SEATTLE, April 21, 2016 /PRNewswire/ --
Financial Highlights:
- Reported record first quarter net income, excluding special
items, of $183 million, a 23%
increase over the first quarter of 2015. Adjusted diluted earnings
per share of $1.45 was a 29% increase
over the first quarter of 2015. This quarter's results exceed First
Call analyst consensus estimate of $1.42 per share.
- Reported net income for the first quarter under Generally
Accepted Accounting Principles (GAAP) of $184 million or $1.46 per diluted share, compared to net income
of $149 million, or $1.12 per diluted share in 2015.
- Paid $0.275 per-share quarterly
cash dividend in the first quarter, a 38% increase over the
dividend paid in the first quarter of 2015.
- Repurchased 1.7 million shares of common stock for an average
price of $74 during the first quarter
of 2016 for $127 million.
- Generated approximately $530
million of operating cash flow and $410 million of free cash flow in the first
quarter of 2016.
- Grew passenger revenues by 4% compared to the first quarter of
2015.
- Achieved return on invested capital of 25.6% for the
twelve-month period ending March 31,
2016, compared to 20.1% for the twelve-month period ending
March 31, 2015.
- Lowered adjusted debt-to-capitalization ratio to 26% as of
March 31, 2016.
- Held $1.6 billion in unrestricted
cash and marketable securities as of March
31, 2016.
- Placed an order on April 12,
2016, for 30 Embraer E175s with the option to purchase an
additional 33 E175s. The E175s will be flown by Horizon Air
beginning in 2017.
Planned Acquisition of Virgin America:
- Announced an agreement on April 4,
2016, to acquire the outstanding common stock of Virgin
America, Inc. (Virgin America) for $2.6
billion in cash. The transaction is expected to close late
this year or early 2017, pending Virgin America shareholder and
regulatory approval.
Operational Highlights:
- Held the No. 1 spot in U.S. Department of Transportation
on-time performance among the six largest U.S. airlines for the
12-months ended February 2016.
- Recognized by Air Transport World as the Airline Market Leader
for strong financial performance and outstanding customer
service.
- Increased Visa Signature affinity cardholders by 12% compared
to the prior year.
- Began offering Mileage Plan members the ability to redeem award
miles for flights with Hainan Airlines.
- Announced the formation of McGee Air Services, a wholly-owned
subsidiary of Alaska Airlines, which will provide ground handling,
aircraft cleaning and airport mobility services.
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)
|
Reno, Nevada to
Orange County, California
|
San Diego, California
to San Jose, California (6/8/16)
|
Orange County,
California to Santa Rosa, California
|
Bellingham,
Washington to Kona, Hawaii (11/12/16)
|
Alaska Air Group, Inc., (NYSE: ALK) today reported first quarter
2016 GAAP net income of $184 million,
or $1.46 per diluted share, compared
to $149 million, or $1.12 per diluted share in the first quarter of
2015. Excluding the impact of mark-to-market fuel hedge
adjustments, the company reported record adjusted net income of
$183 million, or $1.45 per diluted share, compared to adjusted net
income of $149 million, or
$1.12 per diluted share, in 2015.
"We are proud to report record first quarter results," said CEO
Brad Tilden. "These results are due
to the efforts of employees at Alaska and Horizon who share a common sense of
mission and a focus on low fares, operational reliability, and
delivering a level of genuine and caring service that sets us
apart. We see many of these same qualities in Virgin America, and
we're very excited about our proposed combination. We are looking
forward to the integration process and are confident that our team
has what it takes to build the premier airline for people living on
the West Coast."
The following table reconciles the company's reported GAAP net
income and earnings per diluted share (Diluted EPS) during the
first quarters of 2016 and 2015 to adjusted amounts:
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
(in millions,
except per-share amounts)
|
Dollars
|
|
Diluted
EPS
|
|
Dollars
|
|
Diluted
EPS
|
Reported GAAP net
income
|
$
|
184
|
|
|
$
|
1.46
|
|
|
$
|
149
|
|
|
$
|
1.12
|
|
Mark-to-market fuel
hedge adjustments, net of tax
|
(1)
|
|
|
(0.01)
|
|
|
—
|
|
|
—
|
|
Non-GAAP adjusted
income and per-share amounts
|
$
|
183
|
|
|
$
|
1.45
|
|
|
$
|
149
|
|
|
$
|
1.12
|
|
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 21,
2016. 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.
