Alaska Air (ALK) 8-K Alaska Air Group Reports First Quarter Results

Exhibit 99.1

Contact: Brad Tilden
206/433-3362 -or- Lou Cancelmi
206/433-3170

FOR IMMEDIATE RELEASE April 22, 2003

ALASKA AIR GROUP REPORTS FIRST QUARTER RESULTS

     SEATTLE — Alaska Air Group, Inc. (NYSE:ALK) today reported a first quarter net loss of $56.3 million, or $2.12 per share, compared with a net loss of $85.1 million, or $3.21 per share, during the corresponding quarter in 2002. The first quarter results were negatively impacted by increased fuel prices and lower demand resulting from the war in Iraq and a sluggish U.S. economy. The company’s first quarter results for 2002 include a $51.4 million charge related to the write-off of goodwill in connection with the adoption of Statement of Financial Accounting Standards No. 142. Excluding this charge, the company lost $33.7 million or $1.27 per share in the first quarter of 2002.

     “The combination of a flagging economy, higher fuel prices and the war in Iraq made this a difficult quarter for both Alaska Air Group and the industry,” said John F. Kelly, chairman and chief executive officer. “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 achieving our cost management goals.”

     During the quarter, Alaska successfully completed the private placement of $150 million of floating rate convertible bonds. “These proceeds strengthen an already strong liquidity position, and enhance our ability to implement our strategy and further position Alaska for success in this changing marketplace,” said Kelly.

     Operationally, Alaska Airlines’ passenger traffic in the first quarter increased 5.6 percent on a capacity increase of 5.4 percent. Load factor was consistent with the prior year at 66.7 percent. The airline’s operating revenue per available seat mile (ASM) decreased 1.7 percent, while its operating cost per ASM excluding fuel decreased 1.3 percent. Alaska’s pretax loss was $70.6 million compared to a pretax loss of $41.7 million a year earlier.

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Exhibit 99.1

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     Horizon Air’s passenger traffic in the first quarter increased 8.6 percent on a 15.9 percent capacity increase. Load factor decreased by 3.9 points to 58.1 percent. The airline’s operating revenue per ASM decreased 8.5 percent, while its operating cost per ASM excluding fuel decreased 7.5 percent. Horizon’s pretax loss was $15.3 million, compared to a pretax loss of $10.2 million a year earlier.

     Alaska Air Group continues to have a strong cash position at March 31, 2003 with approximately $616 million in cash and marketable securities. The company’s debt-to-capital ratio, assuming aircraft operating leases are capitalized at seven times annualized rent, was 79 percent.

     A conference call regarding the first quarter results will be simulcast via the Internet at 8:30 a.m. Pacific Standard Time. It may be accessed through the company’s website at www.alaskaair.com.

     This report may contain forward-looking statements that are based on the best information currently available to management. These forward-looking statements are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are indicated by phrases such as “will,” “should,” “the company believes,” “we expect” or any other language indicating a prediction of future events. There can be no assurance that actual developments will be those anticipated by the company. Actual results could differ materially from those projected as a result of a number of factors, some of which the company cannot predict or control. For a discussion of these factors, please see Item 1 of the company’s Annual Report on Form 10-K for the year ended December 31, 2002.

     Alaska Air Group is the parent company of Alaska Airlines, Inc. and Horizon Air Industries, Inc.

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Exhibit 99.1

Alaska Air Group, Inc.

CONDENSED CONSOLIDATED BALANCE SHEET (unaudited)

	December 31		March 31
(In Millions Except Per Share Amounts)	2002		2003
Cash and marketable securities	$	636	$	616
Total current assets		976		990
Property and equipment-net		1,780		1,839
Other assets		125		163
Total assets	$	2,881	$	2,992
Current liabilities		778		832
Long-term debt and capital lease obligations		857		979
Other liabilities and credits		590		581
Shareholders’ equity		656		600
Total liabilities and equity	$	2,881	$	2,992

SUPPLEMENTAL TABLE

During 2002 and 2003, the Company’s diluted loss per share (EPS) and net loss were impacted by the following (dollars in millions):

	Three Months Ended March 31
	2002						2003
	Dollars			EPS			Dollars			EPS
Net loss and diluted EPS excluding non-recurring items	$	(33.7	)	$	(1.27	)	$	(56.3	)	$	(2.12	)
Change in accounting principle relating to goodwill		(51.4	)		(1.94	)		—			—
Reported amounts	$	(85.1	)	$	(3.21	)	$	(56.3	)	$	(2.12	)

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Exhibit 99.1

Alaska Air Group, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Three Months Ended March 31
(In Millions Except Per Share Amounts)		2002			2003
Operating Revenues
Passenger		$	455.9		$	475.5
Freight and mail			17.1			18.6
Other – net			27.1			24.6
Total Operating Revenues			500.1			518.7
Operating Expenses
Wages and benefits			202.9			227.1
Contracted services			24.7			25.7
Aircraft fuel			64.7			90.2
Aircraft maintenance			43.2			46.5
Aircraft rent			46.5			46.9
Food and beverage service			14.3			13.4
Commissions			12.4			3.3
Other selling expenses			30.2			27.2
Depreciation and amortization			32.3			32.4
Loss (gain) on sale of assets			(0.6	)		0.1
Landing fees and other rentals			29.8			37.1
Other			49.3			47.4
Total Operating Expenses			549.7			597.3
Operating Loss			(49.6	)		(78.6	)
Nonoperating Income (Expense)
Interest income			4.4			0.6
Interest expense			(11.9	)		(11.1	)
Interest capitalized			0.2			0.8
Other – net			4.5			0.4
			(2.8	)		(9.3	)
Loss before income tax and accounting change			(52.4	)		(87.9	)
Income tax benefit			(18.7	)		(31.6	)
Loss before accounting change			(33.7	)		(56.3	)
Cumulative effect of accounting change			(51.4	)		—
Net Loss		$	(85.1	)	$	(56.3	)
Basic and Diluted Loss Per Share:
	Loss before accounting change	$	(1.27	)	$	(2.12	)
	Cumulative effect of accounting change		(1.94	)		—
Net Loss Per Share		$	(3.21	)	$	(2.12	)
Shares used for computation:
	Basic		26.532			26.582
	Diluted		26.532			26.582

