Alaska Air Group Reports Second Quarter Results
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Alaska Air Group, Inc. today reported second quarter net income of $17.4 million, or $0.56 per diluted share, compared to a net loss of $1.7 million, or $0.06 per diluted share, in the second...
Alaska Air Group, Inc.
Second quarter results include a restructuring charge of $14.7 million ($9.2 million, net of tax, or $0.28 per diluted share) for employee severance and related costs resulting primarily from the subcontracting of the Seattle ramp service function in May 2005. Second quarter results also include $3 million ($1.9 million, net of tax, or $0.06 per diluted share) in mark-to-market hedging gains on fuel hedges that settle in future periods, compared to $22.3 million ($14.8 million, net of tax, or $0.55 per share) in 2004. Without these items, and excluding aircraft impairment charges of $37.2 million ($24.7 million, net of tax, or $0.92 per share) in the second quarter of 2004, net income would have been $24.7 million, or $0.74 per diluted share, for the second quarter of 2005, compared to net income of $8.2 million, or $0.31 per diluted share, in the second quarter of 2004.
"Although we are seeing gains in passenger loads and ticket prices, we are facing operational problems, which, if we don’t correct them, will impact the long-term reputation of Alaska Airlines," said Bill Ayer, Alaska Air Group’s chairman and chief executive officer. "Our primary focus is on improving our on-time performance in order to deliver on customer promises and reduce the stress on our employees."
Alaska Airlines’ passenger traffic in the second quarter increased 5.2 percent on a capacity decrease of 1.6 percent. Alaska’s load factor increased 5.1 percentage points to 77.9 percent compared to the same period in 2004. Alaska’s operating revenue per available seat mile (ASM) increased 8.4 percent, while its operating cost per ASM excluding fuel, restructuring and impairment charges increased 1.4 percent. Alaska’s pretax income for the quarter was $22.1 million, compared to a pretax loss of $2.8 million in the same period of 2004. Excluding the notable items referenced above, Alaska’s pretax income was $34.2 million for the quarter compared to $14.4 million in the second quarter of 2004.
Horizon Air’s passenger traffic in the second quarter increased 15.9 percent on a 7.2 percent capacity increase. Horizon’s load factor increased by 5.5 percentage points to 73 percent compared to the same period in 2004. Horizon’s operating revenue per ASM increased 5.2 percent, while its operating cost per ASM excluding fuel and impairment charges decreased 4.9 percent. Horizon’s pretax income for the quarter was $11.1 million, compared to $4.7 million in the second quarter of 2004. Excluding the notable items referenced above, Horizon’s pretax income was $10.7 million for the quarter compared to $2.4 million in the same period in 2004.
Alaska Air Group had cash and short-term investments at June 30, 2005, of approximately $726 million, compared to $874 million at Dec. 31, 2004.
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 first quarter 2005 results will be simulcast via the Internet at 8:30 a.m. Pacific time on July 21, 2005. 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 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, which can be volatile; the competitive environment and other trends in our industry; our ability to meet our cost reduction goals; labor disputes; economic conditions; our reliance on automated systems; increases in government fees and taxes; actual or threatened terrorist attacks; global instability and potential U.S. military actions or activities; insurance costs; changes in laws and regulations; liability and other claims asserted against us; operational disruptions; compliance with financial covenants; our ability to attract and retain qualified personnel; third-party vendors and partners; continuing operating losses; our significant indebtedness; downgrades of our credit ratings and the availability of financing. For a discussion of these and other risk factors, see Item 7 of the Company’s Annual Report for the year ended December 31, 2004 on Form 10-K. 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.
