SEATTLE, April 26, 2017 /PRNewswire/ --
Financial Highlights:
- Reported net income for the first quarter under Generally
Accepted Accounting Principles ("GAAP") of $99 million or $0.79 per diluted share, compared to net income
of $184 million, or $1.46 per diluted share in 2016. As the
acquisition of Virgin America Inc. ("Virgin America") closed on
Dec. 14, 2016, first quarter 2017
information reflects the results of Virgin America, including the
impacts associated with purchase accounting. First quarter 2016
results do not include Virgin America.
- Reported first quarter net income, excluding merger-related
costs and mark-to-market fuel hedging adjustments, of $130 million, compared to $183 million in the first quarter of 2016.
Adjusted diluted earnings per share were $1.05, compared to $1.45 in the first quarter of 2016. This
quarter's results were in line with First Call analyst consensus
estimate of $1.02 per share.
- Paid $0.30 per-share quarterly
cash dividend in the first quarter, a 9% increase over the dividend
paid in the first quarter of 2016.
- Total assets surpassed $10
billion for the first time in Air Group's history.
- Generated approximately $470
million of operating cash flow and used approximately
$215 million for capital
expenditures, resulting in $255
million of free cash flow in the first quarter of 2017.
- Held $1.7 billion in unrestricted
cash and marketable securities as of March
31, 2017.
Operational Accomplishments and Highlights:
- Released the single largest new market announcement in Air
Group's history, adding 20 new nonstop markets from San Francisco
International ("SFO"), San Jose International ("SJC") and
San Diego ("SAN"). In total,
announced 26 and launched six new routes during the quarter,
highlighting the primary purpose of the Virgin America acquisition,
which is to grow the combined airline and become the premier
carrier for guests on the West Coast.
- Reached a tentative agreement with the International
Brotherhood of Teamsters to amend the eight-year contract with
Horizon Air's pilots, which will provide Horizon the ability to
attract and retain the best pilots in the regional industry.
- Granted "Single Carrier Determination" by the National
Mediation Board ("NMB") for Alaska Airlines and Virgin America,
paving the way for labor integration and union representation. The
NMB officially certified the Association of Flight Attendants as
the union representative for Virgin America inflight
teammates.
- Took delivery of the first of 33 E175s to be flown by
subsidiary Horizon Air.
- Became the first airline to take delivery of the Airbus A321neo
in April 2017. The aircraft is the
first of five scheduled for delivery through 2017.
- Launched various new in-flight amenities, including Free Chat,
upgraded food and beverage options and Premium Class service.
- Added Condor Airlines as an Alaska Mileage Plan partner.
- Alaska Airlines: Ranked No. 1 in the "Airline Quality Rating"
of performance and quality for 2016—a study performed by
Embry-Riddle Aeronautical University
focused on four major areas of airline performance aspects
important to air travel consumers.
- Alaska Airlines: Named one of top ten airlines in the world by
TripAdvisor in 2017 Travelers' Choice awards.
- Alaska Airlines: Won the "Best Rewards Program" for Alaska
Mileage Plan for carriers in the "Americas" region in the sixth
annual FlyerTalk Award.
Alaska Air Group, Inc., (NYSE: ALK) today reported first quarter
2017 GAAP net income of $99 million,
or $0.79 per diluted share, compared
to $184 million, or $1.46 per diluted share in the first quarter of
2016. Excluding the impact of special items and mark-to-market fuel
hedge adjustments, the company reported adjusted net income of
$130 million, or $1.05 per diluted share, compared to $183 million, or $1.45 per diluted share, in 2016.
"We are pleased to report a solid profit for the first quarter,"
said Alaska CEO Brad Tilden. "With
the biggest integration decisions behind us, the hard work of
executing the plan now lies ahead. We've laid a foundation for
growth with our recent announcements of 37 new routes, and the
leadership team is fully focused on running a great airline and
doing the things we do well—taking care of our guests, building
loyalty and operating on time."
