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Alaska Air Group Reports Third Quarter Results
The company's third quarter results for 2002 and 2001 were adversely impacted by the September 11th terrorist attacks and include US government compensation received in connection with the Air Transportation Safety and System Stabilization Act totaling $.5 million ($.3 million after tax, or $0.01 per share) and $29.1 million ($18.0 million after tax, or $0.68 per share), respectively. Excluding the receipt of this compensation, net income during the third quarter 2002 was $10.3 million, or $0.39 per share compared to $7.3 million and $0.27 during the same period in 2001. Due to the September 11 terrorist acts, year over year comparisons of both financial and operational information is significantly impacted.
"We're obviously pleased to be reporting profitable results, especially given the difficult times our industry has faced over the past year," said John F. Kelly, Chairman and CEO of Alaska Air Group, Inc. "Both Alaska and Horizon Air did an excellent job of developing and executing their post 9/11 strategies, and both carriers recorded profits for the quarter. Still, the industry is clearly suffering financially, and we're not immune to it, especially as we contemplate the difficult winter months ahead."
Alaska Airlines' passenger traffic increased 10.4 percent (2.7 percent adjusted for September 11th) on a capacity increase of 11.1 percent (3.4 percent adjusted for September 11th). Load factor fell 0.5 points to 70.5 percent. The airline's operating revenue per available seat mile (ASM) decreased 4.9 percent, while its operating cost per ASM excluding fuel decreased 3.7 percent. Alaska's pretax income was $10.4 million compared to pretax income of $31.6 million a year earlier. Alaska's 2002 and 2001 pretax income includes $.3 million and $18.7 million of U.S. government compensation, respectively.
Horizon Air's passenger traffic increased 19.0 percent (7.7 percent adjusted for September 11th) on an 18.4 percent (9.8 percent adjusted for September 11th) capacity increase. Load factor increased 0.3 points to 64.6 percent. The airline's operating revenue per ASM decreased 9.2 percent, while its operating cost per ASM decreased 16.9 percent. Excluding fuel, cost per ASM decreased 15.5 percent. Horizon's pretax income was $5.8 million, compared to a pretax income of $7.0 million a year earlier. Horizon's 2002 and 2001 pretax income includes $.2 million and $10.4 million of U.S. government compensation, respectively.
Alaska Air Group continues to have a strong cash position and ended the September 2002 quarter with approximately $663 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 72 percent.
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, 2001.
Alaska Air Group is the parent company of Alaska Airlines, Inc. and Horizon Air Industries, Inc.
ALASKA AIR GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(In Millions Except Per Share Amounts)
Three Months Nine Months
Ended Ended
September 30
Restated Restated
2001 2002 2001 2002
Operating Revenues:
Passenger $536.8 $569.8 $1,550.9 $1,551.3
Freight and mail 22.6 21.0 67.3 59.4
Other - net 28.6 29.3 71.8 86.1
Total Operating Revenues 588.0 620.1 1,690.0 1,696.8
Operating Expenses:
Wages and benefits 204.9 224.8 590.7 642.4
Contracted services 21.4 22.1 65.1 69.0
Aircraft fuel 85.6 82.8 265.1 222.6
Aircraft maintenance 43.3 35.8 143.7 121.3
Aircraft rent 46.0 48.3 138.5 141.6
Food and beverage service 15.2 18.6 44.6 49.9
Commissions 16.0 7.2 47.8 31.1
Other selling expenses 31.8 32.5 96.4 96.2
Depreciation and amortization 34.5 34.8 97.3 101.6
Loss (gain) on sale of assets 0.3 (0.2) 1.5 (0.8)
Landing fees and other rentals 33.8 38.9 92.8 105.1
Other 42.4 50.9 135.6 151.1
Total Operating Expenses 575.2 596.5 1,719.1 1,731.1
Operating (Loss) Income 12.8 23.6 (29.1) (34.3)
Nonoperating Income (Expense):
Interest income 7.1 5.8 20.9 16.0
Interest expense (11.8) (11.2) (34.6) (34.7)
Interest capitalized 1.6 0.7 7.5 1.4
U.S. government compensation 29.1 0.5 29.1 0.5
Other - net (0.4) (3.0) (2.3) 8.0
25.6 (7.2) 20.6 (8.8)
Income (loss) before income tax 38.4 16.4 (8.5) (43.1)
Income tax expense (benefit) 13.1 5.8 (3.0) (15.1)
Net Income (Loss) $25.3 $10.6 $(5.5) $(28.0)
Basic Earnings (Loss) Per Share $0.95 $0.40 $(0.21) $(1.05)
Diluted Earnings (Loss) Per Share $0.95 $0.40 $(0.21) $(1.05)
Shares used for computation:
Basic 26.514 26.549 26.489 26.543
Diluted 26.559 26.562 26.489 26.543
Note: Certain reclassifications have been made to the September
30, 2001 restated consolidated statements of income to conform to the
September 30, 2002 presentation.
CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)
(In Millions)
December 31, 2001 September
30
As Restated 2002
Reported
Cash and marketable securities $661 $661 $663
Total current assets 900 924 956
Property and equipment-net 1,825 1,809 1,773
Other assets 209 209 216
Total assets $2,934 $2,942 $2,945
Current liabilities $756 $762 $756
Long-term debt and capital lease
obligations 863 848 844
Other liabilities and credits 495 483 509
Shareholders' equity 820 849 836
Total liabilities and equity $2,934 $2,942 $2,945
Note: Certain reclassifications have been made to the December 31,
2001 restated condensed consolidated balance sheet to conform to the
September 30, 2002 presentation.
ALASKA AIRLINES FINANCIAL AND STATISTICAL DATA
Three Months Ended September 30
Restated %
Financial Data (in millions): 2001 2002 Change
Operating Revenues:
Passenger $441.8 $467.1 5.7%
Freight and mail 20.8 19.7 -5.3%
Other - net 22.0 25.2 14.5%
Total Operating Revenues 484.6 512.0 5.7%
Operating Expenses:
Wages and benefits 166.5 186.0 11.7%
Contracted services 19.0 19.0 0.0%
Aircraft fuel 71.7 70.7 -1.4%
Aircraft maintenance 32.5 31.6 -2.8%
Aircraft rent 33.7 32.1 -4.7%
Food and beverage service 14.5 17.8 22.8%
Commissions 16.3 12.1 -25.8%
Other selling expenses 26.3 26.1 -0.8%
Depreciation and amortization 27.4 29.5 7.7%
Loss on sale of assets 0.6 0.5 -16.7%
Landing fees and other rentals 25.9 30.2 16.6%
Other 34.0 39.5 16.2%
Total Operating Expenses 468.4 495.1 5.7%
Operating Income (Loss) 16.2 16.9 4.3%
Interest income 7.9 6.3
Interest expense (11.9) (11.3)
Interest capitalized 1.0 0.5
U.S. government compensation 18.7 0.3
Other - net (0.3) (2.3)
15.4 (6.5)
Income (Loss) Before Income Tax $31.6 $10.4 NM
Operating Statistics:
Revenue passengers (000) 3,747.12 3,977.80 6.2%
RPMs (000,000) 3,328.44 3,672.95 10.4%
ASMs (000,000) 4,687.18 5,206.59 11.1%
Passenger load factor 71.0% 70.5% (0.5)pts
Breakeven load factor 70.0% 69.8% (0.2)pts
Yield per passenger mile 13.27(cents) 12.72(cents) -4.2%
Operating revenue per ASM 10.34(cents) 9.83(cents) -4.9%
Operating expenses per ASM 10.00(cents) 9.51(cents) -4.9%
