Productivity improves 6% and pilot training
throughput doubles over prior year;
Anticipate double-digit adjusted pre-tax
margin in second quarter;
Reiterated full-year adjusted pre-tax margin
guidance of 9% to 12%
SEATTLE, April 20,
2023 /PRNewswire/ -- Alaska Air Group (NYSE: ALK)
today reported financial results for the first quarter ending
March 31, 2023, and provided outlook for the second quarter
ending June 30, 2023.
"This quarter we returned to pre-pandemic levels of flying and
our roadmap to profitable growth is on track," said Alaska CEO
Ben Minicucci. "As we progress
through the year, we have taken deliberate steps to build momentum
and we are well prepared for peak summer flying. Thank you to our
23,000 employees who are the backbone of our success – I'm proud of
their work to deliver operational excellence and show care for the
people who fly with us each day. We are well-positioned to deliver
on our full-year financial targets, including a 9% to 12% adjusted
pretax margin."
Financial Highlights:
- Reported net loss for the first quarter of 2023 under Generally
Accepted Accounting Principles (GAAP) of $142 million, or $1.11 per share, compared to a net loss of
$143 million, or $1.14 per share, for the first quarter of
2022.
- Reported net loss for the first quarter of 2023, excluding
special items and mark-to-market fuel hedge accounting adjustments,
of $79 million, or $0.62 per share, compared to a net loss,
excluding special items and mark-to-market fuel hedge accounting
adjustments, of $167 million, or
$1.33 per share, for the first
quarter of 2022.
- Resumed the share repurchase program, purchasing a total of
413,554 shares of common stock for approximately $18 million in the first quarter. The company
continues to expect share repurchases of at least $100 million in 2023.
- Held $2.4 billion in unrestricted
cash and marketable securities as of March
31, 2023.
- Ended the quarter with a debt-to-capitalization ratio of 48%,
within the target range of 40% to 50%.
Operational Updates:
- Ratified a two-year contract extension with more than 2,300
McGee Air Services employees represented by the IAM.
- Received six 737-9 aircraft during the quarter, bringing the
737-9 fleet count to 43.
- Activated new benefits for Alaska Visa Signature® cardholders,
including priority boarding, lounge membership discounts, new ways
to earn bonus miles and other perks. New benefits and program
changes drove cash remuneration under the co-brand credit card
agreement up 17% on a year-over-year basis.
- Announced plans to elevate guests' regional flying experience
with streaming-fast satellite Wi-Fi on E175 regional jets.
- Announced three new daily nonstop flights from San Diego to Washington, D.C., Tampa and Eugene, beginning service later in
2023.
- Doubled pilot training throughput compared to the same period
in 2022, aided by a 75% increase in qualified flight instructors
and an investment in two 737 full-flight simulators. Three
additional 737 full-flight simulator deliveries are expected later
this year.
- Began lobby transformation projects to provide guests a more
seamless travel experience; expect to roll out new bag tag stations
and bag drop technology in key airports throughout 2023 and
2024.
- Created a virtual reality 737 flight deck, in partnership with
VRPilot, to better prepare pilots for their training
experience.
Environmental, Social and Governance Updates:
- Announced an agreement with Shell Aviation to advance
sustainable aviation fuel (SAF) technology and infrastructure
throughout the West Coast; Shell Aviation will also supply
Alaska with up to 10 million
gallons of SAF in Los
Angeles.
- Launched a partnership with the Surfrider Foundation, an
organization focused on protecting coastal habitats and reducing
waste across the West Coast and throughout the Hawaiian
Islands.
Awards and Recognition:
- Alaska's Mileage Plan named
Best Airline Rewards Program by NerdWallet for its
customer-friendly policies, rewards and fee structures.
- Alaska and Horizon earned the
Diamond Award of Excellence from the Federal Aviation
Administration, recognizing the airlines' aircraft technicians for
their dedication to training.
