News releases

Alaska Air Group Reports Record First Quarter 2016 Results
Financial Highlights:
- Reported record first quarter net income, excluding special items, of
$183 million , a 23% increase over the first quarter of 2015. Adjusted diluted earnings per share of$1.45 was a 29% increase over the first quarter of 2015. This quarter's results exceed First Call analyst consensus estimate of$1.42 per share. - Reported net income for the first quarter under Generally Accepted Accounting Principles (GAAP) of
$184 million or$1.46 per diluted share, compared to net income of$149 million , or$1.12 per diluted share in 2015. - Paid
$0.275 per-share quarterly cash dividend in the first quarter, a 38% increase over the dividend paid in the first quarter of 2015. - Repurchased 1.7 million shares of common stock for an average price of
$74 during the first quarter of 2016 for$127 million . - Generated approximately
$530 million of operating cash flow and$410 million of free cash flow in the first quarter of 2016. - Grew passenger revenues by 4% compared to the first quarter of 2015.
- Achieved return on invested capital of 25.6% for the twelve-month period ending
March 31, 2016 , compared to 20.1% for the twelve-month period endingMarch 31, 2015 . - Lowered adjusted debt-to-capitalization ratio to 26% as of
March 31, 2016 . - Held
$1.6 billion in unrestricted cash and marketable securities as ofMarch 31, 2016 . - Placed an order on
April 12, 2016 , for 30 Embraer E175s with the option to purchase an additional 33 E175s. The E175s will be flown byHorizon Air beginning in 2017.
Planned Acquisition of
- Announced an agreement on
April 4, 2016 , to acquire the outstanding common stock ofVirgin America, Inc. (Virgin America ) for$2.6 billion in cash. The transaction is expected to close late this year or early 2017, pendingVirgin America shareholder and regulatory approval.
Operational Highlights:
- Held the No. 1 spot in
U.S. Department of Transportation on-time performance among the six largest U.S. airlines for the 12-months endedFebruary 2016 . - Recognized by Air Transport World as the Airline Market Leader for strong financial performance and outstanding customer service.
- Increased Visa Signature affinity cardholders by 12% compared to the prior year.
- Began offering Mileage Plan members the ability to redeem award miles for flights with
Hainan Airlines . - Announced the formation of McGee Air Services, a wholly-owned subsidiary of
Alaska Airlines , which will provide ground handling, aircraft cleaning and airport mobility services.
New routes launched and announced in the first quarter are as follows:
New Non-Stop Routes Launched in Q1 |
New Non-Stop Routes Announced (Launch Dates) |
Reno, Nevada to Orange County, California |
San Diego, California to San Jose, California (6/8/16) |
Orange County, California to Santa Rosa, California |
Bellingham, Washington to Kona, Hawaii (11/12/16) |
"We are proud to report record first quarter results," said CEO
The following table reconciles the company's reported GAAP net income and earnings per diluted share (Diluted EPS) during the first quarters of 2016 and 2015 to adjusted amounts:
Three Months Ended March 31, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
(in millions, except per-share amounts) |
Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||
Reported GAAP net income |
$ |
184 |
$ |
1.46 |
$ |
149 |
$ |
1.12 |
|||||||
Mark-to-market fuel hedge adjustments, net of tax |
(1) |
(0.01) |
— |
— |
|||||||||||
Non-GAAP adjusted income and per-share amounts |
$ |
183 |
$ |
1.45 |
$ |
149 |
$ |
1.12 |
Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables. A glossary of financial terms can be found on the last page of this release.
