Alaska Air Group Reports Fourth Quarter and Full-Year Results
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Alaska Air Group, Inc. today reported fourth quarter 2009 net income of $24.1 million, or $0.67 per diluted share, compared to a net loss of $75.2 million, or $2.08 per diluted share, in the...
Alaska Air Group, Inc.
The company reported full-year 2009 net income of $121.6 million, compared to a net loss of $135.9 million in 2008. Excluding the impact of the items noted in the table below, the company reported 2009 net income of $88.7 million, or $2.45 per diluted share, an $84.3 million improvement from the $4.4 million, or $0.12 per diluted share, in 2008.
"Our traffic and unit revenue performance, driven by positive network changes, outpaced the industry throughout the year. This performance, combined with lower fuel costs, placed Alaska Air Group’s profitability among the best in the industry for 2009," said Bill Ayer, Alaska Air Group’s chairman and chief executive officer. "This marks our sixth consecutive year of profits on an adjusted basis."
Based on its 2009 profit and operational performance, the company will distribute a total of $76 million from its pay-for-performance incentive plans.
"Our employees’ ongoing commitment to operating reliably and providing exceptional customer service is fundamental to building a great company for the long term, and broad participation in a common gain-sharing plan helps align Alaska and Horizon employees around important performance goals," said Ayer. "I want to thank our people for their hard work and dedication, which contributed significantly to our 2009 results."
The following tables reconcile the company’s adjusted net income and earnings per diluted share (EPS) during the fourth quarters and full years of 2009 and 2008 to amounts as reported in accordance with GAAP (in millions except per-share amounts):
Three months ended Dec. 31,
---------------------------
2009 2008
---- ----
Dollars Diluted EPS Dollars Diluted EPS
------- ----------- ------- -----------
Net income and diluted EPS,
excluding items noted below $4.4 $0.12 $16.4 $0.45
Restructuring charges, net of tax --- --- (5.8) (0.16)
Fleet transition costs -
CRJ-700, net of tax --- --- (4.2) (0.12)
Adjustments to reflect the timing
of gain or loss recognition
resulting from mark-to-market
fuel-hedge accounting, net of tax 19.7 0.55 (50.3) (1.39)
Realized losses on hedge
portfolio restructuring,
net of tax --- --- (31.3) (0.86)
----- ----- ------ ------
Reported GAAP net income (loss) $24.1 $0.67 $(75.2) $(2.08)
Twelve months ended Dec. 31,
----------------------------
2009 2008
---- ----
Dollars Diluted EPS Dollars Diluted EPS
------- ----------- ------- -----------
Net income and diluted EPS,
excluding items noted below $88.7 $2.45 $4.4 $0.12
Change in Mileage Plan terms,
net of tax --- --- 26.5 0.73
New pilot contract transition
costs, net of tax (22.3) (0.62) --- ---
Restructuring charges, net of tax --- --- (8.1) (0.22)
Fleet transition costs
- MD-80, net of tax --- --- (29.8) (0.82)
Fleet transition costs
- CRJ-700, net of tax --- --- (8.4) (0.23)
Adjustments to reflect the timing
of gain or loss recognition
resulting from mark-to-market
fuel-hedge accounting, net of tax 55.2 1.53 (89.2) (2.46)
Realized losses on hedge
portfolio restructuring,
net of tax --- --- (31.3) (0.86)
------ ----- ------- ------
Reported GAAP net income (loss) $121.6 $3.36 $(135.9) $(3.74)
Financial and statistical data for Alaska Airlines and Horizon Air, 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 at the end of this release.
A conference call regarding the fourth quarter and full-year 2009 results will be simulcast via the Internet at 8:30 a.m. Pacific time on Jan. 28, 2010. It can be accessed through the company’s Web site at alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call at alaskaair.com/investors.
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 contains 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 Dec. 31, 2008 and revisions in Item 1A of the Company’s Quarterly Report on Form 10-Q for the period ended Sept. 30, 2009. Some of these risks include current economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our significant indebtedness, inability to meet cost reduction goals, terrorist attacks, seasonal fluctuations in our financial results, an aircraft accident, changes in laws and regulations, and government fees and taxes. 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 Horizon Air, subsidiaries of Alaska Air Group
Glossary of Financial Terms
ASM – Available seat miles or "capacity." Represents total seats available across the fleet multiplied by the number of miles flown.
RPM – Revenue passenger miles or "traffic." The number of those available seats that were filled with paying passengers. One passenger traveling one mile is one RPM.
RASM – Total operating revenue divided by ASMs. Operating revenue includes all passenger revenue, freight and mail, Mileage Plan and other ancillary revenue — commonly called "unit revenue" and represents the average total revenue for flying one seat one mile.
PRASM – Passenger revenue per ASM — commonly called "passenger unit revenue."
Yield – Passenger revenue per RPM. This represents the average revenue for flying one passenger one mile.