The following table reconciles the company's reported GAAP net
loss per share (EPS) for the three months ended March 31, 2023
and 2022 to adjusted amounts.
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
(in millions,
except per-share amounts)
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
GAAP net loss per
share
|
$
(142)
|
|
$
(1.11)
|
|
$
(143)
|
|
$
(1.14)
|
Mark-to-market fuel
hedge adjustments
|
20
|
|
0.16
|
|
(107)
|
|
(0.85)
|
Special items - fleet
transition and other(a)
|
13
|
|
0.10
|
|
75
|
|
0.60
|
Special items - labor
and related(b)
|
51
|
|
0.40
|
|
—
|
|
—
|
Income tax effect of
reconciling items above
|
(21)
|
|
(0.17)
|
|
8
|
|
0.06
|
Non-GAAP adjusted net
loss per share
|
$
(79)
|
|
$
(0.62)
|
|
$
(167)
|
|
$
(1.33)
|
|
|
(a)
|
Special items - fleet
transition and other in the three months ended March 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 in the three months ended March 31, 2023 is primarily
for changes to Alaska pilots' sick leave benefits resulting from an
agreement signed in the first quarter of 2023.
|
Statistical data, as well as a reconciliation of the reported
non-GAAP financial measures, can be found in the accompanying
tables. A glossary of financial terms can be found on the last page
of this release.
Alaska will hold its quarterly
conference call to discuss first quarter results at 8:30 a.m. PDT on April 20, 2023. A webcast
of the call is available to the public at
www.alaskaair.com/investors. For those unable to listen to the live
broadcast, a replay will be available after the call.
Second Quarter and Full Year 2023 Forecast
Information
|
|
Q2
Expectation
|
Capacity (ASMs) %
change versus 2022
|
|
Up 6% to 9%
|
Total revenue % change
versus 2022
|
|
Up 2.5% to 5.5%
|
Cost per ASM excluding
fuel and special items (CASMex) % change versus 2022
|
|
Up 1% to 3%
|
Economic fuel cost per
gallon
|
|
$2.95 to
$3.15
|
Adjusted pre-tax margin
%
|
|
14% to 17%
|
Our second quarter guidance reflects the continuation of
improving operational and financial performance trends that we
experienced in March. For the full year, we continue to expect
achievement of our previous guidance, including adjusted pre-tax
margins of 9% to 12%, and earnings per share of $5.50 to $7.50.
This guidance assumes a full year tax rate of approximately
25%.
References in this update to "Air Group," "Company," "we," "us,"
and "our" refer to Alaska Air Group, Inc. and its subsidiaries,
unless otherwise specified.
This news release may contain forward-looking statements subject
to the safe harbor protection provided by Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act
of 1934, and the Private Securities Litigation Reform Act of 1995.
These statements relate to future events and involve known and
unknown risks and uncertainties that may cause actual outcomes to
be materially different from those indicated by our forward-looking
statements, assumptions or beliefs. For a comprehensive discussion
of potential risk factors, see Item 1A of the Company's Annual
Report on Form 10-K for the year ended December 31, 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.
