Tag Archives: Alaska Air Group

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.

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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.

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 raises its guidance due to rising fuel costs

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

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

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

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

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

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

Financial Results for the Fourth Quarter and Full Year:

Reported net income for the fourth quarter and full year 2021 under Generally Accepted Accounting Principles (GAAP) of $18 million, or $0.14 per diluted share, and $478 million, or $3.77 per diluted share. These results compare to a net loss for the fourth quarter and full year 2020 of $447 million, or $3.60 per share, and $1.3 billion, or $10.72 per share.
Reported net income for the fourth quarter and net loss for the full year 2021, excluding special items and mark-to-market fuel hedge accounting adjustments, of $31 million, or $0.24 per diluted share, and $256 million, or $2.03 per share. These results compare to a net loss for the fourth quarter and full year 2020, excluding special items and mark-to-market fuel hedge accounting adjustments, of $316 million, or $2.54 per share, and $1.3 billion, or $10.17 per share.
Reported adjusted pre-tax margin for the fourth quarter of 2021 of 2.4%, marking the second profitable quarter on an adjusted basis since the onset of the pandemic.
Recorded $42 million and $151 million of incentive pay in the fourth quarter and full year 2021 earned by employees for meeting or exceeding cash flow, cost management, and safety goals, representing approximately three weeks pay for most employees.

Balance Sheet and Liquidity at Year End:

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

Operational Updates and Milestones for the Fourth Quarter:

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

Fourth Quarter Environmental, Social, and Governance Updates:

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

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

	Three Months Ended December 31,
	2021		2020
*(in millions, except per share amounts)*	Dollars	Diluted EPS	Dollars	EPS
Reported GAAP net income (loss) and diluted EPS	$ 18	$ 0.14	$ (447)	$ (3.60)
Payroll support program wage offset	—	—	(22)	(0.18)
Mark-to-market fuel hedge adjustments	21	0.16	(8)	(0.06)
Special items – impairment charges and other	(6)	(0.05)	277	2.23
Special items – restructuring charges	2	0.02	(102)	(0.82)
Special items – merger-related costs	—	—	1	0.01
Special items – net non-operating	—	—	26	0.21
Income tax effect on special items and fuel hedge adjustments	(4)	(0.03)	(41)	(0.33)
Non-GAAP adjusted net income (loss) and diluted EPS	$ 31	$ 0.24	$ (316)	$ (2.54)

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

Alaska Air Group returns to profitability in the third quarter

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

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

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

Financial Results:

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

Operational Updates:

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

Environmental, Social and Governance Updates:

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

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

	Three Months Ended September 30,
	2021				2020
*(in millions, except per-share amounts)*	Dollars		Diluted EPS		Dollars		EPS
GAAP net income (loss) per share	$	194	$	1.53	$	(431)	$	(3.49)
Payroll support program wage offset	—		—		(398)		(3.22)
Mark-to-market fuel hedge adjustments	—		—		(3)		(0.02)
Special items – impairment charges and other	(9)		(0.07)		121		0.98
Special items – restructuring charges	—		—		322		2.60
Special items – merger-related costs	—		—		1		0.01
Income tax effect of reconciling items above	2		0.01		(11)		(0.09)
Non-GAAP adjusted net income (loss) per share	$	187	$	1.47	$	(399)	$	(3.23)

	Nine Months Ended September 30,
	2021				2020
*(in millions, except per-share amounts)*	Dollars		Diluted EPS		Dollars		Diluted EPS
GAAP net income (loss) per share	$	460	$	3.64	$	(877)	$	(7.12)
Payroll support program wage offset	(914)		(7.24)		(760)		(6.16)
Mark-to-market fuel hedge adjustments	(68)		(0.54)		—		—
Special items – impairment charges and other	5		0.04		350		2.84
Special items – restructuring charges	(12)		(0.09)		322		2.61
Special items – merger-related costs	—		—		5		0.04
Income tax effect of reconciling items above	242		1.92		20		0.16
Non-GAAP adjusted net loss per share	$	(287)	$	(2.27)	$	(940)	$	(7.63)

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

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

The public health and economic crises resulting from the outbreak of COVID-19 have dramatically impacted demand for air travel and driven significant change to our business operation and performance. From the beginning of these crises, the recovery path has been volatile and difficult to predict. If circumstances no longer support the plans we have established, our expectation for these metrics could change.

In the six weeks since we published our Q3 expectations, our bookings trends have deteriorated moderately as COVID case counts have increased. The setbacks in demand are not unique to any single geography. As a result, we have revised our guidance ranges. We now expect cash flow from operations toward the lower end of our previously disclosed range due to the above-mentioned slowing in forward bookings. While August and September performance is not expected to be as strong as that of July, we continue to expect to deliver positive pretax margins for the third quarter.

The table below provides our expectations for the third quarter.


