UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Date of earliest event reported)
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation)
| (Commission File Number) | (IRS Employer Identification No.) | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||||||||
(206 ) 392-5040
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Ticker Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
This document is also available on our website at http://investor.alaskaair.com.
ITEM 2.02. Results of Operations And Financial Condition
On April 18, 2024 , Alaska Air Group, Inc. (Air Group) issued a press release reporting financial results for the first quarter of 2024. The press release is furnished herein as Exhibit 99.1. Supplemental information is furnished herein as Exhibit 99.2.
ITEM 7.01. Regulation FD Disclosure
Pursuant to 17 CFR Part 243 (Regulation FD), the Company is submitting information relating to its financial and operational outlook in an investor update. The investor update is furnished herein as Exhibit 99.1. Supplemental information is furnished herein as Exhibit 99.2.
In accordance with General Instruction B.2 of Form 8-K, the information under this item and Exhibit 99.1 and Exhibit 99.2 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing. This report will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.
ITEM 9.01. Financial Statements and Other Exhibits
| First Quarter 2024 Earnings Press Release dated April 18, 2024 | ||||||||
| Supplemental Earnings Materials | ||||||||
| 104 | Cover Page Interactive Data File - embedded within the Inline XBRL Document | |||||||
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ALASKA AIR GROUP, INC.
Registrant
Date: April 18, 2024
/s/ EMILY HALVERSON
Emily Halverson
Vice President Finance, Controller, and Treasurer
Exhibit 99.1
April 18, 2024
| Media contact: | Investor/analyst contact: | |||||||
| Media Relations | Ryan St. John | |||||||
| (206) 304-0008 | VP Finance, Planning and Investor Relations | |||||||
| ALKInvestorRelations@alaskaair.com | ||||||||
Alaska Air Group reports first quarter 2024 results
Achieved record first quarter operating revenue of $2.2 billion
Ratified new agreement with AMFA-represented employees
SEATTLE — Alaska Air Group (NYSE: ALK) today reported financial results for the first quarter ending March 31, 2024, and provided outlook for the second quarter ending June 30, 2024.
"I want to recognize Alaska's employees for their uncompromising prioritization of safety, for taking great care of our guests, and for delivering strong performance in the first quarter," said CEO Ben Minicucci. "Despite significant challenges to start the year our results have far exceeded initial expectations. Thanks to thoughtful capacity planning, network optimization, and diligent cost control, we are well positioned to carry our strong performance into the second quarter and beyond."
Impact of Flight 1282:
Air Group's first quarter operation and results were significantly impacted by Flight 1282 in January and the Boeing 737-9 MAX grounding which extended into February. The Company has received $162 million in initial cash compensation from Boeing to address the financial damages incurred during the first quarter.
The table below illustrates the financial impact of the Flight 1282 accident and 737-9 MAX grounding compared to the three months ended March 31, 2023:
| Q1 2023 | Q1 2024 | |||||||||||||||||||||||||
| (in millions, except per share amounts) | As Reported | As Reported | Grounding Impact | Excluding Grounding Impact | ||||||||||||||||||||||
| Adjusted income (loss) before income tax | ($115) | ($157) | ($162) | $5 | ||||||||||||||||||||||
| Adjusted earnings (loss) per share | ($0.62) | ($0.92) | ~($0.95) | ~$0.03 | ||||||||||||||||||||||
| YoY change in capacity | (2%) | ~(5.5%) | ~3.5% | |||||||||||||||||||||||
Financial Results:
•Reported net loss for the first quarter of 2024 under Generally Accepted Accounting Principles (GAAP) of $132 million, or $1.05 per share, compared to a net loss of $142 million, or $1.11 per share, for the first quarter of 2023.
•Reported net loss for the first quarter of 2024, excluding special items and mark-to-market fuel hedge accounting adjustments, of $116 million, or $0.92 per share, compared to a net loss of $79 million, or $0.62 per share, for the first quarter of 2023.
•Repurchased 561,086 shares of common stock for approximately $21 million in the first quarter.
•Generated $292 million in operating cash flow for the first quarter.
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•Held $2.3 billion in unrestricted cash and marketable securities as of March 31, 2024.
•Ended the quarter with a debt-to-capitalization ratio of 47%, within the target range of 40% to 50%.
Operational Updates:
•Agreement to purchase Hawaiian Airlines for $18 per share was approved by Hawaiian shareholders. The proposed combination remains subject to regulatory approval.
