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

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SEATTLE, Jan. 26, 2021 /PRNewswire/ --

Financial Results:

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

Liquidity and Fleet Updates:

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

Operational and Guest Safety Updates

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

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

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

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

The following tables reconcile the company's adjusted net income and earnings per diluted share (EPS) during the full year and fourth quarters of 2020 and 2019 to amounts as reported in accordance with GAAP:


Three Months Ended December 31,


2020


2019

(in millions, except per share amounts)

Dollars


Diluted EPS


Dollars


Diluted EPS

Reported GAAP net income (loss) and diluted EPS

$

(430)



$

(3.47)



$

181



$

1.46


Payroll support program wage offset

(22)



(0.18)






Mark-to-market fuel hedge adjustments

(8)



(0.07)



(5)



(0.04)


Special items - impairment charges and other

255



2.06






Special items - restructuring charges

(102)



(0.82)






Special items - merger-related costs

1



0.01



5



0.04


Special items - net non-operating

26



0.21






Income tax effect on special items and fuel hedge adjustments

(36)



(0.29)






Non-GAAP adjusted net income (loss) and diluted EPS

$

(316)



$

(2.55)



$

181



$

1.46


 


Twelve Months Ended December 31,


2020


2019

(in millions, except per share amounts)

Dollars


Diluted EPS


Dollars


Diluted EPS

Reported GAAP net income (loss) and diluted EPS

$

(1,307)



$

(10.59)



$

769



$

6.19


Payroll support program wage offset

(782)



(6.33)






Mark-to-market fuel hedge adjustments

(8)



(0.06)



(6)



(0.05)


Special items - impairment charges and other

605



4.90






Special items - restructuring charges

220



1.78






Special items - merger-related costs

6



0.05



44



0.35


Special items - net non-operating

26



0.21






Income tax effect on special items and fuel hedge adjustments

(16)



(0.13)



(9)



(0.07)


Non-GAAP adjusted net income (loss) and diluted EPS

$

(1,256)



$

(10.17)



$

798



$

6.42


Statistical data, as well as a reconciliation of other 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 fourth quarter and full year results will be streamed online at 8:30 a.m. Pacific time on January 26, 2021. It can be accessed through alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call.

References in this news release to "Air Group," "company," "we," "us" and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred to as "Alaska" and "Horizon," respectively, and together as our "airlines."

This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2019, the Company's Quarterly Report on Form 10-Q for the year ended September 30, 2020, as well as in other documents filed by the Company with the SEC after the date thereof. Some of these risks include the risks associated with contagious illnesses and contagion, such as COVID-19, general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our indebtedness, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, changes in laws and regulations, and risks inherent in the achievement of anticipated synergies and the timing thereof in connection with the acquisition of Virgin America. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance, or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.

Alaska Airlines and its regional partners serve more than 115 destinations across the United States and North America. The airline provides essential air service for our guests along with moving crucial cargo shipments, while emphasizing Next-Level Care. Alaska is known for low fares, award-winning customer service and sustainability efforts. Guests can earn and redeem miles on flights to more than 800 destinations worldwide with Alaska and its Global Partners. On March 31, 2021, Alaska will officially become a member of the oneworld global alliance. Learn more about Alaska at newsroom.alaskaair.com and blog.alaskaair.com. Alaska Airlines and Horizon Air are subsidiaries of Alaska Air Group (NYSE:ALK).

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Alaska Air Group, Inc.

















Three Months Ended December 31,


Twelve Months Ended December 31,

(in millions, except per share amounts)

2020


2019


Change


2020


2019


Change

Operating Revenues:












Passenger revenue

$

657



$

2,057



(68)

%


$

3,019



$

8,095



(63)

%

Mileage Plan other revenue

108



119



(9)

%


374



465



(20)

%

Cargo and other

43



52



(17)

%


173



221



(22)

%

Total Operating Revenues

808



2,228



(64)

%


3,566



8,781



(59)

%













Operating Expenses:












Wages and benefits

474



638



(26)

%


2,053



2,370



(13)

%

Variable incentive pay

65



38



71

%


130



163



(20)

