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21.10.2021 12:00:00
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Alaska Air Group reports third quarter 2021 results
SEATTLE, Oct. 21, 2021 /PRNewswire/ -- Alaska Air Group (NYSE: ALK) today reported financial results for its third quarter ending Sept. 30, 2021, and provided outlook for the fourth quarter ending Dec. 31, 2021.
The third quarter marks a significant stride forward in Alaska Air Group's path to recovery. Alaska's goal from the beginning of the pandemic has been deliberate - scaling the business back up in a measured way, leveraging the company's strong balance sheet, and running a resilient operation, all with the aim of producing consistent industry-leading financial performance.
"We are thrilled to return to profitability this quarter, leading the industry with a 12% pretax profit margin," said CEO Ben Minicucci. "Thanks to each one of our employees for running our operation and showing remarkable care for our guests, and credit to the leadership team for laying out a measured plan and executing it with discipline. We're all feeling the momentum and look forward to building on our strong foundation for growth in 2022 and beyond."
Financial Results:
- Reported net income for the third quarter of 2021 under Generally Accepted Accounting Principles (GAAP) of $194 million, or $1.53 per share, compared to a net loss of $431 million, or $3.49 per share in the third quarter of 2020.
- Reported net income for the third quarter of 2021, excluding special items and mark-to-market fuel hedge accounting adjustments, of $187 million, or $1.47 per share, compared to an adjusted net loss of $399 million or $3.23 per share, in the third quarter of 2020. This quarter's adjusted results compare to the First Call analyst consensus estimate of $1.30 per share.
- Generated adjusted pre-tax margin for the third quarter of 2021 of 12%.
- Reported a debt-to-capitalization ratio of 51%, a reduction of 10 points from Dec. 31, 2020.
- Made a $100 million voluntary contribution to the defined benefit plan for Alaska's pilots in the third quarter, boosting estimated combined funded status of all defined benefit plans to 94%.
- Held $3.2 billion in unrestricted cash and marketable securities as of Sept. 30, 2021.
- Prepaid $425 million in debt from the 364-day term loan facility, bringing total debt payments to $1.2 billion for the year.
Operational Updates:
- Exercised options for 12 Boeing 737-9 aircraft slated for delivery in 2023 and 2024, and added options for an additional 25 deliveries, bringing Alaska's total firm commitments for 737-9 aircraft to 93 and available options to 52.
- Ratified amended wage agreement for Horizon Air pilots, represented by the International Brotherhood of Teamsters.
- Opened new San Francisco International Airport Lounge with 9,200 square feet of Bay-Area inspired amenities.
- Announced new nonstop flights between San Francisco and Loreto and Ixtapa/Zihuatanejo, with service slated to begin Dec. 18. Since the onset of the pandemic, approximately 70 new markets have been announced or commenced operation.
- Resumed and expanded inflight meals, snacks, and drinks in all classes of service.
- Continued to exceed internal metrics for guest satisfaction, highlighting our commitment to providing our guests a smooth and safe experience throughout their journey.
- Near the top of the industry for on-time arrivals and completion rates in the third quarter.
Environmental, Social and Governance Updates:
- Appointed Adrienne Lofton, vice president of global marketing at Google, to the Company's board of directors.
- Announced formation of Alaska Star Ventures, an entity created to identify and further technologies that accelerate Alaska Airlines' path to net zero carbon emissions.
- Supported the Afghan Humanitarian Airlift Mission and the U.S. military by operating Civil Reserve Air Fleet flights in the evacuation of individuals and families from Afghanistan.
- Awarded $260,000 in LIFT Grants to 25 nonprofits focused on a clear vision to provide the next generation of leaders with the knowledge, skills and providing pathways for success through the Alaska Airlines Foundation.
The following table reconciles the company's reported GAAP net income (loss) per share (EPS) for the three and nine months ended Sept. 30, 2021 and 2020 to adjusted amounts.
Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | ||||||||||||||
(in millions, except per-share amounts) | Dollars | Diluted EPS | Dollars | EPS | |||||||||||
GAAP net income (loss) per share | $ | 194 | $ | 1.53 | $ | (431) | $ | (3.49) | |||||||
Payroll support program wage offset | — | — | (398) | (3.22) | |||||||||||
Mark-to-market fuel hedge adjustments | — | — | (3) | (0.02) | |||||||||||
Special items - impairment charges and other | (9) | (0.07) | 121 | 0.98 | |||||||||||
Special items - restructuring charges | — | — | 322 | 2.60 | |||||||||||
Special items - merger-related costs | — | — | 1 | 0.01 | |||||||||||
Income tax effect of reconciling items above | 2 | 0.01 | (11) | (0.09) | |||||||||||
Non-GAAP adjusted net income (loss) per share | $ | 187 | $ | 1.47 | $ | (399) | $ | (3.23) | |||||||
Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | ||||||||||||||
(in millions, except per-share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
GAAP net income (loss) per share | $ | 460 | $ | 3.64 | $ | (877) | $ | (7.12) | |||||||
Payroll support program wage offset | (914) | (7.24) | (760) | (6.16) | |||||||||||
Mark-to-market fuel hedge adjustments | (68) | (0.54) | — | — | |||||||||||
Special items - impairment charges and other | 5 | 0.04 | 350 | 2.84 | |||||||||||
Special items - restructuring charges | (12) | (0.09) | 322 | 2.61 | |||||||||||
Special items - merger-related costs | — | — | 5 | 0.04 | |||||||||||
Income tax effect of reconciling items above | 242 | 1.92 | 20 | 0.16 | |||||||||||
Non-GAAP adjusted net loss per share | $ | (287) | $ | (2.27) | $ | (940) | $ | (7.63) | |||||||
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.