ALASKA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In Millions Except Per Share Amounts)
Three Months Six Months
Ended June 30 Ended June 30
2005 2004 2005 2004
Operating Revenues:
Passenger $697.5 $637.9 $1,284.5 $1,191.7
Freight and mail 24.9 24.2 45.2 42.8
Other - net 34.1 39.2 69.3 64.8
Total Operating Revenues 756.5 701.3 1,399.0 1,299.3
Operating Expenses:
Wages and benefits 227.3 246.4 472.0 488.2
Contracted services 34.8 31.9 65.4 59.4
Aircraft fuel 175.2 128.6 321.9 236.4
Aircraft maintenance 58.2 50.1 119.4 100.9
Aircraft rent 47.0 47.0 93.1 94.8
Food and beverage service 12.1 13.6 23.6 25.2
Other selling expenses and commissions 37.8 35.6 75.2 74.0
Depreciation and amortization 35.3 34.0 69.5 70.1
Landing fees and other rentals 51.9 46.6 104.1 89.2
Other 53.1 50.9 104.5 100.6
Impairment of aircraft and related
spare parts -- 37.2 -- 39.6
Restructuring charges 14.7 -- 22.1 --
Total Operating Expenses 747.4 721.9 1,470.8 1,378.4
Operating Income (Loss) 9.1 (20.6) (71.8) (79.1)
Nonoperating Income (Expense):
Interest income 7.1 6.1 13.0 10.7
Interest expense (15.3) (12.6) (29.4) (25.3)
Interest capitalized 1.3 0.3 2.1 0.6
Fuel hedging gains 27.6 25.9 135.8 26.4
Other - net (0.1) 0.2 (3.0) (0.2)
20.6 19.9 118.5 12.2
Income (loss) before income tax and
accounting change 29.7 (0.7) 46.7 (66.9)
Income tax expense (benefit) 12.3 1.0 19.4 (22.5)
Income (loss) before accounting change $17.4 $(1.7) $27.3 $(44.4)
Cumulative effect of accounting
change, net of tax -- -- (90.4) --
Net Income (Loss) $17.4 $(1.7) $(63.1) $(44.4)
Basic Earnings (Loss) Per Share:
Income (loss) before accounting
change $0.64 $(0.06) $1.01 $(1.66)
Cumulative effect of accounting
change -- -- (3.33) --
Net Income (Loss) Per Share $0.64 $(0.06) $(2.32) $(1.66)
Diluted Earnings (Loss) Per Share:
Income (loss) before accounting
change $0.56 $(0.06) $0.90 $(1.66)
Cumulative effect of accounting
change -- -- (2.72) --
Net Income (Loss) Per Share $0.56 $(0.06) $(1.82) $(1.66)
Shares Used for Computation:
Basic 27.200 26.818 27.173 26.798
Diluted 33.273 26.818 33.256 26.798
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
June 30 December 31,
(In Millions) 2005 2004
Cash and marketable securities $726 $874
Total current assets $1,199 $1,242
Property and equipment-net 1,932 1,908
Other assets 240 185
Total assets $3,371 $3,335
Current liabilities $1,086 $957
Long-term debt and capital lease obligations 980 990
Other liabilities and credits 704 723
Shareholders' equity 601 665
Total liabilities and shareholders' equity $3,371 $3,335
Alaska Airlines Financial and Statistical Data
Three Months Ended June 30 Six Months Ended June 30
Financial Data (in % %
millions): 2005 2004 Change 2005 2004 Change
Operating Revenues:
Passenger $561.2 $519.9 7.9 $1,032.5 $969.2 6.5
Freight and mail 23.9 23.1 3.5 43.2 40.8 5.9
Other - net 31.2 34.6 (9.8) 63.9 58.9 8.5
Total Operating
Revenues 616.3 577.6 6.7 1,139.6 1,068.9 6.6
Operating Expenses:
Wages and benefits 182.0 203.7 (10.7) 381.7 404.5 (5.6)
Contracted services 31.6 29.4 7.5 59.4 52.5 13.1
Aircraft fuel 151.5 112.6 34.5 279.1 206.2 35.4
Aircraft maintenance 50.2 40.7 23.3 100.3 84.2 19.1
Aircraft rent 29.3 27.9 5.0 57.7 57.4 0.5
Food and beverage
service 11.5 13.0 (11.5) 22.4 24.2 (7.4)
Other selling expenses
and commissions 31.2 31.3 (0.3) 63.9 65.2 (2.0)