Additional Information About the Merger and Where to Find
It
This communication may be deemed to be solicitation material in
respect of the merger of Virgin America, Inc. ("Virgin America")
with a wholly owned subsidiary of Alaska Air Group. Virgin America
intends to file relevant materials with the Securities and Exchange
Commission (the "SEC"), including a proxy statement in preliminary
and definitive form, in connection with the solicitation of proxies
for the merger. The definitive proxy statement will contain
important information about the proposed merger and related
matters. BEFORE MAKING A VOTING DECISION, STOCKHOLDERS OF VIRGIN
AMERICA ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND OTHER
RELEVANT MATERIALS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
VIRGIN AMERICA AND THE MERGER. Stockholders will be able to obtain
copies of the proxy statement and other relevant materials (when
they become available) and any other documents filed by Virgin
America with the SEC for no charge at the SEC's website at
www.sec.gov. In addition, stockholders will be able to obtain free
copies of the proxy statement from Virgin America by contacting
Virgin America's Investor Relations Department by telephone at
(650) 762-7000, by mail to Virgin America Inc., Attention: Investor
Relations Department, 555 Airport Boulevard, Burlingame, California 94010, or by going to
Virgin America's Investor Relations page on its corporate website
at http://ir.virginamerica.com.
Participants in the Solicitation
Alaska Air Group, Virgin America and certain of their respective
directors, executive officers and other employees may be deemed to
be participants in the solicitation of proxies from Virgin
America's stockholders in respect of the merger. Information
concerning the ownership of Virgin America securities by Virgin
America's directors and executive officers is included in their SEC
filings on Forms 3, 4, and 5, and additional information about
Virgin America's directors and executive officers is also available
in Virgin America's proxy statement for its 2016 annual meeting of
stockholders filed with the SEC on March 25,
2016, and is supplemented by other public filings made, and
to be made, with the SEC by Virgin America. Information concerning
Alaska Air Group's directors and executive officers is available in
Alaska Air Group's proxy statement for its 2016 annual meeting of
stockholders filed with the SEC on April 1,
2016. Other information regarding persons who may be deemed
participants in the proxy solicitation, including their respective
interests by security holdings or otherwise, will be set forth in
the definitive proxy statement that Virgin America intends to file
with the SEC. These documents can be obtained free of charge from
the sources indicated above.
Forward-Looking Statements
This communication contains forward-looking statements, within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities and Exchange Act of 1934, as amended.
These statements relate to future events, Alaska Air Group and the
proposed merger of Virgin America with a wholly owned subsidiary of
Alaska Air Group. Forward-looking statements are statements that
are not historical facts. These statements can be identified by the
use of forward-looking terminology such as "believe," " expect,"
"may," "likely," "should," "project," "could," "plan," "goal,"
"potential," "pro forma," "seek," "estimate," "intend" or
"anticipate" or the negative thereof or comparable terminology, and
include discussions of strategy, financial projections, guidance
and estimates (including their underlying assumptions), statements
regarding plans, objectives, expectations or consequences of
announced transactions, and statements about the future
performance, operations and services of Alaska Air Group. Alaska
Air Group cautions readers not to place undue reliance on these
statements. These forward-looking statements are subject to a
variety of risks and uncertainties. Consequently, actual results
and experience may materially differ from those contained in any
forward-looking statements. Such risks and uncertainties include
the following: the failure to obtain Virgin America stockholder
approval of the proposed merger; the possibility that the closing
conditions to the proposed merger may not be satisfied or waived,
including that a governmental entity may prohibit, delay or refuse
to grant a necessary regulatory approval; delay in closing the
merger or the possibility of non-consummation of the merger; the
occurrence of any event that could give rise to termination of the
merger agreement; the risk that stockholder litigation in
connection with the contemplated merger may affect the timing or
occurrence of the contemplated merger or result in significant
costs of defense, indemnification and liability; risks inherent in
the achievement of anticipated synergies and the timing thereof;
risks related to the disruption of the merger to Virgin America and
its management; the effect of the announcement of the merger on
Virgin America's ability to retain and hire key personnel and
maintain relationships with suppliers and other third parties;
labor costs and relations; general economic conditions; increases
in operating costs including fuel; competition; inability to meet
cost reduction goals; seasonal fluctuations in our financial
results; an aircraft accident; and changes in laws and regulations.
