SEATTLE, April 23, 2015 /PRNewswire/ --
Financial Highlights:
- Reported record first quarter net income, excluding special
items, of $149 million - a 67%
increase over the first quarter of 2014.
- Reported adjusted earnings per share of $1.12 per diluted share, a 75% increase over the
first quarter of 2014 and ahead of First Call analyst consensus
estimate of $1.10 per share.
- Earned net income for the first quarter under Generally
Accepted Accounting Principles (GAAP) of $149 million or $1.12 per diluted share, compared to net income
of $94 million, or $0.68 per diluted share in 2014.
- Recorded $26 million of employee
incentive pay in recognition of Air Group employees' progress on
meeting customer service, safety, operational and financial
goals.
- Increased fuel efficiency (as measured by seat-miles per
gallon) by 2.5% compared to the first quarter of 2014, as part of
our effort to be the airline leader in environmental
stewardship.
- Generated record adjusted pretax margin in the first quarter of
18.9% compared to 11.8% in 2014.
- Generated 18.8% adjusted pretax margin for the trailing
12-month period ended March 31, 2015,
compared to 13.6% for the same period in the prior year.
- Achieved trailing 12-month after-tax return on invested capital
of 20.1% compared to 14.8% in the 12-month period ended
March 31, 2014.
- Repurchased 1.6 million shares of common stock for $102 million in the first quarter of 2015,
representing 1.2% of the total shares outstanding at the beginning
of the year.
- Paid a $0.20 per-share quarterly
cash dividend on March 10, 2015, a
60% increase over the dividend declared in the first quarter of
2014.
Operational Highlights:
- Held the No. 1 spot in U.S. Department of Transportation
on-time performance among the eight largest U.S. airlines for the
twelve months ended February
2015.
- Named No. 1 on-time carrier in North
America for the fifth year in a row by FlightStats in
February 2015.
- Increased members in our Mileage Plan by 14% and Visa Signature
affinity cardholders by 10% from the first quarter of 2014.
- Achieved our highest ever customer satisfaction score for the
first quarter, improving 3 percentage points over prior year.
- Ranked first in the Leadership 500 Excellence Awards,
recognizing the success of Alaska's Gear Up leadership training.
- Ranked in the Top 100 in the 2015 Forbes "America's Best
Employers" survey.
- Ordered six additional Boeing 737-900ER aircraft for delivery
in 2016 and 2017.
- Offered free checked first bag to all Mileage Plan members in
January and all Alaska Airlines Visa Signature affinity credit card
holders in February and March.
- New routes launched and announced in the first quarter are as
follows:
New Non-Stop
Routes Launched in Q1
|
New Non-Stop
Routes Announced (Launch Dates)
|
Las Vegas to Mammoth
Lakes, California
|
Seattle to JFK, New
York (9/16/15)
|
San Diego to Kona,
Hawaii
|
Orange County,
California to Cabo San Lucas, Mexico (10/8/15)
|
Seattle to
Washington, D.C. Dulles
|
Orange County,
California to Puerto Vallarta, Mexico (10/9/15)
|
|
Boise to Spokane,
Washington (8/24/15)
|
Alaska Air Group, Inc., (NYSE: ALK) today reported first quarter
2015 GAAP net income of $149 million,
or $1.12 per diluted share, compared
to $94 million, or $0.68 per diluted share in the first quarter of
2014. Excluding the impact of mark-to-market fuel hedge
adjustments, the company reported record adjusted net income of
$149 million, or $1.12 per diluted share, compared to adjusted net
income of $89 million, or
$0.64 per diluted share, in 2014.
"Our record first quarter results reflect lower fuel prices, but
more importantly the tremendous loyalty of our customers in
Seattle and across our system"
said CEO Brad Tilden. "It is
gratifying to see such strong growth and financial results given
unprecedented competition. I want to thank our incredible
employees who continue to rise to the challenge and deliver
outstanding experiences to our customers."
