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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Alaska Air Group Inc | NYSE:ALK | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.70 | -1.63% | 42.32 | 43.11 | 42.11 | 42.99 | 1,675,147 | 01:00:00 |
1-8957 | 91-1292054 | |
(Commission File Number) | (IRS Employer Identification No.) |
19300 International Boulevard, Seattle, Washington | 98188 | |
(Address of Principal Executive Offices) | (Zip Code) |
Media contact: | Investor/analyst contact: | |
Bryan Zidar | Lavanya Sareen | |
Managing Director | Managing Director of Investor Relations | |
Strategic & Corporate Communications | (206) 392-5656 | |
(206) 392-5134 |
FOR IMMEDIATE RELEASE | January 22, 2015 |
• | Reported record fourth quarter net income, excluding special items, of $125 million, or $0.94 per diluted share, compared to $77 million, or $0.55 per diluted share in 2013. This quarter's results compare to a First Call analyst consensus estimate of $0.93 per share. |
• | Reported record full-year net income, excluding special items, of $571 million, or $4.18 per diluted share, compared to $383 million, or $2.70 per diluted share in 2013. |
• | Reported net income for the fourth quarter under Generally Accepted Accounting Principles (GAAP) of $148 million, or $1.11 per diluted share, compared to net income of $78 million, or $0.56 per diluted share in 2013. |
• | Reported net income for the full year under GAAP of $605 million, or $4.42 per diluted share, compared to net income of $508 million, or $3.58 per diluted share in 2013. |
• | Declared a $0.20 per share dividend, up 60% from the prior quarter. The dividend will be paid on March 10, to shareholders of record as of February 24, 2015. |
• | Paid $0.125 per-share quarterly cash dividend on December 3, bringing total dividend payments in 2014 to $68 million. |
• | Repurchased 7,316,731 shares of common stock for an average price of $47.63 during 2014 for $348 million, or 6.9% of market capitalization at the beginning of 2014. Since 2007, Air Group has used $827 million to repurchase 49 million shares at an average price of $16.85. |
• | Grew passenger revenues by 8% compared to the fourth quarter of 2013, and by 7% compared to full-year 2013. |
• | Generated record full-year adjusted pretax margin of 17.2% in 2014 compared to 12.4% in 2013. |
• | Achieved return on invested capital of 18.6% in 2014, compared to 13.6% in 2013. |
• | Generated over $1.0 billion in operating cash flows and $344 million in free cash flows in 2014. |
• | Lowered adjusted debt-to-total capitalization ratio to 31% as of December 31, 2014. |
• | Held $1.2 billion in unrestricted cash and marketable securities as of December 31, 2014. |
• | Became one of only two U.S. airlines with investment grade credit ratings. |
• | Launched Ready, Safe, Go safety campaign designed to increase safety awareness across the Air Group System. |
• | Awarded a record $116 million in incentive pay to employees for 2014, or more than one month's pay for most employees. Over the last five years, employees have earned more than $473 million in incentive pay, averaging 8.7% of annual pay. |
• | Signed a five-year agreement with Alaska Airline's Flight Attendants in December 2014. |
• | Signed a six-year contract with Horizon's aircraft technicians and fleet service agents in June 2014. |
• | Signed a five-year contract with Alaska's clerical, office, and passenger service employees in April 2014. |
• | Signed a four-year contract with Horizon's dispatchers in April 2014. |
• | Completed "Gear Up" - an intensive leadership workshop for over 1,200 leaders at Alaska and Horizon. |
• | Ranked "Highest in Customer Satisfaction Among Traditional Network Carriers" by J.D. Power and Associates for the seventh year in a row. |