A conference call regarding the third quarter results will be streamed online at 8:30 a.m. PDT on October 21, 2021. It can be accessed at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of 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, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, 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 any forward-looking statements. 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, 2020. Some of these risks include the risks associated with contagious illnesses and contagion, such as COVID-19, general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our indebtedness, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, and changes in laws and regulations. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. 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 after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance, or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.
Alaska Airlines and its regional partners serve more than 120 destinations across the United States and to Mexico, Canada and Costa Rica. The airline emphasizes Next-Level Care for its guests, along with providing low fares, award-winning customer service and sustainability efforts. Alaska is a member of oneworld. With the global alliance and the airline's additional partners, guests can travel to more than 1,000 destinations on more than 20 airlines while earning and redeeming miles on flights to locations around the world. Learn more about Alaska at newsroom.alaskaair.com and blog.alaskaair.com. Alaska Airlines and Horizon Air are subsidiaries of Alaska Air Group (NYSE: ALK).
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | |||||||||||||||||||||
Alaska Air Group, Inc. | |||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
(in millions, except per-share amounts) | 2021 | 2020 | Change | 2021 | 2020 | Change | |||||||||||||||
Operating Revenues: | |||||||||||||||||||||
Passenger revenue | $ | 1,774 | $ | 572 | 210 | % | $ | 3,785 | $ | 2,362 | 60 | % | |||||||||
Mileage Plan other revenue | 120 | 84 | 43 | % | 332 | 266 | 25 | % | |||||||||||||
Cargo and other | 59 | 45 | 31 | % | 160 | 130 | 23 | % | |||||||||||||
Total Operating Revenues | 1,953 | 701 | 179 | % | 4,277 | 2,758 | 55 | % | |||||||||||||
Operating Expenses: | |||||||||||||||||||||
Wages and benefits | 578 | 495 | 17 | % | 1,581 | 1,579 | — | % | |||||||||||||
Payroll support program wage offset | — | (398) | (100) | % | (914) | (760) | 20 | % | |||||||||||||
Variable incentive pay | 42 | 42 | — | % | 109 | 65 | 68 | % | |||||||||||||
Aircraft fuel, including hedging gains and losses | 376 | 125 | 201 | % | 853 | 568 | 50 | % | |||||||||||||
Aircraft maintenance | 89 | 84 | 6 | % | 272 | 244 | 11 | % | |||||||||||||
Aircraft rent | 64 | 74 | (14) | % | 188 | 229 | (18) | % | |||||||||||||
Landing fees and other rentals | 141 | 109 | 29 | % | 414 | 323 | 28 | % | |||||||||||||
Contracted services | 62 | 36 | 72 | % | 167 | 138 | 21 | % | |||||||||||||
Selling expenses | 49 | 24 | 104 | % | 123 | 83 | 48 | % | |||||||||||||
Depreciation and amortization | 99 | 105 | (6) | % | 294 | 320 | (8) | % | |||||||||||||
Food and beverage service | 39 | 14 | 179 | % | 97 | 70 | 39 | % | |||||||||||||
Third-party regional carrier expense | 39 | 29 | 34 | % | 106 | 92 | 15 | % | |||||||||||||
Other | 126 | 89 | 42 | % | 348 | 310 | 12 | % | |||||||||||||
Special items - impairment charges and other | (9) | 121 | (107) | % | 5 | 350 | (99) | % | |||||||||||||
Special items - restructuring charges | — | 322 | . | (100) | % | (12) | 322 | (104) | % | ||||||||||||
Special items - merger-related costs | — | 1 | (100) | % | — | 5 | (100) | % | |||||||||||||
Total Operating Expenses | 1,695 | 1,272 | 33 | % | 3,631 | 3,938 | (8) | % | |||||||||||||
Operating Income (Expense) | 258 | (571) | (145) | % | 646 | (1,180) | (155) | % | |||||||||||||
Nonoperating Income (Expense): | |||||||||||||||||||||
Interest income | 6 | 7 | (14) | % | 19 | 23 | (17) | % | |||||||||||||
Interest expense | (30) | (34) | (12) | % | (101) | (64) | 58 | % | |||||||||||||
