Alaska Air Group Reports 2005 Full Year Results
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Alaska Air Group, Inc. today reported full year income of $84.5 million, or $2.65 per diluted share, before the cumulative effect of a maintenance accounting policy change, compared to a loss of...
Alaska Air Group, Inc.
The company reported a fourth quarter net loss of $33.0 million, or $1.15 per share, compared to a net loss of $44.9 million, or $1.66 per share, in the fourth quarter of 2004. Similar to the items noted for the full year, both the 2005 and 2004 quarterly results include mark-to-market fuel hedge accounting adjustments, restructuring activities and an impairment charge in 2004. Excluding the impact of these items, fourth quarter net income would have been $0.6 million, or $0.02 per diluted share in 2005, compared to a loss of $14.3 million, or $0.53 per share in the fourth quarter of 2004.
"Sacrifices by our employees, strong revenue performance and the benefit of our fuel hedging program enabled us to be one of only a couple of major airlines that posted a significant adjusted profit for 2005," said Bill Ayer, chairman and chief executive officer. "Our people should be extremely proud of that. I want to thank our customers for sticking with us and our employees for their hard work. Our job now is to stay the course to secure Alaska Air Group’s position as a leader in this tumultuous industry."
Alaska Airlines’ passenger traffic in the fourth quarter increased 3.2 percent on a capacity increase of 1.9 percent. Alaska’s load factor increased 1.0 percentage point to 73.9 percent, compared to the same period in 2004. Alaska’s operating revenue per available seat mile (ASM) increased 8.4 percent and its operating costs per ASM excluding fuel and restructuring charges increased 0.9 percent. The airline’s pretax loss for the quarter was $46.3 million, compared to a pretax loss of $68.9 million in 2004. Excluding the unusual items referenced above, Alaska’s pretax income was $0.5 million for the quarter, compared to a $22.7 million loss in the fourth quarter of 2004.
Horizon Air’s passenger traffic in the fourth quarter increased 11.1 percent on an 8.2 percent capacity increase. Horizon’s load factor increased by 2.0 percentage points to 73.7 percent, compared to the same period in 2004. Horizon’s operating revenue per ASM increased 1.1 percent and its operating costs per ASM excluding fuel and impairment charges increased 1.1 percent. The airline’s pretax loss for the quarter was $6.6 million, compared to a pretax loss of $1.6 million in 2004. Excluding the unusual items referenced above, Horizon’s pretax income was $0.4 million for the quarter, compared to $1.8 million in the fourth quarter of 2004.
Alaska Air Group had cash and short-term investments at Dec. 31, 2005, of approximately $983 million, compared to $874 million at Dec. 31, 2004. The company’s debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, was 73 percent as of Dec. 31, 2005, compared to 78 percent as of Dec. 31, 2004. The company’s cash position and debt-to-capital ratio were positively impacted by Air Group’s recent common stock offering, which raised approximately $200 million in net proceeds.
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 following.
A conference call regarding the fourth quarter and full year 2005 results will be simulcast via the Internet at 8 a.m. Pacific Time on Jan. 26, 2006. It may be accessed through the company’s Web site at alaskaair.com. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at alaskaair.com.
This report contains forward-looking statements 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 and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from that indicated by any forward- looking statements. Some of the things that could cause our actual results to differ from our expectations are: the competitive environment and other trends in our industry; changes in our operating costs including fuel, which can be volatile; our ability to meet our cost reduction goals; our inability to achieve or maintain profitability and fluctuations in our quarterly results; our significant indebtedness; our inability to secure new aircraft financing; the implementation of our growth strategy; possible accelerated retirement of our MD-80 fleet; compliance with our financial covenants; potential downgrades of our credit ratings and the availability of financing; the concentration of our revenue from a few key markets; general economic conditions, as well as economic conditions in the geographic regions we serve; actual or threatened terrorist attacks; global instability and potential U.S. military actions or activities; insurance costs; labor disputes; our ability to attract and retain qualified personnel; an aircraft accident or incident; liability and other claims asserted against us; operational disruptions; increases in government fees and taxes; changes in laws and regulations; our reliance on automated systems; and our reliance on third-party vendors and partners. For a discussion of these and other risk factors, see the company’s Form S-3 Registration Statement filed on Dec. 12, 2005. 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 press release to conform them to actual results.
