Alaska Air Group Reports Third Quarter Results

Oct. 22, 2009

SEATTLE, Oct. 22 /PRNewswire-FirstCall/ -- Alaska Air Group, Inc. (NYSE: ALK) today reported third quarter 2009 net income of $87.6 million, or $2.46 per diluted share, compared to a net loss of $86.5 million, or $2.40 per diluted share, in the third quarter of 2008. Excluding mark-to-market fuel hedge gains of $7.3 million ($4.6 million after tax or $0.13 per diluted share), the company reported net income of $83.0 million, or $2.33 per diluted share, compared to net income of $39.9 million, or $1.10 per diluted share, excluding mark-to-market fuel hedge losses and other special items in the third quarter of 2008.

"Our work to reduce capacity to better match demand, redeploy aircraft into promising new markets, and achieve record operational reliability contributed to our best quarterly financial performance in many years," said Bill Ayer, Alaska Air Group's chairman and chief executive officer. "My thanks to our people for taking excellent care of customers and for their relentless efforts to improve our business."

The following table reconciles the company's adjusted net income and earnings per diluted share (EPS) during the third quarters of 2009 and 2008 to the most directly related amounts as reported in accordance with GAAP (in millions except per-share amounts):

Three months ended Sept. 30, ----------------------------------------- 2009 2008 ---- ---- Diluted Diluted Dollars EPS Dollars EPS --------------------------- -------- ------- -------- ------- Net income and diluted EPS, excluding special items $83.0 $2.33 $39.9 $1.10 Change in Mileage Plan terms, net of tax --- --- 26.5 0.73 Restructuring charges, net of tax --- --- (2.3) (0.06) Fleet transition costs - MD-80, net of tax --- --- (13.5) (0.37) Fleet transition costs - CRJ-700, net of tax --- --- (0.4) (0.01) Adjustments to reflect the timing of gain recognition resulting from mark-to-market fuel-hedge accounting, net of tax 4.6 0.13 (136.7) (3.79) --- ---- ------- ----- Reported GAAP amounts $87.6 $2.46 $(86.5) $(2.40) ===== ===== ======= ======

Financial and statistical data for Alaska Airlines and Horizon Air, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables. A glossary of financial terms can be found at the end of this release.

A conference call regarding the third quarter 2009 results will be simulcast via the Internet at 8:30 a.m. Pacific time on Oct. 22, 2009. It can be accessed through the company's Web site at alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at alaskaair.com/investors.

References in this news release to "Air Group," "company," "we," "us" and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred to as "Alaska" and "Horizon," respectively, and together as our "airlines."

This news release contains forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the company's Annual Report on Form 10-K for the year ended Dec. 31, 2008. Some of these risks include current economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our significant indebtedness, inability to meet cost reduction goals, terrorist attacks, seasonal fluctuations in our financial results, an aircraft accident, changes in laws and regulations, and government fees and taxes. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.

Alaska Airlines and Horizon Air, subsidiaries of Alaska Air Group (NYSE: ALK), together serve more than 90 cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada and Mexico. Alaska Airlines ranked "Highest in Customer Satisfaction Among Traditional Network Carriers" in the J.D. Power and Associates 2008 and 2009 North America Airline Satisfaction Studies(SM). For reservations, visit alaskaair.com. For more news and information, visit the Alaska Airlines/Horizon Air Newsroom at alaskaair.com/newsroom.

