Alaska Air Group Reports Third Quarter Results
Share
Alaska Air Group, Inc. today reported third quarter 2009 net income of $87.6 million, or $2.46 per diluted share, compared to a net loss of $86.5 million, or $2.40 per diluted share, in the third...
Alaska Air Group, Inc.
"Our work to reduce capacity to better match demand, redeploy aircraft into promising new markets, and achieve record operational reliability contributed to our best quarterly financial performance in many years," said Bill Ayer, Alaska Air Group’s chairman and chief executive officer. "My thanks to our people for taking excellent care of customers and for their relentless efforts to improve our business."
The following table reconciles the company’s adjusted net income and earnings per diluted share (EPS) during the third quarters of 2009 and 2008 to the most directly related amounts as reported in accordance with GAAP (in millions except per-share amounts):
Three months ended Sept. 30,
-----------------------------------------
2009 2008
---- ----
Diluted Diluted
Dollars EPS Dollars EPS
--------------------------- -------- ------- -------- -------
Net income and diluted EPS,
excluding special items $83.0 $2.33 $39.9 $1.10
Change in Mileage Plan
terms, net of tax --- --- 26.5 0.73
Restructuring charges, net
of tax --- --- (2.3) (0.06)
Fleet transition costs -
MD-80, net of tax --- --- (13.5) (0.37)
Fleet transition costs -
CRJ-700, net of tax --- --- (0.4) (0.01)
Adjustments to reflect the
timing of gain recognition
resulting from
mark-to-market fuel-hedge
accounting, net of tax 4.6 0.13 (136.7) (3.79)
--- ---- ------- -----
Reported GAAP amounts $87.6 $2.46 $(86.5) $(2.40)
===== ===== ======= ======
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 third quarter 2009 results will be simulcast via the Internet at 8:30 a.m. Pacific time on Oct. 22, 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 Nine Months
Ended Ended
September 30, September 30,
-------------- ----------------
(in millions, except per share
amounts) 2009 2008 2009 2008
---- ---- ---- ----
Operating Revenues:
Passenger $884.8 $952.8 $2,326.1 $2,592.0
Freight and mail 27.7 30.5 72.3 80.4
Other - net 54.9 39.6 155.3 120.8
Change in Mileage Plan terms - 42.3 - 42.3
--- ---- --- ----
Total Operating Revenues 967.4 1,065.2 2,553.7 2,835.5
----- ------- ------- -------
Operating Expenses:
Wages and benefits 246.2 232.1 739.3 711.2
Variable incentive pay 24.0 6.3 52.2 15.0
Aircraft fuel, including hedging
gains and losses 199.5 575.6 485.6 1,039.6
Aircraft maintenance 49.7 47.4 169.0 159.6
Aircraft rent 38.3 40.2 115.4 126.1
Landing fees and other rentals 57.3 56.8 165.9 169.7
Contracted services 37.4 40.2 112.6 128.3
Selling expenses 37.0 41.7 97.3 120.3
Depreciation and amortization 55.6 52.1 162.3 152.9
Food and beverage service 12.7 13.5 36.7 39.2
Other 51.1 52.7 158.2 171.4
New pilot contract transition costs - - 35.8 -
Restructuring charges - 3.7 - 3.7
Fleet transition costs - MD-80 - 21.5 - 47.5
Fleet transition costs - CRJ-700 - 0.7 - 6.8
Fleet transition costs - Q200 (1.2) 0.7 8.8 9.7
---- --- --- ---
Total Operating Expenses 807.6 1,185.2 2,339.1 2,901.0
----- ------- ------- -------
