SEATTLE -- After two straight quarters of losses, Alaska Air Group Inc., the parent company of Alaska Airlines and Horizon Air, bounced back with a profit Thursday, buoyed by a rise in passenger traffic and ticket prices.
For the three months ended June 30, the company posted net earnings of $17.4 million, or 56 cents a share, up from a net loss of $1.7 million, or 6 cents a share, for the same period a year ago.
But the stock price slid slightly as the company cautioned that Alaska Airlines needs to land more planes on time, fix other operational problems, cut costs and settle contracts with several labor unions.
Bill Ayer, Alaska Air Group's chairman and chief executive, noted that Alaska's on-time arrivals fell to roughly 50 percent in June after nearly 500 laid-off Seattle baggage handlers were replaced with subcontractors. At the same time, the airline struggled to keep up with growing demand for air travel.
"It is no surprise that if we don't get back to delivering on our promise to customers, Alaska's reputation will be tarnished and our customers will go elsewhere. We simply cannot and will not let that happen," Ayer said in a conference call.
Alaska Air shares fell 65 cents, or 1.9 percent, to close at $33.57 Thursday on the New York Stock Exchange. The stock has traded in a 52-week range of $18.74 to $34.47.
The airline's second-quarter earnings included a $14.7 million pretax restructuring charge for severance pay and other costs stemming mostly from the subcontracting of baggage handling and other ramp services at Seattle- Tacoma International Airport.
Without that charge and other one-time items, the company said its earnings would have been $24.7 million, or 74 cents a share, beating Wall Street estimates.
On average, analysts surveyed by Thomson Financial were looking for earnings of 68 cents a share. Estimates varied widely, from 40 cents a share to 92 cents a share.
Peter Jacobs, an analyst with Ragen MacKenzie, a division of Wells Fargo, said he thinks the company is taking solid steps toward positioning itself for growth, though the tough times don't appear to be over.
"They've made some good progress, and that progress has not been without pains," Jacobs said, mentioning the layoffs of baggage handlers and a legal fight that Alaska Airlines' pilots union is waging against an arbitrated contract that calls for pay cuts.
"It's been a very painful process up until now, and there's still some more work to be done," Jacobs added.
Ayer said that no more "significant outsourcing" is planned and that the company is confident it will hammer out contracts with the unions that are still negotiating.
Rising fuel prices remain a big concern, but the company has softened the blow by buying fuel hedges, essentially insurance against fuel price spikes.
It also expects that 35 Boeing 737 planes Alaska Airlines recently bought will save money in the long term because they're more fuel-efficient and cost less to maintain than older models.
Total operating revenue for Alaska Air Group, including passenger, freight and mail and other income, was $756.5 million, up from $701.3 million for the second quarter of 2004.
Alaska Airlines, the nation's ninth-largest carrier, reported pretax earnings of $22.1 million for the quarter, up from a loss of $2.8 million in the same period last year. Revenue were $616.3 million, compared with $577.6 million a year ago.
Horizon Air, Alaska's sister carrier, posted a pretax profit of $11.1 million, up from $4.7 million a year ago. Revenue was $140.6 million, up from $124.7 million in the second quarter of 2004.
For the first six months of the year, Alaska Air Group posted a net loss of $63.1 million, compared with a loss of $44.4 million for the first six months of 2004. Six-month revenues increased slightly to $1.4 billion, compared with $1.3 billion last year. |
