Alaska Air Group Reports Second Quarter Results
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Alaska Air Group, Inc. today reported second quarter 2009 net income of $29.1 million, or $0.79 per diluted share, compared to net income of $63.1 million, or $1.74 per diluted share, in the...
Alaska Air Group, Inc.
Alaska Air Group Chairman and Chief Executive Officer Bill Ayer said the quarter’s earnings were shaped by a steep decline in fuel prices, network adjustments and employees’ hard work and attention to customers. "We’ve made significant changes at both airlines over many years," said Ayer. "While there’s more to do, we’re seeing clear signs that what we’re doing is working." He noted that he expects the economy to be very challenging for the foreseeable future. The company plans to maintain a healthy level of cash with a continued focus on improving revenues and reducing costs.
The following table summarizes the company’s net income (loss) and earnings per diluted share (EPS) during the second quarters of 2009 and 2008 excluding one-time pilot contract costs, fleet transition costs and adjustments to reflect the timing of gain or loss recognition resulting from mark-to-market fuel-hedge accounting as reported in accordance with GAAP (in millions except per-share amounts):
Three months ended June 30,
---------------------------
2009 2008
---- ----
Diluted Diluted
Dollars EPS Dollars EPS
------- ------- ------- -------
Net income (loss) and
diluted EPS, excluding
new pilot contract
transition costs,
fleet transition costs
and mark-to-market
hedging adjustments $26.5 $0.72 $(14.1) $(0.39)
New pilot contract
transition costs,
net of tax (22.3) (0.61) --- ---
Fleet transition costs
- MD-80, net of tax --- --- (16.3) (0.45)
Fleet transition costs
- CRJ-700, net of tax --- --- (3.8) (0.11)
Adjustments to reflect
the timing of gain
recognition resulting
from mark-to-market
fuel-hedge accounting,
net of tax 24.9 0.68 97.3 2.69
---- ---- ---- ----
Reported GAAP amounts $29.1 $0.79 $63.1 $1.74
===== ===== ===== =====
Summary statistical and financial data for Alaska and Horizon are shown below:
Alaska Airlines
---------------
Three months ended June 30,
---------------------------
2009 2008 Change
---- ---- ------
Mainline revenue passenger miles
- "RPMs" (000,000) 4,613 4,872 (5.3)%
Mainline available seat miles
- "ASMs" (000,000) 5,852 6,238 (6.2)%
Mainline passenger load factor 78.8% 78.1% 0.7 pts
Mainline revenue passengers (000) 3,983 4,425 (10.0)%
Mainline passenger revenue per ASM (in cents) 10.30 10.94 (5.9)%
Mainline cost per ASM, excluding fuel
and special items (in cents) 8.22 7.49 9.7%
Pretax income on a GAAP basis (in millions) $42.1 $87.3 $(45.2)
Pretax income (loss) adjusted for special
items (in millions) $44.9 $(15.6) $60.5
On-time arrivals as reported to U.S. Dept.
of Transportation 84.9% 79.9% 5.0 pts
Horizon Air
-----------
Three months ended June 30,
---------------------------
2009 2008 Change
---- ---- ------
RPMs (000,000) 609 695 (12.4)%
ASMs (000,000) 828 944 (12.3)%
Passenger load factor 73.6% 73.6% (0.0) pts
Revenue passengers (000) 1,694 1,913 (11.4)%
Passenger revenue per ASM (in cents) 18.74 19.75 (5.1)%
Cost per ASM, excluding fuel and
Special items (in cents) 15.18 14.40 5.4%
Pretax income on a GAAP basis (in millions) $6.5 $12.6 $(6.1)
Pretax loss adjusted for special items
(in millions) $(0.3) $(7.7) $7.4
On-time arrivals as reported to U.S. Dept.
of Transportation 88.8% 87.7% 1.1 pts
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 in the accompanying tables. A glossary of financial terms can be found at the end of this release.
