Atlantic Coast Airlines Holdings, Inc. Reports Second Quarter 2004 Financial and Operating Results

Atlantic Coast Airlines Holdings, Inc. Reports Second Quarter
2004 Financial and Operating Results 


DULLES, Va., July 28  /PRNewswire-FirstCall/ -- Atlantic Coast Airlines
Holdings, Inc. (NASDAQ:ACAI), parent of Atlantic Coast Airlines (ACA) and
Independence Air, today reported a second quarter 2004 net loss of $27.1
million (($0.60) per diluted share) compared to second quarter 2003 net income
of $45.7 million ($1.01 per diluted share) in accordance with Generally
Accepted Accounting Principles (GAAP).  The company's results for second
quarter 2004 and 2003 reflect several special items as noted below and in the
Pro-Forma Financial Results table at the end of this press release.  The
company's net loss for second quarter 2004 includes:

--$21.9 million (pre-tax) charge for the early retirement of ten leased
Jetstream-41 (J-41) turboprop aircraft --$3.6 million (pre-tax) impairment
charges to write-down the value of one owned 328JET aircraft and certain J-41
expendable parts inventory to current estimated fair market value

Excluding the charges and credits, the company reported a net loss of $11.4
million or ($0.25) per diluted share compared to net income of $17.2 million or
$0.38 per diluted share in the second quarter 2003.  A reconciliation of
results as reported in accordance with GAAP to these non- GAAP presentations
for the three and six months ended June 30, 2004 and 2003 is included in the
Pro-Forma Financial Results table at the end of this press release.

Results for the second quarter were impacted by the start of the transition to
Independence Air. Results reflect reduced revenue as aircraft exited the
company's United Express program commencing June 4, 2004 and were phased into
Independence Air service commencing June 16, 2004, as well as increased sales
and marketing expense associated with the Independence Air operations.  In
addition, second quarter results were impacted by the following items:

--$1.1 million United revenue dispute -- United withheld $1.1 million from
payments due in June.  The company believes these payments were required under
its agreements with United and has filed a motion with the bankruptcy court to
collect this amount. --$1 million for CRJ painting expense --$1 million reserve
for an FAA fine previously disclosed and for a potential liability associated
with a prior grievance filed under the company's labor agreements

The company's exit from the United Express program as a result of United's
decision to reject its agreement with ACA is nearly complete, with the transfer
of the last aircraft and stations out of the United Express program scheduled
for August 3, 2004.  Once flights have been completed on that date, the company
will no longer operate in partnership with United, and ACA's remaining 26
United Express CRJs will be released and undergo interior and exterior upgrades
prior to entering service for Independence Air.

The five J-41 turboprops currently in the United Express program will be
immediately retired, leaving the company with a modern all-jet fleet.

In addition, the company is working on a transition plan with Delta Air Lines
to exit the company's Delta Connection agreement. Following the decision by
Delta to terminate the agreement without cause, the company exercised its right
in July to require Delta to assume the leases on 30 of the 33 328JETs that are
used in the Delta Connection operation. The company currently anticipates that
it will finish service in the Delta Connection program and transfer 30 of its
328JET aircraft to Delta by November 2, 2004.

On June 16, 2004, the company began new low-fare service as Independence Air
from Washington Dulles International Airport. To date, new service and market
launches continue as scheduled.  Independence Air now has 56 jet aircraft in
service, while the upgrade process for the remaining 31 jets remains on or
ahead of schedule.  Two-thirds of the "A" concourse at Dulles -- constituting
24 aircraft parking positions -- has been upgraded for the Independence Air
operation, with the final one-third to be converted in August.  Eight more
gates in the "B" concourse designed to handle A319 service will come online
beginning in the fourth quarter of this year. Service currently exists from
Washington Dulles to 22 markets, with additional flights to the following
destinations scheduled to commence or expand in the coming weeks:

August 1:  New York/JFK (13 daily roundtrips, expanding to 17 on 8/4),
Greensboro (9 daily roundtrips), Cleveland (9 daily roundtrips),
Savannah/Hilton Head (6 daily roundtrips), Atlanta (expands from 8 daily
roundtrips to 16)

August 15:  Hartford (8 daily roundtrips), Columbus (8 daily roundtrips),
Dayton (8 daily roundtrips), Indianapolis (7 daily roundtrips)

August 23:  Detroit (8 daily roundtrips), Pittsburgh (8 daily roundtrips),
Providence (8 daily roundtrips), Louisville (6 daily roundtrips), Jacksonville
(expands from 6 daily roundtrips to 7)

September 1:  Stewart/Newburgh (6 daily roundtrips)

By September 1, 2004, the Independence Air schedule will grow to 600 daily
departures, and its operation at Washington Dulles will be the largest low-
fare hub in the United States in terms of number of departures.