CASM – Total operating costs per ASM. This represents all operating expenses, including fuel and special items — commonly called "unit cost."
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 costs are largely out the company’s control.
Economic fuel – Best estimate of the cash cost of fuel, net of the impact of the company’s fuel-hedging program.
Mainline – Represents flying on Alaska jets and all associated revenue and costs.
Purchased capacity flying – Represents operations whereby Horizon and, to a much lesser extent, another small carrier in the state of Alaska fly certain routes for Alaska using Horizon’s or the other carrier’s fleets.
Alaska Air Group, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
(in millions, except per share ------------- ---------------
amounts) 2009 2008 2009 2008
---- ---- ---- ----
Operating Revenues:
Passenger $766.0 $763.8 $3,092.1 $3,355.8
Freight and mail 23.6 23.2 95.9 103.6
Other - net 56.5 40.1 211.8 160.9
Change in Mileage Plan terms - - - 42.3
--- --- --- ----
Total Operating Revenues 846.1 827.1 3,399.8 3,662.6
----- ----- ------- -------
Operating Expenses:
Wages and benefits 248.8 232.5 988.1 943.7
Variable incentive pay 23.8 6.4 76.0 21.4
Aircraft fuel, including hedging
gains and losses 172.5 358.8 658.1 1,398.4
Aircraft maintenance 54.1 49.2 223.1 208.8
Aircraft rent 38.3 37.0 153.7 163.1
Landing fees and other rentals 57.3 54.0 223.2 223.7
Contracted services 38.0 37.8 150.6 166.1
Selling expenses 34.5 26.8 131.8 147.1
Depreciation and amortization 56.9 51.7 219.2 204.6
Food and beverage service 13.4 11.7 50.1 50.9
Other 55.7 51.5 213.9 222.9
New pilot contract transition costs - - 35.8 -
Restructuring charges - 9.2 - 12.9
Fleet transition costs - MD-80 - - - 47.5
Fleet transition costs - CRJ-700 - 6.7 - 13.5
Fleet transition costs - Q200 - 0.5 8.8 10.2
--- --- --- ----
Total Operating Expenses 793.3 933.8 3,132.4 3,834.8
----- ----- ------- -------
Operating Income (Loss) 52.8 (106.7) 267.4 (172.2)
---- ------ ----- ------
Nonoperating Income (Expense):
Interest income 8.2 10.9 32.6 42.4
Interest expense (22.7) (28.0) (100.5) (102.3)
Interest capitalized 1.6 4.7 7.6 23.2
Other - net 2.1 (0.9) (4.2) (4.3)
--- ---- ---- ----
(10.8) (13.3) (64.5) (41.0)
----- ----- ----- -----
Income (loss) before income tax 42.0 (120.0) 202.9 (213.2)
Income tax expense (benefit) 17.9 (44.8) 81.3 (77.3)
---- ----- ---- -----
Net Income (Loss) $24.1 $(75.2) $121.6 $(135.9)
===== ====== ====== =======
Basic Earnings (Loss) Per Share: $0.68 $(2.08) $3.39 $(3.74)
Diluted Earnings (Loss) Per Share: $0.67 $(2.08) $3.36 $(3.74)
Shares Used for Computation:
Basic 35.323 36.225 35.815 36.343
Diluted 35.844 36.225 36.154 36.343
Alaska Air Group, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions) December 31, 2009 December 31, 2008
----------------- -----------------
Cash and marketable securities $1,192 $1,077
====== ======
Total current assets 1,634 1,509
Property and equipment-net 3,168 3,168
Other assets 183 159
--- ---
Total assets $4,985 $4,836
====== ======
Current liabilities $1,258 $1,361
Long-term debt 1,699 1,596
Other liabilities and credits 1,156 1,217
Shareholders' equity 872 662
--- ---
Total liabilities and shareholders' equity $4,985 $4,836
====== ======
Debt to Capitalization, adjusted
for operating leases 76%:24% 81%:19%
====== ======
Number of common shares outstanding 35.591 36.275
====== ======
Air Group Net Income (Loss) and EPS Reconciliation:
---------------------------------------------------
The following table reconciles Alaska Air Group, Inc.'s net income (loss)
and amounts per share during 2009 and 2008 excluding certain noted items
to the most directly related amounts as reported in accordance with GAAP
(in millions except per share amounts):
Three Months Ended December 31,
-------------------------------
2009 2008
---- ----
Dollars Diluted EPS Dollars Diluted EPS
------- ----------- ------- -----------
Net income and diluted EPS,
excluding the items noted
below $4.4 $0.12 $16.4 $0.45
Restructuring charges, net of tax - - (5.8) (0.16)
Fleet transition costs - CRJ-700,
net of tax - - (4.2) (0.12)
Adjustments to reflect the timing
of gain or loss recognition
resulting from mark-to-market
fuel-hedge accounting, net of
tax 19.7 0.55 (50.3) (1.39)
Realized losses on hedge
portfolio restructuring, net of
tax - - (31.3) (0.86)
--- --- ----- -----
Reported GAAP amounts $24.1 $0.67 $(75.2) $(2.08)
===== ===== ====== ======
Twelve Months Ended December 31,
---------------------------------
2009 2008
---- ----
Dollars Diluted EPS Dollars Diluted EPS
------- ----------- ------- -----------
Net income and diluted EPS,
excluding the items noted below $88.7 $2.45 $4.4 $0.12
Change in Mileage Plan terms, net
of tax - - 26.5 0.73
New pilot contract transition
costs, net of tax (22.3) (0.62) - -
Restructuring charges, net of tax - - (8.1) (0.22)
Fleet transition costs - MD-80,
net of tax - - (29.8) (0.82)
Fleet transition costs - CRJ-700,
net of tax - - (8.4) (0.23)
Adjustments to reflect the timing
of gain or loss recognition
resulting from mark-to-market
fuel-hedge accounting, net of
tax 55.2 1.53 (89.2) (2.46)
Realized losses on hedge
portfolio restructuring, net of
tax - - (31.3) (0.86)
--- --- ----- -----
Reported GAAP amounts $121.6 $3.36 $(135.9) $(3.74)
====== ===== ======= ======
Note 1: Diluted EPS, excluding special items was calculated using
diluted weighted-average shares outstanding of 36.568 million
and 36.657 million for the three and twelve months ended
December 31, 2008, respectively.
