News releases
Alaska Air Group reports second quarter 2020 results; COVID-19 updates
Financial Results:
- Reported net loss for the second quarter of 2020 under Generally Accepted Accounting Principles (GAAP) of
$214 million , or$1.73 per diluted share, compared to net income of$262 million , or$2.11 per diluted share in the second quarter of 2019. - Reported net loss for the second quarter of 2020, excluding the payroll support program wage offsets, special items and mark-to-market fuel hedge accounting adjustments, of
$439 million , or$3.54 per diluted share, compared to net income of$270 million or$2.17 per diluted share, in the second quarter of 2019. - Reported a debt-to-capitalization ratio, including short-term borrowings related to COVID-19, of 51%.
Liquidity Updates:
- Lowered cash burn from an exit rate of
$400 million per month in March to$120 million in June, a 70% reduction. - Closed on an additional
$164 million in secured financing in the second quarter, secured by seven aircraft. - Held
$2.8 billion in unrestricted cash and marketable securities as ofJune 30, 2020 . - Obtained nearly
$1.2 billion in financing through the issuance of Enhanced Equipment Trust Certificates (EETC), secured by 42 Boeing and 19 Embraer aircraft, onJuly 2, 2020 . - Held
$3.8 billion in cash and marketable securities as ofJuly 22, 2020 , including EETC funds received in July. - Received
$992 million in support forAlaska and Horizon under the Coronavirus Aid, Relief, and Economic Security (CARES) Act Payroll Support Program (PSP) inApril 2020 . - Reached an agreement for McGee to receive
$30 million in CARES Act PSP support,$15 million of which was received inJune 2020 . - Signed a non-binding letter of intent with the
U.S. Treasury to obtain up to$1.1 billion in additional CARES Act loans.
Operational Updates:
- Received official oneworld invitation on
July 23, 2020 . The company is working to accelerate the timeline and join the partnership by the end of 2020. - Returned 43 mainline aircraft and all
Horizon Air and SkyWest Airlines aircraft to service. As ofJuly 22, 2020 , 89 mainline aircraft remain temporarily parked. - In
July 2020 , eliminated 300 management positions, initiated early-out programs for frontline workers and offered incentive leaves to pilots as we work to mitigate involuntary furloughs. - Received
FAA certification to transport cargo in the passenger cabin on five Boeing 737-900 passenger aircraft, and began cargo-only service toUnalakleet, Alaska . - Announced expansion to year-round service to
King Salmon andDillingham, Alaska , to be flown by Horizon E175 aircraft, as well as began weekly service on Boeing 737 aircraft toCold Bay, Alaska . - Announced 12 new routes to be flown to various destinations from
Los Angeles International Airport .
Next-Level Care:
- Expanded the Company's Next-Level Care initiative, including nearly 100 measures, offering layers of safety through every single stage of travel and helping guests build confidence in flying. Such measures include the following:
Covering and caring for guests
- Flyers are required to complete a pre-travel wellness agreement at check-in. Guests aged 12 and older are required to wear a mask throughout all stages of travel.
- Empowered flight attendants with the ability to issue "yellow card" warnings to guests refusing mask policies, with the consequence of suspension of future travel for non-compliance.
- Provided hand sanitization stations throughout the airport, including lobby and gate areas. Personal sanitizing wipes made available onboard starting
July 2020 . - Extended "Peace-of-Mind" waiver, allowing changes to ticketed travel without change or cancellation fees for tickets booked through
Sept. 8, 2020 .
Personal Safety
- Limiting the number of guests onboard and extended blocking middle seats on mainline aircraft through
Sept. 30, 2020 . - Reduced onboard service to limit interaction between flight crews and guests.
- Placed floor decals throughout our airports, reminding guests to "mind their wingspan," when at ticket counters, kiosks and boarding.
- Limited capacity of airport lounges to 50% and extended lounge memberships active as of
April 1 by six months. - Boarding aircraft from the rear, and in smaller groups, to limit interaction between guests.
- Working with airports to install plexiglass barriers at all guest touchpoints along their journey.
