Dec. 27--The nation's largest airlines' financial woes have been well-publicized, but both carriers operating flights out of Redmond Airport are weathering the storm quite well, according to a federal report released this week.
The U.S. Department of Transportation's financial data comparison of domestic airlines showed both Horizon Air, part of Seattle-based Alaska Air Group, and St. George, Utah-based SkyWest Airlines posting double-digit profit margins for the third quarter of 2005. SkyWest operates as Delta Connection and United Express in Redmond.
Alaska ranked first among the nation's network carriers with a profit margin of 11.7 percent. Only one other network airline, United, posted a positive profit margin in the third quarter that ended Sept. 30.
Network airlines are considered those that operate nationally with a hub-and-spoke system. There are seven in the United States, all with more than $1 billion annually in operating revenues.
SkyWest, a regional carrier that services smaller cities, posted an 11.1-percent profit margin, ranking it third among similar airlines.
The picture of health for carriers servicing Redmond contradicts sharply with the national scene, where three of the top four airlines are operating in bankruptcy.
Atlanta-based Delta Air Lines and Minneapolis-based Northwest Airlines both declared bankruptcy in September, joining Chicago-based United Airlines, which has been in bankruptcy since 2002.
A fourth major carrier, US Airways, emerged from bankruptcy in September after completing its merger with America West Airlines.
The health of carriers serving Redmond is vital to the economy of Central Oregon, said Roger Lee, executive director of Economic Development for Central Oregon.
"It's critical," Lee said. "Being off the interstate system, (airlines) are like ladders for the region. With the amount of intellectual capital flowing through here, people still like to meet face-to-face for business."
Flights out of Redmond Airport appear to be popular. The airport already has set a new annual passenger record.
Passenger counts through November were running 20.3 percent ahead of last year, largely due to the launch of Delta Connection flights between Redmond and Delta's hub in Salt Lake City last March.
Alaska Air's managing director of investor relations, Shannon Alberts, said her company benefited largely from fuel-hedging . or purchasing fuel in advance of the current high prices . at locked-in lower rates.
"We have had a lot of success with our fuel-hedging programs," Alberts said, adding that Alaska saved $44 million in the third quarter of 2005 on fuel alone. "We were paying $30 a barrel for about half of our fuel supply."
Oil was trading at nearly double that price on Thursday.
Southwest Airlines also relied on fuel-hedging, Alberts said.
Southwest, a low-cost carrier, posted a 13.7 percent profit margin, putting it in first place in its category of the federal report.
Alberts also pointed to Alaska's reduction in wages and benefits, which saved the company another $33 million compared to the same period last year, as a key factor in its success.
Aaron Gellman, professor at Kellogg School of Management at Northwestern University in Illinois and a former director of the school's Transportation Center, said Alaska also benefited from is base geographical market in the West, where there is more demand for air travel with the long distances between major cities.
"The base market of the company enables them to try new things," Gellman said. "If (a certain route) doesn't work, they can bend more than others."
For SkyWest and other regional airlines, their profit margins are largely linked to contract flying agreements with network carriers.
SkyWest operates Delta Connection and United Express under contracts with the two network airlines. Passengers buy tickets through the larger carriers, and SkyWest is paid to fly certain routes to service those passengers.
Contract flying means that, regardless of passenger count, regional airlines like SkyWest get a steady payment for their network agreement routes.
But a contract agreement isn't a guarantee for a regional airline to profit, Gellman said.
"When you have a code-share agreement, it doesn't guarantee success," he said, pointing to the bankruptcy of Eagan, Minn.-based regional carrier Mesaba Airlines in October. Mesaba is a contract carrier for Northwest.
SkyWest officials were unavailable for comment ahead of its release of fourth quarter 2005 results.
<
