Expected to lead the industry with adjusted
pretax margin of 15.8%
Achieved a completion rate of
99.5%, among the highest in the industry
Reached
tentative agreement with Alaska
flight attendants represented by AFA
SEATTLE, July 17,
2024 /PRNewswire/ -- Alaska Air Group (NYSE: ALK)
today reported financial results for the second quarter ending
June 30, 2024, and provided outlook
for the third quarter ending September 30,
2024 and full year 2024.
"It's clear that premium airlines are rising above the rest of
the industry, and Alaska's product
and performance put us in that top tier, with a strong long-term
outlook to grow and compete," said CEO Ben
Minicucci. "That's how we brought in record quarterly
revenue and achieved a 15.8% adjusted pretax margin that should
lead the industry. Thank you to our 23,000 employees for being
safe, operating well, and taking care of our guests through our
biggest summer travel season ever."
Financial Results:
- Reported net income for the second quarter of 2024 under
Generally Accepted Accounting Principles (GAAP) of $220 million, or $1.71 per share, compared to net income of
$240 million, or $1.86 per share, for the second quarter of
2023.
- Reported net income for the second quarter of 2024, excluding
special items and mark-to-market fuel hedge accounting adjustments,
of $327 million, or $2.55 per share, compared to net income of
$387 million, or $3.00 per share, for the second quarter of
2023.
- Reported adjusted pretax margin of 15.8% for the second
quarter.
- Repurchased 663,177 shares of common stock for approximately
$28 million in the second quarter,
bringing total repurchases to $49
million for the six months ended June
30, 2024.
- Generated $580 million in
operating cash flow for the second quarter.
- Held $2.5 billion in unrestricted
cash and marketable securities as of June
30, 2024.
- Ended the quarter with a debt-to-capitalization ratio of 45%,
within the target range of 40% to 50%.
Operational Updates:
- Reached a tentative agreement with mainline flight attendants
that recognizes their outstanding contributions. Voting on the
agreement is expected to conclude by mid-August.
- Certified substantial compliance with the U.S. Department of
Justice's second request for information regarding our proposed
acquisition of Hawaiian Airlines, maintaining open communication
with the DOJ during its review process.
- Finished the second quarter with a completion rate of 99.5%,
among the highest in the industry.
- Received six 737-9 aircraft and three 737-8 aircraft during the
quarter, bringing the totals within the Alaska fleet to 70 737-9s and four
737-8s.
- Received one E175 aircraft during the quarter, bringing the
total in the Horizon fleet to 44.
- Added a second 737-800 freighter to Alaska Air Cargo's fleet
and expanded the freighter network with twice-weekly service to
Los Angeles.
- Purchased a 600,000 square-foot facility in Renton, Washington to serve as the new home
for Alaska's training programs and
operational teams following completion of renovations in 2025.
- Moved Air Group operations at San
Francisco International Airport to Harvey Milk Terminal 1,
which will improve guests' travel experience with advanced
technology in the lobby and convenient proximity to our
partners.
- Enhanced onboard offerings with the return of hot meals to the
inflight menu within the Main Cabin.
- Began expansion of our lounge at Ted Stevens Anchorage
International Airport to offer more than double the seating and
improved amenities.
Network and Commercial Updates:
- Announced 20 nonstop routes to provide guests with more winter
travel options, including new service to Vail, Colorado as well as La Paz and Monterrey, Mexico.
- Announced seasonal daily service from Portland to New
Orleans beginning January
2025, our 55th nonstop destination from
Portland.
- Expanded partnership with British Airways to offer guests the
ability to book nonstop flights between London and multiple U.S. cities directly at
alaskaair.com or via the Alaska Airlines app.
Sustainability Updates:
- Released our 2023 Sustainability Report, sharing the company's
progress on its goals for sustainability, safety, and our people,
as well as highlighting accomplishments and ongoing
initiatives.
- Launched option for guests to reduce their environmental impact
by purchasing sustainable aviation fuel credits in the flight
booking path, while also providing Mileage Plan members the ability
to earn up to 5,000 elite-qualifying miles annually for their
contributions.
Awards and Recognition:
- Alaska Airlines Mileage Plan named best U.S. airline frequent
flier program by WalletHub for 2024.
