Good news, bad news: Alaska Air turns a profit but will cut capacity

Alaska Air Group reported second-quarter net income of $63.1 million in the second quarter of 2008, aided by a $97.3 million gain in the value of fuel hedges.

Because of significant recent increases in crude oil prices, Alaska Air said the value of the company's fuel hedge portfolio that will benefit future periods increased dramatically. However, Alaska’s fuel hedges are not significant enough to ward off layoffs and capacity cuts.

Alaska Airlines will reduce management positions by 5%, effective Sept. 1. Sister carrier Horizon Air, which reduced its management workforce by 13% earlier this year, will further reduce operational and management positions in connection with capacity cuts.

Alaska Airlines’ mainline capacity in the fourth quarter will decline 5% from 2007 levels, and mainline capacity for 2009 will decrease 5% to 10% compared with 2008, said Bill Ayer, Alaska Air Group’s CEO.

"Skyrocketing fuel prices have eclipsed the improvements we've worked so hard to achieve in every area of our business," said Ayer. “Decisive action, an excellent operation, and the genuine, caring service our employees provide will help us survive what is shaping up to be the most difficult period in commercial aviation history."
Alaska Air Group is determining the full effect of schedule reductions on employees, and expects to have more information in early September.

Alaska Air Group’s total operating revenue for the second quarter rose 2.9%, to $930.8 million.

Alaska Airlines’ mainline passenger traffic in the second quarter increased 1.1% on a capacity increase of 1.6 percent. Horizon Air's passenger traffic in the second quarter declined 4.9 percent on a 3% capacity decrease.

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