Federal aid results in profit for Alaska Air Group

Posted: Wednesday, July 23, 2003

SEATTLE - Alaska Air Group Inc. swung to a profit for the second quarter, almost entirely because of $71.4 million infusion of federal aid, the airline holding company said Tuesday.

The Seattle-based parent company of Alaska Airlines and Horizon Air reported net income of $45.2 million or $1.70 a share, compared to a net loss of $2.9 million, or 11 cents a share, for the same period a year ago.

Alaska Air reported quarterly revenue of $609.1 million compared to $575.7 million last year.

Excluding the nonrecurring government aid under the Emergency Wartime Supplemental Appropriations Act, the company earned net income of $900,000 or 3 cents a share. On that basis, it easily beat the consensus estimate among analysts polled by Thomson First Call for a 32 cents a share loss on revenue of $607 million.

The report sent shares of Alaska Air up $1.03, or 4.5 percent, to $23.79, on the New York Stock Exchange.

"We eked out a small amount of net income for the quarter excluding the government compensation," Alaska Air chairman William S. Ayer said in a statement. "We are working hard to achieve our cost management objectives, and this quarter's results are an encouraging sign that initiatives we have implemented to date are helping us with our plan to return to profitability on a full year basis."

Passenger traffic for the quarter was up 9.1 percent at Alaska Airlines, the dominant carrier on north-south routes along the West Coast, and 6.9 percent at Horizon, a feeder airline.

Alaska Airlines is making progress toward cutting expenses, which helped the company beat expectations, said analyst Jamelah Leddy with McAdams Wright Ragen.

It also is working with its unions to extract $112 million in savings from workers. In addition, the company said last month that Ayer was taking a 20 percent pay cut and three other top executives were taking 15 percent cuts.

Alaska Airlines still needs to identify another $75 million in cost savings, the company said. Possible ways include automating more processes or using technology to streamline operations.

Alaska Airlines also said in June that it would postpone delivery of two new Boeing 737-900s from 2004 to 2005.

For the six months ended June 30, the company reported a net loss of $11.1 million, or 42 cents a share, compared to a net loss of $88.0 million or $3.32 a share for the same period a year ago.

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