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Alaska Air Group delivers strong fourth quarter 2021 and full-year results

·11 min read

Achieved adjusted pre-tax margin of 2.4% and debt-to-cap ratio of 49%

SEATTLE, Jan. 27, 2022 /PRNewswire/ -- Alaska Air Group Inc. (NYSE: ALK) today announced another quarter of improvement in its financial results for the fourth quarter and full year ended December 31, 2021, and provided an outlook for the first quarter ending March 31, 2022.

(PRNewsfoto/Alaska Airlines)
(PRNewsfoto/Alaska Airlines)

"While recovery in our industry is never linear, our caring and dedicated people and the strength of our competitive advantages position us for success no matter what challenges we face," said CEO Ben Minicucci. "Despite operational disruption from omicron and severe winter weather in December, our fourth quarter adjusted pre-tax margin was 2.4%, marking one of the industry's most profitable performances in Q4 and the second half of the year. We have laid a solid foundation for our return to 100% of our pre-COVID flying by summer 2022 and we're poised to grow from there."

Alaska's fourth quarter and full year 2021 results reflect a disciplined focus on cost management and a measured approach to bringing back capacity in recovery. In addition to delivering profitability in the second half of the year, Alaska's financial performance enabled the company to restore its debt-to-capitalization ratio to pre-pandemic levels in the fourth quarter, priming the airlines for profitable growth in 2022.

Financial Results for the Fourth Quarter and Full Year:

  • Reported net income for the fourth quarter and full year 2021 under Generally Accepted Accounting Principles (GAAP) of $18 million, or $0.14 per diluted share, and $478 million, or $3.77 per diluted share. These results compare to a net loss for the fourth quarter and full year 2020 of $447 million, or $3.60 per share, and $1.3 billion, or $10.72 per share.

  • Reported net income for the fourth quarter and net loss for the full year 2021, excluding special items and mark-to-market fuel hedge accounting adjustments, of $31 million, or $0.24 per diluted share, and $256 million, or $2.03 per share. These results compare to a net loss for the fourth quarter and full year 2020, excluding special items and mark-to-market fuel hedge accounting adjustments, of $316 million, or $2.54 per share, and $1.3 billion, or $10.17 per share.

  • Reported adjusted pre-tax margin for the fourth quarter of 2021 of 2.4%, marking the second profitable quarter on an adjusted basis since the onset of the pandemic.

  • Recorded $42 million and $151 million of incentive pay in the fourth quarter and full year 2021 earned by employees for meeting or exceeding cash flow, cost management, and safety goals, representing approximately three weeks pay for most employees.

Balance Sheet and Liquidity at Year End:

  • Reported a debt-to-capitalization ratio of 49%, a reduction of 12 points from December 31, 2020, and the lowest level since the first quarter of 2020.

  • For the full year, generated $138 million in operating cash flows, net of Payroll Support Program grant funds received.

  • Repaid $112 million in debt in the fourth quarter, bringing total debt payments to $1.3 billion for the year.

  • Held $3.1 billion in unrestricted cash and marketable securities as of December 31, 2021.

Operational Updates and Milestones for the Fourth Quarter:

  • Announced nonstop service between Seattle-Tacoma International Airport and Miami, marking the 100th nonstop destination from Alaska's Seattle hub.

  • Expanded oneworld partnership with new West Coast international flights between Portland and London Heathrow on British Airways and between Seattle and Helsinki on Finnair. Expanded service will provide Alaska's guests more than 100 nonstop flights on oneworld partners from the West Coast to Europe by summer 2022.

  • Launched new MVP Gold 100k tier for Mileage Plan members, providing enhanced benefits for those traveling 100,000 miles or more in one year.

  • Named the safest U.S. airline by AirlineRatings.com in their annual Top 20 Safest Airline Report.

  • Received four 737-9 aircraft during the quarter, bringing total additions in 2021 to 11.

  • Began nonstop service to Belize from Seattle and Los Angeles in November, marking the fourth country Alaska flies to from its West Coast hubs.

Fourth Quarter Environmental, Social, and Governance Updates:

  • Announced the appointment of Diana Birkett Rakow as senior vice president of public affairs and sustainability, emphasizing Alaska's commitment to protect the places it flies and support the communities it serves.

  • Announced collaboration with ZeroAvia to begin development on a hydrogen-electric powertrain engine capable of flying regional aircraft in excess of 500 nautical miles.

  • Expanded inflight sustainability efforts by trading plastic water bottles and cups for Boxed Water Is Better® plant-based cartons and recyclable paper cups. This change will eliminate an estimated 1.8 million pounds of single-use plastics over the next year.

  • Launched partnership with travel2change, a Hawaii-based social and environmental impact organization that connects travelers with sustainable volunteer projects while visiting Hawaii.

The following table reconciles the company's reported GAAP net income (loss) per share (EPS) for the three and twelve months ended December 31, 2021 and 2020 to adjusted amounts.


