News releases
Alaska Air Group reports Third Quarter 2017 results
Financial Highlights:
- Reported net income for the third quarter under Generally Accepted Accounting Principles ("GAAP") of
$266 million or$2.14 per diluted share, compared to net income of$256 million , or$2.07 per diluted share in 2016. As the acquisition ofVirgin America Inc. ("Virgin America") closed onDec. 14, 2016 , third quarter 2017 information reflects the results of Virgin America, including the impacts associated with purchase accounting. Third quarter 2016 results do not include Virgin America. - Reported third quarter net income, excluding merger-related costs and mark-to-market fuel hedging adjustments, of
$278 million , compared to$272 million in the third quarter of 2016. Adjusted diluted earnings per share were$2.24 , compared to$2.20 in the third quarter of 2016. - Virgin America results were accretive to EPS in the three and nine months ending
Sept. 30, 2017 . - Paid
$0.30 per-share quarterly cash dividend in the third quarter, a 9% increase over the dividend paid in the third quarter of 2016. - Repurchased approximately 0.6 million shares of common stock for
$50 million in the first nine months of 2017. - Generated approximately
$1.4 billion of operating cash flow and used approximately$840 million for capital expenditures, resulting in approximately$520 million of free cash flow in the first nine months of 2017. - Held
$1.7 billion in unrestricted cash and marketable securities as ofSept. 30, 2017 . - Reduced debt-to-capitalization ratio to 53% as of
Sept. 30, 2017 , compared to 59% as ofDec. 31, 2016 .
Operational Highlights:
- Launched twenty new routes during the quarter, continuing the most significant network expansion in
Alaska Air Group's 85-year history, bringing the total new markets since the merger to 37. - Overall, the integration of Virgin America is going well and a number of significant milestones are expected to be achieved in the next seven months.
- Announced a seven-year partnership to be the official airline of the
San Francisco Giants which includes, among other things, exclusive naming rights to the AT&T Park Club Level which will now be called the "Alaska Airlines Club Level." - Signed an exclusive multi-year partnership with
Golden State Warriors star,Kevin Durant , and named him our "Advisor to the CEO." - Added
Singapore Airlines as a global Mileage Plan partner. - Selected Gogo to provide next-generation satellite-based Wi-Fi across the entire
Boeing and Airbus fleets, providing guests a faster and more-reliable internet connection. - Dropped fees for bikes, golf clubs, skis, surfboards, and other sporting equipment that exceed Alaska's normal checked baggage weight and dimensions to
$25 . - Took delivery of four Embraer 175 jets, bringing the total operated by Horizon to ten as of
Sept. 30, 2017 . - Placed the world's first
Boeing 737-700 converted from a passenger plane to a freighter into service.
Recognition and Awards:
- Ranked as the top U.S. airline in the Dow Jones Sustainability Index (DJSI), receiving perfect scores for "efficiency" and "reliability".
- Mileage Plan ranked first in the
U.S. News & World Report's list of Best Airline Rewards Programs for the third consecutive year. - Virgin America named "
Best U.S. Airline " by Condé Nast Traveler in their 2017 Reader's Choice Awards for the 10th year in a row. Ranked Best Airline in Customer Service in the 2017 worldwide SimpliFlying Awards for Excellence in Social Media.Named Favorite Airline inNorth America for the second consecutive year by Trazee Travel.- Mileage Plan ranked Best Airline Elite Status Program in the U.S. by The Points Guy.
- Recognized by the
Puget Sound Business Journal as the 2017 Board Diversity Champion, for diversifyingAir Group's board composition over the last five years. - Named one of the overall five-star major regional airlines at the Passenger Choice Awards during the APEX EXPO. Virgin America received a five-star rating for low-cost carrier, and received a top honor with a Passenger Choice Award for "Best Seat Comfort."
