AirTran reports loss and announces note offering

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AirTran Holdings, the parent company of AirTran Airways, reported a net loss of $34.8 million for the first quarter compared with income of $2.2 million in the year-earlier period.

Revenues for the first quarter grew 18.3% to $596.4 million, an all-time quarterly record, and passenger unit revenue increased 6.9%.

The airline also announced plans to offer $65 million of convertible senior notes due 2015. Concurrently with the offering, the airline intends to offer 14,250,000 shares of its common stock.

The underwriters on the offerings have the option to purchase up to an additional 2,137,500 shares of common stock from AirTran solely to cover over allotments, if any.

AirTran intends to place a portion of the net proceeds of the notes offering in an escrow account and plans to use the remaining net proceeds for general corporate purposes.

Morgan Stanley will act as bookrunner for each of the offerings and Credit Suisse Securities will act as co-lead manager for each of the offerings

AirTran’s first quarter traffic rose by 19.2% on a 10.8% increase in capacity, resulting in a record first quarter load factor of 75.3%, a 5.2 point increase over 2007.

During the quarter, AirTran Airways added four new Boeing 737-700 aircraft, which increased its 737 fleet to 54 aircraft and total fleet to 141 aircraft.

“Despite record revenues, record high fuel costs remain a tremendous challenge for all airlines," says Bob Fornaro, AirTran Airways' president and chief executive officer.

The average price per gallon of fuel increased 49.3% to $3.00 in the first quarter. Total fuel expense was $268 million, up $102 million from the prior year.

During the first quarter, AirTran realized $4.1 million of hedging gains which reduced fuel expense. At quarter end, the estimated net asset fair value of AirTran's fuel related derivative financial instruments was $17.3 million, including unrecognized gains of $13 million.

Going forward the airline has increased its fuel hedge positions to cover approximately 50% of its fuel needs for the remainder of the year.