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Alaska Air Group says smaller is better

Alaska Airlines parent company believes small size is an advantage

Posted: Wednesday, November 11, 2009

ATLANTA - The parent company of Alaska Airlines and Horizon Air believes the company's smaller size relative to some of its bigger rivals is an advantage in a financially challenging environment.

Alaska Air Group Inc. Chief Executive Bill Ayer told an investor conference in New York on Tuesday that the company's size enables it to make changes faster.

He said he is optimistic about the company's future. It posted a profit in the third quarter, while several bigger carriers reported losses.

Alaska Air Group has consistently resisted talk by analysts that it could be an attractive acquisition target of a big network carrier.

Together, Alaska Airlines and Horizon Air serve more than 90 cities through their network in Alaska, Hawaii, the continental United States, Canada and Mexico. Alaska Air Group, which is based in Seattle, has a marketing alliance with Delta Air Lines Inc., the world's biggest airline. Delta is based in Atlanta.

Chief Financial Officer Glenn Johnson said Alaska Airlines' capacity, as measured by available seat miles, is projected to increase 1 percent to 2 percent in 2010, while Horizon Air's capacity is expected to be flat.

He said the company's lower capital expenditures - estimated to be $253 million in 2010, compared to $440 million this year - will give it more financial flexibility.

Johnson said the carrier's amount of cash on hand was 36 percent of its revenue as of Sept. 30, a much higher percentage than some of its peers.

Ayer said he is optimistic about Alaska Air's future. He said encouraging customers to fly Alaska Airlines and Horizon Air will be key.

"They vote with their wallet and they vote with their feet," Ayer said.

Meanwhile, the Department of Transportation has still not made a decision on Alaska Airlines' petition questioning the citizenship status of privately held carrier Virgin America, which is based in Burlingame, Calif. Alaska Airlines is among the carriers that stands to gain if Virgin America's ability to operate in the United States is impeded.

In February, Alaska Airlines asked the government to determine whether Virgin America continues to meet the qualifications for being a U.S. air carrier. Virgin America has said it complies with U.S. regulations.

Addressing a question about the status of the petition, Keith Loveless, Alaska Air Group's general counsel, said at Tuesday's investor conference that the DOT appears to have a "limited appetite" for such inquiries.

The DOT has said little beyond that it has been reviewing Alaska Airlines' allegations.



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