Alaska Air posts profit on special gains

SEATTLE - Alaska Air Group Inc. said Thursday it swung to a fourth-quarter profit due to special gains, though adjusted results reflected a wider loss than Wall Street had expected, as fares failed to keep up with higher fuel costs.

The parent company of Alaska Airlines and Horizon Air posted a profit of $7.4 million, or 19 cents per share, versus a loss of $11.6 million, or 29 cents per share, a year earlier. Revenue rose 8 percent to $853.4 million, due mostly to rising passenger revenue.

However, adjusted for fuel hedging as well as special charges and benefits, Alaska Air's loss widened to $17.9 million, or 46 cents per share, from $3.4 million, or 8 cents per share.

Analysts polled by Thomson Financial had forecast a loss of 32 cents per share on revenue of $845.1 million.

Alaska Air shares tumbled 8 percent, or $1.98, to close at $22.71 Thursday.

"It's frustrating to report a fourth-quarter adjusted loss in what has been a solid year relative to other carriers," Chief Executive Bill Ayer said in a statement. "The loss was driven primarily by skyrocketing fuel costs combined with fares that have not kept pace."

Though the industry has tried to pass on those higher fuel costs to customers as oil touched new highs, fierce competition has prevented big fare hikes.

Chief Financial Officer Brad Tilden said the company has had mixed results raising fares, lifting prices as much as $20 in certain markets while not being able to push through any increases in others.

Alaska Air Group bought half of its fuel in advance last quarter, using contracts that tied its jet fuel costs to oil prices of $62.27 a barrel, on average, well below the market rate. That saved the company $29 million during the three months ended Dec. 31.

For the full year, the company gained more than $53 million by hedging just over half its fuel at $58.83 a barrel.