alk-20200723
0000766421false00007664212020-07-232020-07-23




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549


FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

July 23, 2020
(Date of earliest event reported)

ALASKA AIR GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of Incorporation)
1-895791-1292054
(Commission File Number)(IRS Employer Identification No.)

19300 International BoulevardSeattleWashington98188
(Address of Principal Executive Offices)(Zip Code)

(206) 392-5040
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTicker SymbolName of each exchange on which registered
Common stock, $0.01 par value ALKNew York Stock Exchange
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

This document is also available on our website at http://investor.alaskaair.com.



ITEM 2.02.  Results of Operations And Financial Condition

On July 23, 2020, Alaska Air Group, Inc. (Air Group) issued a press release reporting financial results for the second quarter of 2020.  The press release is furnished herein as Exhibit 99.1.

ITEM 7.01.  Regulation FD Disclosure

Pursuant to 17 CFR Part 243 (Regulation FD), the Company is submitting information relating to its financial and operational outlook in an Investor Update. The Investor Update is furnished herein as Exhibit 99.2.

In accordance with General Instruction B.2 of Form 8-K, the information under this item and Exhibit 99.2 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.  This report will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.


ITEM 9.01  Financial Statements and Other Exhibits
Second Quarter 2020 Earnings Press Release dated July 23, 2020
Investor Update dated July 23, 2020
104Cover Page Interactive Data File - embedded within the Inline XBRL Document

Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ALASKA AIR GROUP, INC.                                                                           
Registrant

Date: July 23, 2020

/s/ CHRISTOPHER M. BERRY
Christopher M. Berry
Vice President Finance and Controller



Document

Exhibit 99.1
https://cdn.kscope.io/1d9dccad3a1653f08c0761d095ee0bb0-alaskaairgrouplogob0311.jpg

July 23, 2020
Media contact:Investor/analyst contact:
Media RelationsEmily Halverson
(206) 304-0008Director, Investor Relations
(206) 392-5908

Alaska Air Group reports second quarter 2020 results; COVID-19 updates
Alaska receives official oneworld invitation
SEATTLE -
Financial Results:
Reported net loss for the second quarter of 2020 under Generally Accepted Accounting Principles (GAAP) of $214 million, or $1.73 per diluted share, compared to net income of $262 million, or $2.11 per diluted share in the second quarter of 2019.
Reported net loss for the second quarter of 2020, excluding the payroll support program wage offsets, special items and mark-to-market fuel hedge accounting adjustments, of $439 million, or $3.54 per diluted share, compared to net income of $270 million or $2.17 per diluted share, in the second quarter of 2019.
Reported a debt-to-capitalization ratio, including short-term borrowings related to COVID-19, of 51%.

Liquidity Updates:
Lowered cash burn from an exit rate of $400 million per month in March to $120 million in June, a 70% reduction.
Closed on an additional $164 million in secured financing in the second quarter, secured by seven aircraft.
Held $2.8 billion in unrestricted cash and marketable securities as of June 30, 2020.
Obtained nearly $1.2 billion in financing through the issuance of Enhanced Equipment Trust Certificates (EETC), secured by 42 Boeing and 19 Embraer aircraft, on July 2, 2020.
Held $3.8 billion in cash and marketable securities as of July 22, 2020, including EETC funds received in July.
Received $992 million in support for Alaska and Horizon under the Coronavirus Aid, Relief, and Economic Security (CARES) Act Payroll Support Program (PSP) in April 2020.
Reached an agreement for McGee to receive $30 million in CARES Act PSP support, $15 million of which was received in June 2020.
Signed a non-binding letter of intent with the U.S. Treasury to obtain up to $1.1 billion in additional CARES Act loans.

