News releases

Alaska Air Group reports third quarter 2016 results
Financial Highlights:
- Reported net income for the third quarter under Generally Accepted Accounting Principles (GAAP) of
$256 million , or$2.07 per diluted share, compared to net income of$274 million , or$2.14 per diluted share in 2015. - Reported adjusted diluted earnings per share of
$2.20 , a 2% increase over the third quarter of 2015. Third quarter net income, excluding special items, was$272 million , a 2% decrease from the third quarter of 2015. This quarter's results exceed First Call analyst consensus estimate of$2.09 per share. - Paid 27.5¢ per-share quarterly cash dividend in the third quarter, a 38% increase over the dividend paid in the third quarter of 2015.
- Generated approximately
$1.2 billion of operating cash flow and$700 million of free cash flow for the nine months endingSept. 30, 2016 . - Achieved 24.8% adjusted pre-tax margin on a trailing 12-month basis.
- Achieved return on invested capital of 24.4% for the 12-month period ending
Sept. 30, 2016 . - Held
$3.2 billion in unrestricted cash and marketable securities as ofSept. 30, 2016 .
Planned Acquisition of
- Announced proposed acquisition of
Virgin America onApril 4, 2016 . - Raised approximately
$1.5 billion of funding in anticipation of the proposed acquisition ofVirgin America . - Recorded special items of
$22 million in the third quarter for merger-related costs.
Year-To-Date Accomplishments and Highlights:
- Became the first major U.S. airline to receive approval from the
Federal Aviation Administration for its Safety Management System. - Ranked "Highest in Customer Satisfaction Among Traditional Carriers in
North America " in 2016 byJ.D. Power for 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. - 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 , providingAlaska customers seamless travel and mileage earning opportunities. - Ranked among
Forbes' 2016 "America's Best Employers." - 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 endedAugust 2016 . - Received the
Department of Defense 2016 Freedom Award, the highest recognition given to employers by the U.S. government for their support ofNational Guard and Reserve members. - Received 15th Diamond Awards of Excellence from the
Federal Aviation Administration , recognizing bothAlaska and Horizon's aircraft technicians for their commitment to training. - Earned first place 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 the 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.
- Flew the first commercial flight using sustainable alcohol-to-jet biofuel made from U.S. grown corn, continuing
Alaska's commitment to reduce its carbon emissions. - Ranked among the top "green companies" in
the United States by Newsweek. - 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.
New routes announced in the third quarter were as follows:
New Nonstop Routes Announced (Launch Dates)
(a) Pending final
"We had a fantastic quarter operationally and financially. I want to thank both our employees and customers," said
The following table reconciles the company's reported GAAP net income and earnings per diluted share (Diluted EPS).
Three Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
(in millions, except per-share amounts) |
Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||
Reported GAAP net income |
$ |
256 |
$ |
2.07 |
$ |
274 |
$ |
2.14 |
|||||||
Mark-to-market fuel hedge adjustments |
3 |
0.02 |
5 |
0.04 |
|||||||||||
Special items - merger-related costs |
22 |
0.18 |
— |
— |
|||||||||||
Income tax effect |
(9) |
(0.07) |
(2) |
(0.02) |
|||||||||||
Non-GAAP adjusted income and per-share amounts |
$ |
272 |
$ |
2.20 |
$ |
277 |
$ |
2.16 |
Nine Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
(in millions, except per-share amounts) |
Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||
Reported GAAP net income |
$ |
700 |
$ |
5.63 |
$ |
657 |
$ |
5.05 |
|||||||
Mark-to-market fuel hedge adjustments |
(9) |
(0.07) |
(1) |
(0.01) |
|||||||||||
Special items - merger-related costs |
36 |
0.29 |
— |
— |
|||||||||||
Income tax effect |
(10) |
(0.08) |
— |
— |
|||||||||||
Non-GAAP adjusted income and per-share amounts |
$ |
717 |
$ |
5.77 |
$ |
656 |
$ |
5.04 |
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 third quarter results will be simulcast online at
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 |
Nine Months Ended |
|||||||||||||||||||||
(in millions, except per-share amounts) |
2016 |
2015 |
Change |
2016 |
2015 |
Change |
||||||||||||||||
Operating Revenues: |
||||||||||||||||||||||
Passenger |
||||||||||||||||||||||
Mainline |
$ |
1,073 |
$ |
1,057 |
2 |
% |
$ |
3,036 |
$ |
2,977 |
2 |
% |
||||||||||
Regional |
249 |
240 |
4 |
% |
682 |
638 |
7 |
% |
||||||||||||||
Total passenger revenue |
1,322 |
1,297 |
2 |
% |
3,718 |
3,615 |
3 |
% |
||||||||||||||
Freight and mail |
31 |
30 |
3 |
% |
82 |
83 |
(1) |
% |
||||||||||||||
Other - net |
213 |
188 |
13 |
% |
607 |
523 |
16 |
% |
||||||||||||||
Total Operating Revenues |
1,566 |
1,515 |
3 |
% |
4,407 |
4,221 |
4 |
% |
||||||||||||||
Operating Expenses: |
||||||||||||||||||||||
Wages and benefits |
340 |
312 |
9 |
% |
1,008 |
923 |
9 |
% |
||||||||||||||
Variable incentive pay |
31 |
32 |
(3) |
% |
95 |
90 |
6 |
% |
||||||||||||||
Aircraft fuel, including hedging gains and losses |
225 |
245 |
(8) |
% |
593 |
741 |
(20) |
% |
||||||||||||||
Aircraft maintenance |
64 |
67 |
(4) |
% |
197 |
182 |
8 |
% |
||||||||||||||
Aircraft rent |
25 |
26 |
(4) |
% |
80 |
78 |
3 |
% |
||||||||||||||
Landing fees and other rentals |
89 |
80 |
11 |
% |
232 |
217 |
7 |
% |
||||||||||||||
Contracted services |
63 |
54 |
17 |
% |
183 |
157 |
17 |
% |
||||||||||||||
Selling expenses |
58 |
53 |
9 |
% |
162 |
160 |
1 |
% |
||||||||||||||
Depreciation and amortization |
101 |
81 |
25 |
% |
281 |
236 |
19 |
% |
||||||||||||||
Food and beverage service |
31 |
30 |
3 |
% |
93 |
83 |
12 |
% |
||||||||||||||
Third-party regional carrier expense |
25 |
20 |
25 |
% |
72 |
52 |
38 |
% |
||||||||||||||
Other |
92 |
82 |
12 |
% |
267 |
259 |
3 |
% |
||||||||||||||
Special items - merger-related costs |
22 |
— |
NM |
36 |
— |
NM |
||||||||||||||||
Total Operating Expenses |
1,166 |
1,082 |
8 |
% |
3,299 |
3,178 |
4 |
% |
||||||||||||||
Operating Income |
400 |
433 |
(8) |
% |
1,108 |
1,043 |
6 |
% |
||||||||||||||
Nonoperating Income (Expense): |
||||||||||||||||||||||
Interest income |
7 |
5 |
20 |
16 |
||||||||||||||||||
Interest expense |
(11) |
(10) |
(33) |
(32) |
||||||||||||||||||