%

Payroll support program wage offset

(22)





NM


(782)





NM

Aircraft fuel, including hedging gains and losses

155



470



(67)

%


723



1,878



(62)

%

Aircraft maintenance

77



96



(20)

%


321



437



(27)

%

Aircraft rent

70



84



(17)

%


299



331



(10)

%

Landing fees and other rentals

94



143



(34)

%


417



531



(21)

%

Contracted services

43



75



(43)

%


181



289



(37)

%

Selling expenses

18



77



(77)

%


101



313



(68)

%

Depreciation and amortization

100



106



(6)

%


420



423



(1)

%

Food and beverage service

20



55



(64)

%


90



214



(58)

%

Third-party regional carrier expense

36



41



(12)

%


128



166



(23)

%

Other

97



148



(34)

%


407



559



(27)

%

Special items - impairment charges and other

255





NM


605





NM

Special items - restructuring charges

(102)





NM


220





NM

Special items - merger-related costs

1



5



(80)

%


6



44



(86)

%

Total Operating Expenses

1,381



1,976



(30)

%


5,319



7,718



(31)

%

Operating Income (Loss)

(573)



252



NM


(1,753)



1,063



NM

Non-operating Income (Expense):












Interest income

8



11



(27)

%


31



42



(26)

%

Interest expense

(34)



(18)



89

%


(98)



(78)



26

%

Interest capitalized

3



4



(25)

%


11



15



(27)

%

Other - net

1



(6)



NM


17



(26)



NM

Special charges - net non-operating

(26)





NM


(26)





NM

Total Non-operating Expense

(48)



(9)



NM


(65)



(47)



38

%

Income (Loss) Before Income Tax

(621)



243





(1,818)



1,016




Income tax (benefit) expense

(191)



62





(511)



247




Net Income (Loss)

$

(430)



$

181





$

(1,307)



$

769
















Basic Earnings (Loss) Per Share:

$

(3.47)



$

1.47





$

(10.59)



$

6.24




Diluted Earnings (Loss) Per Share:

$

(3.47)



$

1.46





$

(10.59)



$

6.19
















Shares Used for Computation:












Basic

124.013



123.129





123.450



123.279




Diluted

124.013



124.245





123.450



124.289
















Cash dividend declared per share

$



$

0.35





$

0.375



$

1.40




 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)




Alaska Air Group, Inc.








(in millions)

December 31, 2020


December 31, 2019

Cash and marketable securities

$

3,346



$

1,521


Other current assets

660



516


Current assets

4,006



2,037


Property and equipment-net

6,211



6,902


Operating lease asset

1,400



1,711


Goodwill

1,943



1,943


Intangible assets-net

107



122


Other assets

379



278


Total assets

$

14,046



$

12,993






Air traffic liability

1,073



900


Current portion of long-term debt

1,138



235


Current portion of operating lease liabilities

290



269


Other current liabilities

1,770



1,797


Current liabilities

$

4,271



$

3,201


Long-term debt

2,357



1,264


Long-term operating lease liabilities

1,268



1,439


Other liabilities and credits

3,145



2,758


Shareholders' equity

3,005



4,331


Total liabilities and shareholders' equity

$

14,046



$

12,993






Debt-to-capitalization ratio, including operating leases

61%


41%

Number of common shares outstanding

124.218



123.000


SUMMARY CASH FLOW (unaudited)
Alaska Air Group, Inc.

The Company believes that cash burn is an important metric to investors in evaluating the Company's ability to maintain liquidity and manage cash on hand. We define cash burn as all cash flows, excluding the impact of any CARES Act funding or proceeds from new borrowings, one-time vendor advances, plus net activities from marketable securities.

