Company reports fourth quarter profit excluding $92 million of special items
Fourth quarter financial highlights:
* Net income excluding special items of $16.4 million, or $0.45 per diluted share, compared to a $17.9 million net loss, or $0.46 per share, in the fourth quarter of 2007. This compares to a First Call mean estimate of a $0.04 loss per share.
* A net loss under Generally Accepted Accounting Principles (GAAP) of $75.2 million, or $2.08 per share, compared to income of $7.4 million, or $0.19 per diluted share, in 2007.
* Nearly $1.1 billion in unrestricted cash and marketable securities as of Dec. 31, 2008.
* Debt-to-capital ratio increases to 81 percent: 19 percent at Dec. 31, 2008, from 70 percent: 30 percent at Dec. 31, 2007, due to a significant decline in the funded status of the company's defined-benefit pension plans, increases in outstanding long-term debt and the full year GAAP loss.
Alaska Air Group, Inc. (NYSE:ALK) today reported a fourth quarter 2008 net loss of $75.2 million, compared to net income of $7.4 million in the fourth quarter of 2007. Excluding special items, the company reported a net profit of $16.4 million, or $0.45 per diluted share, compared to a net loss of $17.9 million, or $0.46 per share, in the fourth quarter of 2007.
Special items for the fourth quarter include the following:
• Restructuring charges of $9.2 million ($5.8 million after tax, or $0.16 per share),
• CRJ-700 fleet transition costs of $6.7 million ($4.2 million after tax, or $0.12 per share),
• Mark-to-market fuel hedge adjustments of $80.2 million ($50.3 million after tax, or $1.39 per share), and
• Realized losses on the early termination of fuel hedge contracts originally scheduled to settle in 2009 and 2010 of $50 million ($31.3 million after tax, or $0.86 per share).
The company reported a full year 2008 net loss of $135.9 million, compared to net income of $124.3 million in 2007. Excluding the full year impact of the special items noted above, the $42.3 million benefit ($26.5 million after tax, or $0.73 per share) from changes in the company's Mileage Plan program in the third quarter and MD-80 fleet transition costs, the company reported a 2008 net profit of $4.4 million, or $0.12 per diluted share, compared to $91.6 million, or $2.26 per diluted share, in 2007.
Financial and operational highlights for 2008 include:
• A $156.6 million, or 4 percent, increase in total operating revenues on a system-wide capacity reduction of 1.2 percent,
• Revenues from the cargo operation that were greater than $100 million for the first time,
• Continued non-fuel cost control at both Alaska and Horizon with unit costs excluding fuel and special items relatively flat at both companies, and
• Year-over-year improvements in on-time performance and schedule completion at both Alaska and Horizon.
"In a year of unprecedented volatility that included soaring fuel prices and an economic meltdown, we were pleased to eke out a small profit for 2008, excluding special items, and be one of only a few major airlines to do so," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "Our concerted efforts to control costs, improve our operation and tailor our schedule to better match customer demand have prepared us to face whatever hurdles the current year brings. I want to thank our people for taking excellent care of customers and stepping up to the challenge to see us through this period of great uncertainty."
Alaska Airlines' mainline passenger traffic in the fourth quarter declined 4.4 percent on a capacity decline of 7.1 percent, compared to the fourth quarter of 2007. Load factor increased 2.3 percentage points to 77.0 percent. Alaska's mainline passenger revenue per available seat mile (ASM) increased 5.9 percent, and its operating cost per ASM, excluding fuel and the special items mentioned above, increased 0.6 percent. Alaska's total pretax loss for the quarter was $93.4 million, compared to pretax income of $15.2 million in 2007. Excluding special items, Alaska's pretax income was $23.8 million for the quarter, compared to a pretax loss of $18.8 million in the fourth quarter of 2007.
Horizon Air's passenger traffic in the fourth quarter declined 22.4 percent on a 21.1 percent capacity decrease. Load factor decreased by 1.2 percentage points to 71.4 percent. Horizon's passenger revenue per ASM increased 13.6 percent, and its operating cost per ASM, excluding fuel and the special items mentioned above, increased 2.9 percent. Horizon's total pretax loss for the quarter was $25.7 million, compared to a pretax loss of $4.8 million in 2007. Excluding special items, Horizon's pretax income was $3.2 million for the quarter, compared to a pretax loss of $11.2 million in the fourth quarter of 2007.
The company's debt-to-capital ratio was 81 percent: 19 percent as of Dec. 31, 2008, compared to 70 percent: 30 percent at Dec. 31, 2007. The decline is attributable to the nearly $500 million increase in long-term debt and the GAAP loss of $135.9 million in 2008. The largest component of the change, however, was the significant increase in the company's unfunded defined benefit pension obligation, which is recorded through equity net of the tax effect. The liability increased approximately $300 million from Dec. 31, 2007, primarily as a result of the decline in market value of the plan's assets. On a projected benefit obligation basis, the company's liability is 59.4-percent funded at Dec. 31, 2008, compared to 86.2 percent a year earlier.