- Named to Forbes' Best Employers for Diversity list, receiving
the highest ranking of all U.S. airlines.
- Received the highest satisfaction score for 2024 among all U.S.
airlines from the American Customer Satisfaction Index.
- As recently released by the U.S. Department of Transportation,
Alaska generated the fewest
customer complaints per 100,000 guests of any U.S. airline in 2023,
finishing 75% better than the industry average and 35% better than
the second-ranked airline.
The following table reconciles the company's reported GAAP net
income per share (EPS) for the three and six months ended
June 30, 2024 and 2023 to adjusted amounts.
|
Three Months Ended
June 30,
|
|
2024
|
|
2023
|
(in millions,
except per share amounts)
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
Net income per
share
|
$
220
|
|
$
1.71
|
|
$
240
|
|
$
1.86
|
Mark-to-market fuel
hedge adjustments
|
(5)
|
|
(0.04)
|
|
1
|
|
0.01
|
Special items -
operating
|
146
|
|
1.14
|
|
186
|
|
1.44
|
Special items - net
non-operating
|
—
|
|
—
|
|
6
|
|
0.05
|
Income tax effect of
reconciling items above
|
(34)
|
|
(0.26)
|
|
(46)
|
|
(0.36)
|
Adjusted net income
per share
|
$
327
|
|
$
2.55
|
|
$
387
|
|
$
3.00
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2024
|
|
2023
|
(in millions,
except per-share amounts)
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
Net income per
share
|
$
88
|
|
$
0.69
|
|
$
98
|
|
$
0.76
|
Mark-to-market fuel
hedge adjustments
|
(18)
|
|
(0.14)
|
|
21
|
|
0.16
|
Special items -
operating
|
180
|
|
1.41
|
|
250
|
|
1.94
|
Special items - net
non-operating
|
—
|
|
—
|
|
6
|
|
0.05
|
Income tax effect of
reconciling items above
|
(39)
|
|
(0.31)
|
|
(67)
|
|
(0.52)
|
Adjusted net income
per share
|
$
211
|
|
$
1.65
|
|
$
308
|
|
$
2.39
|
Statistical data, as well as a reconciliation of the reported
non-GAAP financial measures, can be found in the accompanying
tables. A glossary of financial terms can be found on the last page
of this release.
Alaska will hold its quarterly
conference call to discuss second quarter results at 8:30 a.m. PDT on July 18, 2024. A webcast of
the call is available to the public at www.investor.alaskaair.com.
For those unable to listen to the live broadcast, a replay will be
available after the call.
References in this update to "Air Group," "Company," "we," "us,"
and "our" refer to Alaska Air Group, Inc. and its subsidiaries,
unless otherwise specified.
This news release may contain forward-looking statements subject
to the safe harbor protection provided by Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act
of 1934, and the Private Securities Litigation Reform Act of 1995.
These statements relate to future events and involve known and
unknown risks and uncertainties that may cause actual outcomes to
be materially different from those indicated by our forward-looking
statements, assumptions or beliefs. For a comprehensive discussion
of potential risk factors, see Item 1A of the Company's Annual
Report on Form 10-K for the year ended December 31, 2023. Some of these risks include
competition, labor costs, relations and availability, general
economic conditions including those associated with pandemic
recovery, increases in operating costs including fuel, inability to
meet cost reduction, ESG and other strategic goals, seasonal
fluctuations in demand and financial results, supply chain risks,
events that negatively impact aviation safety and security, and
changes in laws and regulations that impact our business. All of
the forward-looking statements are qualified in their entirety by
reference to the risk factors discussed in our most recent Form
10-K and in our subsequent SEC filings. We operate in a continually
changing business environment, and new risk factors emerge from
time to time. Management cannot predict such new risk factors, nor
can it assess the impact, if any, of such new risk factors on our
business or events described in any forward-looking statements. We
expressly disclaim any obligation to publicly update or revise any
forward-looking statements made today to conform them to actual
results. Over time, our actual results, performance or achievements
may differ from the anticipated results, performance or
achievements that are expressed or implied by our forward-looking
statements, assumptions or beliefs and such differences might be
significant and materially adverse.
