Alaska Air Group Reports First Quarter Profit
4/22/2010 4:46:45 AM
First quarter highlights:
•Net income excluding special items was $13.1 million, or $0.36 per diluted share, compared to a net loss excluding special items of $25.4 million, or $0. 70 per diluted share, in the first quarter of 2009, despite a $27.1 million increase in economic fuel costs. This compares to a First Call mean estimate of $0.35 per share.
•This is only the third time the company has posted a first quarter adjusted profit in 11 years —and the best since 1999.
•Net income under Generally Accepted Accounting Principles (GAAP) of $5.3 million, or $0.15 per diluted share, compared to a net loss of $19.2 million, or $0.53 per diluted share, in 2009.
•The company announced new Alaska Airlines service from Portland, Oreg., to Honolulu and Maui and from San Diego to Maui and Puerto Vallarta, Mexico, as well as new Horizon Air service between San Jose, Calif., and Los Angeles.
•For the most recent 12-month U.S. Department of Transportation (DOT) reporting period, Alaska held the No. 1 spot in on-time performance among the 10 largest U.S. airlines. And recently, Horizon was ranked among the world's top five airlines for 2009 on-time performance.
SEATTLE — Alaska Air Group, Inc. (NYSE: ALK) today reported first quarter 2010 net income of $5.3 million, or $0.15 per diluted share, compared to a net loss of $19.2 million, or $0.53 per diluted share, in the first quarter of 2009. Excluding mark-to-market fuel hedge losses of $12.5 million ($7.8 million after tax or $0.21 per diluted share), the company reported first quarter 2010 net income of $13.1 million, or $0.36 per diluted share, compared to a net loss excluding special items of $25.4 million, or $0.70 per diluted share, in the first quarter of 2009.
"Producing a profit in our seasonally weakest period is particularly noteworthy," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "The last time we reported a significant first-quarter profit was in 1999.
"Our results were driven by higher load factors, improving pricing trends and good cost management. Selective schedule reductions coupled with entry into new markets also contributed to our strong performance and provide a foundation for continued improvement.
"Our operational results continue to be outstanding. For the most recent 12-month DOT reporting period, Alaska held the No. 1 spot in on-time performance among the 10 largest U.S. airlines. And recently, Horizon was ranked among the world's top five airlines for 2009 on-time performance. I want to thank all our employees for running a safe, reliable operation and providing outstanding customer service."
The following table reconciles the company's adjusted net income and earnings per diluted share (EPS) during the first quarters of 2010 and 2009 to amounts as reported in accordance with GAAP (in millions except per-share amounts):
Three Months Ended March 31,
Net income (loss) and diluted EPS, excluding items noted below
Adjustments to reflect the timing of gain or loss recognition resulting from mark-to-market fuel-hedge accounting, net of tax
Reported GAAP net income (loss)
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 in the accompanying tables. A glossary of financial terms can be found at the end of this release.
A conference call regarding the first quarter results will be simulcast via the Internet at 8:30 a.m. Pacific time on April 22, 2010. It can be accessed through the company's Web site at alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at alaskaair.com/investors.
References in this news release to "Air Group," "company," "we," "us" and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred to as "Alaska" and "Horizon," respectively, and together as our "airlines."
This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the company's Annual Report on Form 10-K for the year ended Dec. 31, 2009. Some of these risks include current economic conditions, increases in operating costs including fuel, competition, labor costs and relations, seasonal fluctuations in our financial results, an aircraft accident, and changes in laws and regulations. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. We operate 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 our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.
Alaska Airlines and Horizon Air, subsidiaries of Alaska Air Group (NYSE: ALK), together serve more than 90 cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada and Mexico. Alaska Airlines ranked "Highest in Customer Satisfaction Among Traditional Network Carriers" in the J.D. Power and Associates 2008 and 2009 North America Airline Satisfaction StudiesSM. For reservations, visit alaskaair.com. For more news and information, visit the Alaska Airlines/Horizon Air Newsroom at alaskaair.com/newsroom.
View First Quarter Financial Results
Glossary of Financial Terms
ASM - Available seat miles or "capacity." Represents total seats available across the fleet multiplied by the number of miles flown.
RPM – Revenue passenger miles or "traffic." The number of those available seats that were filled with paying passengers. One passenger traveling one mile is one RPM.
RASM - Total operating revenue divided by ASMs. Operating revenue includes all passenger revenue, freight and mail, Mileage Plan and other ancillary revenue — commonly called "unit revenue" and represents the average total revenue for flying one seat one mile.
PRASM – Passenger revenue per ASM — commonly called "passenger unit revenue."
Yield – Passenger revenue per RPM. This represents the average revenue for flying one passenger one mile.
CASM – Total operating costs per ASM. This represents all operating expenses, including fuel and special items — commonly called "unit cost."
CASMex – Operating costs excluding fuel and special items per ASM. This metric is used to help track progress toward reduction of non-fuel operating costs, since fuel costs are largely out the company's control.
Economic fuel – Best estimate of the cash cost of fuel, net of the impact of the company's fuel-hedging program.
Mainline – Represents flying on Alaska jets and all associated revenue and costs.
Purchased capacity flying – Represents operations whereby Horizon and, to a much lesser extent, another small carrier in the state of Alaska fly certain routes for Alaska using Horizon's or the other carrier's fleets.