News releases

Alaska Air Group reports Third Quarter 2018 results
Financial Highlights:
- Reported net income for the third quarter under Generally Accepted Accounting Principles (GAAP) of
$217 million , or$1.75 per diluted share, compared to net income of$259 million , or$2.09 per diluted share in the third quarter of 2017. As the company has recently implemented new accounting standards, including the standards relating to revenue recognition and retirement benefits, 2017 financial information has been adjusted. - Reported net income for the third quarter, excluding special items such as merger-related costs and mark-to-market fuel hedge accounting adjustments, of
$237 million , or$1.91 per diluted share, compared to$270 million or$2.18 per diluted share, in the third quarter of 2017. This quarter's adjusted results compare to the First Call analyst consensus estimate of$1.81 per share. - Paid a
$0.32 per-share quarterly cash dividend in the third quarter, a 7% increase over the dividend paid in the third quarter of 2017. - Repurchased a total of 582,942 shares of common stock for approximately
$37 million in the first nine months of 2018. - Generated approximately
$1 billion of operating cash flow in the first nine months of 2018, including merger-related costs and other special items. - Held
$1.4 billion in unrestricted cash and marketable securities as ofSept. 30, 2018 . - Reduced debt-to-capitalization ratio to 49% as of
Sept. 30, 2018 , compared to 53% as ofDec. 31, 2017 , and down from 59% immediately following our acquisition of Virgin America. Reduced long-term debt balance to$1.7 billion as ofSept. 30, 2018 from$2.6 billion as ofDec. 31, 2016 .
Operational Highlights:
- Updated food and beverage menus to highlight
West Coast inspired fresh meals, snacks and local craft beers further enhancing the airline's onboard guest experience. - Announced one new route to
Columbus, Ohio , which will begin service inMarch 2019 , and two new routes toEl Paso, Texas , which will begin service inFebruary 2019 . - Began our fleet-wide installation of satellite Wi-Fi, completing three Airbus aircraft during the quarter.
- Completed the painting of
Alaska livery on 16 Airbus aircraft, and expect to have 33 completed by the end of the year. - Finalized the integrated seniority list for our pilots; all groups except for aircraft technicians are now under a single contract and have an integrated seniority list.
- Added three
Boeing 737-900ER aircraft to the mainline operating fleet and four Embraer 175 (E175) aircraft to the regional operating fleet in the third quarter of 2018.
Recognition and Awards:
- Named "
Best U.S. Airline " by Condé Nast Traveler in their 2018 Reader's Choice Awards. - Ranked as the top U.S. airline in the Dow Jones Sustainability Index (DJSI) for the second consecutive year, receiving top scores for "corporate governance" and "efficiency."
- Ranked "
Best Airline " in the U.S. andCanada by KAYAK. - Mileage Plan ranked first in the
U.S. News & World Report's list of Best Airline Rewards Programs for the fourth consecutive year. - Mileage Plan ranked in the top three airlines among traditional and low-cost carriers in the 2018 J.D. Power Loyalty Program study.
- Ranked among
Forbes' 2018 global list for "World's Best Employers" and national list for "America's Best Employers for New Graduates."
"In the nearly two years since our merger closed, we've now completed approximately 90 percent of our integration milestones," said
The following table reconciles the company's reported GAAP net income and earnings per diluted share (diluted EPS) for the three and nine months ended Sept. 30, 2018 and 2017 to adjusted amounts.
