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SeaTac’s Alaska Air Group posts record quarterly profits

Post by John Gillie / The News Tribune on April 25, 2013 at 6:23 am |
April 25, 2013 1:18 pm

This year’s first quarter, traditionally the weakest for Sea-Tac’s Alaska Air Group because of the dearth of tourist traffic to its namesake state,  again produced record profits, the company announced this morning.

Alaska Air Group, parent company of Alaska Airlines and Horizon Air, reported record adjusted income of 62 cents a share or $44 million today for the first quarter.

Alaska Airlines 737 -- Alaska Airlines photo
Alaska Airlines 737 — Alaska Airlines photo

The earnings beat analysts’ consensus predictions by 6 cents a share.

This year’s first-quarter profits compared with 2012′s first-quarter earnings of $28 million, or 39 cents a share.

“Our record performance in what is seasonally our weakest quarter is due to steady demand that kept pace with our growth, and to the many changes we’ve made to improve our business over the last several years,” Alaska Air Group Chief Executive Officer Brad Tilden said. “Looking ahead, we’re facing increased competition in certain markets, and we will closely monitor the environment and continue to adjust our plans to appropriately address these challenges. Our first quarter results, and our ability to be flexible and adapt to an ever-changing industry landscape, would not be possible without the dedication and determination of our employees at Alaska and Horizon.”

Other U.S. carriers including Delta and US Airways also have reported first quarter earnings above what Wall Street had expected.

Both cautioned, however, that the federal government’s budget-cutting sequester may weaken traffic later this year as government workers taking furloughs take fewer vacations, and federal business travel declines.

Alaska officials echoed that sentiment saying they’re seeing some weakness in ticket sales in the second quarter.  But Tilden said he expects the usually robust demand will return in the third quarter.

One other area of weakness, said Alaska officials,  is fares levels in the California-Hawaii market where competition and overcapacity has cut average tickets by $50 to $60.

Alaska said it is cutting back flights from San Jose and Oakland in California to Kona and Lihue in Hawaii from daily to four flights week to cope with that extra capacity.

The federal budget sequestration has had some effect on Alaska flights to Los Angeles, the airline said, with an average of one Horizon Air flight headed for Los Angeles being cancelled because of a shortage of air traffic controllers since traffic controller furloughs began Sunday .  Alaska in some cases has landed flights at Orange County Airport instead of Los Angeles International and provided bus transportation from there to LAX.

Alaska also reported other positive financial  achievements during the first three months of 2013:

* Alaska’s return on invested capital for the last 12 months hit 13.4 percent compared with 11.6 percent for the 12 months ending March 31, 2012.

* The airline group’s debt-to-capital ratio declined to 53 percent during the quarter, a one percent dip compared with the end of last year’s fourth quarter.

* The company’s stash of cash and marketable securities hit $1.3 billion at the quarter’s end.

On the operations side, Alaska bragged about its on-time performance, the best among major U.S. carriers last year, and increases in employee productivity of 4.3 percent.

Alaska Airlines began several new routes in the quarter including Seattle-Salt Lake City and San Diego-Boston.  Alaska has announced it will begin service to Lihue in Hawaii from San Diego and from Portland to Fairbanks, both in June.

The airlines adjusted earnings don’t include consideration of the varying value of fuel hedges it holds to stabilize the cost of its aircraft fuel.  If those are included, the earnings would have been $37 million or 51 cents a share.

 

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