Operating Income (Loss) 159.8 (120.0) 214.6 (65.5)
----- ------ ----- -----
Nonoperating Income (Expense):
Interest income 8.3 10.7 24.4 31.5
Interest expense (25.9) (25.9) (77.8) (74.3)
Interest capitalized 1.4 5.9 6.0 18.5
Other - net (0.8) (3.7) (6.3) (3.4)
---- ---- ---- ----
(17.0) (13.0) (53.7) (27.7)
----- ----- ----- -----
Income (loss) before income tax 142.8 (133.0) 160.9 (93.2)
Income tax expense (benefit) 55.2 (46.5) 63.4 (32.5)
---- ----- ---- -----
Net Income (Loss) $87.6 $(86.5) $97.5 $(60.7)
===== ====== ===== ======
Basic Earnings (Loss) Per Share: $2.48 $(2.40) $2.71 $(1.67)
Diluted Earnings (Loss) Per Share: $2.46 $(2.40) $2.69 $(1.67)
Shares Used for Computation:
Basic 35.275 36.069 35.981 36.383
Diluted 35.681 36.069 36.292 36.383
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
------------- ------------
September 30, December 31,
(in millions) 2009 2008
------------- ------------- ------------
Cash and marketable securities $1,230 $1,077
====== ======
Total current assets 1,686 1,509
Property and equipment-net 3,136 3,168
Other assets 184 159
--- ---
Total assets $5,006 $4,836
====== ======
Current liabilities $1,282 $1,361
Long-term debt 1,658 1,596
Other liabilities and credits 1,292 1,217
Shareholders' equity 774 662
--- ---
Total liabilities and shareholders' equity $5,006 $4,836
====== ======
Debt to Capitalization, adjusted for
operating leases 78%:22% 81%:19%
====== ======
Number of common shares outstanding 35.251 36.275
====== ======
Air Group Net Income (Loss) and EPS Reconciliation:
---------------------------------------------------
The following table reconciles Alaska Air Group, Inc.'s net income (loss)
and amounts per share during 2009 and 2008 excluding certain noted items
to the most directly related amounts as reported in accordance with GAAP
(in millions except per share amounts):
Three Months Ended September 30,
--------------------------------
2009 2008
------ ------
Dollars Diluted EPS Dollars Diluted EPS
------- ----------- ------- -----------
Net income and diluted
EPS, excluding the
items noted below $83.0 $2.33 $39.9 $1.10
Change in Mileage Plan
terms, net of tax - - 26.5 0.73
Restructuring
charges, net of tax - - (2.3) (0.06)
Fleet transition costs
- MD-80, net of tax - - (13.5) (0.37)
Fleet transition costs
- CRJ-700, net of tax - - (0.4) (0.01)
Adjustments to reflect
the timing of gain or loss
recognition resulting
from mark-to-market
fuel hedge accounting,
net of tax 4.6 0.13 (136.7) (3.79)
--- ---- ------ -----
Reported GAAP amounts $87.6 $2.46 $(86.5) $(2.40)
===== ===== ====== ======
Nine Months Ended September 30,
--------------------------------
2009 2008
------ ------
Dollars Diluted EPS Dollars Diluted EPS
------- ----------- ------- -----------
Net income (loss) and
diluted EPS,
excluding the items
noted below $84.1 $2.32 $(12.0) $(0.33)
Change in Mileage Plan
terms, net of tax - - 26.5 0.73
New pilot contract
transition costs,
net of tax (22.3) (0.61) - -
Restructuring
charges, net of tax - - (2.3) (0.06)
Fleet transition costs
- MD-80, net of tax - - (29.8) (0.82)
Fleet transition costs
- CRJ-700, net of tax - - (4.2) (0.12)
Adjustments to reflect
