Announced agreement to acquire Hawaiian
Airlines
Achieved record annual operating revenue of
$10.4 billion
SEATTLE, Jan. 25,
2024 /PRNewswire/ -- Alaska Air Group Inc. (NYSE:
ALK) today reported financial results for the fourth quarter and
full year ended December 31, 2023.
"Air Group's 2023 accomplishments were significant," said CEO
Ben Minicucci. "I want to thank our
people for delivering a reliable operation, industry-leading cost
performance, and a strong 7.5% adjusted pretax margin. As we
navigate early 2024, we remain steadfast in our commitment to
safety, providing a premium experience for our guests, and
delivering durable financial performance. I am also grateful for
how the team has rallied together to demonstrate tremendous
professionalism and care in the midst of a challenging start to
2024 for them and our guests. Alaska is a resilient company with a track
record of operational excellence, and we are confident in the plans
we have laid out to ensure that success moving forward."
Financial Results:
- Reported net loss for the fourth quarter and net income for the
full year 2023 under Generally Accepted Accounting Principles
(GAAP) of $2 million, or $0.02 per share, and $235
million, or $1.83 per diluted
share. These results compare to net income for the fourth quarter
and full year 2022 of $22 million, or
$0.17 per diluted share, and
$58 million, or $0.45 per diluted share.
- Reported net income for the fourth quarter and full year 2023,
excluding special items and mark-to-market fuel hedge accounting
adjustments, of $38 million, or
$0.30 per diluted share, and
$583 million, or $4.53 per diluted share. These results compare to
net income for the fourth quarter and full year 2022, excluding
special items and mark-to-market fuel hedge accounting adjustments,
of $118 million, or $0.92 per diluted share, and $556 million, or $4.35 per diluted share.
- Generated an adjusted pretax margin of 7.5% for the full year
2023, among the highest in the industry.
- Recorded $2.6 billion in
operating revenue for the fourth quarter, and a record $10.4 billion for the full year 2023.
- Reduced CASM excluding fuel and special items by 6.6% in
the fourth quarter and 2.6% in the full year compared to 2022.
- Generated $1.1 billion in operating cash flow for the full
year 2023.
- Repurchased approximately 2 million shares of common
stock for $75 million in the fourth
quarter, bringing total repurchases to approximately 3.5 million
shares for $145 million for the full
year 2023.
- Recognized more than $400 million
in bank card partner commissions in the fourth quarter and
$1.6 billion for the full year 2023,
representing a 13% year-over-year increase compared to the full
year 2022.
- Air Group employees earned $200
million of incentive pay in 2023 by achieving profitability,
sustainability, operational, and safety targets. The payout
represents more than three weeks of pay for most employees.
- Received an investment grade credit rating of "Baa3" from
Moody's Investors Service, citing the Company's "strong business
profile and conservative financial policy."
Balance Sheet and Liquidity:
- Ended the year with a debt-to-capitalization ratio of 46%,
within the target range of 40% to 50%.
- Repaid $40 million in debt in the
fourth quarter, bringing total debt payments to $282 million for the full year 2023.
Operational Updates:
- Agreed to purchase Hawaiian Airlines for $18 per share in cash. The proposed combined
airline will preserve both the Alaska and Hawaiian brands and provide guests
with an expanded network across the Pacific.
- Placed our first 737-800 freighter into operating service, with
a second 737-800 freighter expected to be delivered in the first
quarter of 2024.
- Announced Alaska's 30th global
airline partner, Porter Airlines, opening new opportunities for
guests to travel to Canada from
the West Coast.
- Announced new routes beginning in 2024, including:
Seattle-Toronto, Anchorage-New York JFK,
Anchorage-San Diego, and
Portland-Nashville.
- Enhanced partnership with Condor Airlines with a bilateral
codeshare agreement that enables Alaska and Condor to sell each other's
flights.
- Completed sale of ten Airbus A321neos to American Airlines,
with eight transactions occurring in the fourth quarter and two in
January.
- Introduced inflight contactless payment Tap to Pay, an industry
first, providing customers with an easier option to make purchases
while flying.
737-9 MAX Grounding:
- Preparing to complete the final inspections on all of our 737-9
MAX aircraft. Each aircraft will be returned to service after the
inspection has been completed and any findings resolved.
- Completed requested inspections of all 737-900ER aircraft with
only one minor finding which was immediately corrected.
- Initiated a thorough review of Boeing's production quality and
control systems, including Boeing's production vendor oversight to
enhance quality control on new aircraft.
- Began enhanced quality oversight program at the Boeing
production facility, expanding our team to validate work and
quality of our aircraft as they progress through the manufacturing
process.
Environmental, Social, and Governance Updates:
- Partnered with climate-tech company CHOOOSE to offer guests the
ability to purchase sustainable aviation fuel credits or support
nature-based climate projects upon check-out.
- Through Alaska's Care Miles
program, Mileage Plan members donated over 100 million miles to 22
different charities in 2023.
