Category Archives: Alaska Air Group

Alaska Air Group reports a loss of $143 million in the first quarter

Alaska Air Group (Alaska Airlines and Horizon Air) today reported financial results for its first quarter ending March 31, 2022 and provided outlook for the second quarter ending June 30, 2022.

“Alaska has a proven track record and a resilient business model that delivers in good times and through challenging ones. We are on course to deliver 6% to 9% adjusted pre-tax margins in 2022, as we recently announced at our investor day,” said Alaska Airlines CEO Ben Minicucci. “March results were particularly strong, marked by our highest cash sales month in history and revenues that exceeded 2019 levels for the first time since the pandemic began. Our people are working hard to get our airline back to its pre-COVID size and to return to growth from there, all while delivering the operational excellence that we’re known for. It’s an honor to have our company’s hard work recognized by Air Transport World as the 2022 Global Airline of the Year.”

Financial Results:

  • Reported net loss for the first quarter of 2022 under Generally Accepted Accounting Principles (GAAP) of $143 million, or $1.14 per share, compared to a net loss of $131 million, or $1.05 per share in the first quarter of 2021.
  • Reported net loss for the first quarter of 2022, excluding special items and mark-to-market fuel hedge accounting adjustments, of $167 million, or $1.33 per share, compared to a net loss, excluding special items and mark-to-market fuel hedge accounting adjustments, of $436 million or $3.51 per share, in the first quarter of 2021.
  • Generated $287 million in operating cash flow for the first quarter, driven by increased advance bookings as both leisure and business demand for air travel continue to recover.
  • Held $2.9 billion in unrestricted cash and marketable securities as of March 31, 2022.
  • Ended the quarter with a debt-to-capitalization ratio of 50%, within our target range of 40% to 50%.

Operational Updates:

  • Announced plans to accelerate the transition of Alaska’s mainline fleet to all-Boeing and introduced new plans to transition Horizon’s regional fleet to all-Embraer jets by the end of 2023. This transition is expected to drive significant economic benefits through cost savings, operational simplicity and better fuel efficiency.
  • Extended the co-branded Mileage Plan credit card agreement with Bank of America through 2030, providing expanded guest benefits and accelerating Alaska’s strategic growth plans in the West Coast.
  • Modified the Boeing aircraft order to include six firm and 41 option 737-10 aircraft and 10 firm 737-8 aircraft. The new mix of aircraft types provides an optimal fleet for our network and anticipated growth.
  • Announced plans to renovate and expand Alaska lounges in Seattle and Portland to provide additional capacity and enhanced amenities, with both expected to open by 2026.
  • Received nine Boeing 737-9 aircraft, bringing the total number of 737-9s in our fleet to 20.
  • Added Air Tahiti Nui as a new global Mileage Plan partner, allowing our guests to earn miles flying nonstop between Seattle or Los Angeles and French Polynesia.
  • Expanded codeshare agreement with Finnair, bringing total codeshare growth to more than 250 routes since Alaska’s entrance into the oneworld alliance in 2021.

Recognition and Awards:

  • Awarded the 2022 Airline of the Year by Air Transport World, given to an airline each year in recognition of outstanding performance, innovation and superior service.
  • Named to the TIME100 Most Influential Companies list, highlighting Alaska’s commitment to make meaningful changes in the climate impact of aviation.

Environmental, Social and Governance Updates:

  • Announced Patricia Bedient as the next chair of Alaska Air Group’s Board of Directors, replacing Brad Tilden effective May 5, 2022.
  • Launched the Ascend Pilot Academy in partnership with Hillsboro Aero Academy, providing aspiring pilots a simpler and more financially accessible path to become a commercial pilot at Horizon and Alaska.
  • Alongside other oneworld partners, signed two offtake agreements to procure sustainable aviation fuel for California operations, beginning in 2024.

