Alaska Air Group Reports 2006 Full Year and Fourth Quarter Results
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Alaska Air Group, Inc. today reported a full year net loss of $52.6 million, or $1.39 per share, compared to a net loss of $5.9 million, or $0.01 per diluted share, in 2005. The 2006 results...
Alaska Air Group, Inc.
The company reported a fourth quarter net loss of $11.6 million, or $0.29 per share, compared to a net loss of $33.0 million, or $1.15 per share, in the fourth quarter of 2005. Similar to the items noted for the full year, both the 2006 and 2005 quarterly results include mark-to-market fuel hedge accounting adjustments and restructuring-related items. Excluding the impact of these items, the company would have reported a fourth quarter net loss of $3.4 million, or $0.08 per share in 2006, compared to net income of $0.6 million, or $0.02 per share, in the fourth quarter of 2005.
"While unit revenue growth slowed somewhat during the fourth quarter, our full year adjusted earnings show steady improvement over the last five years," said Bill Ayer, the company’s chairman and chief executive officer. "This positive trend reflects the commitment of employees at Alaska and Horizon to achieve our customer, operational and financial goals. Alaska’s transition by the end of 2008 to an all-737 fleet will further our efforts to reduce costs while delivering a compelling customer value."
Because they achieved a number of financial and operational goals, Air Group employees have earned $36.8 million of incentive pay. This is the highest incentive payout in the company’s history. In addition, the marked improvement in operating cash flows allowed the company to contribute nearly $122 million to its defined benefit pension plans in 2006, bringing the funded percentage to nearly 80 percent based on the projected benefit obligation of the plans.
Alaska Airlines’ passenger traffic in the fourth quarter increased 3.4 percent on a capacity increase of 3.6 percent. Alaska’s load factor decreased 0.2 percentage points to 73.7 percent, compared to the same period in 2005. Alaska’s operating revenue per available seat mile (ASM) increased 3.9 percent, and its operating costs per ASM excluding fuel and adjustments related to restructuring activities increased 2.0 percent. Alaska’s pretax loss for the quarter was $12.1 million, compared to a pretax loss of $46.3 million in 2005. Excluding the restructuring adjustments and fuel-hedging items referenced above, Alaska’s pretax loss was $1.9 million for the quarter, compared to pre-tax income of $0.5 million in the fourth quarter of 2005.
Horizon Air’s passenger traffic in the fourth quarter increased 4.3 percent on a 5.2 percent capacity increase. Horizon’s load factor decreased by 0.7 percentage points to 73.0 percent. Horizon’s operating revenue per ASM increased 7.1 percent, and its operating costs per ASM excluding fuel increased 6.8 percent. Horizon’s pretax loss for the quarter was $3.5 million, compared to a pretax loss of $6.6 million in 2005. Excluding the fuel-hedging adjustments referenced above, Horizon’s pretax loss was $0.5 million for the quarter, compared to pretax income of $0.4 million in the fourth quarter of 2005.
Alaska Air Group had cash and short-term investments at Dec. 31, 2006, of approximately $1.0 billion, compared to $983 million at Dec. 31, 2005. The company’s debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, improved to 72 percent as of Dec. 31, 2006.
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 10.
A conference call regarding the fourth quarter 2006 results will be simulcast via the Internet at 8:30 a.m. Pacific time on Jan. 25, 2007. It can be accessed through the company’s Web site at alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at alaskaair.com/investors .
References in this report to "Air Group," "Company," "we," "us," and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred to as "Alaska" and "Horizon," respectively, and together as our "airlines."
This report contains forward-looking statements that are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. 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: 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; the implementation of our growth strategy; the timing of the MD-80 fleet disposal, and the amounts of potential lease termination payments with lessors and sublease payments from sub lessees; 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 Item 1A of the Company’s Annual Report on Form 10-K for the year ended Dec. 31, 2005, and Item 1A of the Company’s Quarterly Report on Form 10-Q for the three and nine months ended Sept. 30, 2006. 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. Over time, our actual results, performance or achievements will likely differ from the anticipated results; performance or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.
Alaska Airlines and sister carrier, Horizon Air, together serve 89 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 alaskaair.com/newsroom.
