Originally Posted by
Stayontarget
The last earnings call an investor complained to Barry that it seems Frontier is more concerned about making money with leases than flying people. It’s a little hazy but my understanding is as such…
Example: We order a group of planes for 70M each. The day we would be required to fork over the money to Airbus for a plane we sell that order to the lessor for 100M. In exchange we sign a lease term on that aircraft to that lessor for 400k per month. Company shows it as we made 30M on the quarterly report.
The "profits" from Sale Lease Back transactions are not part of the "net profit" number. The proceeds from any SLB are added to our balance sheet. If we show a "net profit" of $0 that $0 is not impacted in any way by sale lease backs. For example, in Q1 we took delivery of six planes and our cash balance sheet increased by $48 million but that $48 million is NOT baked into the net profit for the quarter. In other words, our "profitability" is based upon revenues (fare and non-fare) minus expenses/liabilities. It is a good thing that our cash on hand is increasing slightly each quarter but again we are not "surviving" on the proceeds from SLB's.