A conference call regarding the second quarter 2009 results will be simulcast via the Internet at 8:30 a.m. Pacific time on July 23, 2009. 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 news release 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 news release contains forward-looking statements 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 and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2008. Some of these risks include current economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our significant indebtedness, inability to meet cost reduction goals, terrorist attacks, seasonal fluctuations in our financial results, an aircraft accident, changes in laws and regulations, and government fees and taxes. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. 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 expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report 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 Horizon Air, subsidiaries of Alaska Air Group
Alaska Air Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
(in millions, except per
share amounts) 2009 2008 %Change 2009 2008 %Change
---- ---- ------- ---- ---- -------
Operating Revenues:
Passenger $757.2 $863.5 (12.3) $1,441.3 $1,639.2 (12.1)
Freight and mail 25.2 27.7 (9.0) 44.6 49.9 (10.6)
Other - net 61.5 39.6 55.3 100.4 81.2 23.6
---- ---- ----- ----
Total Operating Revenues 843.9 930.8 (9.3) 1,586.3 1,770.3 (10.4)
----- ----- ------- -------
Operating Expenses:
Wages and benefits 247.1 234.4 5.4 493.1 479.1 2.9
Variable incentive pay 18.9 5.1 270.6 28.2 8.7 224.1
Aircraft fuel, including
hedging gains and losses 128.4 182.0 (29.5) 286.1 464.0 (38.3)
Aircraft maintenance 59.6 54.2 10.0 119.3 112.2 6.3
Aircraft rent 39.1 42.3 (7.6) 77.1 85.9 (10.2)
Landing fees and other
rentals 54.4 56.9 (4.4) 108.6 112.9 (3.8)
Contracted services 36.8 43.6 (15.6) 75.2 88.1 (14.6)
Selling expenses 35.3 44.1 (20.0) 60.3 78.6 (23.3)
Depreciation and
amortization 53.9 51.5 4.7 106.7 100.8 5.9
Food and beverage service 12.4 13.4 (7.5) 24.0 25.7 (6.6)
Other 50.3 61.5 (18.2) 107.1 118.7 (9.8)
New pilot contract transition
costs 35.8 - NM 35.8 - NM
Fleet transition costs
- MD-80 - 26.0 NM - 26.0 NM
Fleet transition costs
- CRJ-700 - 6.1 NM - 6.1 NM
Fleet transition costs
- Q200 5.2 3.2 62.5 10.0 9.0 11.1
--- --- ---- --- ---
Total Operating Expenses 777.2 824.3 (5.7) 1,531.5 1,715.8 (10.7)
----- ----- ------- -------
Operating Income 66.7 106.5 54.8 54.5
---- ----- ---- ----
Nonoperating Income (Expense):
Interest income 7.8 10.5 16.1 20.8
Interest expense (25.1) (25.0) (51.9) (48.4)
Interest capitalized 1.8 6.1 4.6 12.6
Other - net (3.5) 0.1 (5.5) 0.3
---- --- ---- ---
(19.0) (8.3) (36.7) (14.7)
----- ---- ----- -----
Income before income tax 47.7 98.2 18.1 39.8
Income tax expense 18.6 35.1 8.2 14.0
---- ---- --- ----
Net Income $29.1 $63.1 $9.9 $25.8
===== ===== ==== =====
Basic Earnings Per Share: $0.80 $1.75 $0.27 $0.71
Diluted Earnings Per Share: $0.79 $1.74 $0.27 $0.70
Shares Used for Computation:
Basic 36.354 36.059 36.340 36.542
Diluted 36.591 36.255 36.742 36.876
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
-------- ------------
June 30, December 31,
(in millions) 2009 2008
------------- ---- ----
Cash and marketable securities $1,122 $1,077
====== ======
Total current assets 1,594 1,509
Property and equipment-net 3,154 3,168
Other assets 193 159
--- ---
Total assets $4,941 $4,836
====== ======
Current liabilities $1,340 $1,361
Long-term debt 1,670 1,596