A conference call regarding the first quarter results will be simulcast via the Internet at
Additional Information About the Merger and Where to Find It
This communication may be deemed to be solicitation material in respect of the merger of
Participants in the Solicitation
Forward-Looking Statements
This communication contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934, as amended. These statements relate to future events,
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
||||||||||
Alaska Air Group, Inc. |
||||||||||
Three Months Ended March 31, |
||||||||||
(in millions, except per-share amounts) |
2016 |
2015 |
Change |
|||||||
Operating Revenues: |
||||||||||
Passenger |
||||||||||
Mainline |
$ |
927 |
$ |
901 |
3 |
% |
||||
Regional |
206 |
186 |
11 |
% |
||||||
Total passenger revenue |
1,133 |
1,087 |
4 |
% |
||||||
Freight and mail |
24 |
23 |
4 |
% |
||||||
Other - net |
190 |
159 |
19 |
% |
||||||
Total Operating Revenues |
1,347 |
1,269 |
6 |
% |
||||||
Operating Expenses: |
||||||||||
Wages and benefits |
336 |
306 |
10 |
% |
||||||
Variable incentive pay |
32 |
26 |
23 |
% |
||||||
Aircraft fuel, including hedging gains and losses |
167 |
235 |
(29) |
% |
||||||
Aircraft maintenance |
68 |
63 |
8 |
% |
||||||
Aircraft rent |
29 |
26 |
12 |
% |
||||||
Landing fees and other rentals |
80 |
71 |
13 |
% |
||||||
Contracted services |
60 |
52 |
15 |
% |
||||||
Selling expenses |
49 |
53 |
(8) |
% |
||||||
Depreciation and amortization |
88 |
76 |
16 |
% |
||||||
Food and beverage service |
31 |
25 |
24 |
% |
||||||
Other |
94 |
83 |
13 |
% |
||||||
Third-party regional carrier expense |
23 |
15 |
53 |
% |
||||||
Total Operating Expenses |
1,057 |
1,031 |
3 |
% |
||||||
Operating Income |
290 |
238 |
22 |
% |
||||||
Nonoperating Income (Expense): |
||||||||||
Interest income |
6 |
5 |
||||||||
Interest expense |
(13) |
(11) |
||||||||
Interest capitalized |
8 |
8 |
||||||||
Other - net |
1 |
— |
||||||||
Total Nonoperating Income (Expense) |
2 |
2 |
||||||||
Income Before Income Tax |
292 |
240 |
||||||||
Income tax expense |
108 |
91 |
||||||||
Net Income |
$ |
184 |
$ |
149 |
||||||
Basic Earnings Per Share: |
$ |
1.47 |
$ |
1.13 |
||||||
Diluted Earnings Per Share: |
$ |
1.46 |
$ |
1.12 |
||||||
Shares Used for Computation: |
||||||||||
Basic |
124.550 |
131.120 |
||||||||
Diluted |
125.328 |
132.230 |
||||||||
Cash dividend declared per share: |
$ |
0.275 |
$ |
0.20 |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
|||||||
Alaska Air Group, Inc. |
|||||||
(in millions) |
March 31, 2016 |
December 31, 2015 |
|||||
Cash and marketable securities |
$ |
1,564 |
$ |
1,328 |
|||
Total current assets |
1,923 |
1,663 |
|||||
Property and equipment-net |
4,830 |
4,802 |
|||||
Other assets |
76 |
65 |
|||||
Total assets |
6,829 |
6,530 |
|||||
Air traffic liability |
868 |
669 |
|||||
Current portion of long-term debt |
116 |
114 |
|||||
Other current liabilities |
1,085 |
1,022 |
|||||
Current liabilities |
2,069 |
1,805 |
|||||
Long-term debt |
531 |
569 |
|||||
Other liabilities and credits |
1,774 |
1,745 |
|||||
Shareholders' equity |
2,455 |
2,411 |
|||||
Total liabilities and shareholders' equity |
$ |
6,829 |
$ |
6,530 |
|||
Debt-to-capitalization ratio, adjusted for operating leases(a) |
26%:74% |
27%:73% |
|||||
Number of common shares outstanding |
123.913 |
125.175 |
(a) |
Calculated using the present value of remaining aircraft lease payments. |
OPERATING STATISTICS SUMMARY (unaudited) |
|||||
Alaska Air Group, Inc. |
|||||
Three Months Ended March 31, |
|||||
2016 |
2015 |
Change |
|||
Consolidated Operating Statistics:(a) |
|||||
Revenue passengers (000) |
7,835 |
7,316 |
7.1% |
||