Depreciation and
amortization 30.7 30.4 1.0 61.0 63.2 (3.5)
Landing fees and other
rentals 40.5 35.3 14.7 81.1 68.5 18.4
Other 41.5 38.1 8.9 79.9 75.8 5.4
Impairment of aircraft
and related spare parts -- 36.8 NM -- 36.8 NM
Restructuring charges 14.7 -- NM 22.1 -- NM
Total Operating
Expenses 614.7 599.2 2.6 1,208.6 1,138.5 6.2
Operating Income (Loss) 1.6 (21.6) NM (69.0) (69.6) NM
Interest income 7.6 6.3 13.9 11.6
Interest expense (12.4) (10.7) (23.9) (21.5)
Interest capitalized 1.2 0.2 1.9 0.3
Fuel hedging gains 23.9 22.8 117.3 23.3
Other - net 0.2 0.2 (2.7) (0.1)
20.5 18.8 106.5 13.6
Income (Loss) Before
Income Tax and
Accounting Change $22.1 $(2.8) NM $37.5 $(56.0) NM
Operating Statistics:
Revenue passengers
(000) 4,232 4,116 2.8 8,083 7,707 4.9
RPMs (000,000) 4,317 4,104 5.2 8,214 7,684 6.9
ASMs (000,000) 5,543 5,635 (1.6) 10,913 10,813 0.9
Passenger load factor 77.9% 72.8% 5.1pts 75.3% 71.1% 4.2pts
Yield per passenger
mile (in cents) 13.00 12.67 2.5 12.57 12.61 (0.3)
Operating revenue per
ASM (in cents) 11.12 10.25 8.4 10.44 9.89 5.6
Operating expenses per
ASM (a) (in cents) 11.09 10.63 4.2 11.07 10.53 5.2
Operating expense per
ASM excluding fuel,
impairment and
restructuring
charges(a) (in cents) 8.09 7.98 1.4 8.31 8.28 0.4
Raw fuel cost per
gallon (a) (in cents) 179.5 131.6 36.4 167.7 124.4 34.8
GAAP fuel cost per
gallon (a) (in cents) 175.8 126.7 38.8 163.8 120.0 36.5
Economic fuel cost per
gallon (a) (in cents) 151.1 123.1 22.7 142.1 118.2 20.2
Fuel gallons (000,000) 86.2 88.9 (3.1) 170.4 171.8 (0.8)
Average number of
employees 9,144 10,255 (10.8) 9,180 10,120 (9.3)
Aircraft utilization
(blk hrs/day) 10.7 11.1 (3.6) 10.3 10.7 (3.7)
Operating fleet at
period-end 109 108 0.9 109 108 0.9
NM = Not Meaningful
(a) See Note A on page 8.
Horizon Air Financial and Statistical Data
Three Months Ended June 30 Six Months Ended June 30
Financial Data % %
(in millions): 2005 2004 Change 2005 2004 Change
Operating Revenues:
Passenger $136.9 $120.4 13.7 $254.6 $226.9 12.2
Freight and mail 0.9 1.1 (18.2) 1.9 2.0 (5.0)
Other - net 2.8 3.2 (12.5) 5.3 6.1 (13.1)
Total Operating
Revenues 140.6 124.7 12.8 261.8 235.0 11.4
Operating Expenses:
Wages and benefits 43.1 40.9 5.4 86.3 82.4 4.7
Contracted services 6.1 5.2 17.3 11.6 10.4 11.5
Aircraft fuel 23.7 16.0 48.1 42.8 30.2 41.7
Aircraft maintenance 8.1 9.4 (13.8) 19.2 16.7 15.0
Aircraft rent 17.6 19.1 (7.9) 35.3 37.4 (5.6)
Food and beverage
service 0.6 0.6 0.0 1.2 1.0 20.0
Other selling
expenses and
commissions 7.3 6.7 9.0 14.0 13.2 6.1
Depreciation and
amortization 4.3 3.3 30.3 7.9 6.3 25.4
Landing fees and
other rentals 11.7 10.3 13.6 23.5 20.2 16.3
Other 9.6 10.7 (10.3) 20.9 21.8 (4.1)
Impairment of
aircraft and
related spare parts -- 0.4 NM -- 2.8 NM
Total Operating
Expenses 132.1 122.6 7.7 262.7 242.4 8.4
Operating Income
(Loss) 8.5 2.1 NM (0.9) (7.4) NM
Interest income 0.4 0.4 0.7 0.6
Interest expense (1.5) (1.0) (2.7) (2.3)
Interest capitalized 0.1 0.1 0.2 0.3
Fuel hedging gains 3.6 3.1 18.4 3.1
2.6 2.6 16.6 1.7
Income (Loss) Before
Income Tax and
Accounting Change $11.1 $4.7 NM $15.7 $(5.7) NM
Operating Statistics:
Revenue passengers
(000) 1,638 1,454 12.7 3,113 2,721 14.4
RPMs (000,000) 620 535 15.9 1,160 985 17.8
ASMs (000,000) 849 792 7.2 1,631 1,484 9.9
Passenger load
factor 73.0% 67.5% 5.5pts 71.1% 66.4% 4.7pts
Yield per passenger
