Alaska Air Group announces record second quarter earnings

You might forgive Alaska Air Group executives for wondering Thursday if anyone got the license number of the bus that just hit them.

The SeaTac-based airline holding company early Thursday announced stellar financial results especially considering the heightened competition from giant Delta Air Lines on many of its major routes.

Yet Alaska’s stock was pounded by investors Thursday causing a nearly 10 percent drop in the stock’s price.

This pummeling came after the company announced record profits and positive results across the board.

Earnings were up 50 percent over the same quarter last year. Operating revenues grew by 9 percent. The $1.13 per share earnings exceeded Wall Street consensus estimates that ranged from $1.09 to $1.11 a share.

The company’s pre-tax margins grew from 13.5 percent in the same quarter last year to 18.5 in the second quarter of 2013.

Perhaps the news that of a third airline tragedy this week had deflated the market for airline stocks. But those incidents in the Ukraine, Taiwan and Mali didn’t involve American carriers and didn’t happen on U.S. soil.

Most major airlines stocks such as United Continental, Delta and Southwest were all reported down Thursday despite positive financial results for their second quarters. But their stocks feel less steeply than Alaska’s. United and Delta’s stocks were off by roughly 2.5 percent. Southwest’s declined by less than one percent.

Perhaps it was a significant error that occurred in one stock ratings service’s site that caused the decline. That site, whose news appeared at the top of both Google and Bing searches for Alaska Air Group news, erroneously reported that Alaska had missed analysts’ predicted earnings by 98 cents a share.

On the earnings call Thursday morning most analysts asking questions appeared to be upbeat on Alaska’s prospects.

And company executives themselves, while cautioning that Delta’s build up of new flights at Sea-Tac would inevitably lead to some overcapacity in some markets, didn’t seem worried that the airline couldn’t withstand the competition.

Alaska Air Group, parent company of both Alaska Airlines and Horizon Air, has accumulated a large cash reserve, $1.5 billion, has a fully-funded pension plan, has no net debt and has long-term contracts with all but one of its major unions. And the company is sharing its bounty with shareholders.

So far this year, it has paid $34 million in dividends and recently announced a $650-million stock buyback plan.