About Alaska Airlines
Alaska Airlines and our regional partners serve more than 120
destinations across the United
States, Belize,
Canada, Costa Rica and Mexico. We strive to be the most caring
airline with award-winning customer service and an industry-leading
loyalty program. As a member of the oneworld alliance, and with our
additional global partners, our guests can travel to more than
1,000 destinations on more than 25 airlines while earning and
redeeming miles on flights to locations around the world. 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
March 31,
|
(in millions,
except per share amounts)
|
2023
|
|
2022
|
|
Change
|
Operating
Revenue
|
|
|
|
|
|
Passenger
revenue
|
$
1,984
|
|
$
1,511
|
|
31 %
|
Mileage Plan other
revenue
|
154
|
|
112
|
|
38 %
|
Cargo and other
revenue
|
58
|
|
58
|
|
— %
|
Total Operating
Revenue
|
2,196
|
|
1,681
|
|
31 %
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
Wages and
benefits
|
723
|
|
606
|
|
19 %
|
Variable incentive
pay
|
47
|
|
36
|
|
31 %
|
Aircraft fuel,
including hedging gains and losses
|
665
|
|
347
|
|
92 %
|
Aircraft
maintenance
|
124
|
|
135
|
|
(8) %
|
Aircraft
rent
|
59
|
|
73
|
|
(19) %
|
Landing fees and other
rentals
|
152
|
|
138
|
|
10 %
|
Contracted
services
|
95
|
|
78
|
|
22 %
|
Selling
expenses
|
66
|
|
58
|
|
14 %
|
Depreciation and
amortization
|
104
|
|
102
|
|
2 %
|
Food and beverage
service
|
54
|
|
41
|
|
32 %
|
Third-party regional
carrier expense
|
52
|
|
42
|
|
24 %
|
Other
|
177
|
|
152
|
|
16 %
|
Special items - fleet
transition and other
|
13
|
|
75
|
|
(83) %
|
Special items - labor
and related
|
51
|
|
—
|
|
NM
|
Total Operating
Expenses
|
2,382
|
|
1,883
|
|
27 %
|
Operating
Loss
|
(186)
|
|
(202)
|
|
8 %
|
Non-operating Income
(Expense)
|
|
|
|
|
|
Interest
income
|
17
|
|
7
|
|
143 %
|
Interest
expense
|
(28)
|
|
(27)
|
|
4 %
|
Interest
capitalized
|
7
|
|
2
|
|
NM
|
Other - net
|
(9)
|
|
14
|
|
(164) %
|
Total Non-operating
Income (Expense)
|
(13)
|
|
(4)
|
|
NM
|
Loss Before Income
Tax
|
(199)
|
|
(206)
|
|
|
Income tax
benefit
|
(57)
|
|
(63)
|
|
|
Net
Loss
|
$
(142)
|
|
$
(143)
|
|
|
|
|
|
|
|
|
Basic Loss Per
Share
|
$
(1.11)
|
|
$
(1.14)
|
|
|
Diluted Loss Per
Share
|
$
(1.11)
|
|
$
(1.14)
|
|
|
Shares used for
computation:
|
|
|
|
|
|
Basic
|
127.501
|
|
125.984
|
|
|
Diluted
|
127.501
|
|
125.984
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
(in
millions)
|
March 31,
2023
|
|
December 31,
2022
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$
516
|
|
$
338
|
Marketable
securities
|
1,913
|
|
2,079
|
Total cash and
marketable securities
|
2,429
|
|
2,417
|
Receivables -
net
|
340
|
|
296
|
Inventories and
supplies - net
|
105
|
|
104
|
Prepaid
expenses
|
181
|
|
163
|
Other current
assets
|
44
|
|
60
|
Total Current