Three Months Ended September 30, |
|||||||||||||||
2018 |
2017(a) |
||||||||||||||
(in millions, except per-share amounts) |
Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||
GAAP net income and diluted EPS |
$ |
217 |
$ |
1.75 |
$ |
259 |
$ |
2.09 |
|||||||
Mark-to-market fuel hedge adjustments |
5 |
0.04 |
(5) |
(0.04) |
|||||||||||
Special items—merger-related costs |
22 |
0.18 |
23 |
0.19 |
|||||||||||
Income tax effect of reconciling items above |
(7) |
(0.06) |
(7) |
(0.06) |
|||||||||||
Non-GAAP adjusted net income and diluted EPS |
$ |
237 |
$ |
1.91 |
$ |
270 |
$ |
2.18 |
Nine Months Ended September 30, |
|||||||||||||||
2018 |
2017(a) |
||||||||||||||
(in millions, except per-share amounts) |
Dollars |
Diluted EPS |
Dollars |
Diluted EPS |
|||||||||||
GAAP net income and diluted EPS |
$ |
414 |
$ |
3.34 |
$ |
645 |
$ |
5.19 |
|||||||
Mark-to-market fuel hedge adjustments |
(30) |
(0.24) |
7 |
0.06 |
|||||||||||
Special items—employee tax reform bonus |
25 |
0.20 |
— |
— |
|||||||||||
Special items—merger-related costs |
67 |
0.54 |
86 |
0.69 |
|||||||||||
Income tax effect of reconciling items above |
(15) |
(0.12) |
(35) |
(0.28) |
|||||||||||
Non-GAAP adjusted net income and diluted EPS |
$ |
461 |
$ |
3.72 |
$ |
703 |
$ |
5.66 |
(a) |
Certain historical information has been adjusted to reflect the adoption of new accounting standards. |
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 streamed online at
References in this news release to "
This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the Company's Annual Report on Form 10-K for the year ended
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
|||||||||||||||||||||
Alaska Air Group, Inc. |
|||||||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||
(in millions, except per-share amounts) |
2018 |
2017(a) |
Change |
2018 |
2017(a) |
Change |
|||||||||||||||
Operating Revenues: |
|||||||||||||||||||||
Passenger revenue |
$ |
2,043 |
$ |
1,958 |
4 |
% |
$ |
5,725 |
$ |
5,505 |
4 |
% |
|||||||||
Mileage Plan other revenue |
114 |
105 |
9 |
% |
329 |
314 |
5 |
% |
|||||||||||||
Cargo and other |
55 |
47 |
17 |
% |
146 |
133 |
10 |
% |
|||||||||||||
Total Operating Revenues |
2,212 |
2,110 |
5 |
% |
6,200 |
5,952 |
4 |
% |
|||||||||||||
Operating Expenses: |
|||||||||||||||||||||
Wages and benefits |
549 |
477 |
15 |
% |
1,629 |
1,397 |
17 |
% |
|||||||||||||
Variable incentive pay |
27 |
40 |
(33) |
% |
104 |
98 |
6 |
% |
|||||||||||||
Aircraft fuel, including hedging gains and losses |
513 |
368 |
39 |
% |
1,397 |
1,051 |
33 |
% |
|||||||||||||
Aircraft maintenance |
107 |
88 |
22 |
% |
320 |
271 |
18 |
% |
|||||||||||||
Aircraft rent |
82 |
70 |
17 |
% |
233 |
204 |
14 |
% |
|||||||||||||
Landing fees and other rentals |
135 |
124 |
9 |
% |
371 |
338 |
10 |
% |
|||||||||||||
Contracted services |
70 |
76 |
(8) |
% |
227 |
234 |
(3) |
% |
|||||||||||||
Selling expenses |
79 |
92 |
(14) |
% |
245 |
277 |
(12) |
% |
|||||||||||||
Depreciation and amortization |
99 |
95 |
4 |
% |
290 |
275 |
5 |
% |
|||||||||||||
Food and beverage service |
53 |
50 |
6 |
% |
158 |