• | Ranked as the best airline in the U.S. by The Wall Street Journal's "Middle Seat" scorecard for two consecutive years. |
• | Ranked highest by frequent fliers in the first-ever J.D. Power Airline Loyalty/Rewards Program Satisfaction Report. |
• | Held the top spot in U.S. Department of Transportation on-time performance among the largest eight U.S. airlines for the twelve months ended November 2014. |
• | Named No. 1 on-time carrier in North America for the fourth year in a row by FlightStats in February 2014. |
• | Launched online self-tag baggage options for passengers flying from Seattle to San Diego, Anchorage, and Juneau. |
• | Became the launch customer of Boeing's new, innovative, high-capacity 737 Space Bins, which will increase bag capacity in the cabin by 48%. |
• | Launched Alaska Beyond™ in-flight experience featuring gourmet Tom Douglas signature meals, new streaming in-flight entertainment, and power at every seat on our 737-800/900/900ER aircraft. |
• | Received the 2014 Community Impact Award from Seattle Business Magazine. |
• | Celebrated the opening of the Alaska Airlines Center sports complex at the University of Alaska Anchorage. |
• | Committed over $7 million to support local communities, including job training for workers at the Seattle-Tacoma airport, STEM-focused education programs at Seattle's Museum of Flight, and Seattle's new bicycle sharing program. |
• | Flew 13 relief flights to Los Cabos, Loreto, and Mazatlan, Mexico and transported approximately 2,000 passengers to safety following Hurricane Odile. |
• | Ordered ten additional Boeing 737-900ERs, which will further strengthen Alaska's fuel-efficient fleet. |
• | Exercised options for two Q400 aircraft to be delivered in 2017. |
• | Completed 100% of the cabin improvement project, adding new Recaro seats and power at every seat for 95 aircraft. |
• | Increased fuel efficiency (as measured by seat-miles per gallon) by 2.1% over 2013. |
• | Added split-scimitar winglets to 48 planned aircraft, which are expected to improve fuel efficiency by about 1.5% per aircraft. |
• | Lowered unit costs excluding fuel and special items for the fifth consecutive year, to the lowest level ever. |
• | Grew Seattle departures by 4% in 2014 and committed to growing Seattle departures by 10% in 2015. |
• | Added 16 routes during 2014. New routes launched and announced in the fourth quarter are as follows: |
New Non-Stop Routes Launched in Q4 | New Non-Stop Routes (Launch Date) |
Portland to Puerto Vallarta | Las Vegas to Mammoth Lakes (1/15/2015) |
Seattle to Cancun | San Diego to Kona (3/5/2015) |
Portland to Los Cabos | Seattle to Washington D.C. (Dulles) (3/11/2015) |
Seattle to Milwaukee (7/1/2015) | |
Seattle to Oklahoma City (7/1/2015) | |
Portland to St. Louis (7/1/2015) |
Three Months Ended December 31, | |||||||||||||||
2014 | 2013 | ||||||||||||||
(in millions, except per share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
Reported GAAP net income | $ | 148 | $ | 1.11 | $ | 78 | $ | 0.56 | |||||||
Mark-to-market fuel hedge adjustments, net of tax | (4 | ) | (0.03 | ) | (1 | ) | (0.01 | ) | |||||||
Special items, net of tax | (19 | ) | (0.14 | ) | — | — | |||||||||
Non-GAAP adjusted income and per share amounts | $ | 125 | $ | 0.94 | $ | 77 | $ | 0.55 |
Twelve Months Ended December 31, | |||||||||||||||
2014 | 2013 | ||||||||||||||
(in millions, except per share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
Reported GAAP net income | $ | 605 | $ | 4.42 | $ | 508 | $ | 3.58 | |||||||
Mark-to-market fuel hedge adjustments, net of tax | (15 | ) | (0.11 | ) | (5 | ) | (0.03 | ) | |||||||
Special items, net of tax | (19 | ) | (0.13 | ) | — | — | |||||||||
Special mileage plan revenue, net of tax | $ | — | $ | — | $ | (120 | ) | $ | (0.85 | ) | |||||
Non-GAAP adjusted income and per share amounts | $ | 571 | $ | 4.18 | $ | 383 | $ | 2.70 |
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | |||||||||||||||||||||
Alaska Air Group, Inc. | |||||||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||
(in millions, except per share amounts) | 2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||||
Operating Revenues: | |||||||||||||||||||||
Passenger | |||||||||||||||||||||
Mainline | $ | 916 | $ | 839 | 9 | % | $ | 3,774 | $ | 3,490 | 8 | % | |||||||||
Regional | 200 | 195 | 3 | % | 805 | 777 | 4 | % | |||||||||||||
Total passenger revenue | 1,116 | 1,034 | 8 | % | 4,579 | 4,267 | 7 | % | |||||||||||||
Freight and mail | 26 | 25 | 4 | % | 114 | 113 | 1 | % | |||||||||||||
Other - net | 164 | 151 | 9 | % | 675 | 584 | 16 | % | |||||||||||||
Special mileage plan revenue | — | — | NM | — | 192 | NM | |||||||||||||||
Total Operating Revenues | 1,306 | 1,210 | 8 | % | 5,368 | 5,156 | 4 | % | |||||||||||||
Operating Expenses: | |||||||||||||||||||||
Wages and benefits | 304 | 280 | 9 | % | 1,136 | 1,086 | 5 | % | |||||||||||||
Variable incentive pay | 32 | 37 | (14 | )% | 116 | 105 | 10 | % | |||||||||||||
Aircraft fuel, including hedging gains and losses | 306 | 352 | (13 | )% | 1,418 | 1,467 | (3 | )% | |||||||||||||
Aircraft maintenance | 63 | 60 | 5 | % | 229 | 247 | (7 | )% | |||||||||||||
Aircraft rent | 26 | 30 | (13 | )% | 110 | 119 | (8 | )% | |||||||||||||
Landing fees and other rentals | 72 | 55 | 31 | % | 279 | 262 | 6 | % | |||||||||||||
Contracted services | 66 | 60 | 10 | % | 254 | 221 | 15 | % | |||||||||||||
Selling expenses | 45 | 42 | 7 | % | 199 | 179 | 11 | % | |||||||||||||
Depreciation and amortization | 76 | 67 | 13 | % | 294 | 270 | 9 | % | |||||||||||||
Food and beverage service | 25 | 21 | 19 | % | 93 | 84 | 11 | % | |||||||||||||
Other | 79 | 76 | 4 | % | 308 | 278 | 11 | % | |||||||||||||
Special items | (30 | ) | — | NM | (30 | ) | — | NM | |||||||||||||
Total Operating Expenses | 1,064 | 1,080 | (1 | )% | 4,406 | 4,318 | 2 | % | |||||||||||||
Operating Income | 242 | 130 | 86 | % | 962 | 838 | 15 | % | |||||||||||||
Nonoperating Income (Expense): | |||||||||||||||||||||
Interest income | 6 | 4 | 21 | 18 | |||||||||||||||||
Interest expense | (12 | ) | (14 | ) | (48 | ) | (56 | ) | |||||||||||||
Interest capitalized | 6 | 6 | 20 | 21 | |||||||||||||||||
Other - net | — | (1 | ) | 20 | (5 | ) | |||||||||||||||
— | (5 | ) | 13 | (22 | ) | ||||||||||||||||
Income Before Income Tax | 242 | 125 | 94 | % | 975 | 816 | 19 | % | |||||||||||||
Income tax expense | 94 | 47 | 370 | 308 | |||||||||||||||||
Net Income | $ | 148 | $ | 78 | 90 | % | $ | 605 | $ | 508 | 19 | % | |||||||||
Basic Earnings Per Share: | $ | 1.12 | $ | 0.56 | $ | 4.47 | $ | 3.63 | |||||||||||||
Diluted Earnings Per Share: | $ | 1.11 | $ | 0.56 | $ | 4.42 | $ | 3.58 | |||||||||||||
Shares Used for Computation: | |||||||||||||||||||||
Basic | 132.368 | 138.670 | 135.445 | 139.910 | |||||||||||||||||
Diluted | 133.705 | 140.484 | 136.801 | 141.878 | |||||||||||||||||
Cash dividend declared per share | $ | 0.125 | 0.100 | $ | 0.500 | 0.200 |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | |||||||
Alaska Air Group, Inc. | |||||||
(in millions) | December 31, 2014 | December 31, 2013 | |||||
Cash and marketable securities | $ | 1,217 | $ | 1,330 | |||
Total current assets | 1,756 | 1,762 | |||||
Property and equipment-net | 4,299 | 3,893 | |||||
Other assets | 126 | 183 | |||||
Total assets | $ | 6,181 | $ | 5,838 | |||
Air traffic liability | 631 | 564 | |||||
Current portion of long-term debt | 117 | 117 | |||||
Other current liabilities | 923 | 899 | |||||
Current liabilities | $ | 1,671 | $ | 1,580 | |||
Long-term debt | 686 | 754 | |||||
Other liabilities and credits | 1,697 | 1,475 | |||||
Shareholders' equity | 2,127 | 2,029 | |||||
Total liabilities and shareholders' equity | $ | 6,181 | $ | 5,838 | |||
Debt to Capitalization, adjusted for operating leases(a) | 31%:69% | 35%:65% | |||||
Number of common shares outstanding | 131.481 | 137.492 |
(a) | Calculated using the present value of remaining aircraft lease payments for aircraft that are in our operating fleet as of the balance sheet date. |
OPERATING STATISTICS SUMMARY (unaudited) | |||||||||||
Alaska Air Group, Inc. | |||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||
2014 | 2013 | Change | 2014 | 2013 | Change | ||||||
Consolidated Operating Statistics:(a) | |||||||||||
Revenue passengers (PAX) (000) | 7,282 | 6,694 | 8.8% | 29,278 | 27,414 | 6.8% | |||||
RPMs (000,000) "traffic" | 7,640 | 6,980 | 9.5% | 30,718 | 28,833 | 6.5% | |||||
ASMs (000,000) "capacity" | 9,156 | 8,275 | 10.6% | 36,078 | 33,672 | 7.1% | |||||
Load factor | 83.4% | 84.4% | (1.0) pts | 85.1% | 85.6% | (0.5) pts | |||||
Yield | 14.61¢ | 14.80¢ | (1.3)% | 14.91¢ | 14.80¢ | 0.7% | |||||
PRASM | 12.19¢ | 12.49¢ | (2.4)% | 12.69¢ | 12.67¢ | 0.2% | |||||
RASM | 14.27¢ | 14.62¢ | (2.4)% | 14.88¢ | 14.74¢ | 0.9% | |||||
CASM excluding fuel and special items(b) | 8.60¢ | 8.81¢ | (2.4)% | 8.36¢ | 8.47¢ | (1.3)% | |||||
Economic fuel cost per gallon(c) | $2.64 | $3.21 | (17.8)% | $3.08 | $3.30 | (6.7)% | |||||
Fuel gallons (000,000) | 118 | 110 | 7.3% | 469 | 447 | 4.9% | |||||
ASM's per gallon | 77.6 | 75.2 | 3.2% | 76.9 | 75.3 | 2.1% | |||||
Average number of full-time equivalent employees (FTEs) | 13,059 | 12,284 | 6.3% | 12,739 | 12,163 | 4.7% | |||||
Employee productivity (PAX/FTEs/months) | 185.9 | 181.6 | 2.4% | 191.5 | 187.8 | 2.0% | |||||
Mainline Operating Statistics: | |||||||||||
Revenue passengers (PAX) (000) | 5,177 | 4,764 | 8.7% | 20,972 | 19,737 | 6.3% | |||||
RPMs (000,000) "traffic" | 6,907 | 6,308 | 9.5% | 27,778 | 26,172 | 6.1% | |||||
ASMs (000,000) "capacity" | 8,233 | 7,438 | 10.7% | 32,430 | 30,411 | 6.6% | |||||
Load factor | 83.9% | 84.8% | (0.9) pts | 85.7% | 86.1% | (0.4) pts | |||||
Yield | 13.25¢ | 13.29¢ | (0.3)% | 13.58¢ | 13.33¢ | 1.9% | |||||
PRASM | 11.12¢ | 11.27¢ | (1.3)% | 11.64¢ | 11.48¢ | 1.4% | |||||
RASM | 13.18¢ | 13.40¢ | (1.6)% | 13.80¢ | 13.52¢ | 2.1% | |||||
CASM excluding fuel and special items(b) | 7.70¢ | 7.91¢ | (2.7)% | 7.45¢ | 7.54¢ | (1.2)% | |||||
Economic fuel cost per gallon(c) | $2.64 | $3.21 | (17.8)% | $3.07 | $3.30 | (7.0)% | |||||
Fuel gallons (000,000) | 102 | 96 | 6.3% | 407 | 393 | 3.6% | |||||
ASM's per gallon | 80.7 | 77.5 | 4.1% | 79.7 | 77.4 | 3.0% | |||||
Average number of FTEs | 10,171 | 9,519 | 6.8% | 9,910 | 9,493 | 4.4% | |||||
Employee productivity (PAX/FTEs/months) | 169.7 | 166.8 | 1.7% | 176.4 | 173.3 | 1.8% | |||||
Aircraft utilization | 10.3 | 10.1 | 2.0% | 10.5 | 10.6 | (0.9)% | |||||
Average aircraft stage length | 1,190 | 1,177 | 1.1% | 1,182 | 1,177 | 0.4% | |||||
Regional Operating Statistics:(d) | |||||||||||
Revenue passengers (PAX) (000) | 2,106 | 1,930 | 9.1% | 8,306 | 7,677 | 8.2% | |||||
RPMs (000,000) "traffic" | 734 | 673 | 9.1% | 2,940 | 2,661 | 10.5% | |||||
ASMs (000,000) "capacity" | 923 | 837 | 10.3% | 3,648 | 3,261 | 11.9% | |||||
Load factor | 79.5% | 80.4% | (0.9) pts | 80.6% | 81.6% | (1.0) pts | |||||
Yield | 27.38¢ | 28.99¢ | (5.6)% | 27.40¢ | 29.20¢ | (6.2)% | |||||
PRASM | 21.76¢ | 23.32¢ | (6.7)% | 22.08¢ | 23.83¢ | (7.3)% |
(a) | Except for full-time equivalent employees, 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 why these measures may be important to investors in the accompanying pages. |
(c) | See a reconciliation of economic fuel cost in the accompanying pages. |
(d) | 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 December 31, 2014 | |||||||||||||||||||||||||||
Alaska | |||||||||||||||||||||||||||
(in millions) | Mainline | Regional | Horizon | Consolidating | Air Group Adjusted(a) | Special Items(b) | Consolidated | ||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 916 | $ | — | $ | — | $ | — | $ | 916 | $ | — | $ | 916 | |||||||||||||
Regional | — | 200 | — | — | 200 | — | 200 | ||||||||||||||||||||
Total passenger revenues | 916 | 200 | — | — | 1,116 | — | 1,116 | ||||||||||||||||||||
Revenue from CPA with Alaska | — | — | 94 | (94 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 25 | 1 | — | — | 26 | — | 26 | ||||||||||||||||||||
Other-net | 144 | 19 | 1 | — | 164 | — | 164 | ||||||||||||||||||||
Total operating revenues | 1,085 | 220 | 95 | (94 | ) | 1,306 | — | 1,306 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 634 | 159 | 92 | (97 | ) | 788 | (30 | ) | 758 | ||||||||||||||||||
Economic fuel | 271 | 41 | — | — | 312 | (6 | ) | 306 | |||||||||||||||||||
Total operating expenses | 905 | 200 | 92 | (97 | ) | 1,100 | (36 | ) | 1,064 | ||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 5 | — | — | 1 | 6 | — | 6 | ||||||||||||||||||||
Interest expense | (7 | ) | 1 | (2 | ) | (4 | ) | (12 | ) | — | (12 | ) | |||||||||||||||
Other | 5 | (1 | ) | 2 | — | 6 | — | 6 | |||||||||||||||||||
3 | — | — | (3 | ) | — | — | — | ||||||||||||||||||||
Income (loss) before income tax | $ | 183 | $ | 20 | $ | 3 | $ | — | $ | 206 | $ | 36 | $ | 242 | |||||||||||||
Three Months Ended December 31, 2013 | |||||||||||||||||||||||||||
Alaska | |||||||||||||||||||||||||||
(in millions) | Mainline | Regional | Horizon | Consolidating | Air Group Adjusted(a) | Special Items(b) | Consolidated | ||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 839 | $ | — | $ | — | $ | — | $ | 839 | $ | — | $ | 839 | |||||||||||||
Regional | — | 195 | — | — | 195 | — | 195 | ||||||||||||||||||||
Total passenger revenues | 839 | 195 | — | — | 1,034 | — | 1,034 | ||||||||||||||||||||
Revenue from CPA with Alaska | — | — | 94 | (94 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 24 | 1 | — | — | 25 | — | 25 | ||||||||||||||||||||
Other-net | 133 | 17 | 1 | — | 151 | — | 151 | ||||||||||||||||||||
Total operating revenues | 996 | 213 | 95 | (94 | ) | 1,210 | — | 1,210 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 589 | 145 | 88 | (94 | ) | 728 | — | 728 | |||||||||||||||||||
Economic fuel | 307 | 47 | — | — | 354 | (2 | ) | 352 | |||||||||||||||||||
Total operating expenses | 896 | 192 | 88 | (94 | ) | 1,082 | (2 | ) | 1,080 | ||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 4 | — | — | — | 4 | — | 4 | ||||||||||||||||||||
Interest expense | (8 | ) | — | (4 | ) | (2 | ) | (14 | ) | — | (14 | ) | |||||||||||||||
Other | 6 | (3 | ) | 1 | 1 | 5 | — | 5 | |||||||||||||||||||
2 | (3 | ) | (3 | ) | (1 | ) | (5 | ) | — | (5 | ) | ||||||||||||||||
Income (loss) before income tax | $ | 102 | $ | 18 | $ | 4 | $ | (1 | ) | $ | 123 | $ | 2 | $ | 125 |
OPERATING SEGMENTS (unaudited) | |||||||||||||||||||||||||||
Alaska Air Group, Inc. | |||||||||||||||||||||||||||
Twelve Months Ended December 31, 2014 | |||||||||||||||||||||||||||
Alaska | |||||||||||||||||||||||||||
(in millions) | Mainline | Regional | Horizon | Consolidating | Air Group Adjusted(a) | Special Items(b) | Consolidated | ||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 3,774 | $ | — | $ | — | $ | — | $ | 3,774 | $ | — | $ | 3,774 | |||||||||||||
Regional | — | 805 | — | — | 805 | — | 805 | ||||||||||||||||||||
Total passenger revenues | 3,774 | 805 | — | — | 4,579 | — | 4,579 | ||||||||||||||||||||
Revenue from CPA with Alaska | — | — | 371 | (371 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 109 | 5 | — | 114 | — | 114 | |||||||||||||||||||||
Other-net | 592 | 78 | 5 | 675 | 675 | ||||||||||||||||||||||
Total operating revenues | 4,475 | 888 | 376 | (371 | ) | 5,368 | — | 5,368 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 2,417 | 623 | 349 | (371 | ) | 3,018 | (30 | ) | 2,988 | ||||||||||||||||||
Economic fuel | 1,251 | 190 | — | — | 1,441 | (23 | ) | 1,418 | |||||||||||||||||||
Total operating expenses | 3,668 | 813 | 349 | (371 | ) | 4,459 | (53 | ) | 4,406 | ||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 20 | — | — | 1 | 21 | — | 21 | ||||||||||||||||||||
Interest expense | (32 | ) | — | (12 | ) | (4 | ) | (48 | ) | — | (48 | ) | |||||||||||||||
Other | 39 | (1 | ) | 2 | — | 40 | — | 40 | |||||||||||||||||||
27 | (1 | ) | (10 | ) | (3 | ) | 13 | — | 13 | ||||||||||||||||||
Income (loss) before income tax | $ | 834 | $ | 74 | $ | 17 | $ | (3 | ) | $ | 922 | $ | 53 | $ | 975 | ||||||||||||
Twelve Months Ended December 31, 2013 | |||||||||||||||||||||||||||
Alaska | |||||||||||||||||||||||||||
(in millions) | Mainline | Regional | Horizon | Consolidating | Air Group Adjusted(a) | Special Items(b) | Consolidated | ||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 3,490 | $ | — | $ | — | $ | — | $ | 3,490 | $ | — | $ | 3,490 | |||||||||||||
Regional | — | 777 | — | — | 777 | — | 777 | ||||||||||||||||||||
Total passenger revenues | 3,490 | 777 | — | — | 4,267 | — | 4,267 | ||||||||||||||||||||
Revenue from CPA with Alaska | — | — | 368 | (368 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 109 | 4 | — | 113 | — | 113 | |||||||||||||||||||||
Other-net | 513 | 66 | 5 | 584 | 192 | 776 | |||||||||||||||||||||
Total operating revenues | 4,112 | 847 | 373 | (368 | ) | 4,964 | 192 | 5,156 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 2,293 | 585 | 341 | (368 | ) | 2,851 | — | 2,851 | |||||||||||||||||||
Economic fuel | 1,294 | 181 | — | — | 1,475 | (8 | ) | 1,467 | |||||||||||||||||||
Total operating expenses | 3,587 | 766 | 341 | (368 | ) | 4,326 | (8 | ) | 4,318 | ||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 18 | — | — | — | 18 | — | 18 | ||||||||||||||||||||
Interest expense | (38 | ) | — | (14 | ) | (4 | ) | (56 | ) | — | (56 | ) | |||||||||||||||
Other | 25 | (12 | ) | 2 | 1 | 16 | — | 16 | |||||||||||||||||||
5 | (12 | ) | (12 | ) | (3 | ) | (22 | ) | — | (22 | ) | ||||||||||||||||
Income (loss) before income tax | $ | 530 | $ | 69 | $ | 20 | $ | (3 | ) | $ | 616 | $ | 200 | $ | 816 |
(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 for further information in the accompanying pages. |
(b) | Includes accounting adjustments related to special mileage plan revenue, mark-to-market fuel-hedge accounting charges, non-cash curtailment gain, and a one-time gain related to a legal matter. |
Alaska Air Group, Inc. | |||||||||||||||
RASM RECONCILIATION (unaudited) | |||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Total operating revenues | $ | 1,306 | $ | 1,210 | $ | 5,368 | $ | 5,156 | |||||||
Less: special mileage plan revenue | — | — | — | 192 | |||||||||||
Adjusted Revenue | $ | 1,306 | $ | 1,210 | $ | 5,368 | $ | 4,964 | |||||||
Consolidated ASMs | 9,156 | 8,275 | 36,078 | 33,672 | |||||||||||
RASM | 14.27 | ¢ | 14.62 | ¢ | 14.88 | ¢ | 14.74 | ¢ | |||||||
CASM EXCLUDING FUEL RECONCILIATION (unaudited) | |||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(in cents) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Consolidated: | |||||||||||||||
CASM | 11.61 | ¢ | 13.05 | ¢ | 12.21 | ¢ | 12.82 | ¢ | |||||||
Less the following components: | |||||||||||||||
Aircraft fuel, including hedging gains and losses | 3.34 | 4.24 | 3.93 | 4.35 | |||||||||||
