ALK
$38.81
Alaska Air Group
($1.97)
(4.83%)
Earnings Details
2nd Quarter June 2022
Thursday, July 21, 2022 6:00:00 AM
Tweet Share Watch
Summary

Alaska Air Group Beats

Alaska Air Group (ALK) reported 2nd Quarter June 2022 earnings of $2.19 per share on revenue of $2.7 billion. The consensus earnings estimate was $1.94 per share on revenue of $2.6 billion. The Earnings Whisper number was $1.93 per share. Revenue grew 74.1% on a year-over-year basis.

The company said it expects third quarter revenue of $2.77 billion to $2.84 billion. The current consensus revenue estimate is $2.64 billion for the quarter ending September 30, 2022.

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
$2.19
Earnings Whisper
$1.93
Consensus Estimate
$1.94
Reported Revenue
$2.66 Bil
Revenue Estimate
$2.57 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Alaska Air Group delivers record-breaking second quarter 2022 results

Generated record quarterly revenues of $2.7 billion on improved operational performance; flew record load factor of 88% reflecting strong demand

SEATTLE, July 21, 2022 /PRNewswire/ -- Alaska Air Group (NYSE: ALK) today announced another quarter of improvement in its financial results for the second quarter ending June 30, 2022, and provided outlook for the third quarter ending Sept. 30, 2022.

"It's clear that travel is one of the things people have missed the most these past two years. They are excited to fly again and our team is delivering on the safe, reliable and caring experience they expect from us," said CEO Ben Minicucci. "Revenue in June topped $1 billion, the highest single month in our history. Our 14% adjusted pretax margin in Q2 is near the top of the industry, and our operation is on track in June with the #1 on-time performance and a schedule completion rate over 99%. I'm feeling so much gratitude for the people of Alaska, Horizon and McGee for pulling together. We have a strong platform for growth in 2023 and a lot to be optimistic about."

Financial Results for the Second Quarter:
  • Reported net income for the second quarter of 2022 under Generally Accepted Accounting Principles (GAAP) of $139 million, or $1.09 per share, compared to a net income of $397 million, or $3.13 per share, in the second quarter of 2021.
  • Reported net income for the second quarter of 2022, excluding special items and mark-to-market fuel hedge accounting adjustments, of $280 million, or $2.19 per share, compared to a net loss, excluding special items and mark-to-market fuel hedge accounting adjustments, of $38 million, or $0.30 per share, in the second quarter of 2021.
  • Reported adjusted pretax margin for the second quarter of 14%.
  • Recorded $2.7 billion in operating revenues for the second quarter, the highest revenue-generating quarter in company history.
Balance Sheet and Liquidity:
  • Generated $948 million in operating cash flow for the second quarter, inclusive of $231 million in net federal income tax refunds.
  • Held $3.4 billion in unrestricted cash and marketable securities as of June 30, 2022.
  • Maintained a debt-to-capitalization ratio of 50% as of June 30, 2022, within our target range of 40% to 50%.
Operational Updates and Milestones for the Second Quarter:
  • Flew a record load factor for the quarter of 88%, driven by high demand on reduced capacity.
  • Led the industry in on-time performance for the month of June, meeting our commitment to operational reliability.
  • Received nine Boeing 737-9 aircraft in the second quarter, bringing the total number of 737-9s in our mainline fleet to 28.
  • Ratified new contracts with Alaska Airlines dispatchers and Horizon Air aircraft technicians and fleet service agents; and reached a tentative agreement with Alaska Airlines IAM represented employees.
  • Expanded pilot training throughput by 20% from April, and added 100 active mainline pilots in the second quarter.
  • Began nonstop service to Miami and Cleveland from Seattle, bringing the total nonstop destinations served from Seattle to 100.
  • Launched $8 flat rate satellite Wi-Fi on mainline aircraft in partnership with Intelsat.
Awards and Employee Recognition:
  • Ranked as one of America's Best Employers for Diversity by Forbes, recognizing our commitment to increasing diverse leadership representation and equity initiatives.
  • Named the Best Major Airline in North America by the Airline Passenger Experience Association, highlighting Alaska's inflight experience.
  • Recognized the company's workforce for their relentless commitment to caring for our guests for 90 years by giving each employee 90,000 miles redeemable for travel anywhere in the world.
Second Quarter Environmental, Social and Governance Updates:
  • Released our 2021 Care Report, highlighting the company's progress in various environmental, social and governance areas and outlining ongoing initiatives and future goals.
  • Signed agreement with Aemetis to purchase 13 million gallons of sustainable aviation fuel to be delivered over the seven-year term of the agreement.
  • Subsequent to quarter end, announced a partnership with Microsoft and Twelve, a carbon transformation technology company, to advance the availability of sustainable aviation fuels.
  • Scored 100% in our first year participating in Disability:IN's Disability Equality Index, which benchmarks companies on their disability inclusion and equality.

The following table reconciles the company's reported GAAP net income (loss) per share (EPS) for the three and six months ended June 30, 2022, and 2021 to adjusted amounts.


Three Months Ended June 30,


2022


2021

(in millions, except per-share amounts)

Dollars


Diluted EPS


Dollars


Diluted EPS

GAAP net income per share

$               139


$              1.09


$               397


$              3.13

Payroll Support Program grant wage offset



(503)


(3.97)

Mark-to-market fuel hedge adjustments

40


0.31


(46)


(0.36)

Special items - fleet transition and related charges(a)

146


1.14


(4)


(0.03)

Special items - restructuring charges(b)



(23)


(0.18)

Income tax effect of reconciling items above

(45)


(0.35)


141


1.11

Non-GAAP adjusted net income (loss) per share

$               280


$              2.19


$               (38)


$            (0.30)










Six Months Ended June 30,


2022


2021

(in millions, except per-share amounts)

Dollars


Diluted EPS


Dollars


Diluted EPS

GAAP net income (loss) per share

$                  (4)


$            (0.03)


$               266


$              2.10

Payroll support program grant wage offset



(914)


(7.23)

Mark-to-market fuel hedge adjustments

(67)


(0.53)


(68)


(0.54)

Special items - fleet transition and related charges(a)

221


1.75


14


0.11

Special items - restructuring charges(b)



(12)


(0.09)

Income tax effect of reconciling items above

(37)


(0.30)


240


1.90

Non-GAAP adjusted net income (loss) per share

$               113


$              0.89


$             (474)


$            (3.75)



(a)   

Special items - fleet transition and related charges in the three and six months ended June 30, 2022 are primarily for impairment charges and accelerated costs associated with the retirement of the A320 and Q400 fleets. The A320 fleet is expected to be retired from operating service by the end of 2022; the Q400 fleet is expected to be retired from operating service in early 2023.



(b)   

Special items - restructuring charges in the three and six months ended June 30, 2021 are related to the estimated costs for pilot incentive leaves.

 

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.

Alaska will hold its quarterly conference call to discuss second quarter results at 8:30 a.m. PDT on July 21, 2022. A webcast of the call is available to the public at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the call.

Third Quarter and Full Year 2022 Outlook



Q3 Expectation(a)

Capacity (ASMs) % change versus 2019(a)


Down 5% to 8%

Revenue passengers % change versus 2019(a)


Down 8% to 10%

Passenger load factor


85% to 88%

Total revenue % change versus 2019(a)


Up 16% to 19%

Cost per ASM excluding fuel and special items (CASMex) % change versus 2019(a)


Up 16% to 19%

Economic fuel cost per gallon


$3.79 to $3.89

Non-operating expense


$2 million to $4 million

Adjusted tax rate


24% to 25%



(a)

Due to the unusual nature of 2021 and 2020, all 2022 comparisons are versus the third quarter of 2019.

 

For full year 2022, we expect our capacity to be down 8% to 9% versus 2019, and expect our CASMex to be up 15% to 17% versus 2019. We continue to expect our full year adjusted pre-tax margin to be between 6% and 9%.

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 Next-Level Care for our guests, along with providing low fares, award-winning customer service and sustainability efforts. Alaska is a member of the oneworld global alliance. With the alliance and our additional airline partners, guests can travel to more than 1,000 destinations on more than 20 airlines while earning and redeeming miles on flights to locations around the world. Learn more about Alaska at news.alaskair.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 June 30,


Six Months Ended June 30,

(in millions, except per share amounts)

2022


2021


Change


2022


2021


Change

Operating Revenues












Passenger revenue

$        2,418


$        1,352


79 %


$        3,929


$        2,011


95 %

Mileage Plan other revenue

175


118


48 %


287


212


35 %

Cargo and other

65


57


14 %


123


101


22 %

Total Operating Revenues

2,658


1,527


74 %


4,339


2,324


87 %













Operating Expenses












Wages and benefits

639


510


25 %


1,245


1,003


24 %

Variable incentive pay

56


34


65 %


92


67


37 %

Payroll Support Program grant wage offset


(503)


NM



(914)


NM

Aircraft fuel, including hedging gains and losses

776


274


183 %


1,123


477


135 %

Aircraft maintenance

104


102


2 %


239


183


31 %

Aircraft rent

73


62


18 %


146


124


18 %

Landing fees and other rentals

136


144


(6) %


274


273


— %

Contracted services

82


54


52 %


160


105


52 %

Selling expenses

78


41


90 %


136


74


84 %

Depreciation and amortization

104


98


6 %


206


195


6 %

Food and beverage service

50


35


43 %


91


58


57 %

Third-party regional carrier expense

50


37


35 %


92


67


37 %

Other

177


117


51 %


329


222


48 %

Special items - fleet transition and related charges

146


(4)


NM


221


14


NM

Special items - restructuring charges


(23)

.

NM



(12)


NM

Total Operating Expenses

2,471


978


153 %


4,354


1,936


125 %

Operating Income (Loss)

187


549


(66) %


(15)


388


(104) %

Non-operating Income (Expense)












Interest income

11


6


100 %


18


13


38 %

Interest expense

(26)


(39)


(33) %


(53)


(71)


(25) %

Interest capitalized

3


3


7 %


5


6


(17) %

Other - net

10


9


10 %


24


19


25 %

Total Non-operating Income (Expense)

(2)


(21)


(90) %


(6)


(33)


(82) %

Income (Loss) Before Income Tax

185


528




(21)


355



Income tax expense (benefit)

46


131




(17)


89



Net Income (Loss)

$           139


$           397




$              (4)


$           266















Basic Earnings (Loss) Per Share

$          1.10


$          3.18




$        (0.03)


$          2.13



Diluted Earnings (Loss) Per Share

$          1.09


$          3.13




$        (0.03)


$          2.10















Shares used for computation:












Basic

126.543


124.977




126.265


124.640



Diluted

127.795


126.825




126.265


126.388



 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)




Alaska Air Group, Inc.








(in millions)

June 30, 2022


December 31, 2021

ASSETS




Current Assets




Cash and cash equivalents

$                            778


$                            470

Marketable securities

2,647


2,646

   Total cash and marketable securities

3,425


3,116

Receivables - net

401


546

Inventories and supplies - net

93


62

Prepaid expenses and other current assets

313


196

Total Current Assets

4,232


3,920





Property and Equipment




Aircraft and other flight equipment

8,569


8,127

Other property and equipment

1,532


1,489

Deposits for future flight equipment

292


384


10,393


10,000

Less accumulated depreciation and amortization

3,922


3,862

Total Property and Equipment - Net

6,471


6,138





Other Assets




Operating lease assets

1,669


1,453

Goodwill and intangible assets

2,041


2,044

Other noncurrent assets

387


396

Other Assets

4,097


3,893





Total Assets

$                      14,800


$                      13,951

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)




Alaska Air Group, Inc.








(in millions, except share amounts)

June 30, 2022


December 31, 2021

LIABILITIES AND SHAREHOLDERS' EQUITY




Current Liabilities




Accounts payable

$                            286


$                            200

Accrued wages, vacation and payroll taxes

416


457

Air traffic liability

1,778


1,163

Other accrued liabilities

794


625

Deferred revenue

1,012


912

Current portion of operating lease liabilities

274


268

Current portion of long-term debt

342


366

Total Current Liabilities

4,902


3,991





Long-Term Debt, Net of Current Portion

1,961


2,173





Noncurrent Liabilities




Long-term operating lease liabilities, net of current portion

1,505


1,279

Deferred income taxes

552


578

Deferred revenue

1,429


1,446

Obligation for pension and postretirement medical benefits

299


305

Other liabilities

353


378

Total Noncurrent Liabilities

4,138


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 - 136,109,649 shares; 2021 - 135,255,808 shares, Outstanding: 2022 - 126,759,705 shares; 2021 - 125,905,864 shares

1


1

Capital in excess of par value

542


494

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

(674)


(674)

Accumulated other comprehensive loss

(308)


(262)

Retained earnings

4,238


4,242


3,799


3,801

Total Liabilities and Shareholders' Equity

$                      14,800


$                      13,951

 

SUMMARY CASH FLOW (unaudited)






Alaska Air Group, Inc.






(in millions)

Six Months
Ended

June 30, 2022


Three Months Ended
March 31,
2022(a)


Three Months Ended
June 30,
2022(b)

Cash Flows from Operating Activities:






Net income (loss)

$                           (4)


$                      (143)


$                        139

Non-cash reconciling items

447


182


265

Changes in working capital

792


248


544

Net cash provided by (used in) operating activities

1,235


287


948







Cash Flows from Investing Activities:






Property and equipment additions

(632)


(288)


(344)

Other investing activities

(89)


327


(416)

Net cash provided by (used in) investing activities

(721)


39


(760)







Cash Flows from Financing Activities:

(206)


(168)


(38)







Net increase (decrease) in cash and cash equivalents

308


158


150

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

494


494


652

Cash, cash equivalents, and restricted cash at end of the period

$                        802


$                        652


$                        802



(a) 

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

(b)

Cash flows for the three months ended June 30, 2022, can be calculated by subtracting cash flows for the three months ended March 31,
2022, as reported in Form 10-Q for the first quarter 2022, from the six months ended June 30, 2022.



 

OPERATING STATISTICS SUMMARY (unaudited)







Alaska Air Group, Inc.

























Three Months Ended June 30,


Six Months Ended June 30,


2022


2021


Change


2022


2021


Change

Consolidated Operating Statistics:(a)












Revenue passengers (000)

11,005


8,712


26.3 %


19,700


13,379


47.2 %

RPMs (000,000) "traffic"

13,746


10,334


33.0 %


24,332


15,727


54.7 %

ASMs (000,000) "capacity"

15,611


13,413


16.4 %


29,394


23,810


23.5 %

Load factor

88.1 %


77.0 %


11.1 pts


82.8 %


66.1 %


16.7 pts

Yield

17.59¢


13.09¢


34.4 %


16.15¢


12.79¢


26.3 %

RASM

17.03¢


11.38¢


49.6 %


14.76¢


9.76¢


51.2 %

CASMex(b)

9.92¢


9.20¢


7.8 %


10.24¢


9.95¢


2.9 %

Economic fuel cost per gallon(b)

$3.76


$1.90


97.9 %


$3.23


$1.85


74.6 %

Fuel gallons (000,000)

196


168


16.7 %


368


294


25.2 %

ASMs per gallon

79.6


79.8


(0.3) %


79.9


81.0


(1.4) %

Average full-time equivalent employees (FTEs)

22,603


19,001


19.0 %


22,092


18,071


22.3 %

Mainline Operating Statistics:












Revenue passengers (000)

8,321


6,151


35.3 %


14,887


9,302


60.0 %

RPMs (000,000) "traffic"

12,460


8,966


39.0 %


21,972


13,555


62.1 %

ASMs (000,000) "capacity"

14,052


11,611


21.0 %


26,439


20,464


29.2 %

Load factor

88.7 %


77.2 %


11.5 pts


83.1 %


66.2 %


16.9 pts

Yield

16.28¢


11.96¢


36.1 %


14.89¢


11.64¢


27.9 %

RASM

16.02¢


10.59¢


51.3 %


13.81¢


9.09¢


51.9 %

CASMex(b)

8.98¢


8.48¢


5.9 %


9.29¢


9.17¢


1.3 %

Economic fuel cost per gallon(b)

$3.74


$1.88


98.9 %


$3.21


$1.84


74.4 %

Fuel gallons (000,000)

165


135


22.2 %


311


233


33.5 %

ASMs per gallon

85.2


86.0


(0.9) %


85.0


87.8


(3.2) %

Average number of FTEs

17,315


14,021


23.5 %


16,825


13,247


27.0 %

Aircraft utilization

10.1


9.9


2.0 %


9.8


9.2


6.5 %

Average aircraft stage length

1,363


1,320


3.3 %


1,349


1,313


2.7 %

Operating fleet(d)

233


202


31 a/c


233


202


31 a/c

Regional Operating Statistics:(c)












Revenue passengers (000)

2,685


2,562


4.8 %


4,813


4,077


18.1 %

RPMs (000,000) "traffic"

1,285


1,367


(6.0) %


2,360


2,172


8.7 %

ASMs (000,000) "capacity"

1,559


1,802


(13.5) %


2,955


3,346


(11.7) %

Load factor

82.4 %


75.9 %


6.5 pts


79.9 %


64.9 %


15.0 pts

Yield

30.35¢


20.48¢


48.2 %


27.88¢


19.95¢


39.7 %

RASM

26.04¢


16.41¢


58.7 %


23.21¢


13.84¢


67.7 %

Operating fleet(d)

104


94


10 a/c


104


94


10 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 the importance of this measure to investors in the accompanying pages.

(c)     

Data presented includes information for 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 to 2019 (unaudited)

Alaska Air Group, Inc.

























Three Months Ended June 30,


Six Months Ended June 30,


2022


2019


Change


2022


2019


Change

Passenger revenue

$        2,418


$        2,111


15 %


$        3,929


$        3,827


3 %

Mileage plan other revenue

175


118


48 %


287


228


26 %

Cargo and other

65


59


10 %


123


109


13 %

Total Operating Revenues

2,658


2,288


16 %


4,339


4,164


4 %













Operating expenses, excluding fuel and special items

1,549


1,414


10 %


3,010


2,819


7 %

Aircraft fuel, including hedging gains and losses

776


502


55 %


1,123


922


22 %

Special items

146


8


NM


221


34


NM

Total Operating Expenses

2,471


1,924


28 %


4,354


3,775


15 %













Total Non-operating Expense

(2)


(13)


(85) %


(6)


(32)


(81) %

Income (Loss) Before Income Tax

$            185


$            351


(47) %


$            (21)


$            357


(106) %













Consolidated Operating Statistics:












Revenue passengers (000)

11,005


12,026


(8) %


19,700


22,442


(12) %

RPMs (000,000) "traffic"

13,746


14,638


(6) %


24,332


27,087


(10) %

ASMs (000,000) "capacity"

15,611


16,980


(8) %


29,394


32,487


(10) %

Load Factor

88.1 %


86.2 %


         1.9 pts


82.8 %


83.4 %


       (0.6) pts

Yield

17.59¢


14.43¢


22 %


16.15¢


14.13¢


14 %

RASM

17.03¢


13.48¢


26 %


14.76¢


12.82¢


15 %

CASMex

9.92¢


8.33¢


19 %


10.24¢


8.68¢


18 %

FTEs

22,603


21,921


3 %


22,092


21,876


1 %

 

OPERATING SEGMENTS (unaudited)

Alaska Air Group, Inc.





























