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:

Boom Supersonic reveals a refined Overture, partners with Northrop Grumman

Boom Supersonic, the company building the world’s fastest airliner, optimized for speed, safety, and sustainability, has presented the refined design of Overture and also announced a new partnering agreement with Northrop Grumman to develop special mission variants of the aircraft. Carrying 65–80 passengers at twice the speed of today’s airliners and running on 100% sustainable aviation fuel (SAF), Overture will fly Mach 1.7 over water with a range of 4,250 nautical miles.

The Overture reveal at the Farnborough International Airshow is the culmination of 26 million core-hours of simulated software designs, five wind tunnel tests, and the careful evaluation of 51 full design iterations, resulting in an economically and environmentally sustainable supersonic airliner.

With this updated configuration, Boom combines a number of engineering innovations in aerodynamics, noise reduction, and overall performance.

Key Features:

Four-engine design: Overture will be powered by four powerful, wing-mounted engines that enable the airliner to cruise at Mach 1.7 over water and just under Mach 1 over land. Additionally, the four-engine design reduces noise while also decreasing costs for airline operators. Engine placement was selected to conform to the strictest passenger safety requirements.

Quieter operation: On take-off, Overture will use the world’s first automated noise reduction system. The airliner will fly without afterburners, meeting the same strict regulatory noise levels as the latest subsonic airplanes. These noise reduction efforts will deliver a quieter experience both for passengers and airport communities.

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Contoured fuselage: According to the principle of area-ruling, Overture’s fuselage has a larger diameter toward the front of the aircraft and a smaller diameter toward the rear. Boom has applied this design technique to minimize drag and maximize fuel efficiency at supersonic speeds.

Gull wings: The aircraft’s wings are sculpted to enhance supersonic performance as well as improve subsonic and transonic handling. Importantly, the wing shaping also helps ensure safety and stability at any speed.

Carbon composite construction: Overture will incorporate carbon composite materials into the majority of the build that are lighter, stronger, and more thermally stable than traditional metal construction. Carbon composites can also be manufactured with highly complex curvature, contributing to the aircraft’s aerodynamic efficiency.

Net zero carbon: Overture has been developed from the beginning to be net zero carbon, flying on 100% SAF. Sustainability is woven into all aspects of Overture, from design and production to flight and end-of-life recycling.

Overture Specifications:

• Cruise speed: Mach 1.7 supersonic, Mach 0.94 subsonic
• Range: 4,250nm with full payload
• Passengers: 65–80
• Exterior Dimensions: Length: 201 feet, Wingspan: 106 feet, Height: 36 feet • Interior Dimensions: 79 feet long, up to 6.5 feet height at aisle

• Airframe: composite fuselage, wing, vertical, and horizontal
• Wing: gull with digital leading and trailing edge flap control
• Flight controls: 4x redundant digital fly-by-wire on 2 LRUs
• Powerplant: 4x medium-bypass 100% SAF-compatible turbofan • Airport Community noise: ICAO Chapter 14 / FAA Stage 5

Additionally, the company announced today that it will begin outfitting The Iron Bird, a new 70,000-square-foot hardware ground test facility in Centennial, Colorado to house its first full-scale Overture testing model and flight deck simulators. The test model, also called an iron bird, will be used for integrating Overture’s flight hardware, software, and systems. Earlier this year, Boom announced its selection of the Piedmont Triad area for its first Overture Superfactory and remains on track to begin production in 2024.

Boom signs partnering agreement with Northrop Grumman:

Today at The Farnborough Airshow, Boom Supersonic also announced a landmark partnering agreement with Northrop Grumman to develop special mission variants for the U.S. Government and its allies.

“Time is a strategic advantage in high consequence scenarios, from emergency evacuations to disaster response,” said Scholl. “This collaboration between Boom and Northrop Grumman unlocks the potential for Overture to provide the US and our allies with an unmatched high speed capability when and where it’s most needed.”

Together, the two companies will pursue new use cases for Overture to support government and military operations that require rapid response, including quick-reaction surveillance and reconnaissance, command and control, as well as mobility and logistics missions such as emergency medical and troop transport.

“Pairing Northrop Grumman’s airborne defense systems integration expertise with Boom’s state-of-the-art Overture supersonic aircraft makes perfect sense,” said Tom Jones, president of Northrop Grumman Aeronautics Systems. “Together we can ensure military variants of Overture are tailored for missions where advanced system capabilities and speed are critical.”

Vietjet boosts Boeing with a commitment for 200 Boeing 737 MAXs

Vietjet (VietJet Aviation) has confirmed an order for 200 Boeing 737 MAX jets.

