ALK
$51.34
Alaska Air Group
$1.18
2.35%
Earnings Details
Quarter December 2022
Thursday, January 26, 2023 6:00:00 AM
Tweet Share Watch
Summary

Alaska Air Group Reports In-line

Alaska Air Group (ALK) reported Quarter December 2022 earnings of $0.92 per share on revenue of $2.5 billion. The consensus earnings estimate was $0.90 per share on revenue of $2.5 billion. The Earnings Whisper number was $0.92 per share. Revenue grew 30.5% on a year-over-year basis.

Alaska Air Group Inc through its subsidiaries, provides passenger air, freight and mail services within the state of Alaska and on the West Coast.

Results
Reported Earnings
$0.92
Earnings Whisper
$0.92
Consensus Estimate
$0.90
Reported Revenue
$2.48 Bil
Revenue Estimate
$2.51 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Alaska Air Group delivers strong fourth quarter 2022 and full-year results

Delivered industry-leading full-year adjusted pretax margin of 7.6%; 
Record annual revenue of $9.6 billion, up 10% versus 2019; 
Employees hard work recognized with performance-based bonuses totaling 10.5% of annual pay

SEATTLE, Jan. 26, 2023 /PRNewswire/ -- Alaska Air Group Inc. (NYSE: ALK) today reported financial results for the fourth quarter and full year ended Dec. 31, 2022, and provided an outlook for the first quarter ending March 31, 2023.

"2022 was a year of significant recovery and accomplishment for Alaska Airlines," said Alaska Airlines CEO Ben Minicucci. "Despite many challenges during the year, we ran one of the best operations, signed five new labor deals, and executed the majority of our single fleet transition. The results we posted today signal how well our teams are navigating this recovery. I want to thank our employees for their commitment to our success, and for the work they do every day to take great care of our guests. I am confident that we are well positioned to grow, compete and out-perform in 2023."

Financial Results:
  • Reported net income for the fourth quarter and full year 2022 under Generally Accepted Accounting Principles (GAAP) of $22 million, or $0.17 per diluted share, and $58 million, or $0.45 per diluted share. These results compare to net income for the fourth quarter and full year 2021 of $18 million, or $0.14 per diluted share, and $478 million, or $3.77 per diluted share.
  • Reported net income for the fourth quarter and full year 2022, excluding special items and mark-to-market fuel hedge accounting adjustments, of $118 million, or $0.92 per diluted share, and $556 million, or $4.35 per diluted share. These results compare to net income for the fourth quarter and net loss for the full year 2021, excluding special items and mark-to-market fuel hedge accounting adjustments, of $31 million, or $0.24 per diluted share, and $256 million, or $2.03 per share.
  • Recorded $257 million of incentive pay in 2022 earned by employees for meeting or exceeding profitability, safety and emissions targets. The payout is the richest in the 20-year history of the plan, representing nearly six weeks of pay for most employees.
  • Recorded $2.5 billion in operating revenue for the fourth quarter, resulting in $9.6 billion in operating revenue for the full year 2022, the highest annual total in company history.
  • Received nearly $1.5 billion in annual cash remuneration under the renewed co-brand credit card arrangement with Bank of America, the highest level in the program's history.

 

Balance Sheet and Liquidity:
  • Announced plans to resume share repurchases in early 2023 to offset annual dilution. Repurchases are expected to range from $75 million to $100 million in 2023.
  • Ended the quarter with a debt-to-capitalization ratio of 49%, within our target range of 40% to 50%.
  • Repaid $52 million in debt in the fourth quarter, bringing total debt payments to $385 million for the full year 2022.
  • Held $2.4 billion in unrestricted cash and marketable securities as of Dec. 31, 2022.

 

Fleet Updates:
  • Retired ten Airbus A320 aircraft and nine Q400 aircraft during the fourth quarter. All remaining A320 aircraft have since been retired and all remaining Q400 aircraft will be retired by the end of January 2023.
  • Amended a previously existing aircraft purchase agreement with Boeing to convert 52 737 MAX aircraft options to firm purchases for delivery between 2024 and 2027. Alaska also added an incremental 105 delivery positions to purchase 737 MAX aircraft between 2026 and 2030.
  • Received four 737-9 aircraft during the quarter, bringing the total 737-9 fleet to 37.
  • Received three E175 aircraft during the quarter, bringing Horizon's total E175 fleet to 33.