Three Months Ended December 31,


2021


2020

(in millions, except per share amounts)

Dollars


Diluted EPS


Dollars


EPS

Reported GAAP net income (loss) and diluted EPS

$ 18


$ 0.14


$ (447)


$ (3.60)

Payroll support program wage offset



(22)


(0.18)

Mark-to-market fuel hedge adjustments

21


0.16


(8)


(0.06)

Special items - impairment charges and other

(6)


(0.05)


277


2.23

Special items - restructuring charges

2


0.02


(102)


(0.82)

Special items - merger-related costs



1


0.01

Special items - net non-operating



26


0.21

Income tax effect on special items and fuel hedge adjustments

(4)


(0.03)


(41)


(0.33)

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

$ 31


$ 0.24


$ (316)


$ (2.54)




Twelve Months Ended December 31,


2021


2020

(in millions, except per share amounts)

Dollars


Diluted EPS


Dollars


EPS

Reported GAAP net income (loss) and diluted EPS

$ 478


$ 3.77


$ (1,324)


$ (10.72)

Payroll support program wage offset

(914)


(7.21)


(782)


(6.33)

Mark-to-market fuel hedge adjustments

(47)


(0.37)


(8)


(0.06)

Special items - impairment charges and other

(1)


(0.01)


627


5.08

Special items - restructuring charges

(10)


(0.08)


220


1.78

Special items - merger-related costs



6


0.05

Special items - net non-operating



26


0.21

Income tax effect on special items and fuel hedge adjustments

238


1.87


(21)


(0.18)

Non-GAAP adjusted net loss and diluted EPS

$ (256)


$ (2.03)


$ (1,256)


$ (10.17)

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 fourth quarter and full year results will be streamed online at 8:30 a.m. PST on January 27, 2022. It can be accessed 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 update to "Air Group," "Company," "we," "us," and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified.

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, 2020, the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, 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, 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 and our regional partners serve more than 120 destinations across the United States, Belize, Canada, Costa Rica and Mexico. We emphasize Next-Level Care for our guests, along with providing low fares, award-winning customer service and sustainability efforts. Alaska is a member of the oneworld global alliance. With the alliance and our additional airline partners, guests can travel to more than 1,000 destinations on more than 20 airlines while earning and redeeming miles on flights to locations around the world. 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)

2021


2020


Change


2021


2020


Change

Operating Revenues:












Passenger revenues

$ 1,715


$ 657


161 %


$ 5,499


$ 3,019


82 %

Mileage Plan other revenues

129


108


19 %


461


374


23 %

Cargo and other

55


43


28 %


216


173


25 %

Total Operating Revenues

1,899


808


135 %


6,176


3,566


73 %













Operating Expenses:












Wages and benefits

637


474


34 %


2,218


2,053


8 %

Variable incentive pay

42


65


(35) %


151


130


16 %

Payroll support program wage offset


(22)


NM


(914)


(782)


17 %

Aircraft fuel, including hedging gains and losses

426


155


175 %


1,279


723


77 %

Aircraft maintenance

92


77


19 %


364


321


13 %

Aircraft rent

66


70


(6) %


254


299


(15) %

Landing fees and other rentals

141


94


50 %


555


417


33 %

Contracted services

68


43


58 %


235


181


30 %

Selling expenses

50


18


178 %


173


101


71 %

Depreciation and amortization

100


100


— %


394


420


(6) %

Food and beverage service

42


20


110 %


139


90


54 %

Third-party regional carrier expense

41


36


14 %


147


128


15 %

Other

159


97


64 %


507


407


25 %

Special items - impairment charges and other

(6)


277


NM


(1)


627


NM

Special items - restructuring charges

2


(102)


NM


(10)


220


NM

Special items - merger-related costs


1


NM



6


NM

Total Operating Expenses

1,860


1,403


33 %


5,491


5,341


3 %

Operating Income (Loss)

39


(595)


NM


685


(1,775)


NM

Non-operating Income (Expense):












Interest income

6


8


(25) %


25


31


(19) %

Interest expense

(27)


(34)


(21) %


(128)


(98)


31 %

Interest capitalized

2


3


(33) %


11


11


— %

Other - net

9


1


NM


36


17


NM

Special charges - net non-operating


(26)


NM



(26)


NM

Total Non-operating Expense

(10)


(48)


(79) %


(56)


(65)


(14) %

Income (Loss) Before Income Tax

29


(643)




629


(1,840)



Income tax (benefit) expense

11


(196)




151


(516)



Net Income (Loss)

$ 18


$ (447)




$ 478


$ (1,324)















Basic Earnings (Loss) Per Share

$ 0.14


$ (3.60)




$ 3.82


$ (10.72)



Diluted Earnings (Loss) Per Share

$ 0.14


$ (3.60)




$ 3.77


$ (10.72)















Shares used for computation:












Basic

125.708


124.013




125.063


123.450



Diluted

127.284


124.013




126.775


123.450















Cash dividend declared per share

$ —


$ —




$ —


$ 0.375



CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)




Alaska Air Group, Inc.








As of December 31 (in millions)

2021


2020

ASSETS




Current Assets




Cash and cash equivalents

$ 470


$ 1,370

Marketable securities

2,646


1,976

Total cash and marketable securities

3,116


3,346

Receivables - net

546


480

Inventories and supplies - net

62


57

Prepaid expenses, assets held-for-sale, and other current assets

196


123

Total Current Assets

...

3,920


4,006





Property and Equipment




...