Assets
|
3,099
|
|
3,040
|
|
|
|
|
Property and
Equipment
|
|
|
|
Aircraft and other
flight equipment
|
9,189
|
|
9,053
|
Other property and
equipment
|
1,661
|
|
1,661
|
Deposits for future
flight equipment
|
580
|
|
670
|
|
11,430
|
|
11,384
|
Less accumulated
depreciation and amortization
|
4,178
|
|
4,127
|
Total Property and
Equipment - net
|
7,252
|
|
7,257
|
|
|
|
|
Other
Assets
|
|
|
|
Operating lease
assets
|
1,534
|
|
1,471
|
Goodwill and intangible
assets
|
2,037
|
|
2,038
|
Other noncurrent
assets
|
374
|
|
380
|
Total Other
Assets
|
3,945
|
|
3,889
|
|
|
|
|
Total
Assets
|
$
14,296
|
|
$
14,186
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
(in millions,
except share amounts)
|
March 31,
2023
|
|
December 31,
2022
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
Liabilities
|
|
|
|
Accounts
payable
|
$
206
|
|
$
221
|
Accrued wages, vacation
and payroll taxes
|
431
|
|
619
|
Air traffic
liability
|
1,613
|
|
1,180
|
Other accrued
liabilities
|
908
|
|
846
|
Deferred
revenue
|
1,218
|
|
1,123
|
Current portion of
operating lease liabilities
|
213
|
|
228
|
Current portion of
long-term debt
|
268
|
|
276
|
Total Current
Liabilities
|
4,857
|
|
4,493
|
|
|
|
|
Long-Term Debt, Net
of Current Portion
|
1,795
|
|
1,883
|
|
|
|
|
Noncurrent
Liabilities
|
|
|
|
Long-term operating
lease liabilities, net of current portion
|
1,455
|
|
1,393
|
Deferred income
taxes
|
523
|
|
574
|
Deferred
revenue
|
1,325
|
|
1,374
|
Obligation for pension
and post-retirement medical benefits
|
355
|
|
348
|
Other
liabilities
|
297
|
|
305
|
Total Noncurrent
Liabilities
|
3,955
|
|
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 -
137,006,134 shares; 2022 - 136,883,042 shares, Outstanding: 2023 -
127,243,454 shares; 2022 - 127,533,916 shares
|
1
|
|
1
|
Capital in excess of
par value
|
587
|
|
577
|
Treasury stock
(common), at cost: 2023 - 9,763,498 shares; 2022 - 9,349,944
shares
|
(692)
|
|
(674)
|
Accumulated other
comprehensive loss
|
(365)
|
|
(388)
|
Retained
earnings
|
4,158
|
|
4,300
|
|
3,689
|
|
3,816
|
Total Liabilities
and Shareholders' Equity
|
$
14,296
|
|
$
14,186
|
SUMMARY CASH FLOW
(unaudited)
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
Three Months Ended
March 31,
|
(in
millions)
|
2023
|
|
2022
|
Cash Flows from
Operating Activities:
|
|
|
|
Net loss
|
$
(142)
|
|
$
(143)
|
Non-cash reconciling
items
|
191
|
|
182
|
Changes in working
capital
|
173
|
|
248
|
Net cash provided by
operating activities
|
222
|
|
287
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
Property and equipment
additions
|
(124)
|
|
(288)
|
Other investing
activities
|
184
|
|
327
|
Net cash provided by
investing activities
|
60
|
|
39
|
|
|
|
|
Cash Flows from
Financing Activities:
|
(114)
|
|
(168)
|
|
|
|
|
Net increase in cash
