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MAIR Holdings, Inc. Reports Fiscal 2006 Fourth Quarter and Year-End Results

Posted on: Monday, 26 June 2006, 09:00 CDT

MAIR Holdings, Inc. (the "Company") (NASDAQ:MAIR) today reported a net loss of $54.1 million, or $2.63 per diluted share, for the fiscal 2006 fourth quarter ended March 31, 2006 compared to a net loss of $1.7 million, or $0.08 per share, during the same quarter a year ago.

The Company's $54.1 million net loss in the fourth quarter of fiscal 2006 was primarily the result of a $45.6 million net loss at the Company's subsidiary, Mesaba Aviation, Inc. ("Mesaba"). Mesaba's losses were driven by:

-- $20.2 million of reorganization items, mostly due to

additional unsecured creditors' claims filed in the quarter;

-- $19.6 million in income tax expense due to recording a full

valuation allowance on Mesaba's net deferred tax assets; and

-- $6.2 million in operating losses as Mesaba reduced its flying

by 12 fewer Avros and 11 fewer Saabs in the fourth quarter

year-over-year.

The Company also recorded an $8.9 million impairment charge in the fourth quarter to write off its remaining equity investment in Mesaba.

For the fiscal year ended March 31, 2006, the Company reported a net loss of $82.8 million, compared to net income of $7.4 million in fiscal 2005. On a per-share basis, the fiscal 2006 results equal a net loss of $4.02 per diluted share compared with net income of $0.35 per diluted share in fiscal 2005.

"Fiscal 2006 financial results were very disappointing," said Paul F. Foley, MAIR's president and chief executive officer. "Northwest Airlines' decision to withhold approximately $30 million in regularly scheduled payments to Mesaba, its bankruptcy filing in September 2005, and its subsequent decision to reduce Mesaba's fleet by more than 50% led to Mesaba's own bankruptcy in October 2005 and to the Company incurring substantial financial losses in fiscal 2006. In fiscal 2007, we will explore growth opportunities, including acquisitions to diversify both within and outside the airline industry."

The Company's $82.8 million net loss in fiscal 2006 was primarily the result of a $70.7 million net loss at Mesaba. Mesaba's losses were due to the $45.6 million fourth fiscal quarter loss described above and a $29.1 million reserve for the unsecured prepetition receivables due from Northwest to Mesaba for services provided by Mesaba prior to the date on which Northwest filed its bankruptcy petition (net of certain offsetting liabilities). In addition, the Company recorded the following charges in fiscal 2006:

-- a $4.8 million charge for MAIR's guaranty related to the

Cincinnati hangar that Mesaba vacated in October 2005;

-- an $8.9 million charge to write off MAIR's remaining equity

investment in Mesaba; and

-- a $2.5 million goodwill impairment charge associated with Big

Sky Transportation Co., the Company's subsidiary.

As previously disclosed, Mesaba filed for Chapter 11 bankruptcy on October 13, 2005, and MAIR deconsolidated Mesaba's financial results effective the date of its bankruptcy. As a result, Mesaba's assets and liabilities have been removed from the Company's condensed consolidated balance sheet at March 31, 2006 and replaced with MAIR's investment in Mesaba. Because MAIR owns all of the common stock of Mesaba, this change did not affect the amount of net loss MAIR recorded resulting from Mesaba's operations in any current or prior period, but did result in Mesaba's net loss from the date of the bankruptcy forward being presented as "Equity in loss of Mesaba Aviation, Inc." rather than its results being included in each individual income statement line item, as was the case for periods prior to October 13, 2005.

QUARTERLY CONFERENCE CALL

MAIR Holdings will conduct a live webcast to discuss its fourth quarter and fiscal 2006 results today, June 26th, at 10:00 A.M. (central time). The webcast will be available through the MAIR Holdings web site at www.mairholdings.com under the "Investor" link.