Exceeding
- Aircraft are equipped with hospital-grade HEPA air filters, which are designed to remove 99.95% of airborne contaminants and bring outside air on board every three minutes.
- Exceed
CDC cleaning guidelines on board and use high-grade,EPA -certified disinfectant to clean critical areas, and perform a deep-clean and sanitization of all aircraft overnight. - Utilizing electrostatic disinfectant sprayers, which emit a safe, high-grade
EPA cleaning solution to sanitize surfaces.
"Airlines are currently navigating the biggest demand contraction in the history of aviation," said
The following table reconciles the company's reported GAAP net income and earnings per diluted share (diluted EPS) for the three and six months ended
Three Months Ended |
|||||||||||||||
2020 |
2019 |
||||||||||||||
(in millions, except per-share amounts) |
Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||
GAAP net income (loss) and diluted EPS |
$ |
(214) |
$ |
(1.73) |
$ |
262 |
$ |
2.11 |
|||||||
Payroll support program wage offset |
(362) |
(2.92) |
— |
— |
|||||||||||
Mark-to-market fuel hedge adjustments |
(6) |
(0.05) |
3 |
0.02 |
|||||||||||
Special items - merger-related costs |
1 |
0.01 |
8 |
0.06 |
|||||||||||
Special items - impairment charges and other |
69 |
0.56 |
— |
— |
|||||||||||
Income tax effect of reconciling items above |
73 |
0.59 |
(3) |
(0.02) |
|||||||||||
Non-GAAP adjusted net income (loss) and diluted EPS |
$ |
(439) |
$ |
(3.54) |
$ |
270 |
$ |
2.17 |
|||||||
Six Months Ended |
|||||||||||||||
2020 |
2019 |
||||||||||||||
(in millions, except per-share amounts) |
Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||
GAAP net income (loss) and diluted EPS |
$ |
(446) |
$ |
(3.60) |
$ |
266 |
$ |
2.14 |
|||||||
Payroll support program wage offset |
(362) |
(2.93) |
— |
— |
|||||||||||
Mark-to-market fuel hedge adjustments |
3 |
0.03 |
(1) |
(0.01) |
|||||||||||
Special items - merger-related costs |
4 |
0.03 |
34 |
0.27 |
|||||||||||
Special items - impairment charges and other |
229 |
1.85 |
— |
— |
|||||||||||
Income tax effect of reconciling items above |
31 |
0.25 |
(8) |
(0.06) |
|||||||||||
Non-GAAP adjusted net income (loss) and diluted EPS |
$ |
(541) |
$ |
(4.37) |
$ |
291 |
$ |
2.34 |
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 second quarter results will be streamed 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) |
|||||||||||||||||||||
|
|||||||||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||||||||
(in millions, except per-share amounts) |
2020 |
2019 |
Change |
2020 |
2019 |
Change |
|||||||||||||||
Operating Revenues: |
|||||||||||||||||||||
Passenger revenue |
$ |
309 |
$ |
2,111 |
(85) |
% |
$ |
1,790 |
$ |
3,827 |
(53) |
% |
|||||||||
Mileage Plan other revenue |
73 |
118 |
(38) |
% |
182 |
228 |
(20) |
% |
|||||||||||||
Cargo and other |
39 |
59 |
(34) |
% |
85 |
109 |
(22) |
% |
|||||||||||||
Total Operating Revenues |
421 |
2,288 |
(82) |
% |
2,057 |