Our daily cash burn for the quarter and year ended December 31, 2020, is reconciled from our statement of cash flows as follows:

(in millions)

Year Ended
December 31,  2020


Nine Months Ended
September 30, 2020(a)


Three Months Ended
December 31, 2020(b)

Net cash provided by (used in) operating activities

$

(234)



$

116



$

(350)


Less: Payroll support program grant

(753)



(753)




Adjusted net cash used in operating activities

(987)



(637)



(350)


Net cash provided by (used in) investing activities

(593)



(767)



174


Net cash provided by (used in) financing activities

1,981



2,286



(305)


Adjusted net increase (decrease) in cash, cash
equivalents and restricted cash

401



882



(481)








Adjusted to remove:






Payroll support program note and equity

298



298




CARES Act loan program and equity

135



135




Net secured debt issuances (payments)(c)

1,711



1,724



(13)


Net credit facility draws (payments)(d)

363



363




Net marketable security activity(e)

(676)



(593)



(83)


Early out and severance payments(f)

(31)





(31)


Advance vendor rebate(g)

38



50



(12)


Total adjustments

1,838



1,977



(139)








Adjusted cash burn

$

(1,437)



$

(1,095)



$

(342)


Days in the period

366



274



92


Average daily cash burn

$

(4)



$

(4)



$

(4)



(a)    As reported in Form 10-Q for the third quarter 2020.

(b)    Cash burn for the three months ended December 31, 2020, can be calculated by subtracting cash flows for the nine months ended 
         September 30, 2020, as previously reported in Form 10-Q for the third quarter 2020, from the year-ended December 31, 2020.

(c)     Secured debt issuances are presented net of related issuance costs and collateral-based prepayments.

(d)     Credit facility draws are presented net of collateral-based prepayments.

(e)     Net marketable security activity represents net purchases and sales activity of marketable securities, plus any unrealized gains or losses 
          on outstanding securities.

(f)      In the fourth quarter of 2020, the Company paid severance payments to certain employees through voluntary and involuntary leaves.

(g)     In the third quarter of 2020, the Company received an advance payment of a vendor rebate. This rebate will be recognized into earnings  
          and adjusted into cash burn over the next 12 month period.

 

OPERATING STATISTICS SUMMARY (unaudited)









Alaska Air Group, Inc.

























Three Months Ended December 31,


Twelve Months Ended December 31,


2020


2019


Change


2020


2019


Change

Consolidated Operating Statistics:(a)












Revenue passengers (000)

3,916


11,715


(66.6)%


17,927


46,733


(61.6)%

RPMs (000,000) "traffic"

4,366


13,928


(68.7)%


20,493


56,040


(63.4)%

ASMs (000,000) "capacity"

9,631


16,648


(42.1)%


37,114


66,654


(44.3)%

Load factor

45.3%


83.7%


(38.4) pts


55.2%


84.1%


(28.9) pts

Yield

15.06¢


14.77¢


2.0%


14.73¢


14.45¢


1.9%

RASM

8.39¢


13.38¢


(37.3)%


9.61¢


13.17¢


(27.0)%

CASMex(b)

11.35¢


9.01¢


26.0%


12.25¢


8.70¢


40.8%

Economic fuel cost per gallon(b)

$1.39


$2.21


(37.1)%


$1.58


$2.19


(27.9)%

Fuel gallons (000,000)

117


216


(45.9)%


461


862


(46.5)%

ASM's per gallon

82.3


77.2


6.7%


80.5


77.3


4.1%

Average full-time equivalent employees (FTEs)

16,050


22,506


(28.7)%


17,596


22,126


(20.5)%

Employee productivity (PAX/FTEs/months)

81.3


173.5


(53.1)%


84.9


176.0


(51.8)%

Mainline Operating Statistics:












Revenue passengers (000)

2,545


8,805


(71.1)%


12,280


35,530


(65.4)%

RPMs (000,000) "traffic"

3,622


12,496


(71.0)%


17,438


50,413


(65.4)%

ASMs (000,000) "capacity"

8,047


14,895


(46.0)%


31,387


59,711


(47.4)%

Load factor

45.0%


83.9%


(38.9) pts


55.6%


84.4%


(28.8) pts

Yield

13.54¢


13.69¢


(1.1)%


13.48¢


13.39¢


0.7%

RASM

7.73¢


12.53¢


(38.3)%


9.01¢


12.36¢


(27.1)%

CASMex(b)

10.60¢


8.27¢


28.2%


11.57¢


8.00¢


44.6%

Economic fuel cost per gallon(b)