Alaska Air Group, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Nine Months Ended Ended September 30, September 30, -------------- ---------------- (in millions, except per share amounts) 2009 2008 2009 2008 ---- ---- ---- ---- Operating Revenues: Passenger $884.8 $952.8 $2,326.1 $2,592.0 Freight and mail 27.7 30.5 72.3 80.4 Other - net 54.9 39.6 155.3 120.8 Change in Mileage Plan terms - 42.3 - 42.3 --- ---- --- ---- Total Operating Revenues 967.4 1,065.2 2,553.7 2,835.5 ----- ------- ------- ------- Operating Expenses: Wages and benefits 246.2 232.1 739.3 711.2 Variable incentive pay 24.0 6.3 52.2 15.0 Aircraft fuel, including hedging gains and losses 199.5 575.6 485.6 1,039.6 Aircraft maintenance 49.7 47.4 169.0 159.6 Aircraft rent 38.3 40.2 115.4 126.1 Landing fees and other rentals 57.3 56.8 165.9 169.7 Contracted services 37.4 40.2 112.6 128.3 Selling expenses 37.0 41.7 97.3 120.3 Depreciation and amortization 55.6 52.1 162.3 152.9 Food and beverage service 12.7 13.5 36.7 39.2 Other 51.1 52.7 158.2 171.4 New pilot contract transition costs - - 35.8 - Restructuring charges - 3.7 - 3.7 Fleet transition costs - MD-80 - 21.5 - 47.5 Fleet transition costs - CRJ-700 - 0.7 - 6.8 Fleet transition costs - Q200 (1.2) 0.7 8.8 9.7 ---- --- --- --- Total Operating Expenses 807.6 1,185.2 2,339.1 2,901.0 ----- ------- ------- ------- Operating Income (Loss) 159.8 (120.0) 214.6 (65.5) ----- ------ ----- ----- Nonoperating Income (Expense): Interest income 8.3 10.7 24.4 31.5 Interest expense (25.9) (25.9) (77.8) (74.3) Interest capitalized 1.4 5.9 6.0 18.5 Other - net (0.8) (3.7) (6.3) (3.4) ---- ---- ---- ---- (17.0) (13.0) (53.7) (27.7) ----- ----- ----- ----- Income (loss) before income tax 142.8 (133.0) 160.9 (93.2) Income tax expense (benefit) 55.2 (46.5) 63.4 (32.5) ---- ----- ---- ----- Net Income (Loss) $87.6 $(86.5) $97.5 $(60.7) ===== ====== ===== ====== Basic Earnings (Loss) Per Share: $2.48 $(2.40) $2.71 $(1.67) Diluted Earnings (Loss) Per Share: $2.46 $(2.40) $2.69 $(1.67) Shares Used for Computation: Basic 35.275 36.069 35.981 36.383 Diluted 35.681 36.069 36.292 36.383 Alaska Air Group, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) ------------- ------------ September 30, December 31, (in millions) 2009 2008 ------------- ------------- ------------ Cash and marketable securities $1,230 $1,077 ====== ====== Total current assets 1,686 1,509 Property and equipment-net 3,136 3,168 Other assets 184 159 --- --- Total assets $5,006 $4,836 ====== ====== Current liabilities $1,282 $1,361 Long-term debt 1,658 1,596 Other liabilities and credits 1,292 1,217 Shareholders' equity 774 662 --- --- Total liabilities and shareholders' equity $5,006 $4,836 ====== ====== Debt to Capitalization, adjusted for operating leases 78%:22% 81%:19% ====== ====== Number of common shares outstanding 35.251 36.275 ====== ====== Air Group Net Income (Loss) and EPS Reconciliation: --------------------------------------------------- The following table reconciles Alaska Air Group, Inc.'s net income (loss) and amounts per share during 2009 and 2008 excluding certain noted items to the most directly related amounts as reported in accordance with GAAP (in millions except per share amounts): Three Months Ended September 30, -------------------------------- 2009 2008 ------ ------ Dollars Diluted EPS Dollars Diluted EPS ------- ----------- ------- ----------- Net income and diluted EPS, excluding the items noted below $83.0 $2.33 $39.9 $1.10 Change in Mileage Plan terms, net of tax - - 26.5 0.73 Restructuring charges, net of tax - - (2.3) (0.06) Fleet transition costs - MD-80, net of tax - - (13.5) (0.37) Fleet transition costs - CRJ-700, net of tax - - (0.4) (0.01) Adjustments to reflect the timing of gain or loss recognition resulting from mark-to-market fuel hedge accounting, net of tax 4.6 0.13 (136.7) (3.79) --- ---- ------ ----- Reported GAAP amounts $87.6 $2.46 $(86.5) $(2.40) ===== ===== ====== ====== Nine Months Ended September 30, -------------------------------- 2009 2008 ------ ------ Dollars Diluted EPS Dollars Diluted EPS ------- ----------- ------- ----------- Net income (loss) and diluted EPS, excluding the items noted below $84.1 $2.32 $(12.0) $(0.33) Change in Mileage Plan terms, net of tax - - 26.5 0.73 New pilot contract transition costs, net of tax (22.3) (0.61) - - Restructuring charges, net of tax - - (2.3) (0.06) Fleet transition costs - MD-80, net of tax - - (29.8) (0.82) Fleet transition costs - CRJ-700, net of tax - - (4.2) (0.12) Adjustments to reflect the timing of gain or loss recognition resulting from mark-to-market fuel hedge accounting, net of tax 35.7 0.98 (38.9) (1.07) ---- ---- ----- ----- Reported GAAP amounts $97.5 $2.69 $(60.7) $(1.67) ===== ===== ====== ====== Alaska Airlines Financial and Statistical Data Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ------------------------ Financial Data % % (in millions): 2009 2008 Change 2009 2008 Change ---- ---- ------- ---- ---- ------- Operating Revenues: Passenger $702.0 $751.2 (6.5) $1,844.3 $2,041.2 (9.6) Freight and mail 26.5 29.2 (9.2) 69.0 77.1 (10.5) Other - net 48.4 33.5 44.5 136.5 101.2 34.9 Change in Mileage Plan terms - 42.3 NM - 42.3 NM --- ---- --- ---- Total mainline operating revenues 776.9 856.2 (9.3) 2,049.8 2,261.8 (9.4) Passenger - purchased capacity 81.9 85.7 (4.4) 211.4 233.9 (9.6) ---- ---- ----- ----- Total Operating Revenues 858.8 941.9 (8.8) 2,261.2 2,495.7 (9.4) ----- ----- ------- ------- Operating Expenses: Wages and benefits 199.1 182.5 9.1 594.9 558.9 6.4 Variable incentive pay 20.8 4.9 324.5 44.0 10.8 307.4 Aircraft fuel, including hedging gains and losses 166.6 479.1 (65.2) 405.9 864.0 (53.0) Aircraft maintenance 36.5 32.6 12.0 129.4 112.1 15.4 Aircraft rent 27.2 26.3 3.4 81.8 82.4 (0.7) Landing fees and other rentals 43.0 42.3 1.7 124.4 126.9 (2.0) Contracted services 29.7 31.9 (6.9) 88.6 100.5 (11.8) Selling expenses 29.4 33.1 (11.2) 76.8 95.6 (19.7) Depreciation and amortization 45.1 42.8 5.4 132.6 123.2 7.6 Food and beverage service 12.0 12.8 (6.3) 34.9 37.1 (5.9) Other 38.0 41.0 (7.3) 119.3 130.2 (8.4) New pilot contract transition costs - - NM 35.8 - NM Restructuring charges - 3.7 NM - 3.7 NM Fleet transition costs - MD-80 - 21.5 NM - 47.5 NM --- ---- --- ---- Total mainline operating expenses 647.4 954.5 (32.2) 1,868.4 2,292.9 (18.5) ----- ----- ------- ------- Purchased capacity costs 74.7 85.6 (12.7) 206.3 246.8 (16.4) ---- ---- ----- ----- Total Operating Expenses 722.1 1,040.1 (30.6) 2,074.7 2,539.7 (18.3) ----- ------- ------- ------- Operating Income (Loss) 136.7 (98.2) 186.5 (44.0) ----- ----- ----- ----- Interest income 9.6 12.8 29.2 38.2 Interest expense (22.4) (23.5) (67.5) (67.5) Interest capitalized 1.4 4.8 5.7 16.1 Other - net (0.5) (3.3) (5.3) (2.7) ---- ---- ---- ---- (11.9) (9.2) (37.9) (15.9) ----- ---- ----- ----- Income (Loss) Before Income Tax $124.8 $(107.4) $148.6 $(59.9) ====== ======= ====== ====== Mainline Operating Statistics: Revenue passengers (000) 4,240 4,532 (6.4) 11,796 13,037 (9.5) RPMs (000,000) "traffic" 5,020 5,012 0.2 13,812 14,410 (4.1) ASMs (000,000) "capacity" 6,097 6,306 (3.3) 17,469 18,628 (6.2) Passenger load factor 82.3% 79.5% 2.8pts 79.1% 77.4% 1.7pts Yield per passenger mile (in cents) 13.98 14.99 (6.7) 13.35 14.17 (5.8) Operating revenue per ASM "RASM" (in cents) 12.74 13.58 (6.2) 11.73 12.14 (3.4) Change in Mileage Plan terms per ASM (in cents) 0.00 0.67 NM 0.00 0.23 NM ---- ---- ---- ---- RASM excluding change in Mileage Plan terms (in cents) 12.74 12.91 (1.3) 11.73 11.91 (1.5) Passenger revenue per ASM (in cents) 11.51 11.91 (3.4) 10.56 10.96 (3.6) Operating expense per ASM (in cents) 10.62 15.14 (29.9) 10.70 12.31 (13.1) Operating expense per ASM excluding fuel, restructuring charges and fleet transition costs (in cents) (a) 7.89 7.14 10.5 8.17 7.40 10.4 GAAP fuel cost per gallon $2.07 $5.57 (62.8) $1.77 $3.34 (47.0) Economic fuel cost per gallon (b) $2.15 $3.47 (38.0) $1.98 $3.14 (36.9) Fuel gallons (000,000) 80.1 86.0 (6.9) 229.9 258.3 (11.0) Average number of full-time equivalent employees 9,002 9,594 (6.2) 8,987 9,785 (8.2) Aircraft utilization (blk hrs/day) 9.9 10.8 (8.3) 9.9 10.8 (8.3) Average aircraft stage length (miles) 1,044 981 6.4 1,027 975 5.3 Operating fleet at period-end 116 110 6 a/c 116 110 6 a/c Regional Operating Statistics: RPMs (000,000) 298 304 (2.0) 777 873 (11.0) ASMs (000,000) 383 391 (2.0) 1,058 1,153 (8.2) Passenger load factor 77.8% 77.7% 0.1pts 73.4% 75.7% (2.3)pts Yield per passenger mile (in cents) 27.48 28.19 (2.5) 27.21 26.79 1.6 Operating revenue per ASM (in cents) 21.38 21.92 (2.5) 19.98 20.29 (1.5) Operating expenses per ASM (in cents) 19.50 21.89 (10.9) 19.50 21.41 (8.9) NM = Not Meaningful (a) See page 9 for a reconciliation of these non-GAAP measures and a discussion about why these measures may be important to investors. (b) See page 11 for a reconciliation of economic fuel cost. Horizon Air Financial and Statistical Data Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ------------------------- Financial Data (in millions): 2009 2008 % Change 2009 2008 % Change ---- ---- -------- ---- ---- --------- Operating Revenues: Passenger - brand flying $105.4 $120.3 (12.4) $283.7 $330.7 (14.2) Passenger - Alaska capacity purchase arrangement 69.9 81.1 (13.8) 191.2 231.2 (17.3) ---- ---- ----- ----- Total passenger revenue 175.3 201.4 (13.0) 474.9 561.9 (15.5) Freight and mail 0.7 0.8 (12.5) 2.0 2.1 (4.8) Other - net 2.2 1.9 15.8 6.0 6.2 (3.2) --- --- --- --- Total Operating Revenues 178.2 204.1 (12.7) 482.9 570.2 (15.3) ----- ----- ----- ----- Operating Expenses: Wages and benefits 44.4 47.9 (7.3) 137.0 147.2 (6.9) Variable incentive pay 3.2 1.4 128.6 8.2 4.2 95.2 Aircraft fuel, including hedging gains and losses 32.9 96.5 (65.9) 79.7 175.6 (54.6) Aircraft maintenance 13.2 14.8 (10.8) 39.6 47.5 (16.6) Aircraft rent 11.1 13.9 (20.1) 33.6 43.7 (23.1) Landing fees and other rentals 14.6 14.7 (0.7) 42.4 43.6 (2.8) Contracted services 8.4 7.1 18.3 23.8 22.0 8.2 Selling expenses 7.6 8.6 (11.6) 20.5 24.7 (17.0) Depreciation and amortization 10.2 9.0 13.3 28.8 28.8 - Food and beverage service 0.7 0.7 - 1.8 2.1 (14.3) Other 9.4 9.7 (3.1) 29.0 33.7 (13.9) Fleet transition costs - CRJ-700 - 0.7 NM - 6.8 NM Fleet transition costs - Q200 (1.2) 0.7 NM 8.8 9.7 NM ---- --- --- --- Total Operating Expenses 154.5 225.7 (31.5) 453.2 589.6 (23.1) ----- ----- ----- ----- Operating Income (Loss) 23.7 (21.6) 29.7 (19.4) ---- ----- ---- ----- Interest income 0.5 1.1 1.5 3.8 Interest expense (5.1) (5.5) (16.2) (16.9) Interest capitalized - 1.0 0.3 2.3 Other - net - (0.1) (0.2) 0.1 --- ---- ---- --- (4.6) (3.5) (14.6) (10.7) ---- ---- ----- ----- Income (Loss) Before Income Tax $19.1 $(25.1) $15.1 $(30.1) ===== ====== ===== ====== Combined Operating Statistics: (a) Revenue passengers (000) 1,815 1,989 (8.7) 5,055 5,754 (12.1) RPMs (000,000) "traffic" 666 721 (7.6) 1,799 2,074 (13.3) ASMs (000,000) "capacity" 855 945 (9.5) 2,470 2,831 (12.8) Passenger load factor 77.9% 76.3% 1.6pts 72.8% 73.3% (0.5)pts Yield per passenger mile (in cents) 26.32 27.93 (5.8) 26.40 27.09 (2.5) Operating revenue per ASM (in cents) 20.84 21.60 (3.5) 19.55 20.14 (2.9) Passenger revenue per ASM (in cents) 20.50 21.31 (3.8) 19.23 19.85 (3.1) Operating expenses per ASM (in cents) 18.07 23.88 (24.3) 18.35 20.83 (11.9) Operating expense per ASM excluding fuel and CRJ-700 fleet transition costs (b) (in cents) 14.22 13.60 4.6 15.12 14.38 5.1 GAAP fuel cost per gallon $2.11 $5.61 (62.4) $1.76 $3.37 (47.8) Economic fuel cost per gallon (c) $2.19 $3.45 (36.5) $1.98 $3.18 (37.7) Fuel gallons (000,000) 15.6 17.2 (9.3) 45.1 52.1 (13.4) Average number of full-time equivalent employees 3,269 3,687 (11.3) 3,320 3,777 (12.1) Aircraft utilization (blk hrs/day) 8.4 8.5 (1.2) 8.3 8.4 (1.2) Average aircraft stage length (miles) 334 325 2.8 326 324 0.6 Operating fleet at period-end 55 63 (8 a/c) 55 63 (8 a/c) NM = Not Meaningful (a) Represents combined information for all Horizon flights, including those operated under a Capacity Purchase Agreement (CPA) with Alaska. See page 10 for additional line of business information. (b) See page 10 for a reconciliation of these non-GAAP measures and a discussion about why these measures may be important to investors. (c) See page 11 for a reconciliation of economic fuel cost. Note A: Pursuant to Regulation G, we are providing disclosure of the reconciliation of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. We believe that consideration of this measure of unit costs excluding fuel, purchased capacity costs, and other noted items may be important to investors for the following reasons: - By eliminating fuel expense and certain special items from our unit cost metrics, we believe that we have better visibility into the results of our non-fuel cost-reduction initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can result in a significant improvement in operating results. In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management (and thus investors) to understand the impact of (and trends in) company-specific cost drivers such as labor rates and productivity, airport costs, maintenance costs, etc., which are more controllable by management. - Cost per ASM excluding fuel and certain special items is one of the most important measures used by managements of both Alaska and Horizon and by the Air Group Board of Directors in assessing quarterly and annual cost performance. - Cost per ASM excluding fuel (and other items as specified in our plan documents) is an important metric for the employee incentive plan that covers company management and certain other employee groups. - Cost per ASM excluding fuel and certain special items is a measure commonly used by industry analysts, and we believe it is the basis by which they compare our airlines