Interest capitalized | 3 | 4 | (25) | % | 9 | 8 | 13 | % | |||||||||||||
Other - net | 8 | 5 | 60 | % | 27 | 16 | 69 | % | |||||||||||||
Total Nonoperating Expense | (13) | (18) | (28) | % | (46) | (17) | 171 | % | |||||||||||||
Income (Loss) Before Income Tax | 245 | (589) | 600 | (1,197) | |||||||||||||||||
Income tax expense (benefit) | 51 | (158) | 140 | (320) | |||||||||||||||||
Net Income (Loss) | $ | 194 | $ | (431) | $ | 460 | $ | (877) | |||||||||||||
Basic Income (Loss) Per Share: | $ | 1.55 | $ | (3.49) | $ | 3.69 | $ | (7.12) | |||||||||||||
Diluted Income (Loss) Per Share: | $ | 1.53 | $ | (3.49) | $ | 3.64 | $ | (7.12) | |||||||||||||
Shares Used for Computation: | |||||||||||||||||||||
Basic | 125.250 | 123.647 | 124.846 | 123.255 | |||||||||||||||||
Diluted | 127.188 | 123.647 | 126.325 | 123.255 | |||||||||||||||||
Cash dividend declared per share: | $ | — | $ | — | $ | — | $ | 0.375 | |||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | |||||||
Alaska Air Group, Inc. | |||||||
(in millions) | September 30, 2021 | December 31, 2020 | |||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 495 | $ | 1,370 | |||
Marketable securities | 2,700 | 1,976 | |||||
Total cash and marketable securities | 3,195 | 3,346 | |||||
Receivables - net | 536 | 480 | |||||
Inventories and supplies - net | 62 | 57 | |||||
Prepaid expenses, assets held-for-sale, and other current assets | 208 | 123 | |||||
Total Current Assets | 4,001 | 4,006 | |||||
Property and Equipment | |||||||
Aircraft and other flight equipment | 8,076 | 7,761 | |||||
Other property and equipment | 1,446 | 1,398 | |||||
Deposits for future flight equipment | 378 | 583 | |||||
9,900 | 9,742 | ||||||
Less accumulated depreciation and amortization | 3,780 | 3,531 | |||||
Total Property and Equipment - Net | 6,120 | 6,211 | |||||
Operating lease assets | 1,370 | 1,400 | |||||
Goodwill | 1,943 | 1,943 | |||||
Intangible assets - net | 102 | 107 | |||||
Other noncurrent assets | 346 | 379 | |||||
Other Assets | 3,761 | 3,829 | |||||
Total Assets | $ | 13,882 | $ | 14,046 | |||
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | |||||||
(in millions, except share amounts) | September 30, 2021 | December 31, 2020 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 181 | $ | 108 | |||
Accrued wages, vacation and payroll taxes | 441 | 527 | |||||
Air traffic liability | 1,225 | 1,073 | |||||
Other accrued liabilities | 587 | 424 | |||||
Deferred revenue | 904 | 733 | |||||
Current portion of operating lease liabilities | 275 | 290 | |||||
Current portion of long-term debt | 425 | 1,138 | |||||
Total Current Liabilities | 4,038 | 4,293 | |||||
Long-Term Debt, Net of Current Portion | 2,225 | 2,357 | |||||
Noncurrent Liabilities | |||||||
Long-term operating lease liabilities, net of current portion | 1,191 | 1,268 | |||||
Deferred income taxes | 501 | 407 | |||||
Deferred revenue | 1,446 | 1,544 | |||||
Obligation for pension and postretirement medical benefits | 558 | 665 | |||||
Other liabilities | 392 | 524 | |||||
4,088 | 4,408 | ||||||
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: 2021 - 134,655,235 shares; 2020 - 133,567,534 shares, Outstanding: 2021 - 125,305,291 shares; 2020 - 124,217,590 shares | 1 | 1 | |||||
Capital in excess of par value | 462 | 391 | |||||
Treasury stock (common), at cost: 2021 - 9,349,944 shares; 2020 - 9,349,944 shares | (674) | (674) | |||||
Accumulated other comprehensive loss | (482) | (494) | |||||
Retained earnings | 4,224 | 3,764 | |||||
3,531 | 2,988 | ||||||
Total Liabilities and Shareholders' Equity | $ | 13,882 | $ | 14,046 | |||
SUMMARY CASH FLOW (unaudited) | |||||||||||
Alaska Air Group, Inc. | |||||||||||
(in millions) | Nine Months Ended | Six Months Ended | Three Months Ended September 30, 2021(b) | ||||||||
Cash Flows from Operating Activities: | |||||||||||
Net income | $ | 460 | $ | 266 | $ | 194 | |||||
Non-cash reconciling items | 322 | 221 | 101 | ||||||||
Changes in working capital | 119 | 520 | (401) | ||||||||
Net cash provided by (used in) operating activities | 901 | 1,007 | (106) | ||||||||
Cash Flows from Investing Activities: | |||||||||||
