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Trims Work Force 9 To 10 Percent

Alaska Airlines reduces capacity 8 percent

eTN  Sep 13, 2008

SEATTLE, WA (September 12, 2008) - Alaska Airlines announced today it is reducing capacity 8 percent compared to a year ago, effective with its winter schedule starting November 9 and continuing into 2009. The reduction in capacity (available seat miles) represents 15 percent fewer departures. As a result, Alaska Airlines is reducing its work force by 9 to 10 percent.

"The one-two punch of record oil prices and a softening economy, on top of increased competition, has burdened Alaska Air Group with a $50 million loss on an adjusted basis for the first half of this year. That demands decisive action to ensure the viability of our company," said Bill Ayer, chairman and CEO of Alaska Air Group, the parent company of Alaska Airlines and Horizon Air. "We are changing our schedule to make sure we're flying the right routes with the right frequency and right aircraft. Regrettably, a reduced schedule means we need fewer employees."

Alaska Airlines, which operates a fleet of 111 Boeing 737s, is trimming its schedule in four ways:

-- Canceling low-demand flights on Saturdays and holidays.

-- Reducing flights - typically one roundtrip a day - in high-frequency markets, including Seattle-Bay Area and Seattle-Southern California. However, the carrier will fly one more daily Seattle-San Francisco and Seattle-Los Angeles roundtrip than it did a year ago.

-- Operating certain flights between Portland, Oregon and the Bay Area with 70- to 76-seat Bombardier CRJ-700 regional jets and Q400 turbopropsflown by Horizon Air instead of larger Boeing 737s flown by Alaska.

-- Ending seasonal service on three Mexico routes, as previously announced, between San Francisco and Cancun, as well as Mazatlan and Ixtapa/Zihuatanejo. Alaska Airlines continues to serve these destinations nonstop from Los Angeles and operates a daily seasonal nonstop flight between Seattle and Cancun.

The carrier also ended service between Portland, Oregon and Orlando, Florida and between Vancouver, BC and San Francisco on August 24. Alaska Airlines continues to fly two daily roundtrips between Seattle and Orlando.

Some of the capacity from these schedule changes is being redeployed in new markets. Alaska Airlines announced last May it will launch two daily flights between Seattle and Minneapolis/St. Paul on October 26 and one daily flight between Seattle and Kona, Hawaii on November 17. Thrice-weekly seasonal service between Anchorage, Alaska and Kahului, Maui will be offered October 31 through April 25, 2009.

"Alaska Airlines will continue to be nimble in responding to changing market conditions by trimming capacity from underperforming routes and redeploying it where customer demand is stronger," said Andrew Harrison, Alaska Air Group's managing director of planning.

Work force reductions

The effect of a smaller schedule on Alaska Airlines' work force includes a previously announced management headcount reduction of 80 positions. Slightly more than half the reduction, largely completed in August, involved layoffs while the remainder was achieved by eliminating open positions. The company announced today that 850 to 1,000 "operational" positions also will be eliminated, including pilots, flight attendants, aircraft technicians, and reservations, customer service and ramp agents.

"We deeply regret having to take these steps and recognize the hardship on these employees and their families," Ayer said. "This difficult action is particularly frustrating because we've done everything possible to avoid furloughs, and our great people are the reason Alaska Airlines is renowned for our customer service."

In response to the current environment, the company has undertaken a variety of initiatives to improve profitability and protect its cash balance. These measures include raising fares, increasing fees and instituting a charge for a second checked bag, taking steps to reduce fuel consumption and deferring or eliminating numerous projects and capital spending.

"These steps, when combined with the recently completed transition to an all-Boeing 737 fleet, improve our viability but are not enough to eliminate the need to reduce the number of our employees," Ayer said.

Alaska Airlines is working with the unions representing operational employees to offer early-out programs and six-month to two-year leaves of absence to minimize the number of involuntary furloughs. Affected employees will leave the company starting in November and continuing through early 2009.

Alaska Airlines' sister carrier, Horizon Air, expects to reduce capacity in the fourth quarter by about 20 percent compared to the same period last year, which would represent a 9 percent reduction for all of 2008. So far, the effect on Horizon's work force includes:

-- A reduction of 75 management positions, in large part through attrition and voluntary layoffs.

-- A reduction of 94 pilot positions through attrition, early-out packages and leaves and a furlough of about 40 pilots this November.

In other work groups, furloughs are being minimized through early-out programs, unpaid leaves and attrition.

Alaska Airlines reduces capacity 8 percent

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