4,164 |
(51) |
% |
|||||||||||||
Operating Expenses: |
|||||||||||||||||||||
Wages and benefits |
472 |
567 |
(17) |
% |
1,084 |
1,124 |
(4) |
% |
|||||||||||||
Payroll support program wage offset |
(362) |
— |
NM |
(362) |
— |
NM |
|||||||||||||||
Variable incentive pay |
16 |
44 |
(64) |
% |
23 |
79 |
(71) |
% |
|||||||||||||
Aircraft fuel, including hedging gains and losses |
59 |
502 |
(88) |
% |
443 |
922 |
(52) |
% |
|||||||||||||
Aircraft maintenance |
45 |
115 |
(61) |
% |
160 |
235 |
(32) |
% |
|||||||||||||
Aircraft rent |
74 |
82 |
(10) |
% |
155 |
165 |
(6) |
% |
|||||||||||||
Landing fees and other rentals |
83 |
113 |
(27) |
% |
214 |
245 |
(13) |
% |
|||||||||||||
Contracted services |
30 |
70 |
(57) |
% |
102 |
142 |
(28) |
% |
|||||||||||||
Selling expenses |
4 |
87 |
(95) |
% |
59 |
159 |
(63) |
% |
|||||||||||||
Depreciation and amortization |
107 |
105 |
2 |
% |
215 |
211 |
2 |
% |
|||||||||||||
Food and beverage service |
7 |
53 |
(87) |
% |
56 |
102 |
(45) |
% |
|||||||||||||
Third-party regional carrier expense |
26 |
42 |
(38) |
% |
63 |
83 |
(24) |
% |
|||||||||||||
Other |
78 |
136 |
(43) |
% |
221 |
274 |
(19) |
% |
|||||||||||||
Special items - merger-related costs |
1 |
8 |
(88) |
% |
4 |
34 |
(88) |
% |
|||||||||||||
Special items - impairment charges and other |
69 |
— |
NM |
229 |
— |
NM |
|||||||||||||||
Total Operating Expenses |
709 |
1,924 |
(63) |
% |
2,666 |
3,775 |
(20) |
% |
|||||||||||||
Operating Income (Loss) |
(288) |
364 |
(179) |
% |
(609) |
389 |
(257) |
% |
|||||||||||||
Nonoperating Income (Expense): |
|||||||||||||||||||||
Interest income |
7 |
11 |
(36) |
% |
16 |
20 |
(20) |
% |
|||||||||||||
Interest expense |
(17) |
(20) |
(15) |
% |
(30) |
(42) |
(29) |
% |
|||||||||||||
Interest capitalized |
1 |
3 |
(67) |
% |
4 |
7 |
(43) |
% |
|||||||||||||
Other - net |
6 |
(7) |
(186) |
% |
11 |
(17) |
(165) |
% |
|||||||||||||
Total Nonoperating Income (Expense) |
(3) |
(13) |
(77) |
% |
1 |
(32) |
(103) |
% |
|||||||||||||
Income (Loss) Before Income Tax |
(291) |
351 |
(608) |
357 |
|||||||||||||||||
Income tax (benefit) expense |
(77) |
89 |
(162) |
91 |
|||||||||||||||||
Net Income (Loss) |
$ |
(214) |
$ |
262 |
$ |
(446) |
$ |
266 |
|||||||||||||
Basic Earnings (Loss) Per Share: |
$ |
(1.74) |
$ |
2.12 |
$ |
(3.62) |
$ |
2.15 |
|||||||||||||
Diluted Earnings (Loss) Per Share: |
$ |
(1.73) |
$ |
2.11 |
$ |
(3.60) |
$ |
2.14 |
|||||||||||||
Shares Used for Computation: |
|||||||||||||||||||||
Basic |
123.296 |
123.418 |
123.058 |
123.355 |
|||||||||||||||||
Diluted |
123.965 |
124.301 |
123.685 |
124.179 |
|||||||||||||||||
Cash dividend declared per share: |
$ |
— |
$ |
0.35 |
$ |
0.375 |
$ |
0.70 |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
|||||||
|
|||||||
(in millions) |
|
|
|||||
Cash and marketable securities |
$ |
2,803 |
$ |
1,521 |
|||
Other current assets |
441 |
516 |
|||||
Current assets |
3,244 |
2,037 |
|||||
Property and equipment - net |