 

Other Operational Updates:
  • Partnered with Lyft to offer Mileage Plan members one mile for every $1 spent on all Lyft rides in the U.S. and Canada.
  • Added a new Mileage Plan partner, Mokulele Airlines, to offer guests more convenient connections within the Hawaiian Islands, starting in early 2023.
  • Launched the first U.S. electronic bag tag program, enabling guests to tag their luggage through the airline's mobile app before they reach the airport.
  • Opened the renovated C Concourse Lounge in Seattle, the first of several investments that will improve the lounge experience with more seating and food and beverage choices for guests in Seattle, Portland, San Francisco and Los Angeles.

 

Environmental, Social and Governance Updates:
  • Donated a retired Q400 to the Portland Community College Foundation, providing students of the Aviation Maintenance Technology and Aviation Science programs the opportunity to gain hands-on experience working on a commercial aircraft.
  • Completed the transition to paper cups for inflight beverages, which will replace more than 55 million plastic cups each year with a more sustainable alternative.
  • Donated 55 million miles to 20 different charities through Alaska's Care Miles program in 2022.
  • Created a new Diversity, Equity and Inclusion Disability Office dedicated to ensuring Alaska becomes a leader in disability inclusion.

The following table reconciles the company's reported GAAP net income per share (EPS) for the three and twelve months ended Dec. 31, 2022 and 2021 to adjusted amounts.


Three Months Ended December 31,


2022


2021

(in millions, except per-share amounts)

Dollars


Diluted EPS


Dollars


Diluted EPS

GAAP net income per share

$                 22


$             0.17


$                 18


$             0.14

Mark-to-market fuel hedge adjustments

12


0.09


21


0.16

Special items - fleet transition and other(a)

120


0.93


(6)


(0.05)

Special items - labor and related(b)

(6)


(0.04)


2


0.02

Income tax effect of reconciling items above

(30)


(0.23)


(4)


(0.03)

Non-GAAP adjusted net income (loss) per share

$              118


$             0.92


$                 31


$             0.24

 


Twelve Months Ended December 31,


2022


2021

(in millions, except per-share amounts)

Dollars


Diluted EPS


Dollars


Diluted EPS

GAAP net income per share

$                 58


$             0.45


$              478


$             3.77

Payroll Support Program grant wage offset



(914)


(7.21)

Mark-to-market fuel hedge adjustments

76


0.60


(47)


(0.37)

Special items - fleet transition and other(a)

496


3.88


(1)


(0.01)

Special items - labor and related(b)

84


0.66


(10)


(0.08)

Income tax effect of reconciling items above

(158)


(1.24)


238


1.87

Non-GAAP adjusted net income (loss) per share

$              556


$             4.35


$            (256)


$           (2.03)



(a)

Special items - fleet transition and other in the three and twelve months ended December 31, 2022 is primarily impairment charges and accelerated costs associated with the retirement of the A320 and Q400 fleets.

(b)

Special items - labor and related in the three and twelve months ended December 31, 2022 is primarily a one-time payment to Alaska pilots following ratification of a new collective bargaining agreement.

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 fourth quarter and full year results will be streamed online at 8:30 a.m. PST on Jan. 26, 2023. 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.

References in this update to "Air Group," "Company," "we," "us," and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified.

This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, 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 our forward-looking statements, assumptions or beliefs. 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, 2021. Some of these risks include competition, labor costs, relations and availability, general economic conditions including those associated with pandemic recovery, increases in operating costs including fuel, inability to meet cost reduction, ESG and other strategic goals, seasonal fluctuations in demand and financial results, supply chain risks, events that negatively impact aviation safety and security, and changes in laws and regulations that impact our business. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed in our most recent Form 10-K and in our subsequent SEC filings. 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 made today to conform them to actual results. Over time, our actual results, performance or achievements may differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, assumptions or beliefs and such differences might be significant and materially adverse.

Alaska Airlines and our regional partners serve more than 120 destinations across the United States, Belize, Canada, Costa Rica and Mexico. We emphasize low fares and award-winning customer service. Alaska is a member of the oneworld global alliance. With the alliance and our additional airline partners, our guests can travel to more than 900 destinations on more than 20 airlines while earning and redeeming miles on flights to locations around the world. Learn more about Alaska at news.alaskaair.com. Alaska Airlines and Horizon Air are subsidiaries of Alaska Air Group. (NYSE: ALK).