mile (in cents) 22.08 22.50 (1.9) 21.95 23.04 (4.7)
Operating revenue
per ASM (in cents) 16.57 15.75 5.2 16.05 15.84 1.3
Operating expenses
per ASM
(a) (in cents) 15.57 15.49 0.5 16.11 16.34 (1.4)
Operating expense
per ASM excluding
fuel and impairment
charges
(a) (in cents) 12.78 13.43 (4.9) 13.48 14.12 (4.5)
Raw fuel cost
per gallon
(a) (in cents) 187.6 136.1 37.7 175.1 128.4 36.4
GAAP fuel cost
per gallon
(a) (in cents)
183.7 131.1 40.2 171.9 124.3 38.3
Economic fuel cost
per gallon
(a) (in cents) 158.9 127.1 25.0 149.0 122.8 21.3
Fuel gallons
(000,000) 12.9 12.2 5.7 24.9 24.3 2.5
Average number
of employees 3,414 3,414 0.0 3,389 3,379 0.3
Aircraft utilization
(blk hrs/day) 8.5 8.4 1.4 8.9 8.0 11.3
Operating fleet
at period-end 65 64 1.6 65 64 1.6
NM = Not Meaningful
(a) See Note A on page 8.
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), restructuring charges, 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 June 30, Six Months Ended June 30
Unit cost
reconciliations: 2005 2004 2005 2004
Operating expenses $614.7 $599.2 $1,208.6 $1,138.5
ASMs (000,000) 5,543 5,635 10,913 10,813
Operating expenses
per ASM (in cents) 11.09 10.63 11.07 10.53
Operating expenses $614.7 $599.2 $1,208.6 $1,138.5
Less: aircraft fuel (151.5) (112.6) (279.1) (206.2)
Less: restructuring
charges (14.7) -- (22.1) --
Less: impairment of
aircraft and related
spare parts -- (36.8) -- (36.8)
Operating expenses
excluding fuel and
restructuring and
impairment charges $448.5 $449.8 $907.4 $895.5
ASMs (000,000) 5,543 5,635 10,913.0 10,813
Operating expenses
per ASM excluding
fuel and restructuring
and impairment charges
(in cents) 8.09 7.98 8.31 8.28
Reconciliation to GAAP
pretax income (loss):
Pretax income (loss)
reported GAAP amounts $22.1 $(2.8) $37.5 $(56.0)
Less: mark-to-market
hedging gains included
in nonoperating income
(expense) (2.6) (19.6) (80.3) (20.1)
Add: restructuring
charges 14.7 -- 22.1 --
Add: impairment of
aircraft and related
spare parts -- 36.8 -- 36.8
Pretax income (loss)
excluding restructuring
and impairment charges
and mark-to-market
hedging gains $34.2 $14.4 $(20.7) $(39.3)
Aircraft fuel reconciliations:
Three Months Ended June 30
2005 2004
(000s) Cost/Gal (000s) Cost/Gal
Fuel expense before hedge activities
("raw fuel") $154.7 $1.80 $117.0 $1.32
Less: gains on settled hedges
included in fuel expense (3.2) (0.04) (4.4) (0.05)
GAAP fuel expense $151.5 $1.76 $112.6 $1.27
Less: gains on settled hedges
included in nonoperating
income (expense) (21.3) (0.25) (3.2) (0.04)
Economic fuel expense $130.2 $1.51 $109.4 $1.23
Fuel gallons (000,000) 86.2 88.9
Mark-to-market gains included in
non-operating income (expense)
related to hedges that settle in
future periods $2.6 $19.6
Six Months Ended June 30
2005 2004
(000s) Cost/Gal (000s) Cost/Gal
Fuel expense before hedge activities
("raw fuel") $285.7 $1.68 $213.7 $1.24
Less: gains on settled hedges
included in fuel expense (6.6) (0.04) (7.5) (0.04)
GAAP fuel expense $279.1 $1.64 $206.2 $1.20
Less: gains on settled hedges
included in nonoperating
income (expense) (37.0) (0.22) (3.2) (0.02)
Economic fuel expense $242.1 $1.42 $203.0 $1.18
Fuel gallons (000,000) 170.4 171.8
Mark-to-market gains included in
non-operating income (expense)
related to hedges that settle in
future periods $80.3 $20.1
Horizon Air Industries, Inc.
