Economically Speaking...

As we are all too aware, the current economic climate is forcing everyone from the average family to major corporations to re-assess their finances. The airline industry is no exception and the demise in recent weeks of several well know competitors only reinforces the need for analysis and where required, changes to be made.

Over the last couple of months, MetroAir management has been reviewing all aspects of our operations in a bid to remove all unnecessary expenditures and to ensure we avoid possible financial troubles in the future.

A comprehensive review of our fleet operation has clearly shown that various aircraft types are now becoming cost prohibitive. As such, the decision was made to phase these aircraft out of our fleet and implement a temporary delay in the delivery of our new orders to allow time for the market to stabilize.

The realization that higher maintenance costs on our B737-200’s had dramatically reduced profit margins for the aircraft was hard to take. The 732 had served us well but sentiment aside, we now had the ability to remove this aircraft from service as we had sufficient cover with our new and more efficient Airbus A319 and A321 aircraft.

It was however, our Long-Haul fleet that gave us most cause for concern. All three Boeing aircraft types on these routes were simply not as efficient and cost effective as they once were. Higher fuel charges and uncompetitive lease rates were impacting profit margins. Also, from an operational standpoint, they were no longer suitable for the route expansion we had planned in the future due to weight and range restrictions.

Our Previous Long-Haul Fleet.

– 5 x 767-200
– 3 x 767-200ER
– 2 x 747-200
– 2 x A330-200

Our Current Long-Haul Fleet.

– 10 x 757-200
– 4 x A330-200 (No.5 due May 2008)

By acquiring the 10 Boeing 757-200’s, we have in effect reduced the number of aircraft types in the fleet, thus drastically reducing and saving in maintenance costs. The 752’s better serve all future planned destinations as they have substantially lower operating costs and are more versatile should we require them for charter work. We are confident that our new 752’s will serve us favorably for the foreseeable future.

By utilizing our fleet, we have continued to support expansion into European and Asian markets whilst consolidating our domestic route network with our partner Allegius.

Although, we have had to make a substantial financial commitment to acquire the 752’s, we have re-couped $13 million from the sale of our five 762’s. We have also passed on the leases of the 200ER’s to a new client without incurring any financial penalty. Again we are confident the decisions we have made will prove correct and will be vital in the continuing growth and success of the airline.

Taking these actions will ensure our hard earned rank in the US Airline Industry will continue to be safe. Being proactive in this regard allows us to pass on such cost savings to our customers who will continue to receive the same high level of service expected from MetroAir.

Del
Chief Financial Officer