- The Washington Times - Wednesday, March 12, 2003

SEATTLE, March 12 (UPI) — Federal authorities have reopened a criminal investigation into the January 2000 crash of Alaska Airlines Flight 261, the airline's parent company said Wednesday.

Alaska Air Group Inc. made the disclosure in its annual 10-K financial report filed with the Securities and Exchange Commission. The company also filed amended reports with the SEC for 2001 and first three quarters of 2002 to reflect some accounting changes.

Messages left with the U.S. Attorney's Office in San Francisco, which is conducting the investigation, were not immediately returned. Alaska Airlines spokesman Jack Walsh declined to comment Wednesday on the reopening of the inquiry.

The U.S. Attorney for the Northern District of California reopened a criminal probe that was initially closed in December 2001, less than a year after Alaska Flight 261 crashed off the coast of California on Jan. 31, 2000.

"Accordingly, following the final NTSB (National Transportation Safety Board) hearing on the Flight 261 investigation in December 2002, the U.S. Attorney's Office reactivated the matter in order to review it in light of the final NTSB report," the company said in its SEC filing.

The MD-80 was headed for San Francisco when it crashed in the Pacific Ocean off Port Hueneme, Calif., killing 88 passengers and crew members. The crew progressively lost control of the jet's tail-mounted horizontal stabilizer that helps control the angle of flight of the plane.

The NTSB said the motorized jackscrew that drove the stabilizer had not been lubricated properly, according to The Seattle Times. Inadequate maintenance and poor government oversight were blamed for the crash, the newspaper said.

The U.S. Attorney's Office began investigating the airline's maintenance facility in Oakland, Calif., almost immediately after the crash. However, that investigation was put on hold while the National Transportation Safety Board conducted a federal investigation.

Based in Seattle, Alaska Airlines has been hit with a number of lawsuits stemming from the crash of Flight 261.

The suits were originally filed in various state and federal courts in Alaska, California, Washington and Illinois. "Alaska has settled 48 of these cases and continues in its efforts to settle the remaining ones," the airline said.

Since then, they have all been consolidated in the U.S. District Court for the Northern District of California. The suits seek unspecified compensatory and punitive damages, the airline said.

In May 2001, the judge presiding over most of the cases ruled that punitive damages are not available against Alaska. "Trial on the remaining cases is set for July," the company said in its SEC filing.

Also on Wednesday, Alaska Air Group filed amended reports for seven quarters from 2001 to 2002 with the SEC, citing some accounting changes. For 2001, the company restated its net loss of $11.8 billion, narrower than its previously reported loss of $43.4 million.

Alaska Air Group, which is also the parent company of Horizon Air, in addition restated its 2001 operating revenue to $1.8 billion, down from its previously reported revenue of $2.1 billion.

The airline said the amendments were made as a result of the company's change of accounting for certain lease return costs, capitalization of software development costs, and aircraft purchase commitments assumed by a third party.

In its filing, Alaska Air Group said that none of the changes has "a significant impact on previously reported equity or net earnings," but that it made the restatement to be in compliance with generally accepted accounting principles.

The company also amended the first three quarters of 2002. For the third quarter, net income was $12.5 million, or 47 cents a share, from a previously reported $10.6 million, or 40 cents a share.

According to Alaska Air Group, net losses in the second quarter narrowed to $2.9 million, or 11 cents a share, from $4.5 million, or 17 cents a share. However, last year's first quarter net loss increased to $85.1 million, or $3.21 a share, from a net loss of $34.4 million, or $1.30 a share.

Shares of Alaska Air Group gained 20 cents, or 1.16 percent, to close Wednesday at $17.45 on heavy volume of 248,300 shares traded on the New York Stock Exchange.

(Reported by Chris H. Sieroty in Washington)

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