SEATTLE, Feb. 8, 2017 /PRNewswire/ --
Acquisition of Virgin America Inc.:
- Air Group completed its acquisition of Virgin America Inc.
("Virgin America") on Dec. 14,
2016.
- Fourth quarter 2016 results reflect the results of operations
and cash flows for Virgin America from Dec.
14, 2016 through Dec. 31,
2016, including the impacts associated with purchase
accounting. Periods presented prior to the acquisition date do not
include Virgin America's results, except in the supplementary
combined comparative financial information.
Dividend Increase:
- Announced today a 9% increase in the quarterly dividend, from
$0.275 per share to $0.30 per share. This is the fourth time the
company has raised the dividend since initiating the quarterly
dividend in July 2013, with a
cumulative increase of 200% since that time.
Financial Highlights:
- Reported net income for the fourth quarter and full year under
Generally Accepted Accounting Principles ("GAAP") of $114 million, or $0.92 per diluted share, and $814 million, or $6.54 per diluted share, respectively. These
results compared to fourth quarter 2015 net income of $191 million, or $1.51 per diluted share, and full year 2015 net
income of $848 million, or
$6.56 per diluted share.
- Reported adjusted fourth quarter 2016 diluted earnings per
share of $1.56, a 7% increase over
the fourth quarter of 2015. Fourth quarter net income, excluding
special items, was $193 million, a 4%
increase from the fourth quarter of 2015. This quarter's adjusted
results compare to the First Call analyst consensus estimate of
$1.40 per share.
- Reported full year 2016 net income, excluding special items, of
$911 million, an 8% increase from
2015, and adjusted diluted earnings per share of $7.32, a 12% increase from 2015.
- Paid a $0.275 per-share quarterly
cash dividend in the fourth quarter, bringing total dividend
payments in 2016 to $136
million.
- Generated approximately $1.4
billion of operating cash flow and $708 million of free cash flow in 2016.
- Achieved return on invested capital of 21% in 2016, including
Virgin America's results beginning Dec. 14,
2016.
- Grew passenger revenues by 9% compared to the fourth quarter of
2015, and by 4% compared to full-year 2015.
- Generated full-year adjusted pretax margin of 24% in 2016, in
line with 2015.
- Lowered consolidated unit costs excluding fuel and special
items for the seventh consecutive year, to the lowest level ever.
Mainline unit costs excluding fuel and special items have declined
14 of the last 15 years.
- Held $1.6 billion in unrestricted
cash and marketable securities as of Dec.
31, 2016.
2016 Accomplishments and Highlights:
Recognition and Awards - Alaska
- Became the first major U.S. airline to receive approval from
the Federal Aviation Administration for its Safety Management
System.
- Ranked best airline in the U.S. by the Wall Street Journal's
"2016 Airline Scorecard" for the fourth year in a row.
- Ranked "Highest in Customer Satisfaction Among Traditional
Carriers in North America" in 2016
by J.D. Power for the ninth year in a row.
- Ranked "Highest in Customer Satisfaction with Airline Loyalty
Rewards Programs" in 2016 by J.D. Power for the third consecutive
year.
- Ranked first in the U.S. News & World Report's list of Best
Airline Rewards Programs for the second consecutive year.
- Ranked among Forbes' 2016 "America's Best Employers."
- Named No. 1 on-time carrier in North
America for the seventh year in a row by FlightStats in
January 2017.
- Received the Department of Defense 2016 Freedom Award, the
highest recognition given to employers by the U.S. government for
their support of National Guard and Reserve members.
- Received 15th Diamond Award of Excellence from the Federal
Aviation Administration, recognizing both Alaska and Horizon's aircraft technicians for
their commitment to training.
- Ranked first in the commercial aviation division and first
place overall at the 2016 Annual International Aerospace
Maintenance Competition, surpassing over 50 teams from around the
world.
- Named the No. 1 cargo carrier by Logistics Management magazine,
as part of its annual Quest for Quality awards.
- Joined Standard and Poor's 500 Index. Companies included in the
S&P 500 are chosen by the S&P Index Committee based on
their size, earnings history and liquidity, among other
factors.
- Ranked among the Fortune 500 for the third year in a row.
- Ranked among the top "green companies" in the United States by Newsweek.
- Ranked among the top 100 socially just companies in
the United States by Forbes.
- Received the Seattle-Tacoma International Airport Green Gateway
Environmental Excellence Award for the second year in a row, as a
result of efforts in reducing emissions, recycling and waste
reduction and lowered energy consumption.
Recognition and Awards - Virgin America
- Rated Best U.S. Airline by Conde Nast Traveler in their "Annual
Readers' Choice Awards" for nine years in a row.
- Ranked Best Domestic Airline in Travel + Leisure "World's Best
Awards" for nine years in a row.
- Rated the number one carrier in the 2016 Airline Quality Report
for the fourth consecutive year, an annual analysis of airline
performance metrics conducted by Wichita State
University and Embry-Riddle
Aeronautical University.
- Rated "Best Airline in North
America" for the second year in a row and "Best Low-Cost
Airline in the U.S." for the seventh year in a row by Skytrax World
Airline Awards.
Our People
- Awarded a record $159 million in
incentive pay to employees for 2016, including $32 million earned by Virgin America teammates in
2016 prior to the acquisition.
- Reached a tentative agreement with Alaska's aircraft technicians on a new
collective bargaining agreement.
- Alaska received a perfect
score of 100% for workplace equality on the 2017 Corporate Equality
Index ("CEI"). Virgin America received a score of 95%.
Our Guests and Product
- Announced enhanced benefits to the Alaska Airlines Visa
Signature credit card and the Alaska Airlines Visa Business credit
card including the elimination of foreign transaction fees and
increased bonus miles.
- Announced a new codeshare agreement and frequent flier
partnership with Japan Airlines, providing Alaska customers seamless travel and mileage
earning opportunities.
- Launched Premium Class service on Alaska, including more legroom, complimentary
alcoholic beverages, and premium snacks.
- Flew the first three commercial flights using sustainable
alcohol-to-jet biofuel made from U.S. grown corn and alternative
jet fuel made from forest residuals, continuing Alaska's commitment to reduce its carbon
emissions.