The following table reconciles the company's reported GAAP net
income and earnings per diluted share (EPS) during the first
quarters of 2015 and 2014 to adjusted amounts:
|
Three Months Ended
March 31,
|
|
2015
|
|
2014
|
(in millions,
except per-share amounts)
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
Reported GAAP net
income
|
$
|
149
|
|
|
$
|
1.12
|
|
|
$
|
94
|
|
|
$
|
0.68
|
|
Mark-to-market fuel
hedge adjustments, net of tax
|
—
|
|
|
—
|
|
|
(5)
|
|
|
(0.04)
|
|
Non-GAAP adjusted
income and per-share amounts
|
$
|
149
|
|
|
$
|
1.12
|
|
|
$
|
89
|
|
|
$
|
0.64
|
|
Statistical data, as well as a reconciliation of the reported
non-GAAP financial measures, can be found in the accompanying
tables. A glossary of financial terms can be found on the last page
of this release.
A conference call regarding the first quarter results will be
simulcast via the Internet at 8:30 a.m.
Pacific time on April 23, 2015. It can be accessed
through the company's website 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 news release to "Air Group," "company," "we,"
"us" and "our" refer to Alaska Air Group, Inc. and its
subsidiaries, unless otherwise specified. Alaska Airlines, Inc. and
Horizon Air Industries, Inc. are referred to as "Alaska" and "Horizon," respectively, and
together as our "airlines."
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 Dec. 31, 2014.
Some of these risks include general economic conditions, increases
in operating costs including fuel, competition, labor costs and
relations, 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, a subsidiary of Alaska Air Group (NYSE: ALK),
together with its partner regional airlines, serves nearly 100
cities through an expansive network in the United States, Canada and Mexico. For reservations, visit
www.alaskaair.com. For more news and information, visit the Alaska
Airlines Newsroom at www.alaskaair.com/newsroom.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
(in millions,
except per-share amounts)
|
2015
|
|
2014
|
|
Change
|
Operating
Revenues:
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
Mainline
|
$
|
901
|
|
|
$
|
854
|
|
|
6%
|
|
Regional
|
186
|
|
|
186
|
|
|
—%
|
|
Total passenger
revenue
|
1,087
|
|
|
1,040
|
|
|
5%
|
|
Freight and
mail
|
23
|
|
|
24
|
|
|
(4)%
|
|
Other -
net
|
159
|
|
|
158
|
|
|
1%
|
|
Total Operating
Revenues
|
1,269
|
|
|
1,222
|
|
|
4%
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
Wages and
benefits
|
306
|
|
|
272
|
|
|
13%
|
|
Variable incentive
pay
|
26
|
|
|
25
|
|
|
4%
|
|
Aircraft fuel,
including hedging gains and losses
|
235
|
|
|
358
|
|
|
(34)%
|
|
Aircraft
maintenance
|
63
|
|
|
51
|
|
|
24%
|
|
Aircraft
rent
|
26
|
|
|
28
|
|
|
(7)%
|
|
Landing fees and
other rentals
|
71
|
|
|
69
|
|
|
3%
|
|
Contracted
services
|
67
|
|
|
60
|
|
|
12%
|
|
Selling
expenses
|
53
|
|
|
46
|
|
|
15%
|
|
Depreciation and
amortization
|
76
|
|
|
70
|
|
|
9%
|
|
Food and beverage
service
|
25
|
|
|
21
|
|
|
19%
|
|
Other
|
83
|
|
|
81
|
|
|
2%
|
|
Total Operating
Expenses
|
1,031
|
|
|
1,081
|
|
|
(5)%
|
|
Operating
Income
|
238
|
|
|
141
|
|