Alaska Airlines and sister carrier, Horizon Air, together serve 88 cities through an expansive network throughout Alaska, the Lower 48, Canada and Mexico. For reservations visit alaskaair.com. For more news and information, visit the Alaska Airlines/Horizon Air newsroom at http://newsroom.alaskaair.com/ .
ALASKA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In Millions Except Per Share Amounts)
Three Months Twelve Months
Ended December 31 Ended December 31
2005 2004 2005 2004
Operating Revenues:
Passenger $666.8 $598.6 $2,728.7 $2,497.1
Freight and mail 22.8 22.0 94.1 90.3
Other - net 41.0 35.7 152.5 136.4
Total Operating Revenues 730.6 656.3 2,975.3 2,723.8
Operating Expenses:
Wages and benefits 230.1 230.4 923.6 967.5
Contracted services 36.2 29.3 132.4 108.4
Aircraft fuel 196.8 155.9 722.8 540.7
Aircraft maintenance 53.9 46.2 228.5 184.1
Aircraft rent 47.0 45.9 187.0 187.4
Food and beverage service 13.1 12.4 50.2 51.9
Selling expenses 38.2 33.4 157.7 144.9
Depreciation and amortization 37.6 36.8 143.4 142.6
Landing fees and other rentals 51.9 46.6 208.4 185.1
Other 51.9 50.4 208.3 197.4
Restructuring charges (0.3) 25.9 20.4 53.4
Impairment of aircraft and
related spare parts -- 0.6 -- 40.2
Total Operating Expenses 756.4 713.8 2,982.7 2,803.6
Operating Loss (25.8) (57.5) (7.4) (79.8)
Nonoperating Income (Expense):
Interest income 9.3 5.9 30.9 24.5
Interest expense (17.5) (13.0) (63.0) (51.9)
Interest capitalized 4.0 0.6 8.9 1.7
Fuel hedging gains (losses) (24.7) (7.8) 173.9 85.5
Other - net (1.6) (1.1) (6.1) (0.6)
(30.5) (15.4) 144.6 59.2
Income (loss) before income
tax and accounting change (56.3) (72.9) 137.2 (20.6)
Income tax expense (benefit) (23.3) (28.0) 52.7 (5.3)
Income (loss) before
accounting change $(33.0) $(44.9) $84.5 $(15.3)
Cumulative effect of
accounting change,
net of tax -- -- (90.4) --
Net Loss $(33.0) $(44.9) $(5.9) $(15.3)
Basic Earnings Per Share:
Income (loss) before
accounting change $(1.15) $(1.66) $3.06 $(0.57)
Cumulative effect of
accounting change NA NA (3.27) NA
Net Loss Per Share $(1.15) $(1.66) $(0.21) $(0.57)
Diluted Earnings Per Share:
Income (loss) before
accounting change $(1.15) $(1.66) $2.65 $(0.57)
Cumulative effect of
accounting change NA NA (2.66) NA
Net Loss Per Share $(1.15) $(1.66) $(0.01) $(0.57)
Shares Used for Computation:
Basic 28.629 26.975 27.609 26.859
Diluted 28.629 26.975 33.917 26.859
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
December 31, December 31,
(In Millions) 2005 2004
Cash and marketable securities $983 $874
Total current assets $1,540 $1,242
Property and equipment-net 2,032 1,908
Other assets 220 185
Total assets $3,792 $3,335
Current liabilities $1,165 $957
Long-term debt and capital lease obligations 969 990
Other liabilities and credits 830 723
Shareholders' equity 828 665
Total liabilities and shareholders' equity $3,792 $3,335
Alaska Airlines Financial and Statistical Data
Three Months Ended Twelve Months Ended
December 31 December 31
