Alaska Air Group expected to post adjusted fourth-quarter profit

Earnings Preview: Alaska Air Group

ATLANTA — Alaska Air Group Inc., operator of Alaska Airlines and Horizon Air, reports fourth-quarter results on Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: The Seattle-based company is expected to post an adjusted profit for the October-December quarter. Alaska Air could do better than some of the bigger carriers because it does not have as much international exposure as them. Its lower fares may have helped it win over more passengers in the U.S. during the recession, so the carrier could be in a good position to capitalize on improving trends in air travel.

Chief Financial Officer Glenn Johnson told investors on Dec. 9 the company is remaining disciplined in terms of capacity, which is measured by the available seats an airline offers times the miles flown.

The parent company said at the time that Alaska Airlines’ capacity is expected to increase 1 percent to 2 percent in 2010, while Horizon Air’s will probably be flat.

Alaska Air has a partnership with Delta Air Lines, the world’s biggest airline.

Alaska Airlines and Horizon Air serve more than 90 cities through their network in Alaska, Hawaii, the continental U.S., Canada and Mexico.

Earlier this month, Alaska Airlines lost a challenge of rival Virgin America’s citizenship status. The Transportation Department said Virgin America, a privately held carrier based in Burlingame, Calif., is under the control of U.S. citizens. Foreign ownership in a U.S. air carrier is limited to 25 percent of the voting interest in the carrier.

The Virgin Group, controlled by British billionaire Richard Branson, is a minority holder in Virgin America. DOT said the Virgin Group has a 25 percent equity stake in Virgin America.

Some analysts had said Alaska Airlines and United Airlines would have gained if Virgin America had been forced to fold.

BY THE NUMBERS: Analysts polled by Thomson Reuters, on average, expect Alaska Air Group to post fourth-quarter profit of 32 cents a share on revenue of $821.2 million. Analysts’ projections generally exclude one-time items. The airline posted a net loss of $75.2 million, or $2.08 a share, in the fourth quarter of 2008 on sales of $827.1 million.

ANALYST TAKE: Morgan Stanley analyst William Greene said in a research note Monday that Alaska Air Group is a relatively “safer” airline with solid margins, good hedges, and strong relative liquidity. He noted that Alaska Air also has less exposure than peers to international revenue trends and a history of good execution. From an investment point of view, he said, “While positive in a downturn scenario, these characteristics are likely to limit outperformance in a recovery, making the risk/reward less compelling at Alaska Air than at riskier ’survivor’ peers during this industry rebound scenario.”

WHAT’S AHEAD: The company said it wants to boost revenue in 2010 by increasing sales on its Web site, continuing to focus on improving customer service and gaining market share in Portland, Ore.

STOCK PERFORMANCE: Alaska Air shares rose more than 35 percent during the fourth quarter. The stock closed at $25.47 on Oct. 1 and ended the quarter Dec. 31 at $34.56.

On the Net:

Alaska Air Group Inc.: www.alaskaair.com