Category Archives: Alaska Air Group

Horizon Air unveils new aircraft designs before 2022 Apple Cup

Horizon Air made this announcdement:

The Huskies of the University of Washington (UW) are taking on the Cougars of Washington State University (WSU) in their annual rivalry football game – the Apple Cup – and we couldn’t resist getting in on the competitive fun.

While the two universities have graced the outside of Horizon Q400 aircraft, the airline is moving to a fleet solely of modern Embraer E-175 jets, which means the original UW and WSU painted planes will soon be retired. The good news is we’re bringing two brand new aircraft into our fleet with fresh paint highlighting our commitment to our home state’s largest universities.

As the football teams prepare to take the field, get a sneak peek of the new aircraft coming in the summer of 2023.

Which tail are you most excited to see flying around the Northwest?

Our commitment to education

We became the University of Washington’s official airline partner in 2016, and we have worked together through partnership with UW Athletics, the Foster School of Business and other campus initiatives. Over half of our investment with the university goes directly to student-athlete scholarships and welfare – reinforcing our goal of supporting education in the communities we serve. We’re also proud to watch the Huskies take on opponents on the Alaska Airlines Field at Husky Stadium and in the Alaska Airlines Arena at Hec Edmundson Pavilion.

Over the past 12 years, we’ve partnered with Washington State University on several initiatives to advance the production of sustainable aviation fuel (SAF) – a key part of our goal to be carbon net zero by 2040. Beginning in 2015, we partnered with WSU-led Northwest Advanced Renewables Alliance (NARA) on the production and use of SAF made from forest residuals (tree limbs and branches that remain after a forest harvest). In 2016, we made history as the first airline to fly a commercial flight powered by this type of SAF. This year, WSU was named the academic partner as part of Alaska’s new corporate SAF program, with the goal to help expand the education and awareness on opportunities to improve the sustainability of business travel.

A new era of aircraft

Some of the communities we serve in the Pacific Northwest will be experiencing the benefits of Horizon’s new E-175s for the first time this winter. We love the jet and its range of benefits, and we know our guests will too:

  • The jet aircraft has three classes of service, just like our Boeing 737s.
  • Our elite members can enjoy upgrades to First Class and Premium Class.
  • All seats are window or aisle – there are no middle seats.
  • It provides a quieter flight than the Q400 turboprop.
  • There’s inflight entertainment and Wi-Fi connectivity on board.
  • There are larger overhead bins for showing carry-ons.
  • It flies faster than the Q400.

In addition, N652MK is the new Horizon Air retro jet:

Alaska Horizon aircraft photo Gallery:

Alaska Air Group reports third quarter net income of $40 million

Alaska Air Group (Alaska Airlines) released this financial statement:

Alaska Air Group today reported financial results for the third quarter ending Sept. 30, 2022, and provided outlook for the fourth quarter ending Dec. 31, 2022.

I am incredibly proud of our entire team for the strong results they delivered in the third quarter, through the busiest travel season in two years,” said Alaska CEO Ben Minicucci. “We ran an industry-leading operation with completion rates over 99% every month. We set a new revenue record and our double-digit pretax margin will likely lead the industry. Alaska and Horizon also ratified three major labor deals. This is a strong foundation that we look forward to building on in 2023.”

Financial Results for the Third Quarter:

  • Reported net income for the third quarter of 2022 under Generally Accepted Accounting Principles (GAAP) of $40 million, or $0.31 per share, compared to a net income of $194 million, or $1.53 per share, in the third quarter of 2021.
  • Reported net income for the third quarter of 2022, excluding special items and mark-to-market fuel hedge accounting adjustments, of $325 million, or $2.53 per share, compared to a net income, excluding special items and mark-to-market fuel hedge accounting adjustments, of $187 million, or $1.47 per share, in the third quarter of 2021.
  • Recorded $2.8 billion in operating revenues for the third quarter, the highest revenue-generating quarter in company history.
  • Generated RASM in the third quarter of 2022 26.8% above the third quarter 2019 result, driven by strong pricing, a robust demand environment and the execution of our commercial roadmap.
  • Reported adjusted pretax margin for the third quarter of 15.6%.

Balance Sheet and Liquidity:

  • Held $3.2 billion in unrestricted cash and marketable securities as of Sept. 30, 2022.
  • Maintained a debt-to-capitalization ratio of 49% as of Sept. 30, 2022, within the target range of 40% to 50%.
  • Generated $174 million in operating cash flow for the third quarter.