- Placed an order for 33 firm Embraer 175 ("E175") regional jets
to be flown by subsidiary Horizon Air, with the first delivery
scheduled in 2017. An additional 30 options are available under the
purchase arrangement.
- Added 19 Boeing 737-900ERs aircraft to the operating fleet in
2016, bringing the total fleet to 155 Boeing aircraft.
- Added 5 Airbus A320 aircraft to Virgin America's fleet in 2016,
bringing the total fleet to 63 Airbus aircraft.
- Added 17 new markets in 2016 across the Alaska Air Group and
Virgin America networks.
- Increased fuel efficiency (as measured by seat-miles per
gallon) by 1.4% over 2015.
Our Communities
- Donated over $13 million to
support nonprofits in our local communities, focusing on youth and
education, medical (research/transportation) and community
outreach.
Alaska Air Group, Inc. (NYSE: ALK) today reported fourth quarter
2016 GAAP net income of $114 million,
or $0.92 per diluted share, compared
to $191 million, or $1.51 per diluted share in 2015. Excluding the
impact of special items and mark-to-market fuel hedge adjustments,
the company reported record fourth quarter adjusted net income
of $193 million, or
$1.56 per diluted share, compared to
adjusted net income of $186 million,
or $1.46 per diluted share in the
fourth quarter of 2015.
The company reported full-year 2016 GAAP net income of
$814 million, compared to
$848 million in the prior
year. Excluding the impact of special items and mark-to-market
fuel hedge adjustments, the company reported record net income of
$911 million, or $7.32 per diluted share for 2016, compared to
adjusted net income of $842 million,
or $6.51 per diluted share in
2015.
"2016 was an incredible year for Alaska in almost every way, and we are even
more excited as we look forward to 2017 and beyond," said Alaska
CEO Brad Tilden. "Our people are
rallying around a common purpose of creating an airline people
love, and we are well on our way, with benefits like reciprocal
mileage and easy booking of Virgin America flights
on alaskaair.com already available. I want to thank our
people for providing our guests great service, and for staying
focused on running a safe and reliable operation."
On Feb. 7, 2017, the board of
directors of Alaska Air Group declared a quarterly cash dividend of
30 cents per share, payable
March 9, 2017 to all shareholders of
record as of Feb. 21, 2017.
The following tables reconcile the company's adjusted net income
and earnings per diluted share ("EPS") during the full year and
fourth quarters of 2016 and 2015 to amounts as reported in
accordance with GAAP. The amounts include financial results for
Virgin America for the period Dec. 14,
2016 through Dec. 31, 2016,
including impacts associated with purchase accounting as of
Dec. 14, 2016:
|
Three Months Ended
December 31,
|
|
2016
|
|
2015
|
(in millions,
except per share amounts)
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
Reported GAAP net
income and diluted EPS
|
$
|
114
|
|
|
$
|
0.92
|
|
|
$
|
191
|
|
|
$
|
1.51
|
|
Mark-to-market fuel
hedge adjustments
|
(4)
|
|
|
(0.03)
|
|
|
1
|
|
|
0.01
|
|
Special items -
merger-related costs and other
|
81
|
|
|
0.65
|
|
|
32
|
|
|
0.25
|
|
Income tax effect on
special items and fuel hedge adjustments(a)
|
(15)
|
|
|
(0.12)
|
|
|
(12)
|
|
|
(0.09)
|
|
Special tax
(benefit)/expense(b)
|
17
|
|
|
0.14
|
|
|
(26)
|
|
|
(0.22)
|
|
Non-GAAP adjusted net
income and diluted EPS
|
$
|
193
|
|
|
$
|
1.56
|
|
|
$
|
186
|
|
|
$
|
1.46
|
|
|
Twelve Months
Ended December 31,
|
|
2016
|
|
2015
|
(in millions,
except per share amounts)
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
Reported GAAP net
income and diluted EPS
|
$
|
814
|
|
|
$
|
6.54
|
|
|
$
|
848
|
|
|
$
|
6.56
|
|
Mark-to-market fuel
hedge adjustments
|
(13)
|
|
|
(0.11)
|
|
|
—
|
|
|
—
|
|
Special items -
merger-related costs and other
|
117
|
|
|
0.94
|
|
|
32
|
|
|
0.25
|
|
Income tax effect on
special items and fuel hedge adjustments(a)
|
(24)
|
|
|
(0.19)
|
|
|
(12)
|
|
|
(0.10)
|
|
Special tax
(benefit)/expense(b)
|
17
|
|
|
0.14
|
|
|
(26)
|
|
|
(0.20)
|
|
Non-GAAP adjusted net
income and diluted EPS
|
$
|
911
|
|
|
$
|
7.32
|
|
|
$
|
842
|
|
|
$
|
6.51
|
|
|
|
(a)
|
Certain
merger-related costs are non-deductible for tax purposes, resulting
in a smaller income tax effect for current year adjusting
items.
|
(b)
|
Special tax
(benefit)/expense represents the discrete impacts of adjustments to
the Company's position on income sourcing in various
states.
|
Statistical data, as well as a reconciliation of other 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 simulcast online at 8:30
a.m. Pacific time on Feb. 8, 2017. It can be accessed
through the company's website at 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 news release to "Air Group," "company," "we,"
"us" and "our" refer to Alaska Air Group, Inc. and its
subsidiaries, unless otherwise specified. Alaska Airlines, Inc.,
Horizon Air Industries, Inc., and Virgin America Inc. are referred
to as "Alaska," "Horizon," and
"Virgin America" respectively, and together as our "airlines."
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, 2015, as well as in other
documents filed by Alaska Air Group with the SEC after the date
thereof. Some of these risks include general economic conditions,
increases in operating costs including fuel, competition, labor
costs and relations, our significant 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, together with Virgin America and its regional
partners, flies 40 million customers a year to 118 destinations
with an average of 1,200 daily flights across the United States and to Mexico, Canada, Costa
Rica and Cuba. With
Alaska and Alaska Global Partners,
customers can earn and redeem miles on flights to more than 900
destinations worldwide. Learn more about Alaska's award-winning service and unmatched
reliability at newsroom.alaskaair.com and blog.alaskaair.com.
Alaska Airlines, Virgin America and Horizon Air are subsidiaries of
Alaska Air Group (NYSE: ALK).
CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited)
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
Amounts below reflect
the results of operations for Virgin America for the period
December 14, 2016 through December 31, 2016, including impacts
associated with purchase accounting as of December 14,
2016.
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
(in millions,
except per share amounts)
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
|
1,062
|
|
|
$
|
962
|
|
|
10
|
%
|
|
$
|
4,098
|
|
|
$
|
3,939
|
|
|
4
|
%
|
Regional
|
226
|
|
|
216
|
|
|
5
|
%
|
|
908
|
|
|
854
|
|
|
6
|
%
|
Total passenger
revenue
|
1,288
|
|
|
1,178
|
|
|
9
|
%
|
|
5,006
|
|
|
4,793
|
|
|
4
|
%
|
Freight and
mail
|
26
|
|
|
25
|
|
|
4
|
%
|
|
108
|
|
|
108
|
|
|
—
|
%
|
Other -
net
|
210
|
|
|
174
|
|
|
21
|
%
|
|
817
|
|
|
697
|
|
|
17
|
%
|
Total Operating
Revenues
|
1,524
|
|
|
1,377
|
|
|
11
|
%
|
|
5,931
|
|
|
5,598
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Wages and
benefits
|
374
|
|
|
331
|
|
|
13
|
%
|
|
1,382
|
|
|
1,254
|
|
|
10
|
%
|
Variable incentive
pay
|
32
|
|
|
30
|
|
|
7
|
%
|
|
127
|
|
|
120
|
|
|
6
|
%
|
Aircraft fuel,
including hedging gains and losses
|
238
|
|
|
213
|
|
|
12
|
%
|
|
831
|
|
|
954
|
|
|
(13)
|
%
|
Aircraft
maintenance
|
73
|
|
|
71
|
|
|
3
|
%
|
|
270
|
|
|
253
|
|
|
7
|
%
|
Aircraft
rent
|
34
|
|
|
27
|
|
|
26
|
%
|
|
114
|
|
|
105
|
|
|
9
|
%
|
Landing fees and
other rentals
|
88
|
|
|
79
|
|
|
11
|
%
|
|
320
|
|
|
296
|
|
|
8
|
%
|
Contracted
services
|
64
|
|
|
57
|
|
|
12
|
%
|
|
247
|
|
|
214
|
|
|
15
|
%
|
Selling
expenses
|
63
|
|
|
51
|
|
|
24
|
%
|
|
225
|
|
|
211
|
|
|
7
|
%
|
Depreciation and
amortization
|
82
|
|
|
84
|
|
|
(2)
|
%
|
|
363
|
|
|
320
|
|
|
13
|
%
|
Food and beverage
service
|
33
|
|
|
30
|
|
|
10
|
%
|
|
126
|
|
|
113
|
|
|
12
|
%
|
Third-party regional
carrier expense
|
21
|
|
|
20
|
|
|
5
|
%
|
|
95
|
|
|
72
|
|
|
32
|
%
|
Other
|
100
|
|
|
97
|
|
|
3
|
%
|
|
365
|
|
|
356
|
|
|
3
|
%
|
Special items -
merger-related costs and other
|
81
|
|
|
32
|
|
|
153
|
%
|
|
117
|
|
|
32
|
|
|
266
|
%
|
Total Operating
Expenses
|
1,283
|
|
|
1,122
|
|
|
14
|
%
|
|
4,582
|
|
|
4,300
|
|
|
7
|
%
|
Operating
Income
|
241
|
|
|
255
|
|
|
(5)
|
%
|
|
1,349
|
|
|
1,298
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating
Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
7
|
|
|
5
|
|
|
|
|
27
|
|
|
21
|
|
|
|
Interest
expense
|
(22)
|
|
|
(10)
|
|
|
|
|
(55)
|
|
|
(42)
|
|
|
|
Interest
capitalized
|
4
|
|
|
9
|
|
|
|
|
25
|
|
|
34
|
|
|
|
Other -
net
|
1
|
|
|
—
|
|
|
|
|
(1)
|
|
|
1
|
|
|
|
Total Nonoperating
Income (Expense)
|
(10)
|
|
|
4
|
|
|
|
|
(4)
|
|
|
14
|
|
|
|
Income Before
Income Tax
|
231
|
|
|
259
|
|
|
(11)
|
%
|
|
1,345
|
|
|
1,312
|
|
|
3
|
%
|
Income tax
expense
|
117
|
|
|
68
|
|
|
|
|
531
|
|
|
464
|
|
|
|
Net
Income
|
$
|
114
|
|
|
$
|
191
|
|
|
(40)
|
%
|
|
$
|
814
|
|
|
$
|
848
|
|
|
(4)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share:
|
$
|
0.92
|
|
|
$
|
1.52
|
|
|
(39)
|
%
|
|
$
|
6.59
|
|
|
$
|
6.61
|
|
|
—
|
%
|
Diluted Earnings
Per Share:
|
$
|
0.92
|
|
|
$
|
1.51
|
|
|
(39)
|
%
|
|
$
|
6.54
|
|
|
$
|
6.56
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Used for
Computation:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
123.286
|
|
|
125.900
|
|
|
(2)
|
%
|
|
123.557
|
|
|
128.373
|
|
|
(4)
|
%
|
Diluted
|
124.102
|
|
|
126.818
|
|
|
(2)
|
%
|
|
124.389
|
|
|
129.372
|
|
|
(4)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividend
declared per share
|
$
|
0.275
|
|
|
$
|
0.200
|
|
|
|
|
$
|
1.100
|
|
|
$
|
0.800
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
Amounts below for
December 31, 2016 reflect the acquisition of Virgin America,
including impacts associated with purchase accounting.