Property and equipment additions | (190) | (102) | (88) | ||||||||
Other investing activities | (753) | (968) | 215 | ||||||||
Net cash provided by (used in) investing activities | (943) | (1,070) | 127 | ||||||||
Cash Flows from Financing Activities: | (825) | (281) | (544) | ||||||||
Net decrease in cash and cash equivalents | $ | (867) | $ | (344) | $ | (523) | |||||
Cash, cash equivalents, and restricted cash at beginning of period | 1,386 | 1,386 | 1,042 | ||||||||
Cash, cash equivalents, and restricted cash at end of the period | $ | 519 | $ | 1,042 | $ | 519 | |||||
(a) | As reported in Form 10-Q for the second quarter of 2021. |
(b) | Cash flows for the three months ended September 30, 2021, can be calculated by subtracting cash flows for the six months ended June 30, 2021, as reported in Form 10-Q for the second quarter 2021, from the nine months ended September 30, 2021. |
OPERATING STATISTICS SUMMARY (unaudited) | |||||||||||
Alaska Air Group, Inc. | |||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2021 | 2020 | Change | 2021 | 2020 | Change | ||||||
Consolidated Operating Statistics:(a) | |||||||||||
Revenue passengers (000) | 9,832 | 3,595 | 173.5% | 23,211 | 14,012 | 65.7% | |||||
RPMs (000,000) "traffic" | 11,592 | 3,817 | 203.7% | 27,319 | 16,127 | 69.4% | |||||
ASMs (000,000) "capacity" | 14,429 | 7,871 | 83.3% | 38,238 | 27,483 | 39.1% | |||||
Load factor | 80.3% | 48.5% | 31.8 pts | 71.4% | 58.7% | 12.7 pts | |||||
Yield | 15.30¢ | 14.99¢ | 2.1% | 13.85¢ | 14.65¢ | (5.5)% | |||||
RASM | 13.54¢ | 8.90¢ | 52.1% | 11.19¢ | 10.04¢ | 11.5% | |||||
CASMex(b) | 9.21¢ | 14.00¢ | (34.2)% | 9.67¢ | 12.57¢ | (23.1)% | |||||
Economic fuel cost per gallon(b) | $2.05 | $1.32 | 55.3% | $1.93 | $1.65 | 17.0% | |||||
Fuel gallons (000,000) | 183 | 97 | 88.7% | 477 | 344 | 38.7% | |||||
ASM's per gallon | 78.8 | 81.3 | (3.1)% | 80.2 | 79.9 | 0.4% | |||||
Average number of full-time equivalent employees (FTE) | 20,315 | 16,027 | 26.8% | 18,819 | 18,112 | 3.9% | |||||
Mainline Operating Statistics: | |||||||||||
Revenue passengers (000) | 7,065 | 2,156 | 227.7% | 16,367 | 9,736 | 68.1% | |||||
RPMs (000,000) "traffic" | 10,122 | 2,958 | 242.2% | 23,677 | 13,816 | 71.4% | |||||
ASMs (000,000) "capacity" | 12,540 | 6,280 | 99.7% | 33,004 | 23,339 | 41.4% | |||||
Load factor | 80.7% | 47.1% | 33.6 pts | 71.7% | 59.2% | 12.5 pts | |||||
Yield | 14.08¢ | 13.56¢ | 3.8% | 12.68¢ | 13.46¢ | (5.8)% | |||||
RASM | 12.66¢ | 8.14¢ | 55.5% | 10.44¢ | 9.46¢ | 10.4% | |||||
CASMex(b) | 8.45¢ | 13.88¢ | (39.1)% | 8.90¢ | 11.90¢ | (25.2)% | |||||
Economic fuel cost per gallon(b) | $2.03 | $1.31 | 55.0% | $1.91 | $1.66 | 15.1% | |||||
Fuel gallons (000,000) | 147 | 69 | 113.0% | 380 | 270 | 40.7% | |||||
ASM's per gallon | 85.3 | 91.0 | (6.3)% | 86.9 | 86.4 | 0.6% | |||||
Average number of FTE's | 15,116 | 12,032 | 25.6% | 13,870 | 13,730 | 1.0% | |||||
Aircraft utilization | 10.2 | 7.3 | 39.7% | 9.6 | 8.3 | 15.7% | |||||
Average aircraft stage length | 1,313 | 1,244 | 5.5% | 1,313 | 1,263 | 4.0% | |||||
Operating fleet(d) | 210 | 217 | (7) a/c | 210 | 217 | (7) a/c | |||||
Regional Operating Statistics:(c) | |||||||||||
Revenue passengers (000) | 2,767 | 1,439 | 92.3% | 6,843 | 4,276 | 60.0% | |||||
RPMs (000,000) "traffic" | 1,470 | 859 | 71.1% | 3,642 | 2,311 | 57.6% | |||||
ASMs (000,000) "capacity" | 1,889 | 1,592 | 18.7% | 5,235 | 4,143 | 26.4% | |||||
Load factor | 77.8% | 54.0% | 23.8 pts | 69.6% | 55.8% | 13.8 pts | |||||
Yield | 23.72¢ | 19.89¢ | 19.3% | 21.47¢ | 21.72¢ | (1.2)% | |||||
RASM | 19.26¢ | 11.91¢ | 61.7% | 15.80¢ | 13.24¢ | 19.3% | |||||
Operating fleet | 94 | 94 | — a/c | 94 | 94 | — 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) | Data presented includes information for flights operated by Horizon and third-party carriers. |
(d) | Excludes all aircraft removed from operating service. |
Given the unusual nature of 2020, we believe that some analysis of specific financial and operational results compared to 2019 provides meaningful insight. The table below includes comparative results from 2021 to 2019.
