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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 | |
---|---|---|---|---|---|---|---|---|
1.69 | 4.23% | 41.64 | 42.05 | 40.62 | 40.99 | 3,822,350 | 21:39:55 |
Delaware
|
|
91-1292054
|
(State of Incorporation)
|
|
(I.R.S. Employer Identification No.)
|
Title of each class
|
Name of each exchange on which registered
|
Ticker Symbol
|
Common stock, $0.01 par value
|
New York Stock Exchange
|
ALK
|
19300 International Boulevard,
|
Seattle,
|
WA
|
98188
|
|
Telephone:
|
(206)
|
392-5040
|
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
Non-accelerated filer
(Do not check if a smaller reporting company)
|
☐
|
Smaller reporting company
|
☐
|
Emerging growth company
|
☐
|
|
•
|
the competitive environment in our industry;
|
•
|
changes in our operating costs, including fuel, which can be volatile;
|
•
|
our ability to meet our cost reduction goals;
|
•
|
our ability to achieve anticipated synergies and timing thereof in connection with our acquisition of Virgin America;
|
•
|
our ability to successfully integrate the Boeing and Airbus operations;
|
•
|
labor disputes and our ability to attract and retain qualified personnel;
|
•
|
operational disruptions;
|
•
|
general economic conditions, including the impact of those conditions on customer travel behavior;
|
•
|
the concentration of our revenue from a few key markets;
|
•
|
an aircraft accident or incident;
|
•
|
actual or threatened terrorist attacks, global instability and potential U.S. military actions or activities;
|
•
|
our reliance on automated systems and the risks associated with changes made to those systems;
|
•
|
changes in laws and regulations.
|
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(in millions)
|
September 30, 2019
|
|
December 31, 2018
|
||||
ASSETS
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
237
|
|
|
$
|
105
|
|
Marketable securities
|
1,382
|
|
|
1,131
|
|
||
Total cash and marketable securities
|
1,619
|
|
|
1,236
|
|
||
Receivables - net
|
377
|
|
|
366
|
|
||
Inventories and supplies - net
|
63
|
|
|
60
|
|
||
Prepaid expenses and other current assets
|
143
|
|
|
125
|
|
||
Total Current Assets
|
2,202
|
|
|
1,787
|
|
||
|
|
|
|
||||
Property and Equipment
|
|
|
|
|
|
||
Aircraft and other flight equipment
|
8,492
|
|
|
8,221
|
|
||
Other property and equipment
|
1,272
|
|
|
1,363
|
|
||
Deposits for future flight equipment
|
463
|
|
|
439
|
|
||
|
10,227
|
|
|
10,023
|
|
||
Less accumulated depreciation and amortization
|
3,393
|
|
|
3,242
|
|
||
Total Property and Equipment - Net
|
6,834
|
|
|
6,781
|
|
||
|
|
|
|
||||
Operating lease assets
|
1,647
|
|
|
—
|
|
||
Goodwill
|
1,943
|
|
|
1,943
|
|
||
Intangible assets - net
|
123
|
|
|
127
|
|
||
Other noncurrent assets
|
234
|
|
|
274
|
|
||
Other Assets
|
3,947
|
|
|
2,344
|
|
||
|
|
|
|
||||
Total Assets
|
$
|
12,983
|
|
|
$
|
10,912
|
|
(in millions, except share amounts)
|
September 30, 2019
|
|
December 31, 2018
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Accounts payable
|
$
|
120
|
|
|
$
|
132
|
|
Accrued wages, vacation and payroll taxes
|
391
|
|
|
415
|
|
||
Air traffic liability
|
1,032
|
|
|
788
|
|
||
Other accrued liabilities
|
476
|
|
|
416
|
|
||
Deferred revenue
|
794
|
|
|
705
|
|
||
Current portion of operating lease liabilities
|
268
|
|
|
—
|
|
||
Current portion of long-term debt
|
265
|
|
|
486
|
|
||
Total Current Liabilities
|
3,346
|
|
|
2,942
|
|
||
|
|
|
|
||||
Long-Term Debt, Net of Current Portion
|
1,444
|
|
|
1,617
|
|
||
|
|
|
|
||||
Noncurrent Liabilities
|
|
|
|
|
|
||
Long-term operating lease liabilities, net of current portion
|
1,376
|
|
|
—
|
|
||
Deferred income taxes
|
708
|
|
|
512
|
|
||
Deferred revenue
|
1,177
|
|
|
1,169
|
|
||
Obligation for pension and postretirement medical benefits
|
467
|
|
|
503
|
|
||
Other liabilities
|
213
|
|
|
418
|
|
||
|
3,941
|
|
|
2,602
|
|
||
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: 2019 - 131,770,976 shares; 2018 - 130,813,476 shares, Outstanding: 2019 - 123,277,911 shares; 2018 - 123,194,430 shares
|
1
|
|
|
1
|
|
||
Capital in excess of par value
|
297
|
|
|
232
|
|
||
Treasury stock (common), at cost: 2019 - 8,493,065 shares; 2018 - 7,619,046 shares
|
(621
|
)
|
|
(568
|
)
|
||
Accumulated other comprehensive loss
|
(421
|
)
|
|
(448
|
)
|
||
Retained earnings
|
4,996
|
|
|
4,534
|
|
||
|
4,252
|
|
|
3,751
|
|
||
Total Liabilities and Shareholders' Equity
|
$
|
12,983
|
|
|
$
|
10,912
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions, except per share amounts)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Operating Revenues
|
|
|
|
|
|
|
|
||||||||
Passenger revenue
|
$
|
2,211
|
|
|
$
|
2,043
|
|
|
6,038
|
|
|
5,724
|
|
||
Mileage Plan other revenue
|
118
|
|
|
114
|
|
|
346
|
|
|
329
|
|
||||
Cargo and other
|
60
|
|
|
55
|
|
|
169
|
|
|
147
|
|
||||
Total Operating Revenues
|
2,389
|
|
|
2,212
|
|
|
6,553
|
|
|
6,200
|
|
||||
Operating Expenses
|
|
|
|
|
|
|
|
|
|
||||||
Wages and benefits
|
608
|
|
|
549
|
|
|
1,732
|
|
|
1,629
|
|
||||
Variable incentive pay
|
46
|
|
|
27
|
|
|
125
|
|
|
104
|
|
||||
Aircraft fuel, including hedging gains and losses
|
486
|
|
|
513
|
|
|
1,408
|
|
|
1,397
|
|
||||
Aircraft maintenance
|
106
|
|
|
107
|
|
|
341
|
|
|
320
|
|
||||
Aircraft rent
|
82
|
|
|
82
|
|
|
247
|
|
|
233
|
|
||||
Landing fees and other rentals
|
143
|
|
|
135
|
|
|
388
|
|
|
371
|
|
||||
Contracted services
|
72
|
|
|
70
|
|
|
214
|
|
|
227
|
|
||||
Selling expenses
|
77
|
|
|
79
|
|
|
236
|
|
|
245
|
|
||||
Depreciation and amortization
|
106
|
|
|
99
|
|
|
317
|
|
|
290
|
|
||||
Food and beverage service
|
57
|
|
|
53
|
|
|
159
|
|
|
158
|
|
||||
Third-party regional carrier expense
|
42
|
|
|
38
|
|
|
125
|
|
|
114
|
|
||||
Other
|
137
|
|
|
141
|
|
|
411
|
|
|
423
|
|
||||
Special items - merger-related costs
|
5
|
|
|
22
|
|
|
39
|
|
|
67
|
|
||||
Special items - other
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
||||
Total Operating Expenses
|
1,967
|
|
|
1,915
|
|
|
5,742
|
|
|
5,603
|
|
||||
Operating Income
|
422
|
|
|
297
|
|
|
811
|
|
|
597
|
|
||||
Nonoperating Income (Expense)
|
|
|
|
|
|
|
|
|
|
||||||
Interest income
|
11
|
|
|
11
|
|
|
31
|
|
|
29
|
|
||||
Interest expense
|
(18
|
)
|
|
(22
|
)
|
|
(60
|
)
|
|
(71
|
)
|
||||
Interest capitalized
|
4
|
|
|
5
|
|
|
11
|
|
|
14
|
|
||||
Other—net
|
(3
|
)
|
|
(7
|
)
|
|
(20
|
)
|
|
(20
|
)
|
||||
Total Nonoperating Income (Expense)
|
(6
|
)
|
|
(13
|
)
|
|
(38
|
)
|
|
(48
|
)
|
||||
Income Before Income Tax
