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Alaska Air Group reports third quarter 2021 results

SEATTLE, Oct. 21, 2021 /PRNewswire/ -- Alaska Air Group (NYSE: ALK) today reported financial results for its third quarter ending Sept. 30, 2021, and provided outlook for the fourth quarter ending Dec. 31, 2021.

The third quarter marks a significant stride forward in Alaska Air Group's path to recovery. Alaska's goal from the beginning of the pandemic has been deliberate - scaling the business back up in a measured way, leveraging the company's strong balance sheet, and running a resilient operation, all with the aim of producing consistent industry-leading financial performance.

"We are thrilled to return to profitability this quarter, leading the industry with a 12% pretax profit margin," said CEO Ben Minicucci. "Thanks to each one of our employees for running our operation and showing remarkable care for our guests, and credit to the leadership team for laying out a measured plan and executing it with discipline. We're all feeling the momentum and look forward to building on our strong foundation for growth in 2022 and beyond."

Financial Results:

  • Reported net income for the third quarter of 2021 under Generally Accepted Accounting Principles (GAAP) of $194 million, or $1.53 per share, compared to a net loss of $431 million, or $3.49 per share in the third quarter of 2020.
  • Reported net income for the third quarter of 2021, excluding special items and mark-to-market fuel hedge accounting adjustments, of $187 million, or $1.47 per share, compared to an adjusted net loss of $399 million or $3.23 per share, in the third quarter of 2020. This quarter's adjusted results compare to the First Call analyst consensus estimate of $1.30 per share.
  • Generated adjusted pre-tax margin for the third quarter of 2021 of 12%.
  • Reported a debt-to-capitalization ratio of 51%, a reduction of 10 points from Dec. 31, 2020.
  • Made a $100 million voluntary contribution to the defined benefit plan for Alaska's pilots in the third quarter, boosting estimated combined funded status of all defined benefit plans to 94%.
  • Held $3.2 billion in unrestricted cash and marketable securities as of Sept. 30, 2021.
  • Prepaid $425 million in debt from the 364-day term loan facility, bringing total debt payments to $1.2 billion for the year.

Operational Updates:

  • Exercised options for 12 Boeing 737-9 aircraft slated for delivery in 2023 and 2024, and added options for an additional 25 deliveries, bringing Alaska's total firm commitments for 737-9 aircraft to 93 and available options to 52.
  • Ratified amended wage agreement for Horizon Air pilots, represented by the International Brotherhood of Teamsters
  • Opened new San Francisco International Airport Lounge with 9,200 square feet of Bay-Area inspired amenities.
  • Announced new nonstop flights between San Francisco and Loreto and Ixtapa/Zihuatanejo, with service slated to begin Dec. 18. Since the onset of the pandemic, approximately 70 new markets have been announced or commenced operation.
  • Resumed and expanded inflight meals, snacks, and drinks in all classes of service.
  • Continued to exceed internal metrics for guest satisfaction, highlighting our commitment to providing our guests a smooth and safe experience throughout their journey.    
  • Near the top of the industry for on-time arrivals and completion rates in the third quarter.

Environmental, Social and Governance Updates:

  • Appointed Adrienne Lofton, vice president of global marketing at Google, to the Company's board of directors.
  • Announced formation of Alaska Star Ventures, an entity created to identify and further technologies that accelerate Alaska Airlines' path to net zero carbon emissions.
  • Supported the Afghan Humanitarian Airlift Mission and the U.S. military by operating Civil Reserve Air Fleet flights in the evacuation of individuals and families from Afghanistan.
  • Awarded $260,000 in LIFT Grants to 25 nonprofits focused on a clear vision to provide the next generation of leaders with the knowledge, skills and providing pathways for success through the Alaska Airlines Foundation.

The following table reconciles the company's reported GAAP net income (loss) per share (EPS) for the three and nine months ended Sept. 30, 2021 and 2020 to adjusted amounts.


Three Months Ended September 30,


2021


2020

(in millions, except per-share amounts)

Dollars


Diluted EPS


Dollars


EPS

GAAP net income (loss) per share

$

194



$

1.53



$

(431)



$

(3.49)


Payroll support program wage offset





(398)



(3.22)


Mark-to-market fuel hedge adjustments





(3)



(0.02)


Special items - impairment charges and other

(9)



(0.07)



121



0.98


Special items - restructuring charges





322



2.60


Special items - merger-related costs





1



0.01


Income tax effect of reconciling items above

2



0.01



(11)



(0.09)


Non-GAAP adjusted net income (loss) per share

$

187



$

1.47



$

(399)



$

(3.23)











Nine Months Ended September 30,


2021


2020

(in millions, except per-share amounts)

Dollars


Diluted EPS


Dollars


Diluted EPS

GAAP net income (loss) per share

$

460



$

3.64



$

(877)



$

(7.12)


Payroll support program wage offset

(914)



(7.24)



(760)



(6.16)


Mark-to-market fuel hedge adjustments

(68)



(0.54)






Special items - impairment charges and other

5



0.04



350



2.84


Special items - restructuring charges

(12)



(0.09)



322



2.61


Special items - merger-related costs





5



0.04


Income tax effect of reconciling items above

242



1.92



20



0.16


Non-GAAP adjusted net loss per share

$

(287)



$

(2.27)



$

(940)



$

(7.63)


Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables. A glossary of financial terms can be found on the last page of this release.

A conference call regarding the third quarter results will be streamed online at 8:30 a.m. PDT on October 21, 2021. It can be accessed at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call.

References in this update to "Air Group," "Company," "we," "us," and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified.

This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements.  For a comprehensive discussion of potential risk factors, see Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2020. Some of these risks include the risks associated with contagious illnesses and contagion, such as COVID-19, general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our indebtedness, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, and changes in laws and regulations. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance, or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.

Alaska Airlines and its regional partners serve more than 120 destinations across the United States and to Mexico, Canada and Costa Rica. The airline emphasizes Next-Level Care for its guests, along with providing low fares, award-winning customer service and sustainability efforts. Alaska is a member of oneworld. With the global alliance and the airline's additional partners, guests can travel to more than 1,000 destinations on more than 20 airlines while earning and redeeming miles on flights to locations around the world. Learn more about Alaska at newsroom.alaskaair.com and blog.alaskaair.com. Alaska Airlines and Horizon Air are subsidiaries of Alaska Air Group (NYSE: ALK).

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Alaska Air Group, Inc.















Three Months Ended September 30,


Nine Months Ended September 30,

(in millions, except per-share amounts)

2021


2020


Change


2021


2020


Change

Operating Revenues:












Passenger revenue

$

1,774



$

572



210

%


$

3,785



$

2,362



60

%

Mileage Plan other revenue

120



84



43

%


332



266



25

%

Cargo and other

59



45



31

%


160



130



23

%

Total Operating Revenues

1,953



701



179

%


4,277



2,758



55

%

Operating Expenses:












Wages and benefits

578



495



17

%


1,581



1,579



%

Payroll support program wage offset



(398)



(100)

%


(914)



(760)



20

%

Variable incentive pay

42



42



%


109



65



68

%

Aircraft fuel, including hedging gains and losses

376



125



201

%


853



568



50

%

Aircraft maintenance

89



84



6

%


272



244



11

%

Aircraft rent

64



74



(14)

%


188



229



(18)

%

Landing fees and other rentals

141



109



29

%


414



323



28

%

Contracted services

62



36



72

%


167



138



21

%

Selling expenses

49



24



104

%


123



83



48

%

Depreciation and amortization

99



105



(6)

%


294



320



(8)

%

Food and beverage service

39



14



179

%


97



70



39

%

Third-party regional carrier expense

39



29



34

%


106



92



15

%

Other

126



89



42

%


348



310



12

%

Special items - impairment charges and other

(9)



121



(107)

%


5



350



(99)

%

Special items - restructuring charges



322


.

(100)

%


(12)



322



(104)

%

Special items - merger-related costs



1



(100)

%




5



(100)

%

Total Operating Expenses

1,695



1,272



33

%


3,631



3,938



(8)

%

Operating Income (Expense)

258



(571)



(145)

%


646



(1,180)



(155)

%

Nonoperating Income (Expense):












Interest income

6



7



(14)

%


19



23



(17)

%

Interest expense

(30)



(34)



(12)

%


(101)



(64)



58

%

Interest capitalized

3



4



(25)

%


9



8



13

%

Other - net

8



5



60

%


27



16



69

%

Total Nonoperating Expense

(13)



(18)



(28)

%


(46)



(17)



171

%

Income (Loss) Before Income Tax

245



(589)





600



(1,197)




Income tax expense (benefit)

51



(158)





140



(320)




Net Income (Loss)

$

194



$

(431)





$

460



$

(877)
















Basic Income (Loss) Per Share:

$

1.55



$

(3.49)





$

3.69



$

(7.12)




Diluted Income (Loss) Per Share:

$

1.53



$

(3.49)





$

3.64



$

(7.12)
















Shares Used for Computation:












Basic

125.250



123.647





124.846



123.255




Diluted

127.188



123.647





126.325



123.255
















Cash dividend declared per share:

$



$





$



$

0.375
















CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)




Alaska Air Group, Inc.












(in millions)

September 30, 2021


December 31, 2020

ASSETS




Current Assets




Cash and cash equivalents

$

495



$

1,370


Marketable securities

2,700



1,976


   Total cash and marketable securities

3,195



3,346


Receivables - net

536



480


Inventories and supplies - net

62



57


Prepaid expenses, assets held-for-sale, and other current assets

208



123


Total Current Assets

4,001



4,006






Property and Equipment




Aircraft and other flight equipment

8,076



7,761


Other property and equipment

1,446



1,398


Deposits for future flight equipment

378



583



9,900



9,742


Less accumulated depreciation and amortization

3,780



3,531


Total Property and Equipment - Net

6,120



6,211






Operating lease assets

1,370



1,400


Goodwill

1,943



1,943


Intangible assets - net

102



107


Other noncurrent assets

346



379


Other Assets

3,761



3,829






Total Assets

$

13,882



$

14,046








CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


(in millions, except share amounts)

September 30, 2021


December 31, 2020

LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities




Accounts payable

$

181



$

108


Accrued wages, vacation and payroll taxes

441



527


Air traffic liability

1,225



1,073


Other accrued liabilities

587



424


Deferred revenue

904



733


Current portion of operating lease liabilities

275



290


Current portion of long-term debt

425



1,138


Total Current Liabilities

4,038



4,293






Long-Term Debt, Net of Current Portion

2,225



2,357






Noncurrent Liabilities




Long-term operating lease liabilities, net of current portion

1,191



1,268


Deferred income taxes

501



407


Deferred revenue

1,446



1,544


Obligation for pension and postretirement medical benefits

558



665


Other liabilities

392



524



4,088



4,408


Commitments and Contingencies




Shareholders' Equity




Preferred stock, $0.01 par value, Authorized: 5,000,000 shares, none issued or outstanding




Common stock, $0.01 par value, Authorized: 400,000,000 shares, Issued: 2021 - 134,655,235 shares; 2020 - 133,567,534 shares, Outstanding: 2021 - 125,305,291 shares; 2020 - 124,217,590 shares

1



1


Capital in excess of par value

462



391


Treasury stock (common), at cost: 2021 - 9,349,944 shares; 2020 - 9,349,944 shares

(674)



(674)


Accumulated other comprehensive loss

(482)



(494)


Retained earnings

4,224



3,764



3,531



2,988


Total Liabilities and Shareholders' Equity

$

13,882



$

14,046




















SUMMARY CASH FLOW (unaudited)






Alaska Air Group, Inc.












(in millions)

Nine Months Ended
September 30, 2021


Six Months Ended
June 30, 2021(a)


Three Months Ended

September 30, 2021(b)

Cash Flows from Operating Activities:






Net income

$

460



$

266



$

194


Non-cash reconciling items

322



221



101


Changes in working capital

119



520



(401)


Net cash provided by (used in) operating activities

901



1,007



(106)








Cash Flows from Investing Activities:






Property and equipment additions

(190)



(102)



(88)


Other investing activities

(753)



(968)



215


Net cash provided by (used in) investing activities

(943)



(1,070)



127








Cash Flows from Financing Activities:

(825)



(281)



(544)








Net decrease in cash and cash equivalents

$

(867)



$

(344)



$

(523)


Cash, cash equivalents, and restricted cash at beginning of period

1,386



1,386



1,042


Cash, cash equivalents, and restricted cash at end of the period

$

519



$

1,042



$

519




(a) 

As reported in Form 10-Q for the second quarter of 2021.

(b) 

Cash flows for the three months ended September 30, 2021, can be calculated by subtracting cash flows for the six months ended June 30, 2021, as reported in Form 10-Q for the second quarter 2021, from the nine months ended September 30, 2021.







OPERATING STATISTICS SUMMARY (unaudited)







Alaska Air Group, Inc.

























Three Months Ended September 30,


Nine Months Ended September 30,


2021


2020


Change


2021


2020


Change

Consolidated Operating Statistics:(a)












Revenue passengers (000)

9,832


3,595


173.5%


23,211


14,012


65.7%

RPMs (000,000) "traffic"

11,592


3,817


203.7%


27,319


16,127


69.4%

ASMs (000,000) "capacity"

14,429


7,871


83.3%


38,238


27,483


39.1%

Load factor

80.3%


48.5%


31.8 pts


71.4%


58.7%


12.7 pts

Yield

15.30¢


14.99¢


2.1%


13.85¢


14.65¢


(5.5)%

RASM

13.54¢


8.90¢


52.1%


11.19¢


10.04¢


11.5%

CASMex(b)

9.21¢


14.00¢


(34.2)%


9.67¢


12.57¢


(23.1)%

Economic fuel cost per gallon(b)

$2.05


$1.32


55.3%


$1.93


$1.65


17.0%

Fuel gallons (000,000)

183


97


88.7%


477


344


38.7%

ASM's per gallon

78.8


81.3


(3.1)%


80.2


79.9


0.4%

Average number of full-time equivalent employees (FTE)

20,315


16,027


26.8%


18,819


18,112


3.9%

Mainline Operating Statistics:












Revenue passengers (000)

7,065


2,156


227.7%


16,367


9,736


68.1%

RPMs (000,000) "traffic"

10,122


2,958


242.2%


23,677


13,816


71.4%

ASMs (000,000) "capacity"

12,540


6,280


99.7%


33,004


23,339


41.4%

Load factor

80.7%


47.1%


33.6 pts


71.7%


59.2%


12.5 pts

Yield

14.08¢


13.56¢


3.8%


12.68¢


13.46¢


(5.8)%

RASM

12.66¢


8.14¢


55.5%


10.44¢


9.46¢


10.4%

CASMex(b)

8.45¢


13.88¢


(39.1)%


8.90¢


11.90¢


(25.2)%

Economic fuel cost per gallon(b)

$2.03


$1.31


55.0%


$1.91


$1.66


15.1%

Fuel gallons (000,000)

147


69


113.0%


380


270


40.7%

ASM's per gallon

85.3


91.0


(6.3)%


86.9


86.4


0.6%

Average number of FTE's

15,116


12,032


25.6%


13,870


13,730


1.0%

Aircraft utilization

10.2


7.3


39.7%


9.6


8.3


15.7%

Average aircraft stage length

1,313


1,244


5.5%


1,313


1,263


4.0%

Operating fleet(d)

210


217


(7) a/c


210


217


(7) a/c

Regional Operating Statistics:(c)












Revenue passengers (000)

2,767


1,439


92.3%


6,843


4,276


60.0%

RPMs (000,000) "traffic"

1,470


859


71.1%


3,642


2,311


57.6%

ASMs (000,000) "capacity"

1,889


1,592


18.7%


5,235


4,143


26.4%

Load factor

77.8%


54.0%


23.8 pts


69.6%


55.8%


13.8 pts

Yield

23.72¢


19.89¢


19.3%


21.47¢


21.72¢


(1.2)%

RASM

19.26¢


11.91¢


61.7%


15.80¢


13.24¢


19.3%

Operating fleet

94


94


— a/c


94


94


— a/c



(a) 

Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.

(b)

See a reconciliation of this non-GAAP measure and Note A for a discussion of the importance of this measure to investors in the accompanying pages.

(c) 

Data presented includes information for flights operated by Horizon and third-party carriers.

(d) 

Excludes all aircraft removed from operating service.

Given the unusual nature of 2020, we believe that some analysis of specific financial and operational results compared to 2019 provides meaningful insight. The table below includes comparative results from 2021 to 2019.

FINANCIAL INFORMATION AND OPERATING STATISTICS - 2019 RESULTS (unaudited)

Alaska Air Group, Inc.

























Three Months Ended September 30,


Nine Months Ended September 30,


2021


2019


Change


2021


2019


Change

Passenger revenue

$

1,774



$

2,211



(20)

%


$

3,785



$

6,038



(37)

%

Mileage plan other revenue

120



118



2

%


332



346



(4)

%

Cargo and other

59



60



(2)

%


160



169



(5)

%

Total operating revenues

$

1,953



$

2,389



(18)

%


$

4,277



$

6,553



(35)

%













Operating expense, excluding fuel and special items

$

1,328



$

1,476



(10)

%


$

3,699



$

4,295



(14)

%

Economic fuel

376



486



(23)

%


853



1,408



(39)

%

Special items

(9)



5



(280)

%


(921)



39



NM

Total operating expenses

$

1,695



$

1,967



(14)

%


$

3,631



$

5,742



(37)

%













Consolidated Operating Statistics(a):












Revenue passengers (000)

9,832



12,574



(22)

%


23,211



35,018



(34)

%

RPMs (000,000) "traffic"

11,592



15,026



(23)

%


27,319



42,113



(35)

%

ASMs (000,000) "capacity"

14,429



17,519



(18)

%


38,238



50,006



(24)

%

Load Factor

80.3%



85.8%



(5.5)

 pts


71.4%



84.2%



(12.8)

 pts

Yield

15.30¢



14.71¢



4

%


13.85¢



14.34¢



(3)

%

RASM

13.54¢



13.64¢



(1)

%


11.19¢



13.10¢



(15)

%

CASMex

9.21¢



8.43¢



9

%


9.67¢



8.59¢



13

%

FTEs

20,315



22,247



(9)

%


18,819



22,000



(14)

%



(a) 

2019 comparative operating statistics have been recalculated using the information presented above, and as filed in our third quarter 2019 Form 10-Q







OPERATING SEGMENTS (unaudited)

Alaska Air Group, Inc.





























Three Months Ended September 30, 2021

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenues














Passenger revenues

$

1,425



$

349



$



$



$

1,774



$



$

1,774


CPA revenues





107



(107)








Mileage Plan other revenue

105



15







120





120


Cargo and other

58







1



59





59


Total Operating Revenues

1,588



364



107



(106)



1,953





1,953


Operating Expenses














Operating expenses, excluding fuel

1,060



288



93



(113)



1,328



(9)



1,319


Economic fuel

299



77







376





376


Total Operating Expenses

1,359



365



93



(113)



1,704



(9)



1,695


Nonoperating Income (Expense)














Interest income

7







(1)



6





6


Interest expense

(25)





(6)



1



(30)





(30)


Interest capitalized

2







1



3





3


Other - net

8









8





8


Total Nonoperating Expense

(8)





(6)



1



(13)





(13)


Income (Loss) Before Income Tax

$

221



$

(1)



$

8



$

8



$

236



$

9



$

245


















Three Months Ended September 30, 2020

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenues














Passenger revenues

$

401



$

171



$



$



$

572



$



$

572


CPA revenues





95



(95)








Mileage Plan other revenue

65



19







84





84


Cargo and other

45









45





45


Total Operating Revenues

511



190



95



(95)



701





701


Operating Expenses














Operating expenses, excluding fuel

872



248



78



(97)



1,101



46



1,147


Economic fuel

90



38







128



(3)



125


Total Operating Expenses

962



286



78



(97)



1,229



43



1,272


Nonoperating Income (Expense)














Interest income

8







(1)



7





7


Interest expense

(28)





(6)





(34)





(34)


Interest capitalized

4









4





4


Other - net

4







1



5





5


Total Nonoperating Income (Expense)

(12)





(6)





(18)





(18)


Income (Loss) Before Income Tax

$

(463)



$

(96)



$

11



$

2



$

(546)



$

(43)



$

(589)





Nine Months Ended September 30, 2021

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenues














Passenger revenues

$

3,003



$

782



$



$



$

3,785



$



$

3,785


CPA revenues





322



(322)








Mileage Plan other revenue

287



45







332





332


Cargo and other

157







3



160





160


Total Operating Revenues

3,447



827



322



(319)



4,277





4,277


Operating Expenses














Operating expenses, excluding fuel

2,937



839



272



(349)



3,699



(921)



2,778


Economic fuel

726



195







921



(68)



853


Total Operating Expenses

3,663



1,034



272



(349)



4,620



(989)



3,631


Nonoperating Income (Expense)














Interest income

20







(1)



19





19


Interest expense

(86)





(16)



1



(101)





(101)


Interest capitalized

8







1



9





9


Other - net

27









27





27


Total Nonoperating Expense

(31)





(16)



1



(46)





(46)


Income (Loss) Before Income Tax

$

(247)



$

(207)



$

34



$

31



$

(389)



$

989



$

600


















Nine Months Ended September 30, 2020

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenues














Passenger revenues

$

1,860



$

502



$



$



$

2,362



$



$

2,362


CPA revenues





281



(281)








Mileage Plan other revenue

219



47







266





266


Cargo and other

128







2



130





130


Total Operating Revenues

2,207



549



281