•Ratified a five-year collective bargaining agreement with approximately 1,000 Alaska Airlines employees represented by AMFA.
•Completed inspections of all 737-9 MAX aircraft and returned the fleet to service in February.
•Enhanced quality oversight program at the Boeing production facility to validate the work and quality of our aircraft as they progress through the manufacturing process.
•Received two E175 aircraft during the quarter, bringing the total in the Horizon fleet to 43.
Commercial Updates:
•Launched partnership with Bilt Rewards, which adds Alaska's Mileage Plan as a transfer partner and later in 2024 will allow Alaska Airlines Visa Signature® cardholders to earn 3x miles when paying rent via Bilt.
•Announced growth plans out of Portland to provide guests with more travel options, including 25% increased capacity and a new daily nonstop flight to Atlanta, beginning later this year.
•Announced new daily nonstop service between Santa Rosa and Las Vegas, which will be Air Group's seventh destination from Sonoma County.
•Introduced Alaska Access, a monthly subscription program for price-conscious travelers that offers Wi-Fi vouchers, early access to sales, and a personalized fare page.
The following table reconciles the company's reported GAAP net loss per share (EPS) for the three months ended March 31, 2024 and 2023 to adjusted amounts.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in millions, except per share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||||||||||
| GAAP net loss per share | $ | (132) | $ | (1.05) | $ | (142) | $ | (1.11) | |||||||||||||||
| Mark-to-market fuel hedge adjustments | (13) | (0.10) | 20 | 0.16 | |||||||||||||||||||
Special items - fleet transition(a) | 26 | 0.21 | 13 | 0.10 | |||||||||||||||||||
Special items - integration costs(b) | 8 | 0.06 | — | — | |||||||||||||||||||
Special items - labor and other(c) | — | — | 51 | 0.40 | |||||||||||||||||||
| Income tax effect of reconciling items above | (5) | (0.04) | (21) | (0.17) | |||||||||||||||||||
| Non-GAAP adjusted net loss per share | $ | (116) | $ | (0.92) | $ | (79) | $ | (0.62) | |||||||||||||||
(a) Special items - fleet transition in the three months ended March 31, 2024 and 2023 is primarily for costs associated with the retirement of Airbus and Q400 aircraft, as well as gains on the sale of certain Q400 aircraft.
(b) Special items - integration costs is associated with our pending acquisition of Hawaiian Airlines.
(c) Special items - labor and other is for changes to Alaska pilots' sick leave benefits resulting from an agreement signed in the first quarter of 2023.
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.
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Alaska will hold its quarterly conference call to discuss first quarter results at 8:30 a.m. PDT on April 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.
Second Quarter and Full Year 2024 Forecast Information
| Q2 Expectation | ||||||||
| Capacity (ASMs) % change versus 2023 | Up 5% to 7% | |||||||
| Economic fuel cost per gallon | $3.00 to $3.20 | |||||||
Earnings per share(a) | $2.20 to $2.40 | |||||||
| Full Year Expectation | ||||||||
| Capacity (ASMs) % change versus 2023 | < 3% | |||||||
Earnings per share(a) | $3.25 to $5.25 | |||||||
| Capital expenditures | $1.2 billion - $1.3 billion | |||||||
(a) Earnings per share guidance assumes a full year tax rate of approximately 25%
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.