ALASKA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In Millions Except Per Share Amounts)
Three Months Twelve Months
Ended Dec. 31 Ended Dec. 31
2006 2005 2006 2005
Operating Revenues:
Passenger $724.6 $666.8 $3,083.0 $2,728.7
Freight and mail 22.5 22.8 97.3 94.1
Other - net 43.2 41.0 154.1 152.5
Total Operating Revenues 790.3 730.6 3,334.4 2,975.3
Operating Expenses:
Wages and benefits 240.8 220.6 937.0 903.6
Variable incentive pay 12.7 9.5 36.8 20.0
Aircraft fuel, including hedging gains
and losses 219.8 221.5 873.5 548.9
Aircraft maintenance 62.1 53.9 230.7 228.5
Aircraft rent 43.6 47.0 180.2 187.0
Landing fees and other rentals 51.6 50.5 204.0 202.7
Contracted services 38.9 36.2 153.2 132.4
Selling expenses 36.7 39.6 169.3 163.4
Depreciation and amortization 43.4 37.6 157.5 143.4
Food and beverage service 12.9 13.4 51.2 51.3
Other 53.6 51.6 214.0 207.2
Fleet transition costs - - 189.5 -
Restructuring charges and adjustments (7.6) (0.3) 24.8 20.4
Total Operating Expenses 808.5 781.1 3,421.7 2,808.8
Operating Income (Loss) (18.2) (50.5) (87.3) 166.5
Nonoperating Income (Expense):
Interest income 14.9 9.3 54.3 30.9
Interest expense (20.4) (17.5) (78.0) (63.0)
Interest capitalized 7.1 4.0 24.7 8.9
Other - net - (1.6) (1.5) (6.1)
1.6 (5.8) (0.5) (29.3)
Income (loss) before income tax and
accounting change (16.6) (56.3) (87.8) 137.2
Income tax expense (benefit) (5.0) (23.3) (35.2) 52.7
Income (loss) before accounting change $(11.6) $(33.0) $(52.6) $84.5
Cumulative effect of accounting
change, net of tax - - - (90.4)
Net Loss $(11.6) $(33.0) $(52.6) $(5.9)
Basic Earnings (Loss) Per Share:
Income (loss) before accounting
change $(0.29) $(1.15) $(1.39) $3.06
Cumulative effect of accounting
change NA NA NA (3.27)
Net Loss Per Share $(0.29) $(1.15) $(1.39) $(0.21)
Diluted Earnings (Loss) Per Share:
Income (loss) before accounting
change $(0.29) $(1.15) $(1.39) $2.65
Cumulative effect of accounting
change NA NA NA (2.66)
Net Loss Per Share $(0.29) $(1.15) $(1.39) $(0.01)
Shares Used for Computation:
Basic 40.214 28.629 37.939 27.609
Diluted 40.214 28.629 37.939 33.917
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
December 31, December 31,
(In Millions) 2006 2005
Cash and marketable securities $1,014 $983
Total current assets $1,572 $1,540
Property and equipment-net 2,359 2,032
Other assets 174 220
Total assets $4,105 $3,792
Current liabilities $1,307 $1,165
Long-term debt 1,032 969
Other liabilities and credits 881 830
Shareholders' equity 885 828
Total liabilities and shareholders' equity $4,105 $3,792
Alaska Airlines Financial and Statistical Data
