(State of Incorporation) | (I.R.S. Employer Identification No.) |
Title of each class | Name of each exchange on which registered | Ticker Symbol |
Telephone: |
☒ | Accelerated filer | ☐ | Non-accelerated filer (Do not check if a smaller reporting company) | ☐ | Smaller reporting company | Emerging growth company |
• | the competitive environment in our industry; |
• | changes in our operating costs, including fuel, which can be volatile; |
• | our ability to meet our cost reduction goals; |
• | our ability to achieve anticipated synergies and timing thereof in connection with our acquisition of Virgin America; |
• | our ability to successfully integrate the Boeing and Airbus operations; |
• | labor disputes and our ability to attract and retain qualified personnel; |
• | operational disruptions; |
• | general economic conditions, including the impact of those conditions on customer travel behavior; |
• | the concentration of our revenue from a few key markets; |
• | an aircraft accident or incident; |
• | actual or threatened terrorist attacks, global instability and potential U.S. military actions or activities; |
• | our reliance on automated systems and the risks associated with changes made to those systems; |
• | changes in laws and regulations. |
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(in millions) | June 30, 2019 | December 31, 2018 | |||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | $ | |||||
Marketable securities | |||||||
Total cash and marketable securities | |||||||
Receivables—net | |||||||
Inventories and supplies—net | |||||||
Prepaid expenses and other current assets | |||||||
Total Current Assets | |||||||
Property and Equipment | |||||||
Aircraft and other flight equipment | |||||||
Other property and equipment | |||||||
Deposits for future flight equipment | |||||||
Less accumulated depreciation and amortization | |||||||
Total Property and Equipment - Net | |||||||
Operating lease assets | |||||||
Goodwill | |||||||
Intangible assets - net | |||||||
Other noncurrent assets | |||||||
Other Assets | |||||||
Total Assets | $ | $ |
(in millions, except share amounts) | June 30, 2019 | December 31, 2018 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable | $ | $ | |||||
Accrued wages, vacation and payroll taxes | |||||||
Air traffic liability | |||||||
Other accrued liabilities | |||||||
Deferred revenue | |||||||
Current portion of operating lease liabilities | |||||||
Current portion of long-term debt | |||||||
Total Current Liabilities | |||||||
Long-Term Debt, Net of Current Portion | |||||||
Noncurrent Liabilities | |||||||
Long-term operating lease liabilities, net of current portion | |||||||
Deferred income taxes | |||||||
Deferred revenue | |||||||
Obligation for pension and postretirement medical benefits | |||||||
Other liabilities | |||||||
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: 2019 - 131,365,855 shares; 2018 - 130,813,476 shares, Outstanding: 2019 - 123,338,144 shares; 2018 - 123,194,430 shares | |||||||
Capital in excess of par value | |||||||
Treasury stock (common), at cost: 2019 - 8,027,711 shares; 2018 - 7,619,046 shares | ( | ) | ( | ) | |||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Retained earnings | |||||||
Total Liabilities and Shareholders' Equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in millions, except per share amounts) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Operating Revenues | |||||||||||||||
Passenger revenue | $ | $ | |||||||||||||
Mileage Plan other revenue | |||||||||||||||
Cargo and other | |||||||||||||||
Total Operating Revenues | |||||||||||||||
Operating Expenses | |||||||||||||||
Wages and benefits | |||||||||||||||
Variable incentive pay | |||||||||||||||
Aircraft fuel, including hedging gains and losses | |||||||||||||||
Aircraft maintenance | |||||||||||||||
Aircraft rent | |||||||||||||||
Landing fees and other rentals | |||||||||||||||
Contracted services | |||||||||||||||
Selling expenses | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Food and beverage service | |||||||||||||||
Third-party regional carrier expense | |||||||||||||||
Other | |||||||||||||||
Special items - merger-related costs | |||||||||||||||
Special items - other | |||||||||||||||
Total Operating Expenses | |||||||||||||||
Operating Income | |||||||||||||||
Nonoperating Income (Expense) | |||||||||||||||
Interest income | |||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Interest capitalized | |||||||||||||||
Other—net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total Nonoperating Income (Expense) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Income Before Income Tax | |||||||||||||||
Income tax expense | |||||||||||||||
Net Income | $ | $ | $ | $ | |||||||||||
Basic Earnings Per Share: | $ | $ | $ | $ | |||||||||||
Diluted Earnings Per Share: | $ | $ | $ | $ | |||||||||||
Shares used for computation: | |||||||||||||||
Basic | |||||||||||||||
Diluted |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net Income | $ | $ | $ | $ | |||||||||||
Other Comprehensive Income (Loss): | |||||||||||||||
Related to marketable securities: | |||||||||||||||
Unrealized holding gain (loss) arising during the period | ( | ) | ( | ) | |||||||||||
Reclassification of (gain) loss into Other - net nonoperating income (expense) | |||||||||||||||
Income tax effect | ( | ) | ( | ) | |||||||||||
Total | ( | ) | ( | ) | |||||||||||
Related to employee benefit plans: | |||||||||||||||
Reclassification of net pension expense into Wages and benefits and Other - net nonoperating income (expense) | |||||||||||||||
Income tax effect | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total | |||||||||||||||
Related to interest rate derivative instruments: | |||||||||||||||
Unrealized holding gain (loss) arising during the period | ( | ) | ( | ) | |||||||||||
Reclassification of (gain) loss into Aircraft rent | |||||||||||||||
Income tax effect | ( | ) | |||||||||||||
Total | ( | ) | ( | ) | |||||||||||
Other Comprehensive Income | |||||||||||||||
Comprehensive Income | $ | $ | $ | $ |
(in millions) | Common Stock Outstanding | Common Stock | Capital in Excess of Par Value | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total | |||||||||||||||||||
Balances at December 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||
Cumulative effect of accounting changes(a) | — | — | — | — | — | |||||||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | |||||||||||||||||||||
Common stock repurchase | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Stock-based compensation | — | — | — | — | — | |||||||||||||||||||||
Cash dividend declared ($0.35 per share) | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Stock issued for employee stock purchase plan | — | — | — | . | ||||||||||||||||||||||
Stock issued under stock plans | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Balances at March 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | |||||||||||||||||||||
Common stock repurchase | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Stock-based compensation | — | — | — | — | — | |||||||||||||||||||||
Cash dividend declared ($0.35 per share) | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Stock issued under stock plans | — | — | — | — | — | |||||||||||||||||||||
Balances at June 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
(a) | Represents the opening balance sheet adjustment recorded as a result of the adoption of the new lease accounting standard. |
(in millions) | Common Stock Outstanding | Common Stock | Capital in Excess of Par Value | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total | |||||||||||||||||||
Balances at December 31, 2017 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||
Reclassification of tax effects to Retained Earnings | — | — | — | — | ( | ) | ||||||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | |||||||||||||||||||||
Common stock repurchase | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||||||||||
Stock-based compensation | — | — | — | — | — | |||||||||||||||||||||
Cash dividend declared ($0.32 per share) | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Stock issued for employee stock purchase plan | — | — | — | — | ||||||||||||||||||||||
Stock issued under stock plans | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Balances at March 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||
Net income | — | — | — | — | — | |||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | |||||||||||||||||||||
Common stock repurchase | ( | ) | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||
Stock-based compensation | — | — | — | — | — | |||||||||||||||||||||
Cash dividend declared ($0.32 per share) | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||
Stock issued under stock plans | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Balances at June 30, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
Six Months Ended June 30, | |||||||
(in millions) | 2019 | 2018 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Stock-based compensation and other | |||||||
