By August Cole, MarketWatch

Last Update: 11:28 AM ET July 21, 2005

SAN FRANCISCO (MarketWatch) - Alaska Air Group, which operates Alaska Airlines, on Thursday posted a second-quarter profit after losing money last year as planes were fuller and ticket prices were higher.

The Seattle-based company`s quarterly profit came to $17.4 million, or 56 cents a share, reversing the year-ago red ink of $1.7 million, or 6 cents a share.

Excluding restructuring costs, gains from fuel hedging and aircraft impairment charges, Alaska said it would have earned $24.7 million, or 74 cents a share. Analysts polled by Thomson First Call expected Alaska Air Group to report a 75-cent profit, with a range of 60 cents to 96 cents a share.

Revenue rose to $756.5 million, up from $701.3 million.

Fuel costs rose 36% to $175.2 million.

Labor costs fell to $227.3 million, down almost 8%.

``Although we are seeing gains in passenger loads and ticket prices, we are facing operational problems, which, if we don`t correct them, will impact the long-term reputation of Alaska Airlines,`` said Alaska Chairman and Chief Executive Officer Bill Ayer. The company is working on improving its on-time performance, Ayer said.

According to the Transportation Department`s May air travel consumer report, Alaska Airlines ranked last out of 20 carriers in on-time arrivals.

Alaska Airlines had 8.4% higher operating revenue per available seat mile but costs, excluding fuel and charges, rose 1.4%. Traffic rose 5.2%.

At Horizon Air, traffic rose 15.9% while revenue per available seat mile rose 5.2%. Cost per available seat mile, excluding fuel and charges, fell 4.9%.

Shares of Alaska Air Group (ALK: news, chart, profile) fell 1.7% to $33.64.