|
|
|
|
|
(in
millions)
|
December 31, 2016
(b)
|
|
December 31,
2015
|
Cash and marketable
securities
|
$
|
1,580
|
|
|
$
|
1,328
|
|
|
|
|
|
Total current
assets
|
2,050
|
|
|
1,663
|
|
Property and
equipment-net
|
5,686
|
|
|
4,802
|
|
Goodwill
|
1,917
|
|
|
—
|
|
Intangible
assets
|
155
|
|
|
—
|
|
Other
assets
|
169
|
|
|
65
|
|
Total
assets
|
$
|
9,977
|
|
|
$
|
6,530
|
|
|
|
|
|
Air traffic
liability
|
849
|
|
|
669
|
|
Current portion of
long-term debt
|
318
|
|
|
114
|
|
Other current
liabilities
|
1,370
|
|
|
1,022
|
|
Current
liabilities
|
$
|
2,537
|
|
|
$
|
1,805
|
|
Long-term
debt
|
2,637
|
|
|
569
|
|
Other liabilities and
credits
|
1,872
|
|
|
1,745
|
|
Shareholders'
equity
|
2,931
|
|
|
2,411
|
|
Total liabilities
and shareholders' equity
|
$
|
9,977
|
|
|
$
|
6,530
|
|
|
|
|
|
Debt to
Capitalization, adjusted for operating
leases(a)
|
59%
|
|
|
27%
|
|
|
|
|
|
Number of common
shares outstanding
|
123.328
|
|
|
125.175
|
|
|
|
(a)
|
Calculated using the
present value of remaining aircraft lease payments for aircraft
that are in our operating fleet as of the balance sheet
date.
|
(b)
|
The impacts of
purchase accounting included in these balances were determined on a
preliminary basis and are subject to further adjustments as
additional information becomes available concerning the fair value
of the assets acquired and liabilities assumed. Any adjustments to
the purchase price allocation will be made as soon as practicable
but no later than December 14, 2017.
|
OPERATING
STATISTICS SUMMARY (unaudited)
|
|
|
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
Consolidated and
Mainline amounts presented below reflect the results of operations
for Virgin America for the period December 14, 2016 through
December 31, 2016, including impacts associated with purchase
accounting as of December 14, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
Consolidated
Operating Statistics:(a)
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers
(PAX) (000)
|
8,752
|
|
7,927
|
|
10.4%
|
|
34,289
|
|
31,883
|
|
7.5%
|
RPMs (000,000)
"traffic"
|
9,640
|
|
8,526
|
|
13.1%
|
|
37,209
|
|
33,578
|
|
10.8%
|
ASMs (000,000)
"capacity"
|
11,407
|
|
10,340
|
|
10.3%
|
|
44,135
|
|
39,914
|
|
10.6%
|
Load
factor
|
84.5%
|
|
82.5%
|
|
2.0 pts
|
|
84.3%
|
|
84.1%
|
|
0.2 pts
|
Yield
|
13.36¢
|
|
13.82¢
|
|
(3.3)%
|
|
13.45¢
|
|
14.27¢
|
|
(5.7)%
|
PRASM
|
11.29¢
|
|
11.39¢
|
|
(0.9)%
|
|
11.34¢
|
|
12.01¢
|
|
(5.6)%
|
RASM
|
13.36¢
|
|
13.32¢
|
|
0.3%
|
|
13.44¢
|
|
14.03¢
|
|
(4.2)%
|
CASM excluding fuel
and special items(b)
|
8.45¢
|
|
8.48¢
|
|
(0.4)%
|
|
8.23¢
|
|
8.30¢
|
|
(0.8)%
|
Economic fuel cost
per gallon(c)
|
$1.68
|
|
$1.62
|
|
3.7%
|
|
$1.52
|
|
$1.88
|
|
(19.1)%
|
Fuel gallons
(000,000)
|
144
|
|
131
|
|
9.9%
|
|
554
|
|
508
|
|
9.1%
|
ASM's per
gallon
|
79.2
|
|
78.9
|
|
0.4%
|
|
79.7
|
|
78.6
|
|
1.4%
|
Average full-time
equivalent employees (FTEs)
|
15,566
|
|
14,360
|
|
8.4%
|
|
14,760
|
|
13,858
|
|
6.5%
|
Employee productivity
(PAX/FTEs/months)
|
187.4
|
|
184.0
|
|
1.8%
|
|
193.6
|
|
191.7
|
|
1.0%
|
Mainline Operating
Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers
(PAX) (000)
|
6,406
|
|
5,676
|
|
12.9%
|
|
24,838
|
|
22,869
|
|
8.6%
|
RPMs (000,000)
"traffic"
|
8,722
|
|
7,707
|
|
13.2%
|
|
33,489
|
|
30,340
|
|
10.4%
|
ASMs (000,000)
"capacity"
|
10,257
|
|
9,303
|
|
10.3%
|
|
39,473
|
|
35,912
|
|
9.9%
|
Load
factor
|
85.0%
|
|
82.8%
|
|
2.2 pts
|
|
84.8%
|
|
84.5%
|
|
0.3 pts
|
Yield
|
12.17¢
|
|
12.48¢
|
|
(2.5)%
|
|
12.24¢
|
|
12.98¢
|
|
(5.7)%
|
PRASM
|
10.35¢
|
|
10.34¢
|
|
0.1%
|
|
10.38¢
|
|
10.97¢
|
|
(5.4)%
|
RASM
|
12.46¢
|
|
12.28¢
|
|
1.5%
|
|
12.51¢
|
|
12.98¢
|
|
(3.6)%
|
CASM excluding fuel
and special items(b)
|
7.57¢
|
|
7.54¢
|
|
0.4%
|
|
7.30¢
|
|
7.39¢
|
|
(1.2)%
|
Economic fuel cost
per gallon(c)
|
$1.67
|
|
$1.60
|
|
4.4%
|
|
$1.52
|
|
$1.87
|
|
(18.7)%
|
Fuel gallons
(000,000)
|
124
|
|
113
|
|
9.7%
|
|
474
|
|
439
|
|
8.0%
|
ASM's per
gallon
|
82.7
|
|
82.3
|
|
0.5%
|
|
83.3
|
|
81.8
|
|
1.8%
|
Average number of
FTEs
|
12,037
|
|
11,069
|
|
8.7%
|
|
11,447
|
|
10,750
|
|
6.5%
|
Employee productivity
(PAX/FTEs/months)
|
177.4
|
|
170.9
|
|
3.8%
|
|
180.8
|
|
177.3
|
|
2.0%
|
Aircraft
utilization
|
10.1
|
|
10.7
|
|
(5.6)%
|
|
10.5
|
|
10.8
|
|
(2.8)%
|
Average aircraft
stage length
|
1,243
|
|
1,225
|
|
1.5%
|
|
1,225
|
|
1,195
|
|
2.5%
|
Regional Operating
Statistics:(d)
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers
(PAX) (000)
|
2,346
|
|
2,253
|
|
4.1%
|
|
9,452
|
|
9,015
|
|
4.8%
|
RPMs (000,000)
"traffic"
|
918
|
|
819
|
|
12.1%
|
|
3,720
|
|
3,238
|
|
14.9%
|
ASMs (000,000)
"capacity"
|
1,150
|
|
1,037
|
|
10.9%
|
|
4,662
|
|
4,002
|
|
16.5%
|
Load
factor
|
79.8%
|
|
79.0%
|
|
0.8 pts
|
|
79.8%
|
|
80.9%
|
|
(1.1) pts
|
Yield
|
24.64¢
|
|
26.37¢
|
|
(6.6)%
|
|
24.42¢
|
|
26.37¢
|
|
(7.4)%
|
PRASM
|
19.67¢
|
|
20.83¢
|
|
(5.6)%
|
|
19.49¢
|
|
21.34¢
|
|
(8.7)%
|
|
|
(a)
|
Except for full-time
equivalent employees, 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 why these
measures may be important to investors in the accompanying
pages.