Q3 Expectation(a)	Previous Q3 Expectation(d)
Capacity (ASMs) % change versus 2019(a)(b)	Down ~17% – 18%	Down ~17% – 20%
Revenue passengers % change versus 2019(a)	Down ~21% to 23%	Down ~15% to 18%
Passenger load factor	~79% to 81%	~82% to 85%
Total revenue % change versus 2019(a)	Down 19% to 21%	Down 17% to 20%
Cost per ASM excluding fuel and special items % (CASMex) change versus 2019(a)	Up ~11% to 12%	Up ~10% to 12%
Cash flow from operations(c)	~$0 million to $50 million	~$0 million to $100 million
Economic fuel cost per gallon	~$1.98	~$1.95 – $2.00
Non-operating expense	~$13 to $15 million	~$15 to $20 million
Adjusted Tax Rate	~24% to 25%	~24% to 25%

(a)Due to the unusual nature of 2020, all comparisons are versus the third quarter of 2019.

(b)Capacity guidance excludes the impacts of close-in cancels that could occur as we monitor demand throughout the period.

(c)Metric represents our GAAP cash flow, exclusive of any federal income tax payments, refunds, or voluntary pension contributions.

(d)See investor update filed July 22, 2021.

Fleet Update

We continue to expect to return to 100% of 2019 capacity by summer of 2022. After that time, we expect to return to growth rates that are similar pre-pandemic levels. To accelerate the timing of that growth, we recently announced the early exercise of 12 options for Boeing 737-9 option aircraft with deliveries in 2023 and 2024. In conjunction with this transaction, Alaska also added 25 options to backfill those exercised in 2021.

The following table summarizes our anticipated fleet count by year, including the deliveries summarized above:


Actual Fleet	Anticipated Fleet Activity(a)
Aircraft	June 30, 2021	2021 Additions	2021 Removals	Dec 31, 2021	2022 Changes	Dec 31, 2022	2023 Changes	Dec 31, 2023
B737 Freighters	3	–	–	3	–	3	–	3
B737-700	11	–	–	11	–	11	–	11
B737-800	61	–	–	61	–	61	–	61
B737-900	12	–	–	12	–	12	–	12
B737-900ER	79	–	–	79	–	79	–	79
B737-9 MAX	5	7	–	12	31	43	32	75
A320(b)	21	7	(1)	27	(3)	24	(24)	–
A321neo	10	–	–	10	–	10	–	10
Total Mainline Fleet	202	14	(1)	215	28	243	8	251
Q400 operated by Horizon(c)	32	–	–	32	–	32	–	32
E175 operated by Horizon(c)	30	–	–	30	5	35	4	39
E175 operated by third party(c)	32	–	–	32	8	40	–	40
Total Regional Fleet	94	–	–	94	13	107	4	111
Total	296	14	(1)	309	41	350	12	362

(a) Anticipated fleet activity reflects intended early retirement and extensions or replacement of certain leases, not all of which have been contracted yet.

(b) Actual fleet at June 30, 2021, excluding Airbus aircraft permanently parked in response to COVID-19 capacity reductions. We have announced plans to return 12 of these to operating service, seven of which are planned for 2021 and five for 2022.

Above Copyright Photo: Alaska is preparing to retire the Airbus A320 fleet by December 31, 2022. Alaska Airlines Airbus A320-214 N626VA (msn 2830) PAE (Nick Dean). Image: 948142.

Capital Expenditures Forecast

The below table summarizes estimated capital expenditures, including aircraft and non-aircraft spend, for 2021 and 2022. Payments for those aircraft discussed above are not expected to impact capital expenditures in 2021 or 2022.


2021	2022
Expected Capital Expenditures	$225 – $250 million	$1.5 – $1.6 billion

Firm orders and option exercises beyond 2021 are expected to be financed primarily through operating cash flows and long-term debt.

Alaska Airlines (Airbus) aircraft slide show:

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

Alaska Airlines made this announcement:

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

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

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

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

Alaska Air Group reports second quarter 2021 results

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

Financial Results:

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

Operational Updates:

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

Liquidity Updates:

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

Sustainability Updates:

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

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

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

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

	Three Months Ended June 30,
	2021				2020
*(in millions, except per-share amounts)*	Dollars		Diluted EPS		Dollars		Diluted EPS
GAAP net income (loss) per share	$	397	$	3.15	$	(214)	$	(1.74)
Payroll support program wage offset	(503)		(3.99)		(362)		(2.94)
Mark-to-market fuel hedge adjustments	(46)		(0.37)		(6)		(0.05)
Special items – impairment charges and other	(4)		(0.03)		69		0.56
Special items – restructuring charges	(23)		(0.18)		—		—
Special items – merger-related costs	—		—		1		0.01
Income tax effect of reconciling items above	141		1.12		73		0.59
Non-GAAP adjusted net loss per share	$	(38)	$	(0.30)	$	(439)	$	(3.57)