FINANCIAL INFORMATION AND OPERATING STATISTICS - 2019 RESULTS (unaudited) | |||||||||||||||||||||
Alaska Air Group, Inc. | |||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2021 | 2019 | Change | 2021 | 2019 | Change | ||||||||||||||||
Passenger revenue | $ | 1,774 | $ | 2,211 | (20) | % | $ | 3,785 | $ | 6,038 | (37) | % | |||||||||
Mileage plan other revenue | 120 | 118 | 2 | % | 332 | 346 | (4) | % | |||||||||||||
Cargo and other | 59 | 60 | (2) | % | 160 | 169 | (5) | % | |||||||||||||
Total operating revenues | $ | 1,953 | $ | 2,389 | (18) | % | $ | 4,277 | $ | 6,553 | (35) | % | |||||||||
Operating expense, excluding fuel and special items | $ | 1,328 | $ | 1,476 | (10) | % | $ | 3,699 | $ | 4,295 | (14) | % | |||||||||
Economic fuel | 376 | 486 | (23) | % | 853 | 1,408 | (39) | % | |||||||||||||
Special items | (9) | 5 | (280) | % | (921) | 39 | NM | ||||||||||||||
Total operating expenses | $ | 1,695 | $ | 1,967 | (14) | % | $ | 3,631 | $ | 5,742 | (37) | % | |||||||||
Consolidated Operating Statistics(a): | |||||||||||||||||||||
Revenue passengers (000) | 9,832 | 12,574 | (22) | % | 23,211 | 35,018 | (34) | % | |||||||||||||
RPMs (000,000) "traffic" | 11,592 | 15,026 | (23) | % | 27,319 | 42,113 | (35) | % | |||||||||||||
ASMs (000,000) "capacity" | 14,429 | 17,519 | (18) | % | 38,238 | 50,006 | (24) | % | |||||||||||||
Load Factor | 80.3% | 85.8% | (5.5) | pts | 71.4% | 84.2% | (12.8) | pts | |||||||||||||
Yield | 15.30¢ | 14.71¢ | 4 | % | 13.85¢ | 14.34¢ | (3) | % | |||||||||||||
RASM | 13.54¢ | 13.64¢ | (1) | % | 11.19¢ | 13.10¢ | (15) | % | |||||||||||||
CASMex | 9.21¢ | 8.43¢ | 9 | % | 9.67¢ | 8.59¢ | 13 | % | |||||||||||||
FTEs | 20,315 | 22,247 | (9) | % | 18,819 | 22,000 | (14) | % | |||||||||||||
(a) | 2019 comparative operating statistics have been recalculated using the information presented above, and as filed in our third quarter 2019 Form 10-Q |
OPERATING SEGMENTS (unaudited) | |||||||||||||||||||||||||||
Alaska Air Group, Inc. | |||||||||||||||||||||||||||
Three Months Ended September 30, 2021 | |||||||||||||||||||||||||||
(in millions) | Mainline | Regional | Horizon | Consolidating | Air Group | Special | Consolidated | ||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||
Passenger revenues | $ | 1,425 | $ | 349 | $ | — | $ | — | $ | 1,774 | $ | — | $ | 1,774 | |||||||||||||
CPA revenues | — | — | 107 | (107) | — | — | — | ||||||||||||||||||||
Mileage Plan other revenue | 105 | 15 | — | — | 120 | — | 120 | ||||||||||||||||||||
Cargo and other | 58 | — | — | 1 | 59 | — | 59 | ||||||||||||||||||||
Total Operating Revenues | 1,588 | 364 | 107 | (106) | 1,953 | — | 1,953 | ||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 1,060 | 288 | 93 | (113) | 1,328 | (9) | 1,319 | ||||||||||||||||||||
Economic fuel | 299 | 77 | — | — | 376 | — | 376 | ||||||||||||||||||||
Total Operating Expenses | 1,359 | 365 | 93 | (113) | 1,704 | (9) | 1,695 | ||||||||||||||||||||
Nonoperating Income (Expense) | |||||||||||||||||||||||||||
Interest income | 7 | — | — | (1) | 6 | — | 6 | ||||||||||||||||||||
Interest expense | (25) | — | (6) | 1 | (30) | — | (30) | ||||||||||||||||||||
Interest capitalized | 2 | — | — | 1 | 3 | — | 3 | ||||||||||||||||||||
Other - net | 8 | — | — | — | 8 | — | 8 | ||||||||||||||||||||
Total Nonoperating Expense | (8) | — | (6) | 1 | (13) | — | (13) | ||||||||||||||||||||
Income (Loss) Before Income Tax | $ | 221 | $ | (1) | $ | 8 | $ | 8 | $ | 236 | $ | 9 | $ | 245 | |||||||||||||
Three Months Ended September 30, 2020 | |||||||||||||||||||||||||||
(in millions) | Mainline | Regional | Horizon | Consolidating | Air Group | Special | Consolidated | ||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||
Passenger revenues | $ | 401 | $ | 171 | $ | — | $ | — | $ | 572 | $ | — | $ | 572 | |||||||||||||
CPA revenues | — | — | 95 | (95) | — | — | — | ||||||||||||||||||||
Mileage Plan other revenue | 65 | 19 | — | — | 84 | — | 84 | ||||||||||||||||||||
Cargo and other | 45 | — | — | — | 45 | — | 45 | ||||||||||||||||||||
Total Operating Revenues | 511 | 190 | 95 | (95) | 701 | — | 701 | ||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 872 | 248 | 78 | (97) | 1,101 | 46 | 1,147 | ||||||||||||||||||||