Expense per ASM excluding fuel 8.46(cents) 8.15(cents) -3.7%
Fuel cost per gallon 90.1 (cents) 81.6(cents) -9.4%
Fuel gallons (000,000) 79.6 86.6 8.8%
Average number of employees 10,222 10,465 2.4%
Aircraft utilization (blk hrs/day) 10.3 11.2 8.2%
Operating fleet at period-end 102 102 0.0%
Nine Months Ended September 30
Restated %
Financial Data (in millions): 2001 2002 Change
Operating Revenues:
Passenger $1,261.6 $1,274.9 1.1%
Freight and mail 60.5 55.6 -8.1%
Other - net 58.6 73.0 24.6%
Total Operating Revenues 1,380.7 1,403.5 1.7%
Operating Expenses:
Wages and benefits 479.0 529.1 10.5%
Contracted services 57.0 59.9 5.1%
Aircraft fuel 219.8 190.1 -13.5%
Aircraft maintenance 100.0 103.3 3.3%
Aircraft rent 104.0 95.7 -8.0%
Food and beverage service 42.4 47.9 13.0%
Commissions 50.4 40.6 -19.4%
Other selling expenses 78.9 78.8 -0.1%
Depreciation and amortization 76.5 86.8 13.5%
Loss on sale of assets 1.8 0.7 -61.1%
Landing fees and other rentals 70.7 82.3 16.4%
Other 108.4 114.0 5.2%
Total Operating Expenses 1,388.9 1,429.2 2.9%
Operating Income (Loss) (8.2) (25.7) NM
Interest income 24.2 17.4
Interest expense (34.6) (34.8)
Interest capitalized 4.8 1.0
U.S. government compensation 18.7 0.3
Other - net (1.7) 7.0
11.4 (9.1)
Income (Loss) Before Income Tax $3.2 $(34.8) NM
Operating Statistics:
Revenue passengers (000) 10,642.73 10,786.99 1.4%
RPMs (000,000) 9,513.90 10,022.45 5.3%
ASMs (000,000) 13,797.98 14,602.18 5.8%
Passenger load factor 69.0% 68.6% (0.4)pts
Breakeven load factor 71.2% 71.8% 0.6 pts
Yield per passenger mile 13.26(cents) 12.72(cents) -4.1%
Operating revenue per ASM 10.01(cents) 9.61(cents) -4.0%
Operating expenses per ASM 10.07(cents) 9.79(cents) -2.8%
Expense per ASM excluding fuel 8.47(cents) 8.49(cents) 0.2%
Fuel cost per gallon 93.1(cents) 77.9(cents)-16.3%
Fuel gallons (000,000) 236.1 243.9 3.3%
Average number of employees 10,209 10,167 -0.4%
Aircraft utilization (blk hrs/day) 10.8 10.7 -0.9%
Operating fleet at period-end 102 102 0.0%
NM = Not Meaningful
Note: Certain reclassifications have been made to the September
30, 2001 restated consolidated statements of income to conform to the
September 30, 2002 presentation.