and cash equivalents
|
168
|
|
$
158
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
369
|
|
494
|
Cash, cash
equivalents, and restricted cash at end of the
period
|
$
537
|
|
$
652
|
OPERATING STATISTICS
SUMMARY (unaudited)
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
|
Change
|
Consolidated
Operating Statistics:(a)
|
|
|
|
|
|
Revenue passengers
(000)
|
9,852
|
|
8,694
|
|
13 %
|
RPMs (000,000)
"traffic"
|
12,554
|
|
10,586
|
|
19 %
|
ASMs (000,000)
"capacity"
|
15,705
|
|
13,783
|
|
14 %
|
Load factor
|
79.9 %
|
|
76.8 %
|
|
3.1 pts
|
Yield
|
15.80¢
|
|
14.27¢
|
|
11 %
|
RASM
|
13.98¢
|
|
12.20¢
|
|
15 %
|
CASMex(b)
|
10.53¢
|
|
10.61¢
|
|
(1) %
|
Economic fuel cost per
gallon(b)
|
$3.41
|
|
$2.62
|
|
30 %
|
Fuel gallons
(000,000)
|
189
|
|
173
|
|
9 %
|
ASMs per
gallon
|
83.1
|
|
79.9
|
|
4 %
|
Departures
(000)
|
95.4
|
|
93.2
|
|
2 %
|
Average full-time
equivalent employees (FTEs)
|
22,978
|
|
21,582
|
|
6 %
|
Mainline Operating
Statistics:
|
|
|
|
|
|
Revenue passengers
(000)
|
7,833
|
|
6,566
|
|
19 %
|
RPMs (000,000)
"traffic"
|
11,669
|
|
9,512
|
|
23 %
|
ASMs (000,000)
"capacity"
|
14,610
|
|
12,387
|
|
18 %
|
Load factor
|
79.9 %
|
|
76.8 %
|
|
3.1 pts
|
Yield
|
14.48¢
|
|
13.06¢
|
|
11 %
|
RASM
|
12.94¢
|
|
11.30¢
|
|
15 %
|
CASMex(b)
|
9.52¢
|
|
9.64¢
|
|
(1) %
|
Economic fuel cost per
gallon(b)
|
$3.39
|
|
$2.61
|
|
30 %
|
Fuel gallons
(000,000)
|
166
|
|
146
|
|
14 %
|
ASMs per
gallon
|
88.0
|
|
85.0
|
|
4 %
|
Departures
(000)
|
62.6
|
|
55.8
|
|
12 %
|
Average full-time
equivalent employees (FTEs)
|
17,785
|
|
16,336
|
|
9 %
|
Aircraft
utilization
|
11.1
|
|
9.5
|
|
17 %
|
Average aircraft stage
length
|
1,366
|
|
1,334
|
|
2 %
|
Operating
fleet(d)
|
219
|
|
225
|
|
(6) a/c
|
Regional Operating
Statistics:(c)
|
|
|
|
|
|
Revenue passengers
(000)
|
2,019
|
|
2,128
|
|
(5) %
|
RPMs (000,000)
"traffic"
|
885
|
|
1,075
|
|
(18) %
|
ASMs (000,000)
"capacity"
|
1,095
|
|
1,396
|
|
(22) %
|
Load factor
|
80.8 %
|
|
77.0 %
|
|
3.8 pts
|
Yield
|
33.19¢
|
|
24.96¢
|
|
33 %
|
RASM
|
27.82¢
|
|
20.04¢
|
|
39 %
|
Departures
(000)
|
32.8
|
|
37.4
|
|
(12) %
|
Operating
fleet(d)
|
75
|
|
98
|
|
(23) 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.
|
OPERATING SEGMENTS
(unaudited)
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2023
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other(a)
|
|
Air Group
Adjusted(b)
|
|
Special
Items(c)
|
|
Consolidated
|
Operating
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
revenue
|
$ 1,690
|
|
$
294
|
|
$
—
|
|
$
—
|
|
$ 1,984
|
|
$
—
|
|
$
1,984
|
CPA revenue
|
—
|
|
—
|
|
78
|
|
(78)
|
|
—
|
|
—
|
|
—
|
Mileage Plan other
revenue
|
143
|
|
11
|
|
—
|
|
—
|
|
154
|
|
—
|
|
154
|
Cargo and other
revenue
|
57
|
|
—
|
|
—
|
|
1
|
|
58
|
|
—
|
|
58
|
Total Operating
Revenue
|
1,890
|
|
305
|
|
78
|
|
(77)
|
|
2,196
|
|
—
|
|
2,196
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
1,390
|
|
256
|
|
84
|
|
(77)
|
|
1,653
|
|
64
|
|
1,717
|
Fuel expense
|
561
|
|
85
|
|
—
|
|
(1)
|
|
645
|
|
20
|
|
665
|
Total Operating
Expenses
|
1,951
|
|
341
|
|
84
|
|
(78)
|
|
2,298
|
|
84
|
|
2,382
|
Non-operating Income
(Expense)
|
(6)
|
|
—
|
|
(8)
|
|
1
|
|
(13)
|
|
—
|
|
(13)
|
Income (Loss) Before
Income Tax
|
$
(67)
|
|
$
(36)
|
|
$
(14)
|
|
$
2
|
|
$ (115)
|
|
$
(84)
|
|
$
(199)
|
Pretax
Margin
|
|
|
|
|
|
|
|
|
(5.2) %
|
|
|
|
(9.1) %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2022
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other(a)
|
|
Air Group
Adjusted(b)
|
|
Special
Items(c)
|
|
Consolidated
|
Operating
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
revenue
|
$ 1,243
|
|
$
268
|
|
$
—
|
|
$
—
|
|
$ 1,511
|
|
$
—
|
|
$
1,511
|
CPA revenue
|
—
|
|
—
|
|
94
|
|
(94)
|
|
—
|
|
—
|
|
—
|
Mileage Plan other
revenue
|
100
|
|
12
|
|
—
|
|
—
|
|
112
|
|
—
|
|
112
|
Cargo and other
revenue
|
57
|
|
—
|
|
—
|
|
1
|
|
58
|
|
—
|
|
58
|
Total Operating
Revenue
|
1,400
|
|
280
|
|
94
|
|
(93)
|
|
1,681
|
|
—
|
|
1,681
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
1,194
|
|
262
|
|
99
|
|
(94)
|
|
1,461
|
|
75
|
|
1,536
|
Fuel expense
|
381
|
|
73
|
|
—
|
|
—
|
|
454
|
|
(107)
|
|
347
|
Total Operating
Expenses
|
1,575
|
|
335
|
|
99
|
|
(94)
|
|
1,915
|
|
(32)
|
|
1,883
|
Non-operating Income
(Expense)
|
1
|
|
—
|
|
(5)
|
|
—
|
|
(4)
|
|
—
|
|
(4)
|
Income (Loss) Before
Income Tax
|
$ (174)
|
|
$
(55)
|
|
$
(10)
|
|
$
1
|
|
$ (238)
|
|
$
32
|
|
$
(206)
|
Pretax
Margin
|
|
|
|
|
|
|
|
|
(14.2) %
|
|
|
|
(12.3) %
|
|
|
(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
March 31,
|
(in
cents)
|
2023
|
|
2022
|
Consolidated:
|
|
|
|
CASM
|
15.17 ¢
|
|
13.66 ¢
|
Less the following
components:
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
4.24
|
|
2.51
|
Special items - fleet
transition and other(a)
|
0.08
|
|
0.54
|
Special items - labor
and related(b)
|
0.32
|
|
—
|
CASM excluding fuel
and special items
|
10.53 ¢
|
|
10.61 ¢
|
|
|
|
|
Mainline:
|
|
|
|
CASM
|
13.93 ¢
|
|
11.89 ¢
|
Less the following
components:
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
3.97
|
|
2.21
|
Special items - fleet
transition and other(a)
|
0.09
|
|
0.04
|
Special items - labor
and related(b)
|
0.35
|
|
—
|
CASM excluding fuel
and special items
|
9.52 ¢
|
|
9.64 ¢
|
|
|
(a)
|
Special items - fleet
transition and other in the three months ended March 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 in the three months ended March 31, 2023 is primarily
for changes to Alaska pilots' sick leave benefits resulting from an
agreement signed in the first quarter of 2023.