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Exhibit 99.1

Alaska Airlines Financial and Statistical Data

	Three Months Ended March 31
							%
	2002			2003			Change
Financial Data (in millions):
Operating Revenues:
Passenger	$	374.0		$	387.0			3.5	%
Freight and mail		15.9			17.4			9.4	%
Other – net		22.3			22.6			1.3	%
Total Operating Revenues		412.2			427.0			3.6	%
Operating Expenses:
Wages and benefits		165.7			188.0			13.5	%
Contracted services		21.8			20.7			-5.0	%
Aircraft fuel		55.2			76.9			39.3	%
Aircraft maintenance		35.6			37.9			6.5	%
Aircraft rent		31.8			30.5			-4.1	%
Food and beverage service		13.9			12.9			-7.2	%
Commissions		14.2			8.2			-42.3	%
Other selling expenses		24.9			21.9			-12.0	%
Depreciation and amortization		28.2			28.5			1.1	%
Loss on sale of assets		—			0.3		NM
Landing fees and other rentals		23.6			28.7			21.6	%
Other		36.3			34.1			-6.1	%
Total Operating Expenses		451.2			488.6			8.3	%
Operating Loss		(39.0	)		(61.6	)		57.9	%
Interest income		5.0			1.2
Interest expense		(11.9	)		(11.3	)
Interest capitalized		0.1			0.7
Other – net		4.1			0.4
		(2.7	)		(9.0	)
Loss Before Income Tax before Accounting Change	$	(41.7	)	$	(70.6	)		69.3	%
Operating Statistics:
Revenue passengers (000)		3,193			3,258			2.0	%
RPMs (000,000)		2,977			3,143			5.6	%
ASMs (000,000)		4,467			4,708			5.4	%
Passenger load factor		66.7	%		66.7	%		0.0	pts
Breakeven load factor		76.0	%		80.5	%		4.5	pts
Yield per passenger mile		12.56	¢		12.31	¢		-2.0	%
Operating revenue per ASM		9.23	¢		9.07	¢		-1.7	%
Operating expenses per ASM		10.10	¢		10.38	¢		2.7	%
Expense per ASM excluding fuel		8.87	¢		8.75	¢		-1.3	%
Fuel cost per gallon		73.6	¢		99.1	¢		34.7	%
Fuel gallons (000,000)		75.0			77.6			3.5	%
Average number of employees		9,815			9,988			1.8	%
Aircraft utilization (blk hrs/day)		10.1			10.3			2.4	%
Operating fleet at period-end		102			106			3.9	%

NM = Not Meaningful

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Exhibit 99.1

Horizon Air Financial and Statistical Data

	Three Months Ended March 31
							%
	2002			2003			Change
Financial Data (in millions):
Operating Revenues:
Passenger	$	86.3		$	94.0			8.9	%
Freight and mail		1.2			1.2			0.0	%
Other – net		5.7			3.7			-35.1	%
Total Operating Revenues		93.2			98.9			6.1	%
Operating Expenses:
Wages and benefits		37.3			39.1			4.8	%
Contracted services		3.9			6.6			69.2	%
Aircraft fuel		9.5			13.3			40.0	%
Aircraft maintenance		7.6			8.6			13.2	%
Aircraft rent		14.8			16.4			10.8	%
Food and beverage service		0.4			0.5			25.0	%
Commissions		2.3			0.6			-73.9	%
Other selling expenses		5.3			5.3			0.0	%
Depreciation and amortization		3.9			3.6			-7.7	%
Gain on sale of assets		(0.6	)		(0.2	)	NM
Landing fees and other rentals		6.4			8.7			35.9	%
Other		12.7			11.5			-9.4	%
Total Operating Expenses		103.5			114.0			10.1	%
Operating Loss		(10.3	)		(15.1	)		46.6	%
Interest expense		(0.5	)		(0.3	)
Interest capitalized		0.2			0.1
Other – net		0.4			0.0
		0.1			(0.2	)
Loss Before Income Tax before Accounting Change	$	(10.2	)	$	(15.3	)		50.0	%
Operating Statistics:
Revenue passengers (000)		1,095			1,088			-0.6	%
RPMs (000,000)		329			357			8.6	%
ASMs (000,000)		531			616			15.9	%
Passenger load factor		62.0	%		58.1	%		(3.9	)pts
Breakeven load factor		69.5	%		68.3	%		(1.2	)pts
Yield per passenger mile		26.22	¢		26.30	¢		0.3	%
Operating revenue per ASM		17.55	¢		16.07	¢		-8.5	%
Operating expenses per ASM		19.49	¢		18.53	¢		-4.9	%
Expense per ASM excluding fuel		17.70	¢		16.37	¢		-7.5	%
Fuel cost per gallon		77.2	¢		102.0	¢		32.1	%
Fuel gallons (000,000)		12.3			13.0			5.7	%
Average number of employees		3,452			3,415			-1.1	%
Aircraft utilization (blk hrs/day)		7.1			7.8			9.9	%
Operating fleet at period-end		62			59			-4.8	%

NM = Not Meaningful

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