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Alaska Air Group suffers $75 million 4Q loss

Airline still exceeded Wall Street expectations

Posted: Friday, January 30, 2009

SEATTLE - Alaska Air Group Inc., operator of Alaska Airlines and Horizon Air, said Thursday it swung to a $75.2 million fourth-quarter loss as sales slid and fuel costs increased.

Ted S. Warren / The Associated Press
Ted S. Warren / The Associated Press

The results, when one-time items are excluded, beat Wall Street expectations.

The Seattle-based company said its loss for the October-December period was equivalent to $2.08 a share, compared to a profit of $7.4 million, or 19 cents a share, in the same period a year earlier.

Excluding special items, it posted a fourth-quarter profit of $16.4 million, or 45 cents a share. Analysts polled by Thomson Reuters, on average, expected Alaska Air Group to post a loss of 4 cents per share in the fourth quarter, excluding one-time items.

Revenue slid 3.1 percent to $827.1 million, compared to $853.4 million recorded in the same period a year earlier. Analysts had predicted revenue of $819.7 million for the fourth quarter.

For all of 2008, Alaska Air Group said it lost $135.9 million, or $3.74 a share, compared to a profit of $124.3 million, or $3.07 a share, for all of 2007. Twelve-month revenue rose to $3.7 billion, compared to $3.5 billion recorded for all of 2007. Analysts had predicted revenue of $3.62 billion for 2008.

In a Securities and Exchange Commission filing accompanying its quarterly results, Alaska Air Group said Alaska Airlines' mainline occupancy rate based on advance bookings for March is down 3 percentage points year-over-year. It said Horizon Air's occupancy rate based on advance bookings for March is also down 3 percentage points. The company said advance bookings for March are being negatively impacted because the Easter holiday falls in April this year.

Alaska Airlines' mainline capacity is expected to be down 10 percent to 11 percent in the first quarter and down 8 percent for 2009, while Horizon Air's capacity is expected to be down 15 percent to 16 percent in the first quarter and down 8 percent to 10 percent for 2009, according to the filing.

Alaska Airlines and Horizon Air together serve more than 90 cities through their network in Alaska, Hawaii, the continental U.S., Canada and Mexico.

In November, Alaska Air Group signed an expanded marketing alliance with Atlanta-based Delta Air Lines Inc., the world's biggest carrier. Executives said then that the move is expected to help feed passengers to support new international routes Delta has said it plans to launch this year. Delta's chief said at that time that the two carriers had not had any discussions about a combination.

Alaska Air Group has fared better financially and in stock performance than some of its bigger rivals. At the same time, it has not been immune to the declines in demand due to the weak economy. Like other carriers, it also has been hit with losses related to fuel hedging.

After locking in prices that looked reasonable earlier in 2008, some airlines finished the year paying substantially more than market price for a portion of their fuel. Alaska Air Group said its aircraft fuel cost in the fourth quarter, including hedging gains and losses, was $358.8 million, compared to $220.5 million a year earlier. That came despite the deep slide in oil prices during the final months of 2008. The company said it realized $50 million in losses on the early termination of fuel hedge contracts originally scheduled to settle in 2009 and 2010.

The company ended 2008 with nearly $1.1 billion in unrestricted cash and marketable securities.



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