Airline Pilot Central Forums

Airline Pilot Central Forums (https://www.airlinepilotforums.com/)
-   Major (https://www.airlinepilotforums.com/major/)
-   -   Alaska Air Warning of Lower Profits (https://www.airlinepilotforums.com/major/12988-alaska-air-warning-lower-profits.html)

vagabond 05-23-2007 12:48 PM

Alaska Air Warning of Lower Profits
 
On a side note, I own shares in Alaska. It's annual shareholder meeting is not in Seattle, but will be at the Hotel Captain "James, I've been everywhere" Cook in Anchorage on June 12. I will be unable to attend, but if anyone in ANC would like to go as my proxy, let me know.

From Seattle PI:

Alaska Air Group, parent of Alaska Airlines and regional carrier Horizon Air, said it expects adjusted net income for the second quarter and full year to be lower than in 2006 as expenses rise.

The Seattle-based airline cited "economic fuel costs, unit revenue trends and forecasted non-fuel unit costs" in a regulatory filing today.

Alaska Air, which operates mainly on the U.S. West Coast, is moving to an all-Boeing 737 fleet on its main routes to save money on fuel, parts and training. The company has reached agreement with a buyer for all 20 of its older and less fuel- efficient McDonnell-Douglas MD-80s, according to the filing. The carrier will lease back most of the aircraft, increasing rental expenses, Alaska Air said.

Alaska Air "has been the most erratic performer among legacy carriers, and has consistently missed, or sometimes wildly exceeded, our EPS estimates," Standard & Poor's analyst Jim Corridore wrote in a research note today, cutting his stock recommendation to "sell" from "buy."

Alaska Air had a net loss of $52.6 million, or $1.39 a share, for 2006, on adjusted net income of $137.7 million, or $3.45. Last year the company reported a second-quarter profit of $55.5 million, or $1.38 a share, on adjusted net income of $60.3 million, or $1.50.

Shares of Alaska Air fell 70 cents, or 2.4 percent, to $28.50 at 11:28 a.m. in New York Stock Exchange composite trading, after touching $28.35 earlier. The stock declined 26 percent this year before today.

Analysts expected Alaska Air to report adjusted net income of $1.50 a share in the second quarter, the average of 10 estimates compiled by Bloomberg. For the full year, adjusted net income was expected to be $3.64 a share, the average of 11 estimates.

Alaska Air spokeswoman Amanda Tobin Bielawski had no immediate comment.

Alaska Air said revenue per seat mile declined 1.5 percent in April, with its Horizon Airlines regional unit outperforming its main Alaska Airlines unit. The percentage of seats filled by paying customers declined by about 1.7 points to 76.9 percent.

Most U.S. airlines have said this year's domestic sales have been crimped by increased capacity and a slowing economy.

Alaska Air's warning "does strengthen our conviction" that rival carrier Southwest Airlines is "similarly incapable" of earnings growth and that industry estimates for the second half of the year "may prove too high," Jamie Baker, a JPMorgan Chase & Co. analyst, said in a note to investors today. He kept his recommendation on the stock at "underweight."

Alaska Air is the nation's ninth largest airline, competing primarily in the western U.S. In recent years the carrier has added routes from western cities to Chicago, New York and Orlando, Florida.

Chief Executive Officer William Ayer said last month that Delta Air Lines Inc.'s new service from Los Angeles to eight of the 10 Mexican cities served by Alaska was putting his company under pressure. Alaska Air also competes with UAL Corp.'s United Airlines and US Airways Group Inc.

Ayer had said April 26 that second-quarter results would improve.


From Reuters:

WASHINGTON - Alaska Air Group Inc. , parent of Alaska Airlines, warned investors Wednesday it expected weaker net income due to softer demand and higher fuel costs, raising fresh concerns about the airline industry's recovery.

The Seattle-based airline said adjusted income for the second quarter and full year would be weaker than corresponding periods last year.

Alaska is only the No. 9 airline flying predominantly in the western United States, but it is the first carrier to formally issue such guidance for the second half of the year. The airline is not the only domestic operator buffeted by weaker demand and higher costs.

"We're less worried about Alaska than we are others," said JP Morgan analyst Jamie Baker in a research note.

Baker added that "on balance" industry estimates for the remainder of 2007 may be too high.