the timing of gain or
loss recognition
resulting from
mark-to-market fuel
hedge accounting,
net of tax 35.7 0.98 (38.9) (1.07)
---- ---- ----- -----
Reported GAAP amounts $97.5 $2.69 $(60.7) $(1.67)
===== ===== ====== ======
Alaska Airlines Financial and Statistical Data
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ------------------------
Financial Data % %
(in millions): 2009 2008 Change 2009 2008 Change
---- ---- ------- ---- ---- -------
Operating
Revenues:
Passenger $702.0 $751.2 (6.5) $1,844.3 $2,041.2 (9.6)
Freight and mail 26.5 29.2 (9.2) 69.0 77.1 (10.5)
Other - net 48.4 33.5 44.5 136.5 101.2 34.9
Change in
Mileage Plan
terms - 42.3 NM - 42.3 NM
--- ---- --- ----
Total mainline
operating
revenues 776.9 856.2 (9.3) 2,049.8 2,261.8 (9.4)
Passenger -
purchased
capacity 81.9 85.7 (4.4) 211.4 233.9 (9.6)
---- ---- ----- -----
Total Operating
Revenues 858.8 941.9 (8.8) 2,261.2 2,495.7 (9.4)
----- ----- ------- -------
Operating
Expenses:
Wages and
benefits 199.1 182.5 9.1 594.9 558.9 6.4
Variable
incentive pay 20.8 4.9 324.5 44.0 10.8 307.4
Aircraft fuel,
including
hedging gains
and losses 166.6 479.1 (65.2) 405.9 864.0 (53.0)
Aircraft
maintenance 36.5 32.6 12.0 129.4 112.1 15.4
Aircraft rent 27.2 26.3 3.4 81.8 82.4 (0.7)
Landing fees and
other rentals 43.0 42.3 1.7 124.4 126.9 (2.0)
Contracted
services 29.7 31.9 (6.9) 88.6 100.5 (11.8)
Selling expenses 29.4 33.1 (11.2) 76.8 95.6 (19.7)
Depreciation and
amortization 45.1 42.8 5.4 132.6 123.2 7.6
Food and
beverage
service 12.0 12.8 (6.3) 34.9 37.1 (5.9)
Other 38.0 41.0 (7.3) 119.3 130.2 (8.4)
New pilot
contract
transition costs - - NM 35.8 - NM
Restructuring
charges - 3.7 NM - 3.7 NM
Fleet transition
costs - MD-80 - 21.5 NM - 47.5 NM
--- ---- --- ----
Total mainline
operating
expenses 647.4 954.5 (32.2) 1,868.4 2,292.9 (18.5)
----- ----- ------- -------
Purchased
capacity costs 74.7 85.6 (12.7) 206.3 246.8 (16.4)
---- ---- ----- -----
Total Operating
Expenses 722.1 1,040.1 (30.6) 2,074.7 2,539.7 (18.3)
----- ------- ------- -------
Operating Income
(Loss) 136.7 (98.2) 186.5 (44.0)
----- ----- ----- -----
Interest income 9.6 12.8 29.2 38.2
Interest expense (22.4) (23.5) (67.5) (67.5)
Interest
capitalized 1.4 4.8 5.7 16.1
Other - net (0.5) (3.3) (5.3) (2.7)
---- ---- ---- ----
(11.9) (9.2) (37.9) (15.9)
----- ---- ----- -----
Income (Loss)
Before Income
Tax $124.8 $(107.4) $148.6 $(59.9)
====== ======= ====== ======
Mainline
Operating
Statistics:
Revenue
passengers (000) 4,240 4,532 (6.4) 11,796 13,037 (9.5)
RPMs (000,000)
"traffic" 5,020 5,012 0.2 13,812 14,410 (4.1)
ASMs (000,000)
"capacity" 6,097 6,306 (3.3) 17,469 18,628 (6.2)
Passenger load
factor 82.3% 79.5% 2.8pts 79.1% 77.4% 1.7pts
Yield per
passenger mile
(in cents) 13.98 14.99 (6.7) 13.35 14.17 (5.8)
Operating
revenue per
ASM "RASM"
(in cents) 12.74 13.58 (6.2) 11.73 12.14 (3.4)
Change in
Mileage Plan
terms per ASM
(in cents) 0.00 0.67 NM 0.00 0.23 NM
---- ---- ---- ----
RASM excluding
change in
Mileage Plan
terms (in cents) 12.74 12.91 (1.3) 11.73 11.91 (1.5)
Passenger
revenue per ASM
(in cents) 11.51 11.91 (3.4) 10.56 10.96 (3.6)
Operating
expense per ASM
(in cents) 10.62 15.14 (29.9) 10.70 12.31 (13.1)