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Alaska Air Group, Inc.













Three Months Ended December
31,


Twelve Months Ended December
31,

(in millions, except per-share amounts)

2022


2021


Change


2022


2021


Change

Operating Revenue












Passenger revenue

$        2,264


$        1,715


32 %


$        8,808


$        5,499


60 %

Mileage Plan other revenue

157


129


22 %


590


461


28 %

Cargo and other revenue

58


55


5 %


248


216


15 %

Total Operating Revenue

2,479


1,899


31 %


9,646


6,176


56 %













Operating Expenses












Wages and benefits

709


637


11 %


2,640


2,218


19 %

Variable incentive pay

117


42


179 %


257


151


70 %

Payroll Support Program grant wage offset



— %



(914)


NM

Aircraft fuel, including hedging gains and

losses

668


426


57 %


2,668


1,279


109 %

Aircraft maintenance

93


92


1 %


424


364


16 %

Aircraft rent

69


66


5 %


291


254


15 %

Landing fees and other rentals

146


141


4 %


581


555


5 %

Contracted services

86


68


26 %


329


235


40 %

Selling expenses

77


50


54 %


295


173


71 %

Depreciation and amortization

105


100


5 %


415


394


5 %

Food and beverage service

54


42


29 %


197


139


42 %

Third-party regional carrier expense

37


41


(10) %


182


147


24 %

Other

181


159


14 %


717


507


41 %

Special items - fleet transition and other

120


(6)


NM


496


(1)


NM

Special items - labor and related

(6)


2


NM


84


(10)


NM

Total Operating Expenses

2,456


1,860


32 %


9,576


5,491


74 %

Operating Income

23


39


(41) %


70


685


(90) %

Non-operating Income (Expense)












Interest income

18


6


200 %


53


25


112 %

Interest expense

(24)


(27)


(11) %


(108)


(128)


(16) %

Interest capitalized

6


2


200 %


14


11


27 %

Other - net

12


9


33 %


50


36


39 %

Total Non-operating Income (Expense)

12


(10)


NM


9


(56)


116 %

Income Before Income Tax

35


29




79


629



Income tax expense

13


11




21


151



Net Income

$             22


$             18




$             58


$           478















Basic Earnings Per Share

$          0.17


$          0.14




$          0.46


$          3.82



Diluted Earnings Per Share

$          0.17


$          0.14




$          0.45


$          3.77















Shares used for computation:












Basic

127.303


125.708




126.657


125.063



Diluted

128.470


127.284




127.899


126.775



 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)




Alaska Air Group, Inc.




As of December 31 (in millions)

2022


2021

ASSETS




Current Assets




Cash and cash equivalents

$                              338


$                              470

Marketable securities

2,079


2,646

Total cash and marketable securities

2,417


3,116

Receivables - net

296


546

Inventories and supplies - net

104


62

Prepaid expenses and other current assets

223


196

Total Current Assets

3,040


3,920





Property and Equipment




Aircraft and other flight equipment

9,053


8,127

Other property and equipment

1,661


1,489

Deposits for future flight equipment

670


384


11,384


10,000

Less accumulated depreciation and amortization

4,127


3,862

Total Property and Equipment - Net

7,257


6,138





Other Assets




Operating lease assets

1,566


1,453

Goodwill and intangible assets

2,038


2,044

Other noncurrent assets

380


396

Total Other Assets

3,984


3,893





Total Assets

$                         14,281


$                         13,951

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)




Alaska Air Group, Inc.




As of December 31 (in millions except share amounts)

2022


2021

LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities




Accounts payable

$                            221


$                            200

Accrued wages, vacation and payroll taxes

619


457

Air traffic liability

1,180


1,163

Other accrued liabilities

846


625

Deferred revenue

1,123


912

Current portion of operating lease liabilities

247


268

Current portion of long-term debt

276


366

Total Current Liabilities

4,512


3,991





Long-Term Debt, Net of Current Portion

1,883


2,173





Noncurrent Liabilities




Long-term operating lease liabilities, net of current portion

1,469


1,279

Deferred income taxes

574


578

Deferred revenue

1,374


1,446

Obligation for pension and post-retirement medical benefits

348


305

Other liabilities

305


378

Total Noncurrent Liabilities

4,070


3,986





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:

2022 - 136,883,042 shares; 2021 - 135,255,808 shares, Outstanding: 2022 -

127,533,098 shares; 2021 - 125,905,864 shares

1


1

Capital in excess of par value

577


494

Treasury stock (common), at cost: 2022 - 9,349,944 shares; 2021 - 9,349,944

shares

(674)


(674)

Accumulated other comprehensive loss

(388)


(262)

Retained earnings

4,300


4,242


3,816


3,801

Total Liabilities and Shareholders' Equity

$                      14,281


$                      13,951

 

SUMMARY CASH FLOW (unaudited)






Alaska Air Group, Inc.