Three Months Ended Twelve Months Ended
December 31, December 31,
Financial Data
(in millions): 2006 2005 % Change 2006 2005 % Change
Operating Revenues:
Passenger $570.6 $526.4 8.4 $2,453.1 $2,183.0 12.4
Freight and mail 21.6 21.9 (1.4) 93.4 90.3 3.4
Other - net 40.0 38.9 2.8 146.0 142.8 2.2
Total Operating
Revenues 632.2 587.2 7.7 2,692.5 2,416.1 11.4
Operating Expenses:
Wages and benefits 190.4 173.4 9.8 743.3 722.1 2.9
Variable incentive
pay 10.4 7.8 33.3 27.7 15.3 81.0
Aircraft fuel,
including hedging
gains and losses 189.8 192.4 (1.4) 757.0 476.0 59.0
Aircraft maintenance 38.2 41.7 (8.4) 156.8 185.2 (15.3)
Aircraft rent 26.3 29.6 (11.1) 110.9 116.8 (5.1)
Landing fees and
other rentals 40.3 39.0 3.3 158.2 156.2 1.3
Contracted services 33.4 32.9 1.5 131.8 119.9 9.9
Selling expenses 31.5 30.4 3.6 141.5 132.6 6.7
Depreciation and
amortization 38.2 32.5 17.5 137.8 125.4 9.9
Food and beverage
service 12.2 12.8 (4.7) 48.3 48.8 (1.0)
Other 42.7 38.7 10.3 161.1 157.6 2.2
Fleet transition
costs - - NM 189.5 - NM
Restructuring
charges and
adjustments (7.6) (0.3) NM 24.8 20.4 NM
Total Operating
Expenses 645.8 630.9 2.4 2,788.7 2,276.3 22.5
Operating Income
(Loss) (13.6) (43.7) NM (96.2) 139.8 NM
Interest income 15.1 9.4 56.3 32.5
Interest expense (19.8) (14.3) (73.3) (51.2)
Interest capitalized 6.0 3.6 21.5 8.1
Other - net 0.2 (1.3) (0.5) (5.0)
1.5 (2.6) 4.0 (15.6)
Income (Loss) Before
Income Tax and
Accounting Change $(12.1) $(46.3) NM $(92.2) $124.2 NM
Operating
Statistics:
Revenue passengers
(000) 4,107 4,043 1.6 17,165 16,759 2.4
RPMs (000,000)
"traffic" 4,243 4,104 3.4 17,822 16,915 5.4
ASMs (000,000)
"capacity" 5,755 5,556 3.6 23,278 22,292 4.4
Passenger load
factor 73.7% 73.9% (0.2)pts 76.6% 75.9% 0.7pts
Yield per passenger
mile (in cents) 13.45 12.83 4.8 13.76 12.91 6.7
Operating revenue
per ASM (in cents) 10.99 10.57 3.9 11.57 10.84 6.7
Operating expenses
per ASM
(in cents) (a) 11.22 11.36 (1.2) 11.98 10.21 17.3
Operating expense
per ASM excluding
fuel, fleet
transition costs,
restructuring
charges and
adjustments, and
navigation fee refund
(in cents) (a) 8.06 7.90 2.0 7.81 8.01 (2.5)
GAAP fuel cost per
gallon (a) $2.18 $2.24 (2.7) $2.14 $1.37 56.2
Economic fuel cost
per gallon (a) $1.98 $1.69 17.2 $1.92 $1.53 25.5
Fuel gallons
(000,000) 87.1 85.7 1.6 354.3 346.4 2.3
Average number of
full-time
equivalent
employees 9,485 8,937 6.1 9,322 9,065 2.8
Aircraft utilization
(blk hrs/day) 10.6 10.8 (1.9) 11.0 10.8 1.9
Average aircraft
stage length
(miles) 914 905 1.0 919 898 2.3
Operating fleet at
period-end 114 110 3.6 114 110 3.6
NM = Not Meaningful
(a) See Note A.