Awards and Recognition:
- Named Worldwide Airline of the Year by the Centre for Aviation
at the World Aviation Summit in Abu
Dhabi.
- Achieved a score of 100 on the Human Rights Foundation's
2023-2024 Corporate Equity Index in recognition of Alaska's policies and practices supporting
LGBTQ+ workplace equality.
The following table reconciles the company's reported GAAP net
income (loss) per share (EPS) for the three and twelve months ended
December 31, 2023 and 2022 to adjusted amounts.
|
Three Months Ended
December 31,
|
|
2023
|
|
2022
|
(in millions,
except per share amounts)
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
GAAP net income (loss)
per share
|
$
(2)
|
|
$
(0.02)
|
|
$
22
|
|
$
0.17
|
Mark-to-market fuel
hedge adjustments
|
12
|
|
0.09
|
|
12
|
|
0.09
|
Special items - fleet
transition and other(a)
|
37
|
|
0.29
|
|
120
|
|
0.93
|
Special items - labor
and related(b)
|
—
|
|
—
|
|
(6)
|
|
(0.04)
|
Special items - net
non-operating(c)
|
4
|
|
0.03
|
|
—
|
|
—
|
Income tax effect of
reconciling items above
|
(13)
|
|
(0.09)
|
|
(30)
|
|
(0.23)
|
Non-GAAP adjusted net
income per share
|
$
38
|
|
$
0.30
|
|
$
118
|
|
$
0.92
|
|
Twelve Months Ended
December 31,
|
|
2023
|
|
2022
|
(in millions,
except per share amounts)
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
GAAP net income per
share
|
$
235
|
|
$
1.83
|
|
$
58
|
|
$
0.45
|
Mark-to-market fuel
hedge adjustments
|
(2)
|
|
(0.02)
|
|
76
|
|
0.60
|
Special items - fleet
transition and other(a)
|
392
|
|
3.05
|
|
496
|
|
3.88
|
Special items - labor
and related(b)
|
51
|
|
0.40
|
|
84
|
|
0.66
|
Special items - net
non-operating(c)
|
18
|
|
0.14
|
|
—
|
|
—
|
Income tax effect of
reconciling items above
|
(111)
|
|
(0.87)
|
|
(158)
|
|
(1.24)
|
Non-GAAP adjusted net
income per share
|
$
583
|
|
$
4.53
|
|
$
556
|
|
$
4.35
|
|
|
(a)
|
Special items - fleet
transition and other in the three and twelve months ended December
31, 2023 and 2022 is primarily for impairment charges and
accelerated costs associated with the retirement of Airbus and Q400
aircraft.
|
(b)
|
Special items - labor
and related is primarily for changes to Alaska pilots' sick leave
benefits resulting from an agreement signed in the first quarter of
2023, and for a one-time payment to Alaska pilots following
ratification of a new collective bargaining agreement in the third
quarter of 2022.
|
(c)
|
Special items - net
non-operating in the three and twelve months ended December 31,
2023 is for interest expense associated with certain A321neo lease
agreements which were modified as part of Alaska's fleet
transition.
|
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 fourth quarter and full year
results will be streamed online at 8:30 a.m.
PST on January 25, 2024. 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, 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, 2022. 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.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
(in millions,
except per-share amounts)
|
2023
|
|
2022
|
|
Change
|
|
2023
|
|
2022
|
|
Change
|
Operating
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
revenue
|
$
2,326
|
|
$
2,264
|
|
3 %
|
|
$
9,526
|
|
$
8,808
|
|
8 %
|
Mileage Plan other
revenue
|
165
|
|
157
|
|
5 %
|
|
648
|
|
590
|
|
10 %
|
Cargo and other
revenue
|
62
|
|
58
|
|
7 %
|
|
252
|
|
248
|
|
2 %
|
Total Operating
Revenue
|
2,553
|
|
2,479
|
|
3 %
|
|
10,426
|
|
9,646
|
|
8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
Wages and
benefits
|
782
|
|
709
|
|
10 %
|
|
3,041
|
|
