=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/n/a/2006/05/11/financial/= f151059D52.DTL --------------------------------------------------------------------- Thursday, May 11, 2006 (AP) Ayer Upbeat About Alaska Air Group Future By ELIZABETH M. GILLESPIE, AP Business Writer (05-11) 15:51 PDT SEATTLE, (AP) -- After a bruising year marred by layoffs, delayed flights, complaints abo= ut lost bags, and a spate of cabin pressurization scares, the head of Alaska Air Group Inc. exudes confidence the company has "turned the corner." Bill Ayer, chairman and chief executive of Alaska Airlines and its parent company, said the airline's on-time arrivals and departures have risen steadily since January, in some cases surpassing the company's goals. Contract baggage handlers who replaced unionized ramp service workers are doing a better job after their employer, Menzies Aviation, spent three months taking a close look at operations at Seattle-Tacoma International Airport. "I don't want to tell you that everything's perfect and 100 percent, but we have made huge progress, and the fact that we're consistently meeting our systemwide goals for on-time performance and reliability is just a really encouraging sign," Ayer told The Associated Press Thursday in an interview. Overall, Ayer said ramp service is improving after workers got a slight wage boost and the airline added an extra baggage carousel in Seattle. "I think where we are today is definitely having turned the corner," Ayer said. "The staffing is much improved," he added, "but I would tell you that the agent turnover rate is still higher than what we think is ideal, and that continues to provide a challenge to have new people coming in." Alaska Air Group has benefited handsomely from hedging contracts that ha= ve sheltered it from soaring fuel costs. Ayer said last year's hedges saved the company about $125 million. This year, the company is 46 percent hedged at just under $41 a barrel; crude, by comparison, is hovering above $70 a barrel. Ayer said a lower percentage of the company's fuel contracts will be hedged in the next two years. Beyond that, the company hasn't decided on a strategy to protect its bottom line from soaring fuel costs. Alaska Airlines, the nation's ninth-largest carrier, has spent the past few years aggressively cutting costs. Two years ago, the company cut about 200 management jobs then closed its heavy maintenance facility in Oakland, Calif., laying off about 750 employees. Last May, it laid off nearly 500 baggage handlers, outsourcing those job= s. Then pilots took a pay cut. Ayer, 51, describes those and other cost-cutting measures as difficult moves that were necessary to ensure the company's long-term viability. "We weren't going to shy away from those tough decisions, because the viability of the business is the most important thing," said Ayer, who joined Alaska Airlines in 1995 after 13 years at sister carrier Horizon Air. The layoffs dealt a blow to morale at a company that has long been known for customer service. Ayer said he doesn't blame workers for feeling frustrated or disappointed, but thinks the company's struggles have not irreparably harmed its reputation. He also said he thinks morale is on the mend — especially as employees compare their position to those at other carriers like Delta Air Lines Inc. and Northwest Airlines Corp. that are struggling with much greater woes, such as bankruptcy. Still, some labor struggles remain. More than 600 union baggage handlers still employed at Alaska resumed contract talks with the company last week. Ayer said he's optimistic an agreement is within reach. The company also has yet to settle a contract with more than 3,000 clerical, office and passenger-service workers. Earlier this year, Alaska ordered a fleet-wide review after a series of pressurization problems. The company said no systemwide problems were found. Ayer said Alaska Air Group Inc., the Seattle-based parent company of Alaska Airlines and Horizon Air, was one of only two major airlines to post a profit in 2005, pointing to adjusted earnings of $55 million. Factoring in accounting changes and other one-time items, Alaska Air Group had a net loss of $5.9 million. Among Alaska's competitors, only Southwest Airlines Co. and AirTran Holdings Inc., a discount carrier based in Orlando, Fla., made it out of 2005 in the black. Wall Street seems to like what it's seeing. Alaska Air Group's stock has risen nearly 8 percent year-to-date, trading at the high end of a 52-week range of $26.67 to $40.54. Now that the company is beginning to rebound from several years of losse= s, Ayer said it's looking at several ways to grow: adding flights to crowded routes, "connecting the dots" by adding destinations along popular routes, and adding new destinations. Ayer said the company will be looking closely at the Los Angeles market and the possibility of adding new routes to Mexico. "Growth per se has never been an objective," Ayer said. "What has been an objective is building really a world-class business that then has an opportunity to grow as we see those opportunities through customer demand." ___ On the Net: Alaska Air: www.alaskaair.com ------------------------------------------------------= ---------------- Copyright 2006 AP