	Six Months Ended June 30,
	2021				2020
*(in millions, except per-share amounts)*	Dollars		Diluted EPS		Dollars		Diluted EPS
GAAP net income (loss) per share	$	266	$	2.12	$	(446)	$	(3.62)
Payroll support program wage offset	(914)		(7.27)		(362)		(2.94)
Mark-to-market fuel hedge adjustments	(68)		(0.54)		3		0.02
Special items – impairment charges and other	14		0.11		229		1.86
Special items – restructuring charges	(12)		(0.10)		—		—
Special items – merger-related costs	—		—		4		0.03
Income tax effect of reconciling items above	240		1.91		31		0.25
Non-GAAP adjusted net loss per share	$	(474)	$	(3.77)	$	(541)	$	(4.40)

A conference call regarding the second quarter results will be streamed online at 8:30 a.m. PDT on July 22, 2021. It can be accessed at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call.

References in this update to “Air Group,” “Company,” “we,” “us,” and “our” refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified.

This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Some of these risks include the risks associated with contagious illnesses and contagion, such as COVID-19, general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our indebtedness, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, and changes in laws and regulations. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance, or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.

Alaska Airlines and its regional partners serve more than 120 destinations across the United States and to Mexico, Canada and Costa Rica. The airline emphasizes Next-Level Care for its guests, along with providing low fares, award-winning customer service and sustainability efforts. Alaska is a member of oneworld. With the global alliance and the airline’s additional partners, guests can travel to more than 1,000 destinations on more than 20 airlines while earning and redeeming miles on flights to locations around the world. Learn more about Alaska at newsroom.alaskaair.com and blog.alaskaair.com. Alaska Airlines and Horizon Air are subsidiaries of Alaska Air Group (NYSE: ALK).

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Alaska Air Group, Inc.

Three Months Ended June 30,

Six Months Ended June 30,

(in millions, except per-share amounts)

2021

2020

Change

2021

2020

Change

Operating Revenues:

Passenger revenue

1,352

309

338

2,011

1,790

Mileage Plan other revenue

118

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Alaska Air Group reports fourth quarter 2020 and full-year results

Alaska Air Group has released its 4Q and 2020 financial results:

Financial Results:

Reported net loss for the fourth quarter and full year 2020 under Generally Accepted Accounting Principles (GAAP) of $430 million, or $3.47 per diluted share, and $1.3 billion, or $10.59 per diluted share. These results compare to fourth quarter 2019 net income of $181 million, or $1.46 per diluted share, and full year 2019 net income of $769 million, or $6.19 per diluted share.
Reported adjusted net loss for the fourth quarter and full year 2020, excluding payroll support program wage offsets, special items, and mark-to-market fuel hedging adjustments, of $316 million, or $2.55 per diluted share, and $1.3 billion, or $10.17 per diluted share. These results compare to fourth quarter 2019 adjusted net income of $181 million, or $1.46 per diluted share, and full year 2019 adjusted net income of $798 million, or $6.42 per diluted share.
Reported adjusted net debt of $1.7 billion, flat from December 2019 despite a 59% decline in operating revenues for the year.
Reported a debt-to-capitalization ratio, including certain short-term borrowings, of 61%.
Held $3.3 billion in unrestricted cash and marketable securities as of Dec. 31, 2020.

Liquidity and Fleet Updates:

Accessed approximately $5 billion in new liquidity in 2020, including $1.2 billion raised in the capital markets and approximately $600 million in bank financing.
Reached an agreement with the U.S. Treasury in January 2021 to receive an extension of payroll support totaling $533 million, $266 million of which was received on Jan. 15, 2021.
Extended the period available to draw funds under the CARES Act loan program from March 26, 2021 to May 28, 2021.
Announced plans to expand the mainline fleet and restructure the existing aircraft purchase agreement with Boeing. In total, Air Group will take delivery of 68 737-9 MAX aircraft between 2021 and 2024, inclusive of 32 previous purchase commitments and 13 aircraft to be leased from Air Lease Corporation. https://twitter.com/AlaskaAir/status/1341466170688466945?s=20
Took delivery of Alaska’s first 737-9 MAX aircraft on January 24, 2021, which is expected to enter revenue service on March 1, 2021.
Permanently removed an additional 20 Airbus A320 aircraft from the fleet in the fourth quarter, resulting in 40 Airbus aircraft removed in 2020. A total of 31 Airbus aircraft remain in the operating fleet as of the end of the year.
Held $3.4 billion in cash and marketable securities as of Jan. 22, 2021, and total liquidity of $5.2 billion.