|
(c)
|
See a reconciliation
of economic fuel cost in the accompanying pages.
|
(d)
|
Data presented
includes information related to flights operated by Horizon and
third-party carriers.
|
OPERATING
SEGMENTS (unaudited)
|
|
|
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts below reflect
the results of operations for Virgin America for the period
December 14, 2016 through December 31, 2016, including impacts
associated with purchase accounting as of December 14,
2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, 2016
|
(in
millions)
|
Mainline(a)
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other(b)
|
|
Air Group
Adjusted(c)
|
|
Special
Items(d)
|
|
Consolidated
|
Operating
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
|
1,062
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,062
|
|
|
$
|
—
|
|
|
$
|
1,062
|
|
Regional
|
—
|
|
|
226
|
|
|
—
|
|
|
—
|
|
|
226
|
|
|
—
|
|
|
226
|
|
Total passenger
revenues
|
1,062
|
|
|
226
|
|
|
—
|
|
|
—
|
|
|
1,288
|
|
|
—
|
|
|
1,288
|
|
Revenue from CPA with
Alaska
|
—
|
|
|
—
|
|
|
102
|
|
|
(102)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Freight and
mail
|
25
|
|
|
2
|
|
|
—
|
|
|
(1)
|
|
|
26
|
|
|
—
|
|
|
26
|
|
Other-net
|
192
|
|
|
17
|
|
|
1
|
|
|
—
|
|
|
210
|
|
|
—
|
|
|
210
|
|
Total operating
revenues
|
1,279
|
|
|
245
|
|
|
103
|
|
|
(103)
|
|
|
1,524
|
|
|
—
|
|
|
1,524
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-fuel operating
expenses
|
776
|
|
|
189
|
|
|
102
|
|
|
(103)
|
|
|
964
|
|
|
81
|
|
|
1,045
|
|
Fuel
expense
|
207
|
|
|
35
|
|
|
—
|
|
|
—
|
|
|
242
|
|
|
(4)
|
|
|
238
|
|
Total operating
expenses
|
983
|
|
|
224
|
|
|
102
|
|
|
(103)
|
|
|
1,206
|
|
|
77
|
|
|
1,283
|
|
Nonoperating
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
Interest
expense
|
(19)
|
|
|
—
|
|
|
(2)
|
|
|
(1)
|
|
|
(22)
|
|
|
—
|
|
|
(22)
|
|
Other
|
4
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Total nonoperating
income (expense)
|
(8)
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
(10)
|
|
|
—
|
|
|
(10)
|
|
Income (loss)
before income tax
|
$
|
288
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
(1)
|
|
|
$
|
308
|
|
|
$
|
(77)
|
|
|
$
|
231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, 2015
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other(b)
|
|
Air Group
Adjusted(c)
|
|
Special
Items(d)
|
|
Consolidated
|
Operating
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
|
962
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
962
|
|
|
$
|
—
|
|
|
$
|
962
|
|
Regional
|
—
|
|
|
216
|
|
|
—
|
|
|
—
|
|
|
216
|
|
|
—
|
|
|
216
|
|
Total passenger
revenues
|
962
|
|
|
216
|
|
|
—
|
|
|
—
|
|
|
1,178
|
|
|
—
|
|
|
1,178
|
|
Revenue from CPA with
Alaska
|
—
|
|
|
—
|
|
|
105
|
|
|
(105)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Freight and
mail
|
24
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
25
|
|
Other-net
|
156
|
|
|
17
|
|
|
1
|
|
|
—
|
|
|
174
|
|
|
—
|
|
|
174
|
|
Total operating
revenues
|
1,142
|
|
|
234
|
|
|
106
|
|
|
(105)
|
|
|
1,377
|
|
|
—
|
|
|
1,377
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-fuel operating
expenses
|
702
|
|
|
181
|
|
|
101
|
|
|
(107)
|
|
|
877
|
|
|
32
|
|
|
909
|
|
Fuel
expense
|
182
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
212
|
|
|
1
|
|
|
213
|
|
Total operating
expenses
|
884
|
|
|
211
|
|
|
101
|
|
|
(107)
|
|
|
1,089
|
|
|
33
|
|
|
1,122
|
|
Nonoperating
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
4
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Interest
expense
|
(7)
|
|
|
—
|
|
|
(2)
|
|
|
(1)
|
|
|
(10)
|
|
|
—
|
|
|
(10)
|
|
Other
|
7
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
9
|
|
|
—
|
|
|
9
|
|
Total nonoperating
income (expense)
|
4
|
|
|
—
|
|
|
(1)
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
4
|
|
Income (loss)
before income tax
|
$
|
262
|
|
|
$
|
23
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
292
|
|
|
$
|
(33)
|
|
|
$
|
259
|
|
OPERATING SEGMENTS
(unaudited)
|
|
|
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended December 31, 2016
|
(in
millions)
|
Mainline(a)
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other(b)
|
|
Air Group
Adjusted(c)
|
|
Special
Items(d)
|
|
Consolidated