Financial Data
(in millions): 2005 2004 %Change 2005 2004 %Change
Operating Revenues:
Passenger $526.4 $477.8 10.2 $2,183.0 $2,023.6 7.9
Freight and mail 21.9 21.1 3.8 90.3 86.4 4.5
Other - net 38.9 32.4 20.1 142.8 123.0 16.1
Total Operating
Revenues 587.2 531.3 10.5 2,416.1 2,233.0 8.2
Operating Expenses:
Wages and benefits 181.2 187.9 (3.6) 737.4 799.7 (7.8)
Contracted services 32.9 26.2 25.6 119.9 96.5 24.2
Aircraft fuel 170.9 135.6 26.0 626.6 472.0 32.8
Aircraft maintenance 41.7 34.5 20.9 185.2 145.8 27.0
Aircraft rent 29.6 28.0 5.7 116.8 113.5 2.9
Food and beverage
service 12.5 11.9 5.0 47.7 49.8 (4.2)
Selling expenses 29.0 31.1 (6.8) 126.9 132.2 (4.0)
Depreciation and
amortization 32.5 32.9 (1.2) 125.4 128.1 (2.1)
Landing fees and
other rentals 40.4 35.9 12.5 161.9 142.0 14.0
Other 39.0 38.2 2.1 158.7 148.6 6.8
Restructuring
charges (0.3) 25.9 NM 20.4 53.4 NM
Impairment of
aircraft and
related spare parts -- -- NM -- 36.8 NM
Total Operating
Expenses 609.4 588.1 3.6 2,426.9 2,318.4 4.7
Operating Loss (22.2) (56.8) NM (10.8) (85.4) NM
Interest income 9.4 6.2 32.5 26.2
Interest expense (14.3) (11.0) (51.2) (44.1)
Interest capitalized 3.6 0.4 8.1 1.1
Fuel hedging
gains (losses) (21.5) (6.8) 150.6 75.3
Other - net (1.3) (0.9) (5.0) (0.1)
(24.1) (12.1) 135.0 58.4
Income (Loss)
Before Income Tax
and Accounting
Change $(46.3) $(68.9) NM $124.2 $(27.0) NM
Operating Statistics:
Revenue passengers
(000) 4,043 3,998 1.1 16,759 16,295 2.8
RPMs (000,000) 4,104 3,976 3.2 16,915 16,231 4.2
ASMs (000,000) 5,556 5,452 1.9 22,292 22,276 0.1
Passenger load
factor 73.9% 72.9% 1.0pts 75.9% 72.9% 3.0pts
Yield per
passenger mile
(in cents) 12.83 12.02 6.7 12.91 12.47 3.5
Operating revenue
per ASM (in cents) 10.57 9.75 8.4 10.84 10.02 8.2
Operating expenses
per ASM (a)
(in cents) 10.97 10.79 1.7 10.89 10.41 4.6
Operating expenses
per ASM excluding
fuel, navigation
fee recovery,
restructuring and
impairment
charges (a)
(in cents) 7.90 7.83 0.9 8.01 7.92 1.1
Raw fuel cost
per gallon (a) $2.02 $1.60 26.3 $1.84 $1.37 34.3
GAAP fuel cost
per gallon (a) $1.99 $1.56 27.6 $1.81 $1.33 36.1
Economic fuel cost
per gallon (a) $1.69 $1.40 20.7 $1.53 $1.26 21.4
Fuel gallons
(000,000) 85.7 87.1 (1.6) 346.4 354.7 (2.3)
Average number
of employees 8,937 9,433 (5.3) 9,065 9,968 (9.1)
Aircraft utilization
(blk hrs/day) 10.8 10.8 0.0 10.8 11.0 (1.8)
Operating fleet at
period-end 110 108 1.9 110 108 1.9
NM = Not Meaningful
(a) See Note A following
Horizon Air Financial and Statistical Data
Three Months Ended Twelve Months Ended
December 31 December 31
Financial Data
(in millions): 2005 2004 %Change 2005 2004 %Change
Operating Revenues:
Passenger $138.2 $125.1 10.5 $544.0 $487.3 11.6
Freight and mail 0.9 0.9 0.0 3.8 3.9 (2.6)
Other - net 1.8 2.9 (37.9) 8.6 12.0 (28.3)
Total Operating
Revenues 140.9 128.9 9.3 556.4 503.2 10.6
Operating Expenses:
Wages and benefits 46.8 41.4 13.0 178.4 163.5 9.1
Contracted services 6.1 5.3 15.1 23.8 20.7 15.0