The following table reconciles the company's reported GAAP net
income and earnings per diluted share ("diluted EPS") during the
first quarters of 2017 and 2016 to adjusted amounts:
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
(in millions,
except per-share amounts)
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
Reported GAAP net
income
|
$
|
99
|
|
|
$
|
0.79
|
|
|
$
|
184
|
|
|
$
|
1.46
|
|
Mark-to-market fuel
hedge adjustments
|
10
|
|
|
0.08
|
|
|
(2)
|
|
|
(0.02)
|
|
Special
items—merger-related costs
|
40
|
|
|
0.33
|
|
|
—
|
|
|
—
|
|
Income tax effect on
special items and fuel hedge adjustments
|
(19)
|
|
|
(0.15)
|
|
|
1
|
|
|
0.01
|
|
Non-GAAP adjusted
income and per-share amounts
|
$
|
130
|
|
|
$
|
1.05
|
|
|
$
|
183
|
|
|
$
|
1.45
|
|
Statistical data, as well as a reconciliation of the reported
non-GAAP financial measures, can be found in the accompanying
tables. A glossary of financial terms can be found on the last page
of this release.
A conference call regarding the first quarter results will be
simulcast online at 8:30 a.m. Pacific
time on April 26, 2017. It can
be accessed through the company's website 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.
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.,
Horizon Air Industries, Inc., and Virgin America Inc. are referred
to as "Alaska," "Horizon," and
"Virgin America" 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 Dec. 31, 2016, as well as in other documents
filed by the Company with the SEC after the date thereof. Some of
these risks include 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, together with Virgin America and its regional
partners, flies 40 million customers a year to 118 destinations
with an average of 1,200 daily flights across the United States and to Mexico, Canada, Costa
Rica and Cuba. With
Alaska and Alaska Global Partners,
customers can earn and redeem miles on flights to more than 900
destinations worldwide. Alaska Mileage Plan ranked "Highest in
Customer Satisfaction with Airline Loyalty Rewards Programs" in the
J.D. Power Airline Loyalty/Rewards Program Satisfaction Report for
the last three consecutive years. Learn more about
Alaska's award-winning service and
unmatched reliability at newsroom.alaskaair.com and
blog.alaskaair.com. Alaska Airlines, Virgin America and Horizon Air
are subsidiaries of Alaska Air Group (NYSE: ALK).
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
|
Alaska Air Group,
Inc.
|
|
As the acquisition
closed on December 14, 2016, amounts presented below include Virgin
America results for the three months ended March 31, 2017 but not
for the prior period.
|
|
|
Three Months Ended
March 31,
|
(in millions,
except per-share amounts)
|
2017
|
|
2016
|
|
Change(a)
|
Operating
Revenues:
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
Mainline
|
$
|
1,272
|
|
|
$
|
927
|
|
|
37
|
%
|
Regional
|
212
|
|
|
206
|
|
|
3
|
%
|
Total passenger
revenue
|
1,484
|
|
|
1,133
|
|
|
31
|
%
|
Freight and
mail
|
24
|
|
|
24
|
|
|
—
|
%
|
Other—net
|
241
|
|
|
190
|
|
|
27
|
%
|
Total Operating
Revenues
|
1,749
|
|
|
1,347
|
|
|
30
|
%