145 |
9 |
% |
|||||||||||||
Third-party regional carrier expense |
38 |
30 |
27 |
% |
114 |
84 |
36 |
% |
|||||||||||||
Other |
141 |
150 |
(6) |
% |
423 |
421 |
— |
% |
|||||||||||||
Special items—merger-related costs |
22 |
23 |
(4) |
% |
67 |
86 |
(22) |
% |
|||||||||||||
Special items—other |
— |
— |
— |
% |
25 |
— |
NM |
||||||||||||||
Total Operating Expenses |
1,915 |
1,683 |
14 |
% |
5,603 |
4,881 |
15 |
% |
|||||||||||||
Operating Income |
297 |
427 |
(30) |
% |
597 |
1,071 |
(44) |
% |
|||||||||||||
Nonoperating Income (Expense): |
|||||||||||||||||||||
Interest income |
11 |
9 |
29 |
25 |
|||||||||||||||||
Interest expense |
(22) |
(26) |
(71) |
(77) |
|||||||||||||||||
Interest capitalized |
5 |
5 |
14 |
13 |
|||||||||||||||||
Other—net |
(7) |
2 |
(20) |
1 |
|||||||||||||||||
Total Nonoperating Income (Expense) |
(13) |
(10) |
(48) |
(38) |
|||||||||||||||||
Income (Loss) Before Income Tax |
284 |
417 |
549 |
1,033 |
|||||||||||||||||
Income tax expense |
67 |
158 |
135 |
388 |
|||||||||||||||||
Net Income (Loss) |
$ |
217 |
$ |
259 |
$ |
414 |
$ |
645 |
|||||||||||||
Basic Earnings (Loss) Per Share: |
$ |
1.76 |
$ |
2.10 |
$ |
3.36 |
$ |
5.22 |
|||||||||||||
Diluted Earnings (Loss) Per Share: |
$ |
1.75 |
$ |
2.09 |
$ |
3.34 |
$ |
5.19 |
|||||||||||||
Shares Used for Computation: |
|||||||||||||||||||||
Basic |
123.224 |
123.467 |
123.216 |
123.501 |
|||||||||||||||||
Diluted |
123.864 |
124.220 |
123.804 |
124.341 |
|||||||||||||||||
Cash dividend declared per share: |
$ |
0.320 |
$ |
0.300 |
$ |
0.960 |
$ |
0.900 |
(a) |
Certain historical information has been adjusted to reflect the adoption of new accounting standards. |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) |
|||||||
Alaska Air Group, Inc. |
|||||||
(in millions) |
September 30, 2018 |
December 31, 2017(a) |
|||||
Cash and marketable securities |
$ |
1,397 |
$ |
1,621 |
|||
Total current assets |
2,056 |
2,152 |
|||||
Property and equipment—net |
6,495 |
6,284 |
|||||
Goodwill |
1,943 |
1,943 |
|||||
Intangible assets |
128 |
133 |
|||||
Other assets |
271 |
234 |
|||||
Total assets |
10,893 |
10,746 |
|||||
Air traffic liability |
950 |
806 |
|||||
Current portion of long-term debt |
345 |
307 |
|||||
Other current liabilities |
1,593 |
1,573 |
|||||
Current liabilities |
2,888 |
2,686 |
|||||
Long-term debt |
1,684 |
2,262 |
|||||
Other liabilities and credits |
2,530 |
2,338 |
|||||
Shareholders' equity |
3,791 |
3,460 |
|||||
Total liabilities and shareholders' equity |
$ |
10,893 |
$ |
10,746 |
|||
Debt-to-capitalization ratio, adjusted for aircraft operating leases(b) |
49 |
% |
53 |
% |
|||
Number of common shares outstanding |
123.361 |
123.061 |
(a) |
Certain historical information has been adjusted to reflect the adoption of new accounting standards. |
(b) |
Calculated using the present value of remaining aircraft lease payments. |
OPERATING STATISTICS SUMMARY (unaudited) |
|||||||||||
Alaska Air Group, Inc. |
|||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||
2018 |
2017 |
Change |
2018 |
2017 |
Change |
||||||
Consolidated Operating Statistics:(a) |