Operating
expense per
ASM excluding
fuel,
restructuring
charges and
fleet
transition
costs
(in cents) (a) 7.89 7.14 10.5 8.17 7.40 10.4
GAAP fuel cost
per gallon $2.07 $5.57 (62.8) $1.77 $3.34 (47.0)
Economic fuel
cost per gallon
(b) $2.15 $3.47 (38.0) $1.98 $3.14 (36.9)
Fuel gallons
(000,000) 80.1 86.0 (6.9) 229.9 258.3 (11.0)
Average number
of full-time
equivalent
employees 9,002 9,594 (6.2) 8,987 9,785 (8.2)
Aircraft
utilization
(blk hrs/day) 9.9 10.8 (8.3) 9.9 10.8 (8.3)
Average aircraft
stage length
(miles) 1,044 981 6.4 1,027 975 5.3
Operating fleet
at period-end 116 110 6 a/c 116 110 6 a/c
Regional
Operating
Statistics:
RPMs (000,000) 298 304 (2.0) 777 873 (11.0)
ASMs (000,000) 383 391 (2.0) 1,058 1,153 (8.2)
Passenger load
factor 77.8% 77.7% 0.1pts 73.4% 75.7% (2.3)pts
Yield per
passenger mile
(in cents) 27.48 28.19 (2.5) 27.21 26.79 1.6
Operating
revenue per ASM
(in cents) 21.38 21.92 (2.5) 19.98 20.29 (1.5)
Operating
expenses per ASM
(in cents) 19.50 21.89 (10.9) 19.50 21.41 (8.9)
NM = Not Meaningful
(a) See page 9 for a reconciliation of these non-GAAP measures and a
discussion about why these measures may be important to investors.
(b) See page 11 for a reconciliation of economic fuel cost.
Horizon Air Financial and Statistical Data
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -------------------------
Financial Data
(in millions): 2009 2008 % Change 2009 2008 % Change
---- ---- -------- ---- ---- ---------
Operating Revenues:
Passenger - brand
flying $105.4 $120.3 (12.4) $283.7 $330.7 (14.2)
Passenger - Alaska
capacity purchase
arrangement 69.9 81.1 (13.8) 191.2 231.2 (17.3)
---- ---- ----- -----
Total passenger
revenue 175.3 201.4 (13.0) 474.9 561.9 (15.5)
Freight and mail 0.7 0.8 (12.5) 2.0 2.1 (4.8)
Other - net 2.2 1.9 15.8 6.0 6.2 (3.2)
--- --- --- ---
Total Operating
Revenues 178.2 204.1 (12.7) 482.9 570.2 (15.3)
----- ----- ----- -----
Operating Expenses:
Wages and benefits 44.4 47.9 (7.3) 137.0 147.2 (6.9)
Variable incentive
pay 3.2 1.4 128.6 8.2 4.2 95.2
Aircraft fuel,
including hedging
gains and losses 32.9 96.5 (65.9) 79.7 175.6 (54.6)
Aircraft maintenance 13.2 14.8 (10.8) 39.6 47.5 (16.6)
Aircraft rent 11.1 13.9 (20.1) 33.6 43.7 (23.1)
Landing fees and
other rentals 14.6 14.7 (0.7) 42.4 43.6 (2.8)
Contracted services 8.4 7.1 18.3 23.8 22.0 8.2
Selling expenses 7.6 8.6 (11.6) 20.5 24.7 (17.0)
Depreciation and
amortization 10.2 9.0 13.3 28.8 28.8 -
Food and beverage
service 0.7 0.7 - 1.8 2.1 (14.3)
Other 9.4 9.7 (3.1) 29.0 33.7 (13.9)
Fleet transition
costs - CRJ-700 - 0.7 NM - 6.8 NM
Fleet transition
costs - Q200 (1.2) 0.7 NM 8.8 9.7 NM
---- --- --- ---
Total Operating
Expenses 154.5 225.7 (31.5) 453.2 589.6 (23.1)
----- ----- ----- -----
Operating Income
(Loss) 23.7 (21.6) 29.7 (19.4)
---- ----- ---- -----
Interest income 0.5 1.1 1.5 3.8
Interest expense (5.1) (5.5) (16.2) (16.9)
Interest capitalized - 1.0 0.3 2.3
Other - net - (0.1) (0.2) 0.1
--- ---- ---- ---
(4.6) (3.5) (14.6) (10.7)
---- ---- ----- -----
Income (Loss)
Before Income Tax $19.1 $(25.1) $15.1 $(30.1)
===== ====== ===== ======
Combined Operating
Statistics: (a)
Revenue passengers
(000) 1,815 1,989 (8.7) 5,055 5,754 (12.1)