Alaska Air's forecast in a regulatory filing pushed the company's shares down more than 5.4 percent, or $1.59, to $27.61 in afternoon trading on the New York Stock Exchange.

AIRLINE SHARES MIXED

Airline shares overall were mixed after the profit warning and news that U.S. carriers would be granted more service to China, a potentially lucrative boost for those offering Asia service.

Alaska said that mainline passenger revenue fell by 2.8 percent in April due mainly to easing demand and lower average ticket prices. Unit costs for the second quarter, which do not include fuel, are expected to fall by 4 percent to 7.5 cents.

Fuel costs for the quarter are expected to rise by 3.1 cents per gallon, or 4 percent, compared to the same period last year, the company said.

The industry slowly regained footing in 2006 since its worst-ever five-year financial slide, slashing domestic capacity and increasing fares.

However, persistent pressure from sustained higher fuel costs and weaker demand from passengers unwilling to pay higher fares have slowed recovery this year.

Expectations on Wall Street for the sector have diminished in recent months after carriers warned of sagging domestic demand. United Airlines cut domestic capacity last week by 2 percent for the remainder of the year to focus more on international flying.

SUMMER TRAVEL

The industry expects summer travel to rise 3 percent between June and August compared to last year. Summer is traditionally the industry's peak period.

Baker said JP Morgan believes Alaska has been "commendably forthright" as to capacity and yield pressures, a sentiment echoed by Bob Mann, an industry consultant who said others may follow.

"They (Alaska) are being the most transparent about where the domestic market is headed," Mann said.

Southwest Airlines warned in April that unit revenue in the current quarter would fall below last year's high levels. Baker said JP Morgan continues to believe that Southwest is incapable of earnings growth for the time being.

Southwest shares were up 4 cents, or .2 percent, to $14.55 in New York trading.

757Driver 05-23-2007 01:24 PM

More Contract rhetoric. Yawn.

vagabond 05-23-2007 01:39 PM

Yes, I agree. Airline management bean counters are very adept at what I call "Anticipatory Media Manipulation."

I read the 2006 Annual Report. Full of glowing words, pats in the back and colorful pictures of handsome, happy men and women. Page 34 contains the Compensation Table for top management. I'm a little surprised by the relatively low salary Ayer is getting, but that was until I kept reading and noticed the stock awards, options, and the peculiar non-equity incentive plan compensation. Street lawyers only get a chicken from our clients. :)

check6 05-23-2007 03:54 PM


Originally Posted by vagabond (Post 169887)
I'm a little surprised by the relatively low salary Ayer is getting, but that was until I kept reading and noticed the stock awards, options, and the peculiar non-equity incentive plan compensation. Street lawyers only get a chicken from our clients. :)

Yeah. . .I read an article in the Seattle Times about that.

vagabond 05-23-2007 05:53 PM

There was an article in the Seattle Times about street lawyers and a chicken? Where? When? ;)

SkyHigh 05-24-2007 04:41 AM

Seattle Times
 
Do you really think that Alaska Airlines would damage the companies stock price over pilot wage negotiations? How ego centric is that?

Fuel is more expensive. New planes are expensive. Alaska Airlines is attempting to compete on a national scale. They are great at the ANC, JNU, LAX and SEA market however once outside of that they are swimming with the sharks.

Skyhigh

757Driver 05-24-2007 05:18 AM


Originally Posted by SkyHigh (Post 170165)
Do you really think that Alaska Airlines would damage the companies stock price over pilot wage negotiations? How ego centric is that?

Yes I do. The long-term negotiating effects of a Pilot contract far outweigh the short-term decrease in stock price.

mike734 05-24-2007 07:38 AM


Originally Posted by SkyHigh (Post 170165)
Do you really think that Alaska Airlines would damage the companies stock price over pilot wage negotiations? How ego centric is that?

Absolutely. It is going to be a long summer.

SkyHigh 05-24-2007 07:41 AM

Well
 

Originally Posted by 757Driver (Post 170174)
Yes I do. The long-term negotiating effects of a Pilot contract far outweigh the short-term decrease in stock price.

Well if that is true then it appears that management is sinking thier heels in for a fight. I am selling all my ALK stock today.