Three Months Ended June 30, 2022

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenues














Passenger revenues

$     2,028


$        390


$          —


$                  —


$     2,418


$          —


$        2,418

CPA revenues



101


(101)




Mileage Plan other revenue

159


16




175



175

Cargo and other

64




1


65



65

Total Operating Revenues

2,251


406


101


(100)


2,658



2,658

Operating Expenses














Operating expenses, excluding fuel

1,262


289


98


(100)


1,549


146


1,695

Fuel expense

617


119




736


40


776

Total Operating Expenses

1,879


408


98


(100)


2,285


186


2,471

Non-operating Income (Expense)

3



(5)



(2)



(2)

Income (Loss) Before Income Tax

$        375


$           (2)


$           (2)


$                  —


$        371


$       (186)


$           185

Pretax Margin









14.0 %




7.0 %
















Three Months Ended June 30, 2021

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenues














Passenger revenues

$     1,072


$        280


$          —


$                  —


$     1,352


$          —


$        1,352

CPA revenues



111


(111)




Mileage Plan other revenue

102


16




118



118

Cargo and other

55




2


57



57

Total Operating Revenues

1,229


296


111


(109)


1,527



1,527

Operating Expenses














Operating expenses, excluding fuel

984


286


91


(127)


1,234


(530)


704

Fuel expense

253


66



1


320


(46)


274

Total Operating Expenses

1,237


352


91


(126)


1,554


(576)


978

Non-operating Income (Expense)

(16)



(5)



(21)



(21)

Income (Loss) Before Income Tax

$         (24)


$         (56)


$          15


$                  17


$         (48)


$        576


$           528

Pretax Margin









(3.1) %




34.6 %

 



Six Months Ended June 30, 2022

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenues














Passenger revenues

$     3,271


$        658


$          —


$                  —


$    3,929


$          —


$        3,929

CPA revenues



195


(195)




Mileage Plan other revenue

259


28




287



287

Cargo and other

121




2


123



123

Total Operating Revenues

3,651


686


195


(193)


4,339



4,339

Operating Expenses














Operating expenses, excluding fuel

2,456


551


197


(194)


3,010


221


3,231

Fuel expense

998


192




1,190


(67)


1,123

Total Operating Expenses

3,454


743


197


(194)


4,200


154


4,354

Non-operating Income (Expense)

4



(10)



(6)



(6)

Income (Loss) Before Income Tax

$        201


$         (57)


$         (12)


$                    1


$       133


$       (154)


$            (21)

Pretax Margin









3.1 %




(0.5) %
















Six Months Ended June 30, 2021

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating Revenues














Passenger revenues

$     1,578


$        433


$          —


$                  —


$    2,011


$          —


$        2,011

CPA revenues



215


(215)




Mileage Plan other revenue

182


30




212



212

Cargo and other

99




2


101



101

Total Operating Revenues

1,859


463


215


(213)


2,324



2,324

Operating Expenses














Operating expenses, excluding fuel

1,877


551


179


(236)


2,371


(912)


1,459

Fuel expense

427


118




545


(68)


477

Total Operating Expenses

2,304


669


179


(236)


2,916


(980)


1,936

Non-operating Income (Expense)

(23)



(10)



(33)



(33)

Income (Loss) Before Income Tax

$       (468)


$       (206)


$          26


$                  23


$      (625)


$        980


$           355

Pretax Margin









(26.9) %




15.3 %



(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 June 30,


Six Months Ended June 30,

(in cents)

2022


2021


2022


2021

Consolidated:








CASM

                15.84 ¢


                  7.29 ¢


                14.81 ¢


                  8.13 ¢

Less the following components:








Payroll Support Program grant wage offset


(3.75)



(3.84)

Aircraft fuel, including hedging gains and losses

4.98


2.04


3.82


2.00

Special items - fleet transition and related charges(a)

0.94


(0.03)


0.75


0.07

Special items - restructuring charges(b)


(0.17)



(0.05)

CASM excluding fuel and special items

                  9.92 ¢


                  9.20 ¢


                10.24 ¢


                  9.95 ¢









Mainline:








CASM

                15.06 ¢


                  6.24 ¢


                13.69 ¢


                  6.72 ¢

Less the following components:








Payroll Support Program grant wage offset


(3.79)



(4.21)

Aircraft fuel, including hedging gains and losses

5.06


1.78


3.84


1.75

Special items - fleet transition and related charges(a)

1.02


(0.03)


0.56


0.07

Special items - restructuring charges(b)


(0.20)



(0.06)

CASM excluding fuel and special items

                  8.98 ¢


                  8.48 ¢


                  9.29 ¢


                  9.17 ¢



(a)   

Special items - fleet transition and related charges in the three and six months ended June 30, 2022 are primarily for impairment charges and accelerated costs associated with the retirement of the A320 and Q400 fleets. The A320 fleet is expected to be retired from operating service by the end of 2022; the Q400 fleet is expected to be retired from operating service in early 2023.

(b)   

Special items - restructuring charges in the three and six months ended June 30, 2021 are related to the estimated costs for pilot incentive leaves.

 

Fuel Reconciliation


Three Months Ended June 30,


2022


2021

(in millions, except for per-gallon amounts)

Dollars


Cost/Gallon


Dollars


Cost/Gallon

Raw or "into-plane" fuel cost

$                   824


$                  4.20


$                   330


$                  1.96

Losses (gains) on settled hedges

(88)


(0.44)


(10)


(0.06)

Consolidated economic fuel expense

736


3.76


320


1.90

Mark-to-market fuel hedge adjustment

40


0.20


(46)


(0.27)

GAAP fuel expense

$                   776


$                  3.96


$                   274


$                  1.63

Fuel gallons



196




168










Six Months Ended June 30,


2022


2021

(in millions, except for per gallon amounts)

Dollars


Cost/Gallon


Dollars


Cost/Gallon

Raw or "into-plane" fuel cost

$                1,328


$                  3.61


$                   552


$                  1.87

Losses (gains) on settled hedges

(138)


(0.38)


(7)


(0.02)

Consolidated economic fuel expense

1,190


3.23


545


1.85

Mark-to-market fuel hedge adjustment

(67)


(0.18)


(68)


(0.23)

GAAP fuel expense

$                1,123


$                  3.05


$                   477


$                  1.62

Fuel gallons



368




294

 

Debt-to-capitalization, including operating leases

(in millions)

June 30, 2022


December 31, 2021

Long-term debt, net of current portion

$                           1,961


$                            2,173

Long-term and current capitalized operating leases

1,779


1,547

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

3,740


3,720

Shareholders' equity

3,799


3,801

Total Invested Capital

$                           7,539


$                            7,521





Debt-to-capitalization ratio, including operating leases

50 %


49 %

 

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

(in millions)

June 30, 2022


December 31, 2021

Current portion of long-term debt

$                                   342


$                                   366

Current portion of operating lease liabilities

274


268

Long-term debt

1,961


2,173

Long-term operating lease liabilities, net of current portion

1,505


1,279

Total adjusted debt

4,082


4,086

Less: Total cash and marketable securities

(3,425)


(3,116)

Adjusted net debt

$                                   657


$                                   970





(in millions)

Twelve Months Ended
June 30, 2022


Twelve Months Ended
December 31, 2021

GAAP Operating Income(a)

$                                   282


$                                   685

Adjusted for:




Payroll Support Program grant wage offset and special items

208


(925)

Mark-to-market fuel hedge adjustments

(46)


(47)

Depreciation and amortization

405


394

Aircraft rent

276


254

EBITDAR

$                               1,125


$                                   361

Adjusted net debt to EBITDAR

0.6x


2.7x



(a)

Operating income can be reconciled using the trailing twelve month operating income as filed quarterly with the SEC.

 

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

  • By eliminating fuel expense and certain special items (including Payroll Support Program wage offset, fleet transition and related charges, and restructuring charges) 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 special items, such as Payroll Support Program wage offset, fleet transition and related charges, and restructuring charges, 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 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

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 revenues 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