SeaTac's Alaska Air Group reported record third-quarter profits Thursday despite new competitive pressure on some of its main routes.
Alaska Air Group, parent company of Alaska Airlines and Horizon Air, reported net income of $157 million or $2.21 a share excluding special items in the third quarter. That compares with $150 million or $2.09 a share in the third quarter of 2012.
Including one-time items such as the varying value of fuel hedges and a change in accounting rules regarding its agreement with Bank of America for affinity debit and credit cards, the airline’s net income amounted to $289 million or $4.08 per share compared with $163 million or $2.27 a share in the third quarter last year. The airline urged the media to use the income figures without the special items as more closely reflecting the company’s ongoing business.
The profit figures exceeded the $2.14 per share prediction by analysts polled by First Call.
The record profit figures came during a quarter in which the company returned money to shareholders in the form of dividends amounting to 20 cents a share and of stock repurchases amounting to $32 million in the third quarter. The dividends were the first the airline has paid since 1992.
Other financial statistics were also strongly positive for Alaska:
* The airline company’s trailing 12-month return on capital increased to 13 percent compared with 12.7 percent in the previous year’s third quarter.
* Alaska’s adjusted debt-to-total capitalization ratio improved by seven percentage points 47 percent.
* The airline holding company’s stash of cash and marketable securities amounted to $1.4 billion on Sept. 30.
“These results represent our best quarter ever and mark Alaska’s 18th consecutive quarterly profit,” said Alaska Chief Executive Officer Brad Tilden. “This is noteworthy given significant additional competition in some of our core market,” he said.
During the quarter more competitors began flying routes to Anchorage, one of Alaska’s largest sources of traffic. That new competition to and from Alaska dropped yields on those routes by 15 percent, Alaska executives said.
Both Delta and United airlines are planning more competition for Alaska on its West Coast routes to Las Vegas, San Francisco and Los Angeles.
Tilden answered numerous questions from analysts about the health of Alaska's partnership relationship with Delta. Delta formed an alliance with Alaska when the Atlanta-based carrier began building a Pacific Coast international hub at Sea-Tac Airport three years ago.
Delta agreed to label many Alaska flights as its own in a so-called "codeshare" arrangement providing domestic connections to its growing inventory of international flights.
Tilden told analysts that Alaska has a long history of competing on the West Coast. The airline will work with Delta on routes where it's advantageous and compete strongly with Delta where the two airlines go head-to-head.
"Alliances can be complicated. It's likely that in the future, there will be markets where it's in our interest to work together with Delta and there will be markets where we will compete because it's in the best interest of Alaska Air Group to do so," said Tilden. "We have a long-standing alliance with Delta, but many of their recent domestic additions are in core air group markets, and we intend to compete aggressively and defend them vigorously."
Alaska recently announced a double miles promotion on some of those routes to counter the new competition.
John Gillie: 253-597-8663