Changes in certain assets and liabilities: | |||||||
Changes in deferred tax provision | |||||||
Increase in air traffic liability | |||||||
Increase in deferred revenue | |||||||
Other—net | ( | ) | |||||
Net cash provided by operating activities | |||||||
Cash flows from investing activities: | |||||||
Property and equipment additions: | |||||||
Aircraft and aircraft purchase deposits | ( | ) | ( | ) | |||
Other flight equipment | ( | ) | ( | ) | |||
Other property and equipment | ( | ) | ( | ) | |||
Total property and equipment additions, including capitalized interest | ( | ) | ( | ) | |||
Purchases of marketable securities | ( | ) | ( | ) | |||
Sales and maturities of marketable securities | |||||||
Other investing activities | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of debt | |||||||
Long-term debt payments | ( | ) | ( | ) | |||
Common stock repurchases | ( | ) | ( | ) | |||
Dividends paid | ( | ) | ( | ) | |||
Other financing activities | |||||||
Net cash used in financing activities | ( | ) | ( | ) | |||
Net increase (decrease) in cash, cash equivalents, and restricted cash | ( | ) | |||||
Cash, cash equivalents, and restricted cash at beginning of year | |||||||
Cash, cash equivalents, and restricted cash at end of the period | $ | $ | |||||
Cash paid during the period for: | |||||||
Interest (net of amount capitalized) | $ | $ | |||||
Income taxes | |||||||
Reconciliation of cash, cash equivalents, and restricted cash at end of the period | |||||||
Cash and cash equivalents | $ | $ | |||||
Restricted cash included in Prepaid expenses and other current assets | |||||||
Total cash, cash equivalents, and restricted cash at end of the period | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Passenger ticket revenue, including ticket breakage and net of taxes and fees | $ | $ | $ | $ | |||||||||||
Passenger ancillary revenue | |||||||||||||||
Mileage Plan passenger revenue | |||||||||||||||
Total Passenger revenue | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Passenger revenue | $ | $ | $ | $ | |||||||||||
Mileage Plan other revenue | |||||||||||||||
Total Mileage Plan revenue | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cargo revenue | $ | $ | $ | $ | |||||||||||
Other revenue | |||||||||||||||
Total Cargo and other revenue | $ | $ | $ | $ |
Six Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
Total Deferred Revenue balance at January 1 | $ | $ | ||||||
Travel miles and companion certificate redemption - Passenger revenue | ( | ) | ( | ) | ||||
Miles redeemed on partner airlines - Other revenue | ( | ) | ( | ) | ||||
Increase in liability for mileage credits issued | ||||||||
Total Deferred Revenue balance at June 30 | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Marketable securities | |||||||||||||||||||||||
U.S. government and agency securities | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Foreign government bonds | |||||||||||||||||||||||
Asset-backed securities | |||||||||||||||||||||||
Mortgage-backed securities | |||||||||||||||||||||||
Corporate notes and bonds | |||||||||||||||||||||||
Municipal securities | |||||||||||||||||||||||
Total Marketable securities | |||||||||||||||||||||||
Derivative instruments | |||||||||||||||||||||||
Fuel hedge—call options | |||||||||||||||||||||||
Interest rate swap agreements | |||||||||||||||||||||||
Total Assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Liabilities | |||||||||||||||||||||||
Derivative instruments | |||||||||||||||||||||||
Interest rate swap agreements | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||
Total Liabilities | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) |
June 30, 2019 | Cost Basis | Fair Value | |||||
Due in one year or less | $ | $ | |||||
Due after one year through five years | |||||||
Due after five years through 10 years | |||||||
Total | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Fixed-rate debt at cost | $ | $ | |||||
Non-recurring purchase price accounting fair value adjustment | |||||||
Total fixed-rate debt | $ | $ | |||||
Estimated fair value | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Fixed-rate notes payable due through 2028 | $ | $ | |||||
Variable-rate notes payable due through 2028 | |||||||
Less debt issuance costs | ( | ) | ( | ) | |||
Total debt | |||||||
Less current portion | |||||||
Long-term debt, less current portion | $ | $ | |||||
Weighted-average fixed-interest rate | % | % | |||||
Weighted-average variable-interest rate | % | % |
Total | |||
Remainder of 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total | $ |
Operating lease assets | |||
Aircraft | $ | ||
CPA aircraft | |||
Airport and terminal facilities | |||
Corporate real estate and other | |||
Total Operating lease assets | $ |
Classification | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | ||||||
Expense | ||||||||
Aircraft | Aircraft rent | $ | $ | |||||
CPA aircraft | Aircraft rent | |||||||
Airport and terminal facilities | Landing fees and other rentals | |||||||
Corporate real estate and other | Landing fees and other rentals | |||||||
Total lease expense | $ | $ | ||||||
Revenue | ||||||||
Lease income | Cargo and other revenues | ( | ) | ( | ) | |||
Net lease impact | $ | $ |
Six Months Ended June 30, 2019 | |||
Cash paid for capitalized operating leases | $ | ||
Operating lease assets obtained in exchange for lease obligations |
Weighted Average IBR | Weighted Average Remaining Lease Term | |||
Aircraft | % | |||
CPA aircraft | % | |||
Airports and terminal facilities | % | |||
Corporate real estate and other | % |
Aircraft | CPA Aircraft | Airport and Terminal Facilities | Corporate Real Estate & Other | ||||||||||||
Remainder of 2019 | $ | $ | $ | ||||||||||||
2020 | |||||||||||||||
2021 | |||||||||||||||
2022 | |||||||||||||||
2023 | |||||||||||||||
Thereafter | |||||||||||||||
Total lease payments | $ | $ | $ | $ | |||||||||||
Less: Imputed interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total operating lease liabilities | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Service cost | $ | $ | $ | $ | |||||||||||
Pension expense included in Wages and benefits | |||||||||||||||
Interest cost | |||||||||||||||
Expected return on assets | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Recognized actuarial loss | |||||||||||||||
Pension expense included in Nonoperating Income (Expense) | $ | $ | $ | $ |
Aircraft Commitments(a) | Capacity Purchase Agreements (b) | Aircraft Maintenance Deposits | |||||||||
Remainder of 2019 | $ | $ | $ | ||||||||
2020 | |||||||||||
2021 | |||||||||||
2022 | |||||||||||
2023 | |||||||||||
Thereafter | |||||||||||
Total | $ | $ | $ |
(a) | Includes non-cancelable contractual commitments for aircraft and engines, buyer furnished equipment, and aircraft maintenance and parts management. |
(b) | Includes all non-aircraft lease costs associated with capacity purchase agreements. |
June 30, 2019 | December 31, 2018 | ||||||
Related to marketable securities | $ | $ | ( | ) | |||
Related to employee benefit plans | ( | ) | ( | ) | |||
Related to interest rate derivatives | ( | ) | |||||
Total | $ | ( | ) | $ | ( | ) |
• | Mainline - includes scheduled air transportation on Alaska's Boeing or Airbus jet aircraft for passengers and cargo throughout the U.S., and in parts of Canada, Mexico, and Costa Rica. |
• | Regional - includes Horizon's and other third-party carriers’ scheduled air transportation for passengers across a shorter distance network within the U.S. under CPAs. This segment includes the actual revenues and expenses associated with regional flying, as well as an allocation of corporate overhead incurred by Air Group on behalf of the regional operations. |
• | Horizon - includes the capacity sold to Alaska under CPA. Expenses include those typically borne by regional airlines such as crew costs, ownership costs and maintenance costs. |
Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||
Mainline | Regional | Horizon | Consolidating & Other(a) | Air Group Adjusted(b) | Special Items(c) | Consolidated | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
CPA revenues | ( | ) | |||||||||||||||||||||||||
Mileage Plan other revenue | |||||||||||||||||||||||||||
Cargo and other | |||||||||||||||||||||||||||
Total operating revenues | ( | ) | |||||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | ( | ) | |||||||||||||||||||||||||
Economic fuel | |||||||||||||||||||||||||||
Total operating expenses | ( | ) | |||||||||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | ( | ) | |||||||||||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Interest capitalized | |||||||||||||||||||||||||||
Other - net | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
Total nonoperating income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Income (loss) before income tax | $ | $ | $ | $ | $ | $ | ( | ) | $ |
Three Months Ended June 30, 2018 | |||||||||||||||||||||||||||
Mainline | Regional | Horizon | Consolidating & Other(a) | Air Group Adjusted(b) | Special Items(c) | Consolidated | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