Note 2: Adjusted items are presented net of tax at our incremental tax
rate of 37.8% for 2009 and 37.5% for 2008.
Alaska Airlines Financial and Statistical Data
Three Months Ended December 31,
-------------------------------
Financial Data (in millions): 2009 2008 % Change
---- ---- --------
Operating Revenues:
Passenger $594.5 $602.5 (1.3)
Freight and mail 22.5 22.2 1.4
Other - net 50.8 34.0 49.4
Change in Mileage Plan terms - - NM
--- ---
Total mainline operating revenues 667.8 658.7 1.4
Passenger - purchased capacity 77.0 66.9 15.1
---- ----
Total Operating Revenues 744.8 725.6 2.6
----- -----
Operating Expenses:
Wages and benefits 197.7 183.8 7.6
Variable incentive pay 17.6 5.0 252.0
Aircraft fuel, including hedging
gains and losses 143.1 298.4 (52.0)
Aircraft maintenance 40.5 38.5 5.2
Aircraft rent 27.2 23.8 14.3
Landing fees and other rentals 42.4 40.8 3.9
Contracted services 30.3 29.7 2.0
Selling expenses 27.9 20.4 36.8
Depreciation and amortization 45.9 42.7 7.5
Food and beverage service 12.8 11.2 14.3
Other 41.9 40.1 4.5
New pilot contract transition costs - - NM
Restructuring charges - 9.2 NM
Fleet transition costs - MD-80 - - NM
--- ---
Total mainline operating expenses 627.3 743.6 (15.6)
----- -----
Purchased capacity costs 75.2 66.9 12.4
---- ----
Total Operating Expenses 702.5 810.5
----- -----
Operating Income (Loss) 42.3 (84.9) NM
---- -----
Interest income 9.4 13.1
Interest expense (20.6) (25.0)
Interest capitalized 1.6 4.1
Other - net 2.5 (0.7)
--- ----
(7.1) (8.5)
---- ----
Income (Loss) Before Income Tax $35.2 $(93.4)
===== ======
Mainline Operating Statistics:
Revenue passengers (000) 3,765 3,772 (0.2)
RPMs (000,000) "traffic" 4,550 4,302 5.8
ASMs (000,000) "capacity" 5,675 5,590 1.5
Passenger load factor 80.2% 77.0% 3.2pts
Yield per passenger mile (in cents) 13.07 14.01 (6.7)
Operating revenue per ASM
"RASM" (in cents) 11.77 11.78 (0.1)
Change in Mileage Plan terms per
ASM (in cents) 0.00 0.00 NM
---- ----
RASM excluding change in Mileage
Plan terms (in cents) 11.77 11.78 (0.1)
Passenger revenue per ASM (in cents) 10.48 10.78 (2.8)
Operating expense per ASM (in cents) 11.05 13.30 (16.9)
Operating expense per ASM
excluding fuel, new pilot
contract transition costs,
restructuring charges and
fleet transition costs
(a) (in cents) 8.53 7.80 9.4
GAAP fuel cost per gallon $1.91 $3.95 (51.6)
Economic fuel cost per gallon (b) $2.26 $2.52 (10.3)
Fuel gallons (000,000) 75.0 75.5 (0.7)
Average number of full-time
equivalent employees 8,701 9,156 (5.0)
Aircraft utilization (blk hrs/ day) 9.3 10.0 (7.0)
Average aircraft stage length
(miles) 1,058 995 6.3
Operating fleet at period-end 115 110 5 a/c
Purchased Capacity Operating Statistics:
RPMs (000,000) 276 227 21.6
ASMs (000,000) 373 316 18.0
Passenger load factor 74.0% 71.8% 2.2pts
Yield per passenger mile (in cents) 27.90 29.47 (5.3)
Operating revenue per ASM (in cents) 20.64 21.17 (2.5)
Operating expenses per ASM
(in cents) 20.16 21.17 (4.8)
Twelve Months Ended
December 31,
-------------------
Financial Data (in millions): 2009 2008 % Change