(in millions)

Year Ended
December 31, 2022


Nine Months Ended
September 30, 2022(a)


Three Months Ended

December 31, 2022(b)

Cash Flows from Operating Activities:






Net income

$                             58


$                                 36


$                                  22

Non-cash reconciling items

953


719


234

Changes in working capital

407


654


(247)

Net cash provided by operating activities

1,418


1,409


9







Cash Flows from Investing Activities:






Property and equipment additions

(1,671)


(947)


(724)

Other investing activities

453


59


394

Net cash used in investing activities

(1,218)


(888)


(330)







Net cash used in financing activities

(325)


(296)


(29)







Net increase (decrease) in cash and cash equivalents

(125)


225


(350)

Cash, cash equivalents, and restricted cash at
beginning of year

494


494


719

Cash, cash equivalents, and restricted cash at end
of year

$                           369


$                               719


$                               369



(a)

As reported in Form 10-Q for the third quarter of 2022.

(b)

Cash flows for the three months ended December 31, 2022 can be calculated by subtracting cash flows for the nine months ended September 30, 2022, as reported in Form 10-Q for the third quarter 2022, from the year ended December 31, 2022.

 

OPERATING STATISTICS SUMMARY (unaudited)









Alaska Air Group, Inc.













Three Months Ended December 31,


Twelve Months Ended December 31,


2022


2021


Change


2022


2021


Change

Consolidated Operating Statistics:(a)












Revenue passengers (000)

10,331


9,196


12.3 %


41,468


32,407


28.0 %

RPMs (000,000) "traffic"

12,855


11,279


14.0 %


51,330


38,598


33.0 %

ASMs (000,000) "capacity"

15,030


14,207


5.8 %


60,773


52,445


15.9 %

Load factor

85.5 %


79.4 %


6.1 pts


84.5 %


73.6 %


10.9 pts

Yield

17.61¢


15.20¢


15.9 %


17.16¢


14.25¢


20.4 %

RASM

16.49¢


13.36¢


23.4 %


15.87¢


11.78¢


34.8 %

CASMex(b)

11.14¢


10.12¢


10.1 %


10.41¢


9.80¢


6.3 %

Economic fuel cost per gallon(b)

$3.55


$2.26


57.1 %


$3.42


$2.02


69.3 %

Fuel gallons (000,000)

185


179


3.4 %


758


656


15.5 %

ASMs per gallon

81.2


79.4


2.3 %


80.2


79.9


0.3 %

Departures (000)

95


94


1.1 %


404


377


7.2 %

Average full-time equivalent employees
(FTEs)

23,195


21,043


10.2 %


22,564


19,375


16.5 %

Mainline Operating Statistics:












Revenue passengers (000)

8,237


6,900


19.4 %


31,795


23,268


36.6 %

RPMs (000,000) "traffic"

11,994


10,078


19.0 %


46,812


33,755


38.7 %

ASMs (000,000) "capacity"

14,004


12,737


9.9 %


55,224


45,741


20.7 %

Load factor

85.6 %


79.1 %


6.5 pts


84.8 %


73.8 %


11.0 pts

Yield

16.39¢


13.97¢


17.3 %


15.92¢


13.07¢


21.8 %

RASM

15.49¢


12.39¢


25.0 %


14.91¢


10.99¢


35.7 %

CASMex(b)

10.05¢


9.14¢


10.0 %


9.45¢


8.96¢


5.5 %

Economic fuel cost per gallon(b)

$3.52


$2.25


56.4 %


$3.40


$2.01


69.2 %

Fuel gallons (000,000)

163


150


8.7 %


646


530


21.9 %

ASMs per gallon

85.9


84.8


1.3 %


85.5


86.2


(0.8) %

Departures (000)