|
Operating
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
|
4,098
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,098
|
|
|
$
|
—
|
|
|
$
|
4,098
|
|
Regional
|
—
|
|
|
908
|
|
|
—
|
|
|
—
|
|
|
908
|
|
|
—
|
|
|
908
|
|
Total passenger
revenues
|
4,098
|
|
|
908
|
|
|
—
|
|
|
—
|
|
|
5,006
|
|
|
—
|
|
|
5,006
|
|
Revenue from CPA with
Alaska
|
—
|
|
|
—
|
|
|
424
|
|
|
(424)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Freight and
mail
|
104
|
|
|
5
|
|
|
—
|
|
|
(1)
|
|
|
108
|
|
|
—
|
|
|
108
|
|
Other-net
|
738
|
|
|
74
|
|
|
4
|
|
|
1
|
|
|
817
|
|
|
—
|
|
|
817
|
|
Total operating
revenues
|
4,940
|
|
|
987
|
|
|
428
|
|
|
(424)
|
|
|
5,931
|
|
|
—
|
|
|
5,931
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-fuel operating
expenses
|
2,883
|
|
|
769
|
|
|
407
|
|
|
(425)
|
|
|
3,634
|
|
|
117
|
|
|
3,751
|
|
Fuel
expense
|
719
|
|
|
125
|
|
|
—
|
|
|
—
|
|
|
844
|
|
|
(13)
|
|
|
831
|
|
Total operating
expenses
|
3,602
|
|
|
894
|
|
|
407
|
|
|
(425)
|
|
|
4,478
|
|
|
104
|
|
|
4,582
|
|
Nonoperating
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
26
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
27
|
|
Interest
expense
|
(42)
|
|
|
—
|
|
|
(9)
|
|
|
(4)
|
|
|
(55)
|
|
|
—
|
|
|
(55)
|
|
Other
|
19
|
|
|
—
|
|
|
1
|
|
|
4
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Total nonoperating
income (expense)
|
3
|
|
|
—
|
|
|
(7)
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(4)
|
|
Income (loss)
before income tax
|
$
|
1,341
|
|
|
$
|
93
|
|
|
$
|
14
|
|
|
$
|
1
|
|
|
$
|
1,449
|
|
|
$
|
(104)
|
|
|
$
|
1,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended December 31, 2015
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other(b)
|
|
Air Group
Adjusted(c)
|
|
Special
Items(d)
|
|
Consolidated
|
Operating
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
|
3,939
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,939
|
|
|
$
|
—
|
|
|
$
|
3,939
|
|
Regional
|
—
|
|
|
854
|
|
|
—
|
|
|
—
|
|
|
854
|
|
|
—
|
|
|
854
|
|
Total passenger
revenues
|
3,939
|
|
|
854
|
|
|
—
|
|
|
—
|
|
|
4,793
|
|
|
—
|
|
|
4,793
|
|
Revenue from CPA with
Alaska
|
—
|
|
|
—
|
|
|
408
|
|
|
(408)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Freight and
mail
|
103
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
108
|
|
|
—
|
|
|
108
|
|
Other-net
|
621
|
|
|
72
|
|
|
4
|
|
|
—
|
|
|
697
|
|
|
—
|
|
|
697
|
|
Total operating
revenues
|
4,663
|
|
|
931
|
|
|
412
|
|
|
(408)
|
|
|
5,598
|
|
|
—
|
|
|
5,598
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-fuel operating
expenses
|
2,653
|
|
|
695
|
|
|
375
|
|
|
(409)
|
|
|
3,314
|
|
|
32
|
|
|
3,346
|
|
Fuel
expense
|
823
|
|
|
131
|
|
|
—
|
|
|
—
|
|
|
954
|
|
|
—
|
|
|
954
|
|
Total operating
expenses
|
3,476
|
|
|
826
|
|
|
375
|
|
|
(409)
|
|
|
4,268
|
|
|
32
|
|
|
4,300
|
|
Nonoperating
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
19
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
21
|
|
|
—
|
|
|
21
|
|
Interest
expense
|
(28)
|
|
|
—
|
|
|
(10)
|
|
|
(4)
|
|
|
(42)
|
|
|
—
|
|
|
(42)
|
|
Other
|
28
|
|
|
—
|
|
|
1
|
|
|
6
|
|
|
35
|
|
|
—
|
|
|
35
|
|
Total nonoperating
income (expense)
|
19
|
|
|
—
|
|
|
(9)
|
|
|
4
|
|
|
14
|
|
|
—
|
|
|
14
|
|
Income (loss)
before income tax
|
$
|
1,206
|
|
|
$
|
105
|
|
|
$
|
28
|
|
|
$
|
5
|
|
|
$
|
1,344
|
|
|
$
|
(32)
|
|
|
$
|
1,312
|
|
|
|
(a)
|
Includes Alaska
activity for the full period, and Virgin America financial results
for the period December 14, 2016 through December 31, 2016, and the
impacts associated with purchase accounting as of December 14,
2016.
|
(b)
|
Includes
consolidating entries, Parent Company, and other immaterial
business units.
|
(c)
|
Air Group Adjusted
excludes certain charges. See Note A on the accompanying pages for
further information.
|
(d)
|
Includes
merger-related costs, mark-to-market fuel-hedge accounting charges,
and other special items described previously.
|
GAAP TO NON-GAAP
RECONCILIATIONS
|
Alaska Air Group,
Inc.
|
Consolidated and
Mainline amounts presented below reflect the results of operations
for Virgin America for the period December 14, 2016 through
December 31, 2016, including impacts associated with purchase
accounting as of December 14, 2016.
