Achieved record first quarter operating
revenue of $2.2 billion
Ratified new agreement with AMFA-represented
employees
SEATTLE, April 18,
2024 /PRNewswire/ -- Alaska Air Group (NYSE: ALK)
today reported financial results for the first quarter ending
March 31, 2024, and provided outlook for the second quarter
ending June 30, 2024.
"I want to recognize Alaska's
employees for their uncompromising prioritization of safety, for
taking great care of our guests, and for delivering strong
performance in the first quarter," said CEO Ben Minicucci. "Despite significant challenges
to start the year our results have far exceeded initial
expectations. Thanks to thoughtful capacity planning, network
optimization, and diligent cost control, we are well positioned to
carry our strong performance into the second quarter and
beyond."
Impact of Flight 1282:
Air Group's first quarter operation and results were
significantly impacted by Flight 1282 in January and the Boeing
737-9 MAX grounding which extended into February. The Company has
received $162 million in initial cash
compensation from Boeing to address the financial damages incurred
during the first quarter.
The table below illustrates the financial impact of the Flight
1282 accident and 737-9 MAX grounding compared to the three months
ended March 31, 2023:
|
|
Q1
2023
|
|
Q1
2024
|
(in millions,
except per
share amounts)
|
|
As
Reported
|
|
As
Reported
|
|
Grounding
Impact
|
|
Excluding
Grounding
Impact
|
Adjusted income
(loss)
before income tax
|
|
($115)
|
|
($157)
|
|
($162)
|
|
$5
|
Adjusted earnings
(loss)
per share
|
|
($0.62)
|
|
($0.92)
|
|
~($0.95)
|
|
~$0.03
|
YoY change in
capacity
|
|
|
|
(2 %)
|
|
~(5.5%)
|
|
~3.5%
|
Financial Results:
- Reported net loss for the first quarter of 2024 under Generally
Accepted Accounting Principles (GAAP) of $132 million, or $1.05 per share, compared to a net loss of
$142 million, or $1.11 per share, for the first quarter of
2023.
- Reported net loss for the first quarter of 2024, excluding
special items and mark-to-market fuel hedge accounting adjustments,
of $116 million, or $0.92 per share, compared to a net loss of
$79 million, or $0.62 per share, for the first quarter of
2023.
- Repurchased 561,086 shares of common stock for approximately
$21 million in the first
quarter.
- Generated $292 million in
operating cash flow for the first quarter.
- Held $2.3 billion in unrestricted
cash and marketable securities as of March
31, 2024.
- Ended the quarter with a debt-to-capitalization ratio of 47%,
within the target range of 40% to 50%.
Operational Updates:
- Agreement to purchase Hawaiian Airlines for $18 per share was approved by Hawaiian
shareholders. The proposed combination remains subject to
regulatory approval.
- Ratified a five-year collective bargaining agreement with
approximately 1,000 Alaska Airlines employees represented
by AMFA.
- Completed inspections of all 737-9 MAX aircraft and returned
the fleet to service in February.
- Enhanced quality oversight program at the Boeing production
facility to validate the work and quality of our aircraft as they
progress through the manufacturing process.
- Received two E175 aircraft during the quarter, bringing the
total in the Horizon fleet to 43.
Commercial Updates:
- Launched partnership with Bilt Rewards, which adds
Alaska's Mileage Plan as a
transfer partner and later in 2024 will allow Alaska Airlines Visa
Signature® cardholders to earn 3x miles when paying rent via
Bilt.
- Announced growth plans out of Portland to provide guests with more travel
options, including 25% increased capacity and a new daily nonstop
flight to Atlanta, beginning later
this year.
- Announced new daily nonstop service between Santa Rosa and Las
Vegas, which will be Air Group's seventh destination
from Sonoma County.
- Introduced Alaska Access, a monthly subscription program for
price-conscious travelers that offers Wi-Fi vouchers, early
access to sales, and a personalized fare page.