Alaska Airlines and our regional partners serve more than 120
destinations across the United
States, the Bahamas,
Belize, Canada, Costa
Rica, Guatemala and
Mexico. We offer our guests a
premium flying experience with award-winning customer service and
an industry-leading loyalty program, Mileage Plan. With our fellow
oneworld Alliance members and additional Global Partners, our
guests have more choices than ever to purchase, earn or redeem on
alaskaair.com across 30 airlines and more than 1,000 worldwide
destinations. Learn more about Alaska at news.alaskaair.com and follow
@alaskaairnews for news and stories. Alaska Airlines and Horizon
Air are subsidiaries of Alaska Air Group.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(in millions,
except per share amounts)
|
2024
|
|
2023
|
|
Change
|
|
2024
|
|
2023
|
|
Change
|
Operating
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
revenue
|
$
2,651
|
|
$
2,598
|
|
2 %
|
|
$
4,655
|
|
$
4,582
|
|
2 %
|
Mileage Plan other
revenue
|
174
|
|
170
|
|
2 %
|
|
338
|
|
324
|
|
4 %
|
Cargo and other
revenue
|
72
|
|
70
|
|
3 %
|
|
136
|
|
128
|
|
6 %
|
Total Operating
Revenue
|
2,897
|
|
2,838
|
|
2 %
|
|
5,129
|
|
5,034
|
|
2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Wages and
benefits
|
782
|
|
754
|
|
4 %
|
|
1,586
|
|
1,477
|
|
7 %
|
Variable incentive
pay
|
49
|
|
57
|
|
(14) %
|
|
93
|
|
104
|
|
(11) %
|
Aircraft fuel,
including hedging gains and
losses
|
615
|
|
573
|
|
7 %
|
|
1,180
|
|
1,238
|
|
(5) %
|
Aircraft
maintenance
|
129
|
|
125
|
|
3 %
|
|
251
|
|
249
|
|
1 %
|
Aircraft
rent
|
46
|
|
54
|
|
(15) %
|
|
93
|
|
113
|
|
(18) %
|
Landing fees and other
rentals
|
173
|
|
167
|
|
4 %
|
|
338
|
|
319
|
|
6 %
|
Contracted
services
|
106
|
|
95
|
|
12 %
|
|
203
|
|
190
|
|
7 %
|
Selling
expenses
|
84
|
|
81
|
|
4 %
|
|
161
|
|
147
|
|
10 %
|
Depreciation and
amortization
|
128
|
|
113
|
|
13 %
|
|
254
|
|
217
|
|
17 %
|
Food and beverage
service
|
67
|
|
60
|
|
12 %
|
|
125
|
|
114
|
|
10 %
|
Third-party regional
carrier expense
|
64
|
|
54
|
|
19 %
|
|
118
|
|
106
|
|
11 %
|
Other
|
186
|
|
182
|
|
2 %
|
|
391
|
|
359
|
|
9 %
|
Special items -
operating
|
146
|
|
186
|
|
(22) %
|
|
180
|
|
250
|
|
(28) %
|
Total Operating
Expenses
|
2,575
|
|
2,501
|
|
3 %
|
|
4,973
|
|
4,883
|
|
2 %
|
Operating
Income
|
322
|
|
337
|
|
(4) %
|
|
156
|
|
151
|
|
3 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating Income
(Expense)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
24
|
|
22
|
|
9 %
|
|
41
|
|
39
|
|
5 %
|
Interest
expense
|
(36)
|
|
(28)
|
|
29 %
|
|
(71)
|
|
(56)
|
|
27 %
|
Interest
capitalized
|
6
|
|
7
|
|
(14) %
|
|
12
|
|
14
|
|
(14) %
|
Special items - net
non-operating
|
—
|
|
(6)
|
|
(100) %
|
|
—
|
|
(6)
|
|
(100) %
|
Other - net
|
—
|
|
(7)
|
|
(100) %
|
|
—
|
|
(16)
|
|
(100) %
|
Total Non-operating
Expense
|
(6)
|
|
(12)
|
|
(50) %
|
|
(18)
|
|
(25)
|
|
(28) %
|
Income Before Income
Tax
|
316
|
|
325
|
|
|
|
138
|
|
126
|
|
|
Income tax
expense
|
96
|
|
85
|
|
|
|
50
|
|
28
|
|
|
Net
Income
|
$
220
|
|
$
240
|
|
|
|
$
88
|
|
$
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share
|
$
1.74
|
|
$
1.88
|
|
|
|
$
0.70
|
|
$
0.77
|