Aircraft fuel 25.9 20.3 27.6 96.2 68.7 40.0
Aircraft maintenance 12.2 11.7 4.3 43.3 38.3 13.1
Aircraft rent 17.4 17.9 (2.8) 70.2 73.9 (5.0)
Food and beverage
service 0.6 0.5 20.0 2.5 2.1 19.0
Selling expenses 7.0 6.6 6.1 29.1 26.5 9.8
Depreciation and
amortization 4.8 3.7 29.7 16.8 13.4 25.4
Landing fees and
other rentals 12.0 10.2 17.6 47.7 41.4 15.2
Other 11.2 10.8 3.7 42.2 42.0 0.5
Impairment of aircraft
and related spare parts -- 0.6 NM -- 3.4 NM
Total Operating
Expenses 144.0 129.0 11.6 550.2 493.9 11.4
Operating Income (Loss) (3.1) (0.1) NM 6.2 9.3 NM
Interest income 0.6 0.2 1.6 1.1
Interest expense (1.2) (0.7) (5.5) (3.9)
Interest capitalized 0.4 0.2 0.8 0.6
Fuel hedging gains
(losses) (3.2) (1.0) 23.3 10.2
Other - net (0.1) (0.2) -- (0.2)
(3.5) (1.5) 20.2 7.8
Income (Loss) Before
Income Tax and
Accounting Change $(6.6) $(1.6) NM $26.4 $17.1 NM
Operating Statistics:
Revenue passengers
(000) 1,613 1,568 2.9 6,481 5,930 9.3
RPMs (000,000) 632 569 11.1 2,475 2,155 14.8
ASMs (000,000) 858 793 8.2 3,400 3,107 9.4
Passenger load factor 73.7% 71.7% 2.0pts 72.8% 69.3% 3.5pts
Yield per
passenger mile
(in cents) 21.87 21.99 (0.5) 21.98 22.61 (2.8)
Operating revenue
per ASM (in cents) 16.42 16.25 1.1 16.36 16.20 1.0
Operating expenses
per ASM (a)
(in cents) 16.78 16.26 3.2 16.18 15.90 1.8
Operating expenses
per ASM excluding
fuel and impairment
charges (a)
(in cents) 13.76 13.62 1.1 13.35 13.58 (1.7)
Raw fuel cost
per gallon (a) $2.06 $1.66 24.1 $1.90 $1.42 33.8
GAAP fuel cost
per gallon (a) $2.04 $1.62 25.9 $1.87 $1.38 35.5
Economic fuel cost
per gallon (a) $1.74 $1.48 17.6 $1.58 $1.31 20.6
Fuel gallons (000,000) 12.7 12.5 1.6 51.3 49.7 3.2
Average number
of employees 3,537 3,493 1.3 3,456 3,423 1.0
Aircraft utilization
(blk hrs/day) 8.7 8.5 2.4 8.7 8.3 4.8
Operating fleet
at period-end 65 65 0.0 65 65 0.0
NM = Not Meaningful
(a) See Note A following
Note A:
Pursuant to Item 10 of Regulation S-K, we are providing disclosure of the reconciliation of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. The non-GAAP financial measures provide management the ability to measure and monitor performance both with and without the cost of aircraft fuel (including the gains and losses associated with our fuel hedging program where appropriate), the navigation fee refund, restructuring charges or adjustments thereto, and aircraft impairment charges. Because the cost and availability of aircraft fuel are subject to many economic and political factors beyond our control and we record changes in the fair value of our hedge portfolio in our income statement, it is our view that the measurement and monitoring of performance without fuel is important. In addition, we believe the disclosure of financial performance without impairment and restructuring charges is useful to investors. Finally, these non-GAAP financial measures are also more comparable to financial measures reported to the Department of Transportation by other major network airlines.