Interest capitalized |
6 |
9 |
21 |
25 |
||||||||||||||||||
Other - net |
— |
— |
(2) |
1 |
||||||||||||||||||
Total Nonoperating Income (Expense) |
2 |
4 |
6 |
10 |
||||||||||||||||||
Income Before Income Tax |
402 |
437 |
1,114 |
1,053 |
||||||||||||||||||
Income tax expense |
146 |
163 |
414 |
396 |
||||||||||||||||||
Net Income |
$ |
256 |
$ |
274 |
$ |
700 |
$ |
657 |
||||||||||||||
Basic Earnings Per Share: |
$ |
2.08 |
$ |
2.15 |
$ |
5.66 |
$ |
5.08 |
||||||||||||||
Diluted Earnings Per Share: |
$ |
2.07 |
$ |
2.14 |
$ |
5.63 |
$ |
5.05 |
||||||||||||||
Shares Used for Computation: |
||||||||||||||||||||||
Basic |
123.149 |
127.308 |
123.648 |
129.231 |
||||||||||||||||||
Diluted |
123.833 |
128.205 |
124.393 |
130.200 |
||||||||||||||||||
Cash dividend declared per share: |
$ |
0.275 |
$ |
0.20 |
$ |
0.825 |
$ |
0.60 |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
|||||||
Alaska Air Group, Inc. |
|||||||
(in millions) |
September 30, 2016 |
December 31, 2015 |
|||||
Cash and marketable securities |
$ |
3,226 |
$ |
1,328 |
|||
Total current assets |
3,600 |
1,663 |
|||||
Property and equipment-net |
5,031 |
4,802 |
|||||
Other assets |
68 |
65 |
|||||
Total assets |
8,699 |
6,530 |
|||||
Air traffic liability |
785 |
669 |
|||||
Current portion of long-term debt |
275 |
114 |
|||||
Other current liabilities |
1,063 |
1,022 |
|||||
Current liabilities |
2,123 |
1,805 |
|||||
Long-term debt |
1,861 |
569 |
|||||
Other liabilities and credits |
1,851 |
1,745 |
|||||
Shareholders' equity |
2,864 |
2,411 |
|||||
Total liabilities and shareholders' equity |
$ |
8,699 |
$ |
6,530 |
|||
Debt-to-capitalization ratio, adjusted for operating leases(a) |
45% |
27% |
|||||
Number of common shares outstanding |
123.266 |
125.175 |
(a) |
Calculated using the present value of remaining aircraft lease payments. |
OPERATING STATISTICS SUMMARY (unaudited) |
|||||||||||
Alaska Air Group, Inc. |
|||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||
2016 |
2015 |
Change |
2016 |
2015 |
Change |
||||||
Consolidated Operating Statistics:(a) |
|||||||||||
Revenue passengers (000) |
9,054 |
8,616 |
5.1% |
25,536 |
23,956 |
6.6% |
|||||
RPMs (000,000) "traffic" |
9,601 |
8,878 |
8.1% |
27,569 |
25,052 |
10.0% |
|||||
ASMs (000,000) "capacity" |
11,212 |
10,368 |
8.1% |
32,728 |
29,574 |
10.7% |
|||||
Load factor |
85.6% |
85.6% |
—pts |
84.2% |
84.7% |
(0.5)pts |
|||||
Yield |
13.77¢ |
14.61¢ |
(5.7)% |
13.49¢ |
14.43¢ |
(6.5)% |
|||||
PRASM |
11.79¢ |
12.51¢ |
(5.8)% |
11.36¢ |
12.22¢ |
(7.0)% |
|||||
RASM |
13.97¢ |
14.61¢ |
(4.4)% |
13.47¢ |
14.27¢ |
(5.6)% |
|||||
CASM excluding fuel and special items(b) |
8.20¢ |
8.07¢ |
1.6% |
8.16¢ |
8.24¢ |
(1.0)% |
|||||
Economic fuel cost per gallon(b) |
$1.58 |
$1.82 |
(13.2)% |
$1.47 |
$1.97 |
(25.4%) |
|||||
Fuel gallons (000,000) |
140 |
132 |
6.1% |
410 |
377 |
8.8% |
|||||
ASM's per gallon |
80.1 |
78.5 |
2.0% |
79.8 |
78.4 |
1.8% |
|||||
Average number of full-time equivalent employees (FTE) |
14,674 |
14,003 |
4.8% |
14,500 |
13,690 |
5.9% |
|||||
Mainline Operating Statistics: |
|||||||||||
Revenue passengers (000) |
6,507 |
6,171 |
5.4% |
18,432 |
17,193 |
7.2% |
|||||
RPMs (000,000) "traffic" |
8,595 |
7,976 |
7.8% |
24,767 |
22,633 |
9.4% |
|||||
ASMs (000,000) "capacity" |