Operational Updates:
Received official oneworld invitation on July 23, 2020. The company is working to accelerate the timeline and join the partnership by the end of 2020.
Returned 43 mainline aircraft and all Horizon Air and SkyWest Airlines aircraft to service. As of July 22, 2020, 89 mainline aircraft remain temporarily parked.
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In July 2020, eliminated 300 management positions, initiated early-out programs for frontline workers and offered incentive leaves to pilots as we work to mitigate involuntary furloughs.
Received FAA certification to transport cargo in the passenger cabin on five Boeing 737-900 passenger aircraft, and began cargo-only service to Unalakleet, Alaska.
Announced expansion to year-round service to King Salmon and Dillingham, Alaska, to be flown by Horizon E175 aircraft, as well as began weekly service on Boeing 737 aircraft to Cold Bay, Alaska.
Announced 12 new routes to be flown to various destinations from Los Angeles International Airport.

Next-Level Care
Expanded the Company's Next-Level Care initiative, including nearly 100 measures, offering layers of safety through every single stage of travel and helping guests build confidence in flying. Such measures include the following:

Covering and caring for guests
Flyers are required to complete a pre-travel wellness agreement at check-in. Guests aged 12 and older are required to wear a mask throughout all stages of travel.
Empowered flight attendants with the ability to issue "yellow card" warnings to guests refusing mask policies, with the consequence of suspension of future travel for non-compliance.
Provided hand sanitization stations throughout the airport, including lobby and gate areas. Personal sanitizing wipes made available onboard starting July 2020.
Extended "Peace-of-Mind" waiver, allowing changes to ticketed travel without change or cancellation fees for tickets booked through September 8, 2020.

Personal Safety
Limiting the number of guests onboard and extended blocking middle seats on mainline aircraft through September 30, 2020.
Reduced onboard service to limit interaction between flight crews and guests.
Placed floor decals throughout our airports, reminding guests to "mind their wingspan," when at ticket counters, kiosks and boarding.
Limited capacity of airport lounges to 50% and extended lounge memberships active as of April 1 by six months.
Boarding aircraft from the rear, and in smaller groups, to limit interaction between guests.
Working with airports to install plexiglass barriers at all guest touchpoints along their journey.

Exceeding CDC guidelines and clearing the air
Aircraft are equipped with hospital-grade HEPA air filters, which are designed to remove 99.95% of airborne contaminants and bring outside air on board every three minutes.
Exceed CDC cleaning guidelines on board and use high-grade, EPA-certified disinfectant to clean critical areas, and perform a deep-clean and sanitization of all aircraft overnight.
Utilizing electrostatic disinfectant sprayers, which emit a safe, high-grade EPA cleaning solution to sanitize surfaces.
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Alaska Air Group Inc. today reported second quarter 2020 GAAP net loss of $214 million, or $1.73 per diluted share, compared to net income of $262 million, or $2.11 per diluted share in the second quarter of 2019. Excluding the impact of payroll support program wage offsets, special items and mark-to-market fuel hedge adjustments, the company reported adjusted net loss of $439 million, or $3.54 per diluted share, compared to adjusted net income of $270 million, or $2.17 per diluted share in 2019.
        "Airlines are currently navigating the biggest demand contraction in the history of aviation," said Air Group CEO Brad Tilden. “The rest of the leadership team and I could not be more proud of how the people of Alaska and Horizon reacted quickly and decisively to adjust our operations and our business, and to help our guests feel safe when they fly with us. Being tested in moments like this reveals character, and I'm confident in our future because of the way our people are responding every day with grit, determination and perseverance. Those are the qualities that will carry our airline and our country through this crisis and beyond."
        The following table reconciles the company's reported GAAP net income and earnings per diluted share (diluted EPS) for the three and six months ended June 30, 2020 and 2019 to adjusted amounts.
  Three Months Ended June 30,
  20202019
(in millions, except per-share amounts)DollarsDiluted EPSDollarsDiluted EPS
GAAP net income (loss) and diluted EPS$(214) $(1.73) $262  $2.11  
Payroll support program wage offset(362) (2.92) —  —  
Mark-to-market fuel hedge adjustments(6) (0.05)  0.02  
Special items - merger-related costs  0.01   0.06  
Special items - impairment charges and other69  0.56  —  —  
Income tax effect of reconciling items above73  0.59  (3) (0.02) 
Non-GAAP adjusted net income (loss) and diluted EPS$(439) $(3.54) $270  $2.17  
Six Months Ended June 30,
20202019
(in millions, except per-share amounts)DollarsDiluted EPSDollarsDiluted EPS
GAAP net income (loss) and diluted EPS$(446) $(3.60) $266  $2.14  
Payroll support program wage offset (362) (2.93) —  —  
Mark-to-market fuel hedge adjustments 0.03  (1) (0.01) 
Special items - merger-related costs  0.03  34  0.27  
Special items - impairment charges and other229  1.85  —  —  
Income tax effect of reconciling items above31  0.25  (8) (0.06) 
Non-GAAP adjusted net income (loss) and diluted EPS$(541) $(4.37) $291  $2.34  