SkyHigh

vagabond 05-24-2007 08:06 AM

The stock price is pretty low these days. If I had known it would be this low, I would have waited before buying more last week! My crystal ball says it's going to go lower still before stabilizing.

dash trash 05-24-2007 08:38 AM


Originally Posted by SkyHigh (Post 170225)
Well if that is true then it appears that management is sinking thier heels in for a fight. I am selling all my ALK stock today.

SkyHigh

ALK is at a 52 week low. Great plan to sell. Buy "Sky" High, Sell Low. Great plan........

Sideshow Bob 05-24-2007 12:27 PM


Originally Posted by dash trash (Post 170254)
ALK is at a 52 week low. Great plan to sell. Buy "Sky" High, Sell Low. Great plan........

I guess his mystery career he's so happy with (although he spends much of it here among real pilots) isn't in trading stocks.:p

vagabond 06-12-2007 10:37 PM

Pilots Picket Alaska Air Group Meeting
 
Note: Well, obviously I did not make the shareholder meeting in ANC today, but here is the Associated Press' rendition of what happened, at least outside of the meeting.

ANCHORAGE, Alaska - Dozens of pilots dressed in their dark blue uniforms and caps formed picket lines Tuesday outside Alaska Air Group's annual shareholder meeting, held this year in Anchorage to mark the company's 75th anniversary.

Two years ago, the pilots were forced to take an average 26 percent pay cut. Now that Alaska Air Group is making money, the pilots contend it is time the company gave back.

"We are two years into a contract that was imposed," said pilot Sean Cassidy, 42, of Tacoma, Wash., vice chairman of the Air Line Pilots Association. "Since then, we haven't had as much as a cost of living increase."

Alaska Air Group wants to reach a contract with the pilots that won't increase costs.

"We want a deal that basically keeps costs where they are today," chairman and Chief Executive Bill Ayer said in a meeting with reporters. He declined to predict when the company might make an offer.

Alaska Air Group's approximately 1,500 pilots took pay cuts ranging from 19 percent to 34 percent after the company successfully persuaded an arbitrator to impose the cuts.

The contract became amendable May 1, and pilots and management began negotiating in January. However, several major contractual issues, including pay and retirement benefits, remain unresolved, according to the union.

Cassidy said the "cost-neutral" contract the company wants means that even if pilots are offered more money, they will have to take concessions elsewhere, most likely in work rules, retirement plans, health benefits or job security.

"We are not in the position of giving up all these things that we have worked so hard for," Cassidy said. "We feel the way we've been treated since 2005 is not right, it's not fair."

Two groups of about 30 pilots each formed picket lines on both sides of a downtown hotel where shareholders were meeting inside. One female pilot carrying a baby held a sign that read, "We love our company but we love our families more." Another sign read: "Alaska Airlines _ Record Profits. Our Pain, Their Gain."

Pilot David Campbell, 39, of Seattle, said the company's stance is disheartening.

"Our company just had its most profitable year ever," he said. "We played an important role in that. Despite those recent profits ... they are not willing to share that success."

For the first time last year, Alaska Air Group's total revenue exceeded $3 billion. Although it posted a net loss of $52.6 million for 2006, the company said it would have made a profit of $137.7 million without charges related to severance programs, fuel hedging, and a write-down of the value of its MD-80 fleet.

Chief Financial Officer Brad Tilden said he expected another good year in 2007.

Ayer said Alaska Air Group, with 14,000 employees, is in the middle of a transformation to make it more efficient and capable of competing both with low-cost carriers and legacy carriers. The problem is that many of the legacy carriers have emerged from bankruptcy with much lower costs after shedding their retirement plans, Ayer said.

Alaska Air Group's pilot costs continue to be on the high end, Ayer said. Pilots make an average $118,000 a year, with 59 percent making more than $100,000, according to company officials.

Pilots, who make up about 15 percent of the work force, account for 60 percent of the company's pension costs.

While the company needs to look at all its costs, Ayer said Alaska Air Group and the pilots would have to agree to any changes concerning pensions and retirement plans.

"We think those obligations stand until we agree mutually to do something different," he said.

Ayer said the transformation the company is undergoing is most apparent in Alaska Airline's transition to an all-Boeing 737 fleet and subsidiary Horizon Air's move toward larger turbo prop planes. The company expects to save $130 million a year in fuel costs with the more efficient fleet. The new planes also will help the company grow its cargo business, he said.