62


56


10.7 %


244


207


17.9 %

Average full-time equivalent employees
(FTEs)

17,792


15,855


12.2 %


17,224


14,366


19.9 %

Aircraft utilization

9.9


10.0


(1.0) %


9.9


9.7


2.1 %

Average aircraft stage length

1,341


1,356


(1.1) %


1,347


1,324


1.7 %

Operating fleet(d)

225


217


8 a/c


225


217


8 a/c

Regional Operating Statistics:(c)












Revenue passengers (000)

2,094


2,296


(8.8) %


9,673


9,139


5.8 %

RPMs (000,000) "traffic"

861


1,201


(28.3) %


4,518


4,842


(6.7) %

ASMs (000,000) "capacity"

1,027


1,469


(30.1) %


5,549


6,704


(17.2) %

Load factor

83.9 %


81.7 %


2.2 pts


81.4 %


72.2 %


9.2 pts

Yield

34.66¢


25.57¢


35.5 %


29.97¢


22.49¢


33.3 %

RASM

30.08¢


21.82¢


37.9 %


25.34¢


17.12¢


48.0 %

Departures (000)

33


38


(13.2) %


160


170


(5.9) %

Operating fleet(d)

86


94


(8) a/c


86


94


(8) 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 all aircraft removed from operating service.

Given the unusual nature of 2021 and 2020, we believe that some analysis of specific financial and operational results compared to 2019 provides meaningful insight. The table below includes comparative results from 2022 to 2019.

FINANCIAL INFORMATION AND OPERATING STATISTICS - 2022 Compared with 2019 (unaudited)

Alaska Air Group, Inc.

























Three Months Ended December 31,


Year Ended December 31,


2022


2019


Change


2022


2019


Change

Passenger revenue

$        2,264


$        2,057


10 %


$        8,808


$        8,095


9 %

Mileage Plan other revenue

157


119


32 %


590


465


27 %

Cargo and other revenue

58


52


12 %


248


221


12 %

Total Operating Revenue

$        2,479


$        2,228


11 %


$        9,646


$        8,781


10 %













Operating expense, excluding fuel and
special items

$        1,674


$        1,500


12 %


$        6,328


$        5,796


9 %

Aircraft fuel, including hedging gains and
losses

668


476


40 %


2,668


1,884


42 %

Special items

114



NM


580


38


NM

Total Operating Expenses

$        2,456


$        1,976


24 %


$        9,576


$        7,718


24 %













Total Non-operating Income (Expense)

$              12


$              (9)


NM


$                9


$            (47)


119 %

Income Before Income Tax

$              35


$            243


(86) %


$              79


$        1,016


(92) %













Consolidated Operating Statistics:












Revenue passengers (000)

10,331


11,715


(12) %


41,468


46,733


(11) %

RPMs (000,000) "traffic"

12,855


13,928


(8) %


51,330


56,040


(8) %

ASMs (000,000) "capacity"

15,030


16,648


(10) %


60,773


66,654


(9) %

Load Factor

85.5 %


83.7 %


1.8 pts


84.5 %


84.1 %


0.4 pts

Yield

17.61¢


14.77¢


19 %


17.16¢


14.45¢


19 %

RASM

16.49¢


13.38¢


23 %


15.87¢


13.17¢


21 %

CASMex

11.14¢


9.01¢


24 %


10.41¢


8.70¢


20 %

FTEs

23,195


22,506


3 %


22,564


22,126


2 %

 

OPERATING SEGMENTS (unaudited)







Alaska Air Group, Inc.















Three Months Ended December 31, 2022

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenue














Passenger revenue

$        1,966


$        298


$          —


$                  —


$       2,264


$           —


$        2,264

CPA revenue



71


(71)




Mileage Plan other revenue

146


11




157



157

Cargo and other revenue

58





58



58

Total Operating Revenue

2,170


309


71


(71)


2,479



2,479

Operating Expenses














Operating expenses, excluding fuel

1,408


243


92


(69)


1,674


114


1,788

Fuel expense

572


84




656


12


668

Total Operating Expenses

1,980


327


92


(69)


2,330


126


2,456

Non-operating Income (Expense)

18



(7)


1


12



12

Income (Loss) Before Income Tax

$           208


$        (18)


$        (28)


$                  (1)


$          161


$       (126)