ABOUT THE COMPANY

MAIR Holdings' primary business units are its regional airline subsidiary Mesaba Aviation, Inc., d/b/a Mesaba Airlines, and its regional airline subsidiary Big Sky Transportation Co., d/b/a Big Sky Airlines. MAIR Holdings, Inc. is traded under the symbol MAIR on the NASDAQ National Market. More information about MAIR Holdings is available on the Internet at www.mairholdings.com.

Mesaba operates as a Northwest Jet Airlink and Airlink partner under an airline service agreement with Northwest Airlines. The airline serves 99 cities in the United States and Canada from Northwest's and Mesaba's three major hubs: Detroit, Minneapolis/St. Paul and Memphis. Mesaba operates an advanced fleet of regional jet and jet-prop aircraft, consisting of the 69 passenger Avro RJ85, the 30-34 passenger Saab SF340 and the 50 passenger Canadair Regional Jet. Mesaba filed for Chapter 11 bankruptcy protection on October 13, 2005 and continues to operate as a debtor-in-possession. Mesaba maintains a web site at www.mesaba.com.

Big Sky currently serves 20 communities in Montana, Colorado, Idaho, Oregon, Washington and Wyoming with a fleet of 19 passenger Beechcraft 1900D aircraft. Big Sky is based in Billings, Montana and has codeshare agreements with Northwest Airlines, Alaska Airlines, Horizon Air and America West Airlines which allows customers the convenience of traveling with one ticket, through baggage checking and economical through fares, to destinations throughout the world. Big Sky is a provider of air service under the Essential Air Service program administered by the Department of Transportation. Big Sky maintains a web site at www.bigskyair.com.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements that are based on the best information currently available to management. These forward-looking statements are intended to be subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual developments will be those anticipated by MAIR Holdings, Inc. Actual results could differ materially from those projected because of a number of factors, some of which MAIR Holdings, Inc. cannot predict or control. For a discussion of some of these factors, please see the 'Cautionary Note Regarding Forward-Looking Statements' and 'Risk Factors' in the company's Form 10-Q for the quarter ended December 31, 2005.

Note to Editors: Summary financial and operating information follows. MAIR Holdings, Inc. Condensed Consolidated Statements of Operations (unaudited - in thousands, except per share information) Quarter Ended March 31 ------------------------------------- Restated Favorable 2006 (1) 2005 (2) (Unfavorable) ------------- --------- ------------- Operating revenues Passenger $3,229 $99,005 Freight and other 2,214 11,859 ------------- --------- Total revenues 5,443 110,864 -95.1% ------------- --------- Operating expenses Wages and benefits 2,561 39,207 Aircraft fuel 1,285 1,493 Aircraft maintenance 962 20,572 Aircraft rents 426 25,762 Landing fees 97 1,639 Insurance and taxes 678 1,276 Depreciation and amortization 207 3,392 Administrative and other 4,789 20,756 Impairment and other charges 8,935 - ------------- --------- Total operating expenses 19,940 114,097 82.5% ------------- --------- Operating (loss) income (14,497) (3,233) -348.4% Non operating income (expense) Equity in loss of Mesaba Aviation, Inc

