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2004 financial results announced
Losses continue while traffic and load factors climb
January 28, 2005 A steep fourth quarter loss accelerated by several big one-time chargeshelped push Alaska Air Group to a net loss of $15.3 million in 2004.The loss would have been even greater were it not for sizable fuelhedging gains during the year.
For the fourth quarter, Air Group reported a net loss of $44.9 million,compared to a net loss of $16.1 million during the same period in 2003.
For all of 2004, Air Group reported a net loss of $15.3 million, compared to net income of $13.5 million in 2003.
Fourthquarter results in 2004 include a restructuring charge of $25.9 millionand additional impairment charges of $600,000 related to Horizon’sretired F-28 fleet. This quarter’s results also include$23.1 million in mark-to-market hedging losses reflecting a decrease inthe fair value of the company’s fuel hedge portfolio during thequarter.
Without these items, the net loss would have been $14.3 million during the fourth quarter of 2004.
Excludingthe full-year impact of the items discussed above, as well as theB737-200 impairment charge and the navigation fee recovery recordedearlier in the year, and government compensation recorded in 2003, the2004 full year net income would have been $5.2 million, compared to a net loss of $30.8 million in 2003.
“Theimprovement in our operating results for the year shows that we arecontinuing to make headway with our restructuring. Our move in early2004 to simplify fares, coupled with our employees’ ongoing focus onthe customer experience, contributed to a jump in our passenger trafficand loads,” said Bill Ayer, CEO. “However, we would haveclearly been in the red in 2004, after adjusting for the unusual items,if not for fuel hedging gains.
“As we head into 2005, we must continue to pursue cost savingsinitiatives that will help us become consistently profitable, andweather the onslaught of low-cost competition, restructured networkairlines and very high fuel prices,” Ayer said.
At Alaska Airlines, “after adjusting for the unusual items, we hadpretax income of $2.1 million for all of 2004, compared to a pretaxloss of $41 million for the prior year,” says Brad Tilden, executive vice president of finance and chief financial officer. “
Alaska Airlines’ passenger traffic in the fourth quarter increased 10.2percent on a capacity increase of 5 percent. The airline’s load factorincreased 3.4 percentage points to 72.9 percent compared to the sameperiod in 2003. Operating revenue per available seat mile (ASM)increased 0.4 percent, while operating cost per ASM excluding fuel andrestructuring charges decreased 8.6 percent. Alaska’s pretax loss forthe quarter was $68.9 million, compared to a pretax loss of $27.3million in 2003. Excluding the unusual items referenced above, Alaska’spretax loss was $22.7 million for the quarter.
Horizon Air reported pretax income of $13.7 million in 2004, compared to a profit of $6.7 million in 2003.
HorizonAir’s passenger traffic in the fourth quarter increased 36.8 percent ona 28.1 percent capacity increase. Horizon’s load factor increased by4.4 percentage points to 71.7 percent compared to the same period in2003. Horizon’s operating revenue per ASM decreased 17.2 percent, whileits operating cost per ASM excluding fuel and the impairment chargedecreased 18.1 percent. The decrease in Horizon’s revenue per ASM andcost per ASM excluding fuel is largely due to the addition of Horizon’scontract flying for Frontier Airlines. This flying represented 23.1percent of Horizon’s capacity during the fourth quarter and 9.9 percentof its passenger revenues. Horizon’s pretax loss for the quarter was$1.6 million, compared to a pretax income of $5.4 million in 2003.Excluding the unusual items referenced above, Horizon’s pretax incomewas $1.8 million for the quarter.
Alaska Air Group had cash andshort-term investments at the end of 2004 of approximately $874 millioncompared to $812 million a year earlier. The company’s debt-to-capitalratio, assuming aircraft operating leases are capitalized at seventimes annualized rent, was 78 percent at year end, compared to 77percent as of Dec. 31, 2003.