RPMs (000,000)
"traffic" 666 721 (7.6) 1,799 2,074 (13.3)
ASMs (000,000)
"capacity" 855 945 (9.5) 2,470 2,831 (12.8)
Passenger load
factor 77.9% 76.3% 1.6pts 72.8% 73.3% (0.5)pts
Yield per passenger
mile (in cents) 26.32 27.93 (5.8) 26.40 27.09 (2.5)
Operating revenue
per ASM (in cents) 20.84 21.60 (3.5) 19.55 20.14 (2.9)
Passenger revenue
per ASM (in cents) 20.50 21.31 (3.8) 19.23 19.85 (3.1)
Operating
expenses per
ASM (in cents) 18.07 23.88 (24.3) 18.35 20.83 (11.9)
Operating expense
per ASM excluding
fuel and CRJ-700
fleet transition
costs (b) (in cents) 14.22 13.60 4.6 15.12 14.38 5.1
GAAP fuel cost per
gallon $2.11 $5.61 (62.4) $1.76 $3.37 (47.8)
Economic fuel cost
per gallon (c) $2.19 $3.45 (36.5) $1.98 $3.18 (37.7)
Fuel gallons
(000,000) 15.6 17.2 (9.3) 45.1 52.1 (13.4)
Average number of
full-time equivalent
employees 3,269 3,687 (11.3) 3,320 3,777 (12.1)
Aircraft
utilization (blk
hrs/day) 8.4 8.5 (1.2) 8.3 8.4 (1.2)
Average aircraft
stage length
(miles) 334 325 2.8 326 324 0.6
Operating fleet
at period-end 55 63 (8 a/c) 55 63 (8 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 10 for additional line of business information.
(b) See page 10 for a reconciliation of these non-GAAP measures and a
discussion about why these measures may be important to investors.
(c) See page 11 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 basis 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 Nine Months Ended
September 30, September 30,
------------- -----------------
Mainline unit cost
reconciliations: 2009 2008 2009 2008
------------------ ---- ---- ---- ----
Mainline operating
expenses $647.4 $954.5 $1,868.4 $2,292.9
Mainline ASMs 6,097 6,306 17,469 18,628
----- ----- ------ ------
Mainline operating
expenses per ASM
(in cents) 10.62 15.14 10.70 12.31
===== ===== ===== =====
Mainline operating
expenses $647.4 $954.5 $1,868.4 $2,292.9
Less: aircraft fuel (166.6) (479.1) (405.9) (864.0)
Less: new pilot
contract transition
costs - - (35.8) -
Less:
restructuring
charges - (3.7) - (3.7)
Less: fleet transition
costs - MD-80 - (21.5) - (47.5)
--- ----- --- -----
Mainline operating
expenses excluding fuel,
restructuring charges
and fleet transition
costs $480.8 $450.2 $1,426.7 $1,377.7
Mainline ASMs 6,097 6,306 17,469 18,628
----- ----- ------ ------
Mainline operating
expenses per ASM
excluding fuel,
restructuring charges
and fleet transition
costs (in cents) 7.89 7.14 8.17 7.40
==== ==== ==== ====
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -----------------
Reconciliation to
GAAP income (loss)
before taxes: 2009 2008 2009 2008
------------------- ---- ---- ---- ----
Income before taxes,
excluding items
noted below $118.7 $56.6 $137.0 $1.4
Change in Mileage
Plan terms - 42.3 - 42.3
New pilot contract
transition costs - - (35.8) -
Restructuring charges - (3.7) - (3.7)
Fleet transition
costs - MD-80 - (21.5) - (47.5)
Adjustments to reflect
timing of gain or loss
recognition resulting from
mark-to-market
accounting on fuel hedges 6.1 (181.1) 47.4 (52.4)
--- ------ ---- -----
GAAP income (loss)
before taxes as
reported $124.8 $(107.4) $148.6 $(59.9)
====== ======= ====== ======
Horizon Air Industries, Inc.