Other liabilities and credits 1,243 1,217
Shareholders' equity 688 662
--- ---
Total liabilities and shareholders' equity $4,941 $4,836
====== ======
Debt to Capitalization, adjusted for
operating leases 80%:20% 81%:19%
====== ======
Number of common shares outstanding 35.741 36.275
====== ======
Air Group Net Income (Loss) and EPS Reconciliation:
---------------------------------------------------
The following table summarizes Alaska Air Group, Inc.'s net income (loss)
and amounts per diluted share during 2009 and 2008 excluding adjustments
for new pilot contract transition costs, certain fleet transition costs
and to reflect the timing of gain or loss recognition resulting from
mark-to-market fuel-hedge accounting as reported in accordance with GAAP
(in millions except per share amounts):
Three Months Ended June 30,
---------------------------
2009 2008
---- ----
Dollars Diluted EPS Dollars Diluted EPS
------- ----------- ------- -----------
Net income (loss) and diluted
EPS, excluding mark-to-market
hedging adjustments, new
pilot contract transition
costs, and MD-80 and
CRJ-700 fleet transition
costs $26.5 $0.72 $(14.1) $(0.39)
New pilot contract transition
costs, net of tax (22.3) (0.61) - -
Fleet transition costs - MD-80,
net of tax - - (16.3) (0.45)
Fleet transition costs - CRJ-700,
net of tax - - (3.8) (0.11)
Adjustments to reflect the timing
of gain recognition resulting
from mark-to-market fuel-hedge
accounting, net of tax 24.9 0.68 97.3 2.69
---- ---- ---- ----
Reported GAAP amounts $29.1 $0.79 $63.1 $1.74
===== ===== ===== =====
Six Months Ended June 30,
-------------------------
2009 2008
---- ----
Dollars Diluted EPS Dollars Diluted EPS
------- ----------- ------- -----------
Net income (loss) and diluted
EPS, excluding mark-to-market
hedging adjustments, new
pilot contract transition
costs, and MD-80 and
CRJ-700 fleet transition
costs $1.1 $0.03 $(51.8) $(1.42)
New pilot contract transition
costs, net of tax (22.3) (0.61) - -
Fleet transition costs - MD-80,
net of tax - - (16.3) (0.44)
Fleet transition costs - CRJ-700,
net of tax - - (3.8) (0.10)
Adjustments to reflect the timing
of gain recognition resulting
from mark-to-market fuel-hedge
accounting, net of tax 31.1 0.85 97.7 2.66
---- ---- ---- ----
Reported GAAP amounts $9.9 $0.27 $25.8 $0.70
==== ===== ===== =====
Alaska Airlines Financial and Statistical Data
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ---------------------
Financial Data
(in millions): 2009 2008 %Change 2009 2008 %Change
---- ---- -------- ---- ---- -------
Operating Revenues:
Passenger $602.5 $682.7 (11.7) $1,142.3 $1,290.0 (11.4)
Freight and mail 24.2 26.6 (9.0) 42.5 47.9 (11.3)
Other - net 54.9 33.3 64.9 88.1 67.7 30.1
---- ---- ---- ----
Total mainline
operating revenues 681.6 742.6 (8.2) 1,272.9 1,405.6 (9.4)
Passenger - purchased
capacity 67.7 77.8 (13.0) 129.5 148.2 (12.6)
---- ---- ----- -----
Total Operating Revenues 749.3 820.4 (8.7) 1,402.4 1,553.8 (9.7)
----- ----- ------- -------
Operating Expenses:
Wages and benefits 198.4 184.3 7.7 395.8 376.4 5.2
Variable incentive pay 16.1 3.3 387.9 23.2 5.9 293.2
Aircraft fuel, including
hedging gains and
losses 107.4 151.2 (29.0) 239.3 384.9 (37.8)
Aircraft maintenance 46.6 37.4 24.6 92.9 79.5 16.9
Aircraft rent 28.1 27.9 0.7 54.6 56.1 (2.7)
Landing fees and
other rentals 40.6 42.7 (4.9) 81.4 84.6 (3.8)
Contracted services 28.4 33.9 (16.2) 58.9 68.6 (14.1)
Selling expenses 28.3 36.0 (21.4) 47.4 62.5 (24.2)
Depreciation and