"Our people delivered very strong results again this quarter," said CEO
The following table reconciles the company's reported GAAP net income and earnings per diluted share ("diluted EPS") for the three and nine months ended
Three Months Ended September 30, |
|||||||||||||||
2017 |
2016 |
||||||||||||||
(in millions, except per-share amounts) |
Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||
Reported GAAP net income and diluted EPS |
$ |
266 |
$ |
2.14 |
$ |
256 |
$ |
2.07 |
|||||||
Mark-to-market fuel hedge adjustments |
(5) |
(0.04) |
3 |
0.02 |
|||||||||||
Special items—merger-related costs |
24 |
0.20 |
22 |
0.18 |
|||||||||||
Income tax effect on special items and fuel hedge adjustments |
(7) |
(0.06) |
(9) |
(0.07) |
|||||||||||
Non-GAAP adjusted net income and diluted EPS |
$ |
278 |
$ |
2.24 |
$ |
272 |
$ |
2.20 |
|||||||
Nine Months Ended September 30, |
|||||||||||||||
2017 |
2016 |
||||||||||||||
(in millions, except per-share amounts) |
Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||
Reported GAAP net income and diluted EPS |
$ |
661 |
$ |
5.31 |
$ |
700 |
$ |
5.63 |
|||||||
Mark-to-market fuel hedge adjustments |
7 |
0.06 |
(9) |
(0.07) |
|||||||||||
Special items—merger-related costs |
88 |
0.70 |
36 |
0.29 |
|||||||||||
Income tax effect on special items and fuel hedge adjustments |
(35) |
(0.28) |
(10) |
(0.08) |
|||||||||||
Non-GAAP adjusted net income and diluted EPS |
$ |
721 |
$ |
5.79 |
$ |
717 |
$ |
5.77 |
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 simulcast online at
References in this news release to "
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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
|||||||||||||||||||||
Alaska Air Group, Inc. |
|||||||||||||||||||||
As the acquisition closed on December 14, 2016, amounts presented below include Virgin America results for the three and nine months ended September 30, 2017 but not for the prior periods. |
|||||||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||
(in millions, except per-share amounts) |
2017 |
2016 |
Change(a) |
2017 |
2016 |
Change(a) |
|||||||||||||||
Operating Revenues: |
|||||||||||||||||||||
Passenger |
|||||||||||||||||||||
Mainline |
$ |
1,562 |
$ |
1,073 |
46 |
% |
$ |
4,390 |
$ |
3,036 |
45 |
% |
|||||||||
Regional |
262 |
249 |
5 |
% |
725 |
682 |
6 |
% |
|||||||||||||
Total passenger revenue |
1,824 |
1,322 |
38 |
% |
5,115 |
3,718 |
38 |
% |
|||||||||||||
Freight and mail |
32 |
31 |
3 |
% |
88 |
82 |
7 |
% |
|||||||||||||
Other—net |
264 |
213 |
24 |
% |
768 |
607 |
27 |
% |
|||||||||||||
Total Operating Revenues |
2,120 |
1,566 |
35 |
% |
5,971 |
4,407 |
35 |
% |
|||||||||||||
Operating Expenses: |
|||||||||||||||||||||
Wages and benefits |
475 |
340 |
40 |
% |
1,392 |
1,008 |
38 |
% |
|||||||||||||
Variable incentive pay |
40 |
31 |
29 |
% |
98 |
95 |
3 |
% |
|||||||||||||
Aircraft fuel, including hedging gains and losses |
368 |
225 |
64 |
% |
1,051 |
593 |
77 |
% |
|||||||||||||
Aircraft maintenance |
88 |
64 |
38 |
% |
271 |
197 |
38 |
% |
|||||||||||||
Aircraft rent |
70 |
25 |
180 |
% |
204 |
80 |
155 |
% |
|||||||||||||
Landing fees and other rentals |
124 |
89 |
39 |
% |
338 |
232 |
46 |
% |
|||||||||||||
Contracted services |
76 |