|
69%
|
|
|
|
|
|
|
|
Nonoperating
Income (Expense):
|
|
|
|
|
|
Interest
income
|
5
|
|
|
5
|
|
|
|
Interest
expense
|
(11)
|
|
|
(12)
|
|
|
|
Interest
capitalized
|
8
|
|
|
5
|
|
|
|
Other -
net
|
—
|
|
|
13
|
|
|
|
|
2
|
|
|
11
|
|
|
|
Income Before
Income Tax
|
240
|
|
|
152
|
|
|
|
Income tax
expense
|
91
|
|
|
58
|
|
|
|
Net
Income
|
$
|
149
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share:
|
$
|
1.13
|
|
|
$
|
0.69
|
|
|
|
Diluted Earnings
Per Share:
|
$
|
1.12
|
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
Shares Used for
Computation:
|
|
|
|
|
|
Basic
|
131.120
|
|
|
137.334
|
|
|
|
Diluted
|
132.230
|
|
|
138.822
|
|
|
|
|
|
|
|
|
|
|
Cash dividend
declared per share:
|
$
|
0.20
|
|
|
$
|
0.125
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
(in
millions)
|
March 31,
2015
|
|
December 31,
2014
|
Cash and marketable
securities
|
$
|
1,312
|
|
|
$
|
1,217
|
|
|
|
|
|
Total current
assets
|
1,776
|
|
|
1,756
|
|
Property and
equipment-net
|
4,497
|
|
|
4,299
|
|
Other
assets
|
137
|
|
|
126
|
|
Total
assets
|
6,410
|
|
|
6,181
|
|
|
|
|
|
Air traffic
liability
|
814
|
|
|
631
|
|
Current portion of
long-term debt
|
118
|
|
|
117
|
|
Other current
liabilities
|
948
|
|
|
923
|
|
Current
liabilities
|
1,880
|
|
|
1,671
|
|
Long-term
debt
|
650
|
|
|
686
|
|
Other liabilities and
credits
|
1,714
|
|
|
1,697
|
|
Shareholders'
equity
|
2,166
|
|
|
2,127
|
|
Total liabilities
and shareholders' equity
|
$
|
6,410
|
|
|
$
|
6,181
|
|
|
|
|
|
Debt-to-capitalization ratio, adjusted for operating
leases(a)
|
29%:71%
|
|
31%:69%
|
|
|
|
|
Number of common
shares outstanding
|
130.444
|
|
|
131.481
|
|
|
|
(a)
|
Calculated using the
present value of remaining aircraft lease payments.
|
OPERATING
STATISTICS SUMMARY (unaudited)
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2015
|
|
2014
|
|
Change
|
Consolidated
Operating Statistics:(a)
|
|
|
|
|
|
Revenue passengers
(000)
|
7,316
|
|
|
6,649
|
|
|
10.0%
|
|
RPMs (000,000)
"traffic"
|
7,723
|
|
|
7,078
|
|
|
9.1%
|
|
ASMs (000,000)
"capacity"
|
9,257
|
|
|
8,352
|
|
|
10.8%
|
|
Load
factor
|
83.4%
|
|
|
84.7%
|
|
|
(1.3pts)
|
|
Yield
|
14.08¢
|
|
|
14.70¢
|
|
|
(4.2%)
|
|
PRASM
|
11.74¢
|
|
|
12.45¢
|
|
|
(5.7%)
|
|
RASM
|
13.71¢
|
|
|
14.64¢
|
|
|
(6.4%)
|
|
CASM excluding
fuel(b)
|
8.61¢
|
|
|
8.66¢
|
|
|
(0.6%)
|
|
Economic fuel cost
per gallon(b)
|
$
|
1.98
|
|
|
$
|
3.32
|
|
|
(40.4%)
|
|
Fuel gallons
(000,000)
|
119
|
|
|
110
|
|
|
8.2%
|
|
ASM's per
gallon
|
77.8
|
|
|
75.9
|
|
|
2.5%
|
|
Average number of
full-time equivalent employees (FTE)
|
13,274
|
|
|
12,386
|
|
|
7.2%
|
|
|
|
|
|
|
|
Mainline Operating
Statistics:
|
|
|
|
|
|
Revenue passengers
(000)
|
5,236
|
|
|
4,737
|
|
|
10.5%
|
|
RPMs (000,000)
"traffic"
|
6,994
|
|
|
6,402
|
|
|
9.2%
|
|
ASMs (000,000)
"capacity"
|
8,347
|
|
|
7,495
|
|
|
11.4%
|
|
Load
factor
|
83.8%
|
|
|
85.4%
|
|
|
(1.6pts)
|
|
Yield
|
12.88¢
|
|
|
13.34¢
|
|
|
(3.4%)
|
|
PRASM
|
10.79¢
|
|
|
11.40¢
|
|
|
(5.4%)
|
|
RASM
|
12.75¢
|
|
|
13.57¢
|
|
|
(6.0%)
|
|
CASM excluding
fuel(b)
|
7.66¢
|
|
|
7.68¢
|
|
|
(0.3%)
|
|
Economic fuel cost