Horizon Air Financial and Statistical Data
Three Months Ended Twelve Months Ended
December 31, December 31,
Financial Data
(in millions): 2006 2005 % Change 2006 2005 % Change
Operating Revenues:
Passenger $155.0 $138.2 12.2 $633.1 $544.0 16.4
Freight and mail 0.9 0.9 0.0 3.9 3.8 2.6
Other - net 2.9 1.8 61.1 7.0 8.6 (18.6)
Total Operating Revenues 158.8 140.9 12.7 644.0 556.4 15.7
Operating Expenses:
Wages and benefits 49.0 45.1 8.6 189.3 173.7 9.0
Variable incentive pay 2.3 1.7 35.3 9.1 4.7 93.6
Aircraft fuel, including
hedging gains and
losses 30.0 29.1 3.1 116.5 72.9 59.8
Aircraft maintenance 23.9 12.2 95.9 73.9 43.3 70.7
Aircraft rent 17.3 17.4 (0.6) 69.3 70.2 (1.3)
Landing fees and other
rentals 11.6 12.0 (3.3) 46.9 47.7 (1.7)
Contracted services 6.9 6.1 13.1 27.0 23.8 13.4
Selling expenses 6.3 7.0 (10.0) 31.5 29.1 8.2
Depreciation and
amortization 4.9 4.8 2.1 18.5 16.8 10.1
Food and beverage
service 0.7 0.6 16.7 2.9 2.5 16.0
Other 9.9 11.2 (11.6) 46.9 42.2 11.1
Total Operating Expenses 162.8 147.2 10.6 631.8 526.9 19.9
Operating Income (Loss) (4.0) (6.3) NM 12.2 29.5 NM
Interest income 1.0 0.6 3.7 1.6
Interest expense (1.6) (1.2) (7.4) (5.5)
Interest capitalized 1.1 0.4 3.2 0.8
Other - net - (0.1) - -
0.5 (0.3) (0.5) (3.1)
Income (Loss) Before
Income Tax and
Accounting Change $(3.5) $(6.6) NM $11.7 $26.4 NM
Operating Statistics:
Revenue passengers (000) 1,689 1,613 4.7 6,860 6,481 5.8
RPMs (000,000) "traffic" 659 632 4.3 2,691 2,475 8.7
ASMs (000,000)
"capacity" 903 858 5.2 3,632 3,400 6.8
Passenger load factor 73.0% 73.7% (0.7)pts 74.1% 72.8% 1.3pts
Yield per passenger mile
(in cents) 23.52 21.87 7.6 23.53 21.98 7.0
Operating revenue per
ASM (in cents) 17.59 16.42 7.1 17.73 16.36 8.4
Operating expenses per
ASM (in cents) (a) 18.03 17.16 5.1 17.40 15.50 12.2
Operating expense per
ASM excluding fuel
(in cents) (a) 14.71 13.76 6.8 14.19 13.35 6.3
GAAP fuel cost per
gallon (a) $2.19 $2.29 (4.4) $2.14 $1.41 51.8
Economic fuel cost per
gallon (a) $1.98 $1.74 13.8 $1.93 $1.58 22.2
Fuel gallons (000,000) 13.7 12.7 7.9 54.3 51.3 5.8
Average number of full-
time equivalent
employees 3,670 3,537 3.8 3,611 3,456 4.5
Aircraft utilization
(blk hrs/day) 8.6 8.7 (1.1) 8.8 8.7 1.1
Operating fleet at
period-end 69 65 6.2 69 65 6.2
NM = Not Meaningful
(a) See Note A.
Note A:
Pursuant to Item 10 of Regulation S-K, we are providing disclosure of the reconciliation of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. The non-GAAP financial measures provide management the ability to measure and monitor performance both with and without the cost of aircraft fuel (including the gains and losses associated with our fuel hedging program where appropriate), fleet transition costs, restructuring charges and adjustments, and a 2005 navigation fee refund. Because the cost and availability of aircraft fuel are subject to many economic and political factors beyond our control and we record changes in the fair value of our hedge portfolio in our income statement, it is our view that the measurement and monitoring of performance without fuel is important. In addition, we believe the disclosure of financial performance without fleet transition costs, restructuring charges, and the navigation fee refund is useful to investors. Finally, these non-GAAP financial measures are also more comparable to financial measures reported to the Department of Transportation by other major network airlines.