CPA revenues | ( | ) | |||||||||||||||||||||||||
Mileage Plan other revenue | |||||||||||||||||||||||||||
Cargo and other | |||||||||||||||||||||||||||
Total operating revenues | ( | ) | |||||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | ( | ) | |||||||||||||||||||||||||
Economic fuel | ( | ) | |||||||||||||||||||||||||
Total operating expenses | ( | ) | |||||||||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | ( | ) | |||||||||||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Interest capitalized | |||||||||||||||||||||||||||
Other - net | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
Total nonoperating income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||
Income (loss) before income tax | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ |
Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||
Mainline | Regional | Horizon | Consolidating & Other(a) | Air Group Adjusted(b) | Special Items(c) | Consolidated | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
CPA revenues | ( | ) | |||||||||||||||||||||||||
Mileage Plan other revenue | |||||||||||||||||||||||||||
Cargo and other | |||||||||||||||||||||||||||
Total operating revenues | ( | ) | |||||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | ( | ) | |||||||||||||||||||||||||
Economic fuel | ( | ) | |||||||||||||||||||||||||
Total operating expenses | ( | ) | |||||||||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | ( | ) | |||||||||||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Interest capitalized | |||||||||||||||||||||||||||
Other - net | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
Total nonoperating income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Income (loss) before income tax | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ |
Six Months Ended June 30, 2018 | |||||||||||||||||||||||||||
Mainline | Regional | Horizon | Consolidating & Other(a) | Air Group Adjusted(b) | Special Items(c) | Consolidated | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger revenues | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
CPA revenues | ( | ) | |||||||||||||||||||||||||
Mileage Plan other revenue | |||||||||||||||||||||||||||
Cargo and other | |||||||||||||||||||||||||||
Total operating revenues | ( | ) | |||||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | ( | ) | |||||||||||||||||||||||||
Economic fuel | ( | ) | |||||||||||||||||||||||||
Total operating expenses | ( | ) | |||||||||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | ( | ) | |||||||||||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Interest capitalized | |||||||||||||||||||||||||||
Other - net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Total nonoperating income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||
Income (loss) before income tax | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ |
(a) | Includes consolidating entries, Air Group parent company, McGee Air Services, and other immaterial business units. |
(b) | The Air Group Adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocations and excludes certain income and charges. |
(c) | Includes merger-related costs, mark-to-market fuel-hedge accounting adjustments, and other special items. |
June 30, 2019 | December 31, 2018 | ||||||
Mainline | $ | $ | |||||
Horizon | |||||||
Consolidating & Other | ( | ) | ( | ) | |||
Consolidated | $ | $ |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Second Quarter Review—highlights from the second quarter of 2019 outlining some of the major events that happened during the period and how they affected our financial performance. |
• | Results of Operations—an in-depth analysis of our revenues by segment and our expenses from a consolidated perspective for the three and six months ended June 30, 2019. To the extent material to the understanding of segment profitability, we more fully describe the segment expenses per financial statement line item. Financial and statistical data is also included here. This section includes forward-looking statements regarding our view of the remainder of 2019. |
• | Liquidity and Capital Resources—an overview of our financial position, analysis of cash flows, and relevant contractual obligations and commitments. |
• | By excluding 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 initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can lead to 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 annual cash incentive plan, which covers the majority of employees within the Air Group organization. |
• | CASM excluding fuel and certain special items is a measure commonly used by industry analysts and we believe it is an important metric 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 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. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | ||||||
Consolidated Operating Statistics:(a) | |||||||||||
Revenue passengers (000) | 12,026 | 12,069 | (0.4)% | 22,442 | 22,558 | (0.5)% | |||||
RPMs (000,000) "traffic" | 14,638 | 14,484 | 1.1% | 27,087 | 26,887 | 0.7% | |||||
ASMs (000,000) "capacity" | 16,980 | 16,833 | 0.9% | 32,487 | 32,313 | 0.5% | |||||
Load factor | 86.2% | 86.0% | 0.2 pts | 83.4% | 83.2% | 0.2 pts | |||||
Yield | 14.43¢ | 13.79¢ | 4.6% | 14.13¢ | 13.69¢ | 3.2% | |||||
RASM | 13.48¢ | 12.81¢ | 5.2% | 12.82¢ | 12.34¢ | 3.9% | |||||
CASM excluding fuel and special items(b) | 8.33¢ | 8.14¢ | 2.3% | 8.68¢ | 8.46¢ | 2.6% | |||||
Economic fuel cost per gallon(b) | $2.27 | $2.30 | (1.3)% | $2.20 | $2.22 | (0.9)% | |||||
Fuel gallons (000,000) | 220 | 216 | 1.9% | 419 | 413 | 1.5% | |||||
ASMs per fuel gallon | 77.2 | 77.9 | (0.9)% | 77.5 | 78.2 | (0.9)% | |||||
Average full-time equivalent employees (FTEs) | 21,921 | 21,655 | 1.2% | 21,876 | 21,461 | 1.9% | |||||
Mainline Operating Statistics: | |||||||||||
Revenue passengers (000) | 9,206 | 9,462 | (2.7)% | 17,070 | 17,673 | (3.4)% | |||||
RPMs (000,000) "traffic" | 13,207 | 13,221 | (0.1)% | 24,379 | 24,581 | (0.8)% | |||||
ASMs (000,000) "capacity" | 15,241 | 15,289 | (0.3)% | 29,114 | 29,387 | (0.9)% | |||||
Load factor | 86.7% | 86.5% | 0.2 pts | 83.7% | 83.6% | 0.1 pts | |||||
Yield | 13.38¢ | 12.95¢ | 3.3% | 13.08¢ | 12.83¢ | 1.9% | |||||
RASM | 12.66¢ | 12.16¢ | 4.1% | 12.02¢ | 11.70¢ | 2.7% | |||||
CASM excluding fuel and special items(b) | 7.65¢ | 7.43¢ | 3.0% | 7.96¢ | 7.71¢ | 3.2% | |||||
Economic fuel cost per gallon(b) | $2.26 | $2.29 | (1.3)% | $2.19 | $2.22 | (1.4)% | |||||
Fuel gallons (000,000) | 187 | 188 | (0.5)% | 356 | 360 | (1.1)% | |||||
ASMs per fuel gallon | 81.5 | 81.3 | 0.2% | 81.8 | 81.5 | 0.4% | |||||
Average FTEs | 16,551 | 16,477 | 0.4% | 16,504 | 16,245 | 1.6% | |||||
Aircraft utilization | 11.1 | 11.6 | (4.3)% | 10.7 | 11.4 | (6.1)% | |||||
Average aircraft stage length | 1,311 | 1,298 | 1.0% | 1,308 | 1,294 | 1.1% | |||||
Operating fleet | 238 | 228 | 10 a/c | 238 | 228 | 10 a/c | |||||
Regional Operating Statistics:(c) | |||||||||||
Revenue passengers (000) | 2,820 | 2,607 | 8.2% | 5,372 | 4,885 | 10.0% | |||||
RPMs (000,000) "traffic" | 1,431 | 1,263 | 13.3% | 2,708 | 2,306 | 17.4% | |||||
ASMs (000,000) "capacity" | 1,739 | 1,544 | 12.6% | 3,373 | 2,926 | 15.3% | |||||
Load factor | 82.3% | 81.8% | 0.5 pts | 80.3% | 78.8% | 1.5 pts | |||||
Yield | 24.06¢ | 22.64¢ | 6.3% | 23.57¢ | 22.93¢ | 2.8% | |||||
RASM | 20.51¢ | 19.14¢ | 7.2% | 19.62¢ | 18.72¢ | 4.8% | |||||
Operating fleet | 94 | 89 | 5 a/c | 94 | 89 | 5 a/c |
(a) | Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements. |
(b) | See reconciliation of this non-GAAP measure to the most directly related GAAP measure in the accompanying pages. |
(c) | Data presented includes information related to flights operated by Horizon and third-party carriers. |
Three Months Ended June 30, | |||||||||||||||
2019 | 2018 | ||||||||||||||
(in millions, except per share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
GAAP net income and diluted EPS | $ | 262 | $ | 2.11 | $ | 193 | $ | 1.56 | |||||||
Mark-to-market fuel hedge adjustments | 3 | 0.02 | (22 | ) | (0.18 | ) | |||||||||
Special items - merger-related costs | 8 | 0.06 | 39 | 0.31 | |||||||||||
Income tax effect of reconciling items above | (3 | ) | (0.02 | ) | (4 | ) | (0.03 | ) | |||||||
Non-GAAP adjusted net income and diluted EPS | $ | 270 | $ | 2.17 | $ | 206 | $ | 1.66 |
Three Months Ended June 30, | ||||||||||
(in cents) | 2019 | 2018 | % Change | |||||||
Consolidated: | ||||||||||
CASM | 11.33 | ¢ | 11.20 | ¢ | 1 | % | ||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 2.96 | 2.82 | 5 | % | ||||||
Special items - merger-related costs | 0.04 | 0.24 | (83 | )% | ||||||
CASM excluding fuel and special items | 8.33 | ¢ | 8.14 | ¢ | 2 | % | ||||
Mainline: | ||||||||||
CASM | 10.50 | ¢ | 10.36 | ¢ | 1 | % | ||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 2.79 | 2.68 | 4 | % | ||||||
Special items - merger-related costs | 0.06 | 0.25 | (76 | )% | ||||||
CASM excluding fuel and special items | 7.65 | ¢ | 7.43 | ¢ | 3 | % |
Three Months Ended June 30, | ||||||||||
(in millions) | 2019 | 2018 | % Change | |||||||
Passenger revenue | $ | 2,111 | $ | 1,997 | 6 | % | ||||
Mileage Plan other revenue | 118 | 108 | 9 | % | ||||||
Cargo and other | 59 | 51 | 16 | % | ||||||
Total operating revenues | $ | 2,288 | $ | 2,156 | 6 | % |
Three Months Ended June 30, | ||||||||||
(in millions) | 2019 | 2018 | % Change | |||||||
Fuel expense | $ | 502 | $ | 475 | 6 | % | ||||
Non-fuel operating expenses, excluding special items | 1,414 | 1,371 | 3 | % | ||||||
Special items - merger-related costs | 8 | 39 | (79 | )% | ||||||
Total operating expenses | $ | 1,924 | $ | 1,885 | 2 | % |
Three Months Ended June 30, | |||||||||||||||
2019 | 2018 | ||||||||||||||
(in millions, except for per gallon amounts) | Dollars | Cost/Gal | Dollars | Cost/Gal | |||||||||||
Raw or "into-plane" fuel cost | $ | 495 | $ | 2.25 | $ | 506 | $ | 2.34 | |||||||
(Gains) losses on settled hedges | 4 | 0.02 | (9 | ) | (0.04 | ) | |||||||||
Consolidated economic fuel expense | 499 | 2.27 | $ | 497 | $ | 2.30 | |||||||||
Mark-to-market fuel hedge adjustments | 3 | 0.01 | (22 | ) | (0.10 | ) | |||||||||
GAAP fuel expense | $ | 502 | $ | 2.28 | $ | 475 | $ | 2.20 | |||||||
Fuel gallons | 220 | 216 |
Three Months Ended June 30, | ||||||||||
(in millions) | 2019 | 2018 | % Change | |||||||
Wages and benefits | $ | 567 | $ | 544 | 4 | % | ||||
Variable incentive pay | 44 | 38 | 16 | % | ||||||
Aircraft maintenance | 115 | 106 | 8 | % | ||||||
Aircraft rent | 82 | 77 | 6 | % | ||||||
Landing fees and other rentals | 113 | 110 | 3 | % | ||||||
Contracted services | 70 | 76 | (8 | )% | ||||||
Selling expenses | 87 | 88 | (1 | )% | ||||||
Depreciation and amortization | 105 | 97 | 8 | % | ||||||
Food and beverage service | 53 | 55 | (4 | )% | ||||||
Third-party regional carrier expense | 42 | 39 | 8 | % | ||||||
Other | 136 | 141 | (4 | )% | ||||||
Total non-fuel operating expenses, excluding special items | $ | 1,414 | $ | 1,371 | 3 | % |
Three Months Ended June 30, | ||||||||||
(in millions) | 2019 | 2018 | % Change | |||||||
Wages | $ | 421 | $ | 411 | 2 | % | ||||
Pension—Defined benefit plans service cost | 11 | 12 | (8 | )% | ||||||
Defined contribution plans | 35 | 30 | 17 | % | ||||||
Medical and other benefits | 69 | 61 | 13 | % | ||||||
Payroll taxes | 31 | 30 | 3 | % | ||||||
Total wages and benefits | $ | 567 | $ | 544 | 4 | % |
Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | ||||||||||||||
(in millions, except per share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
Reported GAAP net income and diluted EPS | $ | 266 | $ | 2.14 | $ | 197 | $ | 1.59 | |||||||
Mark-to-market fuel hedge adjustments | (1 | ) | (0.01 | ) | (35 | ) | (0.28 | ) | |||||||
Special items - merger-related costs | 34 | 0.27 | 45 | 0.36 | |||||||||||
Special items - other(a) | — | — | 25 | 0.20 | |||||||||||
Income tax effect on special items and fuel hedge adjustments | (8 | ) | (0.06 | ) | (8 | ) | (0.06 | ) | |||||||
Non-GAAP adjusted net income and diluted EPS | $ | 291 | $ | 2.34 | $ | 224 | $ | 1.81 |
Six Months Ended June 30, | ||||||||||
(in cents) | 2019 | 2018 | % Change | |||||||
Consolidated: | ||||||||||
CASM | 11.62 | ¢ | 11.41 | ¢ | 2 | % | ||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 2.84 | 2.74 | 4 | % | ||||||
Special items - merger-related costs | 0.10 | 0.13 | (23 | )% | ||||||
Special items - other(a) | — | 0.08 | (100 | )% | ||||||
CASM excluding fuel and special items | 8.68 | ¢ | 8.46 | ¢ | 3 | % | ||||
Mainline: | ||||||||||
CASM | 10.76 | ¢ | 10.54 | ¢ | 2 | % | ||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 2.68 | 2.60 | 3 | % | ||||||
Special items - merger-related costs | 0.12 | 0.14 | (14 | )% | ||||||
Special items - other(a) | — | 0.09 | (100 | )% | ||||||
CASM excluding fuel and special items | 7.96 | ¢ | 7.71 | ¢ | 3 | % |
(a) | Special items - other is the employee tax reform bonus awarded in January 2018. |
Six Months Ended June 30, | ||||||||||
(in millions) | 2019 | 2018 | % Change | |||||||
Passenger revenue | $ | 3,827 | $ | 3,681 | 4 | % | ||||
Mileage Plan other revenue | 228 | 215 | 6 | % | ||||||
Cargo and other | 109 | 92 | 18 | % | ||||||
Total operating revenues | $ | 4,164 | $ | 3,988 | 4 | % |
Six Months Ended June 30, | ||||||||||
(in millions) | 2019 | 2018 | % Change | |||||||
Fuel expense | $ | 922 | $ | 884 | 4 | % | ||||
Non-fuel operating expenses, excluding special items | 2,819 | 2,734 | 3 | % | ||||||
Special items - merger-related costs | 34 | 45 | (24 | )% | ||||||
Special items - other | — | 25 | NM | |||||||
Total operating expenses | $ | 3,775 | $ | 3,688 | 2 | % |
Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | ||||||||||||||
(in millions, except for per gallon amounts) | Dollars | Cost/Gal | Dollars | Cost/Gal | |||||||||||
Raw or "into-plane" fuel cost | $ | 916 | $ | 2.18 | $ | 929 | $ | 2.25 | |||||||
(Gains) losses on settled hedges | 7 | 0.02 | (10 | ) | (0.03 | ) | |||||||||
Consolidated economic fuel expense | 923 | 2.20 | $ | 919 | $ | 2.22 | |||||||||
Mark-to-market fuel hedge adjustments | (1 | ) | — | (35 | ) | (0.08 | ) | ||||||||
GAAP fuel expense | $ | 922 | $ | 2.20 | $ | 884 | $ | 2.14 | |||||||
Fuel gallons | 419 | 413 |
Six Months Ended June 30, | ||||||||||
(in millions) | 2019 | 2018 | % Change | |||||||
Wages and benefits | $ | 1,124 | $ | 1,080 | 4 | % | ||||
Variable incentive pay | 79 | 77 | 3 | % | ||||||
Aircraft maintenance | 235 | 213 | 10 | % | ||||||
Aircraft rent | 165 | 151 | 9 | % | ||||||
Landing fees and other rentals | 245 | 236 | 4 | % | ||||||
Contracted services | 142 | 157 | (10 | )% | ||||||
Selling expenses | 159 | 166 | (4 | )% | ||||||
Depreciation and amortization | 211 | 191 | 10 | % | ||||||
Food and beverage service | 102 | 105 | (3 | )% | ||||||
Third-party regional carrier expense | 83 | 76 | 9 | % | ||||||
Other | 274 | 282 | (3 | )% | ||||||
Total non-fuel operating expenses, excluding special items | $ | 2,819 | $ | 2,734 | 3 | % |
Six Months Ended June 30, | ||||||||||
(in millions) | 2019 | 2018 | % Change | |||||||
Wages | $ | 845 | $ | 818 | 3 | % | ||||
Pension—Defined benefit plans service cost | 21 | 24 | (13 | )% | ||||||
Defined contribution plans | 66 | 58 | 14 | % | ||||||
Medical and other benefits | 132 | 121 | 9 | % | ||||||
Payroll taxes | 60 | 59 | 2 | % | ||||||
Total wages and benefits | $ | 1,124 | $ | 1,080 | 4 | % |
• | Our existing cash and marketable securities balance of $1.6 billion, and our expected cash from operations; |
• | Our 112 unencumbered aircraft that could be financed, if necessary; |
• | Our combined bank line-of-credit facilities, with no outstanding borrowings, of $400 million. |
(in millions) | June 30, 2019 | December 31, 2018 | Change | ||||||
Cash and marketable securities | $ | 1,627 | $ | 1,236 | 32 % | ||||
Cash, marketable securities, and unused lines of credit as a percentage of trailing twelve months' revenue | 24 | % | 20 | % | 4 pts | ||||
Long-term debt, net of current portion | $ | 1,538 | $ | 1,617 | (5)% | ||||
Shareholders’ equity | $ | 3,973 | $ | 3,751 | 6% |
Debt-to-capitalization, adjusted for operating leases | |||||||||
(in millions) | June 30, 2019 | December 31, 2018 | Change | ||||||
Long-term debt, net of current portion | $ | 1,538 | $ | 1,617 | (5)% | ||||
Capitalized operating leases(a) | 1,697 | 1,768 | (a) | ||||||
Adjusted debt | $ | 3,235 | $ | 3,385 | (4)% | ||||
Shareholders' equity | 3,973 | 3,751 | 6% | ||||||
Total Capital | $ | 7,208 | $ | 7,136 | 1% | ||||
Debt-to-capitalization, including operating leases | 45 | % | 47 | % | (2) pts |
(a) | Following the adoption of the new lease accounting standard on January 1, 2019, this represents the total capitalized Operating lease liability, whereas prior year periods were calculated utilizing the present value of aircraft lease payments. This change had no impact to the ratio. |
(in millions) | 2019 | 2020 | |||||
Expected capital expenditures | $ | 725 | $ | 775 |
Actual Fleet | Expected Fleet Activity | ||||||||||||||||
Aircraft | June 30, 2019 | 2019 Additions | 2019 Removals | December 31, 2019 | 2020 Changes(c) | December 31, 2020 | |||||||||||
B737 Freighters | 3 | — | — | 3 | — | 3 | |||||||||||
B737 Passenger Aircraft(a) | 163 | 1 | — | 164 | 9 | 173 | |||||||||||
Airbus Passenger Aircraft | 72 | 1 | (1 | ) | 72 | (2 | ) | 70 | |||||||||
Total Mainline Fleet | 238 | 2 | (1 | ) | 239 | 7 | 246 | ||||||||||
Q400 operated by Horizon(b) | 34 | 2 | (3 | ) | 33 | (1 | ) | 32 | |||||||||
E175 operated by Horizon | 28 | 2 | — | 30 | — | 30 | |||||||||||
E175 operated by third party | 32 | — | — | 32 | — | 32 | |||||||||||
Total Regional Fleet | 94 | 4 | (3 | ) | 95 | (1 | ) | 94 | |||||||||
Total | 332 | 6 | (4 | ) | 334 | 6 | 340 |
(a) | Two of the three 737-MAX9 aircraft that were originally scheduled for delivery in 2019 have been shifted to 2020 in light of the recent MAX grounding, based on our best estimate of the expected delivery dates. |
(b) | Two Q400 aircraft that were previously removed from our operating fleet will be returning to revenue service. We expect these additions to occur in late 2019. |
Approximate % of Expected Fuel Requirements | Weighted-Average Crude Oil Price per Barrel | Average Premium Cost per Barrel | ||||||||
Third Quarter 2019 | 50 | % | 76 | 2 | ||||||
Fourth Quarter 2019 | 50 | % | 74 | 2 | ||||||
Remainder 2019 | 50 | % | $ | 75 | $ | 2 | ||||
First Quarter 2020 | 40 | % | 71 | 2 | ||||||
Second Quarter 2020 | 30 | % | 69 | 2 | ||||||
Third Quarter 2020 | 20 | % | 70 | 2 | ||||||
Fourth Quarter 2020 | 10 | % | 69 | 3 | ||||||
Full Year 2020 | 24 | % | $ | 70 | $ | 2 |
(in millions) | Remainder of 2019 | 2020 | 2021 | 2022 | 2023 | Beyond 2023 | Total | ||||||||||||||||||||
Current and long-term debt obligations | $ | 146 | $ | 287 | $ | 314 | $ | 275 | $ | 235 | $ | 578 | $ | 1,835 | |||||||||||||
Aircraft lease commitments | 168 | 312 | 273 | 248 | 194 | 732 | 1,927 | ||||||||||||||||||||
Facility lease commitments | 6 | 11 | 9 | 5 | 4 | 86 | 121 | ||||||||||||||||||||
Aircraft maintenance deposits | 33 | 73 | 62 | 51 | 27 | 9 | 255 | ||||||||||||||||||||
Aircraft purchase commitments | 255 | 542 | 553 | 303 | 103 | 32 | 1,788 | ||||||||||||||||||||
Interest obligations (a) | 31 | 50 | 40 | 31 | 24 | 40 | 216 | ||||||||||||||||||||
Other obligations (b) | 69 | 152 | 173 | 181 | 186 | 1,079 | 1,840 | ||||||||||||||||||||
Total | $ | 708 | $ | 1,427 | $ | 1,424 | $ | 1,094 | $ | 773 | $ | 2,556 | $ | 7,982 |
(a) | For variable-rate debt, future obligations are shown above using forecasted interest rates as of June 30, 2019. |
(b) | Primarily comprised of non-aircraft lease costs associated with capacity purchase agreements. |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
ITEM 4. CONTROLS AND PROCEDURES |
ITEM 1. LEGAL PROCEEDINGS |
ITEM 1A. RISK FACTORS |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Total Number of Shares Purchased | Average Price Paid per Share | Maximum remaining dollar value of shares that can be purchased under the plan (in millions) | ||||||||
April 1, 2019 - April 30, 2019 | 77,317 | $ | 59.67 | |||||||
May 1, 2019 - May 31, 2019 | 51,592 | 60.92 | ||||||||
June 1, 2019 - June 30, 2019 | 64,865 | 61.71 | ||||||||
Total | 193,774 | $ | 60.68 | $ | 537 |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. MINE SAFETY DISCLOSURES |
ITEM 5. OTHER INFORMATION |
ITEM 6. EXHIBITS |
1. | Exhibits: See Exhibit Index. |
ALASKA AIR GROUP, INC. | |
/s/ CHRISTOPHER M. BERRY | |
Christopher M. Berry | |
Vice President Finance and Controller | |
August 6, 2019 |
Exhibit Number | Exhibit Description | Form | Date of First Filing | Exhibit Number |
3.1 | 10-Q | August 3, 2017 | 3.1 | |
10.1† | 10-Q | |||
31.1† | 10-Q | |||
31.2† | 10-Q | |||
32.1† | 10-Q | |||
32.2† | 10-Q | |||
101.INS† | XBRL Instance Document - The instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document. | |||
101.SCH† | XBRL Taxonomy Extension Schema Document | |||
101.CAL† | XBRL Taxonomy Extension Calculation Linkbase Document | |||
101.DEF† | XBRL Taxonomy Extension Definition Linkbase Document | |||
101.LAB† | XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE† | XBRL Taxonomy Extension Presentation Linkbase Document | |||
† | Filed herewith | |||
* | Indicates management contract or compensatory plan arrangement |
1. | PURPOSE |
2. | DEFINITIONS |
(a) | “Account” means the bookkeeping account maintained by the Company, or by a record keeper on behalf of the Company, for a Participant pursuant to Section 7(a). |
(b) | “Board” means the Board of Directors of the Company, as defined below. |
(c) | “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. |
(d) | “Commission” means the U.S. Securities and Exchange Commission. |
(e) | “Committee” means the committee appointed by the Board to administer the Plan pursuant to Section 12. |
(f) | “Common Stock” means the common stock, par value $0.01 per share, of the Company, and such other securities or property as may become the subject of Options pursuant to an adjustment made under Section 17. |
(a) | “Company” means Alaska Air Group, Inc., a Delaware corporation, and its successors. |
(b) | “Compensation” means an Eligible Employee’s base pay, inclusive of overtime and any employer paid leave. Compensation also includes any amounts contributed as salary reduction contributions to a plan qualifying under Section 401(k), 125, or 129 of the Code. Any other form of remuneration is excluded from Compensation, including (but not limited to) the following: cash bonuses, severance pay, hiring bonuses, prizes, awards, relocation or housing allowances, stock option exercises, stock appreciation right payments, the vesting or grant of restricted stock, the payment of stock units, performance awards, auto allowances, tuition reimbursement, perquisites, non-cash compensation and other forms of imputed income. Notwithstanding the foregoing, Compensation shall not include any amounts deferred under or paid from any nonqualified deferred compensation plan maintained by the Company or any Subsidiary (including, without limitation, the Company’s Nonqualified Deferred Compensation Plan). |
(c) | “Contributions” means the bookkeeping amounts credited to the Account of the Participant pursuant to this Plan, equal in amount to the amount of Compensation that the Participant has elected to contribute for the purchase of Common Stock under and in accordance with this Plan. |
(d) | “Effective Date” means March 11, 2010, the date on which this Plan was initially adopted by the Board. |
(e) | “Eligible Employee” means, subject to Section 3, any person employed by the Company or any Subsidiary which has been designated in writing by the Committee as a “Participating Subsidiary”; provided, however, that “Eligible Employee” shall not include any employee |
(f) | “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended from time to time. |
(g) | “Exercise Date” means, with respect to an Offering Period, the last day of that Offering Period. |
(h) | “Fair Market Value” on any date means: |
(1) | if the Common Stock is listed or admitted to trade on a national securities exchange, the closing price of a share of Common Stock on such date on the principal national securities exchange on which the Common Stock is so listed or admitted to trade, or, if there is no trading of the Common Stock on such date, then the closing price of a share of Common Stock on such exchange on the next preceding date on which there was trading in the shares of Common Stock; or |
(2) | in the absence of exchange data required to determine Fair Market Value pursuant to the foregoing, the value as established by the Committee as of the relevant time for purposes of this Plan. |
(i) | “Grant Date” means, with respect to an Offering Period, the first day of that Offering Period. |
(j) | “Individual Limit” has the meaning given to such term in Section 4(b). |
(k) | “Offering Period” means the six (6) month period commencing on each Grant Date; provided, however, the Committee may declare, as it deems appropriate and in advance of the applicable Offering Period, a shorter (not to be less than three months) Offering Period or a longer (not to exceed 27 months) Offering Period. Unless otherwise expressly provided by the Committee in advance of a particular Offering Period, the Grant Date for that Offering Period may not occur on or before the Exercise Date for the immediately preceding Offering Period. |
(l) | “Option” means the option to acquire shares of Common Stock granted to a Participant pursuant to Section 8. |
(m) | “Option Price” means the per share exercise price of an Option as determined in accordance with Section 8(b). |
(n) | “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company in which each corporation (other than the Company) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain. |
(o) | “Participant” means an Eligible Employee who has elected to participate in this Plan and who has filed a valid and effective Subscription Agreement to make Contributions pursuant to Section 6. |
(p) | “Participating Subsidiary” shall have the meaning given to such term in Section 19(c). |
(q) | “Plan” means this Alaska Air Group, Inc. Employee Stock Purchase Plan, as it may be amended or restated from time to time. |
(r) | “Subscription Agreement” means the written agreement or applicable electronic form of agreement filed by an Eligible Employee with the Company pursuant to Section 6 to participate in this Plan. |
(s) | “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations (beginning with the Company) in which each corporation (other than the last corporation) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain. |
3. | ELIGIBILITY |
4. | STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS |
(a) | Aggregate Share Limit. Subject to the provisions of Section 17, the capital stock that may be delivered under this Plan will be shares of the Company’s authorized but unissued Common Stock. The maximum number of shares of Common Stock that may be delivered pursuant to Options granted under this Plan is 8,000,000 shares, subject to adjustments pursuant to Section 17. |
(b) | Individual Share Limit. The maximum number of shares of Common Stock that any one individual may acquire upon exercise of his or her Option with respect to any one Offering Period is 8,000, subject to adjustments pursuant to Section 17 (the “Individual Limit”). The Committee may amend the Individual Limit, effective no earlier than the first Offering Period commencing after the adoption of such amendment, without stockholder approval. |
(c) | Shares Not Actually Delivered. Shares that are subject to or underlie Options, which for any reason are cancelled, terminated, forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall again, except to the extent prohibited by law, be available for subsequent Options under this Plan. |
5. | OFFERING PERIODS |
6. | PARTICIPATION |
(a) | Enrollment. An Eligible Employee may become a Participant in this Plan by completing a Subscription Agreement on a form approved by and in a manner prescribed by the Committee (or its delegate). To become effective, a Subscription Agreement must be signed by the Eligible Employee and be filed with the Company at the time specified by the Committee, but in all cases prior to the start of the Offering Period with respect to which it is to become effective, and must set forth a whole percentage (or, if the Committee so requires, a stated amount) of the Eligible Employee’s Compensation to be credited to the Participant’s Account as Contributions each pay period. |
(b) | Contribution Limits. Notwithstanding the foregoing, a Participant may not elect to contribute less than one percent (1%) nor more than ten percent (10%) (or such other limit as the Committee may establish prior to the start of the applicable Offering Period) of his or her Compensation during any one pay period as Plan Contributions. The Committee also may prescribe other limits, rules or procedures for Contributions. |
(c) | Content and Duration of Subscription Agreements. Subscription Agreements shall contain the Eligible Employee’s authorization and consent to the Company’s withholding from his or her Compensation the amount of his or her Contributions. An Eligible Employee’s Subscription Agreement, and his or her participation election and withholding consent thereon, shall remain valid for all Offering Periods until (1) the Eligible Employee’s participation terminates pursuant to the terms hereof, (2) the Eligible Employee files a new Subscription Agreement that becomes effective, or (3) the Committee requires that a new Subscription Agreement be executed and filed with the Company. |
7. | METHOD OF PAYMENT OF CONTRIBUTIONS |
(a) | Participation Accounts. The Company shall maintain on its books, or cause to be maintained by a record keeper, an Account in the name of each Participant. The percentage of Compensation elected to be applied as Contributions by a Participant shall be deducted from such Participant’s Compensation on each payday during the period for payroll deductions set forth below and such payroll deductions shall be credited to that Participant’s Account as soon as administratively practicable after such date. A Participant may not make any additional payments to his or her Account. A Participant’s Account shall be reduced by any amounts used to pay the Option Price of shares acquired, or by any other amounts distributed pursuant to the terms hereof. |
(b) | Payroll Deductions. Subject to such other rules as the Committee may adopt, payroll deductions with respect to an Offering Period shall commence as of the first day of the payroll period which coincides with or immediately follows the applicable Grant Date and shall end on the last date of the payroll period which coincides with or immediately proceeds the applicable Exercise Date, unless sooner terminated by the Participant as provided in Section 7(d) or until his or her participation terminates pursuant to Section 11. |
(c) | Changes in Contribution Elections for Next Offering Period; One-Time Reduction Permitted During an Offering Period. A Participant may discontinue, increase, or decrease the level of his or her Contributions (within the Plan limits) by completing and filing with the Company, on such terms as the Committee (or its delegate) may prescribe, a new Subscription Agreement which indicates such election. Subject to any other timing requirements that the Committee may impose, an election pursuant to this Section 7(c) shall be effective with the first Offering Period that commences after the Company’s receipt of such election , provided that a Participant may, on one occasion only during an Offering Period, elect to decrease (but not increase) the level of his or her Contributions (subject to Section 6(b)) by filing a new Subscription Agreement with the Company indicating such election, which election shall be effective as soon as administratively practicable following its receipt by the Company. Except as contemplated by the foregoing proviso and Section 7(d) and 7(e), changes in Contribution levels may not take effect during an Offering Period. Other modifications or suspensions of Subscription Agreements are not permitted. |
(d) | Withdrawal During an Offering Period. A Participant may terminate his or her Contributions during an Offering Period (and receive a distribution of the balance of his or her Account in accordance with Section 11) by completing and filing with the Company, in such form and on such terms as the Committee (or its delegate) may prescribe, a written withdrawal form or applicable electronic withdrawal form which shall be signed by the Participant. Such termination shall be effective as soon as administratively practicable after its receipt by the Company. A withdrawal election pursuant to this Section 7(d) with respect to an Offering Period shall only be effective, however, if it is received by the Company prior to the Exercise Date of the Offering Period (or such earlier deadline that the Committee may reasonably require to process the withdrawal prior to the applicable Exercise Date). Partial withdrawals of Accounts are not permitted. |
(e) | Discontinuance of Contributions During an Offering Period. A Participant may discontinue his or her Contributions at any time during an Offering Period by completing and filing with the Company, on such terms as the Committee (or its delegate) may prescribe, a new Subscription Agreement which indicates such election. If a Participant elects to discontinue his or her Contributions pursuant to this Section 7(e), the Contributions previously credited to the Participant’s Account for that Offering Period shall be used to exercise the Participant’s Option as of the applicable Exercise Date in accordance with Section 9 (unless the Participant makes a timely withdrawal election in accordance with Section 7(d), in which case such Participant’s Account shall be paid to him or her in cash in accordance with Section 11(a)). |
8. | GRANT OF OPTION |
(a) | Grant Date; Number of Shares. On each Grant Date, each Eligible Employee who is a Participant during that Offering Period shall be granted an Option to purchase a number of shares of Common Stock. The Option shall be exercised on the Exercise Date. The number of shares of Common Stock subject to the Option shall be determined by dividing the Participant’s Account balance as of the applicable Exercise Date by the Option Price, subject to the limits of Section 8(c). |
(b) | Option Price. The Option Price per share of the shares subject to an Option for an Offering Period shall be the lesser of: (i) 85% of the Fair Market Value of a Share on the Grant Date of that Offering Period; or (ii) 85% of the Fair Market Value of a Share on the Exercise Date of that Offering Period; provided, however, that the Committee may provide prior to the start of any Offering Period that the Option Price for that Offering Period shall be determined by applying a discount amount (not to exceed 15%) to either (1) the Fair Market Value of a share of Common Stock on that Grant Date of that Offering Period, or (2) the Fair Market Value of a share of Common Stock on the Exercise Date of that Offering Period, or (3) the lesser of the Fair Market Value of a share of Common Stock on the Grant Date of that Offering Period or the Fair Market Value of a share of Common Stock on the Exercise Date of that Offering Period. Notwithstanding anything to the contrary in the preceding provisions of this Section 8(b), in no event shall the Option Price per share be less than the par value of a share of Common Stock. |
(c) | Limits on Share Purchases. Notwithstanding anything else contained herein, the maximum number of shares subject to an Option for an Offering Period shall be subject to the Individual Limit in effect on the Grant Date of that Offering Period (subject to adjustment pursuant to Section 17) and any person who is otherwise an Eligible Employee shall not be granted any Option (or any Option granted shall be subject to compliance with the following limitations) or other right to purchase shares under this Plan to the extent: |
(1) | it would, if exercised, cause the person to own stock (within the meaning of Section 423(b)(3) of the Code) possessing 5% or more of the total combined voting power or value of all classes of stock of the Company, or of any Parent, or of any Subsidiary; or |