###
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| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | |||||||||||||||||
| Alaska Air Group, Inc. | |||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||
| (in millions, except per share amounts) | 2024 | 2023 | Change | ||||||||||||||
| Operating Revenue | |||||||||||||||||
| Passenger revenue | $ | 2,004 | $ | 1,984 | 1 | % | |||||||||||
| Mileage Plan other revenue | 164 | 154 | 6 | % | |||||||||||||
| Cargo and other revenue | 64 | 58 | 10 | % | |||||||||||||
| Total Operating Revenue | 2,232 | 2,196 | 2 | % | |||||||||||||
| Operating Expenses | |||||||||||||||||
| Wages and benefits | 804 | 723 | 11 | % | |||||||||||||
| Variable incentive pay | 44 | 47 | (6) | % | |||||||||||||
| Aircraft fuel, including hedging gains and losses | 565 | 665 | (15) | % | |||||||||||||
| Aircraft maintenance | 122 | 124 | (2) | % | |||||||||||||
| Aircraft rent | 47 | 59 | (20) | % | |||||||||||||
| Landing fees and other rentals | 165 | 152 | 9 | % | |||||||||||||
| Contracted services | 97 | 95 | 2 | % | |||||||||||||
| Selling expenses | 77 | 66 | 17 | % | |||||||||||||
| Depreciation and amortization | 126 | 104 | 21 | % | |||||||||||||
| Food and beverage service | 58 | 54 | 7 | % | |||||||||||||
| Third-party regional carrier expense | 54 | 52 | 4 | % | |||||||||||||
| Other | 205 | 177 | 16 | % | |||||||||||||
| Special items - fleet transition | 26 | 13 | 100 | % | |||||||||||||
| Special items - integration costs | 8 | — | NM | ||||||||||||||
| Special items - labor and other | — | 51 | (100) | % | |||||||||||||
| Total Operating Expenses | 2,398 | 2,382 | 1 | % | |||||||||||||
| Operating Loss | (166) | (186) | 11 | % | |||||||||||||
| Non-operating Income (Expense) | |||||||||||||||||
| Interest income | 17 | 17 | — | % | |||||||||||||
| Interest expense | (35) | (28) | 25 | % | |||||||||||||
| Interest capitalized | 6 | 7 | (14) | % | |||||||||||||
| Other - net | — | (9) | (100) | % | |||||||||||||
| Total Non-operating Expense | (12) | (13) | (8) | % | |||||||||||||
| Loss Before Income Tax | (178) | (199) | |||||||||||||||
| Income tax benefit | (46) | (57) | |||||||||||||||
| Net Loss | $ | (132) | $ | (142) | |||||||||||||
| Basic Loss Per Share | $ | (1.05) | $ | (1.11) | |||||||||||||
| Diluted Loss Per Share | $ | (1.05) | $ | (1.11) | |||||||||||||
| Weighted Average Shares Outstanding used for computation: | |||||||||||||||||
| Basic | 125.970 | 127.501 | |||||||||||||||
| Diluted | 125.970 | 127.501 | |||||||||||||||
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| CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | |||||||||||
| Alaska Air Group, Inc. | |||||||||||
| (in millions) | March 31, 2024 | December 31, 2023 | |||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 885 | $ | 281 | |||||||
| Marketable securities | 1,393 | 1,510 | |||||||||
| Total cash and marketable securities | 2,278 | 1,791 | |||||||||
| Receivables - net | 384 | 383 | |||||||||
| Inventories and supplies - net | 104 | 116 | |||||||||
| Prepaid expenses | 177 | 176 | |||||||||
| Other current assets | 186 | 239 | |||||||||
| Total Current Assets | 3,129 | 2,705 | |||||||||
| Property and Equipment | |||||||||||
| Aircraft and other flight equipment | 10,363 | 10,425 | |||||||||
| Other property and equipment | 1,839 | 1,814 | |||||||||
| Deposits for future flight equipment | 431 | 491 | |||||||||
| 12,633 | 12,730 | ||||||||||
| Less accumulated depreciation and amortization | 4,439 | 4,342 | |||||||||
| Total Property and Equipment - net | 8,194 | 8,388 | |||||||||
| Other Assets | |||||||||||
| Operating lease assets | 1,174 | 1,195 | |||||||||
| Goodwill and intangible assets | 2,033 | 2,033 | |||||||||
| Other noncurrent assets | 283 | 292 | |||||||||
| Total Other Assets | 3,490 | 3,520 | |||||||||
| Total Assets | $ | 14,813 | $ | 14,613 | |||||||