Prior to the opening of trading on August 4, 2004, the company will change the
name of its corporate parent and stock ticker symbol to reflect its newly-
premiered Independence Air brand name.  Parent company Atlantic Coast Airlines
Holdings, Inc. will become FLYi, Inc. and its symbol on the Nasdaq National
Market will change from ACAI to FLYI, mirroring the Independence Air web
address http://www.flyi.com/. Current shareholders will not need to take any
action as a result of this change. The operating entity will continue to
operate as Atlantic Coast Airlines through November 2, 2004, at which time it
will be changed to Independence Air, Inc. and the company's FAA operating
certificate will reflect that identity.

Independence Air will begin adding 27 brand new 132-passenger Airbus A319s at
Washington Dulles this fall.  The Airbus aircraft -- scheduled to launch in
November -- will allow Independence Air to offer low-fare service non-stop from
Washington to major destinations in Florida, the Midwest and across the country
to the West Coast.  Independence Air plans to add live satellite TV or other
programming in every seatback of its Airbus aircraft early next year.

The company employs over 4,200 aviation professionals. For more information
about Atlantic Coast Airlines Holdings, Inc., visit our website at
http://www.atlanticcoast.com/.  For more information about Independence Air,
you are invited to visit http://www.flyi.com/.

Statements in this press release and by company executives regarding its
implementation of new business strategies, as well as regarding operations,
earnings, revenues and costs, include forward-looking information.  A number of
risks and uncertainties exist which could cause actual results to differ
materially from these projected results. Such risks and uncertainties include,
among others: the ability of the Company to implement its transition out of the
United Express and Delta Connection programs; the ability to effectively
implement its low-fare business strategy utilizing regional jets and Airbus
aircraft, and to compete effectively as a low-fare carrier, including passenger
response to the Company's new service, and the response of competitors with
respect to service levels and fares in markets served by the Company; the
effects of high fuel prices on the Company; the ability of government agencies
involved in airport operations to handle the increased number of flights and
passengers anticipated at Washington Dulles without interference with airline
operations; the ability to complete the acquisition of, obtain certification
for, and secure financing of, its Airbus aircraft, and to successfully
integrate these aircraft into its fleet; the ability to implement its
assignment to Delta or others the leases of the 328JET aircraft currently used
in the Company's Delta Connection operations; the possibility that the Company
will remain obligated under the leases for 328JET aircraft currently used in
the Delta Connection operations anticipated to be assigned to Delta, and would
be obligated to fulfill these obligations should Delta default at any time
prior to the expiration of the leases; unexpected costs or procedural
complications arising from the insolvency of Fairchild Dornier GmbH, the
manufacturer and equity owner of the 328JETs; the ability to successfully
remarket the J-41 aircraft; the ability to successfully hire and train
employees in sufficient numbers to implement the transition; the ability to
reach agreement with AMFA and AFA-CWA on mutually satisfactory contracts; and
general economic and industry conditions, any of which may impact the Company,
its aircraft manufacturers and its other suppliers in ways that the Company is
not currently able to predict.  Certain of these and other risk factors are
more fully disclosed under "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003 and in its
Quarterly Report on Form 10-Q for the period ended March 31, 2004. These
statements are made as of July 28, 2004 and Atlantic Coast Airlines Holdings,
Inc. undertakes no obligation to update any such forward-looking information,
including as a result of any new information, future events, changed
expectations or otherwise.

                 Condensed Consolidated Financial Results
                 (in thousands, except per share amounts)
                                Unaudited
                                    Second Quarter Ended June 30,
                                                                      Pct.
                                          2004            2003      Change
  Operating revenues:
  Passenger revenue                   $189,708        $223,720      (15.2%)

  Other revenue                            778           3,410      (77.2%)
  Total operating revenues             190,486         227,130      (16.1%)

  Operating expenses:
  Salaries and related costs            53,539          53,657       (0.2%)
  Aircraft fuel                         39,042          32,458       20.3%
  Aircraft maintenance and materials    23,012          20,390       12.9%
  Aircraft rentals                      31,254          32,356       (3.4%)
  Sales and marketing                   17,709           5,831      203.7%
  Facility rents and landing fees       12,673          12,674         nmf
  Depreciation and amortization         10,400           7,009       48.4%
  Other                                 22,017          20,135        9.3%
  Aircraft early retirement charge      21,867         (34,586)        nmf
  Total operating expenses             231,513         149,924       54.4%

  Operating income (loss)              (41,027)         77,206     (153.1%)

  Non-operating expense                 (2,862)         (1,210)     136.5%
  Government compensation                    -           1,520         nmf
  Income (loss) before taxes           (43,889)         77,516     (156.6%)
  Income tax provision (benefit)       (16,813)         31,781     (152.9%)

  Net income (loss)                   $(27,076)        $45,735     (159.2%)

