Alaska posts small first-quarter profit excluding MD-80 retirement costs
Friday April 21, 2006

Alaska Air Group, parent of Alaska Airlines and Horizon Air, eked out a small but noteworthy profit of $2.8 million before special items in the historically challenging winter quarter, reversing an adjusted net loss of $41.7 million in the year-ago period.

AAG previously had said it would record an impairment charge of $131.1 million ($81.9 million after-tax) during the period to reflect the early retirement of its MD-80 fleet. Including the impact of this charge, partially offset by fuel hedge gains, it had a net loss of $79.1 million compared to a loss of $80.5 million in the 2005 first quarter.

"We're extremely happy to report a small first-quarter adjusted net profit today. Our business is very seasonal and this quarter is always our weakest...The last time we posted an adjusted first-quarter profit was in 1999, so we are off to a great start," Chairman and CEO Bill Ayer said in a conference call.

Group operating revenues climbed 14.5% to $735.4 million, with Alaska revenues up 12.7% to $590 million and Horizon sales up 20.6% to $146.2 million. Operating expenses at the group level rose 39.9% to $860.6 million but actually declined 3.9% year-over-year excluding aircraft fuel and the impairment charge. Operating loss net of special charges was $125.2 million compared to an operating profit of $27.3 million last year.

Yield per RPM at Alaska rose 8.8% to 13.16 cents, marking four consecutive quarters of yield improvement, while Horizon's yield was up 6.3% to 23.19 cents. Alaska's revenue per ASM climbed 9.3% to 10.65 cents on a 1.1-point gain in load factor. Nonfuel unit cost fell 6.8% to 7.97 cents, "the largest year-over-year decline in five quarters," according to Ayers. Horizon's CASM dipped 0.1% to 14.23 cents while RASM rose 7.6% to 16.67 cents.