6,795 |
6,902 |
|||||
Operating lease assets |
1,568 |
1,711 |
|||||
|
1,943 |
1,943 |
|||||
Intangible assets - net |
109 |
122 |
|||||
Other assets |
339 |
278 |
|||||
Total assets |
13,998 |
12,993 |
|||||
Air traffic liability |
1,131 |
900 |
|||||
Current portion of long-term debt |
1,087 |
235 |
|||||
Current portion of operating lease liabilities |
273 |
269 |
|||||
Other current liabilities |
1,629 |
1,797 |
|||||
Current liabilities |
4,120 |
3,201 |
|||||
Long-term debt |
1,549 |
1,264 |
|||||
Long-term operating lease liabilities |
1,376 |
1,439 |
|||||
Other liabilities and credits |
3,092 |
2,758 |
|||||
Shareholders' equity |
3,861 |
4,331 |
|||||
Total liabilities and shareholders' equity |
$ |
13,998 |
$ |
12,993 |
|||
Debt-to-capitalization ratio, including operating leases |
51 |
% |
41 |
% |
|||
Number of common shares outstanding |
123.639 |
123.000 |
OPERATING STATISTICS SUMMARY (unaudited) |
|||||||||||
|
|||||||||||
Three Months Ended |
Six Months Ended |
||||||||||
2020 |
2019 |
Change |
2020 |
2019 |
Change |
||||||
Consolidated Operating Statistics:(a) |
|||||||||||
Revenue passengers (000) |
1,485 |
12,026 |
(87.7)% |
10,417 |
22,442 |
(53.6)% |
|||||
RPMs (000,000) "traffic" |
1,654 |
14,638 |
(88.7)% |
12,310 |
27,087 |
(54.6)% |
|||||
ASMs (000,000) "capacity" |
4,307 |
16,980 |
(74.6)% |
19,612 |
32,487 |
(39.6)% |
|||||
Load factor |
38.4% |
86.2% |
(47.8) pts |
62.8% |
83.4% |
(20.6) pts |
|||||
Yield |
18.68¢ |
14.43¢ |
29.5% |
14.54¢ |
14.13¢ |
2.9% |
|||||
RASM |
9.77¢ |
13.48¢ |
(27.5)% |
10.49¢ |
12.82¢ |
(18.2)% |
|||||
CASMex(b) |
21.87¢ |
8.33¢ |
162.5% |
12.00¢ |
8.68¢ |
38.2% |
|||||
Economic fuel cost per gallon(b) |
|
|
(47.1)% |
|
|
(19.5)% |
|||||
Fuel gallons (000,000) |
54 |
220 |
(75.5)% |
248 |
419 |
(40.8)% |
|||||
ASM's per gallon |
79.8 |
77.2 |
3.4% |
79.1 |
77.5 |
2.1% |
|||||
Average number of full-time equivalent employees (FTE) |
15,836 |
21,921 |
(27.8)% |
19,155 |
21,876 |
(12.4)% |
|||||
Mainline Operating Statistics: |
|||||||||||
Revenue passengers (000) |
905 |
9,206 |
(90.2)% |
7,580 |
17,070 |
(55.6)% |
|||||
RPMs (000,000) "traffic" |
1,276 |
13,207 |
(90.3)% |
10,858 |
24,379 |
(55.5)% |
|||||
ASMs (000,000) "capacity" |
3,363 |
15,241 |
(77.9)% |
17,060 |
29,114 |
(41.4)% |
|||||
Load factor |
37.9% |
86.7% |
(48.8) pts |
63.6% |
83.7% |
(20.1) pts |
|||||
Yield |
17.63¢ |
13.38¢ |
31.8% |
13.44¢ |
13.08¢ |
2.8% |
|||||
RASM |
9.52¢ |
12.66¢ |
(24.8)% |
9.94¢ |
12.02¢ |
(17.3)% |
|||||
CASMex(b) |
22.19¢ |
7.65¢ |
190.1% |
11.17¢ |
7.96¢ |
40.3% |
|||||
Economic fuel cost per gallon(b) |
|
|
(46.9)% |
|
|
(18.7)% |
|||||
Fuel gallons (000,000) |
38 |
187 |
(79.7)% |
201 |
356 |
(43.5)% |
|||||
ASM's per gallon |
88.5 |
81.5 |
8.6% |
84.9 |
81.8 |
3.8% |
|||||
Average number of FTE's |
12,340 |
16,551 |
(25.4)% |
14,579 |
16,504 |
(11.7)% |
|||||
Aircraft utilization |
5.6 |
11.1 |
(49.5)% |
8.8 |
10.7 |
(17.8)% |
|||||