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| CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | |||||||||||
| Alaska Air Group, Inc. | |||||||||||
| (in millions, except share amounts) | March 31, 2024 | December 31, 2023 | |||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable | $ | 181 | $ | 207 | |||||||
| Accrued wages, vacation and payroll taxes | 481 | 584 | |||||||||
| Air traffic liability | 1,604 | 1,136 | |||||||||
| Other accrued liabilities | 791 | 800 | |||||||||
| Deferred revenue | 1,313 | 1,221 | |||||||||
| Current portion of operating lease liabilities | 158 | 158 | |||||||||
| Current portion of long-term debt and finance leases | 301 | 353 | |||||||||
| Total Current Liabilities | 4,829 | 4,459 | |||||||||
| Long-Term Debt, Net of Current Portion | 2,264 | 2,182 | |||||||||
| Noncurrent Liabilities | |||||||||||
| Long-term operating lease liabilities, net of current portion | 1,098 | 1,125 | |||||||||
| Deferred income taxes | 649 | 695 | |||||||||
| Deferred revenue | 1,320 | 1,382 | |||||||||
| Obligation for pension and post-retirement medical benefits | 365 | 362 | |||||||||
| Other liabilities | 311 | 295 | |||||||||
| Total Noncurrent Liabilities | 3,743 | 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 - 139,137,527 shares; 2023 - 138,960,830 shares, Outstanding: 2024 - 125,705,964 shares; 2023 - 126,090,353 shares | 1 | 1 | |||||||||
| Capital in excess of par value | 707 | 695 | |||||||||
Treasury stock (common), at cost: 2024 - 13,431,563 shares; 2023 - 12,870,477 shares | (840) | (819) | |||||||||
| Accumulated other comprehensive loss | (294) | (299) | |||||||||
| Retained earnings | 4,403 | 4,535 | |||||||||
| 3,977 | 4,113 | ||||||||||
| Total Liabilities and Shareholders' Equity | $ | 14,813 | $ | 14,613 | |||||||
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| SUMMARY CASH FLOW (unaudited) | |||||||||||
| Alaska Air Group, Inc. | |||||||||||
| (in millions) | Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net Loss | $ | (132) | $ | (142) | |||||||
| Non-cash reconciling items | 168 | 191 | |||||||||
| Changes in working capital | 256 | 173 | |||||||||
| Net cash provided by operating activities | 292 | 222 | |||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Property and equipment additions | (57) | (124) | |||||||||
| Supplier proceeds | 162 | — | |||||||||
| Other investing activities | 213 | 184 | |||||||||
| Net cash provided by investing activities | 318 | 60 | |||||||||
| Cash Flows from Financing Activities: | (5) | (114) | |||||||||
| Net increase in cash and cash equivalents | 605 | 168 | |||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 308 | 369 | |||||||||
| Cash, cash equivalents, and restricted cash at end of the period | $ | 913 | $ | 537 | |||||||
7
| OPERATING STATISTICS SUMMARY (unaudited) | |||||||||||||||||
| Alaska Air Group, Inc. | |||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||
| 2024 | 2023 | Change | |||||||||||||||
Consolidated Operating Statistics:(a) | |||||||||||||||||
| Revenue passengers (000) | 9,774 | 9,852 | (1)% | ||||||||||||||
| RPMs (000,000) "traffic" | 12,524 | 12,554 | —% | ||||||||||||||
| ASMs (000,000) "capacity" | 15,378 | 15,705 | (2)% | ||||||||||||||
| Load factor | 81.4% | 79.9% | 1.5 pts | ||||||||||||||
| Yield | 16.00¢ | 15.80¢ | 1% | ||||||||||||||
| PRASM | 13.03¢ | 12.63¢ | 3% | ||||||||||||||
| RASM | 14.51¢ | 13.98¢ | 4% | ||||||||||||||
CASMex(b) | 11.60¢ | 10.44¢ | 11% | ||||||||||||||
Economic fuel cost per gallon(b) | $3.08 | $3.41 | (10)% | ||||||||||||||
| Fuel gallons (000,000) | 188 | 189 | (1)% | ||||||||||||||
| ASMs per gallon | 81.8 | 83.1 | (2)% | ||||||||||||||
| Departures (000) | 95.7 | 95.4 | —% | ||||||||||||||
| Average full-time equivalent employees (FTEs) | 23,013 | 22,978 | —% | ||||||||||||||
Operating fleet(c) | 315 | 314 | 1 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.