The following table reconciles the company's reported GAAP net
loss per share (EPS) for the three months ended March 31, 2024
and 2023 to adjusted amounts.
|
|
Three Months Ended
March 31,
|
|
|
2024
|
|
2023
|
(in millions,
except per share amounts)
|
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
GAAP net loss per
share
|
|
$
(132)
|
|
$
(1.05)
|
|
$
(142)
|
|
$
(1.11)
|
Mark-to-market fuel
hedge adjustments
|
|
(13)
|
|
(0.10)
|
|
20
|
|
0.16
|
Special items - fleet
transition(a)
|
|
26
|
|
0.21
|
|
13
|
|
0.10
|
Special items -
integration costs(b)
|
|
8
|
|
0.06
|
|
—
|
|
—
|
Special items - labor
and other(c)
|
|
—
|
|
—
|
|
51
|
|
0.40
|
Income tax effect of
reconciling items above
|
|
(5)
|
|
(0.04)
|
|
(21)
|
|
(0.17)
|
Non-GAAP adjusted
net loss per share
|
|
$
(116)
|
|
$
(0.92)
|
|
$
(79)
|
|
$
(0.62)
|
(a)
|
Special items - fleet
transition in the three months ended March 31, 2024 and 2023 is
primarily for costs associated with the retirement of Airbus and
Q400 aircraft, as well as gains on the sale of certain Q400
aircraft.
|
(b)
|
Special items -
integration costs is associated with our pending acquisition of
Hawaiian Airlines.
|
(c)
|
Special items - labor
and other is 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 18, 2024. A webcast
of the call is available to the public at
www.investor.alaskaair.com. For those unable to listen to the live
broadcast, a replay will be available after the call.
Second Quarter and Full Year 2024 Forecast
Information
|
|
Q2
Expectation
|
Capacity (ASMs) %
change versus 2023
|
|
Up 5% to 7%
|
Economic fuel cost per
gallon
|
|
$3.00 to
$3.20
|
Earnings per
share(a)
|
|
$2.20 to
$2.40
|
|
|
Full Year
Expectation
|
Capacity (ASMs) %
change versus 2023
|
|
< 3%
|
Earnings per
share(a)
|
|
$3.25 to
$5.25
|
Capital
expenditures
|
|
$1.2 billion - $1.3
billion
|
(a)
|
Earnings per share
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, 2023. 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
March 31,
|
(in millions,
except per share amounts)
|
|
2024
|
|
2023
|
|
Change
|
Operating
Revenue
|
|
|
|
|
|
|
Passenger
revenue
|
|
$
2,004
|
|
$
1,984
|
|
1 %
|
Mileage Plan other
revenue
|
|
164
|
|
154
|
|
6 %
|
Cargo and other
revenue
|
|
64
|
|
58
|
|
10 %
|
Total Operating
Revenue
|
|
2,232
|
|
2,196
|
|
2 %
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
Wages and
benefits
|
|
804
|
|
723
|
|
11 %
|
Variable incentive
pay
|
|
44
|
|
47
|
|
(6) %
|
Aircraft fuel,
including hedging gains and losses
|
|
565
|
|
665
|
|
(15) %
|
Aircraft
maintenance
|
|
122
|
|
124
|
|
(2) %
|
Aircraft
rent
|
|
47
|
|
59
|
|
(20) %
|
Landing fees and other
rentals
|
|
165
|
|
152
|
|
9 %
|
Contracted
services
|
|
97
|
|
95
|
|
2 %
|
Selling
expenses
|
|
77
|
|
66
|
|
17 %
|
Depreciation and
amortization
|
|
126
|
|
104
|
|
21 %
|
Food and beverage
service
|
|
58
|
|
54
|
|
7 %
|
Third-party regional
carrier expense
|
|
54
|
|
52
|
|
4 %
|
Other
|
|
205
|
|
177
|
|
16 %
|
Special items - fleet
transition
|
|
26
|
|
13
|
|
100 %
|
Special items -
integration costs
|
|
8
|
|
—
|
|
NM
|
Special items - labor
and other
|
|
—
|
|
51
|
|
(100) %
|
Total Operating
Expenses
|
|
2,398
|
|
2,382
|
|
1 %
|
Operating
Loss
|
|
(166)
|
|
(186)
|
|
11 %
|
|
|
|
|
|
|
|
Non-operating Income
(Expense)
|
|
|
|
|
|
|
Interest
income
|
|