Average aircraft stage length |
1,144 |
1,311 |
(12.7)% |
1,270 |
1,308 |
(2.9)% |
|||||
Operating fleet(d) |
225 |
238 |
(13) a/c |
225 |
238 |
(13) a/c |
|||||
Regional Operating Statistics:(c) |
|||||||||||
Revenue passengers (000) |
580 |
2,820 |
(79.4)% |
2,837 |
5,372 |
(47.2)% |
|||||
RPMs (000,000) "traffic" |
378 |
1,431 |
(73.6)% |
1,452 |
2,708 |
(46.4)% |
|||||
ASMs (000,000) "capacity" |
945 |
1,739 |
(45.7)% |
2,552 |
3,373 |
(24.3)% |
|||||
Load factor |
40.0% |
82.3% |
(42.3) pts |
56.9% |
80.3% |
(23.4) pts |
|||||
Yield |
22.12¢ |
24.06¢ |
(8.1)% |
22.80¢ |
23.57¢ |
(3.3)% |
|||||
RASM |
10.63¢ |
20.51¢ |
(48.2)% |
14.07¢ |
19.62¢ |
(28.3)% |
|||||
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 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) |
Excludes 12 aircraft that were permanently parked in |
OPERATING SEGMENTS (unaudited) |
|||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||
Three Months Ended |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
|
Special |
Consolidated |
||||||||||||||||||||
Operating Revenues |
|||||||||||||||||||||||||||
Passenger revenues |
$ |
225 |
$ |
84 |
$ |
— |
$ |
— |
$ |
309 |
$ |
— |
$ |
309 |
|||||||||||||
CPA revenues |
— |
— |
81 |
(81) |
— |
— |
— |
||||||||||||||||||||
Mileage Plan other revenue |
56 |
17 |
— |
— |
73 |
— |
73 |
||||||||||||||||||||
Cargo and other |
39 |
— |
— |
— |
39 |
— |
39 |
||||||||||||||||||||
Total Operating Revenues |
320 |
101 |
81 |
(81) |
421 |
— |
421 |
||||||||||||||||||||
Operating Expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
746 |
210 |
68 |
(82) |
942 |
(292) |
650 |
||||||||||||||||||||
Economic fuel |
45 |
20 |
— |
— |
65 |
(6) |
59 |
||||||||||||||||||||
Total Operating Expenses |
791 |
230 |
68 |
(82) |
1,007 |
(298) |
709 |
||||||||||||||||||||
Nonoperating Income (Expense) |
|||||||||||||||||||||||||||
Interest income |
11 |
— |
— |
(4) |
7 |
— |
7 |
||||||||||||||||||||
Interest expense |
(18) |
— |
(5) |
6 |
(17) |
— |
(17) |
||||||||||||||||||||
Interest capitalized |
1 |
— |
— |
— |
1 |
— |
1 |
||||||||||||||||||||
Other - net |
6 |
— |
— |
— |
6 |
— |
6 |
||||||||||||||||||||
Total Nonoperating Income (Expense) |
— |
— |
(5) |
2 |
(3) |
— |
(3) |
||||||||||||||||||||
Income (Loss) Before Income Tax |
$ |
(471) |
$ |
(129) |
$ |
8 |
$ |
3 |
$ |
(589) |
$ |
298 |
$ |
(291) |
|||||||||||||
Three Months Ended |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
|
Special Items(c) |
Consolidated |
||||||||||||||||||||
Operating Revenues |
|||||||||||||||||||||||||||
Passenger revenues |
$ |
1,767 |
$ |
344 |
$ |
— |
$ |
— |
$ |
2,111 |
$ |
— |
$ |
2,111 |
|||||||||||||
CPA revenues |
— |
— |
112 |
(112) |
— |
— |
— |
||||||||||||||||||||
Mileage Plan other revenue |
105 |
13 |
— |
— |
118 |
— |
118 |
||||||||||||||||||||
Cargo and other |
57 |
— |
— |
2 |
59 |
— |
59 |
||||||||||||||||||||
Total Operating Revenues |
1,929 |
357 |
112 |
(110) |
2,288 |
— |
2,288 |
||||||||||||||||||||