amortization 44.2 41.6 6.3 87.5 80.4 8.8
Food and beverage service 11.9 12.6 (5.6) 22.9 24.3 (5.8)
Other 38.5 47.4 (18.8) 81.3 89.2 (8.9)
New pilot contract
transition costs 35.8 - NM 35.8 - NM
Fleet transition
costs - MD-80 - 26.0 NM - 26.0 NM
--- ---- --- ----
Total mainline
operating expenses 624.3 644.3 (3.1) 1,221.0 1,338.4 (8.8)
----- ----- ------- -------
Purchased capacity
costs 68.9 84.5 (18.5) 131.6 161.2 (18.4)
---- ---- ----- -----
Total Operating Expenses 693.2 728.8 (4.9) 1,352.6 1,499.6 (9.8)
----- ----- ------- -------
Operating Income 56.1 91.6 49.8 54.2
---- ---- ---- ----
Interest income 9.5 12.3 19.6 25.4
Interest expense (22.1) (22.2) (45.1) (44.0)
Interest capitalized 1.8 5.4 4.3 11.3
Other - net (3.2) 0.2 (4.8) 0.6
---- --- ---- ---
(14.0) (4.3) (26.0) (6.7)
----- ---- ----- ----
Income Before Income Tax $42.1 $87.3 $23.8 $47.5
===== ===== ===== =====
Mainline Operating
Statistics:
Revenue passengers
(000) 3,983 4,425 (10.0) 7,556 8,505 (11.2)
RPMs (000,000)
"traffic" 4,613 4,872 (5.3) 8,792 9,398 (6.4)
ASMs (000,000)
"capacity" 5,852 6,238 (6.2) 11,372 12,322 (7.7)
Passenger load factor 78.8% 78.1% 0.7 77.3% 76.3% 1.0
pts pts
Yield per passenger
mile (in cents) 13.06 14.01 (6.8) 12.99 13.73 (5.3)
Operating revenue
per ASM (in cents) 11.65 11.90 (2.2) 11.19 11.41 (1.9)
Passenger revenue
per ASM (in cents) 10.30 10.94 (5.9) 10.04 10.47 (4.1)
Operating expense
per ASM (in cents) 10.67 10.33 3.3 10.74 10.86 (1.1)
Operating expense
per ASM excluding
fuel, new pilot
contract transition
costs and fleet
transition costs
(a) (in cents) 8.22 7.49 9.7 8.32 7.53 10.5
GAAP fuel cost per
gallon $1.41 $1.75 (19.4) $1.60 $2.23 (28.3)
Economic fuel cost
per gallon (b) $1.84 $3.24 (43.2) $1.88 $2.98 (36.9)
Fuel gallons (000,000) 76.5 86.4 (11.5) 149.8 172.3 (13.1)
Average number of
full-time equivalent
employees 8,937 9,880 (9.5) 8,979 9,881 (9.1)
Aircraft utilization
(blk hrs/day) 9.9 10.9 (9.2) 9.9 10.8 (8.3)
Average aircraft stage
length (miles) 1,020 974 4.7 1,018 971 4.8
Operating fleet at
period-end 116 115 1 a/c 116 115 1 a/c
Regional Operating
Statistics:
RPMs (000,000) 264 302 (12.6) 479 569 (15.8)
ASMs (000,000) 359 399 (10.0) 675 762 (11.4)
Passenger load factor 73.5% 75.7% (2.2) 71.0% 74.7% (3.7)
pts pts
Yield per passenger
mile (in cents) 25.64 25.76 (0.5) 27.04 26.05 3.8
Operating revenue
per ASM (in cents) 18.86 19.50 (3.3) 19.19 19.45 (1.4)
Operating expenses
per ASM (in cents) 19.19 21.18 (9.4) 19.50 21.15 (7.8)
(a) See page 10 for a reconciliation of these non-GAAP measures and a
discussion about why these measures may be important to investors.
(b) See page 12 for a reconciliation of economic fuel cost.
NM = Not Meaningful
Horizon Air Financial and Statistical Data
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
Financial Data (in millions): 2009 2008 %Change 2009 2008 %Change
---- ---- ------- ---- ---- -------
Operating Revenues:
Passenger - brand flying $91.7 $107.7 (14.9) $178.3 $210.4 (15.3)
Passenger - capacity
purchase arrangements (a) 63.5 78.7 (19.3) 121.3 150.1 (19.2)
---- ---- ----- -----
Total passenger revenue 155.2 186.4 (16.7) 299.6 360.5 (16.9)
Freight and mail 0.6 0.7 (14.3) 1.3 1.3 -
Other - net 2.1 1.8 16.7 3.8 4.3 (11.6)
--- --- --- ---
Total Operating Revenues 157.9 188.9 (16.4) 304.7 366.1 (16.8)
----- ----- ----- -----
Operating Expenses:
Wages and benefits 46.2 48.6 (4.9) 92.6 99.3 (6.7)
Variable incentive pay 2.8 1.8 55.6 5.0 2.8 78.6
Aircraft fuel, including
hedging gains and losses 21.0 30.8 (31.8) 46.8 79.1 (40.8)
