Alaska Air Group Reports Record Second Quarter 2015 Results July 23, 2015 Alaska Airlines 25 min read Share Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window) Financial Highlights: Reported record second quarter net income, excluding special items, of $230 million, a 46% increase over the second quarter of 2014. Reported adjusted earnings per share of $1.76 SEATTLE, July 23, 2015 /PRNewswire/ — Financial Highlights: Reported record second quarter net income, excluding special items, of $230 million, a 46% increase over the second quarter of 2014. Reported adjusted earnings per share of $1.76 per diluted share, a 56% increase over the second quarter of 2014 and ahead of First Call analyst consensus estimate of $1.73 per share. Earned net income for the second quarter under Generally Accepted Accounting Principles (GAAP) of $234 million or $1.79 per diluted share, compared to net income of $165 million, or $1.19 per diluted share in 2014. Recorded $58 million of employee incentive pay in recognition of Air Group employees' progress on meeting customer service, safety, operational and financial goals. Generated record adjusted pretax margin in the second quarter of 25.7% compared to 18.3% in 2014. Generated 20.9% adjusted pretax margin for the trailing 12-month period ended June 30, 2015, compared to 14.9% for the same period in the prior year. Achieved trailing 12-month after-tax return on invested capital of 22.0% compared to 16.1% in the 12-month period ended June 30, 2014. Repurchased 2.5 million shares of common stock for $160 million in the second quarter of 2015, and 4.1 million shares of common stock for $262 million during the first six months of 2015, representing 3.1% of the total shares outstanding at the beginning of the year. Paid a $0.20 per-share quarterly cash dividend on June 4, 2015, a 60% increase over the dividend paid in the second quarter of 2014. Accomplishments and Highlights: Ranked "Highest in Customer Satisfaction Among Traditional Carriers" in 2015 by J.D. Power for the eighth year in a row. Ranked "Highest in Customer Satisfaction With Airline Loyalty Rewards Programs" in 2015 by J.D Power for the second consecutive year. Announced that a free first checked bag is a permanent feature of the Alaska Airlines Visa Signature affinity credit card. Held the No. 1 spot in U.S. Department of Transportation on-time performance among the eight largest U.S. airlines for the twelve months ended May 2015. Improved second quarter customer satisfaction score by 2.5 percentage points over prior year. Increased fuel efficiency (as measured by seat-miles per gallon) by 1.9% compared to the second quarter of 2014, as part of our effort to be the airline leader in environmental stewardship. Began offering customers the option to upgrade to Preferred Seating, providing customers the ability to select bulkhead and exit-row seating 24 hours in advance of flight. Preferred Seating also includes priority boarding and a complimentary beer, wine or cocktail. Introduced the first three E-175 regional aircraft into operation with three classes of service. The E-175 is one of the highest rated regional aircraft for customer comfort and experience. New routes served by these aircraft are Seattle–Milwaukee, Seattle–Oklahoma City, and Portland–St. Louis. Amended our agreement with Skywest to replace all eight CRJ-700 regional aircraft with E-175 aircraft, bringing the total E-175 fleet to 15 aircraft by the end of 2016. Launched "Beyond Service" customer service training to all customer-facing employees. Nearly 3,000 of Alaska and Horizon employees have completed the training. New routes announced in the second quarter are as follows: New Non-Stop Routes Announced (Launch Dates) Seattle to Nashville, TN (9/23/15) Los Angeles to Gunnison-Crested Butte, CO (11/5/15) Seattle to Raleigh-Durham, NC (10/1/15) Los Angeles to Monterey, CA (11/6/15) Seattle to Charleston, SC (11/11/15) Eugene to San Jose, CA (11/5/15) Los Angeles to Baltimore, MD (9/15/15) Portland to Austin, TX (11/5/15) Los Angeles to San Jose, Costa Rica (10/31/15) Boise to Reno, NV (11/5/15) Los