The following tables reconcile our non-GAAP financial measures to the most directly comparable GAAP financial measures for both Alaska Airlines, Inc. and Horizon Air Industries, Inc.:
Alaska Airlines, Inc.:
Three Months Ended Twelve Months Ended
($ in millions) December 31, December 31,
Unit cost reconciliations: 2006 2005 2006 2005
Operating expenses $645.8 $630.9 $2,788.7 $2,276.3
ASMs (000,000) 5,755 5,556 23,278 22,292
Operating expenses per ASM
(in cents) 11.22 11.36 11.98 10.21
Operating expenses $645.8 $630.9 $2,788.7 $2,276.3
Less: aircraft fuel (189.8) (192.4) (757.0) (476.0)
Less: fleet transition costs - - (189.5) -
Less: restructuring charges and
adjustments 7.6 0.3 (24.8) (20.4)
Add: navigation fee refund - - - 4.7
Operating expenses excluding fuel,
fleet transition costs, restructuring
charges and adjustments, and the
2005 navigation fee refund $463.6 $438.8 $1,817.4 $1,784.6
ASMs (000,000) 5,755 5,556 23,278 22,292
Operating expenses per ASM excluding
fuel, fleet transition costs, the
navigation fee refund, and
restructuring charges and adjustments
(in cents) 8.06 7.90 7.81 8.01
Reconciliation to GAAP income (loss)
before taxes and accounting change:
Income (loss) before taxes and
accounting change, excluding mark-to-market
hedging gains (losses), fleet
transition costs, restructuring
charges and adjustments, and the 2005
navigation fee refund $(1.9) $0.5 $200.5 $85.8
Mark-to-market hedging gains (losses)
included in aircraft fuel (17.8) (47.1) (78.4) 53.1
Less: fleet transition costs - - (189.5) -
Less: restructuring charges and
adjustments 7.6 0.3 (24.8) (20.4)
Add: navigation fee refund and related
interest received - - - 5.7
GAAP income (loss) before taxes and
accounting change as reported $(12.1) $(46.3) $(92.2) $124.2
Aircraft fuel reconciliations:*
($ in millions except per gallon amounts)
Three Months Ended December 31,
2006 2005
Cost/Gal Cost/Gal
Raw or "into-plane" fuel cost $180.0 $2.07 $172.7 $2.02
Less: gains on settled hedges (8.0) (0.09) (27.4) (0.33)
Economic fuel expense* $172.0 $1.98 $145.3 $1.69
Add: mark-to-market losses related to
hedges that settle in future periods,
including and the reclassification of
previously recorded mark-to-market
gains on settled hedges 17.8 0.20 47.1 0.55
GAAP fuel expense* $189.8 $2.18 $192.4 $2.24
Fuel gallons (000,000) 87.1 85.7
Twelve Months Ended December 31,
2006 2005
Cost/Gal Cost/Gal
Raw or "into-plane" fuel cost $765.6 $2.16 $637.9 $1.84
Less: gains on settled hedges (87.0) (0.24) (108.8) (0.31)
Economic fuel expense* $678.6 $1.92 $529.1 $1.53
Mark-to-market net (gains) losses
related to hedges that settle in
future periods, including the
reclassification of previously
recorded mark-to-market gains on
settled hedges 78.4 0.22 (53.1) (0.16)
GAAP fuel expense* $757.0 $2.14 $476.0 $1.37
Fuel gallons (000,000) 354.3 346.4
* Beginning in the first quarter of 2006, the Company records all fuel
hedging activity, including mark-to-market gains and losses, in aircraft
fuel expense. Prior year amounts have been reclassified for
consistency.
Horizon Air Industries, Inc.
Three Months Ended Twelve Months Ended
($ in millions) December 31, December 31,
Unit cost reconciliations: 2006 2005 2006 2005
Operating expenses $162.8 $147.2 $631.8 $526.9
ASMs (000,000) 903 858 3,632 3,400
Operating expenses per ASM
(in cents) 18.03 17.16 17.40 15.50
Operating expenses $162.8 $147.2 $631.8 $526.9
Less: aircraft fuel (30.0) (29.1) (116.5) (72.9)
Operating expenses excluding fuel $132.8 $118.1 $515.3 $454.0
ASMs (000,000) 903 858 3,632 3,400
Operating expenses per ASM excluding
fuel (in cents) 14.71 13.76 14.19 13.35
Reconciliation to GAAP income (loss)
before taxes and accounting change:
Income before taxes and accounting
change, excluding mark-to-market
hedging gains (losses) $(0.5) $0.4 $23.2 $17.8
Mark-to-market hedging gains (losses)
included in aircraft fuel (3.0) (7.0) (11.5) 8.6
GAAP income (loss) before taxes and
accounting change as reported $(3.5) $(6.6) $11.7 $26.4
Aircraft fuel reconciliations:*
($ in millions except per gallon amounts)
Three Months Ended December 31,
2006 2005
Cost/Gal Cost/Gal
Raw or "into-plane" fuel cost $28.3 $2.07 $26.1 $2.06
Less: gains on settled hedges (1.3) (0.09) (4.0) (0.32)
Economic fuel expense* $27.0 $1.98 $22.1 $1.74
Add: mark-to-market net losses
related to hedges that settle in
future periods,including the
reclassification of previously
recorded mark-to-market
gains on settled hedges 3.0 0.21 7.0 0.55
GAAP fuel expense* $30.0 $2.19 $29.1 $2.29
Fuel gallons (000,000) 13.7 12.7
Twelve Months Ended December 31,
2006 2005
Cost/Gal Cost/Gal
Raw or "into-plane" fuel cost $119.1 $2.19 $97.7 $1.90
Less: gains on settled hedges (14.1) (0.26) (16.2) (0.32)
Economic fuel expense* $105.0 $1.93 $81.5 $1.58
Mark-to-market net (gains) losses
related to hedges that settle in
future periods, including the
reclassification of previously
recorded mark-to-market gains on
settled hedges 11.5 0.21 (8.6) (0.17)
GAAP fuel expense* $116.5 $2.14 $72.9 $1.41
Fuel gallons (000,000) 54.3 51.3
* Beginning in the first quarter of 2006, the Company records all fuel
hedging activity, including mark-to-market gains and losses, in aircraft
fuel expense. Prior year amounts have been reclassified for
consistency.