------------------------------
(in millions, except for per ASM unit information)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
Unit cost
reconciliations: 2009 2008 2009 2008
----------------- ---- ---- ---- ----
Operating expenses $154.5 $225.7 $453.2 $589.6
ASMs 855 945 2,470 2,831
--- --- ----- -----
Operating expenses
per ASM (in cents) 18.07 23.88 18.35 20.83
===== ===== ===== =====
Operating expenses $154.5 $225.7 $453.2 $589.6
Less: aircraft fuel (32.9) (96.5) (79.7) (175.6)
Less: fleet
transition costs -
CRJ-700 - (0.7) - (6.8)
--- ---- --- ----
Operating expenses
excluding fuel and
CRJ-700 fleet
transition costs $121.6 $128.5 $373.5 $407.2
ASMs 855 945 2,470 2,831
--- --- ----- -----
Operating expenses
per ASM excluding
fuel and CRJ-700
fleet transition
costs (in cents) 14.22 13.60 15.12 14.38
===== ===== ===== =====
Unit cost
reconciliations-
excluding all fleet
transition costs:
--------------------
Operating expenses $154.5 $225.7 $453.2 $589.6
Less: aircraft fuel (32.9) (96.5) (79.7) (175.6)
Less: fleet
transition costs -
CRJ-700 - (0.7) - (6.8)
Less: fleet
transition costs -
Q200 1.2 (0.7) (8.8) (9.7)
--- ---- ---- ----
Operating expenses
excluding fuel and
all fleet transition
costs $122.8 $127.8 $364.7 $397.5
ASMs 855 945 2,470 2,831
--- --- ----- -----
Operating expenses
per ASM excluding
fuel and all fleet
transition costs
(in cents) 14.36 13.52 14.77 14.04
===== ===== ===== =====
Reconciliation to GAAP
income (loss) before
taxes:
----------------------
Income (loss) before
taxes, excluding mark-
to-market fuel
hedging gains
(losses)
and CRJ-700 fleet
transition costs $17.9 $12.7 $5.4 $(13.6)
Fleet transition
costs - CRJ-700 - (0.7) - (6.8)
Adjustments to reflect
timing of gain or loss
recognition resulting
from mark-to-market
accounting on fuel
hedges 1.2 (37.1) 9.7 (9.7)
--- ----- --- ----
GAAP income (loss)
before taxes as
reported $19.1 $(25.1) $15.1 $(30.1)
===== ====== ===== ======
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 September 30, 2009
-------------------------------------
Capacity and Mix Load Factor
---------------- ---------------
2009 2008 Current Point
Actual Actual Change % Change
(000,000) (000,000) Y-O-Y Total Actual Y-O-Y
--------- --------- ------- -------- ------ -------
Brand Flying 487 568 (14.3%) 57% 77.9% 2.9
Alaska CPA 368 377 (2.4%) 43% NM NM
--- --- ---- -- ------ ------
System Total 855 945 (9.5%) 100% 77.9% 1.6
=== === ==== === ==== ===
Yield RASM
------ ----
Change Change
Actual Y-O-Y Actual Y-O-Y
------ ------ ------ ------
Brand Flying
(in cents) 27.81 (1.5%) 22.26 2.9%
Alaska CPA
(in cents) NM NM 18.97 (11.8%)
------ --- ----- -----
System Total
(in cents) 26.32 (5.8%) 20.84 (3.5%)
===== ==== ===== ====
NM= Not Meaningful
Nine Months Ended September 30, 2009
------------------------------------
Capacity and Mix Load Factor
---------------- ---------------
2009 2008 Current Point
Actual Actual Change % Change
(000,000) (000,000) Y-O-Y Total Actual Y-O-Y
--------- --------- ------- -------- ------ -------
Brand Flying 1,463 1,736 (15.7%) 59% 72.1% 1.0
Alaska CPA 1,007 1,095 (8.0%) 41% NM NM
----- ----- ---- -- ------ ------
System Total 2,470 2,831 (12.8%) 100% 72.8% (0.5)
===== ===== ===== === ==== ====