|
416
|
|
|
284
|
|
|
773
|
|
|
549
|
|
||||
Income tax expense
|
94
|
|
|
67
|
|
|
185
|
|
|
135
|
|
||||
Net Income
|
$
|
322
|
|
|
$
|
217
|
|
|
$
|
588
|
|
|
$
|
414
|
|
|
|
|
|
|
|
|
|
||||||||
Basic Earnings Per Share:
|
$
|
2.61
|
|
|
$
|
1.76
|
|
|
$
|
4.76
|
|
|
$
|
3.36
|
|
Diluted Earnings Per Share:
|
$
|
2.60
|
|
|
$
|
1.75
|
|
|
$
|
4.74
|
|
|
$
|
3.34
|
|
Shares used for computation:
|
|
|
|
|
|
|
|
|
|||||||
Basic
|
123.280
|
|
|
123.224
|
|
|
123.330
|
|
|
123.216
|
|
||||
Diluted
|
124.067
|
|
|
123.864
|
|
|
124.051
|
|
|
123.804
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net Income
|
$
|
322
|
|
|
$
|
217
|
|
|
$
|
588
|
|
|
$
|
414
|
|
|
|
|
|
|
|
|
|
||||||||
Other Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
||||||||
Related to marketable securities:
|
|
|
|
|
|
|
|
||||||||
Unrealized holding gain (loss) arising during the period
|
4
|
|
|
(2
|
)
|
|
31
|
|
|
(19
|
)
|
||||
Reclassification of (gain) loss into Other - net nonoperating income (expense)
|
(5
|
)
|
|
2
|
|
|
(3
|
)
|
|
5
|
|
||||
Income tax effect
|
—
|
|
|
1
|
|
|
(7
|
)
|
|
4
|
|
||||
Total
|
(1
|
)
|
|
1
|
|
|
21
|
|
|
(10
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Related to employee benefit plans:
|
|
|
|
|
|
|
|
||||||||
Reclassification of net pension expense into Wages and benefits and Other - net nonoperating income (expense)
|
8
|
|
|
7
|
|
|
24
|
|
|
21
|
|
||||
Income tax effect
|
(2
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
(5
|
)
|
||||
Total
|
6
|
|
|
5
|
|
|
18
|
|
|
16
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Related to interest rate derivative instruments:
|
|
|
|
|
|
|
|
||||||||
Unrealized holding gain (loss) arising during the period
|
(5
|
)
|
|
—
|
|
|
(17
|
)
|
|
8
|
|
||||
Reclassification of loss into Aircraft rent
|
1
|
|
|
2
|
|
|
2
|
|
|
3
|
|
||||
Income tax effect
|
—
|
|
|
(1
|
)
|
|
3
|
|
|
(3
|
)
|
||||
Total
|
(4
|
)
|
|
1
|
|
|
(12
|
)
|
|
8
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other Comprehensive Income
|
1
|
|
|
7
|
|
|
27
|
|
|
14
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive Income
|
$
|
323
|
|
|
$
|
224
|
|
|
$
|
615
|
|
|
$
|
428
|
|
(in millions)
|
Common Stock Outstanding
|
|
Common Stock
|
|
Capital in Excess of Par Value
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Retained Earnings
|
|
Total
|
|||||||||||||
Balances at December 31, 2018
|
123.194
|
|
|
$
|
1
|
|
|
$
|
232
|
|
|
$
|
(568
|
)
|
|
$
|
(448
|
)
|
|
$
|
4,534
|
|
|
$
|
3,751
|
|
Cumulative effect of accounting changes(a)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
||||||
Common stock repurchase
|
(0.215
|
)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
||||||
Cash dividend declared
($0.35 per share) |
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(43
|
)
|
|
(43
|
)
|
||||||
Stock issued for employee stock purchase plan
|
0.391
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
.
|
|
20
|
|
|||||||
Stock issued under stock plans
|
0.134
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||
Balances at March 31, 2019
|
123.504
|
|
|
$
|
1
|
|
|
$
|
261
|
|
|
$
|
(581
|
)
|
|
$
|
(433
|
)
|
|
$
|
4,498
|
|
|
$
|
3,746
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
262
|
|
|
262
|
|
||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
||||||
Common stock repurchase
|
(0.194
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
||||||
Cash dividend declared
($0.35 per share) |
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(43
|
)
|
|
(43
|
)
|
||||||
Stock issued under stock plans
|
0.028
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Balances at June 30, 2019
|
123.338
|
|
|
$
|
1
|
|
|
$
|
270
|
|
|
$
|
(593
|
)
|
|
$
|
(422
|
)
|
|
$
|
4,717
|
|
|
$
|
3,973
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
322
|
|
|
322
|
|
||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Common stock repurchase
|
(0.465
|
)
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||||
Cash dividend declared
($0.35 per share) |
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(43
|
)
|
|
(43
|
)
|
||||||
Stock issued for employee stock purchase plan
|
0.394
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
||||||
Stock issued under stock plans
|
0.011
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Balances at September 30, 2019
|
123.278
|
|
|
$
|
1
|
|
|
$
|
297
|
|
|
$
|
(621
|
)
|
|
$
|
(421
|
)
|
|
$
|
4,996
|
|
|
$
|
4,252
|
|
(a)
|
Represents the opening balance sheet adjustment recorded as a result of the adoption of the new lease accounting standard.
|
(in millions)
|
Common Stock Outstanding
|
|
Common Stock
|
|
Capital in Excess of Par Value
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Retained Earnings
|
|
Total
|
|||||||||||||
Balances at December 31, 2017
|
123.061
|
|
|
$
|
1
|
|
|
$
|
164
|
|
|
$
|
(518
|
)
|
|
$
|
(380
|
)
|
|
$
|
4,193
|
|
|
$
|
3,460
|
|
Reclassification of tax effects to Retained Earnings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(62
|
)
|
|
62
|
|
|
—
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Common stock repurchase
|
(0.186
|
)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
||||||
Cash dividend declared
($0.32 per share) |
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
(40
|
)
|
||||||
Stock issued for employee stock purchase plan
|
0.312
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
||||||
Stock issued under stock plans
|
0.163
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||
Balances at March 31, 2018
|
123.350
|
|
|
$
|
1
|
|
|
$
|
190
|
|
|
$
|
(531
|
)
|
|
$
|
(440
|
)
|
|
$
|
4,219
|
|
|
$
|
3,439
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
193
|
|
|
193
|
|
||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
||||||
Common stock repurchase
|
(0.204
|
)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
||||||
Cash dividend declared
($0.32 per share) |
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
(39
|
)
|
||||||
Stock issued under stock plans
|
0.058
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
Balances at June 30, 2018
|
123.204
|
|
|
$
|
1
|
|
|
$
|
198
|
|
|
$
|
(544
|
)
|
|
$
|
(435
|
)
|
|
$
|
4,373
|
|
|
$
|
3,593
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
217
|
|
|
217
|
|
||||||
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
||||||
Common stock repurchase
|
(0.193
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||||
Cash dividend declared
($0.32 per share) |
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