2,640
|
|
15 %
|
Variable incentive
pay
|
51
|
|
117
|
|
(56) %
|
|
200
|
|
257
|
|
(22) %
|
Aircraft fuel,
including hedging gains and losses
|
709
|
|
668
|
|
6 %
|
|
2,641
|
|
2,668
|
|
(1) %
|
Aircraft
maintenance
|
121
|
|
93
|
|
30 %
|
|
488
|
|
424
|
|
15 %
|
Aircraft
rent
|
47
|
|
69
|
|
(32) %
|
|
208
|
|
291
|
|
(29) %
|
Landing fees and other
rentals
|
178
|
|
146
|
|
22 %
|
|
680
|
|
581
|
|
17 %
|
Contracted
services
|
99
|
|
86
|
|
15 %
|
|
389
|
|
329
|
|
18 %
|
Selling
expenses
|
72
|
|
77
|
|
(6) %
|
|
303
|
|
295
|
|
3 %
|
Depreciation and
amortization
|
121
|
|
105
|
|
15 %
|
|
451
|
|
415
|
|
9 %
|
Food and beverage
service
|
65
|
|
54
|
|
20 %
|
|
241
|
|
197
|
|
22 %
|
Third-party regional
carrier expense
|
54
|
|
37
|
|
46 %
|
|
218
|
|
182
|
|
20 %
|
Other
|
185
|
|
181
|
|
2 %
|
|
729
|
|
717
|
|
2 %
|
Special items - fleet
transition and other
|
37
|
|
120
|
|
(69) %
|
|
392
|
|
496
|
|
(21) %
|
Special items - labor
and related
|
—
|
|
(6)
|
|
(100) %
|
|
51
|
|
84
|
|
(39) %
|
Total Operating
Expenses
|
2,521
|
|
2,456
|
|
3 %
|
|
10,032
|
|
9,576
|
|
5 %
|
Operating
Income
|
32
|
|
23
|
|
39 %
|
|
394
|
|
70
|
|
NM
|
Non-operating Income
(Expense)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
18
|
|
18
|
|
—
|
|
80
|
|
53
|
|
51 %
|
Interest
expense
|
(31)
|
|
(24)
|
|
29 %
|
|
(121)
|
|
(108)
|
|
12 %
|
Interest
capitalized
|
6
|
|
6
|
|
—
|
|
27
|
|
14
|
|
93 %
|
Special items - net
non-operating
|
(4)
|
|
—
|
|
NM
|
|
(18)
|
|
—
|
|
NM
|
Other - net
|
(17)
|
|
12
|
|
NM
|
|
(39)
|
|
50
|
|
(178) %
|
Total Non-operating
Income (Expense)
|
(28)
|
|
12
|
|
NM
|
|
(71)
|
|
9
|
|
NM
|
Income Before Income
Tax
|
4
|
|
35
|
|
|
|
323
|
|
79
|
|
|
Income tax
expense
|
6
|
|
13
|
|
|
|
88
|
|
21
|
|
|
Net Income
(Loss)
|
$
(2)
|
|
$
22
|
|
|
|
$
235
|
|
$
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings
(Loss) Per Share
|
$
(0.02)
|
|
$
0.17
|
|
|
|
$
1.84
|
|
$
0.46
|
|
|
Diluted Earnings
(Loss) Per Share
|
$
(0.02)
|
|
$
0.17
|
|
|
|
$
1.83
|
|
$
0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used for
computation:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
127.376
|
|
127.303
|
|
|
|
127.375
|
|
126.657
|
|
|
Diluted
|
127.376
|
|
128.470
|
|
|
|
128.708
|
|
127.899
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
As of December 31
(in millions)
|
2023
|
|
2022
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$
281
|
|
$
338
|
Marketable
securities
|
1,510
|
|
2,079
|
Total cash and
marketable securities
|
1,791
|
|
2,417
|
Receivables -
net
|
383
|
|
296
|
Inventories and
supplies - net
|
116
|
|
104
|
Prepaid
expenses
|
176
|
|
163
|
Other current
assets
|
239
|
|
60
|
Total Current
Assets
|
2,705
|
|
3,040
|
|
|
|
|
Property and
Equipment
|
|
|
|
Aircraft and other
flight equipment
|
10,425
|
|
9,053
|
Other property and
equipment
|
1,814
|
|
1,661
|
Deposits for future
flight equipment
|
491
|
|
670
|
|
12,730
|
|
11,384
|
Less accumulated
depreciation and amortization
|
4,342
|
|
4,127
|
Total Property and
Equipment - Net
|
8,388
|
|
7,257
|
|
|
|
|
Other
Assets
|
|
|
|
Operating lease
assets
|
1,195
|
|
1,471
|
Goodwill and intangible
assets
|
2,033
|
|
2,038
|
Other noncurrent
assets
|
292
|
|
380
|
Total Other
Assets
|
3,520
|
|
3,889
|
|
|
|
|
Total
Assets
|
$
14,613
|
|
$
14,186
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
As of December 31
(in millions except share amounts)
|
2023
|
|
2022
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
Liabilities
|
|
|
|
Accounts
payable
|
$
207
|
|
$
221
