MIAMI — Alaska Air Group today reported a record $125 million profit, excluding special items, on total revenues of $916 million in the fourth quarter. The amount was nearly double the $77 million net income the Seattle-based carrier earned during the same quarter in 2013 despite an unexpected dip in fuel costs and special costs related to labor agreements.

Looking at 2014 as a whole, Alaska reported $571 million profits on $3.77 billion of revenue, up from the $383 million earned in 2013. CEO Brad Tilden said on an earnings call that it was a “record year on almost every front,” despite increased competition in Seattle, alluding to Delta’s growth in its main hub.

Underlying demand continues to be robust, improving  the strength and profitability of the network, said Andrew Harrison, SVP Planning and Revenue. He noted the launch of 16 new markets brings the total number of destinations served from Seattle to 79, compared to the 26 served by its closest competitor. “Decreasing fuel prices will not adjust ticket prices to account for lower fuel prices, [since] reservations are simple supply and demand,” he said.

Alaska’s strong numbers permeate their earnings report. Return on invested capital was 18.6 percent in 2014, up from 13.6 percent in 2013. Alaska repurchased more than 7.3 million shares of common stock at an average price of $47.63 in 2014, totaling $348 million. The group has repurchased more than 49 million shares of stock since 2007, at a cost of $827 million. Debt-to-total capitalization ratio decreased to 31 percent, and Alaska held $1.2 billion in unrestricted cash and securities at the end of 2014.

Alaska departing out Anchorage
Alaska departing out Anchorage

Brandon Pedersen, Alaska Air’s executive vice president of finance and CFO, said his carrier lowered non-fuel unit cost, which widened the cost gap versus larger rival network carriers. “The fourth quarter includes a new contract agreement with flight attendants, accounting for $9 million in additional cost,” he said. “Fuel cost decreases should translate into higher profits, although it will also mean increased fuel efficiency improvement at 22 percent over 10 years.” Alaska owns 77% percent its fleet, with 76 planes owned free and clear, he added.

Alaska will issue stockholders a 20-cent per share dividend, up 60 percent from the previous quarter. This will come on the heels of the $0.125 per share cash dividend issued at the beginning of December, which brought total 2014 dividend payments to $68 million. The airline is one of only two United States carriers to be rated investment-grade, the other being Dallas-based Southwest Airlines.

Fourth-quarter operating revenues increased to $916 million, up 9 percent compared to the previous year. Full-year operating revenues were up 8 percent compared to 2013, at $3.77 billion.

Consolidated revenue passenger miles increased 9.5 percent in Q4 2014 (over Q4 2013), on a 10.6 percent capacity increase, resulting in an 83.4 percent load factor, a decrease of one percentage point year-over-year. Passenger revenues were up by 8 percent compared to fourth-quarter 2013, and by 7 percent compared to year 2013.

“Record earnings and the number one airline ranking in the Wall Street Journal for the second year in a row are proof that our 13,000 employees continue to do a great job serving our customers and running a reliable operation,” said Alaska CEO Brad Tilden in a statement. “The substantial increase in dividend underscores our commitment to shareholders and our confidence in the future.”