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
Wages and
benefits
|
448
|
|
|
336
|
|
|
33
|
%
|
Variable incentive
pay
|
31
|
|
|
32
|
|
|
(3)
|
%
|
Aircraft fuel,
including hedging gains and losses
|
339
|
|
|
167
|
|
|
103
|
%
|
Aircraft
maintenance
|
87
|
|
|
68
|
|
|
28
|
%
|
Aircraft
rent
|
65
|
|
|
29
|
|
|
124
|
%
|
Landing fees and
other rentals
|
115
|
|
|
80
|
|
|
44
|
%
|
Contracted
services
|
81
|
|
|
60
|
|
|
35
|
%
|
Selling
expenses
|
81
|
|
|
49
|
|
|
65
|
%
|
Depreciation and
amortization
|
90
|
|
|
88
|
|
|
2
|
%
|
Food and beverage
service
|
45
|
|
|
31
|
|
|
45
|
%
|
Third-party regional
carrier expense
|
27
|
|
|
23
|
|
|
17
|
%
|
Special
items—merger-related costs
|
40
|
|
|
—
|
|
|
NM
|
Other
|
134
|
|
|
94
|
|
|
43
|
%
|
Total Operating
Expenses
|
1,583
|
|
|
1,057
|
|
|
50
|
%
|
Operating
Income
|
166
|
|
|
290
|
|
|
(43)
|
%
|
|
|
|
|
|
|
Nonoperating
Income (Expense):
|
|
|
|
|
|
Interest
income
|
7
|
|
|
6
|
|
|
|
Interest
expense
|
(25)
|
|
|
(13)
|
|
|
|
Interest
capitalized
|
4
|
|
|
8
|
|
|
|
Other—net
|
—
|
|
|
1
|
|
|
|
Total Nonoperating
Income (Expense)
|
(14)
|
|
|
2
|
|
|
(800)
|
%
|
Income Before
Income Tax
|
152
|
|
|
292
|
|
|
|
Income tax
expense
|
53
|
|
|
108
|
|
|
|
Net
Income
|
$
|
99
|
|
|
$
|
184
|
|
|
(46)
|
%
|
|
|
|
|
|
|
Basic Earnings Per
Share:
|
$
|
0.80
|
|
|
$
|
1.47
|
|
|
(46)
|
%
|
Diluted Earnings
Per Share:
|
$
|
0.79
|
|
|
$
|
1.46
|
|
|
(46)
|
%
|
|
|
|
|
|
|
Shares Used for
Computation:
|
|
|
|
|
|
Basic
|
123.495
|
|
|
124.550
|
|
|
(1)
|
%
|
Diluted
|
124.299
|
|
|
125.328
|
|
|
(1)
|
%
|
|
|
|
|
|
|
Cash dividend
declared per share:
|
$
|
0.300
|
|
|
$
|
0.275
|
|
|
|
|
|
(a)
|
See Combined
Comparative information in the accompanying pages for
year-over-year comparisons including Virgin America.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
Alaska Air Group,
Inc.
|
|
(in
millions)
|
March 31,
2017
|
|
December 31,
2016
|
Cash and marketable
securities
|
$
|
1,710
|
|
|
$
|
1,580
|
|
|
|
|
|
Total current
assets
|
2,213
|
|
|
2,050
|
|
Property and
equipment—net
|
5,809
|
|
|
5,666
|
|
Goodwill
|
1,942
|
|
|
1,934
|
|
Intangible
assets
|
139
|
|
|
143
|
|
Other
assets
|
199
|
|
|
169
|
|
Total
assets
|
10,302
|
|
|
9,962
|
|
|
|
|
|
Air traffic
liability
|
1,218
|
|
|
849
|
|
Current portion of
long-term debt
|
332
|
|
|
319
|
|
Other current
liabilities
|
1,285
|
|
|
1,367
|
|
Current
liabilities
|
2,835
|
|
|
2,535
|
|
Long-term
debt
|
2,531
|
|
|
2,645
|
|
Other liabilities and
credits
|
1,922
|
|
|
1,851
|
|
Shareholders'
equity
|
3,014
|
|
|
2,931
|
|
Total liabilities
and shareholders' equity
|
$
|
10,302
|
|
|
$
|
9,962
|
|
|
|
|
|
Debt-to-capitalization ratio, adjusted for operating
leases(a)
|
58
|
%
|
|
59
|
%
|
|
|
|
|
Number of common
shares outstanding
|
123.729
|
|
|
123.328
|
|
|
|
(a)
|
Calculated using the
present value of remaining aircraft lease payments.
|
OPERATING
STATISTICS SUMMARY (unaudited)
|
Alaska Air Group,
Inc.
|
|
As the acquisition
closed on December 14, 2016, Consolidated and Mainline amounts
presented below include Virgin America results for the three months
ended March 31, 2017 but not for the prior period.