|
Accrued wages, vacation
and payroll taxes
|
584
|
|
619
|
Air traffic
liability
|
1,136
|
|
1,180
|
Other accrued
liabilities
|
800
|
|
846
|
Deferred
revenue
|
1,221
|
|
1,123
|
Current portion of
operating lease liabilities
|
158
|
|
228
|
Current portion of
long-term debt and finance leases
|
353
|
|
276
|
Total Current
Liabilities
|
4,459
|
|
4,493
|
|
|
|
|
Long-Term Debt, Net
of Current Portion
|
2,182
|
|
1,883
|
|
|
|
|
Noncurrent
Liabilities
|
|
|
|
Long-term operating
lease liabilities, net of current portion
|
1,125
|
|
1,393
|
Deferred income
taxes
|
695
|
|
574
|
Deferred
revenue
|
1,382
|
|
1,374
|
Obligation for pension
and post-retirement medical benefits
|
362
|
|
348
|
Other
liabilities
|
295
|
|
305
|
Total Noncurrent
Liabilities
|
3,859
|
|
3,994
|
|
|
|
|
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: 2023 -
138,960,830 shares; 2022 - 136,883,042 shares, Outstanding: 2023 -
126,090,353 shares; 2022 - 127,533,916 shares
|
1
|
|
1
|
Capital in excess of
par value
|
695
|
|
577
|
Treasury stock
(common), at cost: 2023 - 12,870,477 shares; 2022 - 9,349,944
shares
|
(819)
|
|
(674)
|
Accumulated other
comprehensive loss
|
(299)
|
|
(388)
|
Retained
earnings
|
4,535
|
|
4,300
|
|
4,113
|
|
3,816
|
Total Liabilities
and Shareholders' Equity
|
$
14,613
|
|
$
14,186
|
SUMMARY CASH FLOW
(unaudited)
|
|
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
(in
millions)
|
Year Ended
December 31, 2023
|
|
Nine Months
Ended
September 30, 2023(a)
|
|
Three Months
Ended
December 31,
2023(b)
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
Net income
(loss)
|
$
235
|
|
$
237
|
|
$
(2)
|
Non-cash reconciling
items
|
958
|
|
798
|
|
160
|
Changes in working
capital
|
(143)
|
|
68
|
|
(211)
|
Net cash provided by
(used in) operating activities
|
1,050
|
|
1,103
|
|
(53)
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
Property and equipment
additions
|
(1,494)
|
|
(991)
|
|
(503)
|
Other investing
activities
|
531
|
|
181
|
|
350
|
Net cash used in
investing activities
|
(963)
|
|
(810)
|
|
(153)
|
|
|
|
|
|
|
Cash Flows from
Financing Activities
|
(148)
|
|
12
|
|
(160)
|
|
|
|
|
|
|
Net increase (decrease)
in cash and cash equivalents
|
(61)
|
|
305
|
|
(366)
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
369
|
|
369
|
|
674
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
308
|
|
$
674
|
|
$
308
|
|
|
(a)
|
As reported in Form
10-Q for the third quarter of 2023.
|
(b)
|
Cash flows for the
three months ended December 31, 2023 can be calculated by
subtracting cash flows for the nine months
ended September 30, 2023, as reported in Form 10-Q for
the third quarter 2023, from the year ended December 31,
2023.
|
OPERATING STATISTICS
SUMMARY (unaudited)
|
|
|
|
|
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
2023
|
|
2022
|
|
Change
|
|
2023
|
|
2022
|
|
Change
|
Consolidated
Operating Statistics:(a)
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers
(000)
|
10,903
|
|
10,331
|
|
6 %
|
|
44,557
|
|
41,468
|
|
7 %
|
RPMs (000,000)
"traffic"
|
14,153
|
|
12,855
|
|
10 %
|
|
57,362
|
|
51,330
|
|
12 %
|
ASMs (000,000)
"capacity"
|
17,077
|
|
15,030
|
|
14 %
|
|
68,524
|
|
60,773
|
|
13 %
|
Load factor
|
82.9 %
|
|
85.5 %
|
|
(2.6) pts
|
|
83.7 %
|
|
84.5 %
|
|
(0.8) pts
|
Yield
|
16.43¢
|
|
17.61¢
|
|
(7) %
|
|
16.61¢
|
|
17.16¢
|
|
(3) %
|
RASM
|
14.95¢
|
|
16.49¢
|
|
(9) %
|
|
15.21¢
|
|
15.87¢
|
|
(4) %
|
CASMex(b)
|
10.40¢
|
|
11.14¢
|
|
(7) %
|
|
10.14¢
|
|
10.41¢
|
|
(3) %
|
Economic fuel cost per
gallon(b)
|
$3.42
|
|
$3.55
|
|
(4) %
|
|