Economic fuel | 90 | 38 | — | — | 128 | (3) | 125 | ||||||||||||||||||||
Total Operating Expenses | 962 | 286 | 78 | (97) | 1,229 | 43 | 1,272 | ||||||||||||||||||||
Nonoperating Income (Expense) | |||||||||||||||||||||||||||
Interest income | 8 | — | — | (1) | 7 | — | 7 | ||||||||||||||||||||
Interest expense | (28) | — | (6) | — | (34) | — | (34) | ||||||||||||||||||||
Interest capitalized | 4 | — | — | — | 4 | — | 4 | ||||||||||||||||||||
Other - net | 4 | — | — | 1 | 5 | — | 5 | ||||||||||||||||||||
Total Nonoperating Income (Expense) | (12) | — | (6) | — | (18) | — | (18) | ||||||||||||||||||||
Income (Loss) Before Income Tax | $ | (463) | $ | (96) | $ | 11 | $ | 2 | $ | (546) | $ | (43) | $ | (589) | |||||||||||||
Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||
(in millions) | Mainline | Regional | Horizon | Consolidating | Air Group | Special | Consolidated | ||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||
Passenger revenues | $ | 3,003 | $ | 782 | $ | — | $ | — | $ | 3,785 | $ | — | $ | 3,785 | |||||||||||||
CPA revenues | — | — | 322 | (322) | — | — | — | ||||||||||||||||||||
Mileage Plan other revenue | 287 | 45 | — | — | 332 | — | 332 | ||||||||||||||||||||
Cargo and other | 157 | — | — | 3 | 160 | — | 160 | ||||||||||||||||||||
Total Operating Revenues | 3,447 | 827 | 322 | (319) | 4,277 | — | 4,277 | ||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 2,937 | 839 | 272 | (349) | 3,699 | (921) | 2,778 | ||||||||||||||||||||
Economic fuel | 726 | 195 | — | — | 921 | (68) | 853 | ||||||||||||||||||||
Total Operating Expenses | 3,663 | 1,034 | 272 | (349) | 4,620 | (989) | 3,631 | ||||||||||||||||||||
Nonoperating Income (Expense) | |||||||||||||||||||||||||||
Interest income | 20 | — | — | (1) | 19 | — | 19 | ||||||||||||||||||||
Interest expense | (86) | — | (16) | 1 | (101) | — | (101) | ||||||||||||||||||||
Interest capitalized | 8 | — | — | 1 | 9 | — | 9 | ||||||||||||||||||||
Other - net | 27 | — | — | — | 27 | — | 27 | ||||||||||||||||||||
Total Nonoperating Expense | (31) | — | (16) | 1 | (46) | — | (46) | ||||||||||||||||||||
Income (Loss) Before Income Tax | $ | (247) | $ | (207) | $ | 34 | $ | 31 | $ | (389) | $ | 989 | $ | 600 | |||||||||||||
Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||
(in millions) | Mainline | Regional | Horizon | Consolidating | Air Group | Special | Consolidated | ||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||
Passenger revenues | $ | 1,860 | $ | 502 | $ | — | $ | — | $ | 2,362 | $ | — | $ | 2,362 | |||||||||||||
CPA revenues | — | — | 281 | (281) | — | — | — | ||||||||||||||||||||
Mileage Plan other revenue | 219 | 47 | — | — | 266 | — | 266 | ||||||||||||||||||||
Cargo and other | 128 | — | — | 2 | 130 | — | 130 | ||||||||||||||||||||
Total Operating Revenues | 2,207 | 549 | 281 | (279) | 2,758 | — | 2,758 | ||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 2,777 | 727 | 238 | (289) | 3,453 | (83) | 3,370 | ||||||||||||||||||||
Economic fuel | 448 | 120 | — | — | 568 | — | 568 | ||||||||||||||||||||
Total Operating Expenses | 3,225 | 847 | 238 | (289) | 4,021 | (83) | 3,938 | ||||||||||||||||||||
Nonoperating Income (Expense) | |||||||||||||||||||||||||||
Interest income | 33 | — | — | (10) | 23 | — | 23 | ||||||||||||||||||||
Interest expense | (58) | — | (16) | 10 | (64) | — | (64) | ||||||||||||||||||||
Interest capitalized | 8 | — | — | — | 8 | — | 8 | ||||||||||||||||||||
Other - net | 16 | — | — | — | 16 | — | 16 | ||||||||||||||||||||
Total Nonoperating Income (Expense) | (1) | — | (16) | — | (17) | — | (17) | ||||||||||||||||||||
Income (Loss) Before Income Tax | $ | (1,019) | $ | (298) | $ | 27 | $ | 10 | $ | (1,280) | $ | 83 | $ | (1,197) | |||||||||||||
(a) | Includes consolidating entries, Air Group parent company, McGee Air Services, and other immaterial business units. |
(b) | The Air Group Adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocation and excludes certain charges. See Note A in the accompanying pages for further information. |
(c) | Includes payroll support program wage offsets, special items and mark-to-market fuel hedge accounting adjustments. |
GAAP TO NON-GAAP RECONCILIATIONS (unaudited) | |||||||||||