The first 50 will be delivered to its Thai VietJet affiliate.

Vietjet aircraft photo gallery:

easyJet has confirmed a firm order for 56 additional Airbus A320neo Family aircraft

easyJet has confirmed a firm order for 56 Airbus A320neo Family aircraft following shareholder approval. The order is part of easyJet’s fleet renewal and up-gauging, cost and sustainability enhancements to the business. The agreement includes an upsizing of 18 A320neo to the larger A321neo model.

easyJet currently operates a fleet of over 300 A320 Family including the A319, A320ceo, A320neo and A321neo, making it the world’s largest airline operator of Airbus’ single aisle aircraft. easyJet serves over 130 European airports in some 31 countries operating over 1,000 routes.

Top Copyright Photo: easyJet (UK) Airbus A320-251N WL G-UZHD (msn 7841) (NEO) PMI (Ton Jochems). Image: 958258.

easyJet (UK) aircraft photo gallery:

Norse Atlantic Airways launches operations with Boeing Digital Flight Operations Solutions

Norse Atlantic Airways today announced that it has selected several of Boeing’s digital solutions to streamline operations and increase flight deck efficiency as the new airline commences Transatlantic service this summer.

Norse will integrate the following solutions to support their new 787 fleet as part of a five-year agreement that covers the entire fleet:

Jeppesen FliteDeck Pro
Ground Controls and Tailored Maps
Aviator / FliteBrief
Onboard Performance Tool (OPT)
Ops Data and FMS NavData

These digital tools enable flight crews to perform real-time weight and balance and takeoff and landing calculations that reduce maintenance costs, optimize payload capacity, and streamline cockpit operations. Jeppesen’s digital navigation chart services increase flight deck efficiency and integrate key aviation functions efficiently, in a self-service environment.

FliteDeck Pro is a mobile navigation application used by more than 80% of commercial pilots around the globe. The fleet agnostic app for tablet devices provides pilots with all the aeronautical maps, charts, manuals and documents needed for paperless flying.

This agreement builds on a previously-announced agreement with Norse as the launch customer for Boeing Mobile Logbook, as well as Software Distribution Manager and Maintenance Performance Toolbox. These solutions are part of Boeing’s extensive portfolio of digital maintenance management solutions that provide a simplified approach with accelerated results.

Norse Atlantic Airways offers affordable fares on long-haul flights, primarily between Europe and the United States. Norse has a fleet of 15 Boeing 787 Dreamliners that will serve destinations including New York, Los Angeles, Fort Lauderdale, Orlando, Berlin and Paris. The company’s first flight took off from Oslo to New York on June 14, 2022.

Norse Atlantic Airways aircraft photo gallery:

United Airlines announces second quarter 2022 net income of $329 million

United Airlines (UAL) today reported second quarter 2022 financial results. The company achieved the highest second quarter revenue in its history, delivering its first profitable quarter since COVID-19 began, despite record-high fuel prices. The second quarter results combined with continued progress the company is seeing affirms United’s confidence in achieving the long-term adjusted pre-tax margin¹ targets of approximately 9 percent in 2023 and about 14 percent in 2026 that are part of the United Next strategy.

For the quarter, the company saw operating revenue up 6 percent versus the same quarter in 2019 and expects to see sequential improvement in the third quarter. The company also had record-setting TRASM (Total Revenue Per Available Seat Mile), up 24 percent versus the same quarter in 2019 and expects 24 to 26 percent improvement in the third quarter over third quarter 2019. Second quarter revenue improved at a rapid pace and while the company anticipates the economy will slow in the near to medium term, the continuing pandemic recovery is more than offsetting economic headwinds — leading to expected revenue and earnings acceleration in the third quarter. As a result, the company continues to expect to be profitable for the full year 2022. Additionally, even as the industry faced several, well-documented operational challenges throughout the quarter, United performed well and with the exception of Newark had operating results largely in line with 2019.

“I am grateful to the United team that has fought through severe systemic challenges impacting all of global aviation to serve our customers,” said United Airlines CEO Scott Kirby. “It’s nice to return to profitability – but we must confront three risks that could grow over the next 6-18 months. Industry-wide operational challenges that limit the system’s capacity, record fuel prices and the increasing possibility of a global recession are each real challenges that we are already addressing. These fundamental challenges have already led to higher costs, higher fuel prices but, also higher revenue, which means we’re as confident as ever we will deliver on our 9 percent adjusted pre-tax margin target in 2023.”