$3.21
|
|
$3.42
|
|
(6) %
|
Fuel gallons
(000,000)
|
204
|
|
185
|
|
10 %
|
|
824
|
|
758
|
|
9 %
|
ASMs per
gallon
|
83.7
|
|
81.2
|
|
3 %
|
|
83.2
|
|
80.2
|
|
4 %
|
Departures
(000)
|
103
|
|
95
|
|
8 %
|
|
414
|
|
404
|
|
2 %
|
Average full-time
equivalent employees (FTEs)
|
23,117
|
|
23,195
|
|
—
|
|
23,319
|
|
22,564
|
|
3 %
|
Mainline Operating
Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers
(000)
|
8,572
|
|
8,237
|
|
4 %
|
|
35,307
|
|
31,795
|
|
11 %
|
RPMs (000,000)
"traffic"
|
13,008
|
|
11,994
|
|
8 %
|
|
52,975
|
|
46,812
|
|
13 %
|
ASMs (000,000)
"capacity"
|
15,708
|
|
14,004
|
|
12 %
|
|
63,292
|
|
55,224
|
|
15 %
|
Load factor
|
82.8 %
|
|
85.6 %
|
|
(2.8) pts
|
|
83.7 %
|
|
84.8 %
|
|
(1.1) pts
|
Yield
|
15.03¢
|
|
16.39¢
|
|
(8) %
|
|
15.28¢
|
|
15.92¢
|
|
(4) %
|
RASM
|
13.79¢
|
|
15.49¢
|
|
(11) %
|
|
14.12¢
|
|
14.91¢
|
|
(5) %
|
CASMex(b)
|
9.54¢
|
|
10.05¢
|
|
(5) %
|
|
9.23¢
|
|
9.45¢
|
|
(2) %
|
Economic fuel cost per
gallon(b)
|
$3.38
|
|
$3.52
|
|
(4) %
|
|
$3.18
|
|
$3.40
|
|
(6) %
|
Fuel gallons
(000,000)
|
175
|
|
163
|
|
7 %
|
|
713
|
|
646
|
|
10 %
|
ASMs per
gallon
|
89.8
|
|
85.9
|
|
5 %
|
|
88.8
|
|
85.5
|
|
4 %
|
Departures
(000)
|
66
|
|
62
|
|
6 %
|
|
268
|
|
244
|
|
10 %
|
Average full-time
equivalent employees (FTEs)
|
17,966
|
|
17,792
|
|
1 %
|
|
18,129
|
|
17,224
|
|
5 %
|
Aircraft
utilization
|
11.2
|
|
9.9
|
|
13 %
|
|
11.4
|
|
9.9
|
|
15 %
|
Average aircraft stage
length
|
1,409
|
|
1,341
|
|
5 %
|
|
1,387
|
|
1,347
|
|
3 %
|
Operating
fleet(d)
|
231
|
|
225
|
|
6 a/c
|
|
231
|
|
225
|
|
6 a/c
|
Regional Operating
Statistics:(c)
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers
(000)
|
2,331
|
|
2,094
|
|
11 %
|
|
9,250
|
|
9,673
|
|
(4) %
|
RPMs (000,000)
"traffic"
|
1,145
|
|
861
|
|
33 %
|
|
4,387
|
|
4,518
|
|
(3) %
|
ASMs (000,000)
"capacity"
|
1,369
|
|
1,027
|
|
33 %
|
|
5,232
|
|
5,549
|
|
(6) %
|
Load factor
|
83.6 %
|
|
83.9 %
|
|
(0.3) pts
|
|
83.8 %
|
|
81.4 %
|
|
2.4 pts
|
Yield
|
32.41¢
|
|
34.66¢
|
|
(6) %
|
|
32.57¢
|
|
29.97¢
|
|
9 %
|
RASM
|
28.08¢
|
|
30.08¢
|
|
(7) %
|
|
28.26¢
|
|
25.34¢
|
|
12 %
|
Departures
(000)
|
37
|
|
33
|
|
12 %
|
|
146
|
|
160
|
|
(9) %
|
Operating
fleet(d)
|
83
|
|
86
|
|
(3) a/c
|
|
83
|
|
86
|
|
(3) 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 all aircraft
removed from operating service.
|
OPERATING SEGMENTS
(unaudited)
|
|
|
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, 2023
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other(a)
|
|
Air Group
Adjusted(b)
|
|
Special
Items(c)
|
|
Consolidated
|
Operating
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
revenue
|
$
1,954
|
|
$
372
|
|
$
—
|
|
$
—
|
|
$
2,326
|
|
$
—
|
|
$
2,326
|
CPA revenue
|
—
|
|
—
|
|
100
|
|
(100)
|
|
—
|
|
—
|
|
—
|
Mileage Plan other
revenue
|
152
|
|
13
|
|
—
|
|
—
|
|
165
|
|
—
|
|
165
|
Cargo and other
revenue
|
60
|
|
—
|
|
—
|
|
2
|
|
62
|
|
—
|
|
62
|
Total Operating
Revenue
|
2,166
|
|
385
|
|
100
|
|
(98)
|
|
2,553
|
|
—
|
|
2,553
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
1,499
|
|
289
|
|
84
|
|
(97)
|
|
1,775
|
|
37
|
|
1,812
|
Fuel expense
|
592
|
|
105
|
|
—
|
|
—
|
|
697
|
|
12
|
|
709
|
Total Operating
Expenses
|
2,091
|
|
394
|
|
84
|
|
(97)
|
|
2,472
|
|
49
|
|
2,521
|
Non-operating Income
(Expense)
|
(12)
|
|
—
|
|
(12)
|
|
—
|
|
(24)
|
|
(4)
|
|
(28)
|
Income (Loss) Before
Income Tax
|
$
63
|
|
$
(9)
|
|
$
4
|
|
$
(1)
|
|
$
57
|
|
$
(53)
|
|
$
4
|
Pretax
Margin
|
|
|
|
|
|
|
|
|
2.2 %
|
|
|
|
0.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, 2022
