating results in fiscal 1998. If its operating results do not 
improve, or if the Merger Agreement with Western Pacific does not close, the    
Company anticipates that it would be required to obtain additional capital or   
other financing to fund its operations. There can be no assurance that such     
additional capital or other financing would be available when needed or         
available on acceptable terms.                                                  

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PART II.  OTHER INFORMATION 

Item 1:    Not applicable                                                       

Item 2:    Changes in Securities                                                
---------------------                                     

              On June 30, 1997, the Board of Directors of the Company approved
           an amendment to the Company's Shareholder Rights Agreement to provide
           that a merger proposal approved by the Board of Directors Constitutes
         a "Qualifying Offer". The effect of the modification was to clarify
 that the proposed merger with Western Pacific constitutes a
           "Qualifying Offer". See "Item 5: Market for Common Equity and Related
        Stockholder Matters Rights Dividend Distribution" in the Company's
Form 10-KSB for the fiscal year ended March 31, 1997.     

Item 6:    Exhibits and Reports on Form 8-K                                     
--------------------------------                          

None                                                      

Exhibit                                                                         
Numbers    Description of Exhibits                                              
-------    -----------------------                                              

27.1     Financial Data Schedule.                                           

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SIGNATURES  

In accordance with the requirements of the Exchange Act of 1934, the registrant 
has duly caused this report to be signed on its behalf by the undersigned,      
thereunto duly authorized.                                                      

   FRONTIER AIRLINES, INC.

Date: August 12, 1997         By: /s/ Samuel D. Addoms                          
                                 -----------------------------------------------
                       Samuel D. Addoms, Principal Executive
                         Officer and Principal Financial Officer

Date: August 12, 1997         By: /s/ Elissa A. Potucek                         
                                 -----------------------------------------------
                                 Elissa A. Potucek, Principal Accounting Officer

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	10/1/02	12
	10/1/99	12
	12/31/98	8		10-Q
	10/1/98	12
	3/31/98	16	17	10-K/A, 10-K405
	12/31/97	8		10-Q
	10/1/97	7	12	8-K
	9/16/97	7
	8/19/97
Filed on:	8/13/97
	8/12/97	19
	8/8/97	1	16
	8/1/97	7
For Period End:	6/30/97	1	18	NT 10-K
	6/29/97	8	17
	3/31/97	6	18	10KSB, NT 10-K
	3/7/97	12
	2/11/97	17
	1/28/97	16
	9/10/96	7
	6/30/96	4	15	10QSB
	6/28/96	15
	7/5/94	7
				List all Filings

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Filing Submission 0000927356-97-000965 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Frontier Airlines Inc/CO – ‘10-Q’ for 6/30/97

As of: Wednesday, 8/13/97 · For: 6/30/97 · Accession #: 927356-97-965 · File #: 0-24126

Previous ‘10-Q’: None · Next: ‘10-Q’ on 11/14/97 for 9/30/97 · Latest: ‘10-Q’ on 1/30/06 for 12/31/05

Quarterly Report — Form 10-QFiling Table of Contents

10-Q — Form 10-Q 2nd QuarterDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Quarterly Report — Form 10-Q
Filing Table of Contents

10-Q — Form 10-Q 2nd Quarter
Document Table of Contents