Alaska Air Group returns to profitability in the third quarter

Alaska Air Group today reported financial results for its third quarter ending Sept. 30, 2021, and provided outlook for the fourth quarter ending Dec. 31, 2021.

The third quarter marks a significant stride forward in Alaska Air Group’s path to recovery. Alaska’s goal from the beginning of the pandemic has been deliberate – scaling the business back up in a measured way, leveraging the company’s strong balance sheet, and running a resilient operation, all with the aim of producing consistent industry-leading financial performance.

“We are thrilled to return to profitability this quarter, leading the industry with a 12% pretax profit margin,” said CEO Ben Minicucci. “Thanks to each one of our employees for running our operation and showing remarkable care for our guests, and credit to the leadership team for laying out a measured plan and executing it with discipline. We’re all feeling the momentum and look forward to building on our strong foundation for growth in 2022 and beyond.”

Financial Results:

  • Reported net income for the third quarter of 2021 under Generally Accepted Accounting Principles (GAAP) of $194 million, or $1.53 per share, compared to a net loss of $431 million, or $3.49 per share in the third quarter of 2020.
  • Reported net income for the third quarter of 2021, excluding special items and mark-to-market fuel hedge accounting adjustments, of $187 million, or $1.47 per share, compared to an adjusted net loss of $399 million or $3.23 per share, in the third quarter of 2020. This quarter’s adjusted results compare to the First Call analyst consensus estimate of $1.30 per share.
  • Generated adjusted pre-tax margin for the third quarter of 2021 of 12%.
  • Reported a debt-to-capitalization ratio of 51%, a reduction of 10 points from Dec. 31, 2020.
  • Made a $100 million voluntary contribution to the defined benefit plan for Alaska’s pilots in the third quarter, boosting estimated combined funded status of all defined benefit plans to 94%.
  • Held $3.2 billion in unrestricted cash and marketable securities as of Sept. 30, 2021.
  • Prepaid $425 million in debt from the 364-day term loan facility, bringing total debt payments to $1.2 billion for the year.

Operational Updates:

  • Exercised options for 12 Boeing 737-9 aircraft slated for delivery in 2023 and 2024, and added options for an additional 25 deliveries, bringing Alaska’s total firm commitments for 737-9 aircraft to 93 and available options to 52.
  • Ratified amended wage agreement for Horizon Air pilots, represented by the International Brotherhood of Teamsters.
  • Opened new San Francisco International Airport Lounge with 9,200 square feet of Bay-Area inspired amenities.
  • Announced new nonstop flights between San Francisco and Loreto and Ixtapa/Zihuatanejo, with service slated to begin Dec. 18. Since the onset of the pandemic, approximately 70 new markets have been announced or commenced operation.
  • Resumed and expanded inflight meals, snacks, and drinks in all classes of service.
  • Continued to exceed internal metrics for guest satisfaction, highlighting our commitment to providing our guests a smooth and safe experience throughout their journey.
  • Near the top of the industry for on-time arrivals and completion rates in the third quarter.

Environmental, Social and Governance Updates:

  • Appointed Adrienne Lofton, vice president of global marketing at Google, to the Company’s board of directors.
  • Announced formation of Alaska Star Ventures, an entity created to identify and further technologies that accelerate Alaska Airlines’ path to net zero carbon emissions.
  • Supported the Afghan Humanitarian Airlift Mission and the U.S. military by operating Civil Reserve Air Fleet flights in the evacuation of individuals and families from Afghanistan.
  • Awarded $260,000 in LIFT Grants to 25 nonprofits focused on a clear vision to provide the next generation of leaders with the knowledge, skills and providing pathways for success through the Alaska Airlines Foundation.

The following table reconciles the company’s reported GAAP net income (loss) per share (EPS) for the three and nine months ended Sept. 30, 2021 and 2020 to adjusted amounts.

Three Months Ended September 30,
2021 2020
(in millions, except per-share amounts) Dollars Diluted EPS Dollars EPS
GAAP net income (loss) per share $ 194 $ 1.53 $ (431) $ (3.49)
Payroll support program wage offset (398) (3.22)
Mark-to-market fuel hedge adjustments (3) (0.02)
Special items – impairment charges and other (9) (0.07) 121 0.98
Special items – restructuring charges 322 2.60
Special items – merger-related costs 1 0.01
Income tax effect of reconciling items above 2 0.01 (11) (0.09)
Non-GAAP adjusted net income (loss) per share $ 187 $ 1.47 $ (399) $ (3.23)
Nine Months Ended September 30,
2021 2020
(in millions, except per-share amounts) Dollars Diluted EPS Dollars Diluted EPS
GAAP net income (loss) per share $ 460 $ 3.64 $ (877) $ (7.12)
Payroll support program wage offset (914) (7.24) (760) (6.16)
Mark-to-market fuel hedge adjustments (68) (0.54)
Special items – impairment charges and other 5 0.04 350 2.84
Special items – restructuring charges (12) (0.09) 322 2.61
Special items – merger-related costs 5 0.04
Income tax effect of reconciling items above 242 1.92 20 0.16
Non-GAAP adjusted net loss per share $ (287) $ (2.27) $ (940) $ (7.63)