63 |
21 |
% |
234 |
183 |
28 |
% |
|||||||||||||
Selling expenses |
91 |
58 |
57 |
% |
269 |
162 |
66 |
% |
|||||||||||||
Depreciation and amortization |
95 |
101 |
(6)% |
275 |
281 |
(2)% |
|||||||||||||||
Food and beverage service |
50 |
31 |
61 |
% |
145 |
93 |
56 |
% |
|||||||||||||
Third-party regional carrier expense |
30 |
25 |
20 |
% |
84 |
72 |
17 |
% |
|||||||||||||
Special items—merger-related costs |
24 |
22 |
9 |
% |
88 |
36 |
144 |
% |
|||||||||||||
Other |
150 |
92 |
63 |
% |
424 |
267 |
59 |
% |
|||||||||||||
Total Operating Expenses |
1,681 |
1,166 |
44 |
% |
4,873 |
3,299 |
48 |
% |
|||||||||||||
Operating Income |
439 |
400 |
10 |
% |
1,098 |
1,108 |
(1)% |
||||||||||||||
Nonoperating Income (Expense): |
|||||||||||||||||||||
Interest income |
9 |
7 |
25 |
20 |
|||||||||||||||||
Interest expense |
(26) |
(11) |
(77) |
(33) |
|||||||||||||||||
Interest capitalized |
5 |
6 |
13 |
21 |
|||||||||||||||||
Other—net |
— |
— |
(1) |
(2) |
|||||||||||||||||
Total Nonoperating Income (Expense) |
(12) |
2 |
(40) |
6 |
|||||||||||||||||
Income Before Income Tax |
427 |
402 |
1,058 |
1,114 |
|||||||||||||||||
Income tax expense |
161 |
146 |
397 |
414 |
|||||||||||||||||
Net Income |
$ |
266 |
$ |
256 |
$ |
661 |
$ |
700 |
|||||||||||||
Basic Earnings Per Share: |
$ |
2.15 |
$ |
2.08 |
$ |
5.35 |
$ |
5.66 |
|||||||||||||
Diluted Earnings Per Share: |
$ |
2.14 |
$ |
2.07 |
$ |
5.31 |
$ |
5.63 |
|||||||||||||
Shares Used for Computation: |
|||||||||||||||||||||
Basic |
123.467 |
123.149 |
123.501 |
123.648 |
|||||||||||||||||
Diluted |
124.220 |
123.833 |
124.341 |
124.393 |
|||||||||||||||||
Cash dividend declared per share: |
$ |
0.300 |
$ |
0.275 |
$ |
0.900 |
$ |
0.825 |
(a) |
See Combined Comparative information in the accompanying pages for year-over-year comparisons including Virgin America. |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
|||||||
Alaska Air Group, Inc. |
|||||||
(in millions) |
September 30, 2017 |
December 31, 2016 |
|||||
Cash and marketable securities |
$ |
1,740 |
$ |
1,580 |
|||
Total current assets |
2,214 |
2,050 |
|||||
Property and equipment—net |
6,230 |
5,666 |
|||||
Goodwill |
1,934 |
1,934 |
|||||
Intangible assets |
135 |
143 |
|||||
Other assets |
226 |
169 |
|||||
Total assets |
10,739 |
9,962 |
|||||
Air traffic liability |
1,103 |
849 |
|||||
Current portion of long-term debt |
334 |
319 |
|||||
Other current liabilities |
1,328 |
1,367 |
|||||
Current liabilities |
2,765 |
2,535 |
|||||
Long-term debt |
2,367 |
2,645 |
|||||
Other liabilities and credits |
2,116 |
1,851 |
|||||
Shareholders' equity |
3,491 |
2,931 |
|||||
Total liabilities and shareholders' equity |
$ |
10,739 |
$ |
9,962 |
|||
Debt-to-capitalization ratio, adjusted for operating leases(a) |
53 |
% |
59 |
% |
|||
Number of common shares outstanding |
123.387 |
123.328 |
(a) |
Calculated using the present value of remaining aircraft lease payments. |
OPERATING STATISTICS SUMMARY (unaudited) |
|||||||||||
Alaska Air Group, Inc. |
|||||||||||
As the acquisition closed on December 14, 2016, Consolidated and Mainline amounts presented below include Virgin America results for the three and nine months ended September 30, 2017 but not for the prior periods. |