(40
|
)
|
||||||
Stock issued for employee stock purchase plan
|
0.320
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
||||||
Stock issued under stock plans
|
0.030
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Balances at September 30, 2018
|
123.361
|
|
|
$
|
1
|
|
|
$
|
224
|
|
|
$
|
(556
|
)
|
|
$
|
(428
|
)
|
|
$
|
4,550
|
|
|
$
|
3,791
|
|
|
Nine Months Ended September 30,
|
||||||
(in millions)
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
588
|
|
|
$
|
414
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
317
|
|
|
290
|
|
||
Stock-based compensation and other
|
20
|
|
|
34
|
|
||
Changes in certain assets and liabilities:
|
|
|
|
||||
Changes in deferred tax provision
|
187
|
|
|
122
|
|
||
Increase in air traffic liability
|
244
|
|
|
144
|
|
||
Increase in deferred revenue
|
97
|
|
|
106
|
|
||
Pension contribution
|
(65
|
)
|
|
—
|
|
||
Other—net
|
(7
|
)
|
|
(124
|
)
|
||
Net cash provided by operating activities
|
1,381
|
|
|
986
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Property and equipment additions:
|
|
|
|
|
|
||
Aircraft and aircraft purchase deposits
|
(286
|
)
|
|
(349
|
)
|
||
Other flight equipment
|
(125
|
)
|
|
(76
|
)
|
||
Other property and equipment
|
(116
|
)
|
|
(129
|
)
|
||
Total property and equipment additions, including capitalized interest
|
(527
|
)
|
|
(554
|
)
|
||
Purchases of marketable securities
|
(1,446
|
)
|
|
(672
|
)
|
||
Sales and maturities of marketable securities
|
1,228
|
|
|
857
|
|
||
Other investing activities
|
37
|
|
|
36
|
|
||
Net cash used in investing activities
|
(708
|
)
|
|
(333
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Proceeds from issuance of debt
|
356
|
|
|
—
|
|
||
Long-term debt payments
|
(752
|
)
|
|
(544
|
)
|
||
Common stock repurchases
|
(53
|
)
|
|
(37
|
)
|
||
Dividends paid
|
(129
|
)
|
|
(118
|
)
|
||
Other financing activities
|
40
|
|
|
33
|
|
||
Net cash used in financing activities
|
(538
|
)
|
|
(666
|
)
|
||
Net increase (decrease) in cash, cash equivalents, and restricted cash
|
135
|
|
|
(13
|
)
|
||
Cash, cash equivalents, and restricted cash at beginning of year
|
114
|
|
|
197
|
|
||
Cash, cash equivalents, and restricted cash at end of the period
|
$
|
249
|
|
|
$
|
184
|
|
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Interest (net of amount capitalized)
|
$
|
48
|
|
|
$
|
60
|
|
Income taxes, net of refunds received
|
2
|
|
|
—
|
|
||
|
|
|
|
||||
Reconciliation of cash, cash equivalents, and restricted cash at end of the period
|
|
|
|
||||
Cash and cash equivalents
|
$
|
237
|
|
|
$
|
174
|
|
Restricted cash included in Prepaid expenses and other current assets
|
12
|
|
|
10
|
|
||
Total cash, cash equivalents, and restricted cash at end of the period
|
$
|
249
|
|
|
$
|
184
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Passenger ticket revenue, including ticket breakage and net of taxes and fees
|
$
|
1,868
|
|
|
$
|
1,744
|
|
|
$
|
5,099
|
|
|
$
|
4,864
|
|
Passenger ancillary revenue
|
157
|
|
|
146
|
|
|
428
|
|
|
401
|
|
||||
Mileage Plan passenger revenue
|
186
|
|
|
153
|
|
|
511
|
|
|
459
|
|
||||
Total Passenger revenue
|
$
|
2,211
|
|
|
$
|
2,043
|
|
|
$
|
6,038
|
|
|
$
|
5,724
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Passenger revenue
|
$
|
186
|
|
|
$
|
153
|
|
|
$
|
511
|
|
|
$
|
459
|
|
Mileage Plan other revenue
|
118
|
|
|
114
|
|
|
346
|
|
|
329
|
|
||||
Total Mileage Plan revenue
|
$
|
304
|
|
|
$
|
267
|
|
|
$
|
857
|
|
|
$
|
788
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Cargo revenue
|
$
|
36
|
|
|
$
|
36
|
|
|
$
|
104
|
|
|
$
|
96
|
|
Other revenue
|
24
|
|
|
19
|
|
|
65
|
|
|
51
|
|
||||
Total Cargo and other revenue
|
$
|
60
|
|
|
$
|
55
|
|
|
$
|
169
|
|
|
$
|
147
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2019
|
|
2018
|
||||
Total Deferred Revenue balance at January 1
|
|
$
|
1,874
|
|
|
$
|
1,725
|
|
Travel miles and companion certificate redemption - Passenger revenue
|
|
(511
|
)
|
|
(459
|
)
|
||
Miles redeemed on partner airlines - Other revenue
|
|
(84
|
)
|
|
(66
|
)
|
||
Increase in liability for mileage credits issued
|
|
692
|
|
|
631
|
|
||
Total Deferred Revenue balance at September 30
|
|
$
|
1,971
|
|
|
$
|
1,831
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. government and agency securities
|
$
|
379
|
|
|
$
|
—
|
|
|
$
|
379
|
|
|
$
|
293
|
|
|
$
|
—
|
|
|
$
|
293
|
|
Equity mutual funds
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Foreign government bonds
|
—
|
|
|
25
|
|
|
25
|
|
|
—
|
|
|
26
|
|
|
26
|
|
||||||
Asset-backed securities
|
—
|
|
|
201
|
|
|
201
|
|
|
—
|
|
|
190
|
|
|
190
|
|
||||||
Mortgage-backed securities
|
—
|
|
|
142
|
|
|
142
|
|
|
—
|
|
|
92
|
|
|
92
|
|
||||||
Corporate notes and bonds
|
—
|
|
|
609
|
|
|
609
|
|
|
—
|
|
|
520
|
|
|
520
|
|
||||||
Municipal securities
|
—
|
|
|
21
|
|
|
21
|
|
|
—
|
|
|
10
|
|
|
10
|
|
||||||
Total Marketable securities
|
384
|
|
|
998
|
|
|
1,382
|
|
|
293
|
|
|
838
|
|
|
1,131
|
|
||||||
Derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fuel hedge—call options
|
—
|
|
|
7
|
|
|
7
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||||
Interest rate swap agreements
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
10
|
|
|
10
|
|
||||||
Total Assets
|
$
|
384
|
|
|
$
|
1,007
|
|
|
$
|
1,391
|
|
|
$
|
293
|
|
|
$
|
852
|
|
|
$
|
1,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate swap agreements
|
—
|
|
|
(14
|
)
|
|
(14
|
)
|
|
—
|
|
|
(7
|
)
|
|
(7
|
)
|
||||||
Total Liabilities
|
$
|
—
|
|
|
$
|
(14
|
)
|
|
$
|
(14
|
)
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
(7
|
)
|
September 30, 2019
|
Cost Basis
|
|
Fair Value
|
||||
Due in one year or less
|
$
|
244
|
|
|
$
|
244
|
|
Due after one year through five years
|
1,105
|
|
|
1,118
|
|
||
Due after five years through 10 years
|
15
|
|
|
15
|
|
||
Total
|
$
|
1,364
|
|
|
$
|
1,377
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Fixed-rate debt at cost
|
$
|
567
|
|
|
$
|
639
|
|
Non-recurring purchase price accounting fair value adjustment
|
2
|
|
|
3
|
|
||
Total fixed-rate debt
|
$
|
569
|
|
|
$
|
642
|
|
|
|
|
|
||||
Estimated fair value
|
$
|
584
|
|
|
$
|
641
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Fixed-rate notes payable due through 2029
|
$
|
569
|
|
|
$
|
642
|
|
Variable-rate notes payable due through 2029
|
1,150
|
|
|
1,473
|
|
||
Less debt issuance costs
|
(10
|
)
|
|
(12
|
)
|
||
Total debt
|
1,709
|
|
|
2,103
|
|
||
Less current portion
|
265
|
|
|
486
|
|
||
Long-term debt, less current portion
|
$
|
1,444
|
|
|
$
|
1,617
|
|
|
|
|
|
||||
Weighted-average fixed-interest rate
|
3.4
|
%
|
|
4.1
|
%
|
||
Weighted-average variable-interest rate
|
3.2
|
%
|
|
3.9
|
%
|
|
Total
|
||
Remainder of 2019
|
$
|
63
|
|
2020
|
268
|
|
|
2021
|
313
|
|
|
2022
|
274
|
|
|
2023
|
234
|
|
|
Thereafter
|
565
|
|
|
Total
|
$
|
1,717
|
|
|
Operating lease assets
|
||
Aircraft
|
$
|
974
|
|
CPA aircraft
|
609
|
|
|
Airport and terminal facilities
|
18
|
|
|
Corporate real estate and other
|
46
|
|
|
Total Operating lease assets
|
$
|
1,647
|
|
|
Nine Months Ended September 30, 2019
|
||
Cash paid for capitalized operating leases
|
$
|
259
|
|
Operating lease assets obtained in exchange for lease obligations
|
$
|
47
|
|
|
Weighted Average IBR
|
|
Weighted Average Remaining Lease Term
|
|
Aircraft
|
4.1
|
%
|
|
6.7
|
CPA aircraft
|
4.3
|
%
|
|
9.5
|
Airports and terminal facilities
|
4.1
|
%
|
|
10.2
|
Corporate real estate and other
|
4.3
|
%
|
|
36.4
|
|
Aircraft
|
|
CPA Aircraft
|
|
Airport and Terminal Facilities
|
|
Corporate Real Estate & Other
|
||||||||
Remainder of 2019
|
$
|
63
|
|
|
$
|
20
|
|
|
1
|
|
|
$
|
2
|
|
|
2020
|
234
|
|
|
79
|
|
|
3
|
|
|
7
|
|
||||
2021
|
196
|
|
|
79
|
|
|
3
|
|
|
6
|
|
||||
2022
|
171
|
|
|
79
|
|
|
2
|
|
|
4
|
|
||||
2023
|
116
|
|
|
79
|
|
|
2
|
|
|
4
|
|
||||
Thereafter
|
330
|
|
|
408
|
|
|
12
|
|
|
77
|
|
||||
Total lease payments
|
$
|
1,110
|
|
|
$
|
744
|
|
|
$
|
23
|
|
|
$
|
100
|
|
Less: Imputed interest
|
(140
|
)
|
|
(135
|
)
|
|
(4
|
)
|
|
(54
|
)
|
||||
Total operating lease liabilities
|
$
|
970
|
|
|
$
|
609
|
|
|
$
|
19
|
|
|
$
|
46
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Service cost
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
32
|
|
|
$
|
36
|
|
Pension expense included in Wages and benefits
|
11
|
|
|
12
|
|
|
32
|
|
|
36
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest cost
|
23
|
|
|
20
|
|
|
67
|
|
|
59
|
|
||||
Expected return on assets
|
(24
|
)
|
|
(27
|
)
|
|
(71
|
)
|
|
(80
|
)
|
||||
Amortization of prior service cost (credit)
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Recognized actuarial loss
|
9
|
|
|
9
|
|
|
27
|
|
|
25
|
|
||||
Pension expense included in Nonoperating Income (Expense)
|
$
|
7
|
|
|
$
|
1
|
|
|
$
|
22
|
|
|
$
|
3
|
|
|
Aircraft Commitments(a)
|
|
Capacity Purchase Agreements (b)
|
|
Aircraft Maintenance Deposits
|
||||||
Remainder of 2019
|
$
|
111
|
|
|
$
|
34
|
|
|
$
|
16
|
|
2020
|
504
|
|
|
145
|
|
|
73
|
|
|||
2021
|
475
|
|
|
166
|
|
|
63
|
|
|||
2022
|
333
|
|
|
174
|
|
|
54
|
|
|||
2023
|
194
|
|
|
179
|
|
|
29
|
|
|||
Thereafter
|
36
|
|
|
1,065
|
|
|
10
|
|
|||
Total
|
$
|
1,653
|
|
|
$
|
1,763
|
|
|
$
|
245
|
|
(a)
|
Includes non-cancelable contractual commitments for aircraft and engines, buyer furnished equipment, and aircraft maintenance and parts management.
|
(b)
|
Includes all non-aircraft lease costs associated with capacity purchase agreements.
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Related to marketable securities
|
$
|
10
|
|
|
$
|
(11
|
)
|
Related to employee benefit plans
|
(422
|
)
|
|
(440
|
)
|
||
Related to interest rate derivatives
|
(9
|
)
|
|
3
|
|
||
Total
|
$
|
(421
|
)
|
|
$
|
(448
|
)
|
•
|
Mainline - includes scheduled air transportation on Alaska's Boeing or Airbus jet aircraft for passengers and cargo throughout the U.S., and in parts of Canada, Mexico, and Costa Rica.
|
•
|
Regional - includes Horizon's and other third-party carriers’ scheduled air transportation for passengers across a shorter distance network within the U.S. under CPAs. This segment includes the actual revenues and expenses associated with regional flying, as well as an allocation of corporate overhead incurred by Air Group on behalf of the regional operations.
|
•
|
Horizon - includes the capacity sold to Alaska under CPA. Expenses include those typically borne by regional airlines such as crew costs, ownership costs and maintenance costs.
|
|
Three Months Ended September 30, 2019
|
||||||||||||||||||||||||||
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating & Other(a)
|
|
Air Group Adjusted(b)
|
|
Special Items(c)
|
|
Consolidated
|
||||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Passenger revenues
|
$
|
1,850
|
|
|
$
|
361
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,211
|
|
|
$
|
—
|
|
|
$
|
2,211
|
|
CPA revenues
|
—
|
|
|
—
|
|
|
112
|
|
|
(112
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Mileage Plan other revenue
|
107
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
118
|
|
|
—
|
|
|
118
|
|
|||||||
Cargo and other
|
58
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
60
|
|
|
—
|
|
|
60
|
|
|||||||
Total operating revenues
|
2,015
|
|
|
373
|
|
|
112
|
|
|
(111
|
)
|
|
2,389
|
|
|
—
|
|
|
2,389
|
|
|||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses, excluding fuel
|
1,226
|
|
|
275
|
|
|
94
|
|
|
(119
|
)
|
|
1,476
|
|
|
5
|
|
|
1,481
|
|
|||||||
Economic fuel
|
411
|
|
|
75
|
|
|
—
|
|
|
—
|
|
|
486
|
|
|
—
|
|
|
486
|
|
|||||||
Total operating expenses
|
1,637
|
|
|
350
|
|
|
94
|
|
|
(119
|
)
|
|
1,962
|
|
|
5
|
|
|
1,967
|
|
|||||||
Nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest income
|
17
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
11
|
|
|
—
|
|
|
11
|
|
|||||||
Interest expense
|
(18
|
)
|
|
—
|
|
|
(7
|
)
|
|
7
|
|
|
(18
|
)
|
|
—
|
|
|
(18
|
)
|
|||||||
Interest capitalized
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|||||||
Other - net
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|||||||
Total nonoperating income (expense)
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
1
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
|||||||
Income (loss) before income tax
|
$
|
378
|
|
|
$
|
23
|
|
|
$
|
11
|
|
|
$
|
9
|
|
|
$
|
421
|
|
|
$
|
(5
|
)
|
|
$
|
416
|
|
|
Three Months Ended September 30, 2018
|
||||||||||||||||||||||||||
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating & Other(a)
|
|
Air Group Adjusted(b)
|
|
Special Items(c)
|
|
Consolidated
|
||||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Passenger revenues
|
$
|
1,727
|
|
|
$
|
316
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,043
|
|
|
$
|
—
|
|
|
$
|
2,043
|
|
CPA revenues
|
—
|
|
|
—
|
|
|
128
|
|
|
(128
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Mileage Plan other revenue
|
104
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
114
|
|
|
—
|
|
|
114
|
|
|||||||
Cargo and other
|
53
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
55
|
|
|||||||
Total operating revenues
|
1,884
|
|
|
326
|
|
|
130
|
|
|
(128
|
)
|
|
2,212
|
|
|
—
|
|
|
2,212
|
|
|||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses, excluding fuel
|
1,126
|
|
|
267
|
|
|
118
|
|
|
(131
|
)
|
|
1,380
|
|
|
22
|
|
|
1,402
|
|
|||||||
Economic fuel
|
438
|
|
|
70
|
|
|
—
|
|
|
—
|
|
|
508
|
|
|
5
|
|
|
513
|
|
|||||||
Total operating expenses
|
1,564
|
|
|
337
|
|
|
118
|
|
|
(131
|
)
|
|
1,888
|
|
|
27
|
|
|
1,915
|
|
|||||||
Nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest income
|
15
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
11
|
|
|
—
|
|
|
11
|
|
|||||||
Interest expense
|
(20
|
)
|
|
—
|
|
|
(6
|
)
|
|
4
|
|
|
(22
|
)
|
|
—
|
|
|
(22
|
)
|
|||||||
Interest capitalized
|
4
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|||||||
Other - net
|
(5
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|||||||
Total nonoperating income (expense)
|
(6
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
|||||||
Income (loss) before income tax
|
$
|
314
|
|
|
$
|
(13
|
)
|
|
$
|
7
|
|
|
$
|
3
|
|
|
$
|
311
|
|
|
$
|
(27
|
)
|
|
$
|
284
|
|
|
Nine Months Ended September 30, 2019
|
||||||||||||||||||||||||||
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating & Other(a)
|
|
Air Group Adjusted(b)
|
|
Special Items(c)
|
|
Consolidated
|
||||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Passenger revenues
|
$
|
5,039
|
|
|
$
|
999
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,038
|
|
|
$
|
—
|
|
|
$
|
6,038
|
|
CPA revenues
|
—
|
|
|
—
|
|
|
340
|
|
|
(340
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Mileage Plan other revenue
|
312
|
|
|
34
|
|
|
—
|
|
|
—
|
|
|
346
|
|
|
—
|
|
|
346
|
|
|||||||
Cargo and other
|
163
|
|
|
2
|
|
|
1
|
|
|
3
|
|
|
169
|
|
|
—
|
|
|
169
|
|
|||||||
Total operating revenues
|
5,514
|
|
|
1,035
|
|
|
341
|
|
|
(337
|
)
|
|
6,553
|
|
|
—
|
|
|
6,553
|
|
|||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses, excluding fuel
|
3,545
|
|
|
817
|
|
|
286
|
|
|
(353
|
)
|
|
4,295
|
|
|
39
|
|
|
4,334
|
|
|||||||
Economic fuel
|
1,191
|
|
|
218
|
|
|
—
|
|
|
—
|
|
|
1,409
|
|
|
(1
|
)
|
|
1,408
|
|
|||||||
Total operating expenses
|
4,736
|
|
|
1,035
|
|
|
286
|
|
|
(353
|
)
|
|
5,704
|
|
|
38
|
|
|
5,742
|
|
|||||||
Nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest income
|
50
|
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
31
|
|
|
—
|
|
|
31
|
|
|||||||
Interest expense
|
(58
|
)
|
|
—
|
|
|
(22
|
)
|
|
20
|
|
|
(60
|
)
|
|
—
|
|
|
(60
|
)
|
|||||||
Interest capitalized
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|||||||
Other - net
|
(20
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
(20
|
)
|
|||||||
Total nonoperating income (expense)
|
(17
|
)
|
|
—
|
|
|
(22
|
)
|
|
1
|
|
|
(38
|
)
|
|
—
|
|
|
(38
|
)
|
|||||||
Income (loss) before income tax
|
$
|
761
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
17
|
|
|
$
|
811
|
|
|
$
|
(38
|
)
|
|
$
|
773
|
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||||||||
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating & Other(a)
|
|
Air Group Adjusted(b)
|
|
Special Items(c)
|
|
Consolidated
|
||||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Passenger revenues
|
$
|
4,879
|
|
|
$
|
845
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,724
|
|
|
$
|
—
|
|
|
$
|
5,724
|
|
CPA revenues
|
—
|
|
|
—
|
|
|
375
|
|
|
(375
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Mileage Plan other revenue
|
301
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
329
|
|
|
—
|
|
|
329
|
|
|||||||
Cargo and other
|
142
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
|||||||
Total operating revenues
|
5,322
|
|
|
874
|
|
|
379
|
|
|
(375
|
)
|
|
6,200
|
|
|
—
|
|
|
6,200
|
|
|||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses, excluding fuel
|
3,392
|
|
|
755
|
|
|
345
|
|
|
(378
|
)
|
|
4,114
|
|
|
92
|
|
|
4,206
|
|
|||||||
Economic fuel
|
1,237
|
|
|
190
|
|
|
—
|
|
|
—
|
|
|
1,427
|
|
|
(30
|
)
|
|
1,397
|
|
|||||||
Total operating expenses
|
4,629
|
|
|
945
|
|
|
345
|
|
|
(378
|
)
|
|
5,541
|
|
|
62
|
|
|
5,603
|
|
|||||||
Nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest income
|
39
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
29
|
|
|
—
|
|
|
29
|
|
|||||||
Interest expense
|
(64
|
)
|
|
—
|
|
|
(16
|
)
|
|
9
|
|
|
(71
|
)
|
|
—
|
|
|
(71
|
)
|
|||||||
Interest capitalized
|
12
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
|||||||
Other - net
|
(9
|
)
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
(20
|
)
|
|||||||
Total nonoperating income (expense)
|
(22
|
)
|
|
(11
|
)
|
|
(14
|
)
|
|
(1
|
)
|
|
(48
|
)
|
|
—
|
|
|
(48
|
)
|
|||||||
Income (loss) before income tax
|
$
|
671
|
|
|
$
|
(82
|
)
|
|
$
|
20
|
|
|
$
|
2
|
|
|
$
|
611
|
|
|
$
|
(62
|
)
|
|
$
|
549
|
|
(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 allocations and excludes certain income and charges.
|
(c)
|
Includes merger-related costs, mark-to-market fuel-hedge accounting adjustments, and other special items.
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
Mainline
|
$
|
19,129
|
|
|
$
|
16,853
|
|
Horizon
|
1,231
|
|
|
1,229
|
|
||
Consolidating & Other
|
(7,377
|
)
|
|
(7,170
|
)
|
||
Consolidated
|
$
|
12,983
|
|
|
$
|
10,912
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Third Quarter Review—highlights from the third quarter of 2019 outlining some of the major events that happened during the period and how they affected our financial performance.
|
•
|
Results of Operations—an in-depth analysis of our revenues by segment and our expenses from a consolidated perspective for the three and nine months ended September 30, 2019. To the extent material to the understanding of segment profitability, we more fully describe the segment expenses per financial statement line item. Financial and statistical data is also included here. This section includes forward-looking statements regarding our view of the remainder of 2019.
|
•
|
Liquidity and Capital Resources—an overview of our financial position, analysis of cash flows, and relevant contractual obligations and commitments.
|
•
|
By excluding fuel expense and certain special items (including merger-related costs) from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can lead to 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 merger-related costs, 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 annual cash incentive plan, which covers the majority of employees within the Air Group organization.
|
•
|
CASM excluding fuel and certain special items is a measure commonly used by industry analysts and we believe it is an important metric 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 merger-related costs, and mark-to-market hedging adjustments, 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 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.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
Consolidated Operating Statistics:(a)
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers (000)
|
12,574
|
|
12,128
|
|
3.7%
|
|
35,018
|
|
34,685
|
|
1.0%
|
RPMs (000,000) "traffic"
|
15,026
|
|
14,386
|
|
4.4%
|
|
42,113
|
|
41,272
|
|
2.0%
|
ASMs (000,000) "capacity"
|
17,519
|
|
16,943
|
|
3.4%
|
|
50,006
|
|
49,256
|
|
1.5%
|
Load factor
|
85.8%
|
|
84.9%
|
|
0.9 pts
|
|
84.2%
|
|
83.8%
|
|
0.4 pts
|
Yield
|
14.71¢
|
|
14.20¢
|
|
3.6%
|
|
14.34¢
|
|
13.87¢
|
|
3.4%
|
RASM
|
13.64¢
|
|
13.05¢
|
|
4.5%
|
|
13.10¢
|
|
12.59¢
|
|
4.1%
|
CASM excluding fuel and special items(b)
|
8.43¢
|
|
8.15¢
|
|
3.4%
|
|
8.59¢
|
|
8.35¢
|
|
2.9%
|
Economic fuel cost per gallon(b)
|
$2.13
|
|
$2.33
|
|
(8.6)%
|
|
$2.18
|
|
$2.26
|
|
(3.5)%
|
Fuel gallons (000,000)
|
227
|
|
218
|
|
4.1%
|
|
646
|
|
631
|
|
2.4%
|
ASMs per fuel gallon
|
77.2
|
|
77.7
|
|
(0.6)%
|
|
77.4
|
|
78.1
|
|
(0.9)%
|
Average full-time equivalent employees (FTEs)
|
22,247
|
|
21,804
|
|
2.0%
|
|
22,000
|
|
21,575
|
|
2.0%
|
Mainline Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers (000)
|
9,655
|
|
9,435
|
|
2.3%
|
|
26,725
|
|
27,107
|
|
(1.4)%
|
RPMs (000,000) "traffic"
|
13,538
|
|
13,096
|
|
3.4%
|
|
37,917
|
|
37,677
|
|
0.6%
|
ASMs (000,000) "capacity"
|
15,702
|
|
15,343
|
|
2.3%
|
|
44,816
|
|
44,730
|
|
0.2%
|
Load factor
|
86.2%
|
|
85.4%
|
|
0.8 pts
|
|
84.6%
|
|
84.2%
|
|
0.4 pts
|
Yield
|
13.66¢
|
|
13.18¢
|
|
3.6%
|
|
13.29¢
|
|
12.95¢
|
|
2.6%
|
RASM
|
12.83¢
|
|
12.28¢
|
|
4.5%
|
|
12.30¢
|
|
11.90¢
|
|
3.4%
|
CASM excluding fuel and special items(b)
|
7.81¢
|
|
7.34¢
|
|
6.4%
|
|
7.91¢
|
|
7.58¢
|
|
4.4%
|
Economic fuel cost per gallon(b)
|
$2.13
|
|
$2.32
|
|
(8.2)%
|
|
$2.17
|
|
$2.25
|
|
(3.6)%
|
Fuel gallons (000,000)
|
193
|
|
189
|
|
2.1%
|
|
549
|
|
549
|
|
—%
|
ASMs per fuel gallon
|
81.4
|
|
81.2
|
|
0.2%
|
|
81.6
|
|
81.5
|
|
0.1%
|
Average FTEs
|
16,789
|
|
16,499
|
|
1.8%
|
|
16,599
|
|
16,330
|
|
1.6%
|
Aircraft utilization
|
11.3
|
|
11.4
|
|
(0.9)%
|
|
10.9
|
|
11.4
|
|
(4.4)%
|
Average aircraft stage length
|
1,281
|
|
1,291
|
|
(0.8)%
|
|
1,298
|
|
1,293
|
|
0.4%
|
Operating fleet
|
238
|
|
231
|
|
7 a/c
|
|
238
|
|
231
|
|
7 a/c
|
Regional Operating Statistics:(c)
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers (000)
|
2,919
|
|
2,693
|
|
8.4%
|
|
8,293
|
|
7,578
|
|
9.4%
|
RPMs (000,000) "traffic"
|
1,488
|
|
1,290
|
|
15.3%
|
|
4,196
|
|
3,595
|
|
16.7%
|
ASMs (000,000) "capacity"
|
1,817
|
|
1,600
|
|
13.6%
|
|
5,190
|
|
4,526
|
|
14.7%
|
Load factor
|
81.9%
|
|
80.6%
|
|
1.3 pts
|
|
80.8%
|
|
79.4%
|
|
1.4 pts
|
Yield
|
24.23¢
|
|
24.50¢
|
|
(1.1)%
|
|
23.81¢
|
|
23.49¢
|
|
1.4%
|
RASM
|
20.51¢
|
|
20.41¢
|
|
0.5%
|
|
19.93¢
|
|
19.32¢
|
|
3.2%
|
Operating fleet
|
94
|
|
89
|
|
5 a/c
|
|
94
|
|
89
|
|
5 a/c
|
(a)
|
Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.
|
(b)
|
See reconciliation of this non-GAAP measure to the most directly related GAAP measure in the accompanying pages.
|
(c)
|
Data presented includes information related to flights operated by Horizon and third-party carriers.
|
|
Three Months Ended September 30,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
(in millions, except per share amounts)
|
Dollars
|
|
Diluted EPS
|
|
Dollars
|
|
Diluted EPS
|
||||||||
GAAP net income and diluted EPS
|
$
|
322
|
|
|
$
|
2.60
|
|
|
$
|
217
|
|
|
$
|
1.75
|
|
Mark-to-market fuel hedge adjustments
|
—
|
|
|
—
|
|
|
5
|
|
|
0.04
|
|
||||
Special items - merger-related costs
|
5
|
|
|
0.04
|
|
|
22
|
|
|
0.18
|
|
||||
Income tax effect of reconciling items above
|
(1
|
)
|
|
(0.01
|
)
|
|
(7
|
)
|
|
(0.06
|
)
|
||||
Non-GAAP adjusted net income and diluted EPS
|
$
|
326
|
|
|
$
|
2.63
|
|
|
$
|
237
|
|
|
$
|
1.91
|
|
|
Three Months Ended September 30,
|
|||||||||
(in cents)
|
2019
|
|
2018
|
|
% Change
|
|||||
Consolidated:
|
|
|
|
|
|
|||||
CASM
|
|
11.23
|
¢
|
|
|
11.30
|
¢
|
|
(1
|
)%
|
Less the following components:
|
|
|
|
|
|
|
||||
Aircraft fuel, including hedging gains and losses
|
2.77
|
|
|
3.02
|
|
|
(8
|
)%
|
||
Special items - merger-related costs
|
0.03
|
|
|
0.13
|
|
|
(77
|
)%
|
||
CASM excluding fuel and special items
|
|
8.43
|
¢
|
|
|
8.15
|
¢
|
|
3
|
%
|
|
|
|
|
|
|
|||||
Mainline:
|
|
|
|
|
|
|||||
CASM
|
|
10.46
|
¢
|
|
|
10.37
|
¢
|
|
1
|
%
|
Less the following components:
|
|
|
|
|
|
|
||||
Aircraft fuel, including hedging gains and losses
|
2.62
|
|
|
2.89
|
|
|
(9
|
)%
|
||
Special items - merger-related costs
|
0.03
|
|
|
0.14
|
|
|
(79
|
)%
|
||
CASM excluding fuel and special items
|
|
7.81
|
¢
|
|
|
7.34
|
¢
|
|
6
|
%
|
|
Three Months Ended September 30,
|
|||||||||
(in millions)
|
2019
|
|
2018
|
|
% Change
|
|||||
Passenger revenue
|
$
|
2,211
|
|
|
$
|
2,043
|
|
|
8
|
%
|
Mileage Plan other revenue
|
118
|
|
|
114
|
|
|
4
|
%
|
||
Cargo and other
|
60
|
|
|
55
|
|
|
9
|
%
|
||
Total operating revenues
|
$
|
2,389
|
|
|
$
|
2,212
|
|
|
8
|
%
|
|
Three Months Ended September 30,
|
|||||||||
(in millions)
|
2019
|
|
2018
|
|
% Change
|
|||||
Fuel expense
|
$
|
486
|
|
|
$
|
513
|
|
|
(5
|
)%
|
Non-fuel operating expenses, excluding special items
|
1,476
|
|
|
1,380
|
|
|
7
|
%
|
||
Special items - merger-related costs
|
5
|
|
|
22
|
|
|
(77
|
)%
|
||
Total operating expenses
|
$
|
1,967
|
|
|
$
|
1,915
|
|
|
3
|
%
|
|
Three Months Ended September 30,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
(in millions, except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
||||||||
Raw or "into-plane" fuel cost
|
$
|
481
|
|
|
$
|
2.11
|
|
|
$
|
520
|
|
|
$
|
2.38
|
|
(Gains) losses on settled hedges
|
5
|
|
|
0.02
|
|
|
(12
|
)
|
|
(0.05
|
)
|
||||
Consolidated economic fuel expense
|
486
|
|
|
2.13
|
|
|
$
|
508
|
|
|
$
|
2.33
|
|
||
Mark-to-market fuel hedge adjustments
|
—
|
|