|||||||||||
Revenue passengers (000) |
12,128 |
11,639 |
4.2% |
34,685 |
33,038 |
5.0% |
|||||
RPMs (000,000) "traffic" |
14,386 |
13,811 |
4.2% |
41,272 |
39,072 |
5.6% |
|||||
ASMs (000,000) "capacity" |
16,943 |
16,164 |
4.8% |
49,256 |
46,169 |
6.7% |
|||||
Load factor |
84.9% |
85.4% |
(0.5) pts |
83.8% |
84.6% |
(0.8) pts |
|||||
Yield(d) |
14.20¢ |
14.18¢ |
0.1% |
13.87¢ |
14.10¢ |
(1.6)% |
|||||
RASM(d) |
13.05¢ |
13.06¢ |
(0.1)% |
12.59¢ |
12.89¢ |
(2.3)% |
|||||
CASMex(b)(d) |
8.15¢ |
8.00¢ |
1.9% |
8.35¢ |
8.11¢ |
3.0% |
|||||
Economic fuel cost per gallon(b) |
$2.33 |
$1.80 |
29.4% |
$2.26 |
$1.76 |
28.4% |
|||||
Fuel gallons (000,000) |
218 |
207 |
5.3% |
631 |
592 |
6.6% |
|||||
ASM's per gallon |
77.7 |
78.1 |
(0.5)% |
78.1 |
78.0 |
0.1% |
|||||
Average number of full-time equivalent employees (FTE) |
21,804 |
20,743 |
5.1% |
21,575 |
19,723 |
9.4% |
|||||
Mainline Operating Statistics: |
|||||||||||
Revenue passengers (000) |
9,435 |
9,136 |
3.3% |
27,107 |
25,850 |
4.9% |
|||||
RPMs (000,000) "traffic" |
13,096 |
12,694 |
3.2% |
37,677 |
36,045 |
4.5% |
|||||
ASMs (000,000) "capacity" |
15,343 |
14,796 |
3.7% |
44,730 |
42,397 |
5.5% |
|||||
Load factor |
85.4% |
85.8% |
(0.4) pts |
84.2% |
85.0% |
(0.8) pts |
|||||
Yield(d) |
13.18¢ |
13.23¢ |
(0.4)% |
12.95¢ |
13.13¢ |
(1.4)% |
|||||
RASM(d) |
12.28¢ |
12.35¢ |
(0.6)% |
11.90¢ |
12.19¢ |
(2.4)% |
|||||
CASMex(b)(d) |
7.34¢ |
7.30¢ |
0.5% |
7.58¢ |
7.34¢ |
3.3% |
|||||
Economic fuel cost per gallon(b) |
$2.32 |
$1.79 |
29.6% |
$2.25 |
$1.76 |
27.8% |
|||||
Fuel gallons (000,000) |
189 |
183 |
3.3% |
549 |
526 |
4.4% |
|||||
ASM's per gallon |
81.2 |
80.9 |
0.4% |
81.5 |
80.6 |
1.1% |
|||||
Average number of FTE's |
16,499 |
15,862 |
4.0% |
16,330 |
15,439 |
5.8% |
|||||
Aircraft utilization |
11.4 |
11.4 |
—% |
11.4 |
11.1 |
2.7% |
|||||
Average aircraft stage length |
1,291 |
1,300 |
(0.7)% |
1,293 |
1,296 |
(0.2)% |
|||||
Operating fleet |
231 |
218 |
13 a/c |
231 |
218 |
13 a/c |
|||||
Regional Operating Statistics:(c) |
|||||||||||
Revenue passengers (000) |
2,693 |
2,503 |
7.6% |
7,578 |
7,188 |
5.4% |
|||||
RPMs (000,000) "traffic" |
1,290 |
1,117 |
15.5% |
3,595 |
3,027 |
18.8% |
|||||
ASMs (000,000) "capacity" |
1,600 |
1,368 |
17.0% |
4,526 |
3,772 |
20.0% |
|||||
Load factor |
80.6% |
81.7% |
(1.1) pts |
79.4% |
80.2% |
(0.8) pts |
|||||
Yield(d) |
24.50¢ |
25.15¢ |
(2.6)% |
23.49¢ |
25.65¢ |
(8.4)% |
|||||
RASM(d) |
20.41¢ |
20.61¢ |
(1.0)% |
19.32¢ |
20.67¢ |
(6.5)% |
|||||
Operating fleet |
89 |
83 |
6 a/c |
89 |
83 |
6 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 potential importance of this measure to investors in the accompanying pages. |
(c) |
Data presented includes information related to flights operated by Horizon and third-party carriers. |
(d) |
Certain historical information has been adjusted to reflect the adoption of new accounting standards. |
OPERATING SEGMENTS (unaudited) |
|||||||||||||||||||||||||||
Alaska Air Group, Inc. |
|||||||||||||||||||||||||||
Three Months Ended September 30, 2018 |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