RPMs (000,000) "traffic" |
8,571 |
7,723 |
11.0% |
||
ASMs (000,000) "capacity" |
10,453 |
9,257 |
12.9% |
||
Load factor |
82.0% |
83.4% |
(1.4)pts |
||
Yield |
13.22¢ |
14.08¢ |
(6.1)% |
||
PRASM |
10.84¢ |
11.74¢ |
(7.7)% |
||
RASM |
12.88¢ |
13.71¢ |
(6.1)% |
||
CASM excluding fuel(b) |
8.51¢ |
8.61¢ |
(1.2)% |
||
Economic fuel cost per gallon(b) |
$1.29 |
$1.98 |
(34.8)% |
||
Fuel gallons (000,000) |
132 |
119 |
10.9% |
||
ASM's per gallon |
79.2 |
77.8 |
1.8% |
||
Average number of full-time equivalent employees (FTE) |
14,357 |
13,274 |
8.2% |
||
Mainline Operating Statistics: |
|||||
Revenue passengers (000) |
5,642 |
5,236 |
7.8% |
||
RPMs (000,000) "traffic" |
7,716 |
6,994 |
10.3% |
||
ASMs (000,000) "capacity" |
9,354 |
8,347 |
12.1% |
||
Load factor |
82.5% |
83.8% |
(1.3)pts |
||
Yield |
12.01¢ |
12.88¢ |
(6.8)% |
||
PRASM |
9.91¢ |
10.79¢ |
(8.2)% |
||
RASM |
11.99¢ |
12.75¢ |
(6.0)% |
||
CASM excluding fuel(b) |
7.49¢ |
7.66¢ |
(2.2)% |
||
Economic fuel cost per gallon(b) |
$1.28 |
$1.97 |
(35.0)% |
||
Fuel gallons (000,000) |
113 |
103 |
9.7% |
||
ASM's per gallon |
82.8 |
81.0 |
2.2% |
||
Average number of FTE's |
11,123 |
10,380 |
7.2% |
||
Aircraft utilization |
10.6 |
10.6 |
—% |
||
Average aircraft stage length |
1,237 |
1,199 |
3.2% |
||
Operating fleet |
152 |
137 |
15 a/c |
||
Regional Operating Statistics:(c) |
|||||
Revenue passengers (000) |
2,192 |
2,080 |
5.4% |
||
RPMs (000,000) "traffic" |
855 |
728 |
17.4% |
||
ASMs (000,000) "capacity" |
1,100 |
910 |
20.9% |
||
Load factor |
77.7% |
80.0% |
(2.3)pts |
||
Yield |
24.09¢ |
25.58¢ |
(5.8)% |
||
PRASM |
18.72¢ |
20.46¢ |
(8.5)% |
||
Operating fleet |
67 |
60 |
7 a/c |
(a) |
Except for full-time equivalent employees, data includes information related to third-party regional capacity purchase flying arrangements. |
(b) |
See a reconciliation of operating expenses excluding fuel, a reconciliation of economic fuel costs, and Note A in the accompanying pages, for a discussion of why these measures may be important to investors. |
(c) |
Data presented includes information related to flights operated by Horizon Air and third-party carriers. |
OPERATING SEGMENTS (unaudited) |
|||||||||||||||||||||||||||
Alaska Air Group, Inc. |
|||||||||||||||||||||||||||
Three Months Ended March 31, 2016 |
|||||||||||||||||||||||||||
Alaska |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
Air Group Adjusted(a) |
Special Items(b) |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger |
|||||||||||||||||||||||||||
Mainline |
$ |
927 |
$ |
— |
$ |
— |
$ |
— |
$ |
927 |
$ |
— |
$ |
927 |
|||||||||||||
Regional |
— |
206 |
— |
— |
206 |
— |
206 |
||||||||||||||||||||
Total passenger revenues |
927 |
206 |
— |
— |
1,133 |
— |
1,133 |
||||||||||||||||||||
CPA revenues |
— |
— |
103 |
(103) |
— |
— |
— |
||||||||||||||||||||
Freight and mail |
23 |
1 |
— |
— |
24 |
— |
24 |
||||||||||||||||||||
Other-net |
172 |
17 |
1 |
— |
190 |
— |
190 |
||||||||||||||||||||
Total operating revenues |
1,122 |
224 |
104 |
(103) |
1,347 |
— |
1,347 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
701 |
186 |
105 |
(102) |
890 |
— |
890 |
||||||||||||||||||||
Economic fuel |
144 |
25 |
— |
— |
169 |
(2) |
167 |
||||||||||||||||||||
Total operating expenses |
845 |
211 |
105 |
(102) |
1,059 |
(2) |
1,057 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
6 |
— |
— |
— |
6 |
— |
6 |
||||||||||||||||||||
Interest expense |
(12) |
— |
(1) |
— |
(13) |
— |
(13) |
||||||||||||||||||||
Other |
7 |
— |
— |
2 |
9 |
— |
9 |
||||||||||||||||||||
Total Nonoperating income (expense) |
1 |
— |
(1) |
2 |
2 |
— |
2 |
||||||||||||||||||||
Income (loss) before income tax |
$ |
278 |
$ |
