AP News, January 26th, 2007
Two smaller airline companies, Midwest Air Group Inc. and Alaska Air Group Inc., reported improved earnings Thursday, crediting an increase in passenger traffic thanks to expanding service.
Alaska Air, however, acknowledged that its revenue growth was slower than expected, and executives said they were unsure whether to blame higher ticket costs or other factors. They noted winter storms, particularly in Seattle and Denver, hurt the company's performance.
Frontier Airlines, which released results after the market closed, blamed the storms for a deeper net loss in the fiscal third quarter.
The Denver-based carrier canceled 875 flights that affected 105,000 passengers when two storms battered Denver International Airport during the December holiday season, forcing the airport to close for nearly two days.
The airline said the net after-tax impact of the storms was equal to 27 cents a share.
Dealing with the storms presented "the greatest challenge in our history as an airline excluding the events of Sept. 11, 2001," Frontier President and CEO Jeff Potter said in a statement. Employees "faced the challenges head on and became, in my eyes, the heroes of an otherwise dismal story," he wrote.
For the quarter ended Dec. 31, Frontier Airlines Holdings Inc. reported a net loss of $14.4 million, or 39 cents per share, compared with a net loss of $10.3 million, or 28 cents a share, in the previous third quarter.
The most recent results reflected a non-cash derivative gain that decreased the net loss by 2 cents a share. The third quarter of the previous year included special items that increased the net loss by about 3 cents a share.
While the industry is stabilizing for major airlines, smaller carriers face challenges as they push to add new markets, analysts said.
"They were never in as much trouble as the legacy carriers, but they don't have as much upside potential," Calyon Securities analyst Ray Neidl said.
Aviation industry analyst Mike Boyd of the Boyd Group agreed.
"The most problematic factor of the industry will be the smaller low-cost carriers and that's because their model doesn't generate as much revenue," he said.
Seattle-based Alaska Air Group, parent of Alaska Air and Horizon Air, reported a net loss of $11.6 million, or 29 cents per share, in the quarter ended Dec. 31, compared with a loss of $33 million, or $1.15 per share, in the prior-year quarter.
Excluding fuel-hedging losses and an adjustment of pension costs, the loss would have been 8 cents per share. Revenue totaled $790.3 million, up 8 percent from $730.6 million in the comparable quarter of 2005.
Alaska Airlines' fourth-quarter passenger traffic grew 3.4 percent and capacity was up 3.6 percent. The load factor, an industry measure of the seats filled on a plane, fell 0.2 percentage points to 73.7 percent.
For Horizon Air, passenger traffic was up 4.3 percent, capacity increased 5.2 percent, and the load factor dipped 0.7 percentage points to 73 percent.
The results missed the expectations of analysts polled by Thomson Financial who had forecast flat earnings on revenue of $793.4 million.
"Alaska looked a little bit worse than expectations," Neidl said, attributing it to storm-related challenges.
For the year, Alaska Air said net loss was $52.6 million, or $1.39 per share, versus a loss of $5.9 million, or 1 cent a share, in 2005. Revenue totaled $3.33 billion, up 12 percent from $2.98 billion.
The 2006 results included charges related to severance programs and fuel hedging adjustments, while the 2005 results reflected charges for severance programs, fuel hedging and other factors.
Based in Milwaukee, Midwest Air Group reported fourth-quarter earnings on the same day its board recommended that shareholders reject a buyout offer worth $345 million from AirTran Holdings Inc.
Midwest, parent of Midwest Airlines and Midwest Connect, posted fourth-quarter net income of $3.6 million, or 16 cents a share, reversing last year's fourth-quarter loss of $13.8 million, or 79 cents a share.
Revenue totaled $168.3 million in the most recent quarter, up from $142.8 million in the fourth quarter of 2005.
Analysts surveyed by Thomson Financial had forecast earnings per share of 11 cents on revenue of $168.4 million.
For the year, Midwest Air reported net income of $5.4 million, or 29 cents a share, compared with a loss of $64.9 million, or $3.71 a share, in 2005.
The previous year's results reflected an impairment charge on aircraft equipment, capitalized expense write-offs and other special charges equal to 98 cents share, the company said.
The full year's revenue totaled $664.5 million, up from nearly $523 million in the previous year.
Passenger traffic in the quarter rose 16.3 percent on a 6.2 percent increase in capacity.
Midwest Air Group chairman and chief executive Tim Hoeksema said the earnings show the company is poised to grow on its own, reiterating that the company is not interested in a takeover by AirTran.
"I think that is tangible evidence that our business plan is working and we're very excited about the opportunities in 2007 going forward," Hoeksema said at a news conference.
Shares of Alaska Air fell $1, or 2.4 percent, to $40.60 on the New York Stock Exchange. Midwest's stock rose 8 cents, or 0.64 percent, to $12.67 on the American Stock Exchange. Frontier's shares closed down 9 cents, or 1.2 percent, to $7.47 a share on the Nasdaq Stock Market.
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Associated Press writers Emily Fredrix in Milwaukee and Curt Woodward in Seattle contributed to this report.
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On the Net:
Midwest Air Group: http://www.midwestairlines.com
Alaska Air Group: http://www.alaskaair.com