"We are really focusing on our transformation of the company," Ayer said.

Tilden said the company remains dedicated to providing service to Alaska
.

RedBaron007 06-13-2007 11:53 AM

I don't doubt that this could be ALK management's move before the pilot contract negotiations, but I've seen a few similar reports that quote other airline execs saying the similar things. Continental just deferred some orders from 2009 to 2010. The article indicated economic reasons (economy slowing) and a recent increase in nationwide capacity that is making it harder to sustain ticket prices. United and US Air execs are saying the same kind of stuff about income (not that it would take an economic downturn to hurt either of these companies....they seem perfectly capable of screwing themselves over all on their own). Even Southwest is talking about slowing growth. The economy does seem to be slowing a bit from what I can tell. I sure as he!! hope this isn't a trend, though. Capacity needs to stay low or consolidation needs to happen so the companies can remain profitable. Sustained profitability would give pilots a great bargaining position in the upcoming negotiations at the majors. Just my $.02.

SkyHigh 06-13-2007 12:15 PM

Unions
 
I had a conversation with a guy in line at the post office the other day. He was a retired union Freightliner factory assemblyman. He told me that when he retired in 1997 his hourly cost to the company was $57. Now the company is moving most of the manufacturing down to Mexico due to the reduced costs.

Alaska Airlines has already thrown the mechanics and rampers to the curb. They seem to be setting their heels for another fight. No company is so secure that they can afford costs that are higher than their competitors. Every company is in a race to match costs. Alaska Airlines is no different.

Customers don't care. They only want to get there at the cheapest price. The FAA insures that most are equivalent in terms of safety so what then does a big fancy airline have to offer that a Skybus can't?

Like a pack of ravenous mice the LCC's are gnawing away at the base of the establishment. Undercutting once strong and competitive companies.
In the end everyone will have to sink to the lowest common denominator or risk loosing their jobs. The best a union can do for its workers is an organised retreat.

Skyhigh

vagabond 06-13-2007 01:01 PM

We have to be careful what we read in the media these days. There would be an article about how the economy is going to pot like yesterday and it would be right next to an article on a housing boom. For example, I read an article that the economy is slowing down because of high gas prices and foreign competition and what have you, but a couple clicks on my trusty mouse later, I was reading an article on how this summer is going to be crazy because record numbers of people are flying and the airports are having trouble keeping up and Boeing is predicting that airlines will be buying 28,000 aircraft in the next 20 years and the regional airlines are having such a heck of a time finding enough 200 hour wonders let alone an experienced pilot in either seat, so what are we to believe anyway. How’s that for a run on sentence? :)

Bill Ayer is no dumb chump. I'm sure ALPA knows this and it strives to negotiate from a position of strength instead of being on the defensive. A return to status quo of 2005 is not acceptable.

Al Aska 06-15-2007 06:55 AM

Lets see how low the stock does when we are on STRIKE! Corporate America Controls the Media! Get ready for a fight or get ready for Corporate Control!

bagwan 06-15-2007 07:52 AM

Although a strike is a potental threat, I don't see that happening easily at Alaska..... with the essential air service provided throughout AK, the current administration and Ted Stevens, one could block any such move. It's just going to be a long grinding process like FEDEX (and they were making huge profits)

Al Aska 06-15-2007 06:11 PM


Originally Posted by bagwan (Post 180694)
Although a strike is a potental threat, I don't see that happening easily at Alaska..... with the essential air service provided throughout AK, the current administration and Ted Stevens, one could block any such move. It's just going to be a long grinding process like FEDEX (and they were making huge profits)

What like 3 or 4 essential air service airports... Big Deal! Northern will will bring the milk....

vagabond 06-15-2007 06:29 PM

Hate to be the Devil's Advocate, but there's that little annoying thing known as the Railway Labor Act. Self-help is some ways away, in my opinion.


All times are GMT -8. The time now is 07:40 PM.


User Alert System provided by Advanced User Tagging v3.3.0 (Lite) - vBulletin Mods & Addons Copyright © 2021 DragonByte Technologies Ltd.
Website Copyright 2000 - 2017 MH Sub I, LLC dba Internet Brands