Aircraft maintenance 13.0 16.8 (22.6) 26.4 32.7 (19.3)
Aircraft rent 11.0 14.4 (23.6) 22.5 29.8 (24.5)
Landing fees and other rentals 14.1 14.5 (2.8) 27.8 28.9 (3.8)
Contracted services 7.9 6.9 14.5 15.4 14.9 3.4
Selling expenses 7.0 8.1 (13.6) 12.9 16.1 (19.9)
Depreciation and amortization 9.4 9.6 (2.1) 18.6 19.8 (6.1)
Food and beverage service 0.5 0.8 (37.5) 1.1 1.4 (21.4)
Other 8.6 11.2 (23.2) 19.6 24.0 (18.3)
Fleet transition costs
- CRJ-700 - 6.1 NM - 6.1 NM
Fleet transition costs - Q200 5.2 3.2 NM 10.0 9.0 NM
--- --- ---- ---
Total Operating Expenses 146.7 172.8 (15.1) 298.7 363.9 (17.9)
----- ----- ----- -----
Operating Income 11.2 16.1 6.0 2.2
---- ---- --- ---
Interest income 0.6 1.3 1.0 2.7
Interest expense (5.2) (5.7) (11.1) (11.4)
Interest capitalized - 0.7 0.3 1.3
Other - net (0.1) 0.2 (0.2) 0.2
---- --- ---- ---
(4.7) (3.5) (10.0) (7.2)
---- ---- ----- ----
Income (Loss) Before Income
Tax $6.5 $12.6 $(4.0) $(5.0)
==== ===== ===== =====
Combined Operating
Statistics: (a)
Revenue passengers (000) 1,694 1,913 (11.4) 3,240 3,765 (13.9)
RPMs (000,000) "traffic" 609 695 (12.4) 1,133 1,353 (16.3)
ASMs (000,000) "capacity" 828 944 (12.3) 1,615 1,886 (14.4)
Passenger load factor 73.6% 73.6% 0.0 70.2% 71.7% (1.5)
pts pts
Yield per passenger
mile (in cents) 25.48 26.82 (5.0) 26.44 26.64 (0.8)
Operating revenue per
ASM (in cents) 19.07 20.01 (4.7) 18.87 19.41 (2.8)
Passenger revenue per
ASM (in cents) 18.74 19.75 (5.1) 18.55 19.11 (2.9)
Operating expenses per
ASM (in cents) 17.72 18.31 (3.2) 18.50 19.29 (4.1)
Operating expense per
ASM excluding fuel and
CRJ-700 fleet transition
costs (b) (in cents) 15.18 14.40 5.4 15.60 14.78 5.5
GAAP fuel cost per gallon $1.41 $1.79 (21.2) $1.58 $2.27 (30.4)
Economic fuel cost per
gallon (c) $1.86 $3.33 (44.1) $1.87 $3.05 (38.7)
Fuel gallons (000,000) 15.0 17.2 (12.8) 29.5 34.9 (15.5)
Average number of full-time
equivalent employees 3,308 3,792 (12.8) 3,345 3,822 (12.5)
Aircraft utilization
(blk hrs/day) 8.3 8.5 (2.4) 8.3 8.4 (1.2)
Operating fleet at period-end 55 65 (10 a/c) 55 65 (10 a/c)
NM = Not Meaningful
(a) Represents combined information for all Horizon flights, including
those operated under a Capacity Purchase Agreement (CPA) with Alaska.
See page 11 for additional line of business information.
(b) See page 11 for a reconciliation of these non-GAAP measures and a
discussion about why these measures may be important to investors.
(c) See page 12 for a reconciliation of economic fuel cost.
Note A: Pursuant to Regulation G, 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. We
believe that consideration of this measure of unit costs excluding fuel,
purchased capacity costs, and other noted items may be important to
investors for the following reasons:
-- By eliminating fuel expense and certain special items from our unit
cost metrics, we believe that we have better visibility into the results
of our non-fuel cost-reduction initiatives. Our industry is highly
competitive and is characterized by high fixed costs, so even a small
reduction in non-fuel operating costs can result in a significant
improvement in operating results. In addition, we believe that all
domestic carriers are similarly impacted by changes in jet fuel costs over
the long run, so it is important for management (and thus investors) to
understand the impact of (and trends in) company-specific cost drivers
such as labor rates and productivity, airport costs, maintenance costs,
etc., which are more controllable by management.