|
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
|
Change(e)
|
Consolidated
Operating Statistics:(a)
|
|
|
|
|
|
Revenue passengers
(000)
|
10,018
|
|
7,835
|
|
27.9%
|
RPMs (000,000)
"traffic"
|
11,708
|
|
8,571
|
|
36.6%
|
ASMs (000,000)
"capacity"
|
14,394
|
|
10,453
|
|
37.7%
|
Load
factor
|
81.3%
|
|
82.0%
|
|
(0.7)pts
|
Yield
|
12.68¢
|
|
13.22¢
|
|
(4.1)%
|
PRASM
|
10.31¢
|
|
10.84¢
|
|
(4.9)%
|
RASM
|
12.15¢
|
|
12.88¢
|
|
(5.7)%
|
CASMex(b)
|
8.37¢
|
|
8.51¢
|
|
(1.6)%
|
Economic fuel cost
per gallon(c)
|
$1.78
|
|
$1.29
|
|
38.0%
|
Fuel gallons
(000,000)
|
184
|
|
132
|
|
39.4%
|
ASM's per
gallon
|
78.2
|
|
79.2
|
|
(1.3%)
|
Average number of
full-time equivalent employees (FTE)
|
18,682
|
|
14,357
|
|
30.1%
|
|
|
|
|
|
|
Mainline Operating
Statistics:
|
|
|
|
|
|
Revenue passengers
(000)
|
7,783
|
|
5,642
|
|
37.9%
|
RPMs (000,000)
"traffic"
|
10,827
|
|
7,716
|
|
40.3%
|
ASMs (000,000)
"capacity"
|
13,260
|
|
9,354
|
|
41.8%
|
Load
factor
|
81.7%
|
|
82.5%
|
|
(0.8)pts
|
Yield
|
11.75¢
|
|
12.01¢
|
|
(2.2)%
|
PRASM
|
9.59¢
|
|
9.91¢
|
|
(3.2)%
|
RASM
|
11.44¢
|
|
11.99¢
|
|
(4.6)%
|
CASMex(b)
|
7.53¢
|
|
7.49¢
|
|
0.5%
|
Economic fuel cost
per gallon(c)
|
$1.78
|
|
$1.28
|
|
39.1%
|
Fuel gallons
(000,000)
|
164
|
|
113
|
|
45.1%
|
ASM's per
gallon
|
80.8
|
|
82.8
|
|
(2.4%)
|
Average number of
FTE's
|
15,007
|
|
11,123
|
|
34.9%
|
Aircraft
utilization
|
10.8
|
|
10.6
|
|
1.9%
|
Average aircraft
stage length
|
1,245
|
|
1,237
|
|
0.6%
|
Operating
fleet
|
217
|
|
152
|
|
65 a/c
|
|
|
|
|
|
|
Regional Operating
Statistics:(d)
|
|
|
|
|
|
Revenue passengers
(000)
|
2,234
|
|
2,192
|
|
1.9%
|
RPMs (000,000)
"traffic"
|
880
|
|
855
|
|
2.9%
|
ASMs (000,000)
"capacity"
|
1,134
|
|
1,100
|
|
3.1%
|
Load
factor
|
77.6%
|
|
77.7%
|
|
(0.1)pts
|
Yield
|
24.13¢
|
|
24.09¢
|
|
0.2%
|
PRASM
|
18.73¢
|
|
18.72¢
|
|
0.1%
|
Operating
fleet
|
73
|
|
67
|
|
6 a/c
|
|
|
(a)
|
Except for full-time
equivalent employees, data includes information related to
third-party regional capacity purchase flying
arrangements.
|
(b)
|
See a reconciliation
of this non-GAAP measure and Note A for a discussion of potential
importance of this measure to investors in the accompanying
pages.
|
(c)
|
See a reconciliation
of economic fuel cost in the accompanying pages.
|
(d)
|
Data presented
includes information related to flights operated by Horizon Air and
third-party carriers.
|
(e)
|
See Combined
Comparative information in the accompanying pages for
year-over-year comparisons including Virgin America.
|
SUPPLEMENTARY COMBINED COMPARATIVE FINANCIAL AND OPERATING
INFORMATION (unaudited)
We believe that analysis of specific financial and operational
results on a combined basis provides more meaningful year-over-year
comparisons. The table below provides "Combined Comparative"
results for the three months ended March 31,
2016, determined as the sum of the historical consolidated
results of Air Group and of Virgin America. Virgin America's
financial information has been conformed to reflect Air Group's
historical financial statement presentation for each period
presented. This information does not purport to reflect what our
financial and operational results would have been had the
acquisition been consummated at the beginning of the periods
presented.