Operating Expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
1,167 |
268 |
95 |
(116) |
1,414 |
8 |
1,422 |
||||||||||||||||||||
Economic fuel |
422 |
77 |
— |
— |
499 |
3 |
502 |
||||||||||||||||||||
Total Operating Expenses |
1,589 |
345 |
95 |
(116) |
1,913 |
11 |
1,924 |
||||||||||||||||||||
Nonoperating Income (Expense) |
|||||||||||||||||||||||||||
Interest income |
17 |
— |
— |
(6) |
11 |
— |
11 |
||||||||||||||||||||
Interest expense |
(19) |
— |
(7) |
6 |
(20) |
— |
(20) |
||||||||||||||||||||
Interest capitalized |
3 |
— |
— |
— |
3 |
— |
3 |
||||||||||||||||||||
Other - net |
(7) |
— |
— |
— |
(7) |
— |
(7) |
||||||||||||||||||||
Total Nonoperating Income (Expense) |
(6) |
— |
(7) |
— |
(13) |
— |
(13) |
||||||||||||||||||||
Income (Loss) Before Income Tax |
$ |
334 |
$ |
12 |
$ |
10 |
$ |
6 |
$ |
362 |
$ |
(11) |
$ |
351 |
|||||||||||||
Six Months Ended |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
|
Special |
Consolidated |
||||||||||||||||||||
Operating Revenues |
|||||||||||||||||||||||||||
Passenger revenues |
$ |
1,459 |
$ |
331 |
$ |
— |
$ |
— |
$ |
1,790 |
$ |
— |
$ |
1,790 |
|||||||||||||
CPA revenues |
— |
— |
186 |
(186) |
— |
— |
— |
||||||||||||||||||||
Mileage Plan other revenue |
154 |
28 |
— |
— |
182 |
— |
182 |
||||||||||||||||||||
Cargo and other |
83 |
— |
— |
2 |
85 |
— |
85 |
||||||||||||||||||||
Total Operating Revenues |
1,696 |
359 |
186 |
(184) |
2,057 |
— |
2,057 |
||||||||||||||||||||
Operating Expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
1,905 |
479 |
160 |
(192) |
2,352 |
(129) |
2,223 |
||||||||||||||||||||
Economic fuel |
358 |
82 |
— |
— |
440 |
3 |
443 |
||||||||||||||||||||
Total Operating Expenses |
2,263 |
561 |
160 |
(192) |
2,792 |
(126) |
2,666 |
||||||||||||||||||||
Nonoperating Income (Expense) |
|||||||||||||||||||||||||||
Interest income |
25 |
— |
— |
(9) |
16 |
— |
16 |
||||||||||||||||||||
Interest expense |
(30) |
— |
(10) |
10 |
(30) |
— |
(30) |
||||||||||||||||||||
Interest capitalized |
4 |
— |
— |
— |
4 |
— |
4 |
||||||||||||||||||||
Other - net |
12 |
— |
— |
(1) |
11 |
— |
11 |
||||||||||||||||||||
Total Nonoperating Income (Expense) |
11 |
— |
(10) |
— |
1 |
— |
1 |
||||||||||||||||||||
Income (Loss) Before Income Tax |
$ |
(556) |
$ |
(202) |
$ |
16 |
$ |
8 |
$ |
(734) |
$ |
126 |
$ |
(608) |
|||||||||||||
Six Months Ended |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
|
Special |
Consolidated |
||||||||||||||||||||
Operating Revenues |
|||||||||||||||||||||||||||
Passenger revenues |
$ |
3,189 |
$ |
638 |
$ |
— |
$ |
— |
$ |
3,827 |
$ |
— |
$ |
3,827 |
|||||||||||||
CPA revenues |
— |
— |
228 |
(228) |
— |
— |
— |
||||||||||||||||||||
Mileage Plan other revenue |
205 |
23 |
— |
— |
228 |
— |
228 |
||||||||||||||||||||
Cargo and other |
105 |
1 |
1 |
2 |
109 |
— |
109 |
||||||||||||||||||||
Total Operating Revenues |
3,499 |
662 |
229 |
(226) |
4,164 |
— |
4,164 |
||||||||||||||||||||