---- ---- --------
Operating Revenues:
Passenger $2,438.8 $2,643.7 (7.8)
Freight and mail 91.5 99.3 (7.9)
Other - net 187.3 135.2 38.5
Change in Mileage Plan terms - 42.3 NM
--- ----
Total mainline operating revenues 2,717.6 2,920.5 (6.9)
Passenger - purchased capacity 288.4 300.8 (4.1)
----- -----
Total Operating Revenues 3,006.0 3,221.3 (6.7)
------- -------
Operating Expenses:
Wages and benefits 792.6 742.7 6.7
Variable incentive pay 61.6 15.8 289.9
Aircraft fuel, including hedging
gains and losses 549.0 1,162.4 (52.8)
Aircraft maintenance 169.9 150.6 12.8
Aircraft rent 109.0 106.2 2.6
Landing fees and other rentals 166.8 167.7 (0.5)
Contracted services 118.9 130.2 (8.7)
Selling expenses 104.7 116.0 (9.7)
Depreciation and amortization 178.5 165.9 7.6
Food and beverage service 47.7 48.3 (1.2)
Other 161.2 170.3 (5.3)
New pilot contract transition
costs 35.8 - NM
Restructuring charges - 12.9 NM
Fleet transition costs - MD-80 - 47.5 NM
--- ----
Total mainline operating expenses 2,495.7 3,036.5 (17.8)
------- -------
Purchased capacity costs 281.5 313.7 (10.3)
----- -----
Total Operating Expenses 2,777.2 3,350.2
------- -------
Operating Income (Loss) 228.8 (128.9) NM
----- ------
Interest income 38.6 51.3
Interest expense (88.1) (92.5)
Interest capitalized 7.3 20.2
Other - net (2.8) (3.4)
---- ----
(45.0) (24.4)
----- -----
Income (Loss) Before Income Tax $183.8 $(153.3)
====== =======
Mainline Operating Statistics:
Revenue passengers (000) 15,561 16,809 (7.4)
RPMs (000,000) "traffic" 18,362 18,712 (1.9)
ASMs (000,000) "capacity" 23,144 24,218 (4.4)
Passenger load factor 79.3% 77.3% 2.0pts
Yield per passenger mile (in cents) 13.28 14.13 (6.0)
Operating revenue per ASM
"RASM" (in cents) 11.74 12.06 (2.7)
Change in Mileage Plan terms per
ASM (in cents) 0.00 0.17 NM
---- ----
RASM excluding change in Mileage
Plan terms (in cents) 11.74 11.89 (1.3)
Passenger revenue per ASM (in cents) 10.54 10.92 (3.5)
Operating expense per ASM (in cents) 10.78 12.54 (14.0)
Operating expense per ASM (in cents)
excluding fuel, new pilot
contract transition costs,
restructuring charges and
fleet transition costs
(a) (in cents) 8.26 7.49 10.2
GAAP fuel cost per gallon $1.81 $3.48 (48.0)
Economic fuel cost per gallon (b) $2.05 $3.00 (31.7)
Fuel gallons (000,000) 304.9 333.8 (8.7)
Average number of full-time
equivalent employees 8,915 9,628 (7.4)
Aircraft utilization (blk hrs/day) 9.8 10.6 (7.5)
Average aircraft stage length
(miles) 1,034 979 5.6
Operating fleet at period-end 115 110 5 a/c
Purchased Capacity Operating Statistics:
RPMs (000,000) 1,053 1,100 (4.3)
ASMs (000,000) 1,431 1,469 (2.6)
Passenger load factor 73.6% 74.9% (1.3)pts
Yield per passenger mile (in cents) 27.39 27.35 0.1
Operating revenue per ASM (in cents) 20.15 20.48 (1.6)
Operating expenses per ASM
(in cents) 19.67 21.35 (7.9)
NM = Not Meaningful
(a) See page 10 for a reconciliation of these non-GAAP
measures and a discussion about why these measures may be
important to investors.
(b) See page 12 for a reconciliation of economic fuel cost.