|||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||
2017 |
2016 |
Change(d) |
2017 |
2016 |
Change(d) |
||||||
Consolidated Operating Statistics:(a) |
|||||||||||
Revenue passengers (000) |
11,645 |
9,054 |
28.6% |
33,063 |
25,536 |
29.5% |
|||||
RPMs (000,000) "traffic" |
13,811 |
9,601 |
43.8% |
39,073 |
27,569 |
41.7% |
|||||
ASMs (000,000) "capacity" |
16,164 |
11,212 |
44.2% |
46,170 |
32,728 |
41.1% |
|||||
Load factor |
85.4% |
85.6% |
(0.2) pts |
84.6% |
84.2% |
0.4 pts |
|||||
Yield |
13.21¢ |
13.77¢ |
(4.1)% |
13.09¢ |
13.49¢ |
(3.0)% |
|||||
PRASM |
11.29¢ |
11.79¢ |
(4.2)% |
11.08¢ |
11.36¢ |
(2.5)% |
|||||
RASM |
13.12¢ |
13.97¢ |
(6.1)% |
12.93¢ |
13.47¢ |
(4.0)% |
|||||
CASMex(b) |
7.98¢ |
8.20¢ |
(2.7)% |
8.09¢ |
8.16¢ |
(0.9)% |
|||||
Economic fuel cost per gallon(b) |
$1.80 |
$1.58 |
13.9% |
$1.76 |
$1.47 |
19.7% |
|||||
Fuel gallons (000,000) |
207 |
140 |
47.9% |
592 |
410 |
44.4% |
|||||
ASM's per gallon |
78.1 |
80.1 |
(2.5)% |
78.0 |
79.8 |
(2.3)% |
|||||
Average number of full-time equivalent employees (FTE) |
20,743 |
14,674 |
41.4% |
19,723 |
14,500 |
36.0% |
|||||
Mainline Operating Statistics: |
|||||||||||
Revenue passengers (000) |
9,142 |
6,507 |
40.5% |
25,875 |
18,432 |
40.4% |
|||||
RPMs (000,000) "traffic" |
12,694 |
8,595 |
47.7% |
36,046 |
24,767 |
45.5% |
|||||
ASMs (000,000) "capacity" |
14,796 |
9,987 |
48.2% |
42,398 |
29,216 |
45.1% |
|||||
Load factor |
85.8% |
86.1% |
(0.3) pts |
85.0% |
84.8% |
0.2 pts |
|||||
Yield |
12.31¢ |
12.49¢ |
(1.4)% |
12.18¢ |
12.26¢ |
(0.7)% |
|||||
PRASM |
10.56¢ |
10.75¢ |
(1.8)% |
10.36¢ |
10.39¢ |
(0.3)% |
|||||
RASM |
12.40¢ |
12.96¢ |
(4.3)% |
12.22¢ |
12.53¢ |
(2.5)% |
|||||
CASMex(b) |
7.28¢ |
7.28¢ |
—% |
7.32¢ |
7.21¢ |
1.5% |
|||||
Economic fuel cost per gallon(b) |
$1.79 |
$1.57 |
14.0% |
$1.76 |
$1.46 |
20.5% |
|||||
Fuel gallons (000,000) |
183 |
119 |
53.8% |
526 |
350 |
50.3% |
|||||
ASM's per gallon |
80.9 |
83.9 |
(3.6)% |
80.6 |
83.5 |
(3.5)% |
|||||
Average number of FTE's |
15,862 |
11,397 |
39.2% |
15,439 |
11,260 |
37.1% |
|||||
Aircraft utilization |
16.1 |
10.6 |
51.9% |
15.7 |
10.7 |
46.7% |
|||||
Average aircraft stage length |
1,300 |
1,203 |
8.1% |
1,296 |
1,218 |
6.4% |
|||||
Operating fleet |
218 |
154 |
64 a/c |
218 |
154 |
64 a/c |
|||||
Regional Operating Statistics:(c) |
|||||||||||
Revenue passengers (000) |
2,503 |
2,547 |
(1.7)% |
7,188 |
7,105 |
1.2% |
|||||
RPMs (000,000) "traffic" |
1,117 |
1,006 |
11.0% |
3,027 |
2,801 |
8.1% |
|||||
ASMs (000,000) "capacity" |
1,368 |
1,225 |
11.7% |
3,772 |
3,512 |
7.4% |
|||||
Load factor |
81.7% |
82.1% |
(0.4) pts |
80.2% |
79.8% |
0.4 pts |
|||||
Yield |
23.48¢ |
24.75¢ |
(5.1)% |
23.95¢ |
24.35¢ |
(1.6)% |
|||||
PRASM |
19.17¢ |
20.32¢ |
(5.7)% |
19.22¢ |
19.43¢ |
(1.1)% |
|||||
Operating fleet |
83 |
69 |
14 a/c |
83 |
69 |
14 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 potential importance of this measure to investors in the accompanying pages. |
(c) |
Data presented includes information related to flights operated by Horizon and third-party carriers. |
(d) |
See Combined Comparative information in the accompanying pages for year-over-year comparisons including Virgin America. |