$1.37


$2.19


(37.4)%


$1.59


$2.17


(26.7)%

Fuel gallons (000,000)

88


182


(51.4)%


358


731


(51.0)%

ASM's per gallon

90.9


81.8


11.1%


87.7


81.7


7.3%

Average number of FTEs

11,665


16,771


(30.4)%


13,214


16,642


(20.6)%

Aircraft utilization

8.3


10.8


(23.1)%


8.3


10.9


(23.9)%

Average aircraft stage length

1,298


1,303


(0.4)%


1,272


1,299


(2.1)%

Operating fleet(d)

197


237


(40) a/c


197


237


(40) a/c

Regional Operating Statistics:(c)












Revenue passengers (000)

1,371


2,910


(52.9)%


5,647


11,203


(49.6)%

RPMs (000,000) "traffic"

744


1,432


(48.0)%


3,055


5,627


(45.7)%

ASMs (000,000) "capacity"

1,584


1,753


(9.6)%


5,727


6,943


(17.5)%

Load factor

47.0%


81.7%


(34.7) pts


53.3%


81.0%


(27.7) pts

Yield

22.47¢


24.22¢


(7.2)%


21.90¢


23.90¢


(8.4)%

Operating Fleet

94


95


(1) a/c


94


95


(1) a/c


 

(a)     Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.

(b)     See a reconciliation of this non-GAAP measure and Note A for a discussion of potential importance of this measure to investors in the accompanying pages.

(c)     Data presented includes information related to flights operated by Horizon and third-party carriers.

(d)     Excludes 40 Airbus aircraft permanently parked during 2020.

 

 

OPERATING SEGMENTS (unaudited)







Alaska Air Group, Inc.





























Three Months Ended December 31, 2020

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating revenues














Passenger revenue

$

490



$

167



$



$



$

657



$



$

657


CPA revenue





105



(105)








Mileage Plan other revenue

90



18







108





108


Cargo and other

42







1



43





43


Total Operating Revenues

622



185



105



(104)



808





808


Operating Expenses














Non-fuel operating expenses

853



266



85



(110)



1,094



132



1,226


Fuel expense

121



42







163



(8)



155


Total Operating Expenses

974



308



85



(110)



1,257



124



1,381


Total Non-operating Income (Expense)

(18)





(6)



2



(22)



(26)



(48)


Income (Loss) Before Income Tax

$

(370)



$

(123)



$

14



$

8



$

(471)



$

(150)



$

(621)

















Three Months Ended December 31, 2019

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating revenues














Passenger revenue

$

1,711



$

346



$



$



$

2,057



$



$

2,057


CPA revenues





110



(110)








Mileage Plan other revenue

107



12







119





119


Cargo and other

49



1





2



52





52


Total Operating Revenues

1,867



359



110



(108)



2,228





2,228


Operating Expenses














Non-fuel operating expenses

1,233



280



99



(111)



1,501



5



1,506


Fuel expense

398



77







475



(5)



470


Total Operating Expenses

1,631



357



99



(111)



1,976





1,976


Total Non-operating Income (Expense)

(4)





(6)



1



(9)





(9)


Income (Loss) Before Income Tax

$

232



$

2



$

5



$

4



$

243



$



$

243


 

OPERATING SEGMENTS (unaudited)







Alaska Air Group, Inc.





























Twelve Months Ended December 31, 2020

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating revenues














Passenger revenue

$

2,350



$

669



$



$



$

3,019



$



$

3,019


CPA revenue





386



(386)








Mileage Plan other revenue

309



65







374





374


Cargo and other

170







3



173





173


Total Operating Revenues

2,829



734



386



(383)



3,566





3,566


Operating Expenses














Non-fuel operating expenses

3,630



993



323



(399)



4,547



49



4,596


Fuel expense

569



162







731



(8)



723


Total Operating Expenses

4,199



1,155



323



(399)



5,278



41



5,319


Total Non-operating Income (Expense)

(19)





(22)



2



(39)



(26)



(65)


Income (Loss) Before Income Tax

$

(1,389)



$

(421)



$

41



$

18



$

(1,751)