Horizon Air Financial and Statistical Data
Three Months Ended
December 31,
------------------
Financial Data (in millions): 2009 2008 % Change
---- ---- --------
Operating Revenues:
Passenger - brand flying $98.2 $98.5 (0.3)
Passenger - Alaska capacity purchase
arrangement 70.5 62.5 12.8
---- ----
Total passenger revenue 168.7 161.0 4.8
Freight and mail 0.7 0.6 16.7
Other - net 2.1 2.1 -
--- ---
Total Operating Revenues 171.5 163.7 4.8
----- -----
Operating Expenses:
Wages and benefits 48.2 46.9 2.8
Variable incentive pay 6.2 1.4 342.9
Aircraft fuel, including hedging
gains and losses 29.4 60.4 (51.3)
Aircraft maintenance 13.6 10.7 27.1
Aircraft rent 11.1 13.2 (15.9)
Landing fees and other rentals 15.3 13.6 12.5
Contracted services 8.3 7.1 16.9
Selling expenses 6.6 6.4 3.1
Depreciation and amortization 10.7 8.7 23.0
Food and beverage service 0.6 0.5 20.0
Other 10.4 9.0 15.6
Fleet transition costs - CRJ-700 - 6.7 NM
Fleet transition costs - Q200 - 0.5 NM
--- ---
Total Operating Expenses 160.4 185.1 (13.3)
----- -----
Operating Income (Loss) 11.1 (21.4) NM
---- -----
Interest income 0.5 1.6
Interest expense (3.7) (6.7)
Interest capitalized - 0.7
Other - net (0.2) 0.1
---- ---
(3.4) (4.3)
---- ----
Income (Loss) Before Income Tax $7.7 $(25.7)
==== ======
Combined Operating Statistics: (a)
Revenue passengers (000) 1,704 1,636 4.2
RPMs (000,000) "traffic" 609 561 8.6
ASMs (000,000) "capacity" 822 786 4.6
Passenger load factor 74.1% 71.4% 2.7pts
Yield per passenger mile (in cents) 27.70 28.70 (3.5)
Operating revenue per ASM
(RASM) (in cents) 20.86 20.83 0.1
Passenger revenue per ASM (in cents) 20.52 20.48 0.2
Operating expense per ASM (in cents) 19.51 23.55 (17.2)
Operating expense per ASM excluding
fuel and CRJ-700 fleet transition
costs (b) (in cents) 15.94 15.01 6.2
GAAP fuel cost per gallon $1.96 $4.08 (52.0)
Economic fuel cost per gallon (c) $2.32 $2.58 (10.1)
Fuel gallons (000,000) 15.0 14.8 1.4
Average number of full-time
equivalent employees 3,275 3,466 (5.5)
Aircraft utilization (blk hrs/day) 8.1 8.0 1.3
Average aircraft stage length (miles) 330 315 4.8
Operating fleet at period-end 58 59 (1) a/c
Twelve Months Ended
December 31,
-------------------------
Financial Data (in millions): 2009 2008 % Change
---- ---- --------
Operating Revenues:
Passenger - brand flying $381.9 $429.2 (11.0)
Passenger - Alaska capacity purchase
arrangement 261.7 293.7 (10.9)
----- -----
Total passenger revenue 643.6 722.9 (11.0)
Freight and mail 2.7 2.7 -
Other - net 8.1 8.3 (2.4)
--- ---
Total Operating Revenues 654.4 733.9 (10.8)
----- -----
Operating Expenses:
Wages and benefits 185.2 194.1 (4.6)
Variable incentive pay 14.4 5.6 157.1
Aircraft fuel, including hedging
gains and losses 109.1 236.0 (53.8)
Aircraft maintenance 53.2 58.2 (8.6)
Aircraft rent 44.7 56.9 (21.4)
Landing fees and other rentals 57.7 57.2 0.9
Contracted services 32.1 29.1 10.3
Selling expenses 27.1 31.1 (12.9)
Depreciation and amortization 39.5 37.5 5.3
Food and beverage service 2.4 2.6 (7.7)
Other 39.4 42.7 (7.7)
Fleet transition costs - CRJ-700 - 13.5 NM
Fleet transition costs - Q200 8.8 10.2 NM
--- ----
Total Operating Expenses 613.6 774.7 (20.8)
----- -----
Operating Income (Loss) 40.8 (40.8) NM
---- -----
Interest income 2.0 5.4
Interest expense (19.9) (23.6)
Interest capitalized 0.3 3.0
Other - net (0.4) 0.2
---- ---
(18.0) (15.0)
----- -----
Income (Loss) Before Income Tax $22.8 $(55.8)
===== ======
Combined Operating Statistics: (a)
Revenue passengers (000) 6,759 7,390 (8.5)
RPMs (000,000) "traffic" 2,408 2,635 (8.6)
ASMs (000,000) "capacity" 3,292 3,617 (9.0)
Passenger load factor 73.1% 72.9% 0.2pts
Yield per passenger mile (in cents) 26.73 27.43 (2.6)
Operating revenue per ASM
(RASM) (in cents) 19.88 20.29 (2.0)
Passenger revenue per ASM (in cents) 19.55 19.99 (2.2)
Operating expense per ASM (in cents) 18.64 21.42 (13.0)
Operating expense per ASM excluding
fuel and CRJ-700 fleet transition
costs (b) (in cents) 15.33 14.52 5.5
GAAP fuel cost per gallon $1.82 $3.53 (48.4)
Economic fuel cost per gallon (c) $2.07 $3.05 (32.1)
Fuel gallons (000,000) 60.1 66.9 (10.2)
Average number of full-time
equivalent employees 3,308 3,699 (10.6)
Aircraft utilization (blk hrs/day) 8.3 8.3 -
Average aircraft stage length (miles) 327 322 1.6
Operating fleet at period-end 58 59 (1) a/c
NM = Not Meaningful
(a) Represents combined information for Horizon flights, including those
operated under a Capacity Purchase Agreement (CPA) with Alaska. See
page 11 for additional line of business information.