Angeles to Liberia, Costa Rica (11/1/15) Alaska Air Group, Inc., (NYSE: ALK) today reported second quarter 2015 GAAP net income of $234 million, or $1.79 per diluted share, compared to $165 million, or $1.19 per diluted share in the second quarter of 2014. Excluding the impact of mark-to-market fuel hedge adjustments of $6 million ($4 million after tax, or $0.03 per diluted share), the company reported record adjusted net income of $230 million, or $1.76 per diluted share, compared to adjusted net income of $157 million, or $1.13 per diluted share, in 2014. "We're pleased to report our 25th consecutive quarterly profit and our best quarterly result ever," said CEO Brad Tilden. "I want to thank our employees for their hard work and for always putting our customers first. We are focused on running a strong and balanced company that will produce the right outcomes for all of the stakeholders who depend on us, not just this quarter but over the long-term." The following table reconciles the company's reported GAAP net income and earnings per diluted share (EPS) during the second quarters of 2015 and 2014 to adjusted amounts: Three Months Ended June 30, 2015 2014 (in millions, except per-share amounts) Dollars Diluted EPS Dollars Diluted EPS Reported GAAP net income $ 234 $ 1.79 $ 165 $ 1.19 Mark-to-market fuel hedge adjustments, net of tax (4) (0.03) (8) (0.06) Non-GAAP adjusted income and per-share amounts $ 230 $ 1.76 $ 157 $ 1.13 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. A conference call regarding the second quarter results will be simulcast via the Internet at 8:30 a.m. Pacific time on July 23, 2015. It can be accessed through the company's website at www.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 Dec. 31, 2014. Some of these risks include general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, and changes in laws and regulations. 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, a subsidiary of Alaska Air Group (NYSE: ALK), together with its partner regional airlines, serves more than 100 cities through an expansive network in the United States, Canada and Mexico. Alaska Airlines ranked "Highest in Customer Satisfaction Among Traditional Carriers in North America" in the J.D. Power North American Airline Satisfaction Study for eight consecutive years from 2008 to 2015. Alaska Airlines' Mileage Plan also ranked "Highest in Customer Satisfaction with Airline Loyalty Rewards Programs" in the J.D. Power 2014 and 2015 Airline Loyalty/Rewards Program Satisfaction Report. For reservations, visit www.alaskaair.com. For more news and information, visit Alaska Airlines' newsroom at www.alaskaair.com/newsroom. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Alaska Air Group, Inc. Three Months Ended June 30, Six Months Ended June 30, (in millions, except per-share amounts) 2015 2014 Change 2015 2014 Change Operating Revenues: Passenger Mainline $ 1,019 $ 974 5% $ 1,920 $ 1,828 5% Regional 212 200 6% 398 386 3% Total passenger revenue 1,231 1,174 5% 2,318 2,214 5% Freight and mail 30 32 (6)% 53 56 (5)% Other – net 176 169 4% 335 327 2% Total Operating Revenues 1,437 1,375 5% 2,706 2,597 4% Operating Expenses: Wages and benefits 305 281 9% 611 553 10% Variable incentive pay 32 29 10% 58 54 7% Aircraft fuel, including hedging gains and losses 261 360 (28)% 496 718 (31)% Aircraft maintenance 52 57 (9)% 115 108 6% Aircraft rent 26 29 (10)% 52 57 (9)% Landing fees and other rentals 66 64 3% 137 133 3% Contracted services 68 62 10% 135 122 11% Selling expenses 54 53 2% 107 99 8% Depreciation and amortization 79 73 8% 155 143 8% Food and beverage service 28 23 22% 53 44 20% Other 94 81 16% 177 161 10% Total Operating Expenses 1,065 1,112 (4)% 2,096 2,192 (4)% Operating Income 372 263 41% 610 405 51% Nonoperating Income (Expense): Interest income 6 5 11 10 Interest expense (11) (12) (22) (25) Interest capitalized 8 4 16 9 Other – net 1 5 1 18 4 2 6 12 Income Before Income Tax 376 265 616 417 Income tax expense 142 100 233 158 Net Income $ 234 $ 165 $ 383 $ 259 Basic Earnings Per Share: $ 1.80 $ 1.20 $ 2.93 $ 1.88 Diluted Earnings Per