Yield RASM
------ ----
Change Change
Actual Y-O-Y Actual Y-O-Y
------ ------ ------ ------
Brand Flying
(in cents) 26.90 0.4% 19.94 2.1%
Alaska CPA
(in cents) NM NM 18.98 (10.1%)
------ -- ----- -----
System Total
(in cents) 26.40 (2.5%) 19.55 (2.9%)
===== ==== ===== ====
NM= Not Meaningful
Alaska Airlines Fuel Reconciliation
-----------------------------------
(in millions, except for per gallon amounts)
Three Months Ended September 30,
--------------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------
Raw or "into-plane" fuel cost $159.5 $1.99 $334.5 $3.89
Minus gains, or plus the
losses, during the period on
settled hedges 13.2 0.16 (36.5) (0.42)
---- ---- ----- -----
Economic fuel expense $172.7 $2.15 $298.0 $3.47
------ ----- ------ -----
Adjustments to reflect
timing of (gain) or loss recognition
resulting from mark-to-market
accounting (6.1) (0.08) 181.1 2.10
---- ----- ----- ----
GAAP fuel expense $166.6 $2.07 $479.1 $5.57
====== ===== ====== =====
Fuel gallons 80.1 86.0
==== ====
Nine Months Ended September 30,
-------------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------
Raw or "into-plane" fuel cost $410.6 $1.79 $918.8 $3.56
Minus gains, or plus the losses,
during the period on
settled hedges 42.7 0.19 (107.2) (0.42)
---- ---- ------ -----
Economic fuel expense $453.3 $1.98 $811.6 $3.14
------ ----- ------ -----
Adjustments to reflect timing of
(gain) or loss recognition
resulting from mark-to-market
accounting (47.4) (0.21) 52.4 0.20
----- ----- ---- ----
GAAP fuel expense $405.9 $1.77 $864.0 $3.34
====== ===== ====== =====
Fuel gallons 229.9 258.3
===== =====
Horizon Air Fuel Reconciliation
-------------------------------
(in millions, except for per gallon amounts)
Three Months Ended September 30,
--------------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------
Raw or "into-plane" fuel cost $31.4 $2.01 $66.9 $3.89
Minus gains, or plus the losses,
during the period on
settled hedges 2.7 0.18 (7.5) (0.44)
--- ---- ---- -----
Economic fuel expense $34.1 $2.19 $59.4 $3.45
----- ----- ----- -----
Adjustments to reflect timing of
(gain) or loss recognition
resulting from mark-to-market
accounting (1.2) (0.08) 37.1 2.16
---- ----- ---- ----
GAAP fuel expense $32.9 $2.11 $96.5 $5.61
===== ===== ===== =====
Fuel gallons 15.6 17.2
==== ====
Nine Months Ended September 30,
-------------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------
Raw or "into-plane" fuel cost $80.7 $1.79 $187.9 $3.61
Minus gains, or plus the losses,
during the period on
settled hedges 8.7 0.19 (22.0) (0.43)
--- ---- ----- -----
Economic fuel expense $89.4 $1.98 $165.9 $3.18
----- ----- ------ -----
Adjustments to reflect timing of
(gain) or loss recognition
resulting from mark-to-market
accounting (9.7) (0.22) 9.7 0.19
---- ----- --- ----
GAAP fuel expense $79.7 $1.76 $175.6 $3.37
===== ===== ====== =====
Fuel gallons 45.1 52.1
==== ====
First Call Analyst:
FCMN Contact: maria.koenig@alaskaair.com
SOURCE: Alaska Airlines
CONTACT: Media, Caroline Boren of Alaska Airlines, +1-206-392-5101; or
Dan Russo of Horizon Air, +1-206-392-0218; or Investors, Shannon Alberts of
Alaska Air Group, +1-206-392-5218
Web Site: http://www.alaskaair.com/