|
|
Diluted Earnings Per
Share
|
$
1.71
|
|
$
1.86
|
|
|
|
$
0.69
|
|
$
0.76
|
|
|
Weighted Average Shares
Outstanding used
for computation:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
126.337
|
|
127.440
|
|
|
|
126.153
|
|
127.470
|
|
|
Diluted
|
128.310
|
|
128.919
|
|
|
|
127.857
|
|
128.860
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
|
|
|
|
(in
millions)
|
June 30,
2024
|
|
December 31,
2023
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$
1,115
|
|
$
281
|
Marketable
securities
|
1,394
|
|
1,510
|
Total cash and
marketable securities
|
2,509
|
|
1,791
|
Receivables -
net
|
370
|
|
383
|
Inventories and
supplies - net
|
106
|
|
116
|
Prepaid
expenses
|
179
|
|
176
|
Other current
assets
|
212
|
|
239
|
Total Current
Assets
|
3,376
|
|
2,705
|
|
|
|
|
Property and
Equipment
|
|
|
|
Aircraft and other
flight equipment
|
10,734
|
|
10,425
|
Other property and
equipment
|
1,941
|
|
1,814
|
Deposits for future
flight equipment
|
383
|
|
491
|
|
13,058
|
|
12,730
|
Less accumulated
depreciation and amortization
|
4,537
|
|
4,342
|
Total Property and
Equipment - net
|
8,521
|
|
8,388
|
|
|
|
|
Other
Assets
|
|
|
|
Operating lease
assets
|
1,142
|
|
1,195
|
Goodwill and intangible
assets
|
2,033
|
|
2,033
|
Other noncurrent
assets
|
270
|
|
292
|
Total Other
Assets
|
3,445
|
|
3,520
|
|
|
|
|
Total
Assets
|
$
15,342
|
|
$
14,613
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
|
|
|
|
(in millions,
except share amounts)
|
June 30,
2024
|
|
December 31,
2023
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
Liabilities
|
|
|
|
Accounts
payable
|
$
203
|
|
$
207
|
Accrued wages, vacation
and payroll taxes
|
513
|
|
584
|
Air traffic
liability
|
1,576
|
|
1,136
|
Other accrued
liabilities
|
852
|
|
800
|
Deferred
revenue
|
1,312
|
|
1,221
|
Current portion of
operating lease liabilities
|
153
|
|
158
|
Current portion of
long-term debt and finance leases
|
359
|
|
353
|
Total Current
Liabilities
|
4,968
|
|
4,459
|
|
|
|
|
Long-Term Debt, Net
of Current Portion
|
2,313
|
|
2,182
|
|
|
|
|
Noncurrent
Liabilities
|
|
|
|
Long-term operating
lease liabilities, net of current portion
|
1,050
|
|
1,125
|
Deferred income
taxes
|
746
|
|
695
|
Deferred
revenue
|
1,329
|
|
1,382
|
Obligation for pension
and post-retirement medical benefits
|
358
|
|
362
|
Other
liabilities
|
352
|
|
295
|
Total Noncurrent
Liabilities
|
3,835
|
|
3,859
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
Preferred stock, $0.01
par value, Authorized: 5,000,000 shares, none issued or
outstanding
|
—
|
|
—
|
Common stock, $0.01
par value, Authorized: 400,000,000 shares, Issued: 2024 -
140,570,032 shares; 2023 - 138,960,830 shares, Outstanding: 2024 -
126,475,292
shares; 2023 - 126,090,353 shares
|
1
|
|
1
|
Capital in excess of
par value
|
757
|
|
695
|
Treasury stock
(common), at cost: 2024 - 14,094,740 shares; 2023 - 12,870,477
shares
|
(868)
|
|
(819)
|
Accumulated other
comprehensive loss
|
(287)
|
|
(299)
|
Retained
earnings
|
4,623
|
|
4,535
|
|
4,226
|
|
4,113
|
Total Liabilities
and Shareholders' Equity
|
$
15,342
|
|
$
14,613
|
SUMMARY CASH FLOW
(unaudited)
|
|
|
|
|
|
Six Months Ended
June 30, 2024
|
|
Three Months
