Alaska Airlines 2Q revenues bolstered by strong demand

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Published: July 26, 2012

Alaska Airlines 737-800. Courtesy, AS

Alaska Airlines (AS) more than doubled its net income for the second quarter, earning $ 67.5 million versus net income of $ 28.8 million recorded in the year-ago period. Excluding the impact of market-to-market fuel hedge adjustments of $ 69.6 million ($ 43.3 million after tax), it reported second-quarter net income of $ 110.8 million, up 23.7% year-over-year, for its 13 th consecutive quarterly profit.

“Significantly higher revenues driven by strong demand, our growing route network and our preferred product led to a record second-quarter profit,” Group CEO Brad Tilden said. On Thursday he told journalists and analysts that despite the leadership transition, its 2010 strategic plan remains “the big picture plan.” Alaska Air Group in June named AS president Brad Tilden to succeed Bill Ayer as CEO.

Revenues for the quarter jumped 9.3% to $ 1.21 billion on a 4.3% rise in operating expenses to $ 1.09 billion. Among the expenses was a 20.1% increase in variable incentive pay, an 8.6% increase in fuel expense, an 11% hike in aircraft maintenance costs, and a 14.6% increase in food and beverage service expenses. Operating income was $ 115.8 million, a $ 58 million increase year-over-year.

AS earlier this month ratified a new six-year contract with its ramp workers ( ATW Daily News, July 18 ). Tilden said he is hopeful they will be able to achieve long-term contracts with all AS and Horizon workers.

The carrier announced it will advance delivery of one Boeing 737-900ER by one month to September. A total of three -900ERs are slated for delivery this year to replace smaller 737-700s ( ATW Daily News, April 20 ).

“Demand for during the quarter was strong,” Tilden said.

GroupVP finance and CFO Brandon Pedersen said the carrier “did a much better job managing supply and demand this quarter,” leading to a jump in load factor. Mainline traffic jumped 9.4% to 6.23 billion RPMs on a 6.4% rise in capacity to 7.13 billion ASMs, producing a load factor of 87.4%, up 2.4 points. Yield improved 1.9% to 13.85 cents as RASM increased 3.7% to 14.13 cents. CASM ex-fuel lifted 0.3% to 7.46 cents. By year end it expects approximately 20% of its ASMs to be from Hawaii, 20% from California, and about 15% from Alaska.

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