(2) | such Option causes such individual to have rights to purchase stock under this Plan and any other plan of the Company, any Parent, or any Subsidiary which is qualified under Section 423 of the Code which accrue at a rate which exceeds $25,000 of the Fair Market Value of the stock of the Company, of any Parent, or of any Subsidiary (determined at the time the right to purchase such stock is granted, before giving effect to any discounted purchase price under any such plan) for each calendar year in which such right is outstanding at any time. |
9. | EXERCISE OF OPTION |
(a) | Purchase of Shares. Unless a Participant withdraws pursuant to Section 7(d) or the Participant’s Plan participation is terminated as provided in Section 11, his or her Option for the purchase of shares shall be exercised automatically on the Exercise Date for that Offering Period, without any further action on the Participant’s part, and the maximum number of whole shares of Common Stock subject to such Option (subject to the limits of Section 8(c)) shall be purchased at the Option Price with the balance of such Participant’s Account. |
(b) | Account Balance Remaining After Purchase. If any amount which is not sufficient to purchase a whole share remains in a Participant’s Account after the exercise of his or her Option on the Exercise Date: (1) such amount shall be credited to such Participant’s Account for the next Offering Period, if he or she is then a Participant; or (2) if such Participant is not a Participant in the next Offering Period, or if the Committee so elects, such amount shall be refunded to such Participant as soon as administratively practicable after such date. If the share limit of Section 4(a) is reached, any amount that remains in a Participant’s Account after the exercise of his or her Option on the Exercise Date to purchase the number of shares that he or she is allocated shall be refunded to the Participant as soon as administratively practicable after such date. If any amount which exceeds the limits of Section 8(c) remains in a Participant’s Account after the exercise of his or her Option on the Exercise Date, such amount shall be refunded to the Participant as soon as administratively practicable after such date. |
10. | DELIVERY OF SHARES |
11. | TERMINATION OF EMPLOYMENT; CHANGE IN ELIGIBLE STATUS |
(a) | General. Except as provided in Section 11(b) below, if a Participant ceases to be an Eligible Employee for any reason (including, without limitation, due to the Participant’s death, disability, resignation or retirement, or due to a layoff or other termination of employment with or without cause), or if the Participant elects to withdraw from the Plan pursuant to Section 7(d), at any time prior to the Exercise Date for the Offering Period in which he or she participates, such Participant shall not be eligible to exercise the Option for that Offering Period and Participant’s Account shall be paid to him or her (or, in the event of the Participant’s death, to the person or persons entitled thereto under Section 13) in cash, and such Participant’s Option and participation in the Plan shall automatically terminate as of the time that the Participant ceased to be an Eligible Employee. |
(b) | Change in Eligible Status; Leave. If a Participant (1) ceases to be an Eligible Employee during an Offering Period but remains an employee of the Company or a Subsidiary through the Exercise Date (for example, and without limitation, due to a change in the Participant’s employer from the Company or a Participating Subsidiary to a non-Participating Subsidiary, if the Participant’s employer ceases to maintain the Plan as a Participating Subsidiary but otherwise continues as a Subsidiary, or if the Participant’s customary level of employment no longer satisfies the requirements set forth in the definition of Eligible Employee), or (2) during an Offering Period commences a sick leave, military leave, or other leave of absence approved by the Company or a Participating Subsidiary, and the leave meets the requirements of Treasury Regulation Section 1.421-1(h)(2) and the Participant is an employee of the Company or a Subsidiary or on such leave as of the applicable Exercise Date, such Participant’s Contributions shall cease (subject to Section 7(d)), and the Contributions previously credited to the Participant’s Account for that Offering Period shall be used to exercise the Participant’s Option as of the applicable Exercise Date in accordance with Section 9 (unless the Participant makes a timely withdrawal election in accordance with Section 7(d), in which case such Participant’s Account shall be paid to him or her in cash in accordance with Section 11(a)). |
(c) | Re-Enrollment. A Participant’s termination from Plan participation precludes the Participant from again participating in this Plan during that Offering Period. However, such termination shall not have any effect upon his or her ability to participate in any succeeding Offering Period, provided that the applicable eligibility and participation requirements are again then met. A Participant’s termination from Plan participation shall be deemed to be a revocation of that Participant’s Subscription Agreement and such Participant must file a new Subscription Agreement to resume Plan participation in any succeeding Offering Period. |
(d) | Change in Subsidiary Status. For purposes of this Plan, if a Subsidiary ceases to be a Subsidiary, each person employed by that Subsidiary will be deemed to have terminated employment for purposes of this Plan, unless the person continues as an employee of the Company or another Subsidiary. |
12. | ADMINISTRATION |
(a) | The Committee. The Board shall appoint the Committee, which shall be composed of not less than two members of the Board. The Board may, at any time, increase or decrease the number of members of the Committee, may remove from membership on the Committee all or any portion of its members, and may appoint such person or persons as it desires to fill any vacancy existing on the Committee, whether caused by removal, resignation, or otherwise. The Board may also, at any time, assume the administration of all or a part of this Plan, in which case references (or relevant references in the event the Board assumes the administration of only certain aspects of this Plan) to the “Committee” shall be deemed to be references to the Board. Action of the Committee with respect to this Plan shall be taken pursuant to a majority vote or by the unanimous written consent of its members. No member of the Committee shall be entitled to act on or decide any matters relating solely to himself or herself or solely to any of his or her rights or benefits under this Plan. |
(b) | Powers and Duties of the Committee. Subject to the express provisions of this Plan, the Committee shall supervise and administer this Plan and shall have the full authority and discretion: (1) to construe and interpret this Plan and any agreements defining the rights and obligations of the Company, any Subsidiary, and Participants under this Plan; (2) to further define the terms used in this Plan; (3) to prescribe, amend and rescind rules and regulations relating to the administration of this Plan (including, without limitation, deadlines for making elections or for providing any notices contemplated by this Plan, which deadlines may be more restrictive than any deadlines otherwise contemplated by this Plan); and (4) to make all other determinations and take such other action as contemplated by this Plan or as may be necessary or advisable for the administration of this Plan or the effectuation of its purposes. Notwithstanding anything else contained in this Plan to the contrary, the Committee may also adopt rules, procedures or sub-plans applicable to particular Subsidiaries or locations, which sub-plans may be designed to be outside the scope of Section 423 of the Code and need not comply with the otherwise applicable provisions of this Plan. |
(c) | Decisions of the Committee are Binding. Any action taken by, or inaction of, the Company, any Subsidiary, the Board or the Committee relating or pursuant to this Plan and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. |
(d) | Indemnification. Neither the Board nor any Committee, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan, and all such persons shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time. |
(e) | Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Committee or the Board, as the case may be, may obtain and may rely upon the advice of experts, including professional advisors to the Company. No director, officer or agent of the Company or any Participating Subsidiary shall be liable for any such action or determination taken or made or omitted in good faith. |
(f) | Delegation. The Committee may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or a Subsidiary. |
1. | DEATH BENEFITS |
2. | TRANSFERABILITY |
3. | USE OF FUNDS; INTEREST |
4. | REPORTS |