SUPPLEMENTARY COMBINED COMPARATIVE FINANCIAL AND OPERATING INFORMATION (unaudited)
We believe that analysis of specific financial and operational results on a combined basis provides more meaningful year-over-year comparisons. The table below provides "Combined Comparative" results for the three and nine months ended September 30, 2016, determined as the sum of the historical consolidated results of
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||
(in millions, except operating statistics) |
2017 As Reported |
2016 Combined |
Change |
2017 |
2016 |
Change |
|||||||||||||
Combined Comparative Operating Results |
|||||||||||||||||||
Passenger revenue |
$ |
1,824 |
$ |
1,724 |
6% |
$ |
5,115 |
$ |
4,833 |
6% |
|||||||||
Other revenue |
296 |
288 |
3% |
856 |
808 |
6% |
|||||||||||||
Total Operating Revenues |
2,120 |
2,012 |
5% |
5,971 |
5,641 |
6% |
|||||||||||||
Non-fuel operating expense |
1,313 |
1,216 |
8% |
3,822 |
3,518 |
9% |
|||||||||||||
Fuel expense |
368 |
306 |
20% |
1,051 |
822 |
28% |
|||||||||||||
Total Operating Expenses |
1,681 |
1,522 |
10% |
4,873 |
4,340 |
12% |
|||||||||||||
Operating Income |
439 |
490 |
(10)% |
1,098 |
1,301 |
(16)% |
|||||||||||||
Nonoperating income (expense) |
(12) |
(3) |
300% |
(40) |
(8) |
400% |
|||||||||||||
Income Before Tax |
427 |
487 |
(12)% |
1,058 |
1,293 |
(18)% |
|||||||||||||
Special items—merger-related costs |
24 |
24 |
—% |
88 |
44 |
100% |
|||||||||||||
Mark-to-market fuel hedge adjustments |
(5) |
3 |
(267)% |
7 |
(11) |
(164)% |
|||||||||||||
Adjusted Income Before Tax |
$ |
446 |
$ |
514 |
(13)% |
$ |
1,153 |
$ |
1,326 |
(13)% |
|||||||||
Combined Comparative Operating Statistics |
|||||||||||||||||||
Revenue passengers (000) |
11,645 |
11,229 |
3.7% |
33,063 |
31,565 |
4.7% |
|||||||||||||
RPMs (000,000) |
13,811 |
12,922 |
6.9% |
39,073 |
36,670 |
6.6% |
|||||||||||||
ASMs (000,000) |
16,164 |
15,079 |
7.2% |
46,170 |
43,549 |
6.0% |
|||||||||||||
Load Factor |
85.4% |
85.7% |
(0.3) pts |
84.6% |
84.2% |
0.4 pts |
|||||||||||||
PRASM |
11.29¢ |
11.43¢ |
(1.2)% |
11.08¢ |
11.10¢ |
(0.2)% |
|||||||||||||
RASM |
13.12¢ |
13.34¢ |
(1.6)% |
12.93¢ |
12.95¢ |
(0.2)% |
|||||||||||||
CASMex |
7.98¢ |
7.90¢ |
1.0% |
8.09¢ |
7.98¢ |
1.4% |
2016 Combined Comparative Operating Results and Statistics
Refer to our Investor Update issued on
OPERATING SEGMENTS (unaudited) |
|||||||||||||||||||||||||||
Alaska Air Group, Inc. |
|||||||||||||||||||||||||||
As the acquisition closed on December 14, 2016, Consolidated and Mainline amounts presented below include Virgin America results for the three and nine months ended September 30, 2017 but not for the prior periods. |
|||||||||||||||||||||||||||
Three Months Ended September 30, 2017 |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
Air Group |
Special |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger |
|||||||||||||||||||||||||||
Mainline |
$ |
1,562 |
$ |
— |
$ |
— |
$ |
— |
$ |
1,562 |
$ |
— |
$ |
1,562 |
|||||||||||||
Regional |
— |
262 |
— |
— |
262 |
— |
262 |
||||||||||||||||||||
Total passenger revenues |
1,562 |
262 |
— |
— |
1,824 |
— |
1,824 |
||||||||||||||||||||
CPA revenues |
— |
— |
112 |
(112) |
— |
— |
— |
||||||||||||||||||||
Freight and mail |
30 |
1 |
1 |
— |
32 |
— |
32 |
||||||||||||||||||||
Other—net |
242 |
21 |
1 |
— |
264 |
— |
264 |
||||||||||||||||||||
Total operating revenues |
1,834 |
284 |
114 |
(112) |
2,120 |
— |
2,120 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
1,077 |
219 |
105 |
(112) |
1,289 |
24 |
1,313 |
||||||||||||||||||||
Economic fuel |
328 |
45 |
— |
— |
373 |
(5) |
368 |
||||||||||||||||||||
Total operating expenses |
1,405 |
264 |
105 |
(112) |
1,662 |
19 |
1,681 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
11 |
— |
— |
(2) |
9 |
— |
9 |
||||||||||||||||||||
Interest expense |
(23) |
— |
(4) |
1 |
(26) |
— |
(26) |
||||||||||||||||||||
Other |
5 |
— |
— |
— |
5 |
— |
5 |
||||||||||||||||||||
Total Nonoperating income (expense) |
(7) |
— |
(4) |
(1) |
(12) |
— |
(12) |
||||||||||||||||||||
Income (loss) before income tax |
$ |
422 |
$ |
20 |
$ |
5 |
$ |
(1) |
$ |
446 |
$ |
(19) |
$ |
427 |
|||||||||||||
Three Months Ended September 30, 2016 |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
Air Group |
Special |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger |
|||||||||||||||||||||||||||
Mainline |
$ |
1,073 |
$ |
— |
$ |
— |
$ |
— |
$ |
1,073 |
$ |
— |
$ |
1,073 |
|||||||||||||
Regional |
— |
249 |
— |
— |
249 |
— |
249 |
||||||||||||||||||||
Total passenger revenues |
1,073 |
249 |
— |
— |
1,322 |
— |
1,322 |
||||||||||||||||||||
CPA revenues |
— |
— |
109 |
(109) |
— |
— |
— |
||||||||||||||||||||
Freight and mail |
30 |
1 |
— |
— |
31 |
— |
31 |
||||||||||||||||||||
Other—net |
190 |
21 |
1 |
1 |
213 |
— |
213 |
||||||||||||||||||||
Total operating revenues |
1,293 |
271 |
110 |
(108) |
1,566 |
— |
1,566 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
727 |
202 |
99 |
(109) |
919 |
22 |
941 |
||||||||||||||||||||
Economic fuel |
188 |
34 |
— |
— |
222 |
3 |
225 |
||||||||||||||||||||
Total operating expenses |
915 |
236 |
99 |
(109) |
1,141 |
25 |
1,166 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
7 |
— |
— |
— |
7 |
— |
7 |
||||||||||||||||||||
Interest expense |
(7) |
— |
(2) |
(2) |
(11) |
— |
(11) |
||||||||||||||||||||
Other |
5 |
— |
— |
1 |
6 |
— |
6 |
||||||||||||||||||||
Total Nonoperating income (expense) |
5 |
— |
(2) |
(1) |
2 |
— |
2 |
||||||||||||||||||||
Income (loss) before income tax |
$ |
383 |
$ |
35 |
$ |
9 |
$ |
— |
$ |
427 |
$ |
(25) |
$ |
402 |
(a) |
The Air Group Adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocation and does not include certain charges. See Note A in the accompanying pages for further information. |
(b) |
Includes merger-related costs and mark-to-market fuel hedge accounting adjustments. |
Nine Months Ended September 30, 2017 |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
Air Group |
Special |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger |
|||||||||||||||||||||||||||
Mainline |
$ |
4,390 |
$ |
— |
$ |
— |
$ |
— |
$ |
4,390 |
$ |
— |
$ |
4,390 |
|||||||||||||
Regional |
— |
725 |
— |
— |
725 |
— |
725 |
||||||||||||||||||||
Total passenger revenues |
4,390 |
725 |
— |
— |
5,115 |
— |
5,115 |
||||||||||||||||||||
CPA revenues |
— |
— |
317 |
(317) |
— |
— |
— |
||||||||||||||||||||
Freight and mail |
84 |
3 |
1 |
— |
88 |
— |
88 |
||||||||||||||||||||
Other—net |
708 |
57 |
3 |
— |
768 |
— |
768 |
||||||||||||||||||||