-- Cost per ASM excluding fuel and certain special items is one of the
most important measures used by managements of both Alaska and Horizon and
by the Air Group Board of Directors in assessing quarterly and annual cost
performance.
-- Cost per ASM excluding fuel (and other items as specified in our plan
documents) is an important metric for the employee incentive plan that
covers company management and certain other employee groups.
-- Cost per ASM excluding fuel and certain special items is a measure
commonly used by industry analysts, and we believe it is the bases by
which they compare our airlines to others in the industry. The measure is
also the subject of frequent questions from investors.
-- Disclosure of the individual impact of certain noted items provides
investors the ability to measure and monitor performance both with and
without these special items. We believe that disclosing the impact of
certain items, such as new pilot contract transition costs and fleet
transition costs, is important because it provides information on
significant items that are not necessarily indicative of future
performance. Industry analysts and investors consistently measure our
performance without these items for better comparability between periods
and among other airlines.
-- Although we disclose our "mainline" passenger unit revenues for Alaska,
we do not (nor are we able to) evaluate mainline unit revenues excluding
the impact that changes in fuel costs have had on ticket prices. Fuel
expense represents a large percentage of our total mainline operating
expenses. Fluctuations in fuel prices often drive changes in unit
revenues in the mid-to-long term. Although we believe it is useful to
evaluate non-fuel unit costs for the reasons noted above, we would
caution readers of these financial statements not to place undue reliance
on unit costs excluding fuel as a measure or predictor of future
profitability because of the significant impact of fuel costs on our
business.
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, except for per ASM unit information)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
Mainline unit cost
reconciliations: 2009 2008 2009 2008
------------------ ---- ---- ---- ----
Mainline operating expenses $624.3 $644.3 $1,221.0 $1,338.4
Mainline ASMs 5,852 6,238 11,372 12,322
----- ----- ------ ------
Mainline operating expenses
per ASM (in cents) 10.67 10.33 10.74 10.86
===== ===== ===== =====
Mainline operating expenses $624.3 $644.3 $1,221.0 $1,338.4
Less: aircraft fuel, including
hedging gains and losses (107.4) (151.2) (239.3) (384.9)
Less: new pilot contract
transition costs (35.8) - (35.8) -
Less: fleet transition
costs - MD-80 - (26.0) - (26.0)
--- ----- --- -----
Mainline operating expenses
excluding fuel and special
items $481.1 $467.1 $945.9 $927.5
Mainline ASMs 5,852 6,238 11,372 12,322
----- ----- ------ ------
Mainline operating expenses
per ASM excluding fuel and
special items (in cents) 8.22 7.49 8.32 7.53
==== ==== ==== ====
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
Reconciliation to GAAP income
before taxes : 2009 2008 2009 2008
------------------------------ ---- ---- ---- ----
Income (loss) before taxes,
excluding mark-to-market
hedging gains (losses), new
pilot contract transition
costs and fleet transition
costs $44.9 $(15.6) $18.3 $(55.2)
New pilot contract transition
costs (35.8) - (35.8) -
Fleet transition costs - MD-80 - (26.0) - (26.0)
Adjustments to reflect timing
of gain recognition resulting
from mark-to-market accounting
on fuel hedges 33.0 128.9 41.3 128.7
---- ----- ---- -----
GAAP income before taxes
as reported $42.1 $87.3 $23.8 $47.5
===== ===== ===== =====
Horizon Air Industries, Inc.
