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Author: mkha Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 580  
Subject: Some other numbers Date: 2/24/2001 5:05 PM
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I did some research this week. Not really sure what it means, but if I'm even close on these numbers, the ride will get very interesting.

The following numbers are traffic for FRNT and for their home base, Denver International Airport. Even though we're two months into 2001, I wasn't able to find any 2000 numbers. Also, please note that FRNT's year ends March 31, so this is a quarter offset. Shouldn't matter much in the whole picture, I don't think. Here we go:

Year DIA VOLUME GROWTH FRNT VOL GROWTH % of DIA VOL
1995 15,602,678 758,000 4.9%
1996 16,178,997 3.7% 1,180,000 55.7% 7.3%
1997 17,530,200 8.4% 1,356,000 14.9% 7.7%
1998 18,444,540 5.2% 1,664,000 22.7% 9.0%
1999 19,031,209 3.2% 2,284,000 37.3% 12.0%

Average Growth: 5.09% 31.75%

What does this tell us? With Colorado's industry growing, we expect to see the airport's volume to continue to grow as well. 5% seems like a nice average figure.

Frontier did pretty well, too. Its initial growth was interrupted. The dips in 1997 and 1998 do coincide with the battle WestPac declared on Frontier.

Finally, even through the WestPac battle, Frontier shows a clear upward trend in its percentage of DIA volume.

Now let's look at the interesting stuff. Let's assume that DIA's volume increases at 5% the next five years (that's 2000, plus 5 years). And let's assume that Frontier continues to grow, but well below the 31.75% the table average shows. Let's make the assumption that they already have the most profitable markets and that even though analysts predict 19% growth, Frontier can only muster 15.88%, half of what it's done to date.

Year DIA VOLUME FRNT VOL % of DIA VOL
2000 19,982,769 2,646,585 13.2%
2001 20,981,908 3,066,730 14.6%
2002 22,031,003 3,553,574 16.1%
2003 23,132,553 4,117,704 17.8%
2004 24,289,181 4,771,389 19.6%
2005 25,503,640 5,528,847 21.7%

Now, is it realistic for Frontier to double in size by 2005? That's a call individuals have to make. Analysts think FRNT will do better than that. Even Sam Addoms, at last years's annual meeting said he's lined up options for 45 planes in the new Airbus fleet. That's a double.

Is it realistic for Frontier to attain 1/5 of DIA's total volume? Well, it's not unrealistic if they double in size. 22% wouldn't be a double of their current volume.

What does this do to profitability? Frontier has an excellent track record of growing profits as they grow volume. Certainly the more seats they sell, the better off they are. Their seat selling abbility has grown. They participate in all travel agent pools. They've grown their alliances and are constantly building new ones and they are very visable in Denver.

Of course all the standard disclaimers apply and you have to make up your own mind, but do remember, I used very conservative numbers. I like this math.

Max
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