Sea-Tac's Alaska Air Group posts record earnings

Staff writerJanuary 24, 2014 

Alaska Air Group employees will benefit to the tune of more than a month's bonus pay next month thanks to the airline holding company's record financial performance in the fourth quarter and in 2013.

The company, which owns Alaska Airlines and its regional airline partner Horizon Air, this week announced earnings that both set new records and beat Wall Street's predictions.

Those financial achievements for the SeaTac-based company include fourth quarter net income of $77 million or $1.10 per share. That result beat an analysts' consensus estimate of $1.07 a share. The fourth quarter 2013 income compares with $50 million or 70 cents a share in the same quarter in 2012.

For the full year 2013 net income was $383 million excluding extraordinary items. That compares with 2012 net income of $339 million.

Under the company's incentive plan, employees earned a total of $105 million in 2013. Most of that bonus money, which amounts to about five weeks' pay for most employees, will be paid out to workers next month. Over the last four years, Alaska has paid its employees some $357 million in incentive pay. That averages about 8.8 percent of their annual pay.

Alaska's incentive pay system is based on beating financial and customer service benchmarks.

The company, which has been under increasing pressure from rival airlines last year, earned the record results despite an industry capacity increase of about 8 percent on its routes. That compares with a 3 percent capacity increase in airline capacity nationwide.

Several airlines, especially Atlanta-based Delta, have targeted the Pacific Northwest, particularly Sea-Tac,  for more flights. Delta has made Sea-Tac its West Coast hub for international flights and has added dozens of flights on routes that Alaska traditionally has dominated.

The record financial results have greatly enhanced Alaska's balance sheet. The company achieved a return on invested capital of 13.6 percent last year compared with 13 percent the year before.

The holding company has fully funded its defined benefit pension plan, has repurchased some 21 million shares of its own stock since 2007 and initiated a dividend payment to shareholders.

The company has also lowered its debt-to-capitalization ratio to 35 percent.

Even so, it has increased its cash and securities on hand to $1.3 billion at the end of 2013.

That cash horde plus the paid up pension, dividends, buy-backs and employee bonuses prompted one analyst on Alaska's earnings call to ask the company what it is going to do with all its money.

Company officials said they were pondering strategies for reducing that cash accumulation.



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