ALASKA AIR GROUP REPORTS THIRD QUARTER RESULTS
SEATTLE — Alaska Air Group, Inc. (NYSE:ALK) today reported a third quarter net income of $79.2 million, or $2.94 per diluted share, compared to net income of $40.7 million, or $1.52 per diluted share, in the third quarter of 2003.
Third quarter results include restructuring charges of $27.5 million ($15.8 million, net of tax, or $0.59 per share) and a large refund of disputed navigation fees paid in prior years totaling $11.0 million ($6.3 million, net of tax, or $0.23 per share). Third quarter results also include $57.2 million ($32.8 million, net of tax, or $1.22 per share) in mark-to-market hedging gains reflecting an increase in the fair value of the company’s current fuel hedge portfolio during the quarter. Without these items, net income would have been $55.9 million, or $2.08 per share during 2004.
“Reporting a profit strengthens our belief that we are on the right track,†said Bill Ayer, chairman and chief executive officer. “This relatively strong performance is a tribute to our employees who are taking good care of our customers and to our cost reduction efforts, which are gaining momentum.
“In fact, we achieved the best year-over-year reduction in unit costs excluding fuel and unusual items since initiating cost reduction efforts following September 11, and we continue to outperform the industry in terms of revenue. Still, we are committed to the hard work that remains to transform ourselves from a company that is profitable in a seasonably strong quarter into one that is consistently profitable year in and year out.â€
Operationally, Alaska Airlines' passenger traffic in the third quarter increased 10.8 percent on a capacity increase of 5.6 percent. Alaska’s load factor increased 3.5 percentage points to 76.0 percent compared to the same period in 2003. Alaska’s operating revenue per available seat mile (ASM) increased 3.7 percent, while its operating cost per ASM excluding fuel, navigation fee settlement and restructuring charges decreased 6.0 percent. Alaska's pretax income for the quarter was $106.3 million, compared to $50.1 million in 2003. Excluding the notable items referenced above, Alaska’s pretax income was $72.5 million for the quarter.
Horizon Air's passenger traffic in the third quarter increased 29.0 percent on an 18.4 percent capacity increase. Horizon’s load factor increased by 5.9 percentage points to 72.4 percent compared to the same period in 2003. Horizon’s operating revenue per ASM and operating cost per ASM excluding fuel both decreased by 11.4 percent. The decrease in Horizon’s revenue per ASM and cost per ASM excluding fuel is largely due to the addition of Horizon’s contract flying for Frontier Airlines. This flying represented 23.1 percent of Horizon’s capacity during the third quarter and 9.2 percent of its passenger revenues. Horizon's pretax income for the quarter was $24.4 million, compared to a pretax income of $19.5 million in 2003. Excluding the notable items referenced above, Horizon’s pretax income was $17.5 million for the quarter.
Alaska Air Group had cash and short-term investments at September 30, 2004 of approximately $879 million compared to $812 million at December 31, 2003. The company’s debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, remained constant at 77 percent as of September 30, 2004 and December 31, 2003.
A summary of financial and statistical data for Alaska Airlines and Horizon Air as well as a reconciliation of the reported non-GAAP financial measures can be found on pages 6 to 10.
A conference call regarding the third quarter 2004 results will be simulcast via the internet at 8:30 a.m. Pacific Time. It may be accessed through the company’s website at [ http://www.alaskaair.com/ ]www.alaskaair.com. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at [ http://www.alaskaair.com/ ]www.alaskaair.com.
This report may contain forward-looking statements that are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or future financial performance and involve known and unknown risks and uncertainties that may cause actual results or performance to be materially different from those indicated by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “forecast,†“may,†“will,†“could,†“should,†“expect,†“plan,†“believe,†“potential†or other similar words indicating future events or contingencies. Some of the things that could cause our actual results to differ from our expectations are: the competitive environment and other trends in our industry; economic conditions; our reliance on automated systems; actual or threatened terrorist attacks, global instability and potential U.S. military involvement; our ability to meet our cost reduction goals; the outcome of contract talks with the Air Line Pilots Association, whether as a result of negotiations or binding arbitration; labor disputes; changes in our operating costs including fuel and insurance; changes in laws and regulations; liability and other claims asserted against us; failure to expand our business; interest rates and the availability of financing; our ability to attract and retain qualified personnel; changes in our business plans; our significant indebtedness; downgrades of our credit ratings; and inflation. For a discussion of these and other risk factors, review the information under the caption “Business - Business Risks†in Item~1 of the Company's Annual Report on Form 10-K/A for the year ended December 31, 2003. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. These risk factors may not be exhaustive. The company operates in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on the company’s business or events described in any forward-looking statements. The company disclaims any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results.