|
Fuel
Reconciliation
|
|
Three Months Ended
March 31,
|
|
2023
|
|
2022
|
(in millions,
except for per-gallon amounts)
|
Dollars
|
|
Cost/Gallon
|
|
Dollars
|
|
Cost/Gallon
|
Raw or "into-plane"
fuel cost
|
$
633
|
|
$
3.35
|
|
$
504
|
|
$
2.91
|
Losses (gains) on
settled hedges
|
12
|
|
0.06
|
|
(50)
|
|
(0.29)
|
Consolidated
economic fuel expense
|
645
|
|
3.41
|
|
454
|
|
2.62
|
Mark-to-market fuel
hedge adjustment
|
20
|
|
0.11
|
|
(107)
|
|
(0.62)
|
GAAP fuel
expense
|
$
665
|
|
$
3.52
|
|
$
347
|
|
$
2.00
|
Fuel
gallons
|
|
|
189
|
|
|
|
173
|
Debt-to-capitalization, including operating
leases
|
(in
millions)
|
March 31,
2023
|
|
December 31,
2022
|
Long-term debt, net of
current portion
|
$
1,795
|
|
$
1,883
|
Capitalized operating
leases
|
1,668
|
|
1,621
|
Adjusted debt, net of
current portion of long-term debt
|
3,463
|
|
3,504
|
Shareholders'
equity
|
3,689
|
|
3,816
|
Total Invested
Capital
|
$
7,152
|
|
$
7,320
|
|
|
|
|
Debt-to-capitalization
ratio, including operating leases
|
48 %
|
|
48 %
|
Adjusted net debt to
earnings before interest, taxes, depreciation, amortization, rent
and special items
|
(in
millions)
|
March 31,
2023
|
|
December 31,
2022
|
Current portion of
long-term debt
|
$
268
|
|
$
276
|
Current portion of
operating lease liabilities
|
213
|
|
228
|
Long-term
debt
|
1,795
|
|
1,883
|
Long-term operating
lease liabilities, net of current portion
|
1,455
|
|
1,393
|
Total adjusted
debt
|
3,731
|
|
3,780
|
Less: Total cash and
marketable securities
|
(2,429)
|
|
(2,417)
|
Adjusted net
debt
|
$
1,302
|
|
$
1,363
|
|
|
|
|
(in
millions)
|
Twelve Months
Ended
March 31, 2023
|
|
Twelve Months
Ended
December 31, 2022
|
GAAP Operating
Income(a)
|
$
86
|
|
$
70
|
Adjusted
for:
|
|
|
|
Special
items
|
569
|
|
580
|
Mark-to-market fuel
hedge adjustments
|
203
|
|
76
|
Depreciation and
amortization
|
417
|
|
415
|
Aircraft
rent
|
277
|
|
291
|
EBITDAR
|
$
1,552
|
|
$
1,432
|
Adjusted net debt to
EBITDAR
|
0.8x
|
|
1.0x
|
|
|
(a)
|
Operating income can be
reconciled using the trailing twelve month operating income as
filed quarterly with the SEC.
|
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.
- 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.
- 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.
- Disclosure of the individual impact of certain noted items
provides investors the ability to measure and monitor performance
both with and without these special items. We believe that
disclosing the impact of these items as noted above is important
because it provides information on significant items that are not
necessarily indicative of future performance. Industry analysts and
investors consistently measure our performance without these items
for better comparability between periods and among other
airlines.
- Although we disclose our unit revenue, we do not, nor are we
able to, evaluate unit revenue excluding the impact that changes in
fuel costs have had on ticket prices. Fuel expense represents a
large percentage of our total operating expenses. Fluctuations in
fuel prices often drive changes in unit revenue in the mid-to-long
term. Although we believe it is useful to evaluate non-fuel unit
costs for the reasons noted above, we would caution readers of
these financial statements not to place undue reliance on unit
costs excluding fuel as a measure or predictor of future
profitability because of the significant impact of fuel costs on
our business.
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, or "unit cost";
represents all operating expenses including fuel and special
items
CASMex - operating costs excluding fuel and special
items per ASM; this metric is used to help track progress toward
reduction of non-fuel operating costs since fuel is largely out of
our control
Debt-to-capitalization ratio - represents adjusted
debt (long-term debt plus capitalized operating lease liabilities)
divided by total equity plus adjusted debt
Diluted Earnings per Share - represents earnings per
share (EPS) using fully diluted shares outstanding
Diluted Shares - represents the total number of shares
that would be outstanding if all possible sources of conversion,
such as stock options, were exercised
Economic Fuel - best estimate of the cash cost of
fuel, net of the impact of our fuel-hedging program
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
A320, and Airbus A321neo 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