The following tables reconcile our non-GAAP financial measures to the most directly comparable GAAP financial measures for both Alaska Airlines, Inc. and Horizon Air Industries, Inc.:
Alaska Airlines, Inc.:
($ in millions) Three Months Ended Twelve Months Ended
December 31, December 31,
Unit cost reconciliations: 2005 2004 2005 2004
Operating expenses $609.4 $588.1 $2,426.9 $2,318.4
ASMs (000,000) 5,556 5,452 22,292 22,276
Operating expenses per ASM
(in cents) 10.97 10.79 10.89 10.41
Operating expenses $609.4 $588.1 $2,426.9 $2,318.4
Less: aircraft fuel (170.9) (135.6) (626.6) (472.0)
Less: restructuring charges 0.3 (25.9) (20.4) (53.4)
Add: navigation fee refund -- -- 4.7 7.7
Less: impairment of aircraft
and related spare parts -- -- -- (36.8)
Operating expenses excluding
fuel, navigation fee refund,
restructuring and impairment
charges $438.8 $426.6 $1,784.6 $1,763.9
ASMs (000,000) 5,556 5,452 22,292 22,276
Operating expenses per
ASM excluding fuel,
navigation fee refund,
restructuring and
impairment charges (in cents) 7.90 7.83 8.01 7.92
Reconciliation to GAAP income
(loss) before taxes and
accounting change:
Income (loss) before taxes
and accounting change,
excluding mark-to-market
hedging gains (losses),
navigation fee refund,
restructuring and
impairment charges $0.5 $(22.7) $85.8 $2.1
Add: mark-to-market hedging
gains (losses) included
in nonoperating income
(expense) (47.1) (20.3) 53.1 50.1
Less: restructuring charges 0.3 (25.9) (20.4) (53.4)
Add: navigation fee refund
and related interest received -- -- 5.7 11.0
Less: impairment of aircraft
and related spare parts -- -- -- (36.8)
GAAP income (loss) before
taxes and accounting change
as reported $(46.3) $(68.9) $124.2 $(27.0)
Aircraft fuel reconciliations:
Three Months Ended December 31
2005 2004
(000s) Cost/Gal (000s) Cost/Gal
Fuel expense before hedge
activities ("raw" or
"into-plane" fuel cost) $172.7 $2.02 $139.3 $1.60
Less: gains on settled
hedges included in
fuel expense (1.8) (0.03) (3.7) (0.04)
GAAP fuel expense $170.9 $1.99 $135.6 $1.56
Less: gains on settled
hedges included in
nonoperating income
(expense) (25.6) (0.30) (13.5) (0.16)
Economic fuel expense $145.3 $1.69 $122.1 $1.40
Fuel gallons (000,000) 85.7 87.1
Mark-to-market gains (losses)
included in non-operating
income (expense) related to
hedges that settle in future
periods, net of the
reclassification of previously
recorded mark-to-market gains
to gains on settled hedges
included in nonoperating
income (expense) $(47.1) $(20.3)
Twelve Months Ended December 31
2005 2004
(000s) Cost/Gal (000s) Cost/Gal
Fuel expense before hedge
activities ("raw" or
"into-plane" fuel cost) $637.9 $1.84 $486.6 $1.37
Less: gains on settled hedges
included in fuel expense (11.3) (0.03) (14.6) (0.04)
GAAP fuel expense $626.6 $1.81 $472.0 $1.33
Less: gains on settled
hedges included in
nonoperating income
(expense) (97.5) (0.28) (25.2) (0.07)
Economic fuel expense $529.1 $1.53 $446.8 $1.26
Fuel gallons (000,000) 346.4 354.7
Mark-to-market gains included
in non-operating income
(expense) related to hedges
that settle in future periods,
net of the reclassification
of previously recorded
mark-to-market gains to
gains on settled hedges
included in nonoperating
income (expense) $53.1 $50.1
Horizon Air Industries, Inc.
