2004 financial results announced

A steep fourth quarter loss accelerated by several big one-time charges helped push Alaska Air Group to a net loss of $15.3 million in 2004. The loss would have been even greater were it not for sizable fuel hedging gains during the year.

For the fourth quarter, Air Group reported a net loss of $44.9 million, compared to a net loss of $16.1 million during the same period in 2003.

For all of 2004, Air Group reported a net loss of $15.3 million, compared to net income of $13.5 million in 2003. 

Fourth quarter results in 2004 include a restructuring charge of $25.9 million and additional impairment charges of  $600,000 related to Horizon’s retired F-28 fleet. This quarter’s results also include $23.1 million in mark-to-market hedging losses reflecting a decrease in the fair value of the company’s fuel hedge portfolio during the quarter.  

Without these items, the net loss would have been $14.3 million during the fourth quarter of 2004.  

Excluding the full-year impact of the items discussed above, as well as the B737-200 impairment charge and the navigation fee recovery recorded earlier in the year, and government compensation recorded in 2003, the 2004 full year net income would have been $5.2 million, compared to a net loss of $30.8 million in 2003. 

“The improvement in our operating results for the year shows that we are continuing to make headway with our restructuring. Our move in early 2004 to simplify fares, coupled with our employees’ ongoing focus on the customer experience, contributed to a jump in our passenger traffic and loads,” said Bill Ayer, CEO. “However, we would have clearly been in the red in 2004, after adjusting for the unusual items, if not for fuel hedging gains.

 “As we head into 2005, we must continue to pursue cost savings initiatives that will help us become consistently profitable, and weather the onslaught of low-cost competition, restructured network airlines and very high fuel prices,” Ayer said.

 At Alaska Airlines, “after adjusting for the unusual items, we had pretax income of $2.1 million for all of 2004, compared to a pretax loss of $41 million for the prior year,” says Brad Tilden, executive vice president of finance and chief financial officer. “

 Alaska Airlines’ passenger traffic in the fourth quarter increased 10.2 percent on a capacity increase of 5 percent.  The airline’s load factor increased 3.4 percentage points to 72.9 percent compared to the same period in 2003. Operating revenue per available seat mile (ASM) increased 0.4 percent, while operating cost per ASM excluding fuel and restructuring charges decreased 8.6 percent. Alaska’s pretax loss for the quarter was $68.9 million, compared to a pretax loss of $27.3 million in 2003. Excluding the unusual items referenced above, Alaska’s pretax loss was $22.7 million for the quarter.

Horizon Air reported pretax income of $13.7 million in 2004, compared to a profit of $6.7 million in 2003.

Horizon Air’s passenger traffic in the fourth quarter increased 36.8 percent on a 28.1 percent capacity increase. Horizon’s load factor increased by 4.4 percentage points to 71.7 percent compared to the same period in 2003. Horizon’s operating revenue per ASM decreased 17.2 percent, while its operating cost per ASM excluding fuel and the impairment charge decreased 18.1 percent. The decrease in Horizon’s revenue per ASM and cost per ASM excluding fuel is largely due to the addition of Horizon’s contract flying for Frontier Airlines. This flying represented 23.1 percent of Horizon’s capacity during the fourth quarter and 9.9 percent of its passenger revenues. Horizon’s pretax loss for the quarter was $1.6 million, compared to a pretax income of  $5.4 million in 2003. Excluding the unusual items referenced above, Horizon’s pretax income was $1.8 million for the quarter.  

Alaska Air Group had cash and short-term investments at the end of 2004 of approximately $874 million compared to $812 million a year earlier. The company’s debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, was 78 percent at year end, compared to 77 percent as of Dec. 31, 2003.