Share: $ 1.79 $ 1.19 $ 2.91 $ 1.86 Shares Used for Computation: Basic 129.236 137.274 130.173 137.304 Diluted 130.255 138.711 131.271 138.776 Cash dividend declared per share: $ 0.20 $ 0.125 $ 0.40 $ 0.25 CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) Alaska Air Group, Inc. (in millions) June 30, 2015 December 31, 2014 Cash and marketable securities $ 1,192 $ 1,217 Total current assets 1,654 1,756 Property and equipment-net 4,705 4,299 Other assets 121 126 Total assets 6,480 6,181 Air traffic liability 840 631 Current portion of long-term debt 116 117 Other current liabilities 971 923 Current liabilities 1,927 1,671 Long-term debt 629 686 Other liabilities and credits 1,705 1,697 Shareholders' equity 2,219 2,127 Total liabilities and shareholders' equity $ 6,480 $ 6,181 Debt-to-capitalization ratio, adjusted for operating leases(a) 29%:71% 31%:69% Number of common shares outstanding 128.025 131.481 (a) Calculated using the present value of remaining aircraft lease payments. OPERATING STATISTICS SUMMARY (unaudited) Alaska Air Group, Inc. Three Months Ended June 30, Six Months Ended June 30, 2015 2014 Change 2015 2014 Change Consolidated Operating Statistics:(a) Revenue passengers (000) 8,024 7,353 9.1% 15,340 14,002 9.6% RPMs (000,000) "traffic" 8,451 7,755 9.0% 16,173 14,832 9.0% ASMs (000,000) "capacity" 9,949 8,988 10.7% 19,206 17,341 10.8% Load factor 84.9% 86.3% (1.4pts) 84.2% 85.5% (1.3pts) Yield 14.56¢ 15.14¢ (3.8%) 14.33¢ 14.93¢ (4.0%) PRASM 12.37¢ 13.06¢ (5.3%) 12.07¢ 12.77¢ (5.5%) RASM 14.44¢ 15.29¢ (5.6%) 14.09¢ 14.98¢ (5.9%) CASM excluding fuel(b) 8.08¢ 8.37¢ (3.5%) 8.33¢ 8.50¢ (2.0%) Economic fuel cost per gallon(b) $ 2.12 $ 3.20 (33.8%) $ 2.05 $ 3.26 (37.1%) Fuel gallons (000,000) 126 116 8.6% 245 227 7.9% ASM's per gallon 79.0 77.5 1.9% 78.4 76.4 2.6% Average number of full-time equivalent employees (FTE) 13,793 12,515 10.2% 13,534 12,451 8.7% Mainline Operating Statistics: Revenue passengers (000) 5,787 5,307 9.0% 11,022 10,044 9.7% RPMs (000,000) "traffic" 7,662 7,029 9.0% 14,657 13,431 9.1% ASMs (000,000) "capacity" 8,984 8,095 11.0% 17,330 15,590 11.2% Load factor 85.3% 86.8% (1.5pts) 84.6% 86.2% (1.6pts) Yield 13.29¢ 13.86¢ (4.1%) 13.10¢ 13.61¢ (3.7%) PRASM 11.34¢ 12.03¢ (5.7%) 11.08¢ 11.73¢ (5.5%) RASM 13.40¢ 14.24¢ (5.9%) 13.09¢ 13.92¢ (6.0%) CASM excluding fuel(b) 7.17¢ 7.45¢ (3.8%) 7.41¢ 7.56¢ (2.0%) Economic fuel cost per gallon(b) $ 2.12 $ 3.19 (33.5%) $ 2.05 $ 3.25 (36.9%) Fuel gallons (000,000) 110 102 7.8% 213 197 8.1% ASM's per gallon 81.7 79.4 2.9% 81.4 79.1 2.9% Average number of FTE's 10,726 9,767 9.8% 10,553 9,679 9.0% Aircraft utilization 11.1 10.5 5.7% 10.8 10.4 3.8% Average aircraft stage length 1,191 1,181 0.8% 1,195 1,190 0.4% Operating fleet 140 134 6a/c 140 134 6a/c Regional Operating Statistics:(c) Revenue passengers (000) 2,237 2,046 9.3% 4,318 3,958 9.1% RPMs (000,000) "traffic" 789 725 8.8% 1,516 1,401 8.2% ASMs (000,000) "capacity" 965 894 7.9% 1,876 1,751 7.1% Load factor 81.8% 81.2% 0.6pts 80.8% 80.0% 0.8pts Yield 26.92¢ 27.55¢ (2.3%) 26.28¢ 27.54¢ (4.6%) PRASM 21.99¢ 22.37¢ (1.7%) 21.25¢ 22.04¢ (3.6%) Operating fleet(c) 63 59 4a/c 63 59 4a/c (a) Except for full-time equivalent employees, data includes information related to third-party regional capacity purchase flying arrangements. (b) See a reconciliation of operating expenses excluding fuel, a reconciliation of economic fuel costs, and Note A in the accompanying pages, for a discussion of why these measures may be important to investors. (c) Data presented includes information related to flights operated by Horizon Air and third-party carriers. OPERATING SEGMENTS (unaudited) Alaska Air Group, Inc. Three Months Ended June 30, 2015 Alaska (in millions) Mainline Regional Horizon Consolidating Air Group Adjusted(a) Special Items(b) Consolidated Operating revenues Passenger Mainline $ 1,019 $ — $ — $ — $ 1,019 $ — $ 1,019 Regional — 212 — — 212 — 212 Total passenger revenues 1,019 212 — — 1,231 — 1,231 CPA revenues — — 99 (99) — — — Freight and mail 28 2 — — 30 — 30 Other-net 156 19 1 — 176 — 176 Total operating revenues 1,203 233 100 (99) 1,437 — 