$             35

Pretax Margin









6.5 %




1.4 %
















Three Months Ended December 31, 2021

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenue














Passenger revenue

$        1,408


$        307


$          —


$                  —


$       1,715


$           —


$        1,715

CPA revenue



84


(84)




Mileage Plan other revenue

115


14




129



129

Cargo and other revenue

55





55



55

Total Operating Revenue

1,578


321


84


(84)


1,899



1,899

Operating Expenses














Operating expenses, excluding fuel

1,164


258


101


(85)


1,438


(4)


1,434

Fuel expense

339


66




405


21


426

Total Operating Expenses

1,503


324


101


(85)


1,843


17


1,860

Non-operating Income (Expense)

(7)



(5)


2


(10)



(10)

Income (Loss) Before Income Tax

$             68


$          (3)


$        (22)


$                    3


$            46


$         (17)


$             29

Pretax Margin









2.4 %




1.5 %

 

OPERATING SEGMENTS (unaudited)







Alaska Air Group, Inc.















Twelve Months Ended December 31, 2022

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenue














Passenger revenue

$        7,454


$     1,354


$          —


$                  —


$       8,808


$           —


$        8,808

CPA revenue



359


(359)




Mileage Plan other revenue

538


52




590



590

Cargo and other revenue

244




4


248



248

Total Operating Revenue

8,236


1,406


359


(355)


9,646



9,646

Operating Expenses














Operating expenses, excluding fuel

5,216


1,085


383


(356)


6,328


580


6,908

Fuel expense

2,195


397




2,592


76


2,668

Total Operating Expenses

7,411


1,482


383


(356)


8,920


656


9,576

Non-operating Income (Expense)

30



(22)


1


9



9

Income (Loss) Before Income Tax

$           855


$        (76)


$        (46)


$                    2


$          735


$       (656)


$             79

Pretax Margin









7.6 %




0.8 %
















Twelve Months Ended December 31, 2021

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenue














Passenger revenue

$        4,411


$     1,088


$          —


$                  —


$       5,499


$           —


$        5,499

CPA revenue



406


(406)




Mileage Plan other revenue

402


59




461



461

Cargo and other revenue

212




4


216



216

Total Operating Revenue

5,025


1,147


406


(402)


6,176



6,176

Operating Expenses














Operating expenses, excluding fuel

4,101


1,096


373


(433)


5,137


(925)


4,212

Fuel expense

1,065


261




1,326


(47)


1,279

Total Operating Expenses

5,166


1,357


373


(433)


6,463


(972)


5,491

Non-operating Income (Expense)

(38)



(21)


3


(56)



(56)

Income (Loss) Before Income Tax

$         (179)


$      (210)


$          12


$                  34


$        (343)


$         972


$           629

Pretax Margin









(5.6) %




10.2 %



(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 grant wage offsets, special items and mark-to-market fuel hedge accounting adjustments.

 

GAAP TO NON-GAAP RECONCILIATIONS (unaudited)

Alaska Air Group, Inc.    


CASM Excluding Fuel and Special Items Reconciliation


Three Months Ended December 31,


Twelve Months Ended December 31,

(in cents)

2022


2021


2022


2021

Consolidated:








CASM

                  16.34 ¢


                  13.09 ¢


                  15.76 ¢


                  10.47 ¢

Less the following components:








Payroll Support Program grant wage offset




(1.75)

Aircraft fuel, including hedging gains and losses

4.44


3.00


4.39


2.44

Special items - fleet transition and other(a)

0.80


(0.04)


0.82


Special items - labor and related(b)

(0.04)


0.01


0.14


(0.02)

CASM excluding fuel and special items

                  11.14  ¢


                  10.12 ¢


                  10.41 ¢


                    9.80 ¢









Mainline:








CASM

                  14.95 ¢


                  11.77  ¢


                  14.42 ¢


                    9.52 ¢

Less the following components:








Payroll support program grant wage offset




(1.75)

Aircraft fuel, including hedging gains and losses

4.17


2.66


4.11


2.33

Special items - fleet transition and other(a)

0.77


(0.05)


0.71


Special items - labor and related(b)

(0.04)


0.02


0.15


(0.02)

CASM excluding fuel and special items

                  10.05 ¢


                    9.14 ¢


                    9.45 ¢


                    8.96 ¢



(a)

Special items - fleet transition and other in the three and twelve months ended December 31, 2022 is primarily impairment charges and accelerated costs associated with the retirement of the A320 and Q400 fleets.