HORIZON AIR FINANCIAL AND STATISTICAL DATA
Three Months Ended September 30
Restated %
Financial Data (in millions): 2001 2002 Change
----- ----- ------
Operating Revenues:
Passenger $98.4 $108.9 10.7%
Freight and mail 1.9 1.4 -26.3%
Other - net 7.2 5.2 -27.8%
Total Operating Revenues 107.5 115.5 7.4%
Operating Expenses:
Wages and benefits 38.4 38.7 0.8%
Contracted services 3.3 4.2 27.3%
Aircraft fuel 13.8 12.0 -13.0%
Aircraft maintenance 10.7 4.3 -59.8%
Aircraft rent 12.3 16.2 31.7%
Food and beverage service 0.8 0.8 0.0%
Commissions 3.0 1.3 -56.7%
Other selling expenses 5.5 6.4 16.4%
Depreciation and amortization 6.7 4.9 -26.9%
Gain on sale of assets (0.3) (0.7) NM
Landing fees and other rentals 7.9 8.6 8.9%
Other 8.7 12.4 42.5%
Total Operating Expenses 110.8 109.1 -1.5%
Operating Income (Loss) (3.3) 6.4 NM
Interest expense (0.7) (0.6)
Interest capitalized 0.6 0.1
U.S. government compensation 10.4 0.2
Other - net 0.0 (0.3)
10.3 (0.6)
Income (Loss) Before Income Tax $7.0 $5.8 -17.1%
Operating Statistics:
Revenue passengers (000) 1,207 1,334 10.5%
RPMs (000,000) 357 424 19.0%
ASMs (000,000) 555 657 18.4%
Passenger load factor 64.3% 64.6% 0.3 pts
Breakeven load factor 66.9% 61.6% (5.3)pts
Yield per passenger mile 27.59(cents) 25.66(cents) -7.0%
Operating revenue per ASM 19.36(cents) 17.58(cents) -9.2%
Operating expenses per ASM 19.97(cents) 16.60(cents) -16.9%
Expense per ASM excluding fuel 17.48(cents) 14.77(cents) -15.5%
Fuel cost per gallon 94.0(cents) 81.9(cents) -12.9%
Fuel gallons (000,000) 14.7 14.7 0.0%
Average number of employees 3,811 3,518 -7.7%
Aircraft utilization (blk hrs/day) 7.6 7.7 0.9%
Operating fleet at period-end 65 63 -3.1%
Nine Months Ended September 30
Restated %
Financial Data (in millions): 2001 2002 Change
Operating Revenues:
Passenger $301.0 $291.6 -3.1%
Freight and mail 6.8 3.8 -44.1%
Other - net 15.6 16.4 5.1%
Total Operating Revenues 323.4 311.8 -3.6%
Operating Expenses:
Wages and benefits 111.7 113.2 1.3%
Contracted services 10.4 12.3 18.3%
Aircraft fuel 45.2 32.5 -28.1%
Aircraft maintenance 43.6 18.1 -58.5%
Aircraft rent 34.6 45.9 32.7%
Food and beverage service 2.3 2.0 -13.0%
Commissions 9.0 5.7 -36.7%
Other selling expenses 17.6 17.4 -1.1%
Depreciation and amortization 19.8 13.9 -29.8%
Gain on sale of assets (0.3) (1.4) NM
Landing fees and other rentals 22.1 22.8 3.2%
Other 27.3 37.4 37.0%
Total Operating Expenses 343.3 319.8 -6.8%
Operating Income (Loss) (19.9) (8.0) NM
Interest expense (2.8) (1.6)
Interest capitalized 2.7 0.4
U.S. government compensation 10.4 0.2
Other - net (0.5) 1.8
9.8 0.8
Income (Loss) Before Income Tax $(10.1) $(7.2) NM
Operating Statistics:
Revenue passengers (000) 3,635 3,621 -0.4%
RPMs (000,000) 1,050 1,128 7.4%
ASMs (000,000) 1,674 1,795 7.3%
Passenger load factor 62.7% 62.8% 0.1 pts
Breakeven load factor 67.4% 65.0% (2.4)pts
Yield per passenger mile 28.66(cents) 25.86(cents) -9.8%
Operating revenue per ASM 19.32(cents) 17.37(cents) -10.1%
Operating expenses per ASM 20.51(cents) 17.81(cents) -13.2%
Expense per ASM excluding fuel 17.81(cents) 16.00(cents) -10.1%
Fuel cost per gallon 97.6(cents) 80.1(cents) -17.9%
Fuel gallons (000,000) 46.4 40.6 -12.5%
Average number of employees 3,840 3,462 -9.8%
Aircraft utilization (blk hrs/day) 7.9 7.4 -6.2%
Operating fleet at period-end 65 63 -3.1%
NM = Not Meaningful
CONTACT: Alaska Air Group
Brad Tilden, 206/433-3362
or
Lou Cancelmi, 206/433-3170
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