$

(67)



$

(1,818)

















Twelve Months Ended December 31, 2019

(in millions)

Mainline


Regional


Horizon


Consolidating
& Other(a)


Air Group
Adjusted(b)


Special
Items(c)


Consolidated

Operating revenues














Passenger revenue

$

6,750



$

1,345



$



$



$

8,095



$



$

8,095


CPA revenue





450



(450)








Mileage Plan other revenue

419



46







465





465


Cargo and other

212



3



1



5



221





221


Total Operating Revenues

7,381



1,394



451



(445)



8,781





8,781


Operating Expenses














Non-fuel operating expenses

4,778



1,097



385



(464)



5,796



44



5,840


Fuel expense

1,589



295







1,884



(6)



1,878


Total Operating Expenses

6,367



1,392



385



(464)



7,680



38



7,718


Total Non-operating Income (Expense)

(21)





(28)



2



(47)





(47)


Income (Loss) Before Income Tax

$

993



$

2



$

38



$

21



$

1,054



$

(38)



$

1,016



(a)     Includes consolidating entries, Air Group parent company, McGee Air Services, and other immaterial business units.

(b)     The Air Group Adjusted column represents the financial information that is reviewed by management to assess performance of 
          operations and determine capital allocation and excludes certain charges. See Note A in the accompanying pages for further information.

(c)      Includes payroll support program wage offsets, special items and mark-to-market fuel hedge accounting adjustments.

 

GAAP TO NON-GAAP RECONCILIATIONS (unaudited)
Alaska Air Group, Inc.    


CASM Excluding Fuel and Special Items Reconciliation (unaudited)










Three Months Ended December 31,


Twelve Months Ended December 31,

(in cents)

2020


2019


2020


2019

Consolidated:








Total operating expenses per ASM (CASM)

14.33

¢


11.86

¢


14.33

¢


11.58

¢

Less the following components:








Payroll support program wage offset

(0.23)





(2.11)




Aircraft fuel, including hedging gains and losses

1.61



2.82



1.95



2.82


Special items - impairment charges and other

2.65





1.63




Special items - restructuring charges

(1.06)





0.59




Special items - merger-related costs

0.01



0.03



0.02



0.06


CASM, excluding fuel and special items

11.35

¢


9.01

¢


12.25

¢


8.70

¢









Mainline:








Total operating expenses per ASM (CASM)

13.84

¢


10.95

¢


13.59

¢


10.73

¢

Less the following components:








Payroll support program wage offset

(0.07)





(2.17)




Aircraft fuel, including hedging gains and losses

1.40



2.64



1.79



2.65


Special items - impairment charges and other

3.17





1.73




Special items - restructuring charges

(1.27)





0.65




Special items - merger-related costs

0.01



0.04



0.02



0.08


CASM, excluding fuel and special items

10.60

¢


8.27

¢


11.57

¢


8.00

¢









 

Fuel Reconciliations (unaudited)

















Three Months Ended December 31,


2020


2019

(in millions, except for per gallon amounts)

Dollars


Cost/Gal


Dollars


Cost/Gal

Raw or "into-plane" fuel cost

$

159



$

1.36



$

471



$

2.19


Losses (gains) on settled hedges

4



0.03



4



0.02


Consolidated economic fuel expense

$

163



$

1.39



$

475



$

2.21


Mark-to-market fuel hedge adjustments

(8)



(0.07)



(5)



(0.03)


GAAP fuel expense

$

155



$

1.32



$

470



$

2.18


Fuel gallons

117





216













Twelve Months Ended December 31,


2020


2019

(in millions, except for per gallon amounts)

Dollars


Cost/Gal


Dollars


Cost/Gal

Raw or "into-plane" fuel cost

$

713



$

1.54



$

1,868



$

2.17


Losses (gains) on settled hedges

18



0.04



16



0.02


Consolidated economic fuel expense

$

731



$

1.58



$

1,884



$

2.19


Mark-to-market fuel hedge adjustments

(8)



(0.01)



(6)



(0.01)


GAAP fuel expense

$

723



$

1.57



$

1,878



$

2.18


Fuel gallons

461





862












 

