Oregon Public Broadcasting

The parent company of Seattle-based Alaska and Horizon Airlines announced Thursday that it lost $86 million during the third quarter.  But surprisingly, the loss came in part as a result of falling fuel prices.  Correspondent Chris Lehman reports.

With the cost of fuel going down, you might think an airline would make money over the busy summer travel season.

But in an ironic twist, lower fuel prices meant the value of Alaska Air's fuel hedges dropped, resulting in an overall loss for the quarter.  Hedging is a way for airlines to lock in the price of fuel.  It's essentially a bet that the cost of fuel will rise in the future.  That was a good bet for a while, but when fuel costs went down the past few months, the value of those hedges also fell.  Alaska Air CEO Bill Ayer says the loss is emblematic of the uncertainty facing the airline industry these days:

Ayer:  "The key is to control what we can and continue to adapt our business to the changing conditions." 0:05

Alaska Air has trimmed some flights between the Pacific Northwest and California.  Horizon is cutting service to some smaller cities as part of a move away from smaller, less profitable planes.