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other(a)
|
|
Air Group
Adjusted(b)
|
|
Special
Items(c)
|
|
Consolidated
|
Operating
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
revenue
|
$
1,966
|
|
$
298
|
|
$
—
|
|
$
—
|
|
$
2,264
|
|
$
—
|
|
$
2,264
|
CPA revenue
|
—
|
|
—
|
|
71
|
|
(71)
|
|
—
|
|
—
|
|
—
|
Mileage Plan other
revenue
|
146
|
|
11
|
|
—
|
|
—
|
|
157
|
|
—
|
|
157
|
Cargo and other
revenue
|
58
|
|
—
|
|
—
|
|
—
|
|
58
|
|
—
|
|
58
|
Total Operating
Revenue
|
2,170
|
|
309
|
|
71
|
|
(71)
|
|
2,479
|
|
—
|
|
2,479
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
1,408
|
|
243
|
|
92
|
|
(69)
|
|
1,674
|
|
114
|
|
1,788
|
Fuel expense
|
572
|
|
84
|
|
—
|
|
—
|
|
656
|
|
12
|
|
668
|
Total Operating
Expenses
|
1,980
|
|
327
|
|
92
|
|
(69)
|
|
2,330
|
|
126
|
|
2,456
|
Non-operating Income
(Expense)
|
18
|
|
—
|
|
(7)
|
|
1
|
|
12
|
|
—
|
|
12
|
Income (Loss) Before
Income Tax
|
$
208
|
|
$
(18)
|
|
$
(28)
|
|
$
(1)
|
|
$
161
|
|
$
(126)
|
|
$
35
|
Pretax
Margin
|
|
|
|
|
|
|
|
|
6.5 %
|
|
|
|
1.4 %
|
OPERATING SEGMENTS
(unaudited)
|
|
|
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
December 31, 2023
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other(a)
|
|
Air Group
Adjusted(b)
|
|
Special
Items(c)
|
|
Consolidated
|
Operating
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
revenue
|
$
8,097
|
|
$ 1,429
|
|
$
—
|
|
$
—
|
|
$
9,526
|
|
$
—
|
|
$
9,526
|
CPA revenue
|
—
|
|
—
|
|
374
|
|
(374)
|
|
—
|
|
—
|
|
—
|
Mileage Plan other
revenue
|
599
|
|
49
|
|
—
|
|
—
|
|
648
|
|
—
|
|
648
|
Cargo and other
revenue
|
244
|
|
—
|
|
—
|
|
8
|
|
252
|
|
—
|
|
252
|
Total Operating
Revenue
|
8,940
|
|
1,478
|
|
374
|
|
(366)
|
|
10,426
|
|
—
|
|
10,426
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
5,841
|
|
1,121
|
|
344
|
|
(358)
|
|
6,948
|
|
443
|
|
7,391
|
Fuel expense
|
2,264
|
|
379
|
|
—
|
|
—
|
|
2,643
|
|
(2)
|
|
2,641
|
Total Operating
Expenses
|
8,105
|
|
1,500
|
|
344
|
|
(358)
|
|
9,591
|
|
441
|
|
10,032
|
Non-operating Income
(Expense)
|
(15)
|
|
—
|
|
(41)
|
|
3
|
|
(53)
|
|
(18)
|
|
(71)
|
Income (Loss) Before
Income Tax
|
$
820
|
|
$
(22)
|
|
$
(11)
|
|
$
(5)
|
|
$
782
|
|
$
(459)
|
|
$
323
|
Pretax
Margin
|
|
|
|
|
|
|
|
|
7.5 %
|
|
|
|
3.1 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
December 31, 2022
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other(a)
|
|
Air Group
Adjusted(b)
|
|
Special
Items(c)
|
|
Consolidated
|
Operating
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
revenue
|
$
7,454
|
|
$ 1,354
|
|
$
—
|
|
$
—
|
|
$
8,808
|
|
$
—
|
|
$
8,808
|
CPA revenue
|
—
|
|
—
|
|
359
|
|
(359)
|
|
—
|
|
—
|
|
—
|
Mileage Plan other
revenue
|
538
|
|
52
|
|
—
|
|
—
|
|
590
|
|
—
|
|
590
|
Cargo and other
revenue
|
244
|
|
—
|
|
—
|
|
4
|
|
248
|
|
—
|
|
248
|
Total Operating
Revenue
|
8,236
|
|
1,406
|
|
359
|
|
(355)
|
|
9,646
|
|
—
|
|
9,646
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
5,216
|
|
1,085
|
|
383
|
|
(356)
|
|
6,328
|
|
580
|
|
6,908
|
Fuel expense
|
2,195
|
|
397
|
|
—
|
|
—
|
|
2,592
|
|
76
|
|
2,668
|
Total Operating
Expenses
|
7,411
|
|
1,482
|
|
383
|
|
(356)
|
|
8,920
|
|
656
|
|
9,576
|
Non-operating Income
(Expense)
|
30
|
|
—
|
|
(22)
|
|
1
|
|
9
|
|
—
|
|
9
|
Income (Loss) Before
Income Tax
|
$
855
|
|
$
(76)
|
|
$
(46)
|
|
$
2
|
|
$
735
|
|
$
(656)
|
|
$
79
|
Pretax
Margin
|
|
|
|
|
|
|
|
|
7.6 %
|
|
|
|
0.8 %
|
|
|
(a)
|
Includes consolidating
entries, Air Group parent company, McGee Air Services, and other
immaterial business units.
