Alaska Airlines Loss Narrows as Traffic Increases

Alaska Air Group Inc. narrowed its first-quarter loss to $56.3 million as passenger traffic and revenue at its Alaska Airlines unit rose.

The net loss was $2.12 a share in the quarter, compared with $85.1 million, or $3.21, for the same period of 2002, the company said. Sales rose 3.7% to $518.7 million.

Alaska Air said passenger traffic rose 5.6% over the previous year’s quarter as the carrier expanded capacity by 5.4%. Results were held back by war in Iraq, which led to higher fuel prices and lower demand for most of the industry.

“It was a terribly weak revenue environment, even out on the West Coast,” where the drop in demand had previously been less severe, said Blaylock & Partners analyst Ray Neidl, who has a “buy” rating on the stock and doesn’t own shares.

First-quarter costs rose 8.7% over last year to $597.3 million with fuel expense increasing 39% to $90.2 million.

The company’s first-quarter results last year included a $51.4-million expense to write off goodwill under a new accounting standard.

“We’re finding that we can continue to grow, contrary to most of the industry, but it’s clear that we’ll need to continue to adjust our business model” by reducing costs, Alaska Air Group Chief Executive John Kelly said.

Alaska Air shares rose 33 cents, or 2%, to $16.49 on the New York Stock Exchange. The stock is down 24% this year.

The carrier increased passenger traffic in part as a result of discounting, company executives said. First-quarter yields, a measure of average fares, declined 2% over last year.

“The [fare] sale helped a lot,” Alaska Air Group President William Ayer said. “Unfortunately, yields will likely be negatively affected by this sale, but at least we got the loads back.”

Alaska Air Group executives said the company expects a loss this year and isn’t sure whether it will have a profit next year.

The company is expected to have a loss of $2.21 a share this year and a profit of 56 cents next year, according to a survey of analysts by Thomson First Call.

The airline may approach its labor unions about reducing costs, considering wage rate decreases being negotiated by some rivals, including UAL Corp.’s United Airlines.

“Whatever we do there, I think it’s important that people know that we want to work collaboratively,” with workers, Ayer said.

Alaska Air Group ended the quarter with $616 million in cash and marketable securities.

The company expects to receive $60 million to $70 million in government aid as part of funding for U.S. airlines in war appropriations passed by Congress.