5. | ADJUSTMENTS OF AND CHANGES IN THE STOCK |
6. | POSSIBLE EARLY TERMINATION OF PLAN AND OPTIONS |
7. | TERM OF PLAN; AMENDMENT OR TERMINATION |
(a) | Effective Date; Termination. This Plan became effective as of the Effective Date. No new Offering Periods shall commence on or after February 14, 2029 and this Plan shall terminate as of the Exercise Date on or immediately following such date unless sooner terminated pursuant to Section 18 or this Section 19. In the event that all of the shares of Common Stock made available under this Plan are subscribed prior to the expiration of this Plan, this Plan shall terminate at the end of that Offering Period and the shares available shall be allocated for purchase by Participants in that Offering Period on a pro- rata basis determined with respect to Participants’ Account balances. |
(b) | Board Amendment Authority. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part and without notice. Stockholder approval for any amendment or modification shall not be required, except to the extent required by law or applicable stock exchange rules or required under Section 423 of the Code in order to preserve the intended tax consequences of this Plan. No Options may be granted during any suspension of this Plan or after the termination of this Plan, but the Committee will retain jurisdiction as to Options then outstanding in accordance with the terms of this Plan. No amendment, modification, or termination pursuant to this Section 19(b) shall, without written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of such Participant or obligations of the Company under any Option granted under this Plan prior to the effective date of such change. Changes contemplated by Section 17 or Section 18 shall not be deemed to constitute changes or amendments requiring Participant consent. |
(c) | Certain Additional Committee Authority. Notwithstanding the amendment provisions of Section 19(b) and without limiting the Board’s authority thereunder and without limiting the Committee’s authority pursuant to any other provision of this Plan, the Committee shall have the right (1) to designate from time to time the Subsidiaries whose employees may be eligible to participate in this Plan (including, without limitation, any Subsidiary that may first become such after the date stockholders first approve this Plan) (each a “Participating Subsidiary”), and (2) to change the service and other qualification requirements sets forth under the definition of Eligible Employee in Section 2 (subject to the requirements of Section 423(b) of the Code and applicable rules and regulations thereunder). Any such change shall not take effect earlier than the first Offering Period that starts on or after the effective date of such change. Any such change shall not require stockholder approval. |
8. | NOTICES |
9. | CONDITIONS UPON ISSUANCE OF SHARES |
10. | PLAN CONSTRUCTION |
(a) | Section 16. It is the intent of the Company that transactions involving Options under this Plan (other than “Discretionary Transactions” as that term is defined in Rule 16b-3(b)(1) promulgated by the Commission under Section 16 of the Exchange Act, to the extent there are any Discretionary Transactions under the Plan), in the case of Participants who are or may be subject to the prohibitions of Section 16 of the Exchange Act, satisfy the requirements for exemption under Rule 16b-3(c) promulgated by the Commission under Section 16 of the Exchange Act to the maximum extent possible. Notwithstanding the foregoing, the Company shall have no liability to any Participant for Section 16 consequences of Options or other events with respect to this Plan. |
(b) | Section 423. Except as the Committee may expressly provide in the case of one or more sub-plans adopted pursuant to Section 12(b), this Plan and Options are intended to qualify under Section 423 of the Code. Accordingly, all Participants are to have the same rights and privileges (within the meaning of Section 423(b)(5) of the Code and except as not required thereunder to qualify this Plan under Section 423) under this Plan, subject to differences in Compensation among Participants and subject to the Contribution and share limits of this Plan. |
(c) | Interpretation. If any provision of this Plan or of any Option would otherwise frustrate or conflict with the intents expressed above, that provision to the extent possible shall be interpreted so as to avoid such conflict. If the conflict remains irreconcilable, the Committee may disregard the provision if it concludes that to do so furthers the interest of the Company and is consistent with the purposes of this Plan as to such persons in the circumstances. |
11. | EMPLOYEES’ RIGHTS |
(a) | No Employment Rights. Nothing in this Plan (or in any Subscription Agreement or other document related to this Plan) will confer upon any Eligible Employee or Participant any right to continue in the employ or other service of the Company or any Subsidiary, constitute any contract or agreement of employment or other service or effect an employee’s status as an employee at will, nor shall interfere in any way with the right of the Company or any Subsidiary to change such person’s compensation or other benefits or to terminate his or her employment or other service, with or without cause. Nothing contained in this Section 23(a), however, is intended to adversely affect any express independent right of any such person under a separate employment or service contract other than a Subscription Agreement. |
(b) | No Rights to Assets of the Company. No Participant or other person will have any right, title or interest in any fund or in any specific asset (including shares of Common Stock) of the Company or any Subsidiary by reason of any Option hereunder. Neither the provisions of this Plan (or of any Subscription Agreement or other document related to this Plan), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan will create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company or any Subsidiary and any Participant, Beneficiary or other person. To the extent that a Participant, Beneficiary or other person acquires a right to receive payment pursuant to this Plan, such right will be no greater than the right of any unsecured general creditor of the Company. |
(c) | No Stockholder Rights. A Participant will not be entitled to any privilege of stock ownership as to any shares of Common Stock not actually delivered to and held of record by the Participant. No adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery. |
12. | MISCELLANEOUS |
(a) | Governing Law. This Plan, the Options, Subscription Agreements and other documents related to this Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware. |
(b) | Severability. If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue in effect. |
(c) | Captions and Headings. Captions and headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such captions and headings shall not be deemed in any way material or relevant to the construction of interpretation of this Plan or any provision hereof. |
(d) | No Effect on Other Plans or Corporate Authority. The adoption of this Plan shall not affect any other Company or Subsidiary compensation or incentive plans in effect. Nothing in this Plan will limit or be deemed to limit the authority of the Board or Committee (1) to establish any other forms of incentives or compensation for employees of the Company or any Subsidiary (with or without reference to the Common Stock), or (2) to grant or assume options (outside the scope of and in addition to those contemplated by this Plan) in connection with any proper corporate purpose; to the extent consistent with any other plan or authority. Benefits received by a Participant under an Option granted pursuant to this Plan shall not be deemed a part of the Participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company or any Subsidiary, except where the Committee or the Board (or the Board of Directors of the Subsidiary that sponsors such plan or arrangement, as applicable) expressly otherwise provides or authorizes in writing. |
13. | TAX WITHHOLDING |
14. | NOTICE OF SALE |
1. | I have reviewed this annual report on Form 10-Q of Alaska Air Group, Inc. for the period ended June 30, 2019; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors: |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By | /s/ BRADLEY D. TILDEN |
Bradley D. Tilden | |
Chairman, President and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-Q of Alaska Air Group, Inc. for the period ended June 30, 2019; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors: |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By | /s/ BRANDON S. PEDERSEN |
Brandon S. Pedersen | |
Executive Vice President/Finance and Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By | /s/ BRADLEY D. TILDEN |
Bradley D. Tilden | |
Chairman, President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By | /s/ BRANDON S. PEDERSEN |
Brandon S. Pedersen | |
Executive Vice President/Finance and Chief Financial Officer |