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

Three Months Ended March 31,
2022 2021
(in millions, except per-share amounts) Dollars EPS Dollars EPS
GAAP net loss per share $             (143) $            (1.14) $             (131) $            (1.05)
Payroll Support Program grant wage offset (411) (3.31)
Mark-to-market fuel hedge adjustments (107) (0.85) (22) (0.18)
Special items – fleet transition and related charges(a) 75 0.60 18 0.14
Special items – restructuring charges(b) 11 0.09
Income tax effect of reconciling items above 8 0.06 99 0.80
Non-GAAP adjusted net loss per share $             (167) $            (1.33) $             (436) $            (3.51)
(a) Special items – fleet transition and related charges in the three months ended March 31, 2022 are primarily comprised of impairment charges associated on the Q400 fleet that will be retired from the operating service by the end of 2023.
(b) Special items – restructuring charges in the three months ended March 31, 2021 represent adjustments to total estimated cost for pilot incentive leaves as a result of updated recall timing from what was previously anticipated due to schedule changes, training limitations and other factors.

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 streamed online at 8:30 a.m. PDT on April 21, 2022. 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.

Second Quarter and Full Year 2022 Outlook

Q2 Expectation(a)
Capacity (ASMs) % change versus 2019(a) Down 6% to 9%
Revenue passengers % change versus 2019(a) Down 10% to 12%
Passenger load factor 85% to 88%
Total revenue % change versus 2019(a) Up 5% to 8%
Cost per ASM excluding fuel and special items (CASMex) % change versus 2019(a) Up 16% to 19%
Economic fuel cost per gallon $3.25 to $3.30
Non-operating expense $7 million to $9 million
Adjusted tax rate ~24% to 25%
(a) Due to the unusual nature of 2021 and 2020, all 2022 comparisons are versus the second quarter of 2019.

We recently reduced Q2 scheduled capacity in response to shortfalls in throughput from our pilot training department versus what was originally planned. For this reason, coupled with our commitment to exit the Airbus A320 fleet on an accelerated timeline, as well as persistent high oil prices, we have reduced our planned capacity growth modestly as compared to previous expectations.

For these reasons, we’ve also reduced our full year 2022 capacity expectations from up 1% to 3% versus 2019, to flat to down 3% versus 2019. As a direct result of the reduction in full year capacity expectations, we expect full year 2022 CASMex to be up 6% to 8% compared to our prior expectation of up 3% to 5%. We continue to expect full year 2022 adjusted pre-tax margins between 6% and 9%.

 

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 Air Group to retire all Airbus and Bombardier Q400 aircraft by late 2023

Alaska Air Group Inc. , the parent company of Alaska Airlines Inc. and Horizon Air Industries Inc., during its Investor Day briefing, announced it will simplify its fleet in 2023 to only Boeing and Embraer aircraft.

This means all Airbus aircraft, including the A321neo aircraft, and Bombardier DHC-8-402 (Q400) aircraft will be retired by the end of 2023.

Runway for Profitable Growth

Members of Alaska’s leadership team outlined the competitive advantages that underpin the company’s industry-leading performance and strategic growth plan:

    1. Adding depth to our expansive network:  Alaska plans to grow an average of 4-8% per year through 2025, in part by investing in the depth of its network. Alaska’s 1,200 flights per day take our guests to 120 destinations across North and Central America, including nonstop flights to transcontinental business routes and four Hawaiian Islands. Alaska’s network has consistently produced industry-leading margins throughout its history and its measured approach to bringing capacity back post-pandemic enabled a return to profitability ahead of the industry. Together with the airline’s global partners in the oneworld® Alliance, guests can reach over 1,000 destinations while earning and redeeming miles on flights to locations around the world.
    2. Operating a single, more efficient fleet: Today, the company will share plans to accelerate the transition of its fleet of 300+ aircraft to all-Boeing 737 for its mainline operations and all-Embraer E175 jets for regional, by the end of 2023.  Consistent with Alaska’s low-cost high productivity mindset, these transitions are expected to drive significant economic benefits. As the fleet grows to 400 aircraft by mid-decade, these will manifest through operational simplicity, flexibility and scalability, better fuel efficiency and reduced maintenance costs. The company is also growing cargo business operations by converting two passenger 737-800s to freighters, bringing the total freighter fleet to five.
    3. Delivering best-in-class care: Care is the foundation of Alaska’s culture, fueled by its people and reflected in everything they do. It has earned the airline high guest satisfaction and long-term loyalty. The company will continue to invest in developing its people through its Pathways program, which cultivates talent from regional to mainline operations. In addition, it is  developing the next generation of pilots and training existing employees for new jobs through its Ascend Pilot Academy. The company is also committed to making measurable progress on initiatives to advance diversity, equity and inclusion.With care central to everything Alaska Airlines does, the company will continue to invest in end-to-end guest experiences that deliver on its brand promise. Today, the company announced infrastructure improvements for four of its main hubs –  Seattle, Portland, San Francisco and Los Angeles. These investments total $2.3 billion in infrastructure upgrades that will provide a more seamless and enjoyable travel experience for guests and provide access to more gates and state-of-the-art lounges and lobbies.
    4. Growing Alaska’s award-winning loyalty program with a renewed co-branded partnership: Alaska and Bank of America today announced an extension of their co-branded credit card agreement through 2030. This agreement will enhance benefits for guests and drive improved profitability for the airline. Alaska’s Mileage Plan™ is the industry’s most generous loyalty rewards program, with miles earned based on flight distance rather than dollars spent and ability to earn and redeem to over 1,000 global destinations as part of oneworld Alliance. Alaska’s co-branded credit card with Bank of America currently offers cardholders Alaska’s Famous Companion Fare™, free checked bag, the opportunity to earn 3x the miles on eligible Alaska purchases, 50 percent discount on day passes for Alaska Lounge access, 20 percent back on all inflight purchases and many other travel benefits.
    5. Preserving a resilient business model for long-term value creation: Alaska’s legacy of industry outperformance is guided by strong principles for management and performance. Today, the company published the guidelines that drive its financial sustainability and performance, providing additional transparency around its financial management principles and capital allocation approach. Key components include:
  • Generating returns on capital that consistently exceed the industry and the company’s cost of capital
  • Managing the business and allocating capital with a long-term perspective and a consistent set of priorities
  • Placing a high value on producing free cash flow consistently and sustainably

 

  1. Sustainable on all fronts: Alaska’s commitment to long-term value includes prioritized ESG commitments to increase diversity at all levels, to reduce the company’s impact on the climate, and to provide transparent accountability on key environmental, social and governance parameters. Last year, the airline set ambitious, but attainable sustainability goals, including being the most fuel-efficient U.S. airline and reaching net-zero carbon emissions by 2040. Further embedding these commitments into its culture, Alaska has linked a portion of its annual performance-based pay plan for all employees to the carbon intensity of the operation, and a portion of executives’ compensation to achieving stronger BIPOC representation in leadership.
Full Year 2022 Outlook

“Alaska’s team is committed to outperforming the industry, even while navigating a choppy pandemic recovery and near-term economic volatility,” said Shane Tackett, executive vice president finance and Chief Financial Officer of Alaska Air Group. “As people return to travel, they are choosing Alaska. And thanks to the caring spirit of our people, when guests try us, they tend to come back. We are excited for the path ahead and confident in our ability to continue creating value for our employees, guests, communities and shareholders.”

As detailed in the company’s fourth quarter 2021 and full-year results, Alaska’s 2022 outlook includes the following metrics:

Key Metric Range*
Capacity Up 1% to 3%
CASM ex-Fuel

(Excluding fleet transition costs and lease return expense)

Up 3% to 5%
Capital Expenditures $1.6 billion to $1.7 billion

*Range increases are compared to 2019 levels

Alaska Air Group raises its guidance due to rising fuel costs

Alaska Air Group has raised its fuel cost guidance for first quarter to $2.60 to $2.65 per gallon from $2.45 to $2.50 per gallon.

Alaska Air Group now expects capacity to be down 3% to 5% in the first half of 2022.

Alaska Air Group delivers strong fourth quarter 2021 and full-year results

Alaska Air Group Inc. today announced another quarter of improvement in its financial results for the fourth quarter and full year ended December 31, 2021, and provided an outlook for the first quarter ending March 31, 2022.

“While recovery in our industry is never linear, our caring and dedicated people and the strength of our competitive advantages position us for success no matter what challenges we face,” said CEO Ben Minicucci. “Despite operational disruption from omicron and severe winter weather in December, our fourth quarter adjusted pre-tax margin was 2.4%, marking one of the industry’s most profitable performances in Q4 and the second half of the year. We have laid a solid foundation for our return to 100% of our pre-COVID flying by summer 2022 and we’re poised to grow from there.”