|
|
CASM Excluding
Fuel and Special Items Reconciliation (unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
(in
cents)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Consolidated:
|
|
|
|
|
|
|
|
Total operating
expenses per ASM (CASM)
|
11.25
|
¢
|
|
10.85
|
¢
|
|
10.38
|
¢
|
|
10.77
|
¢
|
Less the following
components:
|
|
|
|
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
2.09
|
|
|
2.06
|
|
|
1.88
|
|
|
2.39
|
|
Special items -
merger-related costs and other
|
0.71
|
|
|
0.31
|
|
|
0.27
|
|
|
0.08
|
|
CASM, excluding
fuel and special items
|
8.45
|
¢
|
|
8.48
|
¢
|
|
8.23
|
¢
|
|
8.30
|
¢
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
|
Total operating
expenses per ASM (CASM)
|
10.33
|
¢
|
|
9.86
|
¢
|
|
9.39
|
¢
|
|
9.77
|
¢
|
Less the following
components:
|
|
|
|
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
1.98
|
|
|
1.97
|
|
|
1.79
|
|
|
2.29
|
|
Special items -
merger-related costs and other
|
0.78
|
|
|
0.35
|
|
|
0.30
|
|
|
0.09
|
|
CASM, excluding
fuel and special items
|
7.57
|
¢
|
|
7.54
|
¢
|
|
7.30
|
¢
|
|
7.39
|
¢
|
|
|
|
|
|
|
|
|
Fuel
Reconciliations (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
2016
|
|
2015
|
(in millions,
except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
Raw or "into-plane"
fuel cost
|
$
|
238
|
|
|
$
|
1.65
|
|
|
$
|
208
|
|
|
$
|
1.59
|
|
Losses on settled
hedges
|
4
|
|
|
0.03
|
|
|
4
|
|
|
0.03
|
|
Consolidated
economic fuel expense
|
$
|
242
|
|
|
$
|
1.68
|
|
|
$
|
212
|
|
|
$
|
1.62
|
|
Mark-to-market fuel
hedge adjustments
|
(4)
|
|
|
(0.03)
|
|
|
1
|
|
|
—
|
|
GAAP fuel
expense
|
$
|
238
|
|
|
$
|
1.65
|
|
|
$
|
213
|
|
|
$
|
1.62
|
|
Fuel
gallons
|
144
|
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended December 31,
|
|
2016
|
|
2015
|
(in millions,
except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
Raw or "into-plane"
fuel cost
|
$
|
828
|
|
|
$
|
1.49
|
|
|
$
|
935
|
|
|
$
|
1.84
|
|
Losses on settled
hedges
|
16
|
|
|
0.03
|
|
|
19
|
|
|
0.04
|
|
Consolidated
economic fuel expense
|
$
|
844
|
|
|
$
|
1.52
|
|
|
$
|
954
|
|
|
$
|
1.88
|
|
Mark-to-market fuel
hedge adjustments
|
(13)
|
|
|
(0.02)
|
|
|
—
|
|
|
—
|
|
GAAP fuel
expense
|
$
|
831
|
|
|
$
|
1.50
|
|
|
$
|
954
|
|
|
$
|
1.88
|
|
Fuel
gallons
|
554
|
|
|
|
|
508
|
|
|
|
SUPPLEMENTARY COMBINED COMPARATIVE FINANCIAL INFORMATION
(unaudited)
We believe that analysis of specific financial and operational
results on a combined basis provides more meaningful year-over-year
comparisons, and have presented combined results in the tables that
follow. Financial and operational information on a combined basis
is the sum of the historical consolidated financial results of the
Company through December 31, 2016 and
of Virgin America for the periods prior to the acquisition date of
December 14, 2016. It includes the
impact of purchase accounting only for the period following the
acquisition. This information does not purport to reflect what our
financial and operational results would have been had the
acquisition been consummated at the beginning of the periods
presented.
|
Three months ended
December 31, 2016
|
|
Three months ended
December 31, 2015
|
|
|
(in
millions)
|
Alaska Air
Group
(as
reported)
|
Virgin
America
(as
conformed)
|
Combined
|
|
Alaska Air
Group
(as
reported)
|
Virgin
America
(as reported
and
conformed)
|
Combined
|
|
Combined
% Change
|
Passenger
revenue
|
$
|
1,288
|
|
293
|
|
$
|
1,581
|
|
|
$
|
1,178
|
|
$
|
347
|
|
$
|
1,525
|
|
|
3.7
|
%
|
Other
revenue(a)
|
236
|
|
37
|
|
273
|
|
|
199
|
|
43
|
|
242
|
|
|
12.8
|
%
|
Total Operating
Revenues
|
1,524
|
|
330
|
|
1,854
|
|
|
1,377
|
|
390
|
|
1,767
|
|
|
4.9
|
%
|
Non-fuel operating
expense
|
1,045
|
|
237
|
|
1,282
|
|
|
909
|
|
288
|
|
1,197
|
|
|
7.1
|
%
|
Fuel
expense
|
238
|
|
64
|
|
302
|
|
|
213
|
|
82
|
|
295
|
|
|
2.4
|
%
|
Total Operating
Expenses
|
1,283
|
|
301
|
|
1,584
|
|
|
1,122
|
|
370
|
|
1,492
|
|
|
6.2
|
%
|
Operating
Income
|
241
|
|
29
|
|
270
|
|
|
255
|
|
20
|
|
275
|
|
|
(1.8)
|
%
|
Nonoperating income
(expense)
|
(10)
|
|
(5)
|
|
(15)
|
|
|
4
|
|
(3)
|
|
1
|
|
|
NM
|
Income Before
Tax
|
231
|
|
24
|
|
255
|
|
|
259
|
|
17
|
|
276
|
|
|
(7.6)
|
%
|
Special items -
merger-related and other
|
81
|
|
13
|
|
94
|
|
|
32
|
|
36
|
|
68
|
|
|
38.2
|
%
|
Mark-to-market fuel
hedge adjustments
|
(4)
|
|
—
|
|
(4)
|
|
|
1
|
|
—
|
|
1
|
|
|
NM
|
Adjusted Income
Before Tax
|
$
|
308
|
|
$
|
37
|
|
$
|
345
|
|
|
$
|
292
|
|
$
|
53
|
|
$
|
345
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months
ended December 31, 2016
|
|
Twelve months
ended December 31, 2015
|
|
|
(in
millions)
|
Alaska Air
Group
(as
reported)
|
Virgin
America
(as
conformed)
|
Combined
|
|
Alaska Air
Group
(as
reported)
|
Virgin
America
(as reported
and
conformed)
|
Combined
|
|
Combined
% Change
|
Passenger
revenue
|
$
|
5,006
|
|
$
|
1,388
|
|
$
|
6,394
|
|
|
$
|
4,793
|
|
$
|
1,361
|
|
$
|
6,154
|
|
|
3.9
|
%
|
Other
revenue(a)
|
925
|
|
176
|
|
1,101
|
|
|
805
|
|
165
|
|
970
|
|
|
13.5
|
%
|
Total Operating
Revenues
|
5,931
|
|
1,564
|
|
7,495
|
|
|
5,598
|
|
1,526
|
|
7,124
|
|
|
5.2
|
%
|
Non-fuel operating
expense
|
3,751
|
|
1,049
|
|
4,800
|
|
|
3,346
|
|
989
|
|
4,335
|
|
|
10.7
|
%
|
Fuel
Expense
|
831
|
|
293
|
|
1,124
|
|
|
954
|
|
360
|
|
1,314
|
|
|
(14.5)
|
%
|
Total Operating
Expenses
|
4,582
|
|
1,342
|
|
5,924
|
|
|
4,300
|
|
1,349
|
|
5,649
|
|
|
4.9
|
%
|
Operating
Income
|
1,349
|