Total operating revenues |
5,182 |
785 |
321 |
(317) |
5,971 |
— |
5,971 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
3,101 |
625 |
324 |
(316) |
3,734 |
88 |
3,822 |
||||||||||||||||||||
Economic fuel |
924 |
120 |
— |
— |
1,044 |
7 |
1,051 |
||||||||||||||||||||
Total operating expenses |
4,025 |
745 |
324 |
(316) |
4,778 |
95 |
4,873 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
27 |
— |
— |
(2) |
25 |
— |
25 |
||||||||||||||||||||
Interest expense |
(68) |
— |
(9) |
— |
(77) |
— |
(77) |
||||||||||||||||||||
Other |
11 |
— |
1 |
— |
12 |
— |
12 |
||||||||||||||||||||
Total Nonoperating income (expense) |
(30) |
— |
(8) |
(2) |
(40) |
— |
(40) |
||||||||||||||||||||
Income (loss) before income tax |
$ |
1,127 |
$ |
40 |
$ |
(11) |
$ |
(3) |
$ |
1,153 |
$ |
(95) |
$ |
1,058 |
|||||||||||||
Nine Months Ended September 30, 2016 |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
Air Group |
Special |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger |
|||||||||||||||||||||||||||
Mainline |
$ |
3,036 |
$ |
— |
$ |
— |
$ |
— |
$ |
3,036 |
$ |
— |
$ |
3,036 |
|||||||||||||
Regional |
— |
682 |
— |
— |
682 |
— |
682 |
||||||||||||||||||||
Total passenger revenues |
3,036 |
682 |
— |
— |
3,718 |
— |
3,718 |
||||||||||||||||||||
CPA revenues |
— |
— |
322 |
(322) |
— |
— |
— |
||||||||||||||||||||
Freight and mail |
79 |
3 |
— |
— |
82 |
— |
82 |
||||||||||||||||||||
Other—net |
546 |
57 |
3 |
1 |
607 |
— |
607 |
||||||||||||||||||||
Total operating revenues |
3,661 |
742 |
325 |
(321) |
4,407 |
— |
4,407 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
2,107 |
580 |
305 |
(322) |
2,670 |
36 |
2,706 |
||||||||||||||||||||
Economic fuel |
512 |
90 |
— |
— |
602 |
(9) |
593 |
||||||||||||||||||||
Total operating expenses |
2,619 |
670 |
305 |
(322) |
3,272 |
27 |
3,299 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
19 |
— |
1 |
— |
20 |
— |
20 |
||||||||||||||||||||
Interest expense |
(23) |
— |
(7) |
(3) |
(33) |
— |
(33) |
||||||||||||||||||||
Other |
15 |
— |
— |
4 |
19 |
— |
19 |
||||||||||||||||||||
Total Nonoperating income (expense) |
11 |
— |
(6) |
1 |
6 |
— |
6 |
||||||||||||||||||||
Income (loss) before income tax |
$ |
1,053 |
$ |
72 |
$ |
14 |
$ |
2 |
$ |
1,141 |
$ |
(27) |
$ |
1,114 |
(a) |
The Air Group Adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocation and does not include certain charges. See Note A in the accompanying pages for further information. |
(b) |
Includes merger-related costs and mark-to-market fuel hedge accounting adjustments. |
GAAP TO NON-GAAP RECONCILIATIONS (unaudited) |
|||||||||||
Alaska Air Group, Inc. |
|||||||||||
As the acquisition closed on December 14, 2016, amounts presented below include Virgin America results for the three and nine months ended September 30, 2017 but not for the prior period. |
|||||||||||
CASM Excluding Fuel and Special Items Reconciliation |
|||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||
2017 |
2016 |
2017 |
2016 |
||||||||
Consolidated: |
|||||||||||
CASM |
10.40 |
¢ |
10.40 |
¢ |
10.55 |
¢ |
10.08 |
¢ |
|||
Less the following components: |
|||||||||||
Aircraft fuel, including hedging gains and losses |
2.27 |
2.01 |
2.27 |
1.81 |
|||||||
Special items—merger-related costs |