  Net income (loss) per common
   and common equivalent shares:
           Basic                        $(0.60)          $1.01
           Diluted                      $(0.60)          $1.01

  Weighted average number of common
   and common equivalent shares
           Basic                        45,334          45,247
           Diluted                      45,334          45,344


                     Operating Statistics-Second Quarter
                                                                     Pct.
                                          2004           2003      Change
  Revenue passenger miles (000's)      776,735        854,915       (9.1%)
  Available seat miles (000's)       1,051,347      1,135,166       (7.4%)
  Load factor                            73.9%          75.3%   (1.4 pts.)
  Passengers                         1,977,751      2,181,332       (9.3%)
  Revenue departures                    65,823         73,249      (10.1%)
  Revenue block hours                   94,469        103,494       (8.7%)
  Yield per RPM (cents)                   24.4           26.2       (6.9%)
  Passenger revenue per ASM (cents)       18.0           19.7       (8.6%)
  Operating cost per ASM (cents)          22.0           13.2       66.7%
  Operating cost per ASM excluding
   aircraft early retirement charge
   (cents)                                19.9           16.3       22.1%
  Operating cost per ASM excluding
   fuel and aircraft early retirement
   charge (cents)                         16.2           13.4       20.9%
  Operating margin                      (21.5%)         34.0% (55.5 pts.)
  Operating margin excluding aircraft
   early retirement charge              (10.1%)         18.8% (28.8 pts.)
  Average passenger trip length (miles)    393            392        0.2%


                 Condensed Consolidated Financial Results
                 (in thousands, except per share amounts)
                                Unaudited
                                        Six Months Ended June 30,
                                                                      Pct.
                                          2004            2003      Change
  Operating revenues:
  Passenger revenue                   $399,146        $422,322       (5.5%)
  Other revenue                          3,391           9,017      (62.4%)
  Total operating revenues             402,537         431,339       (6.7%)

  Operating expenses:
  Salaries and related costs           107,505         109,178       (1.5%)
  Aircraft fuel                         77,991          72,309        7.9%
  Aircraft maintenance and materials    44,190          42,650        3.6%
  Aircraft rentals                      62,961          64,095       (1.8%)
  Sales and marketing                   25,084          12,267      104.5%
  Facility rents and landing fees       25,802          24,701        4.5%
  Depreciation and amortization         17,694          13,119       34.9%
  Other                                 45,433          46,549       (2.4%)
  Aircraft early retirement charge      28,618         (34,586)     182.7%
  Total operating expenses             435,278         350,282       24.3%

  Operating income (loss)              (32,741)         81,057     (140.4%)

  Non-operating expense                 (5,207)         (1,678)    (210.3%)
  Government compensation                    -           1,520         nmf
  Income (loss) before taxes           (37,948)         80,899     (146.9%)
  Income tax provision (benefit)       (14,496)         33,169     (143.7%)

  Net income (loss)                   $(23,452)        $47,730     (149.1%)

  Net income (loss) per common
   and common equivalent shares:
           Basic                        $(0.52)          $1.06
           Diluted                      $(0.52)          $1.05

  Weighted average number of common
    and common equivalent shares:
           Basic                        45,334          45,236
           Diluted                      45,334          45,334





               Operating Statistics-Six Months Ending June 30,
                                                                      Pct.
                                          2004            2003      Change
  Revenue passenger miles (000's)    1,514,643       1,600,999       (5.4%)
  Available seat miles (000's)       2,184,084       2,235,709       (2.3%)
  Load factor                            69.3%           71.6%   (2.3 pts.)
  Passengers                         3,859,553       4,103,941       (6.0%)
  Revenue departures                   135,606         145,268       (6.7%)
  Revenue block hours                  195,948         209,112       (6.3%)
  Yield per RPM (cents)                   26.4            26.4        0.0%
  Passenger revenue per ASM (cents)       18.3            18.9       (3.2%)
  Operating cost per ASM (cents)          19.9            15.7       26.8%
  Operating cost per ASM excluding
   aircraft early retirement charge
   (cents)                                18.6            17.2        8.1%
  Operating cost per ASM excluding
   fuel and aircraft early retirement
   charge (cents)                         15.0            14.0        7.1%
  Operating margin                       (8.1%)          18.8% (26.9 pts.)
  Operating margin excluding aircraft
   early  retirement charge              (1.0%)          10.8% (11.8 pts.)
  Average passenger trip length (miles)    392             390        0.5%


                       Pro-Forma Financial Results
                 (in thousands, except per share amounts)


           Second Quarter 2004             Income    Net Income     EPS
                                           (loss)      (loss)
                                         Before Tax
  Loss as reported in accordance with
   GAAP                                    $(43,889)   $(27,076)    $(0.60)
  J-41 retirement charge                     21,867      13,514       0.30
  Impairment losses                           3,537       2,185       0.05