per gallon(b)
|
$
|
1.97
|
|
|
$
|
3.32
|
|
|
(40.7%)
|
|
Fuel gallons
(000,000)
|
103
|
|
|
96
|
|
|
7.3%
|
|
ASM's per
gallon
|
81.0
|
|
|
78.1
|
|
|
3.7%
|
|
Average number of
FTE's
|
10,380
|
|
|
9,591
|
|
|
8.2%
|
|
Aircraft
utilization
|
10.6
|
|
|
10.2
|
|
|
3.9%
|
|
Average aircraft
stage length
|
1,199
|
|
|
1,201
|
|
|
(0.2%)
|
|
Operating
fleet
|
137
|
|
|
133
|
|
|
4a/c
|
|
|
|
|
|
|
|
Regional Operating
Statistics:(c)
|
|
|
|
|
|
Revenue passengers
(000)
|
2,080
|
|
|
1,912
|
|
|
8.8%
|
|
RPMs (000,000)
"traffic"
|
728
|
|
|
675
|
|
|
7.9%
|
|
ASMs (000,000)
"capacity"
|
910
|
|
|
857
|
|
|
6.2%
|
|
Load
factor
|
80.0%
|
|
|
78.8%
|
|
|
1.2
|
|
Yield
|
25.58¢
|
|
|
27.53¢
|
|
|
(7.1%)
|
|
PRASM
|
20.46¢
|
|
|
21.69¢
|
|
|
(5.7%)
|
|
Operating fleet
(Horizon only)
|
52
|
|
|
51
|
|
|
1a/c
|
|
|
|
(a)
|
Except for full-time
equivalent employees, data includes information related to
third-party regional capacity purchase flying
arrangements.
|
(b)
|
See a reconciliation
of operating expenses excluding fuel, a reconciliation of economic
fuel costs, and Note A in the accompanying pages, for a discussion
of why these measures may be important to investors.
|
(c)
|
Data presented
includes information related to flights operated by Horizon Air and
third-party carriers.
|
OPERATING SEGMENTS
(unaudited)
|
|
|
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2015
|
|
Alaska
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
|
|
Air Group
Adjusted(a)
|
|
Special
Items(b)
|
|
Consolidated
|
Operating
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
|
901
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
901
|
|
|
$
|
—
|
|
|
$
|
901
|
|
Regional
|
—
|
|
|
186
|
|
|
—
|
|
|
—
|
|
|
186
|
|
|
—
|
|
|
186
|
|
Total
passenger revenues
|
901
|
|
|
186
|
|
|
—
|
|
|
—
|
|
|
1,087
|
|
|
—
|
|
|
1,087
|
|
CPA
revenues
|
—
|
|
|
—
|
|
|
99
|
|
|
(99)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Freight and
mail
|
22
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
23
|
|
Other-net
|
142
|
|
|
16
|
|
|
1
|
|
|
—
|
|
|
159
|
|
|
—
|
|
|
159
|
|
Total operating
revenues
|
1,065
|
|
|
203
|
|
|
100
|
|
|
(99)
|
|
|
1,269
|
|
|
—
|
|
|
1,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
639
|
|
|
164
|
|
|
91
|
|
|
(98)
|
|
|
796
|
|
|
—
|
|
|
796
|
|
Economic
fuel
|
203
|
|
|
32
|
|
|
—
|
|
|
—
|
|
|
235
|
|
|
—
|
|
|
235
|
|
Total operating
expenses
|
842
|
|
|
196
|
|
|
91
|
|
|
(98)
|
|
|
1,031
|
|
|
—
|
|
|
1,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Interest
expense
|
(7)
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(11)
|
|
|
—
|
|
|
(11)
|
|
Other
|
7
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
|
5
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Income (loss)
before income tax
|
$
|
228
|
|
|
$
|
7
|
|
|
$
|
6
|
|
|
$
|
(1)
|
|
|
$
|
240
|
|
|
$
|
—
|
|
|
$
|
240
|
|
|
Three Months Ended
March 31, 2014
|
|
Alaska
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
|
|
Air Group
Adjusted(a)
|
|
Special
Items(b)
|
|
Consolidated
|
Operating
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
|
854