Ended March 31,
2024(a)
|
|
Three Months
Ended June 30,
2024(b)
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
Net Income
(Loss)
|
$
88
|
|
$
(132)
|
|
$
220
|
Adjustments to
reconcile net income to net cash provided by
operating activities
|
291
|
|
168
|
|
123
|
Changes in working
capital
|
493
|
|
256
|
|
237
|
Net cash provided by
operating activities
|
872
|
|
292
|
|
580
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
Property and equipment
additions
|
(587)
|
|
(57)
|
|
(530)
|
Supplier
proceeds
|
162
|
|
162
|
|
—
|
Other investing
activities
|
290
|
|
213
|
|
77
|
Net cash provided by
(used in) investing activities
|
(135)
|
|
318
|
|
(453)
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
87
|
|
(5)
|
|
92
|
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
824
|
|
605
|
|
219
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
308
|
|
308
|
|
913
|
Cash, cash
equivalents, and restricted cash at end of the
period
|
$
1,132
|
|
$
913
|
|
$
1,132
|
(a)
|
As reported in Form
10-Q for the first quarter of 2024.
|
(b)
|
Cash flows for the
three months ended June 30, 2024 can be calculated by subtracting
cash flows from the three months ended March 31, 2024 from the six
months ended June 30, 2024.
|
SPECIAL ITEMS (unaudited)
Air Group has classified certain operating and
non-operating expenses as special items due to their unusual or
infrequently occurring nature. We believe disclosing information
about these items separately improves comparable year over year
analysis and allows stakeholders to better understand our results
of operations. A description of the special items is provided
below.
Fleet transition: Fleet transition costs are associated
with the retirement and disposition of Airbus and Q400
aircraft.
Labor agreements: Labor agreement costs are for
retroactive pay for Alaska flight
attendants pursuant to the tentative agreement reached in the
second quarter of 2024 and for changes to Alaska pilots' sick leave benefits resulting
from an agreement signed in the first quarter of 2023.
Integration costs: Integration costs are associated with
the proposed acquisition of Hawaiian Airlines.
Litigation: Litigation costs represent expenses
associated with the Virgin trademark license agreement with the
Virgin Group and recorded following a negative ruling in an appeal
case in the second quarter of 2024.
Net non-operating: These costs are for interest expense
associated with certain A321neo lease agreements which were
modified as part of Alaska's fleet
transition.
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Operating
Expenses
|
|
|
|
|
|
|
|
Fleet
transition
|
$
41
|
|
$
186
|
|
$
67
|
|
$
199
|
Labor
agreements
|
30
|
|
—
|
|
30
|
|
51
|
Integration
costs
|
30
|
|
—
|
|
38
|
|
—
|
Litigation
|
45
|
|
—
|
|
45
|
|
—
|
Special items -
operating
|
$
146
|
|
$
186
|
|
$
180
|
|
$
250
|
|
|
|
|
|
|
|
|
Non-operating Income
(Expense)
|
|
|
|
|
|
|
|
Special items - net
non-operating
|
$
—
|
|
$
(6)
|
|
$
—
|
|
$
(6)
|
OPERATING STATISTICS
(unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2024
|
|
2023
|
|
Change
|
|
2024
|
|
2023
|
|
Change
|
Consolidated
Operating Statistics:(a)