Operational Updates and Milestones:

  • First major carrier to ratify a new labor agreement with mainline pilots, recognizing Alaska’s more than 3,300 ALPA- represented employees for their contributions to the company’s success.
  • Ratified a pilot retention agreement in September with 700 Horizon Air pilots represented by the IBT.
  • Ratified a two-year contract extension in August with nearly 5,700 Alaska Airlines employees represented by the IAM.
  • Delivered an excellent operation, with 99% completion rates for both mainline and regional for the quarter.
  • Received five Boeing 737-9 aircraft in the third quarter, bringing the total number of 737-9s in our mainline fleet to 33.
  • Retired six Airbus A320 aircraft and nine Q400 aircraft during the quarter, progressing on our transition to single fleets. By the end of January 2023, the remaining 23 A320 aircraft and 22 Q400 aircraft are expected to be retired.
  • Began retrofit project for the 737-800 fleet to refresh interiors and add three main cabin seats.
  • Announced new nonstop service between Everett’s Paine Field and Anchorage starting in November 2022.

Awards and Recognition:

  • Mileage Plan ranked first in the U.S. News & World Report’s list of Best Airline Rewards Programs for the eighth consecutive year.
  • Named to Forbes’ America’s Best Employers for Women list, receiving the highest ranking of all airlines.
  • Named for the second year in a row to Newsweek’s list of America’s Best Customer Service.
  • Recognized by Fast Company as one of the Best Workplaces for Innovators.

Environmental, Social and Governance Updates:

  • Signed agreement with Gevo Inc. to purchase 185 million gallons of sustainable aviation fuel (SAF) over five years beginning in 2026.
  • Launched a new SAF initiative in partnership with Microsoft, Boeing and Washington State University to expand the use of SAF and increase education on sustainable travel topics.
  • Donated funds and miles to multiple organizations assisting disaster relief and recovery in Alaska, Florida and Puerto Rico.

 

Top Copyright Photo: Alaska Airlines Boeing 737-9 MAX 9 N924AK (msn 43333) SEA (Michael B. Ing). Image: 959067.

Alaska AIrlines aircraft photo gallery:

Virgin Group wants Alaska Airlines to continue paying for the Virgin America trademark

Virgin America is long gone. The airline was acquired by the Alaska Airlines Group and merged into Alaska Airlines on April 25, 2018.

According to Reuters, the Virgin Group, which holds the rights to the Virgin brand and logo, is suing Alaska Airlines in a London court for approximately $160 million. Virgin is claiming it is owed brand royalties despite the fact that the Virgin brand is no longer used by Alaska.

Virgin Aviation TM Ltd and Virgin Enterprises Ltd argued in court that Alaska Airlines must pay approximately $8 million “minimum royalty” each year until 2039 under a trademark license agreement signed in 2014 according to Reuters.

All Virgin America aircraft have been repainted into Alaska’s livery.

Top Copyright Photo: Now gone: Virgin America Airbus A320-214 N853VA (msn 5034) JFK (Fred Freketic). Image: 959104.

Virgin America aircraft photo gallery:

 

Alaska Air Group reports second quarter GAAP net income of $139 million

Alaska Air Group 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%.

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.

Top Copyright Photo: Alaska Airlines Boeing 737-900 ER SSWL N298AK (msn 60583) IAH (Jarrod Wilkening). Image: 958261.

Alaska Airlines aircraft slide show:

Alaska Airlines aircraft photo gallery:

 

Alaska Air Group orders 8 additional Embraer E175s, to be operated by Horizon Air

Alaska Air Group has announced plans to grow its regional fleet with an order of eight new additional Embraer E175 jets and options for 13 more.

The E175 aircraft will fly exclusively for Alaska Airlines under a Capacity Purchase Agreement (CPA) with Horizon Air.

The value of the contract, including options, is USD $1.12 billion based on list price.

Horizon’s new 76-seat aircraft from this order will be delivered in Alaska’s livery and three-class configuration over the next four years starting in Q2 2023.

The Horizon Air 76-seat E175 jet features 12 seats in First Class, 12 in Premium Class and 52 in the Main Cabin. Onboard amenities include free entertainment featuring more than 1,000 movies and TV shows. Additionally, customers seated in First Class enjoy 110-volt power in every seat.

Transitioning to a single jet fleet

Earlier this year, Horizon Air announced it would move to a single fleet of all E175 jets. The carrier currently flies a mix of 31Bombardier Q400 turboprop aircraft and 30 E175s. It will take delivery of 9 E175s over the next year as part of a previous order that also includes 3 deliveries in 2025.With this order by 2026, if not sooner, Horizon will have a fleet of 50 E175s.

With bases in Washington, Oregon, Idaho and Alaska, Horizon serves more than 45 cities throughout the Pacific Northwest, California, the Midwest, and British Columbia and Alberta in Canada.

The Alaska Airlines’ E175 experience:

  • Seat pitch is 31 inches in the Main Cabin, 34 inches in Premium Class and between 36 and 38 inches in First Class.
  • All guests flying on the E175 will enjoy a window or aisle seat.
  • The regional jet is equipped with large overhead bins.
  • Maximum cruising altitude: 41,000 feet
  • Typical cruising speed: 494 mph

Alaska Horixon aircraft photo gallery:

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 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:

[youtube https://www.youtube.com/watch?v=DRkBup7d1So&w=560&h=315%5D