|
(b)
|
The Air Group Adjusted
column represents the financial information that is reviewed by
management to assess performance of operations and determine
capital allocation and excludes certain charges. See Note A in the
accompanying pages for further information.
|
(c)
|
Includes special items
and mark-to-market fuel hedge accounting adjustments.
|
GAAP TO
NON-GAAP RECONCILIATIONS (unaudited)
|
Alaska Air Group,
Inc.
|
|
CASM Excluding Fuel
and Special Items Reconciliation
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
(in
cents)
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Consolidated:
|
|
|
|
|
|
|
|
CASM
|
14.76 ¢
|
|
16.34 ¢
|
|
14.64 ¢
|
|
15.76 ¢
|
Less the following
components:
|
|
|
|
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
4.15
|
|
4.44
|
|
3.85
|
|
4.39
|
Special items - fleet
transition and other(a)
|
0.21
|
|
0.80
|
|
0.57
|
|
0.82
|
Special items - labor
and related(b)
|
—
|
|
(0.04)
|
|
0.08
|
|
0.14
|
CASM excluding fuel
and special items
|
10.40 ¢
|
|
11.14 ¢
|
|
10.14 ¢
|
|
10.41 ¢
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
CASM
|
13.63 ¢
|
|
14.95 ¢
|
|
13.51 ¢
|
|
14.42 ¢
|
Less the following
components:
|
|
|
|
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
3.85
|
|
4.17
|
|
3.57
|
|
4.11
|
Special items - fleet
transition and other(a)
|
0.24
|
|
0.77
|
|
0.63
|
|
0.71
|
Special items - labor
and related(b)
|
—
|
|
(0.04)
|
|
0.08
|
|
0.15
|
CASM excluding fuel
and special items
|
9.54 ¢
|
|
10.05 ¢
|
|
9.23 ¢
|
|
9.45 ¢
|
|
|
(a)
|
Special items - fleet
transition and other in the three and twelve months ended December
31, 2023 and 2022 is primarily for impairment charges and
accelerated costs associated with the retirement of Airbus and Q400
aircraft.
|
(b)
|
Special items - labor
and related is primarily for changes to Alaska pilots' sick leave
benefits resulting from an agreement signed in the first quarter of
2023 and for a one-time payment to Alaska pilots following
ratification of a new collective bargaining agreement in the third
quarter of 2022.
|
Fuel
Reconciliation
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
2023
|
|
2022
|
(in millions,
except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
Raw or "into-plane"
fuel cost
|
$
679
|
|
$
3.33
|
|
$
657
|
|
$
3.55
|
Losses (gains) on
settled hedges
|
18
|
|
0.09
|
|
(1)
|
|
—
|
Consolidated
economic fuel expense
|
$
697
|
|
$
3.42
|
|
$
656
|
|
$
3.55
|
Mark-to-market fuel
hedge adjustment
|
12
|
|
0.06
|
|
12
|
|
0.06
|
GAAP fuel
expense
|
$
709
|
|
$
3.48
|
|
$
668
|
|
$
3.61
|
Fuel
gallons
|
|
|
204
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
December 31,
|
|
2023
|
|
2022
|
(in millions,
except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
Raw or "into-plane"
fuel cost
|
$
2,579
|
|
$
3.13
|
|
$
2,761
|
|
$
3.64
|
Losses (gains) on
settled hedges
|
64
|
|
0.08
|
|
(169)
|
|
(0.22)
|
Consolidated
economic fuel expense
|
$
2,643
|
|
$
3.21
|
|
$
2,592
|
|
$
3.42
|
Mark-to-market fuel
hedge adjustment
|
(2)
|
|
—
|
|
76
|
|
0.10
|
GAAP fuel
expense
|
$
2,641
|
|
$
3.21
|
|
$
2,668
|
|
$
3.52
|
Fuel
gallons
|
|
|
824
|
|
|
|
758
|
Debt-to-capitalization, including operating and
financing leases
|
(in
millions)
|
December 31,
2023
|
|
December 31,
2022
|
Long-term debt, net of
current portion
|
$
2,182
|
|
$
1,883
|
Capitalized operating
leases
|
1,283
|
|
1,621
|
Capitalized finance
leases(a)
|
64
|
|
—
|
Adjusted debt, net of
current portion of long-term debt
|
$
3,529
|
|
$
3,504
|
Shareholders'
equity
|
4,113
|
|
3,816
|
Total Invested
Capital
|
$
7,642
|
|
$
7,320
|
|
|
|
|
Debt-to-capitalization
ratio, including operating and finance leases
|
46 %
|
|
48 %
|
|
|
(a)
|
To best reflect our
leverage at December 31, 2023, we included our capitalized finance
lease balances, which are recognized within the Current portion of
long-term debt and finance leases line in the condensed
consolidated balance sheets.