        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 second quarter results will be streamed online at 8:30 a.m. Pacific time on July 23, 2020. It can be accessed at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call.

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References in this news release to "Air Group," "company," "we," "us" and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred to as "Alaska" and "Horizon," respectively, and together as our "airlines."

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 December 31, 2019, the Company's Quarterly Report on Form 10-Q for the year ended March 31, 2020, as amended, as well as in other documents filed by the Company with the SEC after the date thereof. Some of these risks include the risks associated with contagious illnesses and contagion, such as COVID-19, general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our indebtedness, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, changes in laws and regulations, and risks inherent in the achievement of anticipated synergies and the timing thereof in connection with the acquisition of Virgin America. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance, or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.

Alaska Airlines and its regional partners serve more than 115 destinations across the United States and North America, providing essential air service for our guests along with moving crucial cargo shipments, such as food, medicine, mail and e-commerce deliveries. With hubs in Seattle; San Francisco; Los Angeles; Portland, Oregon; and Anchorage, Alaska, the airline is known for low fares, award-winning customer service and sustainability efforts. With Alaska and its Global Partners, guests can earn and redeem miles on flights to more than 800 destinations worldwide. Learn about Alaska at newsroom.alaskaair.com and blog.alaskaair.com. Alaska Airlines and Horizon Air are subsidiaries of Alaska Air Group (NYSE: ALK).
###
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Alaska Air Group, Inc.
  Three Months Ended June 30,Six Months Ended June 30,
(in millions, except per-share amounts)20202019Change20202019Change
Operating Revenues:
Passenger revenue$309  $2,111  (85)%$1,790  $3,827  (53)%
Mileage Plan other revenue73  118  (38)%182  228  (20)%
Cargo and other39  59  (34)%85  109  (22)%
Total Operating Revenues421  2,288  (82)%2,057  4,164  (51)%
Operating Expenses:
Wages and benefits472  567  (17)%1,084  1,124  (4)%
Payroll support program wage offset(362) —  NM(362) —  NM
Variable incentive pay16  44  (64)%23  79  (71)%
Aircraft fuel, including hedging gains and losses59  502  (88)%443  922  (52)%
Aircraft maintenance45  115  (61)%160  235  (32)%
Aircraft rent74  82  (10)%155  165  (6)%
Landing fees and other rentals83  113  (27)%214  245  (13)%
Contracted services30  70  (57)%102  142  (28)%
Selling expenses 87  (95)%59  159  (63)%
Depreciation and amortization107  105  %215  211  %
Food and beverage service 53  (87)%56  102  (45)%
Third-party regional carrier expense26  42  (38)%63  83  (24)%
Other78  136  (43)%221  274  (19)%
Special items - merger-related costs   (88)% 34  (88)%
Special items - impairment charges and other69  —  NM229  —  NM
Total Operating Expenses709  1,924  (63)%2,666  3,775  (20)%
Operating Income (Loss)(288) 364  (179)%(609) 389  (257)%
Nonoperating Income (Expense):
Interest income 11  (36)%16  20  (20)%
Interest expense(17) (20) (15)%(30) (42) (29)%
Interest capitalized  (67)%  (43)%
Other - net (7) (186)%11  (17) (165)%
Total Nonoperating Income (Expense)(3) (13) (77)% (32) (103)%
Income (Loss) Before Income Tax(291) 351  (608) 357  
Income tax (benefit) expense(77) 89  (162) 91  
Net Income (Loss)$(214) $262  $(446) $266  
 
