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Alaska Air Group Reports Fourth Quarter Results
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1/28/2005 5:24 a.m.
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SEATTLE — Alaska Air Group, Inc. (NYSE:ALK) today reported a fourth quarter net loss of $44.9 million, or $1.66 per diluted share, compared to a net loss of $16.1 million, or $0.60 per diluted share, in the fourth quarter of 2003. For the full year, the company reported a net loss of $15.3 million, or $0.57 per share, compared to net income of $13.5 million, or $0.51 per diluted share in 2003.
Fourth quarter results in 2004 include a restructuring charge of $25.9 million ($16.0 million, net of tax, or $0.59 per share) and additional impairment charges of $0.6 million ($0.4 million, net of tax, or $0.01 per share) related to Horizon's retired F-28 fleet. This quarter's results also include $23.1 million ($14.2 million, net of tax, or $0.53 per share) 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, or $0.53 per diluted share 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, or $0.19 per diluted share, compared to a net loss of $30.8 million, or $1.15 per diluted share, 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, Alaska Air Group's chairman and chief executive officer. "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.
Alaska Airlines' passenger traffic in the fourth quarter increased 10.2 percent on a capacity increase of 5.0 percent. Alaska's load factor increased 3.4 percentage points to 72.9 percent compared to the same period in 2003. Alaska's operating revenue per available seat mile (ASM) increased 0.4 percent, while its 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'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 Dec. 31, 2004, of approximately $874 million compared to $812 million at Dec. 31, 2003. The company's debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, was 78 percent as of Dec. 31, 2004, compared to 77 percent as of Dec. 31, 2003.
A summary of financial and statistical data for Alaska Airlines and Horizon Air as well as a reconciliation of the reported non-GAAP financial measures can be found on pages 6 through 11.
A conference call regarding the fourth quarter 2004 results will be simulcast via the Internet at 8:30 a.m. Pacific Time. It may be accessed through the company's website at www.alaskaair.com. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at www.alaskaair.com.
This report may contain forward-looking statements that are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance and involve known and unknown risks and uncertainties that may cause our actual results or performance to be materially different from those indicated by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "forecast," "may," "will," "could," "should," "expect," "plan," "believe," "potential" or other similar words indicating future events or contingencies. Some of the things that could cause our actual results to differ from our expectations are: changes in our operating costs including fuel; the competitive environment and other trends in our industry; economic conditions; our reliance on automated systems; actual or threatened terrorist attacks, global instability and potential U.S. military actions or activities; our ability to meet our cost reduction goals; the outcome of the arbitration with the Air Line Pilots Association; labor disputes; changes in laws and regulations; liability and other claims asserted against us; failure to expand our business; interest rates and the availability of financing; our ability to attract and retain qualified personnel; changes in our business plans; our significant indebtedness; downgrades of our credit ratings; and inflation. For a discussion of these and other risk factors, see Item 1 of the Company's Amendment No. 1 to its Annual Report for the year ended Dec. 31, 2003, on Form 10-K/A. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. These risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results.
View Fourth Quarter Financial Results
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