0.15 |
0.19 |
0.19 |
0.11 |
|||||||
CASM excluding fuel and special items |
7.98 |
¢ |
8.20 |
¢ |
8.09 |
¢ |
8.16 |
¢ |
|||
Mainline: |
|||||||||||
CASM |
9.63 |
¢ |
9.41 |
¢ |
9.72 |
¢ |
9.06 |
¢ |
|||
Less the following components: |
|||||||||||
Aircraft fuel, including hedging gains and losses |
2.19 |
1.91 |
2.19 |
1.72 |
|||||||
Special items—merger-related costs |
0.16 |
0.22 |
0.21 |
0.13 |
|||||||
CASM excluding fuel and special items |
7.28 |
¢ |
7.28 |
¢ |
7.32 |
¢ |
7.21 |
¢ |
Fuel Reconciliation |
|||||||||||||||
Three Months Ended September 30, |
|||||||||||||||
2017 |
2016 |
||||||||||||||
(in millions, except for per-gallon amounts) |
Dollars |
Cost/Gallon |
Dollars |
Cost/Gallon |
|||||||||||
Raw or "into-plane" fuel cost |
$ |
368 |
$ |
1.78 |
$ |
218 |
$ |
1.55 |
|||||||
Losses on settled hedges |
5 |
0.02 |
4 |
0.03 |
|||||||||||
Consolidated economic fuel expense |
373 |
1.80 |
222 |
1.58 |
|||||||||||
Mark-to-market fuel hedge adjustment |
(5) |
(0.02) |
3 |
0.02 |
|||||||||||
GAAP fuel expense |
$ |
368 |
$ |
1.78 |
$ |
225 |
$ |
1.60 |
|||||||
Fuel gallons |
207 |
140 |
|||||||||||||
Nine Months Ended September 30, |
|||||||||||||||
2017 |
2016 |
||||||||||||||
(in millions, except for per gallon amounts) |
Dollars |
Cost/Gallon |
Dollars |
Cost/Gallon |
|||||||||||
Raw or "into-plane" fuel cost |
$ |
1,030 |
$ |
1.74 |
$ |
590 |
$ |
1.44 |
|||||||
Losses on settled hedges |
14 |
0.02 |
12 |
0.03 |
|||||||||||
Consolidated economic fuel expense |
$ |
1,044 |
$ |
1.76 |
$ |
602 |
$ |
1.47 |
|||||||
Mark-to-market fuel hedge adjustment |
7 |
0.01 |
(9) |
(0.02) |
|||||||||||
GAAP fuel expense |
$ |
1,051 |
$ |
1.77 |
$ |
593 |
$ |
1.45 |
|||||||
Fuel gallons |
592 |
410 |
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 merger-related costs) from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost-reduction initiatives. 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 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 CASM excluding fuel (and other items as specified in our plan documents) are important metrics 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 compare our airlines 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 certain items, such as merger-related costs and mark-to-market hedging adjustments, 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 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
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 the present value of future operating lease payments) 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
Free Cash Flow - total operating cash flow generated less cash paid for capital expenditures
Load Factor - RPMs as a percentage of ASMs; represents the number of available seats that were filled with paying passengers
Mainline - represents flying
PRASM - passenger revenue per ASM; commonly called "passenger unit revenue"
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
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:http://www.prnewswire.com/news-releases/alaska-air-group-reports-third-quarter-2017-results-300542819.html
SOURCE
Media contact: Media Relations, (206) 304-0008, Investor contact: Matt Grady, Director, Investor Relations, (206) 392-5382