Basic Earnings (Loss) Per Share:$(1.74) $2.12  $(3.62) $2.15  
Diluted Earnings (Loss) Per Share:$(1.73) $2.11  $(3.60) $2.14  
Shares Used for Computation:
Basic123.296  123.418  123.058  123.355  
Diluted123.965  124.301  123.685  124.179  
Cash dividend declared per share:$—  $0.35  $0.375  $0.70  

5


CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
Alaska Air Group, Inc.
 
(in millions)June 30, 2020December 31, 2019
Cash and marketable securities$2,803  $1,521  
Other current assets441  516  
Current assets3,244  2,037  
Property and equipment - net6,795  6,902  
Operating lease assets1,568  1,711  
Goodwill1,943  1,943  
Intangible assets - net109  122  
Other assets339  278  
Total assets13,998  12,993  
Air traffic liability1,131  900  
Current portion of long-term debt1,087  235  
Current portion of operating lease liabilities273  269  
Other current liabilities1,629  1,797  
Current liabilities4,120  3,201  
Long-term debt 1,549  1,264  
Long-term operating lease liabilities1,376  1,439  
Other liabilities and credits3,092  2,758  
Shareholders' equity3,861  4,331  
Total liabilities and shareholders' equity$13,998  $12,993  
    
Debt-to-capitalization ratio, including operating leases51 %41 %
    
Number of common shares outstanding123.639  123.000  




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OPERATING STATISTICS SUMMARY (unaudited)
Alaska Air Group, Inc.
Three Months Ended June 30,Six Months Ended June 30,
20202019Change20202019Change
Consolidated Operating Statistics:(a)
Revenue passengers (000)1,48512,026(87.7)%10,41722,442(53.6)%
RPMs (000,000) "traffic"1,65414,638(88.7)%12,31027,087(54.6)%
ASMs (000,000) "capacity"4,30716,980(74.6)%19,61232,487(39.6)%
Load factor38.4%86.2%(47.8) pts62.8%83.4%(20.6) pts
Yield18.68¢14.43¢29.5%14.54¢14.13¢2.9%
RASM9.77¢13.48¢(27.5)%10.49¢12.82¢(18.2)%
CASMex(b)
21.87¢8.33¢162.5%12.00¢8.68¢38.2%
Economic fuel cost per gallon(b)
$1.20$2.27(47.1)%$1.77$2.20(19.5)%
Fuel gallons (000,000)54220(75.5)%248419(40.8)%
ASM's per gallon79.877.23.4%79.177.52.1%
Average number of full-time equivalent employees (FTE)15,83621,921(27.8)%19,15521,876(12.4)%
Mainline Operating Statistics:
Revenue passengers (000)9059,206(90.2)%7,58017,070(55.6)%
RPMs (000,000) "traffic"1,27613,207(90.3)%10,85824,379(55.5)%
ASMs (000,000) "capacity"3,36315,241(77.9)%17,06029,114(41.4)%
Load factor37.9%86.7%(48.8) pts63.6%83.7%(20.1) pts
Yield17.63¢13.38¢31.8%13.44¢13.08¢2.8%
RASM9.52¢12.66¢(24.8)%9.94¢12.02¢(17.3)%
CASMex(b)
22.19¢7.65¢190.1%11.17¢7.96¢40.3%
Economic fuel cost per gallon(b)
$1.20$2.26(46.9)%$1.78$2.19(18.7)%
Fuel gallons (000,000)38187(79.7)%201356(43.5)%
ASM's per gallon88.581.58.6%84.981.83.8%
Average number of FTE's12,34016,551(25.4)%14,57916,504(11.7)%
Aircraft utilization5.611.1(49.5)%8.810.7(17.8)%
Average aircraft stage length1,1441,311(12.7)%1,2701,308(2.9)%
Operating fleet(d)
225238(13) a/c225238(13) a/c
Regional Operating Statistics:(c)
Revenue passengers (000)5802,820(79.4)%2,8375,372(47.2)%
RPMs (000,000) "traffic"3781,431(73.6)%1,4522,708(46.4)%
ASMs (000,000) "capacity"9451,739(45.7)%2,5523,373(24.3)%
Load factor40.0%82.3%(42.3) pts56.9%80.3%(23.4) pts
Yield22.12¢24.06¢(8.1)%22.80¢23.57¢(3.3)%
RASM10.63¢20.51¢(48.2)%14.07¢19.62¢(28.3)%
Operating fleet 9494— a/c9494— 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)Excludes 12 aircraft that were permanently parked in March 2020.