(b) See page 11 for a reconciliation of these non-GAAP measures and a
discussion about why these measures may be important to investors.
(c) See page 12 for a reconciliation of economic fuel cost.
Note A: Pursuant to Regulation G, we are providing disclosure of the
reconciliation of reported non-GAAP financial measures to their most
directly comparable financial measures reported on a GAAP basis. We
believe that consideration of this measure of unit costs excluding fuel,
purchased capacity costs, and other noted items may be important to
investors for the following reasons:
-- By eliminating fuel expense and certain special items from our unit
cost metrics, we believe that we have better visibility into the
results of our non-fuel cost-reduction initiatives. Our industry is
highly competitive and is characterized by high fixed costs, so even
a small reduction in non-fuel operating costs can result in a
significant improvement in operating results. In addition, we
believe that all domestic carriers are similarly impacted by changes
in jet fuel costs over the long run, so it is important for
management (and thus investors) to understand the impact of (and
trends in) company-specific cost drivers such as labor rates and
productivity, airport costs, maintenance costs, etc., which are more
controllable by management.
-- Cost per ASM excluding fuel and certain special items is one of the
most important measures used by managements of both Alaska and
Horizon and by the Air Group Board of Directors in assessing
quarterly and annual cost performance.
-- Cost per ASM excluding fuel (and other items as specified in our plan
documents) is an important metric for the employee incentive plan
that covers company management and the majority of other employee
groups.
-- Cost per ASM excluding fuel and certain special items is a measure
commonly used by industry analysts, and we believe it is the basis by
which they compare our airlines to others in the industry. The
measure is also the subject of frequent questions from investors.
-- Disclosure of the individual impact of certain noted items provides
investors the ability to measure and monitor performance both with
and without these special items. We believe that disclosing the
impact of certain items, such as new pilot contract transition costs
and fleet transition costs, 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 "mainline" passenger unit revenues for
Alaska, we do not (nor are we able to) evaluate mainline unit
revenues excluding the impact that changes in fuel costs have had on
ticket prices. Fuel expense represents a large percentage of our
total mainline 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.
Alaska Airlines, Inc.
(in millions, except for per ASM unit information)
Three Months Twelve Months
Ended Ended
December 31, December 31,
-------------- ---------------
Mainline unit cost reconciliations: 2009 2008 2009 2008
----------------------------------- ---- ---- ---- ----
Mainline operating expenses $627.3 $743.6 $2,495.7 $3,036.5
Mainline ASMs 5,675 5,590 23,144 24,218
----- ----- ------ ------
Mainline operating expenses
per ASM (in cents) 11.05 13.30 10.78 12.54
===== ===== ===== =====
Mainline operating expenses $627.3 $743.6 $2,495.7 $3,036.5
Less: aircraft fuel, including
hedging gains and losses (143.1) (298.4) (549.0) (1,162.4)
Less: new pilot contract transition
costs - - (35.8) -
Less: restructuring charges - (9.2) - (12.9)
Less: fleet transition costs - MD-80 - - - (47.5)
--- --- --- -----
Mainline operating expenses excluding
fuel and other noted items $484.2 $436.0 $1,910.9 $1,813.7
Mainline ASMs 5,675 5,590 23,144 24,218
----- ----- ------ ------
Mainline operating expenses per ASM
excluding fuel and other noted
items (in cents) 8.53 7.80 8.26 7.49
==== ==== ==== ====
Three Months Twelve Months
Ended Ended
December 31, December 31,
Reconciliation to GAAP income (loss) -------------- ---------------
before taxes : 2009 2008 2009 2008
------------------------------------ ---- ---- ---- ----
Income before taxes, excluding items
noted below $8.9 $23.8 $145.9 $25.2
Change in Mileage Plan terms - - - 42.3
New pilot contract transition costs - - (35.8) -
Restructuring charges - (9.2) - (12.9)
Fleet transition costs - MD-80 - - - (47.5)
Adjustments to reflect timing of gain
or loss recognition resulting from
mark-to-market accounting on
fuel hedges 26.3 (66.5) 73.7 (118.9)
Realized losses on hedge portfolio
restructuring - (41.5) - (41.5)
--- ----- --- -----
GAAP income (loss) before taxes as
reported $35.2 $(93.4) $183.8 $(153.3)
===== ====== ====== =======
Note: Mainline operating expenses per ASM excluding fuel and other noted
items was higher than our most recent cost guidance provided in our
December 22, 2009 Investor Update. The increase was primarily due to
final adjustments to our incentive pay expense, higher-than-expected
employee medical costs, the write-off of certain discontinued capital
projects, and higher costs associated with environmental remediation,
legal costs, and winter operations.
Horizon Air Industries, Inc.
(in millions, except for per ASM unit information)
Three Months Twelve Months
Ended Ended
December 31, December 31,
-------------- --------------
Unit cost reconciliations: 2009 2008 2009 2008
-------------------------- ---- ---- ---- ----
Operating expenses $160.4 $185.1 $613.6 $774.7
ASMs 822 786 3,292 3,617
--- --- ----- -----
Operating expenses per ASM (in cents) 19.51 23.55 18.64 21.42
===== ===== ===== =====
Operating expenses $160.4 $185.1 $613.6 $774.7
Less: aircraft fuel, including hedging
gains and losses (29.4) (60.4) (109.1) (236.0)
Less: fleet transition costs - CRJ-700 - (6.7) - (13.5)
--- ---- --- -----
Operating expenses excluding fuel and
CRJ-700 fleet transition costs $131.0 $118.0 $504.5 $525.2
ASMs 822 786 3,292 3,617
--- --- ----- -----
Operating expenses per ASM excluding fuel
and CRJ-700 fleet transition
costs (in cents) 15.94 15.01 15.33 14.52
===== ===== ===== =====
Unit cost reconciliations-excluding
all fleet transition costs:
------------------------------------
Operating expenses $160.4 $185.1 $613.6 $774.7
Less: aircraft fuel, including hedging
gains and losses (29.4) (60.4) (109.1) (236.0)
Less: fleet transition costs - CRJ-700 - (6.7) - (13.5)
Less: fleet transition costs - Q200 - (0.5) (8.8) (10.2)
--- ---- ---- -----
Operating expenses excluding fuel and all
fleet transition costs $131.0 $117.5 $495.7 $515.0
ASMs 822 786 3,292 3,617
--- --- ----- -----
Operating expenses per ASM excluding fuel
and all fleet transition
costs (in cents) 15.94 14.95 15.06 14.24
===== ===== ===== =====
Reconciliation to GAAP income (loss) before taxes:
--------------------------------------------------
Income (loss) before taxes, excluding
items noted below $2.3 $3.2 $7.7 $(10.4)
Fleet transition costs - CRJ-700 - (6.7) - (13.5)
Adjustments to reflect timing of gain or
loss recognition resulting from
mark-to-market accounting on fuel hedges 5.4 (13.7) 15.1 (23.4)
Realized losses on hedge portfolio
restructuring - (8.5) - (8.5)
--- ---- --- ----
GAAP income (loss) before taxes
as reported $7.7 $(25.7) $22.8 $(55.8)
==== ====== ===== ======
Line of Business Information:
-----------------------------
Horizon brand flying includes those routes in the Horizon system not
covered by the Alaska Capacity Purchase Agreement (CPA). Horizon bears
the revenue risk in those markets and, as a result, traffic, yield and
load factor impact revenue recorded by Horizon. In the CPA arrangement,
Horizon is insulated from market revenue factors and is guaranteed
contractual revenue amounts based on operational capacity. As a result,
yield and load factor information is not presented.