17
|
|
17
|
|
— %
|
Interest
expense
|
|
(35)
|
|
(28)
|
|
25 %
|
Interest
capitalized
|
|
6
|
|
7
|
|
(14) %
|
Other - net
|
|
—
|
|
(9)
|
|
(100) %
|
Total Non-operating
Expense
|
|
(12)
|
|
(13)
|
|
(8) %
|
Loss Before Income
Tax
|
|
(178)
|
|
(199)
|
|
|
Income tax
benefit
|
|
(46)
|
|
(57)
|
|
|
Net
Loss
|
|
$
(132)
|
|
$
(142)
|
|
|
|
|
|
|
|
|
|
Basic Loss Per
Share
|
|
$
(1.05)
|
|
$
(1.11)
|
|
|
Diluted Loss Per
Share
|
|
$
(1.05)
|
|
$
(1.11)
|
|
|
Weighted Average Shares
Outstanding used for computation:
|
|
|
|
|
|
|
Basic
|
|
125.970
|
|
127.501
|
|
|
Diluted
|
|
125.970
|
|
127.501
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
(in
millions)
|
March 31,
2024
|
|
December 31,
2023
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$
885
|
|
$
281
|
Marketable
securities
|
1,393
|
|
1,510
|
Total cash and
marketable securities
|
2,278
|
|
1,791
|
Receivables -
net
|
384
|
|
383
|
Inventories and
supplies - net
|
104
|
|
116
|
Prepaid
expenses
|
177
|
|
176
|
Other current
assets
|
186
|
|
239
|
Total Current
Assets
|
3,129
|
|
2,705
|
|
|
|
|
Property and
Equipment
|
|
|
|
Aircraft and other
flight equipment
|
10,363
|
|
10,425
|
Other property and
equipment
|
1,839
|
|
1,814
|
Deposits for future
flight equipment
|
431
|
|
491
|
|
12,633
|
|
12,730
|
Less accumulated
depreciation and amortization
|
4,439
|
|
4,342
|
Total Property and
Equipment - net
|
8,194
|
|
8,388
|
|
|
|
|
Other
Assets
|
|
|
|
Operating lease
assets
|
1,174
|
|
1,195
|
Goodwill and intangible
assets
|
2,033
|
|
2,033
|
Other noncurrent
assets
|
283
|
|
292
|
Total Other
Assets
|
3,490
|
|
3,520
|
|
|
|
|
Total
Assets
|
$
14,813
|
|
$
14,613
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
(in millions,
except share amounts)
|
March 31,
2024
|
|
December 31,
2023
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
Liabilities
|
|
|
|
Accounts
payable
|
$
181
|
|
$
207
|
Accrued wages, vacation
and payroll taxes
|
481
|
|
584
|
Air traffic
liability
|
1,604
|
|
1,136
|
Other accrued
liabilities
|
791
|
|
800
|
Deferred
revenue
|
1,313
|
|
1,221
|
Current portion of
operating lease liabilities
|
158
|
|
158
|
Current portion of
long-term debt and finance leases
|
301
|
|
353
|
Total Current
Liabilities
|
4,829
|
|
4,459
|
|
|
|
|
Long-Term Debt, Net
of Current Portion
|
2,264
|
|
2,182
|
|
|
|
|
Noncurrent
Liabilities
|
|
|
|
Long-term operating
lease liabilities, net of current portion
|
1,098
|
|
1,125
|
Deferred income
taxes
|
649
|
|
695
|
Deferred
revenue
|
1,320
|
|
1,382
|
Obligation for pension
and post-retirement medical benefits
|
365
|
|
362
|
Other
liabilities
|
311
|
|
295
|
Total Noncurrent
Liabilities
|
3,743
|
|
3,859
|
|
|
|
|
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: 2024 -
139,137,527 shares; 2023 - 138,960,830 shares, Outstanding: 2024 -
125,705,964
shares; 2023 - 126,090,353 shares
|
1
|
|
1
|
Capital in excess of
par value
|
707
|
|
695
|
Treasury stock
(common), at cost: 2024 - 13,431,563 shares; 2023 - 12,870,477
shares
|
(840)
|
|
(819)
|
Accumulated other
comprehensive loss
|
(294)
|
|
(299)
|
Retained
earnings
|
4,403
|
|
4,535
|
|
3,977
|
|
4,113
|
Total Liabilities
and Shareholders' Equity
|
$
14,813
|
|
$
14,613
|
SUMMARY CASH FLOW
(unaudited)
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
(in
millions)
|
|
Three Months Ended
