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Alaska Air Group reports third quarter 2021 results

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Cision

SEATTLE, Oct. 21, 2021 /PRNewswire/ -- Alaska Air Group (NYSE: ALK) today reported financial results for its third quarter ending Sept. 30, 2021, and provided outlook for the fourth quarter ending Dec. 31, 2021.

The third quarter marks a significant stride forward in Alaska Air Group's path to recovery. Alaska's goal from the beginning of the pandemic has been deliberate - scaling the business back up in a measured way, leveraging the company's strong balance sheet, and running a resilient operation, all with the aim of producing consistent industry-leading financial performance.

"We are thrilled to return to profitability this quarter, leading the industry with a 12% pretax profit margin," said CEO Ben Minicucci. "Thanks to each one of our employees for running our operation and showing remarkable care for our guests, and credit to the leadership team for laying out a measured plan and executing it with discipline. We're all feeling the momentum and look forward to building on our strong foundation for growth in 2022 and beyond."

Financial Results:

  • Reported net income for the third quarter of 2021 under Generally Accepted Accounting Principles (GAAP) of $194 million, or $1.53 per share, compared to a net loss of $431 million, or $3.49 per share in the third quarter of 2020.

  • Reported net income for the third quarter of 2021, excluding special items and mark-to-market fuel hedge accounting adjustments, of $187 million, or $1.47 per share, compared to an adjusted net loss of $399 million or $3.23 per share, in the third quarter of 2020. This quarter's adjusted results compare to the First Call analyst consensus estimate of $1.30 per share.

  • Generated adjusted pre-tax margin for the third quarter of 2021 of 12%.

  • Reported a debt-to-capitalization ratio of 51%, a reduction of 10 points from Dec. 31, 2020.

  • Made a $100 million voluntary contribution to the defined benefit plan for Alaska's pilots in the third quarter, boosting estimated combined funded status of all defined benefit plans to 94%.

  • Held $3.2 billion in unrestricted cash and marketable securities as of Sept. 30, 2021.

  • Prepaid $425 million in debt from the 364-day term loan facility, bringing total debt payments to $1.2 billion for the year.

Operational Updates:

  • Exercised options for 12 Boeing 737-9 aircraft slated for delivery in 2023 and 2024, and added options for an additional 25 deliveries, bringing Alaska's total firm commitments for 737-9 aircraft to 93 and available options to 52.

  • Ratified amended wage agreement for Horizon Air pilots, represented by the International Brotherhood of Teamsters.

  • Opened new San Francisco International Airport Lounge with 9,200 square feet of Bay-Area inspired amenities.

  • Announced new nonstop flights between San Francisco and Loreto and Ixtapa/Zihuatanejo, with service slated to begin Dec. 18. Since the onset of the pandemic, approximately 70 new markets have been announced or commenced operation.

  • Resumed and expanded inflight meals, snacks, and drinks in all classes of service.

  • Continued to exceed internal metrics for guest satisfaction, highlighting our commitment to providing our guests a smooth and safe experience throughout their journey.

  • Near the top of the industry for on-time arrivals and completion rates in the third quarter.

Environmental, Social and Governance Updates:

  • Appointed Adrienne Lofton, vice president of global marketing at Google, to the Company's board of directors.

  • Announced formation of Alaska Star Ventures, an entity created to identify and further technologies that accelerate Alaska Airlines' path to net zero carbon emissions.

  • Supported the Afghan Humanitarian Airlift Mission and the U.S. military by operating Civil Reserve Air Fleet flights in the evacuation of individuals and families from Afghanistan.

  • Awarded $260,000 in LIFT Grants to 25 nonprofits focused on a clear vision to provide the next generation of leaders with the knowledge, skills and providing pathways for success through the Alaska Airlines Foundation.

The following table reconciles the company's reported GAAP net income (loss) per share (EPS) for the three and nine months ended Sept. 30, 2021 and 2020 to adjusted amounts.


Three Months Ended September 30,


2021


2020

(in millions, except per-share amounts)

Dollars


Diluted EPS


Dollars


EPS

GAAP net income (loss) per share

$

194



$

1.53



$

(431)



$

(3.49)


Payroll support program wage offset





(398)



(3.22)


Mark-to-market fuel hedge adjustments





(3)



(0.02)


Special items - impairment charges and other

(9)



(0.07)



121



0.98


Special items - restructuring charges





322



2.60


Special items - merger-related costs





1



0.01


Income tax effect of reconciling items above

2



0.01



(11