(in millions, except for per ASM unit information)
Three Months Six Months
Ended Ended
June 30, June 30,
Unit cost ------------- ------------
reconciliations: 2009 2008 2009 2008
----------------- ---- ---- ---- ----
Operating expenses $146.7 $172.8 $298.7 $363.9
ASMs 828 944 1,615 1,886
--- --- ----- -----
Operating expenses
per ASM (in cents) 17.72 18.31 18.50 19.29
===== ===== ===== =====
Operating expenses $146.7 $172.8 $298.7 $363.9
Less: aircraft fuel,
including hedging
gains and losses (21.0) (30.8) (46.8) (79.1)
Less: fleet transition
costs - CRJ-700 - (6.1) - (6.1)
--- ---- --- ----
Operating expenses
excluding fuel and
CRJ-700 fleet
transition costs $125.7 $135.9 $251.9 $278.7
ASMs 828 944 1,615 1,886
--- --- ----- -----
Operating expenses
per ASM excluding
fuel and CRJ-700
fleet transition
costs (in cents) 15.18 14.40 15.60 14.78
===== ===== ===== =====
Unit cost reconciliations-excluding all fleet
transition costs:
----------------------------------------------
Operating expenses $146.7 $172.8 $298.7 $363.9
Less: aircraft fuel,
including hedging
gains and losses (21.0) (30.8) (46.8) (79.1)
Less: fleet transition
costs - CRJ-700 - (6.1) - (6.1)
Less: fleet transition
costs - Q200 (5.2) (3.2) (10.0) (9.0)
---- ---- ----- ----
Operating expenses
excluding fuel and
all fleet transition
costs $120.5 $132.7 $241.9 $269.7
ASMs 828 944 1,615 1,886
--- --- ----- -----
Operating expenses per
ASM excluding fuel and
all fleet transition
costs (in cents) 14.55 14.06 14.98 14.30
===== ===== ===== =====
Reconciliation to GAAP income (loss) before taxes:
--------------------------------------------------
Loss before taxes,
excluding
mark-to-market fuel
hedging gains (losses)
and CRJ-700 fleet
transition costs $(0.3) $(7.7) $(12.5) $(26.2)
Fleet transition
costs - CRJ-700 - (6.1) - (6.1)
Adjustments to reflect
timing of gain
recognition resulting
from mark-to-market
accounting on fuel
hedges 6.8 26.4 8.5 27.3
--- ---- --- ----
GAAP income (loss) Before
taxes as reported $6.5 $12.6 $(4.0) $(5.0)
==== ===== ===== =====
Line of Business Information:
-----------------------------
Horizon brand flying includes those routes in the Horizon system not
covered by the Alaska Capacity Purchase Agreement (CPA). Horizon bears
the revenue risk in those markets and, as a result, traffic, yield and
load factor impact revenue recorded by Horizon. In the CPA arrangement,
Horizon is insulated from market revenue factors and is guaranteed
contractual revenue amounts based on operational capacity. As a result,
yield and load factor information is not presented.
Three Months Ended June 30, 2009
Capacity and Mix
----------------
2009 Actual 2008 Actual Change Current %
(000,000) (000,000) Y-O-Y Total
----------- ----------- ----- ---------
Brand Flying 488 570 (14.4%) 59%
Alaska CPA 340 374 (9.1%) 41%
--- --- ----- --
System Total 828 944 (12.3%) 100%
=== === ====== ===
Three Months Ended June 30, 2009
Load Factor Yield RASM
----------- ----- ----
Point
Change Actual Change Actual Change
Actual Y-O-Y (in cents) Y-O-Y (in cents) Y-O-Y
------ ----- ---------- ----- --------- -----
Brand
Flying 72.9% 1.6 25.76 (2.9%) 19.33 (0.1%)
Alaska CPA NM NM NM NM 18.69 (11.1%)
-- -- -- -- ----- ------
System
Total
73.6% 0.0 25.48 (5.0%) 19.07 (4.7%)
==== === ===== ===== ===== =====
NM = Not Meaningful
Six Months Ended June 30, 2009
Capacity and Mix
----------------
2009 Actual 2008 Actual Change Current %
(000,000) (000,000) Y-O-Y Total
----------- ----------- ----- ---------
Brand Flying 976 1,168 (16.4%) 60%
Alaska CPA 639 718 (11.0%) 40%
--- --- ------ --
System Total 1,615 1,886 (14.4%) 100%
===== ===== ====== ===
Six Months Ended June 30, 2009
Load Factor Yield RASM
----------- ----- ----
Point
Change Actual Change Actual Change
Actual Y-O-Y (in cents) Y-O-Y (in cents) Y-O-Y
------ ----- ---------- ----- --------- -----
Brand
Flying 69.2% - 26.39 1.3% 18.79 1.5%
Alaska CPA NM NM NM NM 18.99 (9.1%)
-- -- -- -- ----- -----
System
Total 70.2% (1.5) 26.44 (0.8%) 18.87 (2.8%)
==== ==== ===== ===== ===== =====
NM = Not Meaningful
Alaska Airlines Fuel Reconciliation
-----------------------------------
(in millions, except for per gallon amounts)
Three Months Ended June 30,