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers
(000)
|
11,888
|
|
11,592
|
|
3 %
|
|
21,662
|
|
21,444
|
|
1 %
|
RPMs (000,000)
"traffic"
|
15,309
|
|
14,936
|
|
2 %
|
|
27,833
|
|
27,491
|
|
1 %
|
ASMs (000,000)
"capacity"
|
18,196
|
|
17,160
|
|
6 %
|
|
33,575
|
|
32,865
|
|
2 %
|
Load factor
|
84.1 %
|
|
87.0 %
|
|
(2.9) pts
|
|
82.9 %
|
|
83.6 %
|
|
(0.7) pts
|
Yield
|
17.32¢
|
|
17.40¢
|
|
— %
|
|
16.73¢
|
|
16.67¢
|
|
— %
|
PRASM
|
14.57¢
|
|
15.14¢
|
|
(4) %
|
|
13.86¢
|
|
13.94¢
|
|
(1) %
|
RASM
|
15.92¢
|
|
16.54¢
|
|
(4) %
|
|
15.28¢
|
|
15.32¢
|
|
— %
|
CASMex(b)
|
9.89¢
|
|
10.08¢
|
|
(2) %
|
|
10.67¢
|
|
10.25¢
|
|
4 %
|
Economic fuel cost per
gallon(b)
|
$2.84
|
|
$2.76
|
|
3 %
|
|
$2.95
|
|
$3.07
|
|
(4) %
|
Fuel gallons
(000,000)
|
219
|
|
207
|
|
6 %
|
|
406
|
|
396
|
|
3 %
|
ASMs per
gallon
|
83.1
|
|
82.9
|
|
— %
|
|
82.7
|
|
83.0
|
|
— %
|
Departures
(000)
|
112.4
|
|
104.4
|
|
8 %
|
|
208.1
|
|
199.8
|
|
4 %
|
Average full-time
equivalent employees
(FTEs)
|
23,368
|
|
23,301
|
|
— %
|
|
23,190
|
|
23,140
|
|
— %
|
Operating
fleet(c)
|
326
|
|
307
|
|
19 a/c
|
|
326
|
|
307
|
|
19 a/c
|
(a)
|
Except for FTEs, data
includes information related to third-party regional capacity
purchase flying arrangements.
|
(b)
|
See a reconciliation of
this non-GAAP measure and Note A for a discussion of the importance
of this measure to investors in the accompanying pages.
|
(c)
|
Includes aircraft owned
and leased by Alaska and Horizon as well as aircraft operated by
third-party regional carriers under capacity purchase agreements.
Excludes all aircraft removed from operating service.
|
GAAP TO NON-GAAP RECONCILIATIONS (unaudited)
We are providing reconciliations of reported non-GAAP financial
measures to their most directly comparable financial measures
reported on a GAAP basis. Amounts in the tables below are rounded
to the nearest million. As a result, a manual recalculation of
certain figures using these rounded amounts may not agree directly
to the actual figures presented in the tables below.
Income (Loss) Before
Income Tax Reconciliation
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(in
millions)
|
2024
|
2023
|
|
2024
|
2023
|
Income before income
tax
|
$
316
|
|
$
325
|
|
$
138
|
|
$
126
|
Adjusted
for:
|
|
|
|
|
|
|
|
Mark-to-market fuel
hedge adjustment
|
(5)
|
|
1
|
|
(18)
|
|
21
|
Special items -
operating
|
146
|
|
186
|
|
180
|
|
250
|
Special items - net
non-operating
|
—
|
|
6
|
|
—
|
|
6
|
Adjusted income
before income tax
|
$
457
|
|
$
518
|
|
$
300
|
|
$
403
|
|
|
|
|
|
|
|
|
Pretax
margin
|
10.9 %
|
|
11.5 %
|
|
2.7 %
|
|
2.5 %
|
Adjusted pretax
margin
|
15.8 %
|
|
18.3 %
|
|
5.8 %
|
|
8.0 %
|
CASMex
Reconciliation
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
(in
millions)
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Total operating
expenses
|
$
2,575
|
|
$
2,501
|
|
$
4,973
|
|
$
4,883
|
Less the following
components:
|
|
|
|
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
615
|
|
573
|
|
1,180
|
|
1,238
|
Freighter
costs
|
13
|
|
12
|
|
28
|
|
26
|
Special items -
operating
|
146
|
|
186
|
|
180
|
|
250
|
Total operating
expenses, excluding fuel, freighter
