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Alaska Air Group Reports First Quarter Results
SEATTLE, Apr 22, 2003 (BUSINESS WIRE) -- Alaska Air Group, Inc. (NYSE:ALK) today reported a first quarter net loss of $56.3 million, or $2.12 per share, compared with a net loss of $85.1 million, or $3.21 per share, during the corresponding quarter in 2002.
The first quarter results were negatively impacted by increased fuel prices and lower demand resulting from the war in Iraq and a sluggish U.S. economy. The company's first quarter results for 2002 include a $51.4 million charge related to the write-off of goodwill in connection with the adoption of Statement of Financial Accounting Standards No. 142. Excluding this charge, the company lost $33.7 million or $1.27 per share in the first quarter of 2002.
"The combination of a flagging economy, higher fuel prices and the war in Iraq made this a difficult quarter for both Alaska Air Group and the industry," said John F. Kelly, chairman and chief executive officer. "We're finding that we can continue to grow, contrary to most of the industry, but it's clear that we'll need to continue to adjust our business model by achieving our cost management goals."
During the quarter, Alaska successfully completed the private placement of $150 million of floating rate convertible bonds. "These proceeds strengthen an already strong liquidity position, and enhance our ability to implement our strategy and further position Alaska for success in this changing marketplace," said Kelly.
Operationally, Alaska Airlines' passenger traffic in the first quarter increased 5.6 percent on a capacity increase of 5.4 percent. Load factor was consistent with the prior year at 66.7 percent. The airline's operating revenue per available seat mile (ASM) decreased 1.7 percent, while its operating cost per ASM excluding fuel decreased 1.3 percent. Alaska's pretax loss was $70.6 million compared to a pretax loss of $41.7 million a year earlier.
Horizon Air's passenger traffic in the first quarter increased 8.6 percent on a 15.9 percent capacity increase. Load factor decreased by 3.9 points to 58.1 percent. The airline's operating revenue per ASM decreased 8.5 percent, while its operating cost per ASM excluding fuel decreased 7.5 percent. Horizon's pretax loss was $15.3 million, compared to a pretax loss of $10.2 million a year earlier.
Alaska Air Group continues to have a strong cash position at March 31, 2003 with approximately $616 million in cash and marketable securities. The company's debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, was 79 percent.
A conference call regarding the first quarter results will be simulcast via the Internet at 8:30 a.m. Pacific Standard Time. It may be accessed through the company's website at www.alaskaair.com.
This report may contain forward-looking statements that are based on the best information currently available to management. These forward-looking statements 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. Forward-looking statements are indicated by phrases such as "will," "should," "the company believes," "we expect" or any other language indicating a prediction of future events. There can be no assurance that actual developments will be those anticipated by the company. Actual results could differ materially from those projected as a result of a number of factors, some of which the company cannot predict or control. For a discussion of these factors, please see Item 1 of the company's Annual Report on Form 10-K for the year ended December 31, 2002.
Alaska Air Group is the parent company of Alaska Airlines, Inc. and Horizon Air Industries, Inc.
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)
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December 31 March 31
(In Millions Except Per Share Amounts) 2002 2003
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Cash and marketable securities $636 $616
========== ==========
Total current assets 976 990
Property and equipment-net 1,780 1,839
Other assets 125 163
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Total assets $2,881 $2,992
========== ==========
Current liabilities 778 832
Long-term debt and capital lease obligations 857 979
Other liabilities and credits 590 581
Shareholders' equity 656 600
---------- ----------
Total liabilities and equity $2,881 $2,992
========== ==========
SUPPLEMENTAL TABLE
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During 2002 and 2003, the Company's diluted loss per share (EPS) and
net loss were impacted by the following (dollars in millions):
Three Months Ended March 31
2002 2003
------------------- ---------------
Dollars EPS Dollars EPS
----------- ------- ------- -------
Net loss and diluted EPS excluding
non-recurring items $(33.7) $(1.27) $(56.3) $(2.12)
Change in accounting principle
relating to goodwill (51.4) (1.94) - -
----------- ------- ------- -------
Reported amounts $(85.1) $(3.21) $(56.3) $(2.12)
=========== ======= ======= =======
Alaska Air Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
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Three Months Ended March 31
(In Millions Except Per Share Amounts) 2002 2003
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Operating Revenues
Passenger $455.9 $475.5
Freight and mail 17.1 18.6
Other - net 27.1 24.6
------- -------
Total Operating Revenues 500.1 518.7