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
854
|
|
|
$
|
—
|
|
|
$
|
854
|
|
Regional
|
—
|
|
|
186
|
|
|
—
|
|
|
—
|
|
|
186
|
|
|
—
|
|
|
186
|
|
Total
passenger revenues
|
854
|
|
|
186
|
|
|
—
|
|
|
—
|
|
|
1,040
|
|
|
—
|
|
|
1,040
|
|
CPA
revenues
|
—
|
|
|
—
|
|
|
91
|
|
|
(91)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Freight and
mail
|
23
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Other-net
|
140
|
|
|
17
|
|
|
1
|
|
|
—
|
|
|
158
|
|
|
—
|
|
|
158
|
|
Total operating
revenues
|
1,017
|
|
|
204
|
|
|
92
|
|
|
(91)
|
|
|
1,222
|
|
|
—
|
|
|
1,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
576
|
|
|
151
|
|
|
86
|
|
|
(90)
|
|
|
723
|
|
|
—
|
|
|
723
|
|
Economic
fuel
|
318
|
|
|
48
|
|
|
—
|
|
|
—
|
|
|
366
|
|
|
(8)
|
|
|
358
|
|
Total operating
expenses
|
894
|
|
|
199
|
|
|
86
|
|
|
(90)
|
|
|
1,089
|
|
|
(8)
|
|
|
1,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Interest
expense
|
(8)
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(12)
|
|
|
—
|
|
|
(12)
|
|
Other
|
18
|
|
|
(1)
|
|
|
1
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
|
15
|
|
|
(1)
|
|
|
(3)
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
Income (loss)
before income tax
|
$
|
138
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
(1)
|
|
|
$
|
144
|
|
|
$
|
8
|
|
|
$
|
152
|
|
|
|
(a)
|
The adjusted column
represents the financial information that is reviewed by management
to assess performance of operations and determine capital
allocations and does not include certain charges. See Note A
in the accompanying pages for further information.
|
(b)
|
Includes
mark-to-market fuel-hedge accounting adjustments.
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
CASM EXCLUDING
FUEL RECONCILIATION (unaudited)
|
|
Three Months Ended
March 31,
|
(in
cents)
|
2015
|
|
2014
|
Consolidated:
|
|
|
|
CASM
|
11.14¢
|
|
|
12.94¢
|
|
Less the following
components:
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
2.53
|
|
|
4.28
|
|
CASM excluding
fuel
|
8.61¢
|
|
|
8.66¢
|
|
|
|
|
|
Mainline:
|
|
|
|
CASM
|
10.09¢
|
|
|
11.82¢
|
|
Less the following
components:
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
2.43
|
|
|
4.14
|
|
CASM excluding
fuel
|
7.66¢
|
|
|
7.68¢
|
|
FUEL
RECONCILIATIONS (unaudited)
|
|
Three Months Ended
March 31,
|
|
2015
|
|
2014
|
(in millions,
except for per-gallon amounts)
|
Dollars
|
|
Cost/Gallon
|
|
Dollars
|
|
Cost/Gallon
|
Raw or "into-plane"
fuel cost
|
$
|
229
|
|
|
$
|
1.93
|
|
|
$
|
348
|
|
|
$
|
3.16
|
|
Losses on settled
hedges
|
6
|
|
|
0.05
|
|
|
18
|
|
|
0.16
|
|
Consolidated
economic fuel expense
|
235
|
|
|
1.98
|
|
|
366
|
|
|
3.32
|
|
Mark-to-market fuel
hedge adjustment
|
—
|
|
|
—
|
|
|
(8)
|
|
|
(0.07)
|
|
GAAP fuel
expense
|
$
|
235
|
|
|
$
|
1.98
|
|
|
$
|
358
|
|
|
$
|
3.25
|
|
Fuel
gallons
|
119
|
|
|
|
|
110
|
|
|
|
Note A: Pursuant to Regulation G, we are providing
reconciliation 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 from our
unit metrics, we believe that we have better visibility into the
results of operations and our non-fuel cost-reduction initiatives.