These risks and others relating to Alaska Air Group are described
in greater detail in Alaska Air Group's SEC filings, including
Alaska Air Group's Annual Report on Form 10-K for the fiscal year
ended Dec. 31, 2015, as well as in
other documents filed by Alaska Air Group with the SEC after the
date thereof. Alaska Air Group makes no commitment to revise or
update any forward-looking statements in order to reflect events or
circumstances occurring or existing after the date any
forward-looking statement is made.
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
https://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)
|
2016
|
|
2015
|
|
Change
|
Operating
Revenues:
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
Mainline
|
$
|
927
|
|
|
$
|
901
|
|
|
3
|
%
|
Regional
|
206
|
|
|
186
|
|
|
11
|
%
|
Total passenger
revenue
|
1,133
|
|
|
1,087
|
|
|
4
|
%
|
Freight and
mail
|
24
|
|
|
23
|
|
|
4
|
%
|
Other -
net
|
190
|
|
|
159
|
|
|
19
|
%
|
Total Operating
Revenues
|
1,347
|
|
|
1,269
|
|
|
6
|
%
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
Wages and
benefits
|
336
|
|
|
306
|
|
|
10
|
%
|
Variable incentive
pay
|
32
|
|
|
26
|
|
|
23
|
%
|
Aircraft fuel,
including hedging gains and losses
|
167
|
|
|
235
|
|
|
(29)
|
%
|
Aircraft
maintenance
|
68
|
|
|
63
|
|
|
8
|
%
|
Aircraft
rent
|
29
|
|
|
26
|
|
|
12
|
%
|
Landing fees and
other rentals
|
80
|
|
|
71
|
|
|
13
|
%
|
Contracted
services
|
60
|
|
|
52
|
|
|
15
|
%
|
Selling
expenses
|
49
|
|
|
53
|
|
|
(8)
|
%
|
Depreciation and
amortization
|
88
|
|
|
76
|
|
|
16
|
%
|
Food and beverage
service
|
31
|
|
|
25
|
|
|
24
|
%
|
Other
|
94
|
|
|
83
|
|
|
13
|
%
|
Third-party regional
carrier expense
|
23
|
|
|
15
|
|
|
53
|
%
|
Total Operating
Expenses
|
1,057
|
|
|
1,031
|
|
|
3
|
%
|
Operating
Income
|
290
|
|
|
238
|
|
|
22
|
%
|
|
|
|
|
|
|
Nonoperating
Income (Expense):
|
|
|
|
|
|
Interest
income
|
6
|
|
|
5
|
|
|
|
Interest
expense
|
(13)
|
|
|
(11)
|
|
|
|
Interest
capitalized
|
8
|
|
|
8
|
|
|
|
Other -
net
|
1
|
|
|
—
|
|
|
|
Total Nonoperating
Income (Expense)
|
2
|
|
|
2
|
|
|
|
Income Before
Income Tax
|
292
|
|
|
240
|
|
|
|
Income tax
expense
|
108
|
|
|
91
|
|
|
|
Net
Income
|
$
|
184
|
|
|
$
|
149
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share:
|
$
|
1.47
|
|
|
$
|
1.13
|
|
|
|
Diluted Earnings
Per Share:
|
$
|
1.46
|
|
|
$
|
1.12
|
|
|
|
|
|
|
|
|
|
Shares Used for
Computation:
|
|
|
|
|
|
Basic
|
124.550
|
|
|
131.120
|
|
|
|
Diluted
|
125.328
|
|
|
132.230
|
|
|
|
|
|
|
|
|
|
Cash dividend
declared per share:
|
$
|
0.275
|
|
|
$
|
0.20
|
|
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
(in
millions)
|
March 31,
2016
|
|
December 31,
2015
|
Cash and marketable
securities
|
$
|
1,564
|
|
|
$
|
1,328
|
|
|
|
|
|
Total current
assets
|
1,923
|
|
|
1,663
|
|
Property and
equipment-net
|
4,830
|
|
|
4,802
|
|
Other
assets
|
76
|
|
|
65
|
|
Total
assets
|
6,829
|
|
|
6,530
|
|
|
|
|
|
Air traffic
liability
|
868
|
|
|
669
|
|
Current portion of
long-term debt
|
116
|
|
|
114
|
|
Other current
liabilities
|
1,085
|
|
|
1,022
|
|
Current
liabilities
|
2,069
|
|
|
1,805
|
|
Long-term
debt
|
531
|
|
|
569
|
|
Other liabilities and
credits
|
1,774
|
|
|
1,745
|
|
Shareholders'
equity
|
2,455
|
|
|
2,411
|
|
Total liabilities
and shareholders' equity
|
$
|
6,829
|
|
|
$
|
6,530
|
|
|
|
|
|
Debt-to-capitalization ratio, adjusted for operating
leases(a)
|
26%:74%
|
|
|
27%:73%
|
|
|
|
|
|
Number of common
shares outstanding
|
123.913
|
|
|
125.175
|
|
|
|
(a)
|
Calculated using the
present value of remaining aircraft lease payments.