Special items | (0.33 | ) | — | (0.08 | ) | — | |||||||||
CASM excluding fuel | 8.60 | ¢ | 8.81 | ¢ | 8.36 | ¢ | 8.47 | ¢ | |||||||
Mainline: | |||||||||||||||
CASM | 10.56 | ¢ | 12.02 | ¢ | 11.15 | ¢ | 11.77 | ¢ | |||||||
Less the following components: | |||||||||||||||
Aircraft fuel, including hedging gains and losses | 3.22 | 4.11 | 3.79 | 4.23 | |||||||||||
Special items | (0.36 | ) | — | (0.09 | ) | — | |||||||||
CASM excluding fuel | 7.70 | ¢ | 7.91 | ¢ | 7.45 | ¢ | 7.54 | ¢ | |||||||
FUEL RECONCILIATIONS (unaudited) | |||||||||||||||
Alaska Air Group, Inc. | |||||||||||||||
Three Months Ended December 31, | |||||||||||||||
2014 | 2013 | ||||||||||||||
(in millions, except for per gallon amounts) | Dollars | Cost/Gal | Dollars | Cost/Gal | |||||||||||
Raw or "into-plane" fuel cost | $ | 305 | $ | 2.58 | $ | 347 | $ | 3.15 | |||||||
Losses on settled hedges | 7 | 0.06 | 6 | 0.06 | |||||||||||
Consolidated economic fuel expense | $ | 312 | $ | 2.64 | $ | 354 | $ | 3.21 | |||||||
Mark-to-market fuel hedge adjustments | (6 | ) | (0.05 | ) | (2 | ) | 0.10 | ||||||||
GAAP fuel expense | $ | 306 | $ | 2.59 | $ | 352 | $ | 3.20 | |||||||
Fuel gallons | 118 | 110 | |||||||||||||
Twelve Months Ended December 31, | |||||||||||||||
2014 | 2013 | ||||||||||||||
(in millions, except for per gallon amounts) | Dollars | Cost/Gal | Dollars | Cost/Gal | |||||||||||
Raw or "into-plane" fuel cost | $ | 1,400 | $ | 2.99 | $ | 1,423 | $ | 3.19 | |||||||
Losses on settled hedges | 41 | 0.09 | 52 | 0.11 | |||||||||||
Consolidated economic fuel expense | $ | 1,442 | $ | 3.08 | $ | 1,475 | $ | 3.30 | |||||||
Mark-to-market fuel hedge adjustments | (23 | ) | (0.05 | ) | (8 | ) | (0.02 | ) | |||||||
GAAP fuel expense | $ | 1,418 | $ | 3.03 | $ | 1,467 | $ | 3.28 | |||||||
Fuel gallons | 469 | 447 |
• | By eliminating fuel expense and certain special items from our unit metrics, we believe that we have better visibility into the results of operations without the consideration of accounting changes or 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 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. |
• | Operating revenue per ASM (RASM) excludes a favorable, one-time "special" revenue item of $192 million primarily related to our modified affinity card agreement with Bank of America, executed in July 2013. In accordance with accounting standards, we recorded this one-time special revenue item in the third quarter of 2013. This is purely an accounting change and the prior period results do not reflect the economics of the agreement; rather it reflects a non-cash adjustment of the value of miles outstanding in the program. We believe it is appropriate to exclude this special revenue item from recurring revenues from operations. |
• | 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 Taxes 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 fleet transition costs 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. |
AIR GROUP - CONSOLIDATED |
Forecast Q1 2015 | Change Y-O-Y | Forecast Full Year 2015 | Change Y-O-Y | ||||
Capacity (ASMs in millions) | 9,225 - 9,275 | ~ 11.0% | 38,900 - 39,100 | ~ 8.0% | |||
Cost per ASM excluding fuel and special items (cents) | 8.62¢ - 8.67¢ | ~ flat | 8.35¢ - 8.40¢ | ~ flat | |||
Fuel gallons (000,000) | 119 | ~ 8.0% | 492 | ~ 5.5% | |||
Economic fuel cost per gallon(a) | $1.85 | ~ (44.0)% | (b) | (b) |
(a) | Our economic fuel cost per gallon estimate for the first quarter includes the following per-gallon assumptions: crude oil cost - $1.14 ($48 per barrel); refining margin - 39 cents; cost of settled hedges - 5 cents, with the remaining difference due to taxes and other into-plane costs. |
(b) | Because of the volatility of fuel prices, we do not provide full-year economic fuel estimates. |
2014 Actual | 2015 | 2016 | 2017 | 2018 | |||||||||||||||
Aircraft and aircraft purchase deposits - firm | $ | 472 | $ | 485 | $ | 445 | $ | 445 | $ | 405 | |||||||||
Other flight equipment | 130 | 50 | 35 | 25 | 25 | ||||||||||||||
Other property and equipment | 65 | 120 | 75 | 80 | 80 | ||||||||||||||
Total property and equipment additions | $ | 667 | $ | 655 | $ | 555 | $ | 550 | $ | 510 | |||||||||
Option aircraft and aircraft deposits, if exercised.(b) | $ | — | $ | 5 | $ | 60 | $ | 185 | $ | 315 |
(a) | Preliminary estimate, subject to change. |
(b) | Alaska has options to acquire 48 737 aircraft with deliveries from 2017 through 2024, and options to lease 16 E-175 aircraft with deliveries from 2017 to 2018. Horizon has options to acquire 5 Q400 aircraft with deliveries from 2018 through 2019. |
Actual Fleet Count | Expected Fleet Activity | ||||||||||||||||
Aircraft | Dec 31, 2013 | Dec 31, 2014 | 2015 Changes | Dec 31, 2015 | 2016 - 2017 Changes | Dec 31, 2017 | |||||||||||
737 Freighters & Combis | 6 | 6 | — | 6 | (3 | ) | 3 | ||||||||||
737 Passenger Aircraft(b) | 125 | 131 | 6 | 137 | 7 | 144 | |||||||||||
Total Mainline Fleet | 131 | 137 | 6 | 143 | 4 | 147 | |||||||||||
Q400 | 51 | 51 | 1 | 52 | 2 | 54 | |||||||||||
E-175(c) | — | — | 3 | 3 | 4 | 7 | |||||||||||
CRJ-700(c) | 8 | 8 | — | 8 | — | 8 | |||||||||||
Total Regional Fleet | 59 | 59 | 4 | 63 | 6 | 69 | |||||||||||
Total Air Group Fleet | 190 | 196 | 10 | 206 | 10 | 216 |
(a) | The expected fleet counts at December 31, 2015, 2016, and 2017 are subject to change. |
(b) | 2015 changes include the expected delivery of 11 Boeing 737-900ER aircraft offset by the scheduled return of five 737-400 aircraft to lessors. |
(c) | Aircraft are operated under capacity purchase agreements with a third party. |
AIR GROUP - CONSOLIDATED (continued) |
Approximate % of Expected Fuel Requirements | Weighted-Average Crude Oil Price per Barrel | Average Premium Cost per Barrel | |||
First Quarter 2015 | 50% | $105 | $4 | ||
Second Quarter 2015 | 50% | $97 | $3 | ||
Third Quarter 2015 | 40% | $98 | $3 | ||
Fourth Quarter 2015 | 30% | $94 | $3 | ||
Full Year 2015 | 42% | $99 | $3 | ||
First Quarter 2016 | 20% | $88 | $3 | ||
Second Quarter 2016 | 10% | $73 | $4 | ||
Full Year 2016 | 7% | $83 | $3 |
Crude Price per Barrel | ||||||||||||||||||||||||||
$ | 30 | $ | 40 | $ | 50 | $ | 60 | $ | 70 | $ | 80 | |||||||||||||||
Refining Margin (cents per Gallon) | 20 | $ | 1.16 | $ | 1.40 | $ | 1.64 | $ | 1.87 | $ | 2.11 | $ | 2.33 | |||||||||||||
30 | $ | 1.26 | $ | 1.50 | $ | 1.74 | $ | 1.97 | $ | 2.21 | $ | 2.43 | ||||||||||||||
40 | $ | 1.36 | $ | 1.60 | $ | 1.84 | $ | 2.07 | $ | 2.31 | $ | 2.53 | ||||||||||||||
50 | $ | 1.46 | $ | 1.70 | $ | 1.94 | $ | 2.17 | $ | 2.41 | $ | 2.63 | ||||||||||||||
60 | $ | 1.56 | $ | 1.80 | $ | 2.04 | $ | 2.27 | $ | 2.51 | $ | 2.73 | ||||||||||||||
70 | $ | 1.66 | $ | 1.90 | $ | 2.14 | $ | 2.37 | $ | 2.61 | $ | 2.83 |
ALASKA AIRLINES - MAINLINE |
Forecast Q1 2015 | Change Y-O-Y | Forecast Full Year 2015 | Change Y-O-Y | ||||
Capacity (ASMs in millions) | 8,325 - 8,375 | ~ 11.5% | 35,000 - 35,200 | ~ 8.5% | |||
Cost per ASM excluding fuel and special items (cents)(b) | 7.66¢ - 7.71¢ | ~ flat | 7.45¢ - 7.50¢ | ~ flat | |||
Fuel gallons (000,000) | 103 | ~ 7.5% | 430 | ~ 5.5% | |||
Economic fuel cost per gallon(a) | $1.85 | ~ (44)% | (b) | (b) |
(a) | Please see note (a) in Consolidated for the breakout of economic fuel cost per gallon. |
(b) | Because of the volatility of fuel prices, we do not provide full-year economic fuel estimates. |
1 Year Alaska Air Chart |
1 Month Alaska Air Chart |
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