($ in millions) Three Months Ended Six Months Ended
June 30, June 30
Unit cost reconciliations: 2005 2004 2005 2004
Operating expenses $132.1 $122.6 $262.7 $242.4
ASMs (000,000) 849 792 1,631 1,484
Operating expenses per ASM (in cents) 15.57 15.49 16.11 16.34
Operating expenses $132.1 $122.6 $262.7 $242.4
Less: aircraft fuel (23.7) (16.0) (42.8) (30.2)
Less: impairment of aircraft and
related spare parts -- (0.4) -- (2.8)
Operating expenses excluding fuel and
impairment charge $108.4 $106.2 $219.9 $209.4
ASMs (000,000) 849 792 1,631 1,484
Operating expenses per ASM excluding
fuel and impairment charge (in cents) 12.78 13.43 13.48 14.12
Reconciliation to GAAP pretax income
(loss):
Pretax income (loss) reported GAAP
amounts $11.1 $4.7 $15.7 $(5.7)
Less: mark-to-market hedging gains
included in nonoperating income
(expense) (0.4) (2.7) (12.7) (2.7)
Add: impairment of aircraft and
related spare parts -- 0.4 -- 2.8
Pretax income (loss) excluding
impairment charge and mark-to-
market hedging gains $10.7 $2.4 $3.0 $(5.6)
Aircraft fuel reconciliations:
Three Months Ended June 30,
2005 2004
(000s) Cost/Gal (000s) Cost/Gal
Fuel expense before hedge activities
("raw fuel") $24.2 $1.88 $16.6 $1.36
Less: gains on settled hedges
included in fuel expense (0.5) (0.04) (0.6) (0.05)
GAAP fuel expense $23.7 $1.84 $16.0 $1.31
Less: gains on settled hedges
included in nonoperating
income (expense) (3.2) (0.25) (0.4) (0.03)
Economic fuel expense $20.5 $1.59 $15.6 $1.28
Fuel gallons (000,000) 12.9 12.2
Mark-to-market gains included in
non-operating income (expense)
related to hedges that settle in
future periods $0.4 $2.7
Six Months Ended June 30
2005 2004
(000s) Cost/Gal (000s) Cost/Gal
Fuel expense before hedge activities
("raw fuel") $43.6 $1.75 $31.2 $1.28
Less: gains on settled hedges
included in fuel expense (0.8) (0.03) (1.0) (0.04)
GAAP fuel expense $42.8 $1.72 $30.2 $1.24
Less: gains on settled hedges
included in nonoperating
income (expense) (5.7) (0.23) (0.4) (0.01)
Economic fuel expense $37.1 $1.49 $29.8 $1.23
Fuel gallons (000,000) 24.9 24.3
Mark-to-market gains included in
non-operating income (expense)
related to hedges that settle in
future periods $12.7 $2.7
Air Group Net Income (Loss) and EPS Reconciliation:
The following table reconciles Alaska Air Group, Inc.'s net income (loss)
and diluted income (loss) per share during 2005 and 2004 excluding the
cumulative effect of the accounting change, restructuring and impairment
charges, and mark-to-market gains of fuel hedges that settle in future
periods to the reported GAAP amounts (in millions except per share
amounts):
Three Months Ended June 30,
2005 2004
Diluted Diluted
Dollars EPS Dollars EPS
Net income and diluted EPS excluding
restructuring and impairment charges,
and mark-to-market hedging gains $24.7 $0.74 $8.2 $0.31
Effect of interest on convertible
bonds NA 0.04 NA NA
Mark-to-market hedging gains,
net of tax 1.9 0.06 14.8 0.55
Restructuring charges, net of tax (9.2) (0.28) -- --
Impairment charges, net of tax -- -- (24.7) (0.92)
Reported GAAP amounts $17.4 $0.56 $(1.7) $(0.06)
Six Months Ended June 30,
2005 2004
Dollars Diluted Dollars Diluted
EPS EPS
Net loss and diluted EPS excluding
the cumulative effect of the
accounting change, restructuring
and impairment charges, and
mark-to-market hedging gains * $(17.0) $(0.63) $(33.2) $(1.24)
Effect of dilutive shares and
interest on convertible bonds * NA 0.19 NA NA
Cumulative effect of accounting
change (90.4) (2.72) -- --
Mark-to-market hedging gains,
net of tax 58.1 1.75 15.1 0.56
Restructuring charges, net of tax (13.8) (0.41) (26.3) (0.98)
Impairment charges, net of tax -- --
Reported GAAP amounts $(63.1) $(1.82) $(44.4) $(1.66)
*Diluted loss per share for the six months ended June 30, 2005,
excluding the impact of the accounting change, mark to market gain on
fuel hedges, restructuring and impairment charges has been calculated
using the weighted average number of shares outstanding (27.2 million at
June 30, 2005). This share count excludes the dilutive impact of stock
awards and the contingently convertible senior notes as the impact
would have been antidilutive (and thus excluded) if calculated based on
a net loss of $17.0 million.
