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Alaska Air Group Reports First Quarter Results
Operating revenues for the quarter were $497 million, a 3.7 percent decrease, while operating expenses were $548 million, down 3.0 percent. The operating loss for the quarter was $51.4 million compared with an operating loss of $49.5 million a year earlier.
"We've seen a surprisingly quick recovery that has really exceeded expectations," said Alaska Air Group Chairman and CEO John F. Kelly. "Traffic increases at Alaska have been nothing short of remarkable, although yield continues to suffer. And Horizon is beginning to see significant cost improvements from its new fleet of Bombardier aircraft. Of course, we still had a loss, which in absolute terms is obviously disappointing, but in relative terms we're doing exceptionally well compared to the rest of the industry. The challenge now is to continue to execute our strategy and return to profitability."
Operationally, Alaska Airlines' passenger traffic in the first quarter increased 2.8 percent on a capacity increase of 0.9 percent. Load factor increased 1.3 points to 66.7 percent. "Our traffic and load factor were certainly helped by the service to our new cities," said Alaska Airlines Chief Executive Officer Bill Ayer. "And we added Boston to the mix on April 4, plus we'll add Denver on April 28. The advance bookings we're seeing indicate that these new destinations should help us continue this trend in traffic in the months ahead." The airline's operating revenue per available seat mile (ASM) decreased 3.1 percent, while its operating cost per ASM excluding fuel increased 4.1 percent. Alaska's pretax loss was $43.9 million compared to a loss of $33.7 million a year earlier. The results for 2002 include non-operating income of $4.9 million for fuel hedging, insurance recovery and conversion of our investment in Equant N.V.
At Horizon Air, passenger traffic for the first quarter decreased 2.0 percent on a 2.2 percent capacity decrease. Its load factor increased 0.2 points to 62.0 percent. The airline's operating revenue per ASM decreased 6.5 percent, while its operating cost per ASM decreased 11.6 percent. Excluding fuel, cost per ASM decreased 7.6 percent. "We're still being impacted by a fall-off in traffic on our short haul business routes," said Horizon Air Chief Executive Officer Jeff Pinneo, "but the offset has been significant unit cost improvements driven in large part by our new fleet of aircraft." Horizon's pretax loss was $9.0 million, compared to a loss of $17.1 million a year earlier. The results for 2002 include manufacturer support for delays in delivery of aircraft.
A conference call regarding first quarter results will be simulcast via the Internet at 11:00 a.m. Pacific Time. It may be accessed by logging on at www.alaskaair.com.
This report may contain forward-looking statements that are based on the best information currently available to management. These forward-looking statements 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. Forward-looking statements are indicated by phrases such as "will," "should," "the Company believes," "we expect" or any other language indicating a prediction of future events. There can be no assurance that actual developments will be those anticipated by the Company. Actual results could differ materially from those projected as a result of a number of factors, some of which the Company cannot predict or control. For a discussion of these factors, please see Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001.
Alaska Air Group is the parent company of Alaska Airlines, Inc. and Horizon Air Industries, Inc.
ALASKA AIR GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
Quarter Ended March 31
2001 2002 % Change
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Operating Revenues:
Passenger $479.8 $456.1 (4.9)
Freight and mail 20.6 17.1 (17.0)
Other 15.6 23.7 51.9
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Total operating revenues 516.0 496.9 (3.7)
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Operating Expenses:
Wages and benefits 192.0 204.6 6.6
Contracted services 20.9 22.8 9.1
Aircraft fuel 89.7 64.7 (27.9)
Aircraft maintenance 50.1 43.1 (14.0)
Aircraft rent 46.2 46.5 0.6
Food and beverage service 14.0 14.3 2.1
Commissions 15.4 12.4 (19.5)
Other selling expenses 31.8 30.2 (5.0)
Depreciation and amortization 29.9 31.7 6.0
Loss (gain) on sale of assets 0.8 (0.6)
Landing fees and other rentals 28.3 30.1 6.4
Other 46.4 48.5 4.5
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Total operating expenses 565.5 548.3 (3.0)
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Operating Loss (49.5) (51.4) 3.8
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Interest income 8.1 4.4
Interest expense (12.1) (11.9)
Interest capitalized 3.6 0.2
Other income - net (1.4) 5.3
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(1.8) (2.0)
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Loss before income tax (51.3) (53.4)
Income tax credit (18.2) (19.0)
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Net Loss $ (33.1) $ (34.4)
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Basic loss per share: $ (1.25) $ (1.30)
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Diluted loss per share $ (1.25) $ (1.30)
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Shares used for computations 26.471 26.532
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ALASKA AIR GROUP, INC.
CONSOLIDATED BALANCE SHEET
(In millions)
Dec. 31 March 31
2001 2002
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Cash and marketable securities $ 661 $ 620
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Total current assets 900 920
Property and equipment - net 1,825 1,792
Other assets 209 212
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Total assets $2,934 $2,924
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Current liabilities $ 756 $ 759
Long-term debt and capital lease obligations 863 863
Other liabilities and credits 495 505
Shareholders' equity 820 797
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Total liabilities and equity $2,934 $2,924
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Alaska Airlines Financial and Statistical Data
Quarter Ended March 31
Financial Data (in millions): 2001 2002 % Chg.