March 31,
|
2024
|
|
2023
|
Cash Flows from
Operating Activities:
|
|
|
|
|
Net Loss
|
|
$
(132)
|
|
$
(142)
|
Non-cash reconciling
items
|
|
168
|
|
191
|
Changes in working
capital
|
|
256
|
|
173
|
Net cash provided by
operating activities
|
|
292
|
|
222
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
Property and equipment
additions
|
|
(57)
|
|
(124)
|
Supplier
proceeds
|
|
162
|
|
—
|
Other investing
activities
|
|
213
|
|
184
|
Net cash provided by
investing activities
|
|
318
|
|
60
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
(5)
|
|
(114)
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
|
605
|
|
168
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
|
308
|
|
369
|
Cash, cash
equivalents, and restricted cash at end of the
period
|
|
$
913
|
|
$
537
|
OPERATING STATISTICS
SUMMARY (unaudited)
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2024
|
|
2023
|
|
Change
|
Consolidated
Operating Statistics:(a)
|
|
|
|
|
|
|
Revenue passengers
(000)
|
|
9,774
|
|
9,852
|
|
(1) %
|
RPMs (000,000)
"traffic"
|
|
12,524
|
|
12,554
|
|
— %
|
ASMs (000,000)
"capacity"
|
|
15,378
|
|
15,705
|
|
(2) %
|
Load factor
|
|
81.4 %
|
|
79.9 %
|
|
1.5 pts
|
Yield
|
|
16.00¢
|
|
15.80¢
|
|
1 %
|
PRASM
|
|
13.03¢
|
|
12.63¢
|
|
3 %
|
RASM
|
|
14.51¢
|
|
13.98¢
|
|
4 %
|
CASMex(b)
|
|
11.60¢
|
|
10.44¢
|
|
11 %
|
Economic fuel cost per
gallon(b)
|
|
$3.08
|
|
$3.41
|
|
(10) %
|
Fuel gallons
(000,000)
|
|
188
|
|
189
|
|
(1) %
|
ASMs per
gallon
|
|
81.8
|
|
83.1
|
|
(2) %
|
Departures
(000)
|
|
95.7
|
|
95.4
|
|
— %
|
Average full-time
equivalent employees (FTEs)
|
|
23,013
|
|
22,978
|
|
— %
|
Operating
fleet(c)
|
|
315
|
|
314
|
|
1 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)
|
Includes aircraft owned
and leased by Alaska and Horizon as well as aircraft operated by
third-party regional carriers under capacity purchase agreements.
Excludes all aircraft removed from operating service.
|
GAAP TO NON-GAAP
RECONCILIATIONS (unaudited)
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
Income (Loss) Before
Income Tax Reconciliation
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2024
|
|
2023
|
(in
millions)
|
Dollars
|
|
Margin
|
|
Dollars
|
|
Margin
|
Loss before income
tax
|
(178)
|
|
(8.0) %
|
|
(199)
|
|
(9.1) %
|
Adjusted
for:
|
|
|
|
|
|
|
|
Mark-to-market fuel
hedge adjustment
|
(13)
|
|
|
|
20
|
|
|
Special items - fleet
transition
|
26
|
|
|
|
13
|
|
|
Special items -
integration costs
|
8
|
|
|
|
—
|
|
|
Special items - labor
and other
|
—
|
|
|
|
51
|
|
|
Adjusted loss before
income tax
|
(157)
|
|
(7.0) %
|
|
(115)
|
|
(5.2) %
|
CASMex
Reconciliation
|
|
Three Months Ended
March 31,
|
(in
millions)
|
2024
|
|
2023
|
Total operating
expenses
|
2,398
|
|
2,382
|
Less the following
components:
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
565
|
|
665
|
Freighter
costs(a)
|
15
|
|
14
|
Special items - fleet
transition
|
26
|
|
13
|
Special items -
integration costs
|
8
|
|
—
|
Special items - labor
and other
|
—
|
|
51
|
Total operating
expenses, excluding fuel, freighter costs, and special
items
|
1,784
|
|
1,639
|
|
|
|
|
CASM
|
15.59 ¢
|
|
15.17 ¢
|
CASMex
|
11.60 ¢
|
|
10.44 ¢
|
(a)
|
Freighter costs in the
three months ended March 31, 2024 and 2023 are not presented
separately on the statements of operations.