Alaska Air Group, Inc. | |||||||||||
CASM Excluding Fuel and Special Items Reconciliation | |||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||
Consolidated: | |||||||||||
CASM | 11.75 | ¢ | 16.16 | ¢ | 9.50 | ¢ | 14.33 | ¢ | |||
Less the following components: | |||||||||||
Payroll support program wage offset (benefit) | — | (5.06) | (2.39) | (2.77) | |||||||
Aircraft fuel, including hedging gains and losses | 2.60 | 1.59 | 2.24 | 2.07 | |||||||
Special items - impairment charges and other(a) | (0.06) | 1.53 | 0.01 | 1.27 | |||||||
Special items - restructuring charges(b) | — | 4.09 | (0.03) | 1.17 | |||||||
Special items - merger-related costs | — | 0.01 | — | 0.02 | |||||||
CASM excluding fuel and special items | 9.21 | ¢ | 14.00 | ¢ | 9.67 | ¢ | 12.57 | ¢ | |||
Mainline: | |||||||||||
CASM | 10.77 | ¢ | 16.80 | ¢ | 8.26 | ¢ | 13.56 | ¢ | |||
Less the following components: | |||||||||||
Payroll support program wage offset (benefit) | — | (5.56) | (2.61) | (2.89) | |||||||
Aircraft fuel, including hedging gains and losses | 2.39 | 1.43 | 1.99 | 1.92 | |||||||
Special items - impairment charges and other(a) | (0.07) | 1.93 | 0.02 | 1.24 | |||||||
Special items - restructuring charges(b) | — | 5.10 | (0.04) | 1.37 | |||||||
Special items - merger-related costs | — | 0.02 | — | 0.02 | |||||||
CASM excluding fuel and special items | 8.45 | ¢ | 13.88 | ¢ | 8.90 | ¢ | 11.90 | ¢ | |||
(a) | Special items - impairment charges and other in the three and nine months ended September 30, 2021 are primarily comprised of updated estimates of cost associated with leased aircraft that have been retired and removed from the operating fleet but not yet returned to the lessor. |
(b) | Special items - restructuring charges in the nine months ended September 30, 2021 represent adjustments to total cost for pilot incentive leaves as a result of updated recall timing from what was previously anticipated due to schedule changes, training limitations and other factors. |
Fuel Reconciliation | |||||||||||||||
Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | ||||||||||||||
(in millions, except for per-gallon amounts) | Dollars | Cost/Gallon | Dollars | Cost/Gallon | |||||||||||
Raw or "into-plane" fuel cost | $ | 397 | $ | 2.16 | $ | 123 | $ | 1.27 | |||||||
Losses (gains) on settled hedges | (21) | (0.11) | 5 | 0.05 | |||||||||||
Consolidated economic fuel expense | 376 | 2.05 | 128 | 1.32 | |||||||||||
Mark-to-market fuel hedge adjustment | — | — | (3) | (0.03) | |||||||||||
GAAP fuel expense | $ | 376 | $ | 2.05 | $ | 125 | $ | 1.29 | |||||||
Fuel gallons | 183 | 97 | |||||||||||||
Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | ||||||||||||||
(in millions, except for per gallon amounts) | Dollars | Cost/Gallon | Dollars | Cost/Gallon | |||||||||||
Raw or "into-plane" fuel cost | $ | 949 | $ | 1.99 | $ | 553 | $ | 1.61 | |||||||
Losses (gains) on settled hedges | (28) | (0.06) | 15 | 0.04 | |||||||||||
Consolidated economic fuel expense | $ | 921 | $ | 1.93 | $ | 568 | $ | 1.65 | |||||||
Mark-to-market fuel hedge adjustment | (68) | (0.14) | — | — | |||||||||||
GAAP fuel expense | $ | 853 | $ | 1.79 | $ | 568 | $ | 1.65 | |||||||
Fuel gallons | 477 | 344 | |||||||||||||
Debt-to-capitalization, adjusted for operating leases | |||||||
(in millions) | September 30, 2021 | December 31, 2020 | |||||
Long-term debt, net of current portion | $ | 2,225 | $ | 2,357 | |||
Capitalized operating leases | 1,466 | 1,558 | |||||
COVID-19 related borrowings(a) | — | 734 | |||||
Adjusted debt, net of current portion of long-term debt | 3,691 | 4,649 | |||||
Shareholders' equity | 3,531 | 2,988 | |||||
Total Invested Capital | $ | 7,222 | $ | 7,637 | |||
Debt-to-capitalization ratio, including operating leases | 51 | % | 61 | % | |||
(a) | To best reflect our leverage we included the remaining short-term borrowings stemming from the COVID-19 pandemic which are classified as current liabilities in the consolidated balance sheets. As of September 30, 2021, no such borrowings were outstanding. |
Adjusted net debt to earnings before interest, taxes, depreciation, amortization and special items | |||||||
(in millions) | September 30, 2021 | December 31, 2020 | |||||