Air Group Net Income (Loss) and EPS Reconciliation:
The following table summarizes Alaska Air Group, Inc.’s net income (loss) and earnings (loss) per share during 2006 and 2005 excluding the cumulative effect of the accounting change, mark-to-market hedging gains (losses) and related reclassifications, fleet transition costs, restructuring charges and adjustments, and the 2005 navigation refund, as reported in accordance with GAAP (in millions except per share amounts):
Three Months Ended December 31,
2006 2005
Diluted Diluted
Dollars EPS Dollars EPS
Net income (loss) and diluted EPS
excluding mark-to-market hedging
gains (losses), fleet transition
costs, restructuring charges and
adjustments, and the 2005
navigation fee refund* $(3.4) $(0.08) $0.6 $0.02
Mark-to-market hedging gains
(losses), net of tax (13.0) (0.33) (33.8) (1.18)
Fleet transition costs, net of tax - - - -
Restructuring charges and
adjustments, net of tax 4.8 0.12 0.2 0.01
Navigation fee refund, net of tax - - - -
Reported GAAP amounts $(11.6) $(0.29) $(33.0) $(1.15)
Twelve Months Ended December 31,
2006 2005
Diluted Diluted
Dollars EPS Dollars EPS
Net income and diluted EPS excluding
the cumulative effect of the
accounting change, mark-to-market
hedging gains (losses), fleet
transition costs, restructuring
charges and adjustments, and the
2005 navigation fee refund* $137.7 $3.45 $55.0 $1.78
Effect of dilutive shares and
interest on convertible bonds * NA 0.17 NA NA
Cumulative effect of accounting
change, net of tax - - (90.4) (2.66)
Mark-to-market hedging gains
(losses), net of tax (56.3) (1.48) 38.6 1.14
Fleet transition costs, net of tax (118.5) (3.12) - -
Restructuring charges and
adjustments, net of tax (15.5) (0.41) (12.7) (0.37)
Navigation fee refund, net of tax - - 3.6 0.10
Reported GAAP amounts $(52.6) $(1.39) $(5.9) $(0.01)
*Diluted earnings per share for the twelve months ended December 31, 2006, excluding the impact of the mark-to-market losses on fuel hedges, fleet transition costs, and restructuring charges and adjustments has been calculated using the dilutive weighted-average number of shares oustanding of 40.386 million.
In order to reconcile the diluted earnings per share on an adjusted basis to the GAAP loss per share for twelve months ended December 31, 2006, the table above includes $0.17 per share, which represents the impact of the additional shares that were used in the adjusted diluted earnings per share. Additionally, $1.6 million of interest, net of tax, on the convertible senior notes that were outstanding during the first quarter of the year was added back to earnings for the twelve months ended December 31, 2006 in order to derive the diluted earnings per share on an adjusted basis.