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| GAAP TO NON-GAAP RECONCILIATIONS (unaudited) | |||||||||||||||||||||||
| Alaska Air Group, Inc. | |||||||||||||||||||||||
| Income (Loss) Before Income Tax Reconciliation | |||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in millions) | Dollars | Margin | Dollars | Margin | |||||||||||||||||||
| Loss before income tax | (178) | (8.0) | % | (199) | (9.1) | % | |||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Mark-to-market fuel hedge adjustment | (13) | 20 | |||||||||||||||||||||
| Special items - fleet transition | 26 | 13 | |||||||||||||||||||||
| Special items - integration costs | 8 | — | |||||||||||||||||||||
| Special items - labor and other | — | 51 | |||||||||||||||||||||
| Adjusted loss before income tax | (157) | (7.0) | % | (115) | (5.2) | % | |||||||||||||||||
| CASMex Reconciliation | |||||||||||
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2024 | 2023 | |||||||||
| Total operating expenses | 2,398 | 2,382 | |||||||||
| Less the following components: | |||||||||||
| Aircraft fuel, including hedging gains and losses | 565 | 665 | |||||||||
Freighter costs(a) | 15 | 14 | |||||||||
| Special items - fleet transition | 26 | 13 | |||||||||
| Special items - integration costs | 8 | — | |||||||||
| Special items - labor and other | — | 51 | |||||||||
| Total operating expenses, excluding fuel, freighter costs, and special items | 1,784 | 1,639 | |||||||||
| CASM | 15.59 | ¢ | 15.17 | ¢ | |||||||
| CASMex | 11.60 | ¢ | 10.44 | ¢ | |||||||
(a) Freighter costs in the three months ended March 31, 2024 and 2023 are not presented separately on the statements of operations.
| Fuel Reconciliation | |||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in millions, except for per-gallon amounts) | Dollars | Cost/Gallon | Dollars | Cost/Gallon | |||||||||||||||||||
| Raw or "into-plane" fuel cost | $ | 565 | $ | 3.01 | $ | 633 | $ | 3.35 | |||||||||||||||
| Losses on settled hedges | 13 | 0.07 | 12 | 0.06 | |||||||||||||||||||
| Economic fuel expense | 578 | 3.08 | 645 | 3.41 | |||||||||||||||||||
| Mark-to-market fuel hedge adjustment | (13) | (0.07) | 20 | 0.11 | |||||||||||||||||||
| Aircraft fuel, including hedging gains and losses | $ | 565 | $ | 3.01 | $ | 665 | $ | 3.52 | |||||||||||||||
| Fuel gallons | 188 | 189 | |||||||||||||||||||||
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| Debt-to-capitalization, including operating and finance leases | |||||||||||
| (in millions) | March 31, 2024 | December 31, 2023 | |||||||||
| Long-term debt, net of current portion | $ | 2,264 | $ | 2,182 | |||||||
| Capitalized operating leases | 1,256 | 1,283 | |||||||||
Capitalized finance leases(a) | — | 64 | |||||||||
| Adjusted debt, net of current portion of long-term debt | 3,520 | 3,529 | |||||||||
| Shareholders' equity | 3,977 | 4,113 | |||||||||
| Total Invested Capital | $ | 7,497 | $ | 7,642 | |||||||
| Debt-to-capitalization ratio, including operating and finance leases | 47 | % | 46 | % | |||||||
(a)We included our capitalized finance lease balances as of December 31, 2023, which were recognized within the 'Current portion of long-term debt and finance leases' line of the condensed consolidated balance sheet.
| Adjusted net debt to earnings before interest, taxes, depreciation, amortization, rent, and special items | |||||||||||
| (in millions) | March 31, 2024 | December 31, 2023 | |||||||||
| Current portion of long-term debt and finance leases | $ | 301 | $ | 353 | |||||||
| Current portion of operating lease liabilities | 158 | 158 | |||||||||
| Long-term debt | 2,264 | 2,182 | |||||||||
| Long-term operating lease liabilities, net of current portion | 1,098 | 1,125 | |||||||||
| Total adjusted debt | 3,821 | 3,818 | |||||||||
| Less: Total cash and marketable securities | 2,278 | 1,791 | |||||||||
| Adjusted net debt | $ | 1,543 | $ | 2,027 | |||||||
| (in millions) | Twelve Months Ended March 31, 2024 | Twelve Months Ended December 31, 2023 | |||||||||
Operating Income(a) | $ | 414 | $ | 394 | |||||||
| Adjusted for: | |||||||||||
| Special items | 413 | 443 | |||||||||
| Mark-to-market fuel hedge adjustments | (35) | (2) | |||||||||
| Depreciation and amortization | 473 | 451 | |||||||||
| Aircraft rent | 196 | 208 | |||||||||
| EBITDAR | $ | 1,461 | $ | 1,494 | |||||||
| Adjusted net debt to EBITDAR | 1.1x | 1.4x | |||||||||
(a)Operating income can be reconciled using the trailing twelve month operating income as filed quarterly with the SEC.
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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.
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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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