Air Group |
Special |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger revenues |
$ |
1,727 |
$ |
316 |
$ |
— |
$ |
— |
$ |
2,043 |
$ |
— |
$ |
2,043 |
|||||||||||||
CPA revenues |
— |
— |
128 |
(128) |
— |
— |
— |
||||||||||||||||||||
Mileage Plan other revenue |
104 |
10 |
— |
— |
114 |
— |
114 |
||||||||||||||||||||
Cargo and other |
53 |
— |
2 |
— |
55 |
— |
55 |
||||||||||||||||||||
Total operating revenues |
1,884 |
326 |
130 |
(128) |
2,212 |
— |
2,212 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
1,126 |
267 |
118 |
(131) |
1,380 |
22 |
1,402 |
||||||||||||||||||||
Economic fuel |
438 |
70 |
— |
— |
508 |
5 |
513 |
||||||||||||||||||||
Total operating expenses |
1,564 |
337 |
118 |
(131) |
1,888 |
27 |
1,915 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
15 |
— |
— |
(4) |
11 |
— |
11 |
||||||||||||||||||||
Interest expense |
(20) |
— |
(6) |
4 |
(22) |
— |
(22) |
||||||||||||||||||||
Interest capitalized |
4 |
— |
1 |
— |
5 |
— |
5 |
||||||||||||||||||||
Other |
(5) |
(2) |
— |
— |
(7) |
— |
(7) |
||||||||||||||||||||
Total Nonoperating income (expense) |
(6) |
(2) |
(5) |
— |
(13) |
— |
(13) |
||||||||||||||||||||
Income (loss) before income tax |
$ |
314 |
$ |
(13) |
$ |
7 |
$ |
3 |
$ |
311 |
$ |
(27) |
$ |
284 |
Three Months Ended September 30, 2017(c) |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
Air Group |
Special |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger revenues |
$ |
1,677 |
$ |
281 |
$ |
— |
$ |
— |
$ |
1,958 |
$ |
— |
$ |
1,958 |
|||||||||||||
CPA revenues |
— |
— |
112 |
(112) |
— |
— |
— |
||||||||||||||||||||
Mileage Plan other revenue |
97 |
8 |
— |
— |
105 |
— |
105 |
||||||||||||||||||||
Cargo and other |
46 |
— |
1 |
— |
47 |
— |
47 |
||||||||||||||||||||
Total operating revenues |
1,820 |
289 |
113 |
(112) |
2,110 |
— |
2,110 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
1,081 |
219 |
104 |
(112) |
1,292 |
23 |
1,315 |
||||||||||||||||||||
Economic fuel |
328 |
45 |
— |
— |
373 |
(5) |
368 |
||||||||||||||||||||
Total operating expenses |
1,409 |
264 |
104 |
(112) |
1,665 |
18 |
1,683 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
12 |
— |
— |
(3) |
9 |
— |
9 |
||||||||||||||||||||
Interest expense |
(25) |
— |
(4) |
3 |
(26) |
— |
(26) |
||||||||||||||||||||
Interest capitalized |
5 |
— |
— |
— |
5 |
— |
5 |
||||||||||||||||||||
Other |
2 |
— |
— |
— |
2 |
— |
2 |
||||||||||||||||||||
Total Nonoperating income (expense) |
(6) |
— |
(4) |
— |
(10) |
— |
(10) |
||||||||||||||||||||
Income (loss) before income tax |
$ |
405 |
$ |
25 |
$ |
5 |
$ |
— |
$ |
435 |
$ |
(18) |
$ |
417 |
Nine Months Ended September 30, 2018 |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
Air Group |
Special |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger revenues |
$ |
4,880 |
$ |
845 |
$ |
— |
$ |
— |
$ |
5,725 |
$ |
— |
$ |
5,725 |
|||||||||||||
CPA revenues |
— |
— |
375 |
(375) |
— |
— |
— |
||||||||||||||||||||
Mileage Plan other revenue |
301 |
28 |
— |
— |
329 |
— |
329 |
||||||||||||||||||||
Cargo and other |
141 |
1 |
4 |
— |
146 |
— |
146 |
||||||||||||||||||||