The per share impact of the mark-to-market losses on fuel hedges, fleet transition costs, and restructuring and impairment ch
The following table summarizes Alaska Air Group, Inc.’s basic and diluted per share calculations for income (loss) before the accounting change and net loss (in millions except per share amounts):
Three Months Ended Twelve Months
December 31, Ended December 31,
2006 2005 2006 2005
Basic Earnings (Loss) Per Share:
Income (loss) before accounting
change $(11.6) $(33.0) $(52.6) $84.5
Weighted average shares outstanding 40.214 28.629 37.939 27.609
Income (loss) per share before
accounting change $(0.29) $(1.15) $(1.39) $3.06
Cumulative effect of accounting
change, net of tax NA NA NA $(90.4)
Weighted average shares outstanding NA NA NA 27.609
Per share cumulative effect of
accounting change NA NA NA $(3.27)
Net loss $(11.6) $(33.0) $(52.6) $(5.9)
Weighted average shares outstanding 40.214 28.629 37.939 27.609
Net loss per share $(0.29) $(1.15) $(1.39) $(0.21)
Diluted Earnings (Loss) Per Share:
Income (loss) before accounting
change $(11.6) $(33.0) $(52.6) $84.5
Interest on convertible notes, net
of tax NA NA NA 5.5
Income (loss) before accounting
change for diluted calculation $(11.6) $(33.0) $(52.6) $90.0
Weighted average shares outstanding 40.214 28.629 37.939 33.917
Income (loss) per share before
accounting change $(0.29) $(1.15) $(1.39) $2.65
Cumulative effect of accounting
change, net of tax NA NA NA $(90.4)
Weighted average shares outstanding NA NA NA 33.917
Per share cumulative effect of
accounting change NA NA NA $(2.66)
Net loss $(11.6) $(33.0) $(52.6) $(5.9)
Interest on convertible notes, net
of tax NA NA NA 5.5
Net loss for diluted calculation $(11.6) $(33.0) $(52.6) $(0.4)
Weighted average shares outstanding 40.214 28.629 37.939 33.917
Net loss per share $(0.29) $(1.15) $(1.39) $(0.01)
Forecasted Financial Measures
During our quarterly earnings conference call, we expect to discuss forward-looking forecasted unit cost information for 2007. 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
Forecast of cost Forecast operating cost
per available of fuel per available
seat mile, cost per seat mile, as
excluding fuel available reported on a
and impairment seat mile GAAP basis
charges (cents) (See Note 1) (cents)
First quarter 2007 8.0 - 8.1 2.7 10.7 - 10.8
Full year 2007 7.5 - 7.6 2.9 10.4 - 10.5
Horizon Air
Forecast of total
Forecast of Forecast operating cost
cost per of fuel per available
available cost per seat mile, as
seat mile, available reported on a
excluding fuel seat mile GAAP basis
(cents) (See Note 1) (cents)
First quarter 2007 15.7 3.4 19.1
Full year 2007 14.2 3.5 17.7
Note 1: Our forecast of fuel cost is based on anticipated gallons consumed and estimated fuel cost per gallon. The estimate also includes the expected benefit from settled hedges, net of the reclassification of previously recognized mark-to-market hedge portfolio gains and losses. Given the volatility of fuel prices and the mark-to-market adjustments on our fuel hedge portfolio, readers should be cautioned that actual fuel expense could differ significantly from the forecast above.
Operating Fleet Plan
Giving consideration to the current fleet transition plan, the following table displays the currently anticipated fleet counts for Alaska and Horizon as of the end of each quarter in 2007 compared to the fleet count as of December 31, 2006:
31-Dec-06 31-Mar-07 30-Jun-07 30-Sep-07 31-Dec-07 Alaska Airlines B737-200C 2 0 0 0 0 B737-400F** 1 1 1 1 1 B737-400C 0 2 4 4 4 B737-400 39 37 35 35 35 B737-700 22 20 20 20 20 B737-800 15 20 22 25 29 B737-900 12 12 12 12 12 MD-80 23 21 20 17 15 Total 114 113 114 114 116 Horizon Air Q200 28 26 23 20 17 Q400 20 26 32 33 33 CRJ 700 21 21 20 20 20 Total 69 73 75 73 70
FCMN Contact: maria.koenig@alaskaair.com
SOURCE: Alaska Air Group, Inc.
CONTACT: media, Amanda Tobin Bielawski, Media Relations Manager,
+1-206-392-5134, or investors/analysts, Shannon Alberts, Managing Director of
Investor Relations, +1-206-392-5218, both of Alaska Air Group
Web site: http://www.alaskaair.com/