13 |
$ |
(2) |
$ |
1 |
$ |
290 |
$ |
2 |
$ |
292 |
|||||||||||||
Three Months Ended March 31, 2015 |
|||||||||||||||||||||||||||
Alaska |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
Air Group Adjusted(a) |
Special Items(b) |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger |
|||||||||||||||||||||||||||
Mainline |
$ |
901 |
$ |
— |
$ |
— |
$ |
— |
$ |
901 |
$ |
— |
$ |
901 |
|||||||||||||
Regional |
— |
186 |
— |
— |
186 |
— |
186 |
||||||||||||||||||||
Total passenger revenues |
901 |
186 |
— |
— |
1,087 |
— |
1,087 |
||||||||||||||||||||
CPA revenues |
— |
— |
99 |
(99) |
— |
— |
— |
||||||||||||||||||||
Freight and mail |
22 |
1 |
— |
— |
23 |
— |
23 |
||||||||||||||||||||
Other-net |
142 |
16 |
1 |
— |
159 |
— |
159 |
||||||||||||||||||||
Total operating revenues |
1,065 |
203 |
100 |
(99) |
1,269 |
— |
1,269 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
639 |
164 |
91 |
(98) |
796 |
— |
796 |
||||||||||||||||||||
Economic fuel |
203 |
32 |
— |
— |
235 |
— |
235 |
||||||||||||||||||||
Total operating expenses |
842 |
196 |
91 |
(98) |
1,031 |
— |
1,031 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
5 |
— |
— |
— |
5 |
— |
5 |
||||||||||||||||||||
Interest expense |
(7) |
— |
(4) |
— |
(11) |
— |
(11) |
||||||||||||||||||||
Other |
7 |
— |
1 |
— |
8 |
— |
8 |
||||||||||||||||||||
Total Nonoperating income (expense)
|
5 |
— |
(3) |
— |
2 |
— |
2 |
||||||||||||||||||||
Income (loss) before income tax |
$ |
228 |
$ |
7 |
$ |
6 |
$ |
(1) |
$ |
240 |
$ |
— |
$ |
240 |
(a) |
The adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocations and does not include certain charges. See Note A in the accompanying pages for further information. |
(b) |
Includes mark-to-market fuel-hedge accounting adjustments. |
Alaska Air Group, Inc. |
|||||
CASM EXCLUDING FUEL RECONCILIATION (unaudited) |
|||||
Three Months Ended March 31, |
|||||
(in cents) |
2016 |
2015 |
|||
Consolidated: |
|||||
CASM |
10.11 |
¢ |
11.14 |
¢ |
|
Less the following components: |
|||||
Aircraft fuel, including hedging gains and losses |
1.60 |
2.53 |
|||
CASM excluding fuel |
8.51 |
¢ |
8.61 |
¢ |
|
Mainline: |
|||||
CASM |
9.01 |
¢ |
10.09 |
¢ |
|
Less the following components: |
|||||
Aircraft fuel, including hedging gains and losses |
1.52 |
2.43 |
|||
CASM excluding fuel |
7.49 |
¢ |
7.66 |
¢ |
FUEL RECONCILIATIONS (unaudited) |
|||||||||||||||
Three Months Ended March 31, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
(in millions, except for per-gallon amounts) |
Dollars |
Cost/Gallon |
Dollars |
Cost/Gallon |
|||||||||||
Raw or "into-plane" fuel cost |
$ |
165 |
$ |
1.26 |
$ |
229 |
$ |
1.93 |
|||||||
Losses on settled hedges |
4 |
0.03 |
6 |
0.05 |
|||||||||||
Consolidated economic fuel expense |
169 |
1.29 |
235 |
1.98 |
|||||||||||
Mark-to-market fuel hedge adjustment |
(2) |
(0.02) |
— |
— |
|||||||||||
GAAP fuel expense |
$ |
167 |
$ |
1.27 |
$ |
235 |
$ |
1.98 |
|||||||
Fuel gallons |
132 |
119 |
Note A: Pursuant to Regulation G, we have provided 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 term, 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 or special revenues, 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.
Note B:
Glossary of Terms
Aircraft Utilization - block hours per day; this represents the average number of hours our aircraft are flying
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
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
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-record-first-quarter-2016-results-300255109.html
SOURCE
Media: (206) 392-5101, newsroom@alaskaair.com, Investor: Lavanya Sareen, Managing Director, Investor Relations, (206) 392-5656