SEATTLE — Alaska Air Group, Inc. (NYSE:ALK) today reported a third quarter net income of $79.2 million, or $2.94 per diluted share, compared to net income of $40.7 million, or $1.52 per diluted share, in the third quarter of 2003.
Third quarter results include restructuring charges of $27.5 million ($15.8 million, net of tax, or $0.59 per share) and a large refund of disputed navigation fees paid in prior years totaling $11.0 million ($6.3 million, net of tax, or $0.23 per share). Third quarter results also include $57.2 million ($32.8 million, net of tax, or $1.22 per share) in mark-to-market hedging gains reflecting an increase in the fair value of the company’s current fuel hedge portfolio during the quarter. Without these items, net income would have been $55.9 million, or $2.08 per share during 2004.
“Reporting a profit strengthens our belief that we are on the right track,†said Bill Ayer, chairman and chief executive officer. “This relatively strong performance is a tribute to our employees who are taking good care of our customers and to our cost reduction efforts, which are gaining momentum.
“In fact, we achieved the best year-over-year reduction in unit costs excluding fuel and unusual items since initiating cost reduction efforts following September 11, and we continue to outperform the industry in terms of revenue. Still, we are committed to the hard work that remains to transform ourselves from a company that is profitable in a seasonably strong quarter into one that is consistently profitable year in and year out.â€
Operationally, Alaska Airlines' passenger traffic in the third quarter increased 10.8 percent on a capacity increase of 5.6 percent. Alaska’s load factor increased 3.5 percentage points to 76.0 percent compared to the same period in 2003. Alaska’s operating revenue per available seat mile (ASM) increased 3.7 percent, while its operating cost per ASM excluding fuel, navigation fee settlement and restructuring charges decreased 6.0 percent. Alaska's pretax income for the quarter was $106.3 million, compared to $50.1 million in 2003. Excluding the notable items referenced above, Alaska’s pretax income was $72.5 million for the quarter.
Horizon Air's passenger traffic in the third quarter increased 29.0 percent on an 18.4 percent capacity increase. Horizon’s load factor increased by 5.9 percentage points to 72.4 percent compared to the same period in 2003. Horizon’s operating revenue per ASM and operating cost per ASM excluding fuel both decreased by 11.4 percent. The decrease in Horizon’s revenue per ASM and cost per ASM excluding fuel is largely due to the addition of Horizon’s contract flying for Frontier Airlines. This flying represented 23.1 percent of Horizon’s capacity during the third quarter and 9.2 percent of its passenger revenues. Horizon's pretax income for the quarter was $24.4 million, compared to a pretax income of $19.5 million in 2003. Excluding the notable items referenced above, Horizon’s pretax income was $17.5 million for the quarter.
Alaska Air Group had cash and short-term investments at September 30, 2004 of approximately $879 million compared to $812 million at December 31, 2003. The company’s debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, remained constant at 77 percent as of September 30, 2004 and December 31, 2003.
A summary of financial and statistical data for Alaska Airlines and Horizon Air as well as a reconciliation of the reported non-GAAP financial measures can be found on pages 6 to 10.
A conference call regarding the third quarter 2004 results will be simulcast via the internet at 8:30 a.m. Pacific Time. It may be accessed through the company’s website at [ http://www.alaskaair.com/ ]www.alaskaair.com. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at [ http://www.alaskaair.com/ ]www.alaskaair.com.
This report may contain forward-looking statements that are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or future financial performance and involve known and unknown risks and uncertainties that may cause actual results or performance to be materially different from those indicated by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “forecast,†“may,†“will,†“could,†“should,†“expect,†“plan,†“believe,†“potential†or other similar words indicating future events or contingencies. Some of the things that could cause our actual results to differ from our expectations are: the competitive environment and other trends in our industry; economic conditions; our reliance on automated systems; actual or threatened terrorist attacks, global instability and potential U.S. military involvement; our ability to meet our cost reduction goals; the outcome of contract talks with the Air Line Pilots Association, whether as a result of negotiations or binding arbitration; labor disputes; changes in our operating costs including fuel and insurance; changes in laws and regulations; liability and other claims asserted against us; failure to expand our business; interest rates and the availability of financing; our ability to attract and retain qualified personnel; changes in our business plans; our significant indebtedness; downgrades of our credit ratings; and inflation. For a discussion of these and other risk factors, review the information under the caption “Business - Business Risks†in Item~1 of the Company's Annual Report on Form 10-K/A for the year ended December 31, 2003. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. These risk factors may not be exhaustive. The company operates in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on the company’s business or events described in any forward-looking statements. The company disclaims any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results.