to others in the industry. The measure is also the subject of frequent questions from investors. - Disclosure of the individual impact of certain noted items provides investors the ability to measure and monitor performance both with and without these special items. We believe that disclosing the impact of certain items, such as new pilot contract transition costs and fleet transition costs, is important because it provides information on significant items that are not necessarily indicative of future performance. Industry analysts and investors consistently measure our performance without these items for better comparability between periods and among other airlines. - Although we disclose our "mainline" passenger unit revenues for Alaska, we do not (nor are we able to) evaluate mainline unit revenues excluding the impact that changes in fuel costs have had on ticket prices. Fuel expense represents a large percentage of our total mainline operating expenses. Fluctuations in fuel prices often drive changes in unit revenues in the mid-to-long term. Although we believe it is useful to evaluate non-fuel unit costs for the reasons noted above, we would caution readers of these financial statements not to place undue reliance on unit costs excluding fuel as a measure or predictor of future profitability because of the significant impact of fuel costs on our business. The following tables reconcile our non-GAAP financial measures to the most directly comparable GAAP financial measures for both Alaska Airlines, Inc. and Horizon Air Industries, Inc.: Alaska Airlines, Inc. --------------------- (in millions, except for per ASM unit information) Three Months Ended Nine Months Ended September 30, September 30, ------------- ----------------- Mainline unit cost reconciliations: 2009 2008 2009 2008 ------------------ ---- ---- ---- ---- Mainline operating expenses $647.4 $954.5 $1,868.4 $2,292.9 Mainline ASMs 6,097 6,306 17,469 18,628 ----- ----- ------ ------ Mainline operating expenses per ASM (in cents) 10.62 15.14 10.70 12.31 ===== ===== ===== ===== Mainline operating expenses $647.4 $954.5 $1,868.4 $2,292.9 Less: aircraft fuel (166.6) (479.1) (405.9) (864.0) Less: new pilot contract transition costs - - (35.8) - Less: restructuring charges - (3.7) - (3.7) Less: fleet transition costs - MD-80 - (21.5) - (47.5) --- ----- --- ----- Mainline operating expenses excluding fuel, restructuring charges and fleet transition costs $480.8 $450.2 $1,426.7 $1,377.7 Mainline ASMs 6,097 6,306 17,469 18,628 ----- ----- ------ ------ Mainline operating expenses per ASM excluding fuel, restructuring charges and fleet transition costs (in cents) 7.89 7.14 8.17 7.40 ==== ==== ==== ==== Three Months Ended Nine Months Ended September 30, September 30, ------------- ----------------- Reconciliation to GAAP income (loss) before taxes: 2009 2008 2009 2008 ------------------- ---- ---- ---- ---- Income before taxes, excluding items noted below $118.7 $56.6 $137.0 $1.4 Change in Mileage Plan terms - 42.3 - 42.3 New pilot contract transition costs - - (35.8) - Restructuring charges - (3.7) - (3.7) Fleet transition costs - MD-80 - (21.5) - (47.5) Adjustments to reflect timing of gain or loss recognition resulting from mark-to-market accounting on fuel hedges 6.1 (181.1) 47.4 (52.4) --- ------ ---- ----- GAAP income (loss) before taxes as reported $124.8 $(107.4) $148.6 $(59.9) ====== ======= ====== ====== Horizon Air Industries, Inc. ------------------------------ (in millions, except for per ASM unit information) Three Months Nine Months Ended Ended September 30, September 30, ------------- ------------- Unit cost reconciliations: 2009 2008 2009 2008 ----------------- ---- ---- ---- ---- Operating expenses $154.5 $225.7 $453.2 $589.6 ASMs 855 945 2,470 2,831 --- --- ----- ----- Operating expenses per ASM (in cents) 18.07 23.88 18.35 20.83 ===== ===== ===== ===== Operating expenses $154.5 $225.7 $453.2 $589.6 Less: aircraft fuel (32.9) (96.5) (79.7) (175.6) Less: fleet transition costs - CRJ-700 - (0.7) - (6.8) --- ---- --- ---- Operating expenses excluding fuel and CRJ-700 fleet transition costs $121.6 $128.5 $373.5 $407.2 ASMs 855 945 2,470 2,831 --- --- ----- ----- Operating expenses per ASM excluding fuel and CRJ-700 fleet transition costs (in cents) 14.22 13.60 15.12 14.38 ===== ===== ===== ===== Unit cost reconciliations- excluding all fleet transition costs: -------------------- Operating expenses $154.5 $225.7 $453.2 $589.6 Less: aircraft fuel (32.9) (96.5) (79.7) (175.6) Less: fleet transition costs - CRJ-700 - (0.7) - (6.8) Less: fleet transition costs - Q200 1.2 (0.7) (8.8) (9.7) --- ---- ---- ---- Operating expenses excluding fuel and all fleet transition costs $122.8 $127.8 $364.7 $397.5 ASMs 855 945 2,470 2,831 --- --- ----- ----- Operating expenses per ASM excluding fuel and all fleet transition costs (in cents) 14.36 13.52 14.77 14.04 ===== ===== ===== ===== Reconciliation to GAAP income (loss) before taxes: ---------------------- Income (loss) before taxes, excluding mark- to-market fuel hedging gains (losses) and CRJ-700 fleet transition costs $17.9 $12.7 $5.4 $(13.6) Fleet transition costs - CRJ-700 - (0.7) - (6.8) Adjustments to reflect timing of gain or loss recognition resulting from mark-to-market accounting on fuel hedges 1.2 (37.1) 9.7 (9.7) --- ----- --- ---- GAAP income (loss) before taxes as reported $19.1 $(25.1) $15.1 $(30.1) ===== ====== ===== ====== Line of Business Information: ----------------------------- Horizon brand flying includes those routes in the Horizon system not covered by the Alaska Capacity Purchase Agreement (CPA). Horizon bears the revenue risk in those markets and, as a result, traffic, yield and load factor impact revenue recorded by Horizon. In the CPA arrangement, Horizon is insulated from market revenue factors and is guaranteed contractual revenue amounts based on operational capacity. As a result, yield and load factor information is not presented. Three Months Ended September 30, 2009 ------------------------------------- Capacity and Mix Load Factor ---------------- --------------- 2009 2008 Current Point Actual Actual Change % Change (000,000) (000,000) Y-O-Y Total Actual Y-O-Y --------- --------- ------- -------- ------ ------- Brand Flying 487 568 (14.3%) 57% 77.9% 2.9 Alaska CPA 368 377 (2.4%) 43% NM NM --- --- ---- -- ------ ------ System Total 855 945 (9.5%) 100% 77.9% 1.6 === === ==== === ==== === Yield RASM ------ ---- Change Change Actual Y-O-Y Actual Y-O-Y ------ ------ ------ ------ Brand Flying (in cents) 27.81 (1.5%) 22.26 2.9% Alaska CPA (in cents) NM NM 18.97 (11.8%) ------ --- ----- ----- System Total (in cents) 26.32 (5.8%) 20.84 (3.5%) ===== ==== ===== ==== NM= Not Meaningful Nine Months Ended September 30, 2009 ------------------------------------ Capacity and Mix Load Factor ---------------- --------------- 2009 2008 Current Point Actual Actual Change % Change (000,000) (000,000) Y-O-Y Total Actual Y-O-Y --------- --------- ------- -------- ------ ------- Brand Flying 1,463 1,736 (15.7%) 59% 72.1% 1.0 Alaska CPA 1,007 1,095 (8.0%) 41% NM NM ----- ----- ---- -- ------ ------ System Total 2,470 2,831 (12.8%) 100% 72.8% (0.5) ===== ===== ===== === ==== ==== Yield RASM ------ ---- Change Change Actual Y-O-Y Actual Y-O-Y ------ ------ ------ ------ Brand Flying (in cents) 26.90 0.4% 19.94 2.1% Alaska CPA (in cents) NM NM 18.98 (10.1%) ------ -- ----- ----- System Total (in cents) 26.40 (2.5%) 19.55 (2.9%) ===== ==== ===== ==== NM= Not Meaningful Alaska Airlines Fuel Reconciliation ----------------------------------- (in millions, except for per gallon amounts) Three Months Ended September 30, -------------------------------- 2009 2008 ---- ---- Dollars Cost/Gal Dollars Cost/Gal ------- -------- ------- -------- Raw or "into-plane" fuel cost $159.5 $1.99 $334.5 $3.89 Minus gains, or plus the losses, during the period on settled hedges 13.2 0.16 (36.5) (0.42) ---- ---- ----- ----- Economic fuel expense $172.7 $2.15 $298.0 $3.47 ------ ----- ------ ----- Adjustments to reflect timing of (gain) or loss recognition resulting from mark-to-market accounting (6.1) (0.08) 181.1 2.10 ---- ----- ----- ---- GAAP fuel expense $166.6 $2.07 $479.1 $5.57 ====== ===== ====== ===== Fuel gallons 80.1 86.0 ==== ==== Nine Months Ended September 30, ------------------------------- 2009 2008 ---- ---- Dollars Cost/Gal Dollars Cost/Gal ------- -------- ------- -------- Raw or "into-plane" fuel cost $410.6 $1.79 $918.8 $3.56 Minus gains, or plus the losses, during the period on settled hedges 42.7 0.19 (107.2) (0.42) ---- ---- ------ ----- Economic fuel expense $453.3 $1.98 $811.6 $3.14 ------ ----- ------ ----- Adjustments to reflect timing of (gain) or loss recognition resulting from mark-to-market accounting (47.4) (0.21) 52.4 0.20 ----- ----- ---- ---- GAAP fuel expense $405.9 $1.77 $864.0 $3.34 ====== ===== ====== ===== Fuel gallons 229.9 258.3 ===== ===== Horizon Air Fuel Reconciliation ------------------------------- (in millions, except for per gallon amounts) Three Months Ended September 30, -------------------------------- 2009 2008 ---- ---- Dollars Cost/Gal Dollars Cost/Gal ------- -------- ------- -------- Raw or "into-plane" fuel cost $31.4 $2.01 $66.9 $3.89 Minus gains, or plus the losses, during the period on settled hedges 2.7 0.18 (7.5) (0.44) --- ---- ---- ----- Economic fuel expense $34.1 $2.19 $59.4 $3.45 ----- ----- ----- ----- Adjustments to reflect timing of (gain) or loss recognition resulting from mark-to-market accounting (1.2) (0.08) 37.1 2.16 ---- ----- ---- ---- GAAP fuel expense $32.9 $2.11 $96.5 $5.61 ===== ===== ===== ===== Fuel gallons 15.6 17.2 ==== ==== Nine Months Ended September 30, ------------------------------- 2009 2008 ---- ---- Dollars Cost/Gal Dollars Cost/Gal ------- -------- ------- -------- Raw or "into-plane" fuel cost $80.7 $1.79 $187.9 $3.61 Minus gains, or plus the losses, during the period on settled hedges 8.7 0.19 (22.0) (0.43) --- ---- ----- ----- Economic fuel expense $89.4 $1.98 $165.9 $3.18 ----- ----- ------ ----- Adjustments to reflect timing of (gain) or loss recognition resulting from mark-to-market accounting (9.7) (0.22) 9.7 0.19 ---- ----- --- ---- GAAP fuel expense $79.7 $1.76 $175.6 $3.37 ===== ===== ====== ===== Fuel gallons 45.1 52.1 ==== ====

SOURCE Alaska Airlines

Copyright © 2008 PR Newswire Association LLC. All Rights Reserved.