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Operating Expenses
Wages and benefits 202.9 227.1
Contracted services 24.7 25.7
Aircraft fuel 64.7 90.2
Aircraft maintenance 43.2 46.5
Aircraft rent 46.5 46.9
Food and beverage service 14.3 13.4
Commissions 12.4 3.3
Other selling expenses 30.2 27.2
Depreciation and amortization 32.3 32.4
Loss (gain) on sale of assets (0.6) 0.1
Landing fees and other rentals 29.8 37.1
Other 49.3 47.4
------- -------
Total Operating Expenses 549.7 597.3
------- -------
Operating Loss (49.6) (78.6)
------- -------
Nonoperating Income (Expense)
Interest income 4.4 0.6
Interest expense (11.9) (11.1)
Interest capitalized 0.2 0.8
Other - net 4.5 0.4
------- -------
(2.8) (9.3)
------- -------
Loss before income tax and accounting change (52.4) (87.9)
Income tax benefit (18.7) (31.6)
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Loss before accounting change (33.7) (56.3)
Cumulative effect of accounting change (51.4) -
------- -------
Net Loss $(85.1) $(56.3)
======= =======
Basic and Diluted Loss Per Share:
Loss before accounting change $(1.27) $(2.12)
Cumulative effect of accounting change (1.94) -
------- -------
Net Loss Per Share $(3.21) $(2.12)
======= =======
Shares used for computation:
Basic 26.532 26.582
Diluted 26.532 26.582
Alaska Airlines Financial and Statistical Data
Three Months Ended March 31
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%
Financial Data (in millions): 2002 2003 Change
------------------------ -------
Operating Revenues:
Passenger $374.0 $387.0 3.5%
Freight and mail 15.9 17.4 9.4%
Other - net 22.3 22.6 1.3%
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Total Operating Revenues 412.2 427.0 3.6%
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Operating Expenses:
Wages and benefits 165.7 188.0 13.5%
Contracted services 21.8 20.7 -5.0%
Aircraft fuel 55.2 76.9 39.3%
Aircraft maintenance 35.6 37.9 6.5%
Aircraft rent 31.8 30.5 -4.1%
Food and beverage service 13.9 12.9 -7.2%
Commissions 14.2 8.2 -42.3%
Other selling expenses 24.9 21.9 -12.0%
Depreciation and amortization 28.2 28.5 1.1%
Loss on sale of assets - 0.3 NM
Landing fees and other rentals 23.6 28.7 21.6%
Other 36.3 34.1 -6.1%
------------------------
Total Operating Expenses 451.2 488.6 8.3%
------------------------
Operating Loss (39.0) (61.6) 57.9%
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Interest income 5.0 1.2
Interest expense (11.9) (11.3)
Interest capitalized 0.1 0.7
Other - net 4.1 0.4
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(2.7) (9.0)
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Loss Before Income Tax before
Accounting Change $(41.7) $(70.6) 69.3%
========================
Operating Statistics:
Revenue passengers (000) 3,193 3,258 2.0%
RPMs (000,000) 2,977 3,143 5.6%
ASMs (000,000) 4,467 4,708 5.4%
Passenger load factor 66.7% 66.7% 0.0 pts
Breakeven load factor 76.0% 80.5% 4.5 pts
Yield per passenger mile 12.56 cents 12.31 cents -2.0%
Operating revenue per ASM 9.23 cents 9.07 cents -1.7%
Operating expenses per ASM 10.10 cents 10.38 cents 2.7%
Expense per ASM excluding fuel 8.87 cents 8.75 cents -1.3%
Fuel cost per gallon 73.6 cents 99.1 cents 34.7%
Fuel gallons (000,000) 75.0 77.6 3.5%
Average number of employees 9,815 9,988 1.8%
Aircraft utilization (blk hrs/day) 10.1 10.3 2.4%
Operating fleet at period-end 102 106 3.9%
NM = Not Meaningful
Horizon Air Financial and Statistical Data
Three Months Ended March 31
----------------------------------------------------------------------
%
Financial Data (in millions): 2002 2003 Change
------------------------ --------
Operating Revenues:
Passenger $86.3 $94.0 8.9%
Freight and mail 1.2 1.2 0.0%
Other - net 5.7 3.7 -35.1%
------------------------
Total Operating Revenues 93.2 98.9 6.1%
------------------------
Operating Expenses:
Wages and benefits 37.3 39.1 4.8%
Contracted services 3.9 6.6 69.2%
Aircraft fuel 9.5 13.3 40.0%
Aircraft maintenance 7.6 8.6 13.2%
Aircraft rent 14.8 16.4 10.8%
Food and beverage service 0.4 0.5 25.0%
Commissions 2.3 0.6 -73.9%
Other selling expenses 5.3 5.3 0.0%
Depreciation and amortization 3.9 3.6 -7.7%
Gain on sale of assets (0.6) (0.2) NM
Landing fees and other rentals 6.4 8.7 35.9%
Other 12.7 11.5 -9.4%
------------------------
Total Operating Expenses 103.5 114.0 10.1%
------------------------
Operating Loss (10.3) (15.1) 46.6%
------------------------
Interest expense (0.5) (0.3)
Interest capitalized 0.2 0.1
Other - net 0.4 0.0
------------------------
0.1 (0.2)
------------------------
Loss Before Income Tax before
Accounting Change $(10.2) $(15.3) 50.0%
========================
Operating Statistics:
Revenue passengers (000) 1,095 1,088 -0.6%
RPMs (000,000) 329 357 8.6%
ASMs (000,000) 531 616 15.9%
Passenger load factor 62.0% 58.1% (3.9)pts
Breakeven load factor 69.5% 68.3% (1.2)pts
Yield per passenger mile 26.22 cents 26.30 cents 0.3%
Operating revenue per ASM 17.55 cents 16.07 cents -8.5%
Operating expenses per ASM 19.49 cents 18.53 cents -4.9%
Expense per ASM excluding fuel 17.70 cents 16.37 cents -7.5%
Fuel cost per gallon 77.2 cents 102.0 cents 32.1%
Fuel gallons (000,000) 12.3 13.0 5.7%
Average number of employees 3,452 3,415 -1.1%
Aircraft utilization (blk hrs/day) 7.1 7.8 9.9%
Operating fleet at period-end 62 59 -4.8%
NM = Not Meaningful
Alaska Air Group, Inc.
Brad Tilden, 206/433-3362
or
Lou Cancelmi, 206/433-3170
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