Current portion of long-term debt | $ | 425 | $ | 1,138 | |||
Current portion of operating lease liabilities | 275 | 290 | |||||
Long-term debt, net of current portion | 2,225 | 2,357 | |||||
Long-term operating lease liabilities, net of current portion | 1,191 | 1,268 | |||||
Total adjusted debt | 4,116 | 5,053 | |||||
Less: Cash and marketable securities | (3,195) | (3,346) | |||||
Adjusted net debt | $ | 921 | $ | 1,707 | |||
(in millions) | Twelve Months Ended | Twelve Months Ended | |||||
GAAP Operating Income (Loss)(a) | $ | 51 | $ | (1,775) | |||
Adjusted for: | |||||||
Payroll Support Program grant wage offset and special items | (767) | 71 | |||||
Mark-to-market fuel hedge adjustments | (76) | (8) | |||||
Depreciation and amortization | 394 | 420 | |||||
Aircraft rent | 258 | 299 | |||||
EBITDAR | $ | (140) | $ | (993) | |||
Adjusted net debt to EBITDAR | (6.6x) | (1.7x) | |||||
(a) | Operating income (loss) 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 eliminating fuel expense and certain special items (including the payroll support program wage offset, impairment and restructuring charges and merger-related costs) from our unit metrics, we believe that we have better visibility into the results of operations as we focus on cost-reduction initiatives emerging from the COVID-19 pandemic. 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. In addition, 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 thus investors) to understand the impact of (and trends in) company-specific cost drivers such as labor rates and productivity, airport costs, maintenance costs, etc., which are more controllable by management.
- Cost per ASM (CASM) excluding fuel and certain special items, such as the payroll support program wage offset, impairment and restructuring charges and merger-related costs, 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.
- Adjusted income before income tax (and other items as specified in our plan documents) is an important metric for the employee incentive plan, which covers the majority of Air Group employees.
- CASM excluding fuel and certain special items is 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.
- 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. Industry analysts and investors consistently measure our performance without these items for better comparability between periods and among other airlines.
- Although we disclose our passenger unit revenues, we do not (nor are we able to) evaluate unit revenues 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 revenues 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 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, or "unit cost"; represents all operating expenses including fuel and special items
CASMex - operating costs excluding fuel and special items per ASM; this metric is used to help track progress toward reduction of non-fuel operating costs since fuel is largely out of our control
Debt-to-capitalization ratio - represents adjusted debt (long-term debt plus capitalized operating 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
Load Factor - RPMs as a percentage of ASMs; represents the number of available seats that were filled with paying passengers
Mainline - represents flying Boeing 737, Airbus 320 and Airbus 321neo family jets and all associated revenues and costs
Productivity - number of revenue passengers per full-time equivalent employee
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
Regional - represents capacity purchased by Alaska from Horizon and SkyWest. In this segment, Regional records actual on-board passenger revenue, less costs such as fuel, distribution costs, and payments made to Horizon and SkyWest under the respective capacity purchased arrangement (CPAs). Additionally, Regional includes an allocation of corporate overhead such as IT, finance, other administrative costs incurred by Alaska and on behalf of Horizon.
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
View original content:https://www.prnewswire.com/news-releases/alaska-air-group-reports-third-quarter-2021-results-301405450.html
SOURCE Alaska Air Group
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