|
—
|
|
|
5
|
|
|
0.02
|
|
||||
GAAP fuel expense
|
$
|
486
|
|
|
$
|
2.13
|
|
|
$
|
513
|
|
|
$
|
2.35
|
|
Fuel gallons
|
227
|
|
|
|
|
218
|
|
|
|
|
Three Months Ended September 30,
|
|||||||||
(in millions)
|
2019
|
|
2018
|
|
% Change
|
|||||
Wages and benefits
|
$
|
608
|
|
|
$
|
549
|
|
|
11
|
%
|
Variable incentive pay
|
46
|
|
|
27
|
|
|
70
|
%
|
||
Aircraft maintenance
|
106
|
|
|
107
|
|
|
(1
|
)%
|
||
Aircraft rent
|
82
|
|
|
82
|
|
|
—
|
%
|
||
Landing fees and other rentals
|
143
|
|
|
135
|
|
|
6
|
%
|
||
Contracted services
|
72
|
|
|
70
|
|
|
3
|
%
|
||
Selling expenses
|
77
|
|
|
79
|
|
|
(3
|
)%
|
||
Depreciation and amortization
|
106
|
|
|
99
|
|
|
7
|
%
|
||
Food and beverage service
|
57
|
|
|
53
|
|
|
8
|
%
|
||
Third-party regional carrier expense
|
42
|
|
|
38
|
|
|
11
|
%
|
||
Other
|
137
|
|
|
141
|
|
|
(3
|
)%
|
||
Total non-fuel operating expenses, excluding special items
|
$
|
1,476
|
|
|
$
|
1,380
|
|
|
7
|
%
|
|
Three Months Ended September 30,
|
|||||||||
(in millions)
|
2019
|
|
2018
|
|
% Change
|
|||||
Wages
|
$
|
460
|
|
|
$
|
412
|
|
|
12
|
%
|
Pension—Defined benefit plans service cost
|
10
|
|
|
12
|
|
|
(17
|
)%
|
||
Defined contribution plans
|
34
|
|
|
30
|
|
|
13
|
%
|
||
Medical and other benefits
|
71
|
|
|
65
|
|
|
9
|
%
|
||
Payroll taxes
|
33
|
|
|
30
|
|
|
10
|
%
|
||
Total wages and benefits
|
$
|
608
|
|
|
$
|
549
|
|
|
11
|
%
|
|
Nine Months Ended September 30,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
(in millions, except per share amounts)
|
Dollars
|
|
Diluted EPS
|
|
Dollars
|
|
Diluted EPS
|
||||||||
Reported GAAP net income and diluted EPS
|
$
|
588
|
|
|
$
|
4.74
|
|
|
$
|
414
|
|
|
$
|
3.34
|
|
Mark-to-market fuel hedge adjustments
|
(1
|
)
|
|
(0.01
|
)
|
|
(30
|
)
|
|
(0.24
|
)
|
||||
Special items - merger-related costs
|
39
|
|
|
0.31
|
|
|
67
|
|
|
0.54
|
|
||||
Special items - other(a)
|
—
|
|
|
—
|
|
|
25
|
|
|
0.20
|
|
||||
Income tax effect of reconciling items above
|
(9
|
)
|
|
(0.07
|
)
|
|
(15
|
)
|
|
(0.12
|
)
|
||||
Non-GAAP adjusted net income and diluted EPS
|
$
|
617
|
|
|
$
|
4.97
|
|
|
$
|
461
|
|
|
$
|
3.72
|
|
|
Nine Months Ended September 30,
|
|||||||||
(in cents)
|
2019
|
|
2018
|
|
% Change
|
|||||
Consolidated:
|
|
|
|
|
|
|||||
CASM
|
|
11.48
|
¢
|
|
|
11.38
|
¢
|
|
1
|
%
|
Less the following components:
|
|
|
|
|
|
|||||
Aircraft fuel, including hedging gains and losses
|
2.82
|
|
|
2.84
|
|
|
(1
|
)%
|
||
Special items - merger-related costs
|
0.07
|
|
|
0.14
|
|
|
(49
|
)%
|
||
Special items - other(a)
|
—
|
|
|
0.05
|
|
|
(100
|
)%
|
||
CASM excluding fuel and special items
|
|
8.59
|
¢
|
|
|
8.35
|
¢
|
|
3
|
%
|
|
|
|
|
|
|
|||||
Mainline:
|
|
|
|
|
|
|||||
CASM
|
|
10.65
|
¢
|
|
|
10.49
|
¢
|
|
2
|
%
|
Less the following components:
|
|
|
|
|
|
|||||
Aircraft fuel, including hedging gains and losses
|
2.65
|
|
|
2.70
|
|
|
(2
|
)%
|
||
Special items - merger-related costs
|
0.09
|
|
|
0.15
|
|
|
(40
|
)%
|
||
Special items - other(a)
|
—
|
|
|
0.06
|
|
|
(100
|
)%
|
||
CASM excluding fuel and special items
|
|
7.91
|
¢
|
|
|
7.58
|
¢
|
|
4
|
%
|
(a)
|
Special items - other is the employee tax reform bonus awarded in January 2018.
|
|
Nine Months Ended September 30,
|
|||||||||
(in millions)
|
2019
|
|
2018
|
|
% Change
|
|||||
Passenger revenue
|
$
|
6,038
|
|
|
$
|
5,724
|
|
|
5
|
%
|
Mileage Plan other revenue
|
346
|
|
|
329
|
|
|
5
|
%
|
||
Cargo and other
|
169
|
|
|
147
|
|
|
15
|
%
|
||
Total operating revenues
|
$
|
6,553
|
|
|
$
|
6,200
|
|
|
6
|
%
|
|
Nine Months Ended September 30,
|
|||||||||
(in millions)
|
2019
|
|
2018
|
|
% Change
|
|||||
Fuel expense
|
$
|
1,408
|
|
|
$
|
1,397
|
|
|
1
|
%
|
Non-fuel operating expenses, excluding special items
|
4,295
|
|
|
4,114
|
|
|
4
|
%
|
||
Special items - merger-related costs
|
39
|
|
|
67
|
|
|
(42
|
)%
|
||
Special items - other
|
—
|
|
|
25
|
|
|
NM
|
|
||
Total operating expenses
|
$
|
5,742
|
|
|
$
|
5,603
|
|
|
2
|
%
|
|
Nine Months Ended September 30,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
(in millions, except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
||||||||
Raw or "into-plane" fuel cost
|
$
|
1,397
|
|
|
$
|
2.16
|
|
|
$
|
1,450
|
|
|
$
|
2.30
|
|
(Gains) losses on settled hedges
|
12
|
|
|
0.02
|
|
|
(23
|
)
|
|
(0.04
|
)
|
||||
Consolidated economic fuel expense
|
1,409
|
|
|
2.18
|
|
|
$
|
1,427
|
|
|
$
|
2.26
|
|
||
Mark-to-market fuel hedge adjustments
|
(1
|
)
|
|
—
|
|
|
(30
|
)
|
|
(0.05
|
)
|
||||
GAAP fuel expense
|
$
|
1,408
|
|
|
$
|
2.18
|
|
|
$
|
1,397
|
|
|
$
|
2.21
|
|
Fuel gallons
|
646
|
|
|
|
|
631
|
|
|
|
|
Nine Months Ended September 30,
|
|||||||||
(in millions)
|
2019
|
|
2018
|
|
% Change
|
|||||
Wages and benefits
|
$
|
1,732
|
|
|
$
|
1,629
|
|
|
6
|
%
|
Variable incentive pay
|
125
|
|
|
104
|
|
|
20
|
%
|
||
Aircraft maintenance
|
341
|
|
|
320
|
|
|
7
|
%
|
||
Aircraft rent
|
247
|
|
|
233
|
|
|
6
|
%
|
||
Landing fees and other rentals
|
388
|
|
|
371
|
|
|
5
|
%
|
||
Contracted services
|
214
|
|
|
227
|
|
|
(6
|
)%
|
||
Selling expenses
|
236
|
|
|
245
|
|
|
(4
|
)%
|
||
Depreciation and amortization
|
317
|
|
|
290
|
|
|
9
|
%
|
||
Food and beverage service
|
159
|
|
|
158
|
|
|
1
|
%
|
||
Third-party regional carrier expense
|
125
|
|
|
114
|
|
|
10
|
%
|
||
Other
|
411
|
|
|
423
|
|
|
(3
|
)%
|
||
Total non-fuel operating expenses, excluding special items
|
$
|
4,295
|
|
|
$
|
4,114
|
|
|
4
|
%
|
|
Nine Months Ended September 30,
|
|||||||||
(in millions)
|
2019
|
|
2018
|
|
% Change
|
|||||
Wages
|
$
|
1,305
|
|
|
$
|
1,230
|
|
|
6
|
%
|
Pension—Defined benefit plans service cost
|
31
|
|
|
36
|
|
|
(14
|
)%
|
||
Defined contribution plans
|
100
|
|
|
88
|
|
|
14
|
%
|
||
Medical and other benefits
|
203
|
|
|
186
|
|
|
9
|
%
|
||
Payroll taxes
|
93
|
|
|
89
|
|
|
4
|
%
|
||
Total wages and benefits
|
$
|
1,732
|
|
|
$
|
1,629
|
|
|
6
|
%
|
•
|
Our existing cash and marketable securities balance of $1.6 billion, and our expected cash from operations;
|
•
|
Our 123 unencumbered aircraft that could be financed, if necessary;
|
•
|
Our combined bank line-of-credit facilities, with no outstanding borrowings, of $400 million.