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
|
|
|
As
Reported
|
|
Combined(a)
|
|
Change
|
Combined
Comparative Operating Results
|
|
|
|
|
|
Passenger
revenue
|
$
|
1,484
|
|
|
$
|
1,462
|
|
|
2%
|
Other
revenue
|
265
|
|
|
248
|
|
|
7%
|
Total Operating
Revenues
|
1,749
|
|
|
1,710
|
|
|
2%
|
Non-fuel operating
expense
|
1,244
|
|
|
1,150
|
|
|
8%
|
Fuel
expense
|
339
|
|
|
238
|
|
|
42%
|
Total Operating
Expenses
|
1,583
|
|
|
1,388
|
|
|
14%
|
Operating
Income
|
166
|
|
|
322
|
|
|
(48)%
|
Nonoperating income
(expense)
|
(14)
|
|
|
(2)
|
|
|
600%
|
Income Before
Tax
|
152
|
|
|
320
|
|
|
(53)%
|
Special
items—merger-related costs
|
40
|
|
|
2
|
|
|
NM
|
Mark-to-market fuel
hedge adjustments
|
10
|
|
|
(3)
|
|
|
NM
|
Adjusted Income
Before Tax
|
$
|
202
|
|
|
$
|
319
|
|
|
(37)%
|
|
|
|
|
|
|
Combined
Comparative Operating Statistics
|
|
|
|
|
|
Revenue passengers
(in 000)
|
10,018
|
|
|
9,602
|
|
|
4.3%
|
RPMs (in
000,000)
|
11,708
|
|
|
11,186
|
|
|
4.7%
|
ASMs (in
000,000)
|
14,394
|
|
|
13,719
|
|
|
4.9%
|
Load
Factor
|
81.3
|
%
|
|
81.5
|
%
|
|
(0.2) pts
|
PRASM
|
10.31
|
¢
|
|
10.66
|
¢
|
|
(3.3)%
|
RASM
|
12.15
|
¢
|
|
12.47
|
¢
|
|
(2.6)%
|
CASMex
|
8.37
|
¢
|
|
8.36
|
¢
|
|
0.1%
|
|
|
(a)
|
Refer to our Investor
Update issued on April 12, 2017 on Form 8-K for further details of
the calculation of the three months ended March 31, 2016 combined
data.
|
OPERATING SEGMENTS
(unaudited)
|
Alaska Air Group,
Inc.
|
|
As the acquisition
closed on December 14, 2016, Consolidated and Mainline amounts
presented below include Virgin America results for the three months
ended March 31, 2017 but not for the prior period.
|
|
|
Three Months Ended
March 31, 2017
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
& Other
|
|
Air Group
Adjusted(a)
|
|
Special
Items(b)
|
|
Consolidated
|
Operating
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
|
1,272
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,272
|
|
|
$
|
—
|
|
|
$
|
1,272
|
|
Regional
|
—
|
|
|
212
|
|
|
—
|
|
|
—
|
|
|
212
|
|
|
—
|
|
|
212
|
|
Total
passenger revenues
|
1,272
|
|
|
212
|
|
|
—
|
|
|
—
|
|
|
1,484
|
|
|
—
|
|
|
1,484
|
|
CPA
revenues
|
—
|
|
|
—
|
|
|
97
|
|
|
(97)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Freight and
mail
|
23
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Other—net
|
222
|
|
|
17
|
|
|
1
|
|
|
1
|
|
|
241
|
|
|
—
|
|
|
241
|
|
Total operating
revenues
|
1,517
|
|
|
230
|
|
|
98
|
|
|
(96)
|
|
|
1,749
|
|
|
—
|
|
|
1,749
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
998
|
|
|
200
|
|
|
103
|
|
|
(97)
|
|
|
1,204
|
|
|
40
|
|
|
1,244
|
|
Economic
fuel
|
292
|
|
|
36
|
|
|
—
|
|
|
1
|
|
|
329
|
|
|
10
|
|
|
339
|
|
Total operating
expenses
|
1,290
|
|
|
236
|
|
|
103
|
|
|
(96)
|
|
|
1,533
|
|
|
50
|
|
|
1,583
|
|
Nonoperating
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
Interest
expense
|
(22)
|
|
|
—
|
|
|
(2)
|
|
|
(1)
|
|
|
(25)
|
|
|
—
|
|
|
(25)
|
|
Other
|
3
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
4
|
|
Total Nonoperating
income (expense)
|
(12)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(14)
|
|
|
—
|
|
|
(14)
|
|
Income (loss)
before income tax
|
$
|
215
|
|
|
$
|
(6)
|
|
|
$
|
(7)
|
|
|
$
|
—
|
|
|
$
|
202
|
|
|
$
|
(50)
|
|
|
$
|
152
|
|
|
|
|
Three Months Ended
March 31, 2016
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
|
|
Air Group
Adjusted(a)
|
|
Special
Items(b)
|
|
Consolidated
|
Operating
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
|
927
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
927
|
|
|
$
|
—
|
|
|
$
|
927
|
|
Regional
|
—
|
|
|
206
|
|
|
—
|
|
|
—
|
|
|
206
|
|
|
—
|
|
|
206
|
|
Total
passenger revenues
|
927
|
|
|
206
|
|
|
—
|
|
|
—
|
|
|
1,133
|
|
|
—
|
|
|
1,133
|
|
CPA
revenues
|
—
|
|
|
—
|
|
|
103
|
|
|
(103)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Freight and
mail
|
23
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Other—net
|
172
|
|
|
17
|