($ in millions) Three Months Ended Twelve Months Ended
December 31, December 31,
Unit cost reconciliations: 2005 2004 2005 2004
Operating expenses $144.0 $129.0 $550.2 $493.9
ASMs (000,000) 858 793 3,400 3,107
Operating expenses per ASM
(in cents) 16.78 16.26 16.18 15.90
Operating expenses $144.0 $129.0 $550.2 $493.9
Less: aircraft fuel (25.9) (20.3) (96.2) (68.7)
Less: impairment of aircraft
and related spare parts -- (0.6) -- (3.4)
Operating expenses excluding
fuel and impairment charges $118.1 $108.1 $454.0 $421.8
ASMs (000,000) 858 793 3,400 3,107
Operating expenses per ASM
excluding fuel and
impairment charges (in cents) 13.76 13.62 13.35 13.58
Reconciliation to GAAP income
(loss) before taxes
and accounting change:
Income before taxes and
accounting change, excluding
impairment charges and
mark-to-market hedging
gains (losses) $0.4 $1.8 $17.8 $13.7
Add: mark-to-market hedging
gains (losses) included in
nonoperating income (expense) (7.0) (2.8) 8.6 6.8
Less: impairment of aircraft
and related spare parts -- (0.6) -- (3.4)
GAAP income (loss) before
taxes and accounting change
as reported $(6.6) $(1.6) $26.4 $17.1
Aircraft fuel reconciliations:
Three Months Ended December 31,
2005 2004
(000s) Cost/Gal (000s) Cost/Gal
Fuel expense before hedge
activities ("raw" or
"into-plane" fuel cost) $26.1 $2.06 $20.8 $1.66
Less: gains on settled hedges
included in fuel expense (0.2) (0.02) (0.5) (0.04)
GAAP fuel expense $25.9 $2.04 $20.3 $1.62
Less: gains on settled hedges
included in nonoperating
income (expense) (3.8) (0.30) (1.8) (0.14)
Economic fuel expense $22.1 $1.74 $18.5 $1.48
Fuel gallons (000,000) 12.7 12.5
Mark-to-market gains (losses)
included in non-operating
income (expense) related to
hedges that settle in future
periods, net of the
reclassification of previously
recorded mark-to-market gains
to gains on settled hedges
included in nonoperating
income (expense) $(7.0) $(2.8)
Twelve Months Ended December 31,
2005 2004
(000s) Cost/Gal (000s) Cost/Gal
Fuel expense before hedge
activities ("raw" or
"into-plane" fuel cost) $97.7 $1.90 $70.7 $1.42
Less: gains on settled hedges
included in fuel expense (1.5) (0.03) (2.0) (0.04)
GAAP fuel expense $96.2 $1.87 $68.7 $1.38
Less: gains on settled hedges
included in nonoperating
income (expense) (14.7) (0.29) (3.4) (0.07)
Economic fuel expense $81.5 $1.58 $65.3 $1.31
Fuel gallons (000,000) 51.3 49.7
Mark-to-market gains included
in non-operating income
(expense) related to hedges
that settle in future periods,
net of the reclassification of
previously recorded mark-to-market
gains to gains on settled hedges
included in nonoperating
income (expense) $8.6 $6.8
Air Group Net Income and EPS Reconciliation:
The following table reconciles Alaska Air Group, Inc.'s net income (loss)
and diluted earnings per share during 2005 and 2004 excluding the
cumulative effect of the accounting change, mark-to-market hedging gains
(losses) net of related reclassifications, the navigation fee refund, and
restructuring and impairment charges to the reported GAAP amounts (in
millions except per share amounts):
Three Months Ended December 31,
2005 2004
Dollars Diluted EPS Dollars Diluted EPS
Net income (loss) and diluted
EPS excluding mark-to-market
hedging gains (losses),
restructuring and
impairment charges $0.6 $0.02 $(14.3) $(0.53)
Mark-to-market hedging gains
(losses), net of tax (33.8) (1.18) (14.2) (0.53)
Restructuring charges,
net of tax 0.2 0.01 (16.0) (0.59)
Impairment charges,
net of tax -- -- (0.4) (0.01)
Reported GAAP amounts $(33.0) $(1.15) $(44.9) $(1.66)
Twelve Months Ended December 31,
2005 2004
Dollars Diluted EPS Dollars Diluted EPS
Net income and diluted EPS
excluding the cumulative
effect of the accounting
change, mark-to-market
hedging gains, navigation
fee refund, restructuring