|
Adjusted net debt to
earnings before interest, taxes, depreciation, amortization, rent,
and special items
|
(in
millions)
|
December 31,
2023
|
|
December 31,
2022
|
Current portion of
long-term debt and finance leases
|
$
353
|
|
$
276
|
Current portion of
operating lease liabilities
|
158
|
|
228
|
Long-term
debt
|
2,182
|
|
1,883
|
Long-term operating
lease liabilities, net of current portion
|
1,125
|
|
1,393
|
Total adjusted
debt
|
3,818
|
|
3,780
|
Less: Total cash and
marketable securities
|
(1,791)
|
|
(2,417)
|
Adjusted net
debt
|
$
2,027
|
|
$
1,363
|
|
|
|
|
(in
millions)
|
Year Ended
December
31, 2023
|
|
Year Ended
December
31, 2022
|
GAAP Operating
Income
|
$
394
|
|
$
70
|
Adjusted
for:
|
|
|
|
Special
items
|
443
|
|
580
|
Mark-to-market fuel
hedge adjustments
|
(2)
|
|
76
|
Depreciation and
amortization
|
451
|
|
415
|
Aircraft
rent
|
208
|
|
291
|
EBITDAR
|
$
1,494
|
|
$
1,432
|
Adjusted net debt to
EBITDAR
|
1.4x
|
|
1.0x
|
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 fuel expense and special items 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. 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 special items, is one of
the most important measures used by management and by the Air Group
Board of Directors in assessing quarterly and annual cost
performance.
- Adjusted income before income tax (and other items as specified
in our plan documents) is an important metric for the employee
incentive plan, which covers the majority of Air Group
employees.
- CASM excluding fuel and special items is a measure commonly
used by industry analysts, and we believe it is the basis by which
they have historically compared our airline to others in the
industry. The measure is also the subject of frequent questions
from investors.
- Disclosure of the individual impact of certain noted items
provides investors the ability to measure and monitor performance
both with and without these special items. We believe that
disclosing the impact of these items as noted above. Industry
analysts and investors consistently measure our performance without
these items for better comparability between periods and among
other airlines.
- Although we disclose our 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.
GLOSSARY OF TERMS
Adjusted net debt - long-term debt, including current
portion, plus capitalized operating leases, less cash and
marketable securities
Adjusted net debt to EBITDAR - represents net adjusted
debt divided by EBITDAR (trailing twelve months earnings before
interest, taxes, depreciation, amortization, special items and
rent)
Aircraft Utilization - block hours per day; this
represents the average number of hours per day our aircraft are in
transit
Aircraft Stage Length - represents the average miles
flown per aircraft departure
ASMs - available seat miles, or "capacity"; represents
total seats available across the fleet multiplied by the number of
miles flown
CASM - operating costs per ASM; represents all
operating expenses including fuel and special items
CASMex - operating costs excluding fuel and special
items per ASM, or "unit cost"; this metric is used to help track
progress toward reduction of non-fuel operating costs since fuel is
largely out of our control
Debt-to-capitalization ratio - represents adjusted debt
(long-term debt plus capitalized operating lease liabilities)
divided by total equity plus adjusted debt
Diluted Earnings per Share - represents earnings per
share (EPS) using fully diluted shares outstanding
Diluted Shares - represents the total number of shares
that would be outstanding if all possible sources of conversion,
such as stock options, were exercised
Economic Fuel - best estimate of the cash cost of fuel,
net of the impact of our fuel-hedging program
Load Factor - RPMs as a percentage of ASMs; represents
the number of available seats that were filled with paying
passengers
Mainline - represents flying Boeing 737, Airbus 320 and
Airbus 321neo family jets and all associated revenue and costs
Productivity - number of revenue passengers per full-time
equivalent employee
RASM - operating revenue per ASMs, or "unit revenue";
operating revenue includes all passenger revenue, freight &
mail, Mileage Plan and other ancillary revenue; represents the
average total revenue for flying one seat one mile
Regional - represents capacity purchased by Alaska from Horizon and SkyWest. In this
segment, Regional records actual on-board passenger revenue, less
costs such as fuel, distribution costs, and payments made to
Horizon and SkyWest under the respective capacity purchased
arrangement (CPAs). Additionally, Regional includes an allocation
of corporate overhead such as IT, finance, other administrative
costs incurred by Alaska and on
behalf of Horizon.
RPMs - revenue passenger miles, or "traffic"; represents
the number of seats that were filled with paying passengers; one
passenger traveling one mile is one RPM
Yield - passenger revenue per RPM; represents the
average revenue for flying one passenger one mile
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SOURCE Alaska Air Group