Alaska’s fourth quarter and full year 2021 results reflect a disciplined focus on cost management and a measured approach to bringing back capacity in recovery. In addition to delivering profitability in the second half of the year, Alaska’s financial performance enabled the company to restore its debt-to-capitalization ratio to pre-pandemic levels in the fourth quarter, priming the airlines for profitable growth in 2022.

Financial Results for the Fourth Quarter and Full Year:

  • Reported net income for the fourth quarter and full year 2021 under Generally Accepted Accounting Principles (GAAP) of $18 million, or $0.14 per diluted share, and $478 million, or $3.77 per diluted share. These results compare to a net loss for the fourth quarter and full year 2020 of $447 million, or $3.60 per share, and $1.3 billion, or $10.72 per share.
  • Reported 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. These results compare to a net loss for the fourth quarter and full year 2020, excluding special items and mark-to-market fuel hedge accounting adjustments, of $316 million, or $2.54 per share, and $1.3 billion, or $10.17 per share.
  • Reported adjusted pre-tax margin for the fourth quarter of 2021 of 2.4%, marking the second profitable quarter on an adjusted basis since the onset of the pandemic.
  • Recorded $42 million and $151 million of incentive pay in the fourth quarter and full year 2021 earned by employees for meeting or exceeding cash flow, cost management, and safety goals, representing approximately three weeks pay for most employees.

Balance Sheet and Liquidity at Year End:

  • Reported a debt-to-capitalization ratio of 49%, a reduction of 12 points from December 31, 2020, and the lowest level since the first quarter of 2020.
  • For the full year, generated $138 million in operating cash flows, net of Payroll Support Program grant funds received.
  • Repaid $112 million in debt in the fourth quarter, bringing total debt payments to $1.3 billion for the year.
  • Held $3.1 billion in unrestricted cash and marketable securities as of December 31, 2021.

Operational Updates and Milestones for the Fourth Quarter:

  • Announced nonstop service between Seattle-Tacoma International Airport and Miami, marking the 100th nonstop destination from Alaska’s Seattle hub.
  • Expanded oneworld partnership with new West Coast international flights between Portland and London Heathrow on British Airways and between Seattle and Helsinki on Finnair. Expanded service will provide Alaska’s guests more than 100 nonstop flights on oneworld partners from the West Coast to Europe by summer 2022.
  • Launched new MVP Gold 100k tier for Mileage Plan members, providing enhanced benefits for those traveling 100,000 miles or more in one year.
  • Named the safest U.S. airline by AirlineRatings.com in their annual Top 20 Safest Airline Report.
  • Received four 737-9 aircraft during the quarter, bringing total additions in 2021 to 11.
  • Began nonstop service to Belize from Seattle and Los Angeles in November, marking the fourth country Alaska flies to from its West Coast hubs.

Fourth Quarter Environmental, Social, and Governance Updates:

  • Announced the appointment of Diana Birkett Rakow as senior vice president of public affairs and sustainability, emphasizing Alaska’s commitment to protect the places it flies and support the communities it serves.
  • Announced collaboration with ZeroAvia to begin development on a hydrogen-electric powertrain engine capable of flying regional aircraft in excess of 500 nautical miles.
  • Expanded inflight sustainability efforts by trading plastic water bottles and cups for Boxed Water Is Better® plant-based cartons and recyclable paper cups. This change will eliminate an estimated 1.8 million pounds of single-use plastics over the next year.
  • Launched partnership with travel2change, a Hawaii-based social and environmental impact organization that connects travelers with sustainable volunteer projects while visiting Hawaii.

The following table reconciles the company’s reported GAAP net income (loss) per share (EPS) for the three and twelve months ended December 31, 2021 and 2020 to adjusted amounts.