Total operating revenues |
5,322 |
874 |
379 |
(375) |
6,200 |
— |
6,200 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
3,392 |
755 |
345 |
(378) |
4,114 |
92 |
4,206 |
||||||||||||||||||||
Economic fuel |
1,237 |
190 |
— |
— |
1,427 |
(30) |
1,397 |
||||||||||||||||||||
Total operating expenses |
4,629 |
945 |
345 |
(378) |
5,541 |
62 |
5,603 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
39 |
— |
— |
(10) |
29 |
— |
29 |
||||||||||||||||||||
Interest expense |
(64) |
— |
(16) |
9 |
(71) |
— |
(71) |
||||||||||||||||||||
Interest capitalized |
12 |
— |
2 |
— |
14 |
— |
14 |
||||||||||||||||||||
Other |
(9) |
(11) |
— |
— |
(20) |
— |
(20) |
||||||||||||||||||||
Total Nonoperating income (expense) |
(22) |
(11) |
(14) |
(1) |
(48) |
— |
(48) |
||||||||||||||||||||
Income (loss) before income tax |
$ |
671 |
$ |
(82) |
$ |
20 |
$ |
2 |
$ |
611 |
$ |
(62) |
$ |
549 |
Nine Months Ended September 30, 2017(c) |
|||||||||||||||||||||||||||
(in millions) |
Mainline |
Regional |
Horizon |
Consolidating |
Air Group |
Special |
Consolidated |
||||||||||||||||||||
Operating revenues |
|||||||||||||||||||||||||||
Passenger revenues |
$ |
4,729 |
$ |
776 |
$ |
— |
$ |
— |
$ |
5,505 |
$ |
— |
$ |
5,505 |
|||||||||||||
CPA revenues |
— |
— |
317 |
(317) |
— |
— |
— |
||||||||||||||||||||
Mileage Plan other revenue |
291 |
23 |
— |
— |
314 |
— |
314 |
||||||||||||||||||||
Cargo and other |
127 |
3 |
3 |
— |
133 |
— |
133 |
||||||||||||||||||||
Total operating revenues |
5,147 |
802 |
320 |
(317) |
5,952 |
— |
5,952 |
||||||||||||||||||||
Operating expenses |
|||||||||||||||||||||||||||
Operating expenses, excluding fuel |
3,111 |
625 |
323 |
(315) |
3,744 |
86 |
3,830 |
||||||||||||||||||||
Economic fuel |
924 |
120 |
— |
— |
1,044 |
7 |
1,051 |
||||||||||||||||||||
Total operating expenses |
4,035 |
745 |
323 |
(315) |
4,788 |
93 |
4,881 |
||||||||||||||||||||
Nonoperating income (expense) |
|||||||||||||||||||||||||||
Interest income |
29 |
— |
— |
(4) |
25 |
— |
25 |
||||||||||||||||||||
Interest expense |
(72) |
— |
(9) |
4 |
(77) |
— |
(77) |
||||||||||||||||||||
Interest capitalized |
12 |
— |
1 |
— |
13 |
— |
13 |
||||||||||||||||||||
Other |
1 |
— |
— |
— |
1 |
— |
1 |
||||||||||||||||||||
Total Nonoperating income (expense) |
(30) |
— |
(8) |
— |
(38) |
— |
(38) |
||||||||||||||||||||
Income (loss) before income tax |
$ |
1,082 |
$ |
57 |
$ |
(11) |
$ |
(2) |
$ |
1,126 |
$ |
(93) |
$ |
1,033 |
(a) |
The Air Group Adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocation and does not include certain charges. See Note A in the accompanying pages for further information. |
(b) |
Includes merger-related costs, an employee bonus awarded in January in connection with the Tax Cuts and Jobs Act, and mark-to-market fuel hedge accounting adjustments. |
(c) |
Certain historical information has been adjusted to reflect the adoption of new accounting standards. |
GAAP TO NON-GAAP RECONCILIATIONS (unaudited) |
|||||||||||
Alaska Air Group, Inc. |
|||||||||||
CASM Excluding Fuel and Special Items Reconciliation |