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OPERATING SEGMENTS (unaudited)
Alaska Air Group, Inc.
Three Months Ended June 30, 2020
(in millions)MainlineRegionalHorizon
Consolidating & Other(a)
Air Group Adjusted(b)
Special Items(c)
Consolidated
Operating Revenues   
Passenger revenues$225  $84  $—  $—  $309  $—  $309  
CPA revenues—  —  81  (81) —  —  —  
Mileage Plan other revenue56  17  —  —  73  —  73  
Cargo and other39  —  —  —  39  —  39  
Total Operating Revenues320  101  81  (81) 421  —  421  
Operating Expenses
Operating expenses, excluding fuel746  210  68  (82) 942  (292) 650  
Economic fuel45  20  —  —  65  (6) 59  
Total Operating Expenses791  230  68  (82) 1,007  (298) 709  
Nonoperating Income (Expense)
Interest income11  —  —  (4)  —   
Interest expense(18) —  (5)  (17) —  (17) 
Interest capitalized —  —  —   —   
Other - net —  —  —   —   
Total Nonoperating Income (Expense)—  —  (5)  (3) —  (3) 
Income (Loss) Before Income Tax$(471) $(129) $ $ $(589) $298  $(291) 

Three Months Ended June 30, 2019
(in millions)MainlineRegionalHorizon
Consolidating & Other(a)
Air Group Adjusted(b)
Special Items(c)
Consolidated
Operating Revenues   
Passenger revenues$1,767  $344  $—  $—  $2,111  $—  $2,111  
CPA revenues—  —  112  (112) —  —  —  
Mileage Plan other revenue105  13  —  —  118  —  118  
Cargo and other57  —  —   59  —  59  
Total Operating Revenues1,929  357  112  (110) 2,288  —  2,288  
Operating Expenses
Operating expenses, excluding fuel1,167  268  95  (116) 1,414   1,422  
Economic fuel422  77  —  —  499   502  
Total Operating Expenses1,589  345  95  (116) 1,913  11  1,924  
Nonoperating Income (Expense)
Interest income17  —  —  (6) 11  —  11  
Interest expense(19) —  (7)  (20) —  (20) 
Interest capitalized —  —  —   —   
Other - net(7) —  —  —  (7) —  (7) 
Total Nonoperating Income (Expense)(6) —  (7) —  (13) —  (13) 
Income (Loss) Before Income Tax$334  $12  $10  $ $362  $(11) $351  
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Six Months Ended June 30, 2020
(in millions)MainlineRegionalHorizon
Consolidating & Other(a)
Air Group Adjusted(b)
Special Items(c)
Consolidated
Operating Revenues
Passenger revenues$1,459  $331  $—  $—  $1,790  $—  $1,790  
CPA revenues—  —  186  (186) —  —  —  
Mileage Plan other revenue154  28  —  —  182  —  182  
Cargo and other83  —  —   85  —  85  
Total Operating Revenues1,696  359  186  (184) 2,057  —  2,057  
Operating Expenses
Operating expenses, excluding fuel1,905  479  160  (192) 2,352  (129) 2,223  
Economic fuel358  82  —  —  440   443  
Total Operating Expenses2,263  561  160  (192) 2,792  (126) 2,666  
Nonoperating Income (Expense)
Interest income25  —  —  (9) 16  —  16  
Interest expense(30) —  (10) 10  (30) —  (30) 