Three Months Ended December 31,
2021 2020
(in millions, except per share amounts) Dollars Diluted EPS Dollars EPS
Reported GAAP net income (loss) and diluted EPS $                 18 $             0.14 $             (447) $            (3.60)
Payroll support program wage offset (22) (0.18)
Mark-to-market fuel hedge adjustments 21 0.16 (8) (0.06)
Special items – impairment charges and other (6) (0.05) 277 2.23
Special items – restructuring charges 2 0.02 (102) (0.82)
Special items – merger-related costs 1 0.01
Special items – net non-operating 26 0.21
Income tax effect on special items and fuel hedge adjustments (4) (0.03) (41) (0.33)
Non-GAAP adjusted net income (loss) and diluted EPS $                 31 $             0.24 $             (316) $            (2.54)
Twelve Months Ended December 31,
2021 2020
(in millions, except per share amounts) Dollars Diluted EPS Dollars EPS
Reported GAAP net income (loss) and diluted EPS $              478 $             3.77 $          (1,324) $          (10.72)
Payroll support program wage offset (914) (7.21) (782) (6.33)
Mark-to-market fuel hedge adjustments (47) (0.37) (8) (0.06)
Special items – impairment charges and other (1) (0.01) 627 5.08
Special items – restructuring charges (10) (0.08) 220 1.78
Special items – merger-related costs 6 0.05
Special items – net non-operating 26 0.21
Income tax effect on special items and fuel hedge adjustments 238 1.87 (21) (0.18)
Non-GAAP adjusted net loss and diluted EPS $             (256) $            (2.03) $          (1,256) $          (10.17)

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 Air Group is collaborating with ZeroAvia to develop hydrogen powertrain for 76-seat zero-emission aircraft

ZeroAvia has made this announcement:

  • ZeroAvia will incorporate a 3MW+ hydrogen-electric powertrain system into a De Havilland DHC-8-400 (Q400) aircraft.
  • Joint development collaboration also adds Alaska Airlines to ZeroAvia’s list of investors.
  • The aircraft will contain a ZA2000, the largest ZeroAvia’s powertrain platform, capable of producing between 2,000 kW and 5,000 kW.

ZeroAvia is gaining altitude as the leader in zero-emission passenger aircraft as it announces a development collaboration with Alaska Air Group, the parent company of Alaska Airlines, for a hydrogen-electric powertrain capable of flying 76-seat regional aircraft in excess of 500 NM. Alaska is also joining the list of top investors for the company, alongside a fellow Seattle-based Amazon Climate Pledge Fund and Bill Gates’s Breakthrough Energy Ventures.

Alaska and ZeroAvia engineers will work together to scale the company’s existing powertrain platform to produce the ZA2000, an engine family capable of producing between 2,000 and 5,000 kilowatts of power with a 500-mile range. The partnership will initially deploy ZeroAvia’s hydrogen-electric propulsion technology into a full-size De Havilland Q400 aircraft, previously operated by Alaska Air Group subsidiary Horizon Air Industries, Inc., capable of transporting 76 passengers.

ZeroAvia will also work closely with aircraft regulators during this project to ensure the aircraft meets both safety and operational requirements. ZeroAvia will set up a location in the Seattle area to support this initiative.

Alaska has also secured options for up to 50 kits to begin converting its regional aircraft to hydrogen-electric power through ZeroAvia’s zero-emission powertrain, starting with the Q400 aircraft. This pioneering zero-emission aviation rollout will be supported by the ground fuel production and dispensing infrastructure from ZeroAvia and its infrastructure partners, such as Shell. Working to advance novel propulsion is one of the five parts of Alaska’s strategy to achieve net zero.

Recently, ZeroAvia also successfully ground-tested its 600kW powertrain capable of flying airframes 10-20 seats in size 500 miles, is well advanced in preparing a 19-seat aircraft for flight testing at Cotswold Airport in the UK and is moving to full-size prototype manufacturing of its 2,000 kW engine for demonstrations in 2022.

Video:

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)

Alaska Airlines launches investment arm to accelerate progress to net zero

Alaska Airlines has announced the formation of a new LLC, Alaska Star Ventures, to advance emerging technology that will accelerate the airline’s progress toward net zero carbon emissions.

For the inaugural investment by Alaska Star Ventures, the company partnered with UP.Partners, an early-stage investor in sustainable, multi-dimensional mobility technologies that are transforming the moving world.

Alaska announced in April its commitment to reach net zero carbon emissions by 2040 with a five-part strategy to decarbonize. Alaska’s deployment of Flyways, artificial intelligence and machine learning software that supports our dispatchers’ route optimization efforts, inspired the pursuit of additional technologies to accelerate our path to net zero and enable efforts of Alaska employees across our system.