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Operating Revenues:
Passenger $385.1 $374.2 (2.8)
Freight and mail 18.3 15.9 (13.1)
Other - net 14.7 18.8 27.9
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Total Operating Revenues 418.1 408.9 (2.2)
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Operating Expenses:
Wages and benefits 155.3 167.3 7.7
Contracted services 17.9 19.9 11.2
Aircraft fuel 74.0 55.2 (25.4)
Aircraft maintenance 31.1 36.5 17.4
Aircraft rent 35.3 31.8 (9.9)
Food and beverage service 13.2 13.9 5.3
Commissions 15.9 14.3 (10.1)
Other selling expenses 26.0 24.9 (4.2)
Depreciation and amortization 23.1 27.6 19.5
Loss on sale of assets 0.9 0.1 NM
Landing fees and other rentals 21.5 23.7 10.2
Other 36.4 35.5 (2.5)
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Total Operating Expenses 450.6 450.7 0.0
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Operating Loss (32.5) (41.8) 28.6
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Interest income 9.5 5.0
Interest expense (12.1) (11.9)
Interest capitalized 2.6 0.1
Other - net (1.2) 4.7
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(1.2) (2.1)
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Loss Before Income Tax $(33.7) $(43.9) 30.3
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Operating Statistics:
Revenue passengers (000) 3,198 3,193 (0.2)
RPMs (000,000) 2,895 2,977 2.8
ASMs (000,000) 4,428 4,467 0.9
Passenger load factor 65.4% 66.7% 1.3 pts
Breakeven load factor 73.4% 76.5% 3.1 pts
Yield per passenger mile 13.30(cent) 12.57(cent) (5.5)
Operating revenue per ASM 9.44(cent) 9.16(cent) (3.1)
Operating expenses per ASM 10.18(cent) 10.09(cent) (0.9)
Expense per ASM excluding fuel 8.51(cent) 8.86(cent) 4.1
Fuel cost per gallon 97.1(cent) 73.6(cent) (24.3)
Fuel gallons (000,000) 76.2 75.0 (1.6)
Average number of employees 10,203 9,815 (3.8)
Aircraft utilization (blk hrs/day) 11.0 10.1 (8.2)
Operating fleet at period-end 96 102 6.3
Horizon Air Financial and Statistical Data
Quarter Ended March 31
Financial Data (in millions): 2001 2002 % Chg.
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Operating Revenues:
Passenger $98.2 $ 86.3 (12.1)
Freight and mail 2.3 1.2 (47.8)
Other - net 1.5 5.7 280.0
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Total Operating Revenues 102.0 93.2 (8.6)
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Operating Expenses:
Wages and benefits 36.7 37.3 1.6
Contracted services 3.7 3.9 5.4
Aircraft fuel 15.7 9.5 (39.5)
Aircraft maintenance 19.0 6.6 (65.3)
Aircraft rent 11.0 14.8 34.5
Food and beverage service 0.8 0.4 (50.0)
Commissions 2.9 2.3 (20.7)
Other selling expenses 5.8 5.3 (8.6)
Depreciation and amortization 6.4 3.9 (39.1)
Gain on sale of assets (0.1) (0.6) NM
Landing fees and other rentals 6.9 6.4 (7.2)
Other 9.9 12.7 28.3
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Total Operating Expenses 118.7 102.5 (13.6)
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Operating Loss (16.7) (9.3) (44.3)
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Interest expense (1.1) (0.5)
Interest capitalized 1.1 0.2
Other - net (0.4) 0.6
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(0.4) 0.3
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Loss Before Income Tax $ (17.1) $(9.0) (47.4)
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Operating Statistics:
Revenue passengers (000) 1,177 1,095 (7.0)
RPMs (000,000) 336 329 (2.0)
ASMs (000,000) 543 531 (2.2)
Passenger load factor 61.8% 62.0% 0.2 pts
Breakeven load factor 73.3% 69.5% (3.8)pts
Yield per passenger mile 29.24(cent) 26.20(cent) (10.4)
Operating revenue per ASM 18.78(cent) 17.56(cent) (6.5)
Operating expenses per ASM 21.85(cent) 19.31(cent) (11.6)
Expense per ASM excluding fuel 18.96(cent) 17.52(cent) (7.6)
Fuel cost per gallon 100.1 (cent) 77.2 (cent) (22.9)
Fuel gallons (000,000) 15.6 12.3 (21.2)
Average number of employees 3,923 3,452 (12.0)
Aircraft utilization (blk hrs/day) 8.1 7.1 (12.3)
Operating fleet at period-end 63 62 (1.6)
CONTACT: Alaska Air Group, Inc. Brad Tilden, 206/433-3362 Lou Cancelmi, 206/433-3170