|
OPERATING
STATISTICS SUMMARY (unaudited)
|
Alaska Air Group,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
|
Change
|
Consolidated
Operating Statistics:(a)
|
|
|
|
|
|
Revenue passengers
(000)
|
7,835
|
|
7,316
|
|
7.1%
|
RPMs (000,000)
"traffic"
|
8,571
|
|
7,723
|
|
11.0%
|
ASMs (000,000)
"capacity"
|
10,453
|
|
9,257
|
|
12.9%
|
Load
factor
|
82.0%
|
|
83.4%
|
|
(1.4)pts
|
Yield
|
13.22¢
|
|
14.08¢
|
|
(6.1)%
|
PRASM
|
10.84¢
|
|
11.74¢
|
|
(7.7)%
|
RASM
|
12.88¢
|
|
13.71¢
|
|
(6.1)%
|
CASM excluding
fuel(b)
|
8.51¢
|
|
8.61¢
|
|
(1.2)%
|
Economic fuel cost
per gallon(b)
|
$1.29
|
|
$1.98
|
|
(34.8)%
|
Fuel gallons
(000,000)
|
132
|
|
119
|
|
10.9%
|
ASM's per
gallon
|
79.2
|
|
77.8
|
|
1.8%
|
Average number of
full-time equivalent employees (FTE)
|
14,357
|
|
13,274
|
|
8.2%
|
|
|
|
|
|
|
Mainline Operating
Statistics:
|
|
|
|
|
|
Revenue passengers
(000)
|
5,642
|
|
5,236
|
|
7.8%
|
RPMs (000,000)
"traffic"
|
7,716
|
|
6,994
|
|
10.3%
|
ASMs (000,000)
"capacity"
|
9,354
|
|
8,347
|
|
12.1%
|
Load
factor
|
82.5%
|
|
83.8%
|
|
(1.3)pts
|
Yield
|
12.01¢
|
|
12.88¢
|
|
(6.8)%
|
PRASM
|
9.91¢
|
|
10.79¢
|
|
(8.2)%
|
RASM
|
11.99¢
|
|
12.75¢
|
|
(6.0)%
|
CASM excluding
fuel(b)
|
7.49¢
|
|
7.66¢
|
|
(2.2)%
|
Economic fuel cost
per gallon(b)
|
$1.28
|
|
$1.97
|
|
(35.0)%
|
Fuel gallons
(000,000)
|
113
|
|
103
|
|
9.7%
|
ASM's per
gallon
|
82.8
|
|
81.0
|
|
2.2%
|
Average number of
FTE's
|
11,123
|
|
10,380
|
|
7.2%
|
Aircraft
utilization
|
10.6
|
|
10.6
|
|
—%
|
Average aircraft
stage length
|
1,237
|
|
1,199
|
|
3.2%
|
Operating
fleet
|
152
|
|
137
|
|
15 a/c
|
|
|
|
|
|
|
Regional Operating
Statistics:(c)
|
|
|
|
|
|
Revenue passengers
(000)
|
2,192
|
|
2,080
|
|
5.4%
|
RPMs (000,000)
"traffic"
|
855
|
|
728
|
|
17.4%
|
ASMs (000,000)
"capacity"
|
1,100
|
|
910
|
|
20.9%
|
Load
factor
|
77.7%
|
|
80.0%
|
|
(2.3)pts
|
Yield
|
24.09¢
|
|
25.58¢
|
|
(5.8)%
|
PRASM
|
18.72¢
|
|
20.46¢
|
|
(8.5)%
|
Operating
fleet
|
67
|
|
60
|
|
7 a/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, 2016
|
|
Alaska
|
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating
|
|
Air Group
Adjusted(a)
|
|
Special
Items(b)
|
|
Consolidated
|
Operating
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mainline
|
$
|
927
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
927
|
|
|
$
|
—
|
|
|
$
|
927
|
|
Regional
|
—
|
|
|
206
|
|
|
—
|
|
|
—
|
|
|
206
|
|
|
—
|
|
|
206
|
|
Total
passenger revenues
|
927
|
|
|
206
|
|
|
—
|
|
|
—
|
|
|
1,133
|
|
|
—
|
|
|
1,133
|
|
CPA
revenues
|
—
|
|
|
—
|
|
|
103
|
|
|
(103)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Freight and
mail
|
23