|
|
1
|
|
|
—
|
|
|
190
|
|
|
—
|
|
|
190
|
|
Total operating
revenues
|
1,122
|
|
|
224
|
|
|
104
|
|
|
(103)
|
|
|
1,347
|
|
|
—
|
|
|
1,347
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
701
|
|
|
186
|
|
|
105
|
|
|
(102)
|
|
|
890
|
|
|
—
|
|
|
890
|
|
Economic
fuel
|
144
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
169
|
|
|
(2)
|
|
|
167
|
|
Total operating
expenses
|
845
|
|
|
211
|
|
|
105
|
|
|
(102)
|
|
|
1,059
|
|
|
(2)
|
|
|
1,057
|
|
Nonoperating
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
Interest
expense
|
(12)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(13)
|
|
|
—
|
|
|
(13)
|
|
Other
|
7
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
9
|
|
|
—
|
|
|
9
|
|
Total Nonoperating
income (expense)
|
1
|
|
|
—
|
|
|
(1)
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Income (loss)
before income tax
|
$
|
278
|
|
|
$
|
13
|
|
|
$
|
(2)
|
|
|
$
|
1
|
|
|
$
|
290
|
|
|
$
|
2
|
|
|
$
|
292
|
|
|
|
(a)
|
The Air Group
Adjusted column represents the financial information that is
reviewed by management to assess performance of operations and
determine capital allocation and does not include certain charges.
See Note A in the accompanying pages for further
information.
|
(b)
|
Includes
merger-related costs and mark-to-market fuel-hedge accounting
adjustments.
|
GAAP TO NON-GAAP
RECONCILIATIONS (unaudited)
|
Alaska Air Group,
Inc.
|
|
As the acquisition
closed on December 14, 2016, amounts presented below include Virgin
America results for the three months ended March 31, 2017 but not
for the prior period.
|
|
CASM Excluding
Fuel and Special Items Reconciliation
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Consolidated:
|
|
|
|
CASM
|
11.00
|
¢
|
|
10.11
|
¢
|
Less the following
components:
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
2.36
|
|
|
1.60
|
|
Special
items—merger-related costs
|
0.27
|
|
|
—
|
|
CASM excluding
fuel and special items
|
8.37
|
¢
|
|
8.51
|
¢
|
|
|
|
|
Mainline:
|
|
|
|
CASM
|
10.11
|
¢
|
|
9.01
|
¢
|
Less the following
components:
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
2.28
|
|
|
1.52
|
|
Special
items—merger-related costs
|
0.30
|
|
|
—
|
|
CASM excluding
fuel and special items
|
7.53
|
¢
|
|
7.49
|
¢
|
Fuel
Reconciliation
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
(in millions,
except for per-gallon amounts)
|
Dollars
|
|
Cost/Gallon
|
|
Dollars
|
|
Cost/Gallon
|
Raw or "into-plane"
fuel cost
|
$
|
325
|
|
|
$
|
1.76
|
|
|
$
|
165
|
|
|
$
|
1.26
|
|
Losses on settled
hedges
|
4
|
|
|
0.02
|
|
|
4
|
|
|
0.03
|
|
Consolidated
economic fuel expense
|
329
|
|
|
1.78
|
|
|
169
|
|
|
1.29
|
|
Mark-to-market fuel
hedge adjustment
|
10
|
|
|
0.06
|
|
|
(2)
|
|
|
(0.02)
|
|
GAAP fuel
expense
|
$
|
339
|
|
|
$
|
1.84
|
|
|
$
|
167
|
|
|
$
|
1.27
|
|
Fuel
gallons
|
184
|
|
|
|
|
132
|
|
|
|
Note A: Pursuant to Regulation G, we are providing
reconciliation of reported non-GAAP financial measures to their
most directly comparable financial measures reported on a GAAP
basis. We believe that consideration of these non-GAAP financial
measures may be important to investors for the following
reasons:
- By eliminating fuel expense and certain special items
(including merger-related costs) from our unit metrics, we believe
that we have better visibility into the results of operations and
our non-fuel cost-reduction initiatives. Our industry is
highly competitive and is characterized by high fixed costs, so
even a small reduction in non-fuel operating costs can result in a
significant improvement in operating results. In addition, we
believe that all domestic carriers are similarly impacted by
changes in jet fuel costs over the long run, so it is important for
management (and thus investors) to understand the impact of (and
trends in) company-specific cost drivers such as labor rates and
productivity, airport costs, maintenance costs, etc., which are
more controllable by management.