. (39,618) - Other nonoperating income, net 1,413 618 ------------- --------- Income (loss) before income taxes (52,702) (2,615) NM Provision (benefit) for income taxes 1,385 (877) ----------------------- Net (loss) income $(54,087) $(1,738) NM ======================= (Loss) earnings per common share - basic $(2.63) $(0.08) (Loss) earnings per common share - diluted $(2.63) $(0.08) Weighted average shares - basic 20,592 20,574 Weighted average shares - diluted 20,592 20,574 Year Ended March 31 ------------------------------------- Restated Favorable 2006 (1) 2005 (2) (Unfavorable) ---------- ------------ ------------- Operating revenues Passenger $228,920 $400,398 Freight and other 27,359 42,212 ---------- ------------ Total revenues 256,279 442,610 -42.1% ---------- ------------ Operating expenses Wages and benefits 88,666 148,652 Aircraft fuel 4,826 2,471 Aircraft maintenance 49,940 84,276 Aircraft rents 56,251 102,478 Landing fees 5,781 10,208 Insurance and taxes 5,368 7,383 Depreciation and amortization 8,127 14,634 Administrative and other 49,818 63,869 Impairment and other charges 50,203 - ---------- ------------ Total operating expenses 318,980 433,971 26.5% ---------- ------------ Operating (loss) income (62,701) 8,639 NM Non operating income (expense) Equity in loss of Mesaba Aviation, Inc. (39,953) - Other nonoperating income, net 5,964 2,320 ---------- ------------ Income (loss) before income taxes (96,690) 10,959 NM Provision (benefit) for income taxes (13,842) 3,604 ---------- ------------ Net (loss) income $(82,848) $7,355 NM ========== ============ (Loss) earnings per common share - basic $(4.02) $0.36 (Loss) earnings per common share - diluted $(4.02) $0.35 Weighted average shares - basic 20,584 20,505 Weighted average shares - diluted 20,584 21,050 MAIR Holdings, Inc. Condensed Consolidated Balance Sheets (unaudited - in thousands) March 31 March 31 2006 (1) 2005 --------- --------- Assets Cash and cash equivalents $47,135 $57,968 Short term investments 44,117 69,669 Other current assets 7,184 59,910 Net property and equipment 1,423 38,421 Long term investments 19,484 43,240 Other assets, net 2,599 11,746 --------- --------- Total assets $121,942 $280,954 ========= ========= Liabilities and Shareholders' Equity Current liabilities $12,571 $82,206 Other liabilities and deferred credits 772 6,069 Shareholders' equity 108,599 192,679 --------- --------- Total liabilities and shareholders' equity $121,942 $280,954 ========= ========= (1) Fiscal 2006 amounts reflect the deconsolidation of Mesaba's financial results effective October 13, 2005 (2) Fiscal 2005 amounts have been restated to reflect corrections related to the presentation of certain reimbursable pass-through costs at Mesaba, primarily fuel. Mesaba Aviation, Inc. Condensed Statements of Operations (unaudited - in thousands) Quarter Ended March 31 ------------------------------------- Restated Favorable 2006 2005 (1) (Unfavorable) ------------- --------- ------------- Operating revenues Passenger $77,334 $97,176 Freight and other 8,885 9,890 ------------- --------- Total revenues 86,219 107,066 -19.5% ------------- --------- Operating expenses Wages and benefits 33,750 37,151 Aircraft maintenance 19,442 20,033 Aircraft rents 19,618 25,298 Landing fees 1,990 2,473 Insurance and taxes 1,419 918 Depreciation and amortization 2,671 3,203 Administrative and other 14,344 18,372 Impairment and other charges (800) - ------------- --------- Total operating expenses 92,434 107,448 14.0% ------------- --------- Operating (loss) income (6,215) (382) NM Non operating income (expense) Other nonoperating income, net 462 99 ------------- --------- (Loss) income before reorganization items and income taxes (5,753) (283) NM Reorganization items, net 20,239 - (Loss) income before income taxes (25,992) (283) NM Provision (benefit) for income taxes 19,598 154 ------------- --------- Net (loss) income $(45,590) $(437) NM ============= ========= Year Ended March 31 ------------------------------------- Restated Favorable 2006 2005 (1) (Unfavorable) ------------- --------- ------------- Operating revenues Passenger $373,031 $392,808 Freight and other 35,783 34,725 ------------- --------- Total revenues 408,814 427,533 -4.4% ------------- --------- Operating expenses Wages and benefits 145,495 140,871 Aircraft maintenance 83,368 81,860 Aircraft rents 92,948 100,502 Landing fees 9,333 9,959 Insurance and taxes 6,346 6,156 Depreciation and amortization 12,243 13,844 Administrative and other 68,000 59,885 Impairment and other charges 31,206 - ------------- --------- Total operating expenses 448,939 413,077 -8.7% ------------- --------- Operating (loss) income (40,125) 14,456 NM Non operating income (expense) Other nonoperating income, net 1,194 259 ------------- --------- (Loss) income before reorganization items and income taxes (38,931) 14,715 NM Reorganization items, net 23,395 - (Loss) income before income taxes (62,326) 14,715 NM Provision (benefit) for income taxes 8,408 6,611 ------------- --------- Net (loss) income $(70,734) $8,104 NM ============= ========= (1) Fiscal 2005 amounts have been restated to reflect corrections related to the presentation of certain reimbursable pass-through costs at Mesaba, primarily fuel. Mesaba Avaiation, Inc. Condensed Balance Sheets (unaudited - in thousands) March 31 March 31 2006 2005 --------- --------- Assets Cash and cash equivalents $20,718 $20,357 Short term investments 3,262 - Other current assets 54,304 55,569 Net property and equipment 32,532 36,585 Long term investments 6,761 3,615 Other assets, net 864 4,751 --------- --------- Total assets $118,441 $120,877 ========= ========= Liabilities and Shareholders' Equity Current liabilities $52,984 $73,580 Other liabilities and deferred credits 2,547 5,367 Liabilities subject to compromise 59,973 - Shareholders' equity 2,937 41,930 --------- --------- Total liabilities and shareholders' equity $118,441 $120,877 ========= ========= MAIR Holdings, Inc. Selected Operating Statistics By Operating Entity (unaudited) Quarter Ended March 31 -------------------------------- Favorable 2006 2005 (Unfavor) ---------- ---------- ---------- Mesaba Aviation, Inc. Passengers 1,081,626 1,333,510 -18.9% ASMs (000's) 558,889 756,681 -26.1% RPMs (000's) 371,130 475,422 -21.9% Load Factor 66.4% 62.8% 3.6 pts Departures 42,232 50,684 -16.7% Revenue per ASM (cents) 15.4 14.1 9.2% Cost per ASM (cents) 16.5 14.2 -16.2% Cost per ASM (cents) 16.7 14.2 -17.6% excluding impairment and other charges Big Sky Transportation Co. Passengers 27,998 19,743 41.8% ASMs (000's) 20,652 13,843 49.2% RPMs (000's) 7,821 4,974 57.2% Load Factor 37.9% 35.9% 2.0 pts Departures 5,645 4,495 25.6% Revenue per ASM (cents) 26.4 27.4 -3.6% Cost per ASM (cents) 36.8 46.0 20.0% Cost per ASM (cents) 36.5 46.0 20.7% excluding impairment and other charges Year Ended March 31 -------------------------------- Favorable 2006 2005 (Unfavor) ---------- ---------- ---------- Mesaba Aviation, Inc. Passengers 5,452,424 5,623,731 -3.0% ASMs (000's) 2,755,577 3,064,167 -10.1% RPMs (000's) 1,861,110 2,003,910 -7.1% Load Factor 67.5% 65.4% 2.1 pts Departures 198,035 207,067 -4.4% Revenue per ASM (cents) 14.8 14.0 5.7% Cost per ASM (cents) 16.3 13.5 -20.7% Cost per ASM (cents) 15.2 13.5 -12.6% excluding impairment and other charges Big Sky Transportation Co. Passengers 113,525 85,455 32.8% ASMs (000's) 77,786 59,284 31.2% RPMs (000's) 32,193 21,630 48.8% Load Factor 41.4% 36.5% 4.9 pts Departures 21,615 19,423 11.3% Revenue per ASM (cents) 26.3 25.4 3.5% Cost per ASM (cents) 36.3 33.7 -7.7% Cost per ASM (cents) 33.1 33.7 1.8% excluding impairment and other charges

Source: Business Wire

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