and impairment charges $55.0 $1.78 $5.2 $0.19
Cumulative effect of
accounting change,
net of tax (90.4) (2.66) -- --
Mark-to-market hedging
gains, net of tax 38.6 1.14 31.7 1.18
Navigation fee refund,
net of tax 3.6 0.10 6.3 0.23
Restructuring charges,
net of tax (12.7) (0.37) (31.8) (1.18)
Impairment charges,
net of tax -- -- (26.7) (0.99)
Reported GAAP amounts $(5.9) $(0.01) $(15.3) $(0.57)
Air Group EPS Calculations:
The following table summarizes Alaska Air Group, Inc.'s basic and diluted
per share calculations for income (loss) before the accounting change and
net income (loss) (in millions except per share amounts):
Three Months Ended Twelve Months Ended
December 31, December 31,
2005 2004 2005 2004
Basic Earnings Per Share:
Income (loss) before
accounting change $(33.0) $(44.9) $84.5 $(15.3)
Weighted average shares
outstanding 28.629 26.975 27.609 26.859
Income (loss) per share
before accounting change $(1.15) $(1.66) $3.06 $(0.57)
Cumulative effect of
accounting change, net of tax NA NA $(90.4) NA
Weighted average shares
outstanding NA NA 27.609 NA
Per share cumulative effect
of accounting change NA NA $(3.27) NA
Net loss $(33.0) $(44.9) $(5.9) $(15.3)
Weighted average shares
outstanding 28.629 26.975 27.609 26.859
Net loss per share $(1.15) $(1.66) $(0.21) $(0.57)
Diluted Earnings Per Share:
Income (loss) before
accounting change $(33.0) $(44.9) $84.5 $(15.3)
Interest on convertible
notes, net of tax NA NA 5.5 NA
Income before accounting change
for diluted calculation $(33.0) $(44.9) $90.0 $(15.3)
Weighted average shares
outstanding 28.629 26.975 33.917 26.859
Income (loss) per share
before accounting change $(1.15) $(1.66) $2.65 $(0.57)
Cumulative effect of accounting
change, net of tax NA NA $(90.4) NA
Weighted average shares
outstanding NA NA 33.917 NA
Per share cumulative effect
of accounting change NA NA $(2.66) NA
Net loss $(33.0) $(44.9) $(5.9) $(15.3)
Interest on convertible notes,
net of tax NA NA 5.5 NA
Net income for diluted
calculation $(33.0) $(44.9) $(0.4) $(15.3)
Weighted average shares
outstanding 28.629 26.975 33.917 26.859
Net loss per share $(1.15) $(1.66) $(0.01) $(0.57)
Forecasted Financial Measures
During our quarterly earnings conference call, we expect to discuss
forward-looking forecasted unit cost information for 2006.This forecasted
unit cost information includes non-GAAP unit cost estimates which are
summarized in the following table together with the most directly
comparable GAAP unit cost for both Alaska Airlines, Inc. and Horizon Air
Industries, Inc.:
Alaska Airlines
Forecast of total
operating cost
Forecast of Forecast of per available
cost per available fuel cost seat mile,
seat mile, per available as reported on
excluding fuel seat mile a GAAP basis
(cents) (See Note 1) (cents)
First quarter 2006 8.35 3.05 11.40
Full year 2006 7.65 3.05 10.70
Horizon Air
Forecast of total
operating cost
Forecast of Forecast of per available
cost per available fuel cost seat mile,
seat mile, per available as reported on
excluding fuel seat mile a GAAP basis
(cents) (See Note 1) (cents)
First quarter 2006 14.70 3.10 17.80
Full year 2006 13.95 3.10 17.05
Note 1: Our forecast of fuel costs is based on anticipated gallons consumed and estimated fuel cost per gallon for both Alaska and Horizon. The estimate also excludes the benefit from settled hedges recorded in other non-operating income as it does not impact our operating cost per available seat mile as presented on a GAAP basis. Given the volatility of fuel prices, readers should be cautioned that actual fuel expense will likely differ from the forecast above.
SOURCE: Alaska Air Group, Inc.
CONTACT: Brad Tilden, +1-206-392-5362, or Caroline Boren,
+1-206-392-5799, both of Alaska Air Group
Web site: http://www.alaskaair.com/