1,437 Operating expenses Operating expenses, excluding fuel 645 169 90 (100) 804 — 804 Economic fuel 232 35 — — 267 (6) 261 Total operating expenses 877 204 90 (100) 1,071 (6) 1,065 Nonoperating income (expense) Interest income 5 — — 1 6 — 6 Interest expense (7) — (1) (3) (11) — (11) Other 7 — (1) 3 9 — 9 5 — (2) 1 4 — 4 Income before income tax $ 331 $ 29 $ 8 $ 2 $ 370 $ 6 $ 376 Three Months Ended June 30, 2014 Alaska (in millions) Mainline Regional Horizon Consolidating Air Group Adjusted(a) Special Items(b) Consolidated Operating revenues Passenger Mainline $ 974 $ — $ — $ — $ 974 $ — $ 974 Regional — 200 — — 200 — 200 Total passenger revenues 974 200 — — 1,174 — 1,174 CPA revenues — — 87 (87) — — — Freight and mail 31 1 — — 32 — 32 Other-net 147 20 2 — 169 — 169 Total operating revenues 1,152 221 89 (87) 1,375 — 1,375 Operating expenses Operating expenses, excluding fuel 602 151 86 (87) 752 — 752 Economic fuel 324 49 — — 373 (13) 360 Total operating expenses 926 200 86 (87) 1,125 (13) 1,112 Nonoperating income (expense) Interest income 5 — — — 5 — 5 Interest expense (9) (1) (2) — (12) — (12) Other 9 1 (1) — 9 — 9 5 — (3) — 2 — 2 Income before income tax $ 231 $ 21 $ — $ — $ 252 $ 13 $ 265 Six Months Ended June 30, 2015 Alaska (in millions) Mainline Regional Horizon Consolidating Air Group Adjusted(a) Special Items(b) Consolidated Operating revenues Passenger Mainline $ 1,920 $ — $ — $ — $ 1,920 $ — $ 1,920 Regional — 398 — — 398 — 398 Total passenger revenues 1,920 398 — — 2,318 — 2,318 Revenue from CPA with Alaska — — 198 (198) — — — Freight and mail 50 3 — — 53 — 53 Other-net 298 35 2 — 335 — 335 Total operating revenues 2,268 436 200 (198) 2,706 — 2,706 Operating expenses Operating expenses, excluding fuel 1,284 333 181 (198) 1,600 — 1,600 Economic fuel 436 66 — — 502 (6) 496 Total operating expenses 1,720 399 181 (198) 2,102 (6) 2,096 Nonoperating income (expense) Interest income 10 — — 1 11 — 11 Interest expense (14) — (5) (3) (22) — (22) Other 14 — — 3 17 — 17 10 — (5) 1 6 — 6 Income before income tax $ 558 $ 37 $ 14 $ 1 $ 610 $ 6 $ 616 Six Months Ended June 30, 2014 Alaska (in millions) Mainline Regional Horizon Consolidating Air Group Adjusted(a) Special Items(b) Consolidated Operating revenues Passenger Mainline $ 1,828 $ — $ — $ — $ 1,828 $ — $ 1,828 Regional — 386 — — 386 — 386 Total passenger revenues 1,828 386 — — 2,214 — 2,214 Revenue from CPA with Alaska — — 178 (178) — — — Freight and mail 54 2 — — 56 — 56 Other-net 287 37 3 — 327 — 327 Total operating revenues 2,169 425 181 (178) 2,597 — 2,597 Operating expenses Operating expenses, excluding fuel 1,178 302 172 (178) 1,474 — 1,474 Economic fuel 642 97 — — 739 (21) 718 Total operating expenses 1,820 399 172 (178) 2,213 (21) 2,192 Nonoperating income (expense) Interest income 10 — — — 10 — 10 Interest expense (17) (1) (6) (1) (25) — (25) Other 27 — — — 27 — 27 20 (1) (6) (1) 12 — 12 Income before income tax $ 369 $ 25 $ 3 $ (1) $ 396 $ 21 $ 417 (a) The adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocations and does not include certain charges. See Note A in the accompanying pages for further information. (b) Includes mark-to-market fuel-hedge accounting adjustments. CASM EXCLUDING FUEL RECONCILIATION (unaudited) Three Months Ended June 30, Six Months Ended June 30, (in cents) 2015 2014 2015 2014 Consolidated: CASM 10.70 ¢ 12.37 ¢ 10.91 ¢ 12.64 ¢ Less the following components: Aircraft fuel, including hedging gains and losses per ASM 2.62 4.00 2.58 4.14 CASM excluding fuel 8.08 ¢ 8.37 ¢ 8.33 ¢ 8.50 ¢ Mainline: CASM 9.70 ¢ 11.28 ¢ 9.89 ¢ 11.54 ¢ Less the following components: Aircraft fuel, including hedging gains and losses per ASM 2.53 3.83 2.48 3.98 CASM excluding fuel 7.17 ¢ 7.45 ¢ 7.41 ¢ 7.56 ¢ FUEL RECONCILIATIONS (unaudited) Three Months Ended June 30, 2015 2014 (in millions, except for per-gallon amounts) Dollars Cost/Gallon Dollars Cost/Gallon Raw or "into-plane" fuel cost $ 262 $ 2.08 $ 365 $ 3.13 Losses on settled hedges 5 0.04 8 0.07 Consolidated economic fuel expense 267 2.12 373 3.20 Mark-to-market fuel hedge adjustment (6) (0.05) (13) (0.11) GAAP fuel expense $ 261 $ 2.07 $ 360 $ 3.09 Fuel gallons 126 116 Six Months Ended June 30, 2015 2014 (in millions, except for per gallon amounts) Dollars Cost/Gallon Dollars Cost/Gallon Raw or "into-plane" fuel cost $ 492 $ 2.01 $ 712 $ 3.14 (Gains) losses on settled hedges 10 0.04 27 0.12 Consolidated economic fuel expense 502 2.05 739 3.26 Mark-to-market fuel hedge adjustment (6) (0.02) (21) (0.09) GAAP fuel expense $ 496 $ 2.03 $ 718 $ 3.17 Fuel gallons 245 227 Note A: Pursuant to Regulation G, we are providing reconciliation 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 from our unit metrics, we believe that we have better visibility into the results of operations and 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 term, 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 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 that covers all Air Group employees. CASM excluding fuel and certain special items is a measure commonly used by industry analysts, and we believe it is the basis by which they compare our airlines to others in the industry. The measure is also the subject of frequent questions from investors. Disclosure of the individual impact of certain noted items provides investors the ability to measure and monitor performance both with and without these special items. We believe that disclosing the impact of certain items, such as mark-to-market hedging adjustments or special revenues, is important because it provides information on significant items that are not necessarily indicative of future performance. Industry analysts and investors consistently measure our performance without these items for better comparability between periods and among other airlines. Although we disclose our passenger unit revenues, we do not (nor are we able to) evaluate unit revenues excluding the impact that changes in fuel costs have had on ticket prices. Fuel expense represents a large percentage of our total operating expenses. Fluctuations in fuel prices often drive changes in unit revenues in the mid-to-long term. Although we believe it is useful to evaluate non-fuel unit costs for the reasons noted above, we would caution readers of these financial statements not to place undue reliance on unit costs excluding fuel as a measure or predictor of future profitability because of the significant impact of fuel costs on our business. Note B: Air Group has two operating airlines – Alaska Airlines and Horizon Air. Each is a regulated airline with separate management teams primarily in operational roles. To manage the two operating airlines, management views the business in three operating segments. Alaska operates a fleet of passenger jets (Alaska Mainline) and contracts with Horizon, SkyWest Airlines, Inc. (SkyWest), and Peninsula Airways, Inc. (PenAir) for regional capacity under which Alaska receives all passenger revenue from those flights (Alaska Regional). Horizon operates a fleet of turboprop aircraft and sells all of its capacity to Alaska pursuant to a capacity purchase arrangement (Horizon). The Company believes the amounts paid by Alaska to Horizon approximate current market rates received by other regional carriers for similar flying and are available to pay for various Horizon operating expenses such as crew expenses, maintenance, and aircraft ownership costs. All inter-company revenues and expenses between Alaska and Horizon are eliminated in consolidation. Glossary of Terms Aircraft Utilization – block hours per day; this represents the average number of hours our aircraft are flying 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 the present value of future operating lease payments) 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 jets and all associated revenues and costs PRASM – passenger revenue per ASM; commonly called "passenger unit revenue" 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, SkyWest, and PenAir. In this segment, Alaska 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, Alaska 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 SOURCE Alaska Air Group Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window) Related