Three Months Ended December 31, 2009
------------------------------------
Capacity and Mix
----------------
2009 Actual 2008 Actual Change Current %
(000,000) (000,000) Y-O-Y Total
----------- ------------ -------- -----
Brand Flying 464 485 (4.3%) 56%
Alaska CPA 358 301 18.9% 44%
--- --- ---- ---
System Total 822 786 4.6% 100%
=== === === ===
Load Factor Yield RASM
----------- ----- ----
Point Change Actual Change Actual Change
Actual Y-O-Y (in cents) Y-O-Y (in cents) Y-O-Y
------ ----- -------- ----- -------- -----
Brand Flying 73.5% 2.6 28.78 0.5% 21.74 4.1%
Alaska CPA NM NM NM NM 19.69 (5.2%)
System Total -- -- -- --- ------ ------
74.1% 2.7 27.70 (3.5%) 20.86 0.1%
==== === ===== ===== === ====
NM = Not Meaningful
Twelve Months Ended December 31, 2009
-------------------------------------
Capacity and Mix
----------------
2009 Actual 2008 Actual Change Current %
(000,000) (000,000) Y-O-Y Total
----------- ------------ -------- -----
Brand Flying 1,927 2,221 (13.2%) 59%
Alaska CPA 1,365 1,396 (2.2%) 41%
------ ---- ----- ---
System Total 3,292 3,617 (9.0%) 100%
====== ==== ==== ====
Load Factor Yield RASM
----------- ----- ----
Point Change Actual Change Actual Change
Actual Y-O-Y (in cents) Y-O-Y (in cents) Y-O-Y
------ ----- -------- ----- -------- -----
Brand Flying 72.4% 1.3 27.36 0.6% 20.38 2.8%
Alaska CPA NM NM NM NM 19.17 (8.9%)
-- -- -- --- -- ----- ----
System Total 73.1% 0.2 26.73 (2.6%) 19.88 (2.0%)
==== === ===== ===== ===== ====
NM Not Meaningful
Alaska Airlines Fuel Reconciliation
-----------------------------------
(in millions, except for per gallon amounts)
Three Months Ended December 31,
-------------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------
Raw or "into-plane" fuel cost $161.7 $2.16 $185.0 $2.45
Minus gains, or plus the losses,
during the period on settled
hedges 7.7 0.10 5.4 0.07
--- ---- --- ----
Economic fuel expense $169.4 $2.26 $190.4 $2.52
------ ----- ------ -----
Adjustments to reflect timing of
(gain) or loss recognition resulting
from mark-to-market accounting (26.3) (0.35) 66.5 0.88
Plus net realized losses on hedge
portfolio restructuring* - - 41.5 0.55
--- --- ---- ----
Total adjustments (26.3) (0.35) 108.0 1.43
----- ----- ----- ----
GAAP fuel expense $143.1 $1.91 $298.4 $3.95
====== ===== ====== =====
Fuel gallons 75.0 75.5
==== ====
Twelve Months Ended December 31,
--------------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------
Raw or "into-plane" fuel cost $572.3 $1.88 $1,103.8 $3.31
Minus gains, or plus the losses,
during the period on settled hedges 50.4 0.17 (101.8) (0.30)
---- ---- ------ -----
Economic fuel expense $622.7 $2.05 $1,002.0 $3.00
------ ----- -------- -----
Adjustments to reflect timing of
(gain) or loss recognition
resulting from
mark-to-market accounting (73.7) (0.24) 118.9 0.36
Plus net realized losses on hedge
portfolio restructuring* - - 41.5 0.12
--- --- ---- ----
Total adjustments (73.7) (0.24) 160.4 0.48
----- ----- ----- ----
GAAP fuel expense $549.0 $1.81 $1,162.4 $3.48
====== ===== ======== =====
Fuel gallons 304.9 333.8
===== =====
Horizon Air Fuel Reconciliation
-------------------------------
(in millions, except for per gallon amounts)
Three Months Ended December 31,
-------------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------
Raw or "into-plane" fuel cost $33.2 $2.21 $37.1 $2.51
Minus gains, or plus the losses,
during the period on settled
hedges 1.6 0.11 1.1 0.07
--- ---- --- ----
Economic fuel expense $34.8 $2.32 $38.2 $2.58
----- ----- ----- -----
Adjustments to reflect timing of
(gain) or loss recognition
resulting from
mark-to-market accounting (5.4) (0.36) 13.7 0.93
Plus net realized losses on hedge
portfolio restructuring* - - 8.5 0.57
--- --- --- ----
Total adjustments (5.4) (0.36) 22.2 1.50
---- ----- ---- ----
GAAP fuel expense $29.4 $1.96 $60.4 $4.08
===== ===== ===== =====
Fuel gallons 15.0 14.8
==== ====
Twelve Months Ended December 31,
--------------------------------
2009 2008
---- ----
Dollars Cost/Gal Dollars Cost/Gal
------- -------- ------- --------
Raw or "into-plane" fuel cost $113.9 $1.90 $225.0 $3.36
Minus gains, or plus the losses,
during the period on settled
hedges 10.3 0.17 (20.9) (0.31)
---- ---- ----- -----
Economic fuel expense $124.2 $2.07 $204.1 $3.05
------ ----- ------ -----
Adjustments to reflect timing of
(gain) or loss recognition
resulting from
mark-to-market accounting (15.1) (0.25) 23.4 0.35
Plus net realized losses on hedge
portfolio restructuring* - - 8.5 0.13
--- --- --- ----
Total adjustments (15.1) (0.25) 31.9 0.48
----- ----- ---- ----
GAAP fuel expense $109.1 $1.82 $236.0 $3.53
====== ===== ====== =====
Fuel gallons 60.1 66.9
==== ====
* In 2008, these amounts represent losses on the early termination of
hedge contracts originally scheduled to settle in 2009 and 2010.
First Call Analyst:
FCMN Contact: maria.koenig@alaskaair.com
SOURCE: Alaska Air Group, Inc.
CONTACT: Media, Bobbie Egan of Alaska Airlines, +1-206-392-5101, or Dan
Russo of Horizon Air, +1-206-392-0218; or Investor/analyst, Shannon Alberts of
Alaska Air Group, +1-206-392-5218
Web Site: http://www.alaskaair.com/