- Cost per ASM (CASM) excluding fuel and certain special items,
such as merger-related costs, is one of the most important measures
used by management and by the Air Group Board of Directors in
assessing quarterly and annual cost performance.
- Adjusted income before income tax and CASM excluding fuel (and
other items as specified in our plan documents) are important
metrics for the employee incentive plan, which covers the majority
of Air Group employees.
- CASM excluding fuel and certain special items is a measure
commonly used by industry analysts, and we believe it is the basis
by which they compare our airlines to others in the
industry. The measure is also the subject of frequent
questions from investors.
- Disclosure of the individual impact of certain noted items
provides investors the ability to measure and monitor performance
both with and without these special items. We believe that
disclosing the impact of certain items, such as merger-related
costs and mark-to-market hedging adjustments, is important because
it provides information on significant items that are not
necessarily indicative of future performance. Industry analysts and
investors consistently measure our performance without these items
for better comparability between periods and among other
airlines.
- Although we disclose our passenger unit revenues, we do not
(nor are we able to) evaluate unit revenues excluding the impact
that changes in fuel costs have had on ticket prices. Fuel
expense represents a large percentage of our total operating
expenses. Fluctuations in fuel prices often drive changes in
unit revenues in the mid-to-long term. Although we believe it
is useful to evaluate non-fuel unit costs for the reasons noted
above, we would caution readers of these financial statements not
to place undue reliance on unit costs excluding fuel as a measure
or predictor of future profitability because of the significant
impact of fuel costs on our business.
Glossary of Terms
Aircraft Utilization - block hours per day; this
represents the average number of hours per day our aircraft are in
transit
Aircraft Stage Length - represents the average miles
flown per aircraft departure
ASMs - available seat miles, or "capacity"; represents
total seats available across the fleet multiplied by the number of
miles flown
CASM - operating costs per ASM, or "unit cost";
represents all operating expenses including fuel and special
items
CASMex - operating costs excluding fuel and special items
per ASM; this metric is used to help track progress toward
reduction of non-fuel operating costs since fuel is largely out of
our control
Debt-to-capitalization ratio - represents adjusted debt
(long-term debt plus the present value of future operating lease
payments) divided by total equity plus adjusted debt
Diluted Earnings per Share - represents earnings per
share ("EPS") using fully diluted shares outstanding
Diluted Shares - represents the total number of shares
that would be outstanding if all possible sources of conversion,
such as stock options, were exercised
Economic Fuel - best estimate of the cash cost of fuel,
net of the impact of our fuel-hedging program
Free Cash Flow - total operating cash flow generated less
cash paid for capital expenditures
Load Factor - RPMs as a percentage of ASMs; represents
the number of available seats that were filled with paying
passengers
Mainline - represents flying Boeing 737 and Airbus 320
family jets and all associated revenues and costs
PRASM - passenger revenue per ASM; commonly called
"passenger unit revenue"
Productivity - number of revenue passengers per full-time
equivalent employee
RASM - operating revenue per ASMs, or "unit revenue";
operating revenue includes all passenger revenue, freight &
mail, Mileage Plan and other ancillary revenue; represents the
average total revenue for flying one seat one mile
Regional - represents capacity purchased by Alaska from Horizon, SkyWest and PenAir. In
this segment, Regional records actual on-board passenger revenue,
less costs such as fuel, distribution costs, and payments made to
Horizon, SkyWest and PenAir under the respective capacity purchased
arrangement (CPAs). Additionally, Regional includes an allocation
of corporate overhead such as IT, finance, other administrative
costs incurred by Alaska and on
behalf of Horizon.
RPMs - revenue passenger miles, or "traffic"; represents
the number of seats that were filled with paying passengers; one
passenger traveling one mile is one RPM
Yield - passenger revenue per RPM; represents the average
revenue for flying one passenger one mile
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/alaska-air-group-reports-first-quarter-2017-results-300445872.html
SOURCE Alaska Air Group, Inc.