|||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||
2018 |
2017(b) |
2018 |
2017(b) |
||||||||
Consolidated: |
|||||||||||
CASM |
11.30 |
¢ |
10.41 |
¢ |
11.38 |
¢ |
10.57 |
¢ |
|||
Less the following components: |
|||||||||||
Aircraft fuel, including hedging gains and losses |
3.02 |
2.27 |
2.84 |
2.27 |
|||||||
Special items—merger-related costs and other(a) |
0.13 |
0.14 |
0.19 |
0.19 |
|||||||
CASM excluding fuel and special items |
8.15 |
¢ |
8.00 |
¢ |
8.35 |
¢ |
8.11 |
¢ |
|||
Mainline: |
|||||||||||
CASM |
10.37 |
¢ |
9.64 |
¢ |
10.49 |
¢ |
9.74 |
¢ |
|||
Less the following components: |
|||||||||||
Aircraft fuel, including hedging gains and losses |
2.89 |
2.18 |
2.70 |
2.20 |
|||||||
Special items—merger-related costs and other(a) |
0.14 |
0.16 |
0.21 |
0.20 |
|||||||
CASM excluding fuel and special items |
7.34 |
¢ |
7.30 |
¢ |
7.58 |
¢ |
7.34 |
¢ |
(a) |
Special items include merger-related costs and an employee bonus awarded in January in connection with the Tax Cuts and Jobs Act. |
(b) |
Certain historical information has been adjusted to reflect the adoption of new accounting standards. |
Fuel Reconciliation |
|||||||||||||||
Three Months Ended September 30, |
|||||||||||||||
2018 |
2017 |
||||||||||||||
(in millions, except for per-gallon amounts) |
Dollars |
Cost/Gallon |
Dollars |
Cost/Gallon |
|||||||||||
Raw or "into-plane" fuel cost |
$ |
520 |
$ |
2.38 |
$ |
368 |
$ |
1.78 |
|||||||
(Gains) losses on settled hedges |
(12) |
(0.05) |
5 |
0.02 |
|||||||||||
Consolidated economic fuel expense |
508 |
2.33 |
373 |
1.80 |
|||||||||||
Mark-to-market fuel hedge adjustment |
5 |
0.02 |
(5) |
(0.02) |
|||||||||||
GAAP fuel expense |
$ |
513 |
$ |
2.35 |
$ |
368 |
$ |
1.78 |
|||||||
Fuel gallons |
218 |
207 |
|||||||||||||
Nine Months Ended September 30, |
|||||||||||||||
2018 |
2017 |
||||||||||||||
(in millions, except for per gallon amounts) |
Dollars |
Cost/Gallon |
Dollars |
Cost/Gallon |
|||||||||||
Raw or "into-plane" fuel cost |
$ |
1,450 |
$ |
2.30 |
$ |
1,030 |
$ |
1.74 |
|||||||
(Gains) losses on settled hedges |
(23) |
(0.04) |
14 |
0.02 |
|||||||||||
Consolidated economic fuel expense |
$ |
1,427 |
$ |
2.26 |
$ |
1,044 |
$ |
1.76 |
|||||||
Mark-to-market fuel hedge adjustment |
(30) |
(0.05) |
7 |
0.01 |
|||||||||||
GAAP fuel expense |
$ |
1,397 |
$ |
2.21 |
$ |
1,051 |
$ |
1.77 |
|||||||
Fuel gallons |
631 |
592 |
Debt-to-capitalization, adjusted for aircraft operating leases |
|||||||
(in millions) |
September 30, 2018 |
December 31, 2017(a) |
|||||
Long-term debt |
$ |
1,684 |
$ |
2,262 |
|||
Capitalization of aircraft operating leases(b) |
1,887 |
1,671 |
|||||
Adjusted debt |
3,571 |
3,933 |
|||||
Shareholders' equity |
3,791 |
3,460 |
|||||
Total Invested Capital |
$ |
7,362 |
$ |
7,393 |
|||
Debt-to-capitalization ratio, adjusted for aircraft operating leases |
49 |
% |
53 |
% |
(a) |
Certain historical information has been adjusted to reflect the adoption of new accounting standards. |
(b) |
Calculated using the present value of remaining aircraft lease payments. |