Operating Expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
2,319 |
542 |
192 |
(234) |
2,819 |
34 |
2,853 |
||||||||||||||||||||
Economic fuel |
780 |
143 |
— |
— |
923 |
(1) |
922 |
||||||||||||||||||||
Total Operating Expenses |
3,099 |
685 |
192 |
(234) |
3,742 |
33 |
3,775 |
||||||||||||||||||||
Nonoperating Income (Expense) |
|||||||||||||||||||||||||||
Interest income |
33 |
— |
— |
(13) |
20 |
— |
20 |
||||||||||||||||||||
Interest expense |
(40) |
— |
(15) |
13 |
(42) |
— |
(42) |
||||||||||||||||||||
Interest capitalized |
7 |
— |
— |
— |
7 |
— |
7 |
||||||||||||||||||||
Other - net |
(17) |
— |
— |
— |
(17) |
— |
(17) |
||||||||||||||||||||
Total Nonoperating Income (Expense) |
(17) |
— |
(15) |
— |
(32) |
— |
(32) |
||||||||||||||||||||
Income (Loss) Before Income Tax |
$ |
383 |
$ |
(23) |
$ |
22 |
$ |
8 |
$ |
390 |
$ |
(33) |
$ |
357 |
(a) |
Includes consolidating entries, |
(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) |
|||||||||||||||
|
|||||||||||||||
CASM Excluding Fuel and Special Items Reconciliation |
|||||||||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||||||
Consolidated: |
|||||||||||||||
CASM |
16.46 |
¢ |
11.33 |
¢ |
13.59 |
¢ |
11.62 |
¢ |
|||||||
Less the following components: |
|||||||||||||||
Payroll support program wage offset |
(8.40) |
— |
(1.85) |
— |
|||||||||||
Aircraft fuel, including hedging gains and losses |
1.37 |
2.96 |
2.26 |
2.84 |
|||||||||||
Special items - merger-related costs |
0.02 |
0.04 |
0.01 |
0.10 |
|||||||||||
Special items - impairment charges and other |
1.60 |
— |
1.17 |
— |
|||||||||||
CASM excluding fuel and special items |
21.87 |
¢ |
8.33 |
¢ |
12.00 |
¢ |
8.68 |
¢ |
|||||||
Mainline: |
|||||||||||||||
CASM |
15.79 |
¢ |
10.50 |
¢ |
12.39 |
¢ |
10.76 |
¢ |
|||||||
Less the following components: |
|||||||||||||||
Payroll support program wage offset |
(9.69) |
— |
(1.91) |
— |
|||||||||||
Aircraft fuel, including hedging gains and losses |
1.16 |
2.79 |
2.12 |
2.68 |
|||||||||||
Special items - merger-related costs |
0.02 |
0.06 |
0.02 |
0.12 |
|||||||||||
Special items - impairment charges and other |
2.11 |
— |
0.99 |
— |
|||||||||||
CASM excluding fuel and special items |
22.19 |
¢ |
7.65 |
¢ |
11.17 |
¢ |
7.96 |
¢ |
|||||||
Fuel Reconciliation |
|||||||||||||||
Three Months Ended |
|||||||||||||||
2020 |
2019 |
||||||||||||||
(in millions, except for per-gallon amounts) |
Dollars |
Cost/Gallon |
Dollars |
Cost/Gallon |
|||||||||||
Raw or "into-plane" fuel cost |
$ |
60 |
$ |
1.11 |
$ |
495 |
$ |
2.25 |
|||||||
Losses on settled hedges |
5 |
0.09 |
4 |
0.02 |
|||||||||||
Consolidated economic fuel expense |
65 |
1.20 |
499 |
2.27 |
|||||||||||
Mark-to-market fuel hedge adjustment |
(6) |
(0.11) |
3 |
0.01 |
|||||||||||
GAAP fuel expense |
$ |
59 |
$ |
1.09 |
$ |
502 |
$ |
2.28 |
|||||||
Fuel gallons |
54 |
220 |
|||||||||||||
Six Months Ended |
|||||||||||||||
2020 |
2019 |
||||||||||||||
(in millions, except for per gallon amounts) |
Dollars |