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Other-net
|
172
|
|
|
17
|
|
|
1
|
|
|
—
|
|
|
190
|
|
|
—
|
|
|
190
|
|
Total operating
revenues
|
1,122
|
|
|
224
|
|
|
104
|
|
|
(103)
|
|
|
1,347
|
|
|
—
|
|
|
1,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses,
excluding fuel
|
701
|
|
|
186
|
|
|
105
|
|
|
(102)
|
|
|
890
|
|
|
—
|
|
|
890
|
|
Economic
fuel
|
144
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
169
|
|
|
(2)
|
|
|
167
|
|
Total operating
expenses
|
845
|
|
|
211
|
|
|
105
|
|
|
(102)
|
|
|
1,059
|
|
|
(2)
|
|
|
1,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
Interest
expense
|
(12)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(13)
|
|
|
—
|
|
|
(13)
|
|
Other
|
7
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
9
|
|
|
—
|
|
|
9
|
|
Total Nonoperating
income (expense)
|
1
|
|
|
—
|
|
|
(1)
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Income (loss)
before income tax
|
$
|
278
|
|
|
$
|
13
|
|
|
$
|
(2)
|
|
|
$
|
1
|
|
|
$
|
290
|
|
|
$
|
2
|
|
|
$
|
292
|
|
|
|
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
|
|
Total Nonoperating
income (expense)
|
5
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Income (loss)
before income tax
|
$
|
228
|
|
|
$
|
7
|
|
|
$
|
6
|
|
|
$
|
(1)
|
|
|
$
|
240
|
|
|
$
|
—
|
|
|
$
|
240
|
|
|
|
(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)
|
2016
|
|
2015
|
Consolidated:
|
|
|
|
CASM
|
10.11
|
¢
|
|
11.14
|
¢
|
Less the following
components:
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
1.60
|
|
|
2.53
|
|
CASM excluding
fuel
|
8.51
|
¢
|
|
8.61
|
¢
|
|
|
|
|
Mainline:
|
|
|
|
CASM
|
9.01
|
¢
|
|
10.09
|
¢
|
Less the following
components:
|
|
|
|
Aircraft fuel,
including hedging gains and losses
|
1.52
|
|
|
2.43
|
|
CASM excluding
fuel
|
7.49
|
¢
|
|
7.66
|
¢
|
FUEL
RECONCILIATIONS (unaudited)
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
(in millions,
except for per-gallon amounts)
|
Dollars
|
|
Cost/Gallon
|
|
Dollars
|
|
Cost/Gallon
|
Raw or "into-plane"
fuel cost
|
$
|
165
|
|
|
$
|
1.26
|
|
|
$
|
229
|
|
|
$
|
1.93
|
|
Losses on settled
hedges
|
4
|
|
|
0.03
|
|
|
6
|
|
|
0.05
|
|
Consolidated
economic fuel expense
|
169
|
|
|
1.29
|
|
|
235
|
|
|
1.98
|
|
Mark-to-market fuel
hedge adjustment
|
(2)
|
|
|
(0.02)
|
|
|
—
|
|
|
—
|
|
GAAP fuel
expense
|
$
|
167
|
|
|
$
|
1.27
|
|
|
$
|
235
|
|
|
$
|
1.98
|
|
Fuel
gallons
|
132
|
|
|
|
|
119
|
|
|
|
Note A: Pursuant to Regulation G, we have provided
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
Free Cash Flow - total operating cash flow generated less
cash paid for capital expenditures
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