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 eliminating fuel expense and certain special items (including merger-related costs) from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost-reduction initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can result in a significant improvement in operating results. In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management (and thus investors) to understand the impact of (and trends in) company-specific cost drivers such as labor rates and productivity, airport costs, maintenance costs, etc., which are more controllable by management.
- Cost per ASM (CASM) excluding fuel and certain special items, such as merger-related costs, 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, which covers the majority of
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 merger-related costs and mark-to-market hedging adjustments, is important because it provides information on significant items that are not necessarily indicative of future performance. Industry analysts and investors consistently measure our performance without these items for better comparability between periods and among other airlines.
- Although we disclose our passenger unit revenues, we do not (nor are we able to) evaluate unit revenues excluding the impact that changes in fuel costs have had on ticket prices. Fuel expense represents a large percentage of our total operating expenses. Fluctuations in fuel prices often drive changes in unit revenues in the mid-to-long term. Although we believe it is useful to evaluate non-fuel unit costs for the reasons noted above, we would caution readers of these financial statements not to place undue reliance on unit costs excluding fuel as a measure or predictor of future profitability because of the significant impact of fuel costs on our business.
GLOSSARY OF TERMS
Aircraft Utilization - block hours per day; this represents the average number of hours per day our aircraft are in transit
Aircraft Stage Length - represents the average miles flown per aircraft departure
ASMs - available seat miles, or "capacity"; represents total seats available across the fleet multiplied by the number of miles flown
CASM - operating costs per ASM, or "unit cost"; represents all operating expenses including fuel and special items
CASMex - operating costs excluding fuel and special items per ASM; this metric is used to help track progress toward reduction of non-fuel operating costs since fuel is largely out of our control
Debt-to-capitalization ratio - represents adjusted debt (long-term debt plus the present value of future operating lease payments) divided by total equity plus adjusted debt
Diluted Earnings per Share - represents earnings per share (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
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
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
View original content:http://www.prnewswire.com/news-releases/alaska-air-group-reports-third-quarter-2018-results-300737676.html
SOURCE
Media, Media Relations, (206) 304-0008; or Investor/analyst contact, Matt Grady, Director, Investor Relations, (206) 392-5382