  Pro-forma results                        $(18,485)   $(11,377)    $(0.25)


           Second Quarter 2003             Income     Net Income     EPS
                                           Before
                                            Tax
  Income as reported in accordance with
   GAAP                                     $77,516     $45,735      $1.01
  Reversal of the J-41 retirement charge    (34,586)    (20,406)     (0.45)
  Portion of the United rate settlement
   related to  previous period              (12,343)     (7,282)     (0.16)
  Government compensation                    (1,520)       (897)     (0.02)

  Pro-forma results                         $29,067     $17,150      $0.38


      Six Months Ended June 30, 2004       Income    Net Income      EPS
                                           (loss)      (loss)
                                         Before Tax
  Loss as reported in accordance with
   GAAP                                    $(37,948)   $(23,452)    $(0.52)
  J-41 retirement charge                     28,618      17,686       0.40
  Impairment losses                           3,537       2,185       0.05

  Pro-forma results                         $(5,793)    $(3,581)    $(0.07)


      Six Months Ended June 30, 2003       Income    Net Income     EPS
                                           Before
                                            Tax
  Income as reported in accordance with
   GAAP                                     $80,899     $47,730      $1.05
  Reversal of the J-41 retirement charge    (34,586)    (20,406)     (0.45)
  Government compensation                    (1,520)       (897)     (0.02)

  Pro-forma results                         $44,793     $26,427      $0.58


  Notes to Pro-Forma Financial Results:


The company's Pro-Forma Financial Results present non-GAAP financial measures
that the company uses for internal managerial purposes, when publicly providing
guidance on possible future results, and as a means to evaluate
period-to-period comparisons. These non-GAAP financial measures are used in
addition to and in conjunction with results presented in accordance with GAAP,
and should not be relied upon to the exclusion of GAAP financial measures.
These non-GAAP financial measures reflect an additional way of viewing aspects
of our operations that, when viewed with our GAAP results and the accompanying
reconciliations to corresponding GAAP financial measures, provide a more
complete understanding of factors and trends affecting our business. Management
strongly encourages investors to review the company's financial statements and
publicly-filed reports in their entirety and to not rely on any single
financial measure.

With respect to the specific matters addressed in the Pro-Forma Financial
Results, the company has excluded the following items for the reasons addressed
below:

--J-41 retirement charges and reversals:  The company excludes for pro forma
results charges and credits, if any, associated with the retirement of aircraft
from its fleet.  These amounts typically represent the expense of future
commitments, and are not considered by management to be indicative of current
period operations. Under Financial Accounting Standards Board Statement No.
146, "Accounting for Costs Associated with Exit or Disposal Activities," which
the company adopted on January 1 2003, liabilities for the costs associated
with retirement of the company's remaining J-41s will be recognized when the
liabilities are incurred. Reversals or earlier non-cash charges occurred in
2003 when the company revised J-41 retirement plans that were established prior
to the company's adoption of Statement No. 146.

--Impairment losses for owned 328JET aircraft and J-41 expendable parts
inventory:  Under Financial Accounting Standards Board Statement No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," impairment
exists when the carrying amount of a long-lived asset exceeds its fair value
and the carrying amount of the asset is not recoverable if it exceeds the sum
of the undiscounted cash flows expected to result from the use and disposition
of the asset.  Once an impairment loss is recognized, the adjusted carrying
amount of the long-lived asset establishes a new cost basis.

--Government compensation: The government payments are based on special
legislation for specific areas for which the government has determined to
provide benefits to airlines.  These payments are not treated as operating
income in the company's financial statements and are not considered by
management when evaluating the company's performance.

--Portions of the rate settlement with United in the second quarter 2003
related to a previous period:  The company records its revenue based on fee per
departure rates paid by its partners, which rates are subject to adjustment
annually. When rates are not agreed as of the completion of a given period, the
company records its revenue based on an estimate of the rates. Upon agreement
on rates, the company records, in the period rates are agreed, adjustments for
the estimates made for the prior periods. Management believes that the
adjustments for the impact of changes to estimates provide additional
information for period-to-period comparisons of operating performance.

                       Selected Balance Sheet Data
                              (in thousands)


                                   June 30,   December 31,
                                     2004        2003
                                   Unaudited   Audited       % Change
                                    (000s)      (000s)

  Cash, cash equivalents and
   short-term investments          $345,431     $297,934       15.9%

  Restricted cash                    22,382       14,829       50.9%

  Aircraft deposits                  97,196       46,990      106.8%

  Stockholders' equity              335,812      359,414       (6.6%)

  Working capital                   343,253      270,849       26.7%


DATASOURCE: Atlantic Coast Airlines



CONTACT:  Rick DeLisi, Director, Corporate Communications, of Atlantic

Coast Airlines, [phone]



Web site:  http://www.atlanticcoast.com/

http://www.flyi.com/ 

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