---------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------
Raw or "into-plane" fuel cost $132.3 $1.73 $326.6 $3.78
Minus gains, or plus the losses,
during the period on settled
hedges 8.1 0.11 (46.5) (0.54)
--- ---- ----- -----
Economic fuel expense $140.4 $1.84 $280.1 $3.24
------ ----- ------ -----
Adjustments to reflect timing
of gain or loss recognition
resulting from mark-to-market
accounting (33.0) (0.43) (128.9) (1.49)
----- ----- ------ -----
GAAP fuel expense $107.4 $1.41 $151.2 $1.75
====== ----- ====== =====
Fuel gallons 76.5 86.4
==== ====
Six Months Ended June 30,
-------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------
Raw or "into-plane" fuel cost $251.1 $1.68 $584.3 $3.39
Minus gains, or plus the losses,
during the period on settled hedges 29.5 0.20 (70.7) (0.41)
---- ---- ----- -----
Economic fuel expense $280.6 $1.88 $513.6 $2.98
------ ----- ------ -----
Adjustments to reflect timing
of gain or loss recognition
resulting from mark-to-market
accounting (41.3) (0.28) (128.7) (0.75)
----- ----- ------ -----
GAAP fuel expense $239.3 $1.60 $384.9 $2.23
====== ===== ====== =====
Fuel gallons 149.8 172.3
===== =====
Horizon Air Fuel Reconciliation
-------------------------------
(in millions, except for per gallon amounts)
Three Months Ended June 30,
---------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------Raw or "into-plane" fuel cost $26.2 $1.75 $66.7 $3.88
Minus gains, or plus the losses,
during the period on settled hedges 1.6 0.11 (9.5) (0.55)
--- ---- ---- -----
Economic fuel expense $27.8 $1.86 $57.2 $3.33
----- ----- ----- -----
Adjustments to reflect timing of gain
or loss recognition resulting from
mark-to-market accounting (6.8) (0.45) (26.4) (1.54)
---- ----- ----- -----
GAAP fuel expense $21.0 $1.41 $30.8 $1.79
===== ===== ===== =====
Fuel gallons 15.0 17.2
==== ====
Six Months Ended June 30,
-------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------Raw or "into-plane" fuel cost $49.3 $1.67 $120.9 $3.46
Minus gains, or plus the losses,
during the period on settled hedges 6.0 0.20 (14.5) (0.41)
--- ---- ----- -----
Economic fuel expense $55.3 $1.87 $106.4 $3.05
----- ----- ------ -----
Adjustments to reflect timing
of gain or loss recognition
resulting from mark-to-market
accounting (8.5) (0.29) (27.3) (0.78)
---- ----- ----- -----
GAAP fuel expense $46.8 $1.58 $79.1 $2.27
===== ===== ===== =====
Fuel gallons 29.5 34.9
==== ====
Glossary of Financial Terms
ASM – available seat miles, or "capacity" – represents total seats available across the fleet multiplied by the number of miles flown
RPM – revenue passenger miles, or "traffic" – the number of those available seats that were filled with paying passengers; one passenger traveling one mile is one RPM
RASM – total operating revenue divided by ASMs; operating revenue includes all passenger revenue, freight & mail, Mileage Plan, and other ancillary revenue; commonly called "unit revenue" and represents the average total revenue for flying one seat one mile
PRASM – passenger revenue per ASM; commonly called "passenger unit revenue"
Yield – passenger revenue per RPM; this represents the average revenue for flying one passenger one mile
CASM – total operating costs per ASM; this represents all operating expenses including fuel and special items; commonly called "unit cost"
CASMex – operating costs excluding fuel and special items per ASM; this metric is used to help track progress toward reduction of non-fuel operating costs since fuel is largely out of our control
Economic fuel – best estimate of the cash cost of fuel, net of the impact of our fuel-hedging program
Mainline – represents flying on Alaska jets and all associated revenues and costs
Purchased Capacity Flying – represents operations whereby Horizon and, to a much lesser extent, another small carrier in the state of Alaska fly certain routes for Alaska using Horizon’s or the other carrier’s fleets
First Call Analyst:
FCMN Contact: maria.koenig@alaskaair.com
SOURCE: Alaska Air Group, Inc.
CONTACT: Media, Caroline Boren of Alaska Airlines, +1-206-392-5101, or
Bill Coniff of Horizon Air, +1-206-392-0285; or Investor/analyst, Shannon
Alberts of Alaska Air Group, +1-206-392-5218
Web Site: http://www.alaskaair.com/
