Financial Results:
- Reported net loss for the third quarter of 2020 under Generally Accepted Accounting Principles (GAAP) of $431 million, or $3.49 per diluted share, compared to net income of $322 million, or $2.60 per diluted share in the third quarter of 2019.
- Reported net loss for the third quarter of 2020, excluding payroll support program wage offsets, special items and mark-to-market fuel hedge accounting adjustments, of $399 million, or $3.23 per diluted share, compared to adjusted net income of $326 million or $2.63 per diluted share, in the third quarter of 2019.
- Maintained adjusted net debt of $1.7 billion, flat from Dec. 31, 2019.
- Reported a debt-to-capitalization ratio, including short-term borrowings related to COVID-19, of 59%.
- Held $3.8 billion in unrestricted cash and marketable securities as of Sept. 30, 2020.
Liquidity Updates:
- Reduced cash burn to approximately $4 million per day in the third quarter from approximately $5 million per day in the second quarter.
- Obtained nearly $1.2 billion in financing through the issuance of Enhanced Equipment Trust Certificates, secured by 42 Boeing and 19 Embraer aircraft.
- Reached an agreement with the U.S. Treasury in September to participate in the CARES Act loan program, and drew $135 million in September. The U.S. Treasury advised in October 2020 that the facility will be upsized to $1.9 billion.
- Held $3.7 billion in cash and marketable securities as of Oct. 21, 2020 and total liquidity of $5.5 billion.
Operational and Guest Safety Updates:
- Extending blocking of middle seats on mainline aircraft through Jan. 6, 2021.
- Announced today a partnership with Microsoft to use sustainable aviation fuel to offset the environmental impact of certain business air travel.
- Permanently eliminated change fees and extended the flexible travel policy for all new ticket purchases through Dec. 31, 2020.
- Launched a partnership with certain healthcare providers to offer rapid and standardized COVID-19 testing for those guests traveling to destinations which require a negative test result.
- Expanded the company's Next-Level Care initiative, including implementation of new technology to create a touch-free experience for guests and a partnership with essential oils brand EO to provide hand sanitizing wipes onboard.
- Strengthened face covering policy, requiring all guests over the age of two to wear a cloth mask or face covering at all times onboard.
- Initiated voluntary early-out and incentive leave programs to our frontline employee workgroups, which were accepted by more than 4,000 employees. As a result, furloughs were limited to approximately 400 employees.
- Announced 15 new routes during the third quarter, aimed at connecting West Coast travelers to key leisure destinations, including Jackson Hole, Wyoming, and Fort Myers, Florida.
- Received official oneworld invitation on July 23, 2020. The company has announced it will officially join the alliance on March 31, 2021.
Three Months Ended September 30, | |||||||||||||||
2020 | 2019 | ||||||||||||||
(in millions, except per-share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
GAAP net income (loss) and diluted EPS | $ | (431) | $ | (3.49) | $ | 322 | $ | 2.60 | |||||||
Payroll support program wage offset | (398) | (3.22) | — | — | |||||||||||
Mark-to-market fuel hedge adjustments | (3) | (0.02) | — | — | |||||||||||
Special items - merger-related costs | 1 | 0.01 | 5 | 0.04 | |||||||||||
Special items - impairment charges and other | 121 | 0.98 | — | — | |||||||||||
Special items - restructuring charges | 322 | 2.60 | — | — | |||||||||||
Income tax effect of reconciling items above | (11) | (0.09) | (1) | (0.01) | |||||||||||
Non-GAAP adjusted net income (loss) and diluted EPS | $ | (399) | $ | (3.23) | $ | 326 | $ | 2.63 | |||||||
Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | ||||||||||||||
(in millions, except per-share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
GAAP net income (loss) and diluted EPS | $ | (877) | $ | (7.12) | $ | 588 | $ | 4.74 | |||||||
Payroll support program wage offset | (760) | (6.16) | — | — | |||||||||||
Mark-to-market fuel hedge adjustments | — | — | (1) | (0.01) | |||||||||||
Special items - merger-related costs | 5 | 0.04 | 39 | 0.31 | |||||||||||
Special items - impairment charges and other | 350 | 2.84 | — | — | |||||||||||
Special items - restructuring charges | 322 | 2.61 | — | — | |||||||||||
Income tax effect of reconciling items above | 20 | 0.16 | (9) | (0.07) | |||||||||||
Non-GAAP adjusted net income (loss) and diluted EPS | $ | (940) | $ | (7.63) | $ | 617 | $ | 4.97 | |||||||
Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables. A glossary of financial terms can be found on the last page of this release.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||
Alaska Air Group, Inc. | |||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
(in millions, except per-share amounts) | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||
Operating Revenues: | |||||||||||||||||||||
Passenger revenue | $ | 572 | $ | 2,211 | (74) | % | $ | 2,362 | $ | 6,038 | (61) | % | |||||||||
Mileage Plan other revenue | 84 | 118 | (29) | % | 266 | 346 | (23) | % | |||||||||||||
Cargo and other | 45 | 60 | (25) | % | 130 | 169 | (23) | % | |||||||||||||
Total Operating Revenues | 701 | 2,389 | (71) | % | 2,758 | 6,553 | (58) | % | |||||||||||||
Operating Expenses: | |||||||||||||||||||||
Wages and benefits | 495 | 608 | (19) | % | 1,579 | 1,732 | (9) | % | |||||||||||||
Payroll support program wage offset | (398) | — | NM | (760) | — | NM | |||||||||||||||
Variable incentive pay | 42 | 46 | (9) | % | 65 | 125 | (48) | % | |||||||||||||
Aircraft fuel, including hedging gains and losses | 125 | 486 | (74) | % | 568 | 1,408 | (60) | % | |||||||||||||
Aircraft maintenance | 84 | 106 | (21) | % | 244 | 341 | (28) | % | |||||||||||||
Aircraft rent | 74 | 82 | (10) | % | 229 | 247 | (7) | % | |||||||||||||
Landing fees and other rentals | 109 | 143 | (24) | % | 323 | 388 | (17) | % | |||||||||||||
Contracted services | 36 | 72 | (50) | % | 138 | 214 | (36) | % | |||||||||||||
Selling expenses | 24 | 77 | (69) | % | 83 | 236 | (65) | % | |||||||||||||
Depreciation and amortization | 105 | 106 | (1) | % | 320 | 317 | 1 | % | |||||||||||||
Food and beverage service | 14 | 57 | (75) | % | 70 | 159 | (56) | % | |||||||||||||
Third-party regional carrier expense | 29 | 42 | (31) | % | 92 | 125 | (26) | % | |||||||||||||
Other | 89 | 137 | (35) | % | 310 | 411 | (25) | % | |||||||||||||
Special items - merger-related costs | 1 | 5 | (80) | % | 5 | 39 | (87) | % | |||||||||||||
Special items - impairment charges and other | 121 | — | NM | 350 | — | NM | |||||||||||||||
Special items - restructuring charges | 322 | — | . | NM | 322 | — | NM | ||||||||||||||
Total Operating Expenses | 1,272 | 1,967 | (35) | % | 3,938 | 5,742 | (31) | % | |||||||||||||
Operating Income (Loss) | (571) | 422 | (235) | % | (1,180) | 811 | (245) | % | |||||||||||||
Nonoperating Income (Expense): | |||||||||||||||||||||
Interest income | 7 | 11 | (36) | % | 23 | 31 | (26) | % | |||||||||||||
Interest expense | (34) | (18) | 89 | % | (64) | (60) | 7 | % | |||||||||||||
Interest capitalized | 4 | 4 | — | % | 8 | 11 | (27) | % | |||||||||||||
Other - net | 5 | (3) | (267) | % | 16 | (20) | (180) | % | |||||||||||||
Total Nonoperating Income (Expense) | (18) | (6) | 200 | % | (17) | (38) | (55) | % | |||||||||||||
Income (Loss) Before Income Tax | (589) | 416 | (1,197) | 773 | |||||||||||||||||
Income tax (benefit) expense | (158) | 94 | (320) | 185 | |||||||||||||||||
Net Income (Loss) | $ | (431) | $ | 322 | $ | (877) | $ | 588 | |||||||||||||
Basic Earnings (Loss) Per Share: | $ | (3.49) | $ | 2.61 | $ | (7.12) | $ | 4.76 | |||||||||||||
Diluted Earnings (Loss) Per Share: | $ | (3.49) | $ | 2.60 | $ | (7.12) | $ | 4.74 | |||||||||||||
Shares Used for Computation: | |||||||||||||||||||||
Basic | 123.647 | 123.280 | 123.255 | 123.330 | |||||||||||||||||
Diluted | 123.647 | 124.067 | 123.255 | 124.051 | |||||||||||||||||
Cash dividend declared per share: | $ | — | $ | 0.35 | $ | 0.375 | $ | 1.05 | |||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | |||||||
Alaska Air Group, Inc. | |||||||
(in millions) | September 30, 2020 | December 31, 2019 | |||||
Cash and marketable securities | $ | 3,759 | $ | 1,521 | |||
Other current assets | 706 | 516 | |||||
Current assets | 4,465 | 2,037 | |||||
Property and equipment - net | 6,381 | 6,902 | |||||
Operating lease assets | 1,516 | 1,711 | |||||
Goodwill | 1,943 | 1,943 | |||||
Intangible assets - net | 107 | 122 | |||||
Other assets | 337 | 278 | |||||
Total assets | 14,749 | 12,993 | |||||
Air traffic liability | 1,071 | 900 | |||||
Current portion of long-term debt | 1,150 | 235 | |||||
Current portion of operating lease liabilities | 283 | 269 | |||||
Other current liabilities | 1,703 | 1,797 | |||||
Current liabilities | 4,207 | 3,201 | |||||
Long-term debt | 2,672 | 1,264 | |||||
Long-term operating lease liabilities | 1,320 | 1,439 | |||||
Other liabilities and credits | 3,096 | 2,758 | |||||
Shareholders' equity | 3,454 | 4,331 | |||||
Total liabilities and shareholders' equity | $ | 14,749 | $ | 12,993 | |||
Debt-to-capitalization ratio, including operating leases | 59 | % | 41 | % | |||
Number of common shares outstanding | 123.661 | 123.000 | |||||