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 term, 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 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 CASM excluding fuel (and
other items as specified in our plan documents) are important
metrics for the employee incentive plan that covers all 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 compare our airlines 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 certain items, such as mark-to-market
hedging adjustments or special revenues, is important because it
provides information on significant items that are not necessarily
indicative of future performance. 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.
Note B: Air Group has two operating airlines - Alaska
Airlines and Horizon Air. Each is a regulated airline with separate
management teams primarily in operational roles. To manage the two
operating airlines, management views the business in three
operating segments. Alaska
operates a fleet of passenger jets (Alaska Mainline) and contracts
with Horizon, SkyWest Airlines, Inc. (SkyWest), and Peninsula
Airways, Inc. (PenAir) for regional capacity under which
Alaska receives all passenger
revenue from those flights (Alaska Regional). Horizon operates a
fleet of turboprop aircraft and sells all of its capacity to
Alaska pursuant to a capacity
purchase arrangement (Horizon). The Company believes the amounts
paid by Alaska to Horizon
approximate current market rates received by other regional
carriers for similar flying and are available to pay for various
Horizon operating expenses such as crew expenses, maintenance, and
aircraft ownership costs. All inter-company revenues and
expenses between Alaska and
Horizon are eliminated in consolidation.
Glossary of Terms
Aircraft Utilization - block hours per day; this
represents the average number of hours our aircraft are flying
Aircraft Stage Length - represents the average miles
flown per aircraft departure
ASMs - available seat miles, or "capacity"; represents
total seats available across the fleet multiplied by the number of
miles flown
CASM - operating costs per ASM, or "unit cost";
represents all operating expenses including fuel and special
items
CASMex - operating costs excluding fuel and special items
per ASM; this metric is used to help track progress toward
reduction of non-fuel operating costs since fuel is largely out of
our control
Debt-to-capitalization ratio - represents adjusted debt
(long-term debt plus the present value of future operating lease
payments) divided by total equity plus adjusted debt
Diluted Earnings per Share - represents earnings per
share using fully diluted shares outstanding
Diluted Shares - represents the total number of shares
that would be outstanding if all possible sources of conversion,
such as stock options, were exercised
Economic Fuel - best estimate of the cash cost of fuel,
net of the impact of our fuel-hedging program
Load Factor - RPMs as a percentage of ASMs; represents
the number of available seats that were filled with paying
passengers
Mainline - represents flying Boeing 737 jets and all
associated revenues and costs
PRASM - passenger revenue per ASM; commonly called
"passenger unit revenue"
Productivity - number of revenue passengers per full-time
equivalent employee
RASM - operating revenue per ASMs, or "unit revenue";
operating revenue includes all passenger revenue, freight &
mail, Mileage Plan, and other ancillary revenue; represents the
average total revenue for flying one seat one mile
Regional - represents capacity purchased by Alaska from Horizon, SkyWest, and
PenAir. In this segment, Alaska Regional records actual
on-board passenger revenue, less costs such as fuel, distribution
costs, and payments made to Horizon, SkyWest and PenAir under the
respective capacity purchased arrangement (CPAs).
Additionally, Alaska Regional includes an allocation of corporate
overhead such as IT, finance, other administrative costs incurred
by Alaska and on behalf of
Horizon.
RPMs - revenue passenger miles, or "traffic"; represents
the number of seats that were filled with paying passengers; one
passenger traveling one mile is one RPM
Yield - passenger revenue per RPM; represents the average
revenue for flying one passenger one mile
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SOURCE Alaska Air Group