Debt-to-capitalization, including operating leases


(in millions)

December 31, 2020


December 31, 2019

Long-term debt

$

2,357



$

1,264


Long-term and current capitalized operating leases

1,558



1,708


COVID-19 Related Borrowings(a)

734




Adjusted debt, net of current portion of long-term debt

4,649



2,972


Shareholders' equity

3,005



4,331


Total Invested Capital

$

7,654



$

7,303






Debt-to-capitalization ratio, including operating leases

61%



41%



(a)       To best reflect our leverage at December 31, 2020, we included the short-term borrowings stemming from the COVID-19 pandemic which 
          are classified as current liabilities in the above calculation.

 

Adjusted net debt to earnings before interest, taxes, depreciation, amortization, special items and rent


(in millions)

December 31, 2020


December 31, 2019

Current portion of long-term debt

$

1,138



$

235


Current portion of operating lease liabilities

290



269


Long-term debt

2,357



1,264


Long-term operating lease liabilities, net of current
portion

1,268



1,439


Total adjusted debt

5,053



3,207


Less: Cash and marketable securities

(3,346)



(1,521)


Adjusted net debt

$

1,707



$

1,686






(in millions)

Year Ended December 31, 2020


Year Ended December 31, 2019

GAAP Operating Income (Loss)

$

(1,753)



$

1,063


Adjusted for:




Payroll support program grant wage offset and special
items

49



44


Mark-to-market fuel hedge adjustments

(8)



(6)


Depreciation and amortization

420



423


Aircraft rent

299



331


EBITDAR

$

(993)



$

1,855


Net adjusted debt to EBITDAR

(1.7x)



0.9x


Note A: Pursuant to Regulation G, we are providing reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. We believe that consideration of these non-GAAP financial measures may be important to investors for the following reasons:

  • By eliminating fuel expense and certain special items (including the payroll support program wage offset, impairment and restructuring charges and merger-related costs) from our unit metrics, we believe that we have better visibility into the results of operations as we focus on cost-reduction initiatives emerging from the COVID-19 pandemic. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can result in a significant improvement in operating results. In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management (and thus investors) to understand the impact of (and trends in) company-specific cost drivers such as labor rates and productivity, airport costs, maintenance costs, etc., which are more controllable by management.
  • Cost per ASM (CASM) excluding fuel and certain special items, such as the payroll support program wage offset, impairment and restructuring charges and 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 incentive plan, which covers the majority of Air Group employees.
  • CASM excluding fuel and certain special items is a measure commonly used by industry analysts, and we believe it is the basis by which they compare our airlines to others in the industry. The measure is also the subject of frequent questions from investors.
  • Cash burn is a measure that has been used by the industry during the COVID-19 pandemic, and we believe it is useful for investors to evaluate our ability to maintain and manage liquidity, as well as a timeline for return to cash generation. This measure has been 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 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.

GLOSSARY OF TERMS

Aircraft Utilization - block hours per day; this represents the average number of hours per day our aircraft are in transit

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 capitalized operating lease liabilities) divided by total equity plus adjusted debt

Diluted Earnings per Share - represents earnings per share using fully diluted shares outstanding

Diluted Shares - represents the total number of shares that would be outstanding if all possible sources of conversion, such as stock options, were exercised

Economic Fuel - best estimate of the cash cost of fuel, net of the impact of our fuel-hedging program

Load Factor - RPMs as a percentage of ASMs; represents the number of available seats that were filled with paying passengers

Mainline - represents flying Boeing 737, Airbus 320 and Airbus A321neo family jets and all associated revenues and costs

Net adjusted debt - long-term debt, including current portion, plus capitalized operating leases, less cash and marketable securities

Net adjusted debt to EBITDAR - represents net adjusted debt divided by EBITDAR (trailing twelve months earnings before interest, taxes, depreciation, amortization, special items and rent)

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 and SkyWest.  In this segment, 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, 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

 

Cision View original content:http://www.prnewswire.com/news-releases/alaska-air-group-reports-fourth-quarter-2020-and-full-year-results-301214780.html

SOURCE Alaska Air Group

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