The company’s commitments to reduce its impact on carbon, waste and water build on a track record of progress in environmental sustainability including industry-leading onboard recycling, eliminating plastic straws and stir sticks, enabling touchless and paper-less guest experiences through technology, advancing the use of sustainable aviation fuels, and partnering with the Boeing ecoDemonstrator program to evaluate and test sustainability-focused technology.

Alaska Air Group lowers its forecast for third quarter due to softening demand, A320s to be retired before the end of 2022

Alaska Air Group updated its guidance for the third quarter 2021:

The public health and economic crises resulting from the outbreak of COVID-19 have dramatically impacted demand for air travel and driven significant change to our business operation and performance. From the beginning of these crises, the recovery path has been volatile and difficult to predict. If circumstances no longer support the plans we have established, our expectation for these metrics could change.
In the six weeks since we published our Q3 expectations, our bookings trends have deteriorated moderately as COVID case counts have increased. The setbacks in demand are not unique to any single geography. As a result, we have revised our guidance ranges. We now expect cash flow from operations toward the lower end of our previously disclosed range due to the above-mentioned slowing in forward bookings. While August and September performance is not expected to be as strong as that of July, we continue to expect to deliver positive pretax margins for the third quarter.
The table below provides our expectations for the third quarter.
Q3 Expectation(a)
Previous Q3 Expectation(d)
Capacity (ASMs) % change versus 2019(a)(b)
Down ~17% – 18% Down ~17% – 20%
Revenue passengers % change versus 2019(a)
Down ~21% to 23% Down ~15% to 18%
Passenger load factor ~79% to 81% ~82% to 85%
Total revenue % change versus 2019(a)
Down 19% to 21% Down 17% to 20%
Cost per ASM excluding fuel and special items % (CASMex) change versus 2019(a)
Up ~11% to 12% Up ~10% to 12%
Cash flow from operations(c)
~$0 million to $50 million ~$0 million to $100 million
Economic fuel cost per gallon ~$1.98 ~$1.95 – $2.00
Non-operating expense ~$13 to $15 million ~$15 to $20 million
Adjusted Tax Rate ~24% to 25% ~24% to 25%
(a)Due to the unusual nature of 2020, all comparisons are versus the third quarter of 2019.
(b)Capacity guidance excludes the impacts of close-in cancels that could occur as we monitor demand throughout the period.
(c)Metric represents our GAAP cash flow, exclusive of any federal income tax payments, refunds, or voluntary pension contributions.
(d)See investor update filed July 22, 2021.
Fleet Update
We continue to expect to return to 100% of 2019 capacity by summer of 2022. After that time, we expect to return to growth rates that are similar pre-pandemic levels. To accelerate the timing of that growth, we recently announced the early exercise of 12 options for Boeing 737-9 option aircraft with deliveries in 2023 and 2024. In conjunction with this transaction, Alaska also added 25 options to backfill those exercised in 2021.
The following table summarizes our anticipated fleet count by year, including the deliveries summarized above:
Actual Fleet
Anticipated Fleet Activity(a)
Aircraft June 30, 2021 2021 Additions 2021 Removals Dec 31, 2021 2022 Changes Dec 31, 2022 2023 Changes Dec 31, 2023
B737 Freighters 3 3 3 3
B737-700 11 11 11 11
B737-800 61 61 61 61
B737-900 12 12 12 12
B737-900ER 79 79 79 79
B737-9 MAX 5 7 12 31 43 32 75
A320(b)
21 7 (1) 27 (3) 24 (24)
A321neo 10 10 10 10
Total Mainline Fleet 202 14 (1) 215 28 243 8 251
Q400 operated by Horizon(c)
32 32 32 32
E175 operated by Horizon(c)
30 30 5 35 4 39
E175 operated by third party(c)
32 32 8 40 40
Total Regional Fleet 94 94 13 107 4 111
Total 296 14 (1) 309 41 350 12 362
(a) Anticipated fleet activity reflects intended early retirement and extensions or replacement of certain leases, not all of which have been contracted yet.
(b) Actual fleet at June 30, 2021, excluding Airbus aircraft permanently parked in response to COVID-19 capacity reductions. We have announced plans to return 12 of these to operating service, seven of which are planned for 2021 and five for 2022.
(c) Aircraft are either owned or leased by Horizon or operated under capacity purchase agreement with a third party.