In order to reconcile the diluted loss per share to the GAAP loss per
share for the six months ended June 30, 2005, the table above includes
$0.19 per share, which represents the impact of the additional shares
that were used in the GAAP loss per share as well as $2.5 million of
interest, net of tax, on the contingently convertible senior notes added
back to earnings in order to derive the loss per share in accordance
with GAAP.
The per share impact of the change in accounting, mark-to-market gain on
fuel hedges, restructuring and impairment charges have been presented in
the table above assuming fully diluted shares outstanding.
Air Group EPS Calculations:
The following table summarizes Alaska Air Group, Inc.'s basic and diluted
per share calculations for earnings before the accounting change and net
income (loss) (in millions except per share amounts):
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Basic Earnings (Loss) Per Share:
Income (loss) before accounting
change $17.4 $(1.7) $27.3 $(44.4)
Weighted average shares outstanding 27.200 26.818 27.173 26.798
Income (loss) per share before
accounting change $0.64 $(0.06) $1.01 $(1.66)
Cumulative effect of accounting
change, net of tax NA NA $(90.4) NA
Weighted average shares outstanding NA NA 27.173 NA
Per share cumulative effect of
accounting change NA NA $(3.33) NA
Net income (loss) $17.4 $(1.7) $(63.1) $(44.4)
Weighted average shares outstanding 27.200 26.818 27.173 26.798
Net income (loss) per share $0.64 $(0.06) $(2.32) $(1.66)
Diluted Earnings (Loss) Per Share:
Income (loss) before accounting
change $17.4 $(1.7) $27.3 $(44.4)
Interest on convertible notes, net
of tax 1.3 NA 2.5 NA
Income (loss) before accounting
change for diluted calculation $18.7 $(1.7) $29.8 $(44.4)
Weighted average shares outstanding 33.273 26.818 33.256 26.798
Income (loss) per share before
accounting change $0.56 $(0.06) $0.90 $(1.66)
Cumulative effect of accounting
change, net of tax NA NA $(90.4) NA
Weighted average shares outstanding NA NA 33.256 NA
Per share cumulative effect of
accounting change NA NA $(2.72) NA
Net income (loss) $17.4 $(1.7) $(63.1) $(44.4)
Interest on convertible notes, net
of tax 1.3 NA 2.5 NA
Net income (loss) for diluted
calculation $18.7 $(1.7) $(60.6) $(44.4)
Weighted average shares outstanding 33.273 26.818 33.256 26.798
Net income (loss) per share $0.56 $(0.06) $(1.82) $(1.66)
Forecasted Financial Measures
During our quarterly earnings conference call, we expect to discuss
forward-looking forecasted unit cost information for 2005. 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 Forecast of Forecast of Forecast of
cost per fuel cost restructuring total
available per available charges per operating
seat mile, seat mile available cost per
excluding (See Note 1) seat mile available
fuel and seat mile,
restructuring as reported
charges on a GAAP
(cents) basis (cents)
Third
quarter
2005 7.4 2.8 -- 10.2
Fourth
quarter
2005 7.4 2.9 -- 10.3
Total 2005 7.9 2.7 0.1 10.7
Horizon Air
Forecast of cost Forecast of fuel Forecast of total
per available cost per available operating cost per
seat mile, seat mile available seat mile,
excluding fuel (See Note 1) as reported on a
(cents) GAAP basis (cents)
Third
quarter
2005 12.2 2.9 15.1
Fourth
quarter
2005 13.6 3.0 16.6
Total 2005 13.2 2.8 16.0
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, or
+1-206-392-5799, both of Alaska Air Group, Inc.
Web site: http://www.alaskaair.com/