9,987 |
9,278 |
7.6% |
29,216 |
26,609 |
9.8% |
|||||
Load factor |
86.1% |
86.0% |
0.1pts |
84.8% |
85.1% |
(0.3)pts |
|||||
Yield |
12.49¢ |
13.26¢ |
(5.8)% |
12.26¢ |
13.15¢ |
(6.8)% |
|||||
PRASM |
10.75¢ |
11.40¢ |
(5.7)% |
10.39¢ |
11.19¢ |
(7.1)% |
|||||
RASM |
12.96¢ |
13.50¢ |
(4.0)% |
12.53¢ |
13.23¢ |
(5.3)% |
|||||
CASM excluding fuel and special items(b) |
7.28¢ |
7.19¢ |
1.3% |
7.21¢ |
7.33¢ |
(1.6)% |
|||||
Economic fuel cost per gallon(b) |
$1.57 |
$1.81 |
(13.3)% |
$1.46 |
$1.97 |
(25.9%) |
|||||
Fuel gallons (000,000) |
119 |
113 |
5.3% |
350 |
326 |
7.4% |
|||||
ASM's per gallon |
83.9 |
82.1 |
2.2% |
83.5 |
81.6 |
2.3% |
|||||
Average number of FTE's |
11,397 |
10,824 |
5.3% |
11,260 |
10,643 |
5.8% |
|||||
Aircraft utilization |
10.6 |
10.9 |
(2.8%) |
10.7 |
10.9 |
(1.8)% |
|||||
Average aircraft stage length |
1,203 |
1,168 |
3.0% |
1,218 |
1,185 |
2.8% |
|||||
Operating fleet |
154 |
144 |
10 a/c |
154 |
144 |
10 a/c |
|||||
Regional Operating Statistics:(c) |
|||||||||||
Revenue passengers (000) |
2,547 |
2,445 |
4.2% |
7,105 |
6,762 |
5.1% |
|||||
RPMs (000,000) "traffic" |
1,006 |
903 |
11.4% |
2,801 |
2,419 |
15.8% |
|||||
ASMs (000,000) "capacity" |
1,225 |
1,090 |
12.4% |
3,512 |
2,965 |
18.4% |
|||||
Load factor |
82.1% |
82.8% |
(0.7)pts |
79.8% |
81.6% |
(1.8)pts |
|||||
Yield |
24.75¢ |
26.53¢ |
(6.7)% |
24.35¢ |
26.37¢ |
(7.7)% |
|||||
PRASM |
20.32¢ |
21.97¢ |
(7.5)% |
19.43¢ |
21.51¢ |
(9.7)% |
|||||
Operating fleet |
69 |
63 |
6 a/c |
69 |
63 |
6 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 and special items, 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 September 30, 2016 |
|||||||||||||||||||||||||||
Alaska |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Parent & |
Air Group |
Special |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger |
|||||||||||||||||||||||||||
Mainline |
$ |
1,073 |
$ |
— |
$ |
— |
$ |
— |
$ |
1,073 |
$ |
— |
$ |
1,073 |
|||||||||||||
Regional |
— |
249 |
— |
— |
249 |
— |
249 |
||||||||||||||||||||
Total passenger revenues |
1,073 |
249 |
— |
— |
1,322 |
— |
1,322 |
||||||||||||||||||||
CPA revenues |
— |
— |
109 |
(109) |
— |
— |
— |
||||||||||||||||||||
Freight and mail |
30 |
1 |
— |
— |
31 |
— |
31 |
||||||||||||||||||||
Other-net |
190 |
21 |
1 |
1 |
213 |
— |
213 |
||||||||||||||||||||
Total operating revenues |
1,293 |
271 |
110 |
(108) |
1,566 |
— |
1,566 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
727 |
202 |
99 |
(109) |
919 |
22 |
941 |
||||||||||||||||||||
Economic fuel |
188 |
34 |
— |
— |
222 |
3 |
225 |
||||||||||||||||||||
Total operating expenses |
915 |
236 |
99 |
(109) |
1,141 |
25 |
1,166 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
7 |
— |
— |
— |
7 |
— |
7 |
||||||||||||||||||||
Interest expense |
(7) |
— |
(2) |
(2) |
(11) |
— |
(11) |
||||||||||||||||||||
Other |
5 |
— |
— |
1 |
6 |
— |
6 |
||||||||||||||||||||
Total Nonoperating income (expense) |
5 |
— |
(2) |
(1) |
2 |
— |
2 |
||||||||||||||||||||
Income (loss) before income tax |
$ |
383 |
$ |
35 |
$ |
9 |
$ |
— |
$ |
427 |
$ |
(25) |
$ |
402 |
Three Months Ended September 30, 2015 |
|||||||||||||||||||||||||||
Alaska |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Parent & |
Air Group |
Special |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger |
|||||||||||||||||||||||||||
Mainline |
$ |
1,057 |
$ |
— |
$ |
— |
$ |
— |
$ |
1,057 |
$ |
— |
$ |
1,057 |
|||||||||||||
Regional |
— |
240 |
— |
— |
240 |
— |
240 |
||||||||||||||||||||
Total passenger revenues |
1,057 |
240 |
— |
— |
1,297 |
— |
1,297 |
||||||||||||||||||||
CPA revenues |
— |
— |
105 |
(105) |
— |
— |
— |
||||||||||||||||||||
Freight and mail |
29 |
1 |
— |
— |
30 |
— |
30 |
||||||||||||||||||||
Other-net |
167 |
20 |
1 |
— |
188 |
— |
188 |
||||||||||||||||||||
Total operating revenues |
1,253 |
261 |
106 |
(105) |
1,515 |
— |
1,515 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
667 |
181 |
93 |
(104) |
837 |
— |
837 |
||||||||||||||||||||
Economic fuel |
205 |
35 |
— |
— |
240 |
5 |
245 |
||||||||||||||||||||
Total operating expenses |
872 |
216 |
93 |
(104) |
1,077 |
5 |
1,082 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
5 |
— |
— |
— |
5 |
— |
5 |
||||||||||||||||||||
Interest expense |
(7) |
— |
(3) |
— |
(10) |
— |
(10) |
||||||||||||||||||||
Other |
7 |
— |
— |
2 |
9 |
— |
9 |
||||||||||||||||||||
Total Nonoperating income (expense)
|
5 |
— |
(3) |
2 |
4 |
— |
4 |
||||||||||||||||||||
Income (loss) before income tax |
$ |
386 |
$ |
45 |
$ |
10 |
$ |
1 |
$ |
442 |
$ |
(5) |
$ |
437 |
Nine Months Ended September 30, 2016 |
|||||||||||||||||||||||||||
Alaska |
|||||||||||||||||||||||||||
Mainline |
Regional |
Horizon |
Parent & |
Air Group |
Special |
Consolidated |
|||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger |
|||||||||||||||||||||||||||
Mainline |
3,036 |
— |
$ |
— |
$ |
— |
$ |
3,036 |
$ |
— |
$ |
3,036 |
|||||||||||||||
Regional |
— |
682 |
— |
— |
682 |
— |
682 |
||||||||||||||||||||
Total passenger revenues |
3,036 |
682 |
— |
— |
3,718 |
— |
3,718 |
||||||||||||||||||||
CPA revenues |
— |
— |
322 |
(322) |
— |
— |
— |
||||||||||||||||||||
Freight and mail |
79 |
3 |
— |
— |
82 |
— |
82 |
||||||||||||||||||||
Other - net |
546 |
57 |
3 |
1 |
607 |
— |
607 |
||||||||||||||||||||
Total operating revenues |
3,661 |
742 |
325 |
(321) |
4,407 |
— |
4,407 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
2,107 |
580 |
305 |
(322) |
2,670 |
36 |
2,706 |
||||||||||||||||||||
Economic fuel |
512 |
90 |
— |
— |
602 |
(9) |
593 |
||||||||||||||||||||
Total operating expenses |
2,619 |
670 |
305 |
(322) |
3,272 |
27 |
3,299 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
19 |
— |
1 |
— |
20 |
— |
20 |
||||||||||||||||||||
Interest expense |
(23) |
— |
(7) |
(3) |
(33) |
— |
(33) |
||||||||||||||||||||
Other |
15 |
— |
— |
4 |
19 |
— |
19 |
||||||||||||||||||||
Total Nonoperating income (expense)
|
11 |
— |
(6) |
1 |
6 |
— |
6 |
||||||||||||||||||||
Income (loss) before income tax |
$ |
1,053 |
$ |
72 |
$ |
14 |
$ |
2 |
$ |
1,141 |
$ |
(27) |
$ |
1,114 |
Nine Months Ended September 30, 2015 Alaska Mainline Regional Horizon Parent & Air Group Special Consolidated Operating revenues Passenger Mainline $ 2,977 $ — $ — $ — $ 2,977 $ — $ 2,977 Regional — 638 — — 638 — 638 Total passenger revenues 2,977 638 — — 3,615 — 3,615 CPA revenues — — 303 (303) — — — Freight and mail 79 4 — — 83 — 83 Other - net 465 55 3 — 523 — 523 Total operating revenues 3,521 697 306 (303) 4,221 — 4,221 Operating expenses Operating expenses, excluding fuel 1,951 514 274 (302) 2,437 — 2,437 Economic fuel 641 101 — — 742 (1) 741 Total operating expenses 2,592 615 274 (302) 3,179 (1) 3,178 Nonoperating income (expense) Interest income 15 — — 1 16 — 16 Interest expense (21) — (8) (3) (32) — (32) Other 21 — — 5 26 — 26 Total Nonoperating income (expense) 15 — (8) 3 10 — 10 Income (loss) before income tax $ 944 $ 82 $ 24 $ 2 $ 1,052 $ 1 $ 1,053