All A320s to retired by the end of 2022

Above Copyright Photo: Alaska is preparing to retire the Airbus A320 fleet by December 31, 2022. Alaska Airlines Airbus A320-214 N626VA (msn 2830) PAE (Nick Dean). Image: 948142.
Capital Expenditures Forecast
The below table summarizes estimated capital expenditures, including aircraft and non-aircraft spend, for 2021 and 2022. Payments for those aircraft discussed above are not expected to impact capital expenditures in 2021 or 2022.
2021 2022
Expected Capital Expenditures $225 – $250 million $1.5 – $1.6 billion
Firm orders and option exercises beyond 2021 are expected to be financed primarily through operating cash flows and long-term debt.
Alaska Airlines (Airbus) aircraft slide show:

Alaska Airlines to reward its vaccinated employees with a $200 payment

Alaska Airlines made this announcement:

Throughout the pandemic, the safety of our employees and guests has always come first, and we are committed to protecting our fellow employees, guests and loved ones from the impacts of the COVID-19 virus.

We believe having as many people as possible vaccinated is the is best path for protection against COVID-19 and we will continue to strongly encourage our employees to be vaccinated. As of today, 75% of Alaska and Horizon employees who have shared their vaccination status are vaccinated. This is good progress, but we have more work to do. That’s why we are implementing new measures designed to increase vaccination rates and enhance our multi-layered approach to safety.

Moving forward, we will implement a testing protocol for unvaccinated employees as another layer of safety, while continuing to enforce safety protocols such as masking and distancing. We will also require all unvaccinated employees to participate in a vaccine education program and have stopped special COVID pay for unvaccinated employee absences due to exposure or infection. All new hires, effective immediately, will be required to be vaccinated before being hired at Alaska Airlines or Horizon Air. Finally, we will recognize those employees who provide proof of vaccination with a $200 payment.

And as we have throughout the pandemic, we’ll continue to adjust our safety protocols as we learn.

Alaska Air Group reports second quarter 2021 results

Alaska Air Group issued this financial statement for the second quarter:

Financial Results:

  • Reported net income for the second quarter of 2021 under Generally Accepted Accounting Principles (GAAP) of $397 million, or $3.15 per share, compared to a net loss of $214 million, or $1.74 per share in the second quarter of 2020.
  • Reported a net loss for the second quarter of 2021, excluding CARES Act Payroll Support Program (PSP) wage offsets, special items and mark-to-market fuel hedge accounting adjustments, of $38 million, or $0.30 per share, compared to an adjusted net loss of $439 million or $3.57 per share, in the second quarter of 2020.
  • Reported a debt-to-capitalization ratio, including short-term borrowings related to COVID-19, of 56%.
  • Held $4.0 billion in unrestricted cash and marketable securities as of June 30, 2021.
  • Generated $840 million in operating cash flow in the second quarter, inclusive of $489 million of PSP funding, bolstered by improved advance bookings on a surge in demand for air travel. Excluding PSP funding, quarterly operating cash flows improved over $580 million from the first quarter of 2021.

Operational Updates:

  • Announced plans to grow our mainline and regional fleets, exercising options for 13 Boeing 737-9 MAX with deliveries in 2023 and 2024, and nine E175 to be operated by Horizon Air with deliveries in 2022 and 2023. In addition, expanded our long-term capacity agreement with SkyWest Airlines by eight aircraft to be delivered in 2022.
  • Announced new service to Central America with new routes to Belize from Seattle and Los Angeles, with service slated to begin in November 2021.
  • Issued recall notices to all pilots on incentive lines for return to work by October 2021.
  • Continued our history of providing meaningful incentive programs to our employees with $67 million in cash bonuses earned to date.
  • Announced seven new domestic routes aimed at providing our West Coast guests more options to sun-filled destinations, including three new routes serving Boise, Idaho.

Liquidity Updates:

  • Received $664 million through a combination of grants and loans from the U.S. Treasury under an extension of the PSP.
  • Repaid approximately $570 million in debt, including the full $135 million loan from the U.S. Treasury made available under the CARES Act and the $363 million outstanding balance on two credit facilities.

Sustainability Updates:

  • Announced five-part pathway to achieve a net zero carbon footprint by 2040, putting the airline on track to meet the annual carbon intensity target that is part of its performance-based pay program for all employees.
  • First airline to implement network optimization software, Flyways, using artificial intelligence and machine learning to optimize air traffic and enable more fuel-efficient flight paths for aggregate savings of fuel, carbon emissions and time.
  • Partnered with Boeing to launch a 737-9 ecoDemonstrator to test advanced technologies that can enhance the safety and sustainability of air travel.  The aircraft will conduct five months of flight tests across the U.S.
  • Revealed “Our Commitment” aircraft in partnership with long-time partner UNCF, a symbol of the airline’s commitments to increase diverse representation in our leadership, advance education as a critical component of equity, and to make Alaska Airlines a place where everyone feels they belong.

Alaska Air Group Inc. today reported second quarter 2021 GAAP net income of $397 million, or $3.15 per share, compared to a net loss of $214 million, or $1.74 per share in the second quarter of 2020. Excluding the impact of payroll support program wage offsets, special items and mark-to-market fuel hedge adjustments, the company reported an adjusted net loss of $38 million, or $0.30 per diluted share, compared to an adjusted net loss of $439 million, or $3.57 per diluted share in 2020.

“As we put the worst of last year’s downturn behind us, Alaska is back on the path to profitability,” said CEO Ben Minicucci. “We are executing our plan, rebuilding our network, leveraging our capacity to meet growing demand, and delivering exceptional service and value to our guests. I’m incredibly proud and grateful for how hard our employees are working and how they show up for each other and our guests every day with focus on safety, operational excellence and care.”

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

Three Months Ended June 30,
2021 2020
(in millions, except per-share amounts) Dollars Diluted EPS Dollars Diluted EPS
GAAP net income (loss) per share $ 397 $ 3.15 $ (214) $ (1.74)
Payroll support program wage offset (503) (3.99) (362) (2.94)
Mark-to-market fuel hedge adjustments (46) (0.37) (6) (0.05)
Special items – impairment charges and other (4) (0.03) 69 0.56
Special items – restructuring charges (23) (0.18)
Special items – merger-related costs 1 0.01
Income tax effect of reconciling items above 141 1.12 73 0.59
Non-GAAP adjusted net loss per share $ (38) $ (0.30) $ (439) $ (3.57)
Six Months Ended June 30,
2021 2020
(in millions, except per-share amounts) Dollars Diluted EPS Dollars Diluted EPS
GAAP net income (loss) per share $ 266 $ 2.12 $ (446) $ (3.62)
Payroll support program wage offset (914) (7.27) (362) (2.94)
Mark-to-market fuel hedge adjustments (68) (0.54) 3 0.02
Special items – impairment charges and other 14 0.11 229 1.86
Special items – restructuring charges (12) (0.10)
Special items – merger-related costs 4 0.03
Income tax effect of reconciling items above 240 1.91 31 0.25
Non-GAAP adjusted net loss per share $ (474) $ (3.77) $ (541) $ (4.40)

Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables. A glossary of financial terms can be found on the last page of this release.

A conference call regarding the second quarter results will be streamed online at 8:30 a.m. PDT on July 22, 2021. 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, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements.  For a comprehensive discussion of potential risk factors, see Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Some of these risks include the risks associated with contagious illnesses and contagion, such as COVID-19, general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our indebtedness, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, and changes in laws and regulations. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance, or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.

Alaska Airlines and its regional partners serve more than 120 destinations across the United States and to Mexico, Canada and Costa Rica. The airline emphasizes Next-Level Care for its guests, along with providing low fares, award-winning customer service and sustainability efforts. Alaska is a member of oneworld. With the global alliance and the airline’s additional 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 newsroom.alaskaair.com and blog.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 June 30, Six Months Ended June 30,
(in millions, except per-share amounts) 2021 2020 Change 2021 2020 Change
Operating Revenues:
Passenger revenue $ 1,352 $ 309 338 % $ 2,011 $ 1,790 12 %
Mileage Plan other revenue 118 73 <td style=”font-family: arial, verdana; BORDER-BOTTOM: 1pt; BORDER-LEFT