Cost/Gallon |
Dollars |
Cost/Gallon |
|||||||||||
Raw or "into-plane" fuel cost |
$ |
430 |
$ |
1.73 |
$ |
916 |
$ |
2.18 |
|||||||
Losses on settled hedges |
10 |
0.04 |
7 |
0.02 |
|||||||||||
Consolidated economic fuel expense |
$ |
440 |
$ |
1.77 |
$ |
923 |
$ |
2.20 |
|||||||
Mark-to-market fuel hedge adjustment |
3 |
0.01 |
(1) |
— |
|||||||||||
GAAP fuel expense |
$ |
443 |
$ |
1.78 |
$ |
922 |
$ |
2.20 |
|||||||
Fuel gallons |
248 |
419 |
Debt-to-capitalization, adjusted for operating leases |
|||||||
(in millions) |
|
|
|||||
Long-term debt |
$ |
1,549 |
$ |
1,264 |
|||
Capitalized operating leases |
1,649 |
1,708 |
|||||
COVID-19 related borrowings(a) |
818 |
— |
|||||
Adjusted debt |
4,016 |
2,972 |
|||||
Shareholders' equity |
3,861 |
4,331 |
|||||
|
$ |
7,877 |
$ |
7,303 |
|||
Debt-to-capitalization ratio, including operating leases |
51 |
% |
41 |
% |
(a) |
To best reflect our leverage at |
Net adjusted debt to earnings before interest, taxes, depreciation, amortization, special items and rent |
|||
(in millions) |
|
||
Adjusted debt |
$ |
4,016 |
|
Current portion of long-term debt, excluding COVID-19 related borrowings |
269 |
||
Total adjusted debt |
4,285 |
||
Less: Cash and marketable securities |
(2,803) |
||
Net adjusted debt |
$ |
1,482 |
|
(in millions) |
Last Twelve Months |
||
GAAP Operating Income(a) |
$ |
65 |
|
Adjusted for: |
|||
Special items |
(119) |
||
Mark-to-market fuel hedge adjustments |
(2) |
||
Depreciation and amortization |
427 |
||
Aircraft rent |
321 |
||
EBITDAR |
$ |
692 |
|
Net adjusted debt to EBITDAR |
2.1x |
(a) |
Operating income can be reconciled using the trailing twelve month operating income as filed quarterly with the |
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 charges and 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 the payroll support program wage offset, impairment 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 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 the payroll support program wage offset, impairment charges and 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 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
Free Cash Flow - total operating cash flow generated less cash paid for capital expenditures
Free Cash Flow Conversion - free cash flow as a percentage of adjusted net income
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
Net adjusted debt - long-term debt, including current portion, plus capitalized operating leases, less cash and marketable securities
Net adjusted debt to EBITDAR - represents net adjusted debt divided by EBITDAR (trailing twelve months earnings before interest, taxes, depreciation, amortization, special items and rent)
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-second-quarter-2020-results-covid-19-updates-301098537.html
SOURCE
Media contact: Media Relations, (206) 304-0008; Investor/analyst contact: Emily Halverson, Director, Investor Relations, (206) 392-5908