(b)

Special items - labor and related in the three and twelve months ended December 31, 2022 is primarily a one-time payment to Alaska pilots following ratification of a new collective bargaining agreement.

 

Fuel Reconciliation









Three Months Ended December 31,


2022


2021

(in millions, except for per-gallon amounts)

Dollars


Cost/Gal


Dollars


Cost/Gal

Raw or "into-plane" fuel cost

$                     657


$                    3.55


$                     434


$                    2.42

Losses (gains) on settled hedges

(1)



(29)


(0.16)

Consolidated economic fuel expense

$                     656


$                    3.55


$                     405


$                    2.26

Mark-to-market fuel hedge adjustment

12


0.06


21


0.12

GAAP fuel expense

$                     668


$                    3.61


$                     426


$                    2.38

Fuel gallons



185




179










Twelve Months Ended December 31,


2022


2021

(in millions, except for per-gallon amounts)

Dollars


Cost/Gal


Dollars


Cost/Gal

Raw or "into-plane" fuel cost

$                  2,761


$                    3.64


$                  1,383


$                    2.11

Losses (gains) on settled hedges

(169)


(0.22)


(57)


(0.09)

Consolidated economic fuel expense

$                  2,592


$                    3.42


$                  1,326


$                    2.02

Mark-to-market fuel hedge adjustment

76


0.10


(47)


(0.07)

GAAP fuel expense

$                  2,668


$                    3.52


$                  1,279


$                    1.95

Fuel gallons



758




656

 

Debt-to-capitalization, including operating leases

(in millions)

December 31, 2022


December 31, 2021

Long-term debt, net of current portion

$                              1,883


$                              2,173

Long-term and current capitalized operating leases

1,716


1,547

Adjusted debt, net of current portion of long-term debt

$                              3,599


$                              3,720

Shareholders' equity

3,816


3,801

Total Invested Capital

$                              7,415


$                              7,521





Debt-to-capitalization ratio, including operating leases

49 %


49 %

 

Adjusted net debt to earnings before interest, taxes, depreciation, amortization, rent, and special items

(in millions)

December 31, 2022


December 31, 2021

Current portion of long-term debt

$                                 276


$                                 366

Current portion of operating lease liabilities

247


268

Long-term debt

1,883


2,173

Long-term operating lease liabilities, net of current portion

1,469


1,279

Total adjusted debt

3,875


4,086

Less: Total cash and marketable securities

(2,417)


(3,116)

Adjusted net debt

$                              1,458


$                                 970





(in millions)

Year Ended December
31, 2022


Year Ended December
31, 2021

GAAP Operating Income

$                                    70


$                                 685

Adjusted for:




Special items and Payroll Support Program grant wage offset

580


(925)

Mark-to-market fuel hedge adjustments

76


(47)

Depreciation and amortization

415


394

Aircraft rent

291


254

EBITDAR

$                              1,432


$                                 361

Adjusted net debt to EBITDAR

1.0x


2.7x

 

Note A: Pursuant to Regulation G, we are providing reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. We believe that consideration of these non-GAAP financial measures may be important to investors for the following reasons:

  • By excluding fuel expense and certain other items, such as the Payroll Support Program grant wage offset and other special items, from our unit metrics, we believe that we have better visibility into the results of operations. 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 other items, such as the Payroll Support Program grant wage offset and other special items, is one of the most important measures used by management and by the Air Group Board of Directors in assessing quarterly and annual cost performance.
  • Adjusted income before income tax (and other items as specified in our plan documents) is an important metric 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 have historically compared our airline 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 these items as noted above. 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 revenue, we do not, nor are we able to, evaluate unit revenue 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 revenue 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

Adjusted net debt - long-term debt, including current portion, plus capitalized operating leases, less cash and marketable securities

Adjusted net debt to EBITDAR - represents net adjusted debt divided by EBITDAR (trailing twelve months earnings before interest, taxes, depreciation, amortization, special items and rent)

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 capitalized operating lease liabilities) 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

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, Airbus 320 and Airbus 321neo family jets and all associated revenue and costs

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 and SkyWest. In this segment, Regional records actual on-board passenger revenue, less costs such as fuel, distribution costs, and payments made to Horizon and SkyWest 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

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SOURCE Alaska Air Group