costs, and special items
|
$
1,801
|
|
$
1,730
|
|
$
3,585
|
|
$
3,369
|
|
|
|
|
|
|
|
|
ASMs
|
18,196
|
|
17,160
|
|
33,575
|
|
32,865
|
CASMex
|
9.89 ¢
|
|
10.08 ¢
|
|
10.67 ¢
|
|
10.25 ¢
|
Fuel
Reconciliation
|
|
Three Months Ended
June 30,
|
|
2024
|
|
2023
|
(in millions,
except for per-gallon amounts)
|
Dollars
|
|
Cost/Gallon
|
|
Dollars
|
|
Cost/Gallon
|
Raw or "into-plane"
fuel cost
|
$
610
|
|
$
2.79
|
|
$
555
|
|
$
2.68
|
Losses on settled
hedges
|
10
|
|
0.05
|
|
17
|
|
0.08
|
Economic fuel
expense
|
$
620
|
|
$
2.84
|
|
$
572
|
|
$
2.76
|
Mark-to-market fuel
hedge adjustment
|
(5)
|
|
(0.03)
|
|
1
|
|
—
|
Aircraft fuel,
including hedging gains and losses
|
$
615
|
|
$
2.81
|
|
$
573
|
|
$
2.76
|
Fuel
gallons
|
|
|
219
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
2024
|
|
2023
|
(in millions,
except for per gallon amounts)
|
Dollars
|
|
Cost/Gallon
|
|
Dollars
|
|
Cost/Gallon
|
Raw or "into-plane"
fuel cost
|
$
1,175
|
|
$
2.89
|
|
$
1,188
|
|
$
3.00
|
Losses on settled
hedges
|
23
|
|
0.06
|
|
29
|
|
0.07
|
Economic fuel
expense
|
$
1,198
|
|
$
2.95
|
|
$
1,217
|
|
$
3.07
|
Mark-to-market fuel
hedge adjustment
|
(18)
|
|
(0.05)
|
|
21
|
|
0.05
|
Aircraft fuel,
including hedging gains and losses
|
$
1,180
|
|
$
2.90
|
|
$
1,238
|
|
$
3.12
|
Fuel
gallons
|
|
|
406
|
|
|
|
396
|
Debt-to-capitalization, including operating and
finance leases
|
(in
millions)
|
June 30,
2024
|
|
December 31,
2023
|
Long-term debt, net of
current portion
|
$
2,313
|
|
$
2,182
|
Capitalized operating
leases
|
1,203
|
|
1,283
|
Capitalized finance
leases(a)
|
—
|
|
64
|
Adjusted debt, net of
current portion of long-term debt
|
3,516
|
|
3,529
|
Shareholders'
equity
|
4,226
|
|
4,113
|
Total Invested
Capital
|
$
7,742
|
|
$
7,642
|
|
|
|
|
Debt-to-capitalization ratio, including operating
and finance leases
|
45 %
|
|
46 %
|
(a)
|
We included our
capitalized finance lease balance as of December 31, 2023, which
was recognized within the 'Current portion of long-term debt and
finance leases' line of the condensed consolidated balance
sheets.
|
Adjusted net debt to
earnings before interest, taxes, depreciation, amortization, rent,
and special items
|
(in
millions)
|
June 30,
2024
|
|
December 31,
2023
|
Current portion of
long-term debt and finance leases
|
$
359
|
|
$
353
|
Current portion of
operating lease liabilities
|
153
|
|
158
|
Long-term
debt
|
2,313
|
|
2,182
|
Long-term operating
lease liabilities, net of current portion
|
1,050
|
|
1,125
|
Total adjusted
debt
|
3,875
|
|
3,818
|
Less: Total cash and
marketable securities
|
2,509
|
|
1,791
|
Adjusted net
debt
|
$
1,366
|
|
$
2,027
|
|
|
|
|
(in
millions)
|
Twelve Months
Ended
June 30, 2024
|
|
Twelve Months
Ended
December 31, 2023
|
Operating
Income(a)
|
$
399
|
|
$
394
|
Adjusted
for:
|
|
|
|
Special items -
operating
|
373
|
|
443
|
Mark-to-market fuel
hedge adjustments
|
(41)
|
|
(2)
|
Depreciation and
amortization
|
488
|
|
451
|
Aircraft
rent
|
188
|
|
208
|
EBITDAR
|
$
1,407
|
|
$
1,494
|
|
|
|
|
Adjusted net debt to
EBITDAR
|
1.0x
|
|
1.4x
|
(a)
|
Operating income can be
reconciled using the trailing twelve month operating income as
filed quarterly with the SEC.
