Alaska Air Group, parent company of Alaska Airlines and regional carrier Horizon Air, posted steady quarterly financial results Thursday, despite the February snowstorms that caused about 1,100 canceled flights as well as weak transcontinental fares between California and New York.
The full integration of Virgin America and its fleet of Airbus jets into Alaska Airlines is within sight, executives said. And the new flights out of Paine Field in Everett have yielded very positive results.
The airline group reported a first-quarter net profit of $4 million, or $0.03 per diluted share, identical to the result a year earlier.
On an afternoon conference call with analysts, Alaska Chief Executive Brad Tilden said revenues were set back by “a series of winter storms in February that significantly disrupted our operations” and “a substantial drop” in transcontinental fares from California and New York for most of the quarter.
He called the snowstorms “the most significant winter weather the Pacific Northwest has seen in 50 years.”
Alaska’s Chief Commercial Officer Andrew Harrison said a “collapse” in transcontinental ticket prices bought close to the travel date hit carriers flying out of Los Angeles and San Francisco to New York and Boston. The price war lasted for 11 weeks before fares rebounded in mid-March, he said.
He added that fares to Hawaii continue to be weak because of increased competition on those routes.
Since late 2016 when it acquired Virgin America, Alaska has struggled to integrate the California-based operation. Tilden said that task is “largely behind us.”
The booking and scheduling systems and the two sets of employees are integrated. What’s left is to modify Virgin’s fleet of 71 Airbus jets. Of those, 66 have been repainted in the Alaska livery.
Alaska is also modifying the Airbus jet interiors, adding extra seats and making the in-flight experience common with Alaska Airlines. Harrison said all are scheduled to be retrofitted within the next year.
And Alaska is swapping around its larger jets, Boeing 737-900ERS and Airbus A321s, onto the denser transcontinental routes within its Virgin-enlarged network.
Excluding the impact of costs related to the integration of Alaska Airlines with Virgin America, and mark-to-market fuel hedge adjustments, Alaska Air reported adjusted net income of $21 million, or $0.17 per diluted share, compared to $18 million, or $0.14 per diluted share, a year ago.
Tilden said that while Alaska this year is taking a “pause” in its recent rapid growth, it will resume next year and plans to grow at 4 to 6% per year.
At the end of March, Alaska Air revealed the 2018 compensation for its top executives in a filing with the Securities and Exchange Commission.
CEO Tilden received total compensation of $4.4 million last year, of which $2 million was in the form of stock awards and another $0.6 million in stock options.
Newly elevated company president and COO Ben Minicucci received $3.1 million, with $1.3 million in the form of stock awards and another $0.4 million in stock options.
CCO Harrison and CFO Brandon Pedersen each got $2.3 million, including $0.9 million in stock awards and another $0.3 million in stock options.
Dave Campbell, who resigned on Jan. 5, 2018, as chief executive of Horizon Air after a troubled year at the regional carrier, left with a severance package of $1.9 million.