Operational and Guest Safety Updates

Announced seven new routes in the fourth quarter, including three “fun and sun” destinations connecting Anchorage to Las Vegas, Denver and San Francisco, and expanded service from Southern California to Austin and New York.
Eliminated change fees and extended the flexible travel policy for tickets purchased through March 31, 2021.
Implemented Next-Level Care initiative, which includes more than 100 measures designed to create a safe experience for guests and employees.
Named the safest U.S. airline by AirlineRatings.com in their annual Top 20 Safest Airline report.
Launched the West Coast International Alliance with American Airlines on Jan. 1, 2021, which will unlock new benefits for Alaska Mileage Plan members in the spring.
Partnered with healthcare providers to offer rapid and standardized COVID-19 testing for those guests traveling to destinations that require a negative result.
Received diamond level certification from the Airline Passenger Experience Association for the health and safety standards Alaska and Horizon Air implemented to keep guests safe throughout their journey.
Launched pre-clearance program for guests traveling to the Hawaiian Islands from the West Coast with an approved negative COVID-19 test.
Announced a partnership with Microsoft to use sustainable aviation fuel to offset the environmental impact of certain business air travel.
Announced oneworld benefits for elite Mileage Plan members, providing tier status in the global alliance to Alaska’s elite members, as the company works toward joining oneworld on March 31, 2021.

Alaska Air Group Inc. today reported a fourth quarter 2020 GAAP net loss of $430 million, or $3.47 per diluted share, compared to net income of $181 million, or $1.46 per diluted share in 2019. Excluding the impact of payroll support program wage offsets, special items and mark-to-market fuel hedge adjustments, the company reported a fourth quarter adjusted net loss of $316 million, or $2.55 per diluted share, compared to adjusted net income of $181 million, or $1.46 per diluted share in the fourth quarter of 2019.

The company reported a full-year 2020 GAAP net loss of $1.3 billion, compared to net income of $769 million in the prior year. Excluding the impact of payroll support program wage offsets, special items and mark-to-market fuel hedge adjustments, the company reported an adjusted net loss of $1.3 billion, or $10.17 per diluted share for 2020, compared to adjusted net income of $798 million, or $6.42 per diluted share in 2019.

“We are not out of the woods, but we are seeing signs of brighter days ahead,” said Air Group CEO Brad Tilden. “The people of Alaska and Horizon have really shown their grit over the past year, and the rest of the leadership team and I could not be more proud of them. We’re positioned to come out of this crisis with our balance sheet unimpaired and our competitive advantages intact, and both of these set us up for a strong future and a long runway for growth.”

Alaska’s Brad Tilden to retire, Ben Minicucci will take over

Alaska Air Group’s board of directors announced today that Brad Tilden will retire as chief executive officer on March 31, 2021, and Ben Minicucci, president of Alaska Airlines and a member of the Alaska Air Group board, will succeed him. Tilden will continue to serve as Alaska’s board chair.

“We are through the initial phases of our coronavirus response, and Alaska is on a solid trajectory,” said Tilden. “Now is the time to position Alaska for future growth, and now is the time to move forward with this long-planned transition. Ben has proven himself over a long career as a person who cares passionately about our people and our culture, as a leader who builds strong teams and produces results, and as a person who will work tirelessly to push this great company forward. He has earned this role, and I look forward to supporting him as board chair.”

“This announcement is the culmination of a multi-year succession planning process,” said Patricia Bedient, Alaska Air Group lead independent director. “The board has complete confidence in Ben’s ability to lead Alaska to great success in the years to come. We are also grateful to Brad for his outstanding leadership during his eight years as CEO. With Ben as CEO and Brad continuing as chair, Alaska’s future is bright.”

“I am honored and humbled by this incredible opportunity, and profoundly grateful for Brad’s leadership and partnership,” said Minicucci. “Our company is built on the strength of its people and our values, and I am so proud of who we are and all we have accomplished. The way in which our employees have navigated through challenges is truly inspiring – and the last nine months is no exception. I’m excited and optimistic about our future as we continue this journey together.”

During Minicucci’s 16-year career with Alaska, he has contributed in various roles of increasing responsibility. In 2016, he became president of Alaska Airlines and he was also named CEO of Virgin America upon Alaska’s acquisition of the airline. From 2009-2016, he served as executive vice president and chief operating officer where he directed the implementation of a customer service guiding framework which empowers employees to deliver personal and kind-hearted experiences to guests. He also held the role of vice president of Seattle operations (2007-2009) where he dramatically increased Alaska’s on-time performance and reliability. Minicucci joined Alaska in 2004 as staff vice president of maintenance. He holds a master’s degree in mechanical engineering from the Royal Military College of Canada and served in the Canadian Armed Forces for 14 years. He has two children and lives in Issaquah, Washington.

Alaska Air Group is the holding company for Alaska Airlines, the fifth largest U.S. passenger airline, and regional carrier Horizon Air.