Alaska Air narrows loss in 4th quarter

Posted: Friday, January 26, 2007

SEATTLE - Alaska Air Group Inc. on Thursday said its loss narrowed in the fourth quarter as revenue grew. The results missed Wall Street expectations, sending shares down 2.4 percent.

For the three months ended Dec. 31, the Seattle-based parent company of Alaska Air and Horizon Air lost $11.6 million, or 29 cents per share, compared with a loss of $33 million, or $1.15 per share, during the prior-year quarter.

Excluding fuel-hedging losses and an adjustment of pension costs, the loss would have been 8 cents per share.

Revenue grew 8 percent to $790.3 million, from $730.6 million last year.

Analysts polled by Thomson Financial expected flat earnings on revenue of $793.4 million.

Alaska Air Group shares closed down $1, or 2.4 percent, to $40.60 on the New York Stock Exchange. Shares have traded in a 52-week range of $29.44 to $45.85.

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Company officials said they were unsure if higher ticket costs or other factors were behind the slower-than-expected revenue growth. Executives said severe winter weather across the West also may have played a part in decreased occupancy.

"We don't know whether it's just timing, or whether it's related to weather, or whether it might be pushback related to some of these fares," Alaska Airlines Chief Financial Officer Brad Tilden said Thursday in a conference call with analysts.

Alaska Airlines' fourth-quarter passenger traffic grew 3.4 percent as capacity grew 3.6 percent. Load factor, an industry measure of occupancy, fell 0.2 percentage points to 73.7 percent.

Operating revenue per available seat mile grew 3.9 percent.

Horizon Air's passenger traffic grew 4.3 percent as capacity increased 5.2 percent. Occupancy fell 0.7 percentage points to 73 percent. Horizon's operating revenue per available seat mile grew 7.1 percent.

Recent declines in crude oil prices have hurt value the company might otherwise get from hedging, or locking in fuel prices several months or years in advance, said Tilden, who oversees fuel hedging for both carriers.

At current prices, the company expects almost not benefit from hedging in 2007, he said.

"Clearly, we think declining fuel prices are a good thing. But our 2007 hedges are not at the same price as 2006's were," Tilden said.

For the year, net loss was $52.6 million, or $1.39 per share, versus a loss of $5.9 million, or a penny per share, in 2005. Revenue grew 12 percent to $3.33 billion, from $2.98 billion.

The 2006 results included charges related to severance programs and fuel hedging adjustments, while the 2005 results reflected charges for severance programs, fuel hedging and other factors.

Bill Ayer, chairman and chief executive, said the company would continue to focus on controlling costs to keep fares down and insulate the overall business from turbulence in the economy.

"We'll do the best as we can with revenue, every day, every quarter," Ayer said. "But the bottom line is, we can't control a lot of that because it's the underlying economy that drives demand."

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