Consolidating(a)
Adjusted(b)
Items(c)
(a) |
Includes consolidating entries, Parent Company, and other immaterial business units. |
(b) |
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. |
(c) |
Includes accounting adjustments related to mark-to-market fuel-hedge accounting charges, and other special items described previously. |
Alaska Air Group, Inc. |
|||||||||||
CASM EXCLUDING FUEL RECONCILIATION (unaudited) |
|||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||
(in cents) |
2016 |
2015 |
2016 |
2015 |
|||||||
Consolidated: |
|||||||||||
CASM |
10.40 |
¢ |
10.44 |
¢ |
10.08 |
¢ |
10.75 |
¢ |
|||
Less the following components: |
|||||||||||
Aircraft fuel, including hedging gains and losses |
2.01 |
2.37 |
1.81 |
2.51 |
|||||||
Special items - merger-related costs |
0.19 |
— |
0.11 |
— |
|||||||
CASM excluding fuel and special items |
8.20 |
¢ |
8.07 |
¢ |
8.16 |
¢ |
8.24 |
¢ |
|||
Mainline: |
|||||||||||
CASM |
9.19 |
¢ |
9.45 |
¢ |
8.93 |
¢ |
9.74 |
¢ |
|||
Less the following components: |
|||||||||||
Aircraft fuel, including hedging gains and losses |
1.91 |
2.26 |
1.72 |
2.41 |
|||||||
CASM excluding fuel and special items |
7.28 |
¢ |
7.19 |
¢ |
7.21 |
¢ |
7.33 |
¢ |
FUEL RECONCILIATIONS (unaudited) |
|||||||||||||||
Three Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
(in millions, except for per-gallon amounts) |
Dollars |
Cost/Gallon |
Dollars |
Cost/Gallon |
|||||||||||
Raw or "into-plane" fuel cost |
$ |
218 |
$ |
1.55 |
$ |
235 |
$ |
1.78 |
|||||||
Losses on settled hedges |
4 |
0.03 |
5 |
0.04 |
|||||||||||
Consolidated economic fuel expense |
222 |
1.58 |
240 |
1.82 |
|||||||||||
Mark-to-market fuel hedge adjustment |
3 |
0.02 |
5 |
0.03 |
|||||||||||
GAAP fuel expense |
$ |
225 |
$ |
1.60 |
$ |
245 |
$ |
1.85 |
|||||||
Fuel gallons |
140 |
132 |
|||||||||||||
Nine Months Ended September 30, |
|||||||||||||||
2016 |
2015 |
||||||||||||||
(in millions, except for per gallon amounts) |
Dollars |
Cost/Gallon |
Dollars |
Cost/Gallon |
|||||||||||
Raw or "into-plane" fuel cost |
$ |
590 |
$ |
1.44 |
$ |
727 |
$ |
1.93 |
|||||||
Losses on settled hedges |
12 |
0.03 |
15 |
0.04 |
|||||||||||
Consolidated economic fuel expense |
$ |
602 |
$ |
1.47 |
$ |
742 |
$ |
1.97 |
|||||||
Mark-to-market fuel hedge adjustment |
(9) |
(0.02) |
(1) |
— |
|||||||||||
GAAP fuel expense |
$ |
593 |
$ |
1.45 |
$ |
741 |
$ |
1.97 |
|||||||
Fuel gallons |
410 |
377 |
Note A: Pursuant to Regulation G, we have provided 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 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 special items, 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
Virgin America merger-related costs, 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-third-quarter-2016-results-300348212.html
SOURCE
Media Relations, (206) 304-0008, Investor contact: Lavanya Sareen, Managing Director, Investor Relations, (206) 392-5656