|
(in millions)
|
September 30, 2019
|
|
December 31, 2018
|
|
Change
|
||||
Cash and marketable securities
|
$
|
1,619
|
|
|
$
|
1,236
|
|
|
31 %
|
Cash, marketable securities, and unused lines of credit as a percentage of trailing twelve months' revenue
|
23
|
%
|
|
20
|
%
|
|
3 pts
|
||
Long-term debt, net of current portion
|
$
|
1,444
|
|
|
$
|
1,617
|
|
|
(11)%
|
Shareholders’ equity
|
$
|
4,252
|
|
|
$
|
3,751
|
|
|
13%
|
Debt-to-capitalization, adjusted for operating leases
|
|
|
|
|
|
||||
(in millions)
|
September 30, 2019
|
|
December 31, 2018
|
|
Change
|
||||
Long-term debt, net of current portion
|
$
|
1,444
|
|
|
$
|
1,617
|
|
|
(11)%
|
Capitalized operating leases(a)
|
1,644
|
|
|
1,768
|
|
|
(a)
|
||
Adjusted debt
|
$
|
3,088
|
|
|
$
|
3,385
|
|
|
(9)%
|
Shareholders' equity
|
4,252
|
|
|
3,751
|
|
|
13%
|
||
Total invested capital
|
$
|
7,340
|
|
|
$
|
7,136
|
|
|
3%
|
|
|
|
|
|
|
||||
Debt-to-capitalization, including operating leases
|
42
|
%
|
|
47
|
%
|
|
(5) pts
|
(a)
|
Following the adoption of the new lease accounting standard on January 1, 2019, this represents the total capitalized Operating lease liability, whereas prior year periods were calculated utilizing the present value of aircraft lease payments. This change had no meaningful impact to the ratio.
|
(a)
|
Operating income can be reconciled using the trailing twelve month operating income as filed quarterly with the SEC.
|
(in millions)
|
2019
|
|
2020
|
||||
Expected capital expenditures
|
$
|
700
|
|
|
$
|
775
|
|
|
Actual Fleet
|
|
Expected Fleet Activity
|
||||||||||||||
Aircraft
|
September 30, 2019
|
|
2019 Additions
|
|
2019 Removals
|
|
December 31, 2019
|
|
2020 Changes
|
|
December 31, 2020
|
||||||
B737 Freighters
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
B737 Passenger Aircraft(a)
|
163
|
|
|
1
|
|
|
—
|
|
|
164
|
|
|
9
|
|
|
173
|
|
Airbus Passenger Aircraft
|
72
|
|
|
1
|
|
|
(2
|
)
|
|
71
|
|
|
(1
|
)
|
|
70
|
|
Total Mainline Fleet
|
238
|
|
|
2
|
|
|
(2
|
)
|
|
238
|
|
|
8
|
|
|
246
|
|
Q400 operated by Horizon(b)
|
32
|
|
|
2
|
|
|
(1
|
)
|
|
33
|
|
|
(1
|
)
|
|
32
|
|
E175 operated by Horizon
|
30
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
30
|
|
E175 operated by third party
|
32
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
—
|
|
|
32
|
|
Total Regional Fleet
|
94
|
|
|
2
|
|
|
(1
|
)
|
|
95
|
|
|
(1
|
)
|
|
94
|
|
Total
|
332
|
|
|
4
|
|
|
(3
|
)
|
|
333
|
|
|
7
|
|
|
340
|
|
(a)
|
Two of the three B737 MAX9 aircraft that were originally scheduled for delivery in 2019 have been shifted to 2020 in light of the MAX grounding, based on our current estimate of the expected delivery dates.
|
(b)
|
Two Q400 aircraft that were previously removed from our operating fleet will be returning to revenue service. We expect these additions to occur in late 2019.
|
|
Approximate % of Expected Fuel Requirements
|
|
Weighted-Average Crude Oil Price per Barrel
|
|
Average Premium Cost per Barrel
|
|||||
Remainder 2019
|
50
|
%
|
|
$
|
74
|
|
|
$
|
2
|
|
First Quarter 2020
|
50
|
%
|
|
70
|
|
|
2
|
|
||
Second Quarter 2020
|
40
|
%
|
|
68
|
|
|
2
|
|
||
Third Quarter 2020
|
30
|
%
|
|
68
|
|
|
2
|
|
||
Fourth Quarter 2020
|
20
|
%
|
|
66
|
|
|
2
|
|
||
Full Year 2020
|
35
|
%
|
|
$
|
68
|
|
|
$
|
2
|
|
First Quarter 2021
|
10
|
%
|
|
63
|
|
|
2
|
|
||
Full Year 2021
|
2
|
%
|
|
$
|
63
|
|
|
$
|
2
|
|
(in millions)
|
Remainder of 2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Beyond 2023
|
|
Total
|
||||||||||||||
Current and long-term debt obligations
|
$
|
63
|
|
|
$
|
268
|
|
|
$
|
313
|
|
|
$
|
274
|
|
|
$
|
234
|
|
|
$
|
565
|
|
|
$
|
1,717
|
|
Aircraft lease commitments
|
83
|
|
|
313
|
|
|
275
|
|
|
250
|
|
|
195
|
|
|
738
|
|
|
1,854
|
|
|||||||
Facility lease commitments
|
3
|
|
|
10
|
|
|
9
|
|
|
6
|
|
|
6
|
|
|
89
|
|
|
123
|
|
|||||||
Aircraft maintenance deposits
|
16
|
|
|
73
|
|
|
63
|
|
|
54
|
|
|
29
|
|
|
10
|
|
|
245
|
|
|||||||
Aircraft purchase commitments
|
111
|
|
|
504
|
|
|
475
|
|
|
333
|
|
|
194
|
|
|
36
|
|
|
1,653
|
|
|||||||
Interest obligations (a)
|
14
|
|
|
48
|
|
|
39
|
|
|
29
|
|
|
23
|
|
|
38
|
|
|
191
|
|
|||||||
Other obligations (b)
|
34
|
|
|
152
|
|
|
173
|
|
|
181
|
|
|
186
|
|
|
1,079
|
|
|
1,805
|
|
|||||||
Total
|
$
|
324
|
|
|
$
|
1,368
|
|
|
$
|
1,347
|
|
|
$
|
1,127
|
|
|
$
|
867
|
|
|
$
|
2,555
|
|
|
$
|
7,588
|
|
(a)
|
For variable-rate debt, future obligations are shown above using forecasted interest rates as of September 30, 2019.
|
(b)
|
Primarily comprised of non-aircraft lease costs associated with capacity purchase agreements.
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
ITEM 4. CONTROLS AND PROCEDURES
|
ITEM 1. LEGAL PROCEEDINGS
|
ITEM 1A. RISK FACTORS
|
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Total Number of
Shares Purchased
|
|
Average Price
Paid per Share
|
|
Maximum remaining
dollar value of shares
that can be purchased
under the plan
(in millions)
|
|||||
July 1, 2019 - July 31, 2019
|
68,509
|
|
|
$
|
64.05
|
|
|
|
||
August 1, 2019 - August 31, 2019
|
279,370
|
|
|
58.99
|
|
|
|
|||
September 1, 2019 - September 30, 2019
|
117,475
|
|
|
64.26
|
|
|
|
|||
Total
|
465,354
|
|
|
$
|
61.06
|
|
|
$
|
509
|
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4. MINE SAFETY DISCLOSURES
|
ITEM 5. OTHER INFORMATION
|
ITEM 6. EXHIBITS
|
1.
|
Exhibits: See Exhibit Index.
|
ALASKA AIR GROUP, INC.
|
|
|
|
/s/ CHRISTOPHER M. BERRY
|
|
Christopher M. Berry
|
|
Vice President Finance and Controller
|
|
|
|
November 7, 2019
|
|
1 Year Alaska Air Chart |
1 Month Alaska Air Chart |
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