Frontier Makes Money in May, What's Next?

(MoneyWatch)  All this talk about Republic buying Frontier has masked something important. We haven't looked at how Frontier is doing lately. You know what? They're making money. Go figure. Republic may have picked itself up a nice little asset for a song. Frontier made $5.6 million in May net of special items. With those special items included, it would have made $1.1 million. Special items included $8.5 million in bankruptcy costs plus a paper gain of half that amount on fuel hedges. In other words, let's focus on that $5.6 million number to get an idea of how profitable the operation is.

Unit revenue is down 8.7 percent (including ancillary revenues) year-over-year. That's better than other airlines, but it has also seen a greater decrease in capacity than other airlines so you would hope it would outperform on the unit revenue side. The good news, of course, is that unit costs are down even more, and that's why the airline is making money.

Looking backwards, however, is not going to help us considering all the changes going on at the airline these days. Before this whole Republic thing became public, Daniel Shurz was hired as the VP of Strategy and Planning. He has only recently started to leave his mark on the airline's schedules. El Paso and Grand Junction are gone, and other markets are seeing frequency increases.

Of course, there are the questions about what exactly the Republic acquisition will mean for the airline. A codeshare has already been announced between Frontier and Midwest. I doubt that'll add a ton to the bottom line, but it will very likely make AirTran think twice about working with Frontier as they currently do. And might Republic be interested in moving some of Frontier's airplanes to other places? That remains to be seen.

As loyalties shift, Frontier may see some big changes in the future. Having a profitable operation leaves them with a good base to work from, but it's what happens next that will really matter.