Interest capitalized —  —  —   —   
Other - net12  —  —  (1) 11  —  11  
Total Nonoperating Income (Expense)11  —  (10) —   —   
Income (Loss) Before Income Tax$(556) $(202) $16  $ $(734) $126  $(608) 
Six Months Ended June 30, 2019
(in millions)MainlineRegionalHorizon
Consolidating & Other(a)
Air Group Adjusted(b)
Special Items(c)
Consolidated
Operating Revenues
Passenger revenues$3,189  $638  $—  $—  $3,827  $—  $3,827  
CPA revenues—  —  228  (228) —  —  —  
Mileage Plan other revenue205  23  —  —  228  —  228  
Cargo and other105     109  —  109  
Total Operating Revenues3,499  662  229  (226) 4,164  —  4,164  
Operating Expenses
Operating expenses, excluding fuel2,319  542  192  (234) 2,819  34  2,853  
Economic fuel780  143  —  —  923  (1) 922  
Total Operating Expenses3,099  685  192  (234) 3,742  33  3,775  
Nonoperating Income (Expense)
Interest income33  —  —  (13) 20  —  20  
Interest expense(40) —  (15) 13  (42) —  (42) 
Interest capitalized —  —  —   —   
Other - net(17) —  —  —  (17) —  (17) 
Total Nonoperating Income (Expense)(17) —  (15) —  (32) —  (32) 
Income (Loss) Before Income Tax$383  $(23) $22  $ $390  $(33) $357  

(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 allocation and excludes certain charges. See Note A in the accompanying pages for further information.
(c)Includes payroll support program wage offsets, special items and mark-to-market fuel hedge accounting adjustments.

9



GAAP TO NON-GAAP RECONCILIATIONS (unaudited)
Alaska Air Group, Inc.
CASM Excluding Fuel and Special Items Reconciliation
 Three Months Ended June 30,Six Months Ended June 30, 2019
2020201920202019
Consolidated:
CASM16.46 ¢11.33 ¢13.59 ¢11.62 ¢
Less the following components: 
Payroll support program wage offset (8.40) —  (1.85) —  
Aircraft fuel, including hedging gains and losses1.37  2.96  2.26  2.84  
Special items - merger-related costs0.02  0.04  0.01  0.10  
Special items - impairment charges and other1.60  —  1.17  —  
CASM excluding fuel and special items21.87 ¢8.33 ¢12.00 ¢8.68 ¢
Mainline:
CASM15.79 ¢10.50 ¢12.39 ¢10.76 ¢
Less the following components: 
Payroll support program wage offset(9.69) —  (1.91) —  
Aircraft fuel, including hedging gains and losses1.16  2.79  2.12  2.68  
Special items - merger-related costs0.02  0.06  0.02  0.12  
Special items - impairment charges and other2.11  —  0.99  —  
CASM excluding fuel and special items22.19 ¢7.65 ¢11.17 ¢7.96 ¢


Fuel Reconciliation
Three Months Ended June 30,
20202019
(in millions, except for per-gallon amounts)DollarsCost/GallonDollarsCost/Gallon
Raw or "into-plane" fuel cost$60  $1.11  $495  $2.25  
Losses on settled hedges 0.09   0.02  
Consolidated economic fuel expense65  1.20  499  2.27  
Mark-to-market fuel hedge adjustment(6) (0.11)  0.01