|
Note A: Pursuant to Regulation G, we are providing
reconciliations of reported non-GAAP financial measures to their
most directly comparable financial measures reported on a GAAP
basis. We believe that consideration of these non-GAAP financial
measures may be important to investors for the following
reasons:
- By excluding certain costs from our unit metrics, we believe
that we have better visibility into the results of operations. Our
industry is highly competitive and is characterized by high fixed
costs, so even a small reduction in non-fuel operating costs can
result in a significant improvement in operating results. We
believe that all domestic carriers are similarly impacted by
changes in jet fuel costs over the long run, so it is important for
management and investors to understand the impact of
company-specific cost drivers which are more controllable by
management. We adjust for expenses related directly to our
freighter aircraft operations to allow for better comparability to
other domestic carriers that do not operate freighter aircraft. We
also exclude certain special charges as they are unusual or
nonrecurring in nature and adjusting for these expenses allows
management and investors to better understand our cost
performance.
- CASMex is one of the most important measures used by management
and by the Air Group Board of Directors in assessing quarterly and
annual cost performance. CASMex is also a measure commonly used by
industry analysts, and we believe it is the basis by which they
have historically compared our airline to others in the industry.
The measure is also the subject of frequent questions from
investors.
- Adjusted pretax income is an important metric for the employee
incentive plan, which covers the majority of Air Group
employees.
- Disclosure of the individual impact of certain noted items
provides investors the ability to measure and monitor performance
both with and without these special items. We believe that
disclosing the impact of these items as noted above is important
because it provides information on significant items that are not
necessarily indicative of future performance. Industry analysts and
investors consistently measure our performance without these items
for better comparability between periods and among other
airlines.
- Although we disclose our unit revenue, we do not, nor are we
able to, evaluate unit revenue excluding the impact that changes in
fuel costs have had on ticket prices. Fuel expense represents a
large percentage of our total operating expenses. Fluctuations in
fuel prices often drive changes in unit revenue in the mid-to-long
term. Although we believe it is useful to evaluate non-fuel unit
costs for the reasons noted above, we would caution readers of
these financial statements not to place undue reliance on unit
costs excluding fuel as a measure or predictor of future
profitability because of the significant impact of fuel costs on
our business.
GLOSSARY OF TERMS
Adjusted net debt - long-term debt, including current
portion, plus capitalized operating and finance leases, less cash
and marketable securities
Adjusted net debt to EBITDAR - represents net
adjusted debt divided by EBITDAR (trailing twelve months earnings
before interest, taxes, depreciation, amortization, special items
and rent)
Aircraft Utilization - block hours per day; this
represents the average number of hours per day our aircraft are in
transit
Aircraft Stage Length - represents the average miles
flown per aircraft departure
ASMs - available seat miles, or "capacity";
represents total seats available across the fleet multiplied by the
number of miles flown
CASM - operating costs per ASM; represents all
operating expenses including fuel, freighter costs, and special
items
CASMex - operating costs excluding fuel, freighter
costs, and special items per ASM, or "unit cost"
Debt-to-capitalization ratio - represents adjusted
debt (long-term debt plus capitalized operating and finance lease
liabilities) divided by total equity plus adjusted debt
Diluted Earnings per Share - represents earnings per
share (EPS) using fully diluted shares outstanding
Diluted Shares - represents the total number of shares
that would be outstanding if all possible sources of conversion,
such as stock options, were exercised
Economic Fuel - best estimate of the
cash cost of fuel, net of the impact of our fuel-hedging
program
Freighter Costs - operating expenses directly
attributable to the operation of Alaska's Boeing 737 freighter aircraft
exclusively performing cargo missions
Load Factor - RPMs as a percentage of ASMs;
represents the number of available seats that were filled with
paying passengers
PRASM - passenger revenue per ASM, or "passenger
unit revenue"
RASM - operating revenue per ASMs, or "unit
revenue"; operating revenue includes all passenger revenue, freight
& mail, Mileage Plan and other ancillary revenue; represents
the average total revenue for flying one seat one mile
RPMs - revenue passenger miles, or "traffic";
represents the number of seats that were filled with paying
passengers; one passenger traveling one mile is one RPM
Yield - passenger revenue per RPM; represents the
average revenue for flying one passenger one mile
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SOURCE Alaska Air Group, Inc.