|
Fuel
Reconciliation
|
|
|
Three Months Ended
March 31,
|
|
|
2024
|
|
2023
|
(in millions,
except for per-gallon amounts)
|
|
Dollars
|
|
Cost/Gallon
|
|
Dollars
|
|
Cost/Gallon
|
Raw or "into-plane"
fuel cost
|
|
$
565
|
|
$
3.01
|
|
$
633
|
|
$
3.35
|
Losses on settled
hedges
|
|
13
|
|
0.07
|
|
12
|
|
0.06
|
Economic fuel
expense
|
|
578
|
|
3.08
|
|
645
|
|
3.41
|
Mark-to-market fuel
hedge adjustment
|
|
(13)
|
|
(0.07)
|
|
20
|
|
0.11
|
Aircraft fuel,
including hedging gains and losses
|
|
$
565
|
|
$
3.01
|
|
$
665
|
|
$
3.52
|
Fuel
gallons
|
|
|
|
188
|
|
|
|
189
|
Debt-to-capitalization, including operating and
finance leases
|
(in
millions)
|
|
March 31,
2024
|
|
December 31,
2023
|
Long-term debt, net of
current portion
|
|
$
2,264
|
|
$
2,182
|
Capitalized operating
leases
|
|
1,256
|
|
1,283
|
Capitalized finance
leases(a)
|
|
—
|
|
64
|
Adjusted debt, net of
current portion of long-term debt
|
|
3,520
|
|
3,529
|
Shareholders'
equity
|
|
3,977
|
|
4,113
|
Total Invested
Capital
|
|
$
7,497
|
|
$
7,642
|
|
|
|
|
|
Debt-to-capitalization ratio, including operating
and finance leases
|
|
47 %
|
|
46 %
|
(a)
|
We included our
capitalized finance lease balances as of December 31, 2023, which
were recognized within the 'Current portion of long-term debt and
finance leases' line of the condensed consolidated balance
sheet.
|
Adjusted net debt to
earnings before interest, taxes, depreciation, amortization, rent,
and special items
|
(in
millions)
|
March 31,
2024
|
|
December 31,
2023
|
Current portion of
long-term debt and finance leases
|
$
301
|
|
$
353
|
Current portion of
operating lease liabilities
|
158
|
|
158
|
Long-term
debt
|
2,264
|
|
2,182
|
Long-term operating
lease liabilities, net of current portion
|
1,098
|
|
1,125
|
Total adjusted
debt
|
3,821
|
|
3,818
|
Less: Total cash and
marketable securities
|
2,278
|
|
1,791
|
Adjusted net
debt
|
$
1,543
|
|
$
2,027
|
|
|
|
|
(in
millions)
|
Twelve Months
Ended
March 31, 2024
|
|
Twelve Months
Ended
December 31, 2023
|
Operating
Income(a)
|
$
414
|
|
$
394
|
Adjusted
for:
|
|
|
|
Special
items
|
413
|
|
443
|
Mark-to-market fuel
hedge adjustments
|
(35)
|
|
(2)
|
Depreciation and
amortization
|
473
|
|
451
|
Aircraft
rent
|
196
|
|
208
|
EBITDAR
|
$
1,461
|
|
$
1,494
|
Adjusted net debt to
EBITDAR
|
1.1x
|
|
1.4x
|
(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 certain costs 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. 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 investors to understand the impact of
company-specific cost drivers which are more controllable by
management. We adjust for expenses related directly to our
freighter aircraft operations to allow for better comparability to
other domestic carriers that do not operate freighter aircraft. We
also exclude certain special charges as they are unusual or
nonrecurring in nature and adjusting for these expenses allows
management and investors to better understand our cost
performance.
- CASMex 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. CASMex is also 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 pretax income 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 and finance 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, freighter costs, and special
items
CASMex - operating costs excluding fuel, freighter
costs, and special items per ASM, or "unit cost"
Debt-to-capitalization ratio - represents adjusted
debt (long-term debt plus capitalized operating and finance 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
Freighter Costs - operating expenses directly
attributable to the operation of Alaska's Boeing 737 freighter aircraft
exclusively performing cargo missions
Load Factor - RPMs as a percentage of ASMs;
represents the number of available seats that were filled with
paying passengers
PRASM - passenger revenue per ASM, or "passenger
unit revenue"
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
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