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Regional Carriers Fret Over Fuel

Both Alaska and Frontier say high costs will weaken their results in the current quarter.

Despite the airline industry's newfound commitment to capacity restraint, rampaging oil prices are still taking a toll on two midsized carriers that operate primarily in the western U.S.


Alaska Air

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Frontier Airlines


reported strong earnings and continuing positive demand trends, but they said high fuel costs will weaken their results in the current quarter.

"My biggest concern going forward is the continued impact of fuel and its impact on demand," Frontier CEO Sean Menke said Friday on a conference call. Even with strength in unit revenue and load factors, Frontier expects to report a pretax loss for the current quarter, he said.

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Meanwhile, Alaska said it expects to report a loss for the current quarter, and full-year 2007 results that will not be as good as 2006. "We are showing good momentum," said Chief Financial Officer Brad Tilden on a conference call. "

But we are concerned about the economy, high fuel, and what our effort to increase

fares does to demand."

On Tuesday, Alaska raised one-way fares by $5 for shorter flights and $10 for longer flights. "We are trying to get through a very significant fare increase," Tilden said Thursday. "Our general sense is that things are holding up OK."

For the third quarter, Alaska reported net income of $85.8 million, or $2.11 a share. Excluding special items, the company earned $82.8 million, or $2.03 a share. Analysts surveyed by Thomson Financial had estimated $1.92. Revenue was $995.1 million, up 6.3%, and was better than expected.

During the quarter, mainline operating revenue per available seat mile increased 1.5%, on a capacity increase of 3.3%.

At Frontier, net income was $17.3 million, or 39 cents a share, for the fiscal second quarter, which ended Sept. 30. Special items decreased net income by 6 cents a share. Analysts had expected 19 cents. Revenue was $373 million, up 19%.

Mainline revenue per available seat mile increased 5.7% on an 11.9% increase in capacity. Yield declined by 3.2%, but load factor rose 7.2 points to a record 84.7%.

Frontier shares were up 3% at $6.95. Alaska dropped 4.3% to $24.89.