|
222
|
|
1,571
|
|
|
1,298
|
|
177
|
|
1,475
|
|
|
6.5
|
%
|
Nonoperating income
(expense)
|
(4)
|
|
(19)
|
|
(23)
|
|
|
14
|
|
(9)
|
|
5
|
|
|
NM
|
Income Before
Tax
|
1,345
|
|
203
|
|
1,548
|
|
|
1,312
|
|
168
|
|
1,480
|
|
|
4.6
|
%
|
Special items -
merger-related and other
|
117
|
|
21
|
|
138
|
|
|
32
|
|
36
|
|
68
|
|
|
102.9
|
%
|
Mark-to-market fuel
hedge adjustments
|
(13)
|
|
(2)
|
|
(15)
|
|
|
—
|
|
(2)
|
|
(2)
|
|
|
NM
|
Adjusted Income
Before Tax
|
$
|
1,449
|
|
$
|
222
|
|
$
|
1,671
|
|
|
$
|
1,344
|
|
$
|
202
|
|
$
|
1,546
|
|
|
8.1
|
%
|
|
|
(a)
|
Includes Freight and
Mail, and Other-net revenue as presented on the Statement of
Operations.
|
SUPPLEMENTARY COMBINED COMPARATIVE OPERATING STATISTICS
(unaudited)
Selected operating statistics presented in the table below are
on a combined basis, and include operations for Alaska Air Group
and Virgin America for all periods presented, including Virgin
America for the periods prior to the acquisition date. These
combined results include the impact of purchase accounting only for
the period following the acquisition. Virgin America's historical
operating statistics included in the combined presentation have
been conformed to Alaska Air Group's presentation where
appropriate.
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
2016
|
2015
|
Change
|
|
2016
|
2015
|
Change
|
Revenue Passengers
(000)
|
10,382
|
9,787
|
6.1%
|
|
41,947
|
38,919
|
7.8%
|
ASMs
(000,000)
|
14,404
|
13,697
|
5.2%
|
|
57,953
|
52,605
|
10.2%
|
Load
Factor
|
83.9%
|
82.1%
|
1.8 pts
|
|
84.1%
|
83.7%
|
0.4 pts
|
PRASM
|
10.97¢
|
11.13¢
|
(1.4)%
|
|
11.03¢
|
11.70¢
|
(5.7)%
|
RASM
|
12.87¢
|
12.90¢
|
(0.2)%
|
|
12.93¢
|
13.54¢
|
(4.5)%
|
CASMex
|
8.25¢
|
8.24¢
|
0.1%
|
|
8.04¢
|
8.11¢
|
(0.9)%
|
Note A: Pursuant to Regulation G, we are providing
reconciliation 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 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 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 that covers all 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 mark-to-market
hedging adjustments, is important because it provides information
on significant items that are not necessarily indicative of future
performance. Industry analysts and investors consistently measure
our performance without these items for better comparability
between periods and among other airlines.
- Although we disclose our passenger unit revenues, we do not
(nor are we able to) evaluate unit revenues excluding the impact
that changes in fuel costs have had on ticket prices. Fuel
expense represents a large percentage of our total operating
expenses. Fluctuations in fuel prices often drive changes in
unit revenues in the mid-to-long term. Although we believe it
is useful to evaluate non-fuel unit costs for the reasons noted
above, we would caution readers of these financial statements not
to place undue reliance on unit costs excluding fuel as a measure
or predictor of future profitability because of the significant
impact of fuel costs on our business.
Glossary of Terms
Aircraft Utilization - block hours per day; this
represents the average number of hours per day our aircraft are in
transit
Aircraft Stage Length - represents the average miles
flown per aircraft departure
ASMs - available seat miles, or "capacity"; represents
total seats available across the fleet multiplied by the number of
miles flown
CASM - operating costs per ASM, or "unit cost";
represents all operating expenses including fuel and special
items
CASMex - operating costs excluding fuel and special items
per ASM; this metric is used to help track progress toward
reduction of non-fuel operating costs since fuel is largely out of
our control
Debt-to-capitalization ratio - represents adjusted debt
(long-term debt plus the present value of future operating lease
payments) divided by total equity plus adjusted debt
Diluted Earnings per Share - represents earnings per
share using fully diluted shares outstanding
Diluted Shares - represents the total number of shares
that would be outstanding if all possible sources of conversion,
such as stock options, were exercised
Economic Fuel - best estimate of the cash cost of fuel,
net of the impact of our fuel-hedging program
Free Cash Flow - total operating cash flow generated less
cash paid for capital expenditures
Load Factor - RPMs as a percentage of ASMs; represents
the number of available seats that were filled with paying
passengers
Mainline - represents flying Boeing 737 and Airbus jets
and all associated revenues and costs
PRASM - passenger revenue per ASM; commonly called
"passenger unit revenue"
Productivity - number of revenue passengers per full-time
equivalent employee
RASM - operating revenue per ASMs, or "unit revenue";
operating revenue includes all passenger revenue, freight &
mail, Mileage Plan, and other ancillary revenue; represents the
average total revenue for flying one seat one mile
Regional - represents capacity purchased by Alaska from Horizon, SkyWest, and
PenAir. In this segment, Regional records actual on-board
passenger revenue, less costs such as fuel, distribution costs, and
payments made to Horizon, SkyWest and PenAir 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
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/alaska-air-group-reports-fourth-quarter-2016-and-full-year-results-and-raises-dividend-9-300404035.html
SOURCE Alaska Air Group, Inc.