Second Quarter Financial Results

Reported second quarter 2022 net income of $329 million, adjusted net income² of $471 million.
Reported second quarter 2022 capacity down 15% compared to second quarter 2019.
Reported second quarter 2022 total operating revenue of $12.1 billion, up 6% compared to second quarter 2019.
Reported second quarter 2022 TRASM of up 24% compared to second quarter 2019.
Reported second quarter 2022 Cost Per Available Seat Mile (CASM) of up 32%, and CASM-ex² of up 17%, compared to second quarter 2019.
Reported second quarter 2022 operating margin of 7.2%, adjusted operating margin² of 8.2%.
Reported second quarter 2022 pre-tax margin of 3.8%, adjusted pre-tax margin² of 5.0%.
Reported second quarter 2022 fuel price of approximately $4.18 per gallon.
Reported second quarter 2022 payments of long-term debt, finance leases and other financing liabilities of $1.0 billion.
Reported second quarter 2022 ending available liquidity³ of $22 billion.

Operational Performance

ConnectionSaver tool helped save more than 150,000 connections, assisting more than 1,600 customers daily on average.
Inflight satisfaction for on-time flights remained at the highest historic level, achieving 80% for the quarter.
700,000 customers used the Agent on Demand platform since the beginning of the year.

Key Highlights

Launched a new, national advertising campaign – “Good Leads The Way” – that tells the story of United’s leadership in areas like customer service, diversity and sustainability, and captures the optimism fueling the airline’s large ambitions at a time of unprecedented demand in air travel.
Announced expansion of its Flight Training Center in Denver, already the largest facility of its kind in the world, as United seeks to hire an additional 10,000 pilots by 2030.
Became the first airline to donate flights in support of the White House’s Operation Fly Formula and transported Kendamil formula free of charge from Heathrow Airport in London to its Washington, Dulles hub.

Customer-Focused Enhancements

Opened the new United Club^SM location at Newark Liberty International Airport, a 30,000 square foot space offering travelers a modern design, enhanced amenities and culinary offerings.
Debuted new custom amenity kits for United Polaris^® from Away ahead of summer travel.
Announced limited-time collaboration with Spritz Society to offer complimentary premium cocktails on flights from Chicago to Milan and Newark to Rome, and in select United Clubs.
Debuted new plant-based menu items from Impossible Foods as part of United’s commitment to add more vegan and vegetarian options to its culinary line-up amidst growing demand for plant-based meat.

Network

Announced year-round, nonstop service between San Francisco, California, and Brisbane, Australia, becoming the first U.S. airline to add a new transpacific destination to its global network since the start of COVID-19.
Announced the company’s application with the U.S. Department of Transportation (DOT) for three weekly nonstop flights between Washington, D.C., and Cape Town, South Africa. The application was tentatively approved by the DOT earlier this month.
Resumed nonstop service between San Francisco and Melbourne, Australia.
Kicked off the launch of the largest transatlantic expansion in United history with 10 new routes including new destinations Amman, Jordan; Bergen, Norway; Nice, France; Ponta Delgada, Portugal; Palma de Mallorca, Spain; and Tenerife, Spain.
Expanded the airline’s codeshare agreement with Star Alliance member Singapore Airlines, making it easier for customers to travel to more cities in the United States, Southeast Asia and other destinations in the Asia-Pacific region.
Launched a new alliance partnership with Virgin Australia, providing customers new connectivity to Australian cities beyond nonstop services.
Resumed 24 international routes in the second quarter.
Announced new three times weekly service between Tokyo, Japan, and Saipan in the Commonwealth of the Northern Mariana Islandsbeginning in September 2022.

Environmental, Social and Governance (ESG)

Announced a new collaboration with OneTen, a coalition committed to upskill, hire and advance Black talent into family-sustaining careers over the next 10 years.
United Airlines Ventures announced an investment in and commercial agreement with Dimensional Energy, another step forward to reaching United’s pledge to become 100% green by achieving net-zero greenhouse gas emissions by 2050, without relying on the use of traditional carbon offsets.
Became the first U.S. airline to sign an agreement with Neste to purchase sustainable aviation fuel overseas.
United employees and their families participated in 11 different Pride parades in June and July in United hub markets and beyond.
United employees and their families participated in nearly 20 different Earth Month events across our hub communities and beyond.
Over 42 million miles and more than $400,000 donated to World Central Kitchen, Airlink, American Red Cross, and Americares in support of Ukraine relief efforts by United’s customers, with an additional 5 million miles and $100,000 matched by United.
Hosted send-off events for more than 350 athletes and their families flying to the 2022 USA Special Olympics Games in Orlando, Florida, including a fellow O’Hare International Airport Special Olympics Service Ambassador.
United welcomed 50 local youths and their family members to its Los Angeles International Airport maintenance facility for a three-week aviation program.
Sponsored the “Girls Rock Wings” event with Sisters of the Skies, allowing more than 60 young Black women, ages 10-18, to envision a future in aviation.
United, in partnership with the Warriors Community Foundation and Good Tidings Foundation, revealed the newly refurbished basketball court and gymnasium at the Willie Mays Boys and Girls Club of San Francisco.
In the second quarter, through a combination of cargo-only and passenger flights, United transported approximately 275 million pounds of freight, including COVID-19 vaccines and other essential supplies, which included nearly 33 million pounds of vital shipments, such as medical kits, personal protective equipment, pharmaceuticals, and medical equipment.

airBaltic starts the phase out of its Bombardier Q400 fleet

airBaltic has announces that on July 20, 2022 it started the redelivery process of its Bombardier Q400 NextGen aircraft back to their lessor Nordic Aviation Capital.

airBaltic made a decision to introduce an all-Airbus A220 fleet in the wake of the Covid-19 pandemic in spring 2020. It is expected that all 12 Q400 NextGen aircraft will be returned to the lessor by the end of the year.

The first Bombardier Q400 NextGen aircraft joined airBaltic back in 2010. Over the years, 12 different Bombardier Q400 NextGen have carried more than 11 million passengers in total and have performed more than 222 thousand flights all across the Europe.

Ethiopian Airlines orders two Dash 8-400 freighters

De Havilland Aircraft of Canada Limited and Ethiopian Airlines Group announced today that Ethiopian has signed a proposal for the purchase of two Dash 8-400 Freighter – Large Cargo Door (F-LCD) conversion kits. The proposal provides an option for an additional two F-LCD conversion kits. The parties are working to finalize a definitive and binding agreement.

WestJet statement regarding Unifor strike authorization vote results

WestJet today issued the following statement regarding the announcement made by Unifor, the certified union representing certain WestJet airport employees at YYC Calgary International Airport and Vancouver International Airport, regarding the results of its strike authorization vote.

In response to Unifor strike authorization, Angela Avery, Executive Vice-President and Chief People, Corporate and Sustainability Officer commented, “This is a common step in the labour negotiation process and was not unexpected. We remain focused on successfully negotiating an agreement that provides value to our airport employees, many of whom have joined WestJet in the last year. In the meantime, we will continue to provide our guests with the friendly and affordable air travel WestJet has always been known for.”

WestJet is committed to competitive compensation that recognize airport employee contributions, while ensuring the airline is positioned to return to profitability, following more than two years of unprecedented financial losses resulting from the pandemic. As the airline rebuilds, the majority of its airports employees have been with the company for less than one year, and the vast majority of more tenured airport employees have received increases through the existing pay step structure, in addition to a Canadian industry leading variable compensation.

As Canadians make their highly anticipated return to travel this summer, the airline is working on precautionary contingency plans, and has identified employees who may be reassigned if required. This preventative measure is in place to ensure critical air service continuity from coast-to-coast and to protect the fragile recovery of Canada’s travel and tourism industry.

WestJet has meticulously planned for summer operations and through proactive efforts to stabilize operations and since the beginning of July leads Canadian operators with a 97.5 per cent completion factor. The airline continues to work closely with the federal government, third-party providers and airport partners to mitigate operational challenges that remain outside of WestJet’s control in this challenging recovery landscape.

Azerbaijan Airlines signs MOU for four more Boeing 787-8 Dreamliners

Boeing (NYSE: BA) and Azerbaijan Airlines today signed a Memorandum of Understanding (MoU) for four additional fuel-efficient 787-8s at the Farnborough International Airshow. The Azerbaijan flag-carrier currently operates two 787-8s, with today’s announcement the airline intends to grow its Dreamliner fleet to 10 by 2030, enabling it to open new routes across Central Asia.

“Azerbaijan Airlines was the first airline in the Caspian and Central Asia region to operate the 787-8 Dreamliner and we currently have two 787-8s in-service. This MoU is the evidence of joint efforts to scale up the mutually beneficial partnership between Azerbaijan Airlines and Boeing,” said Jahangir Asgarov, president of Azerbaijan Airlines. “Over the years, our 787 airplanes have provided impeccable performance, and the addition of more long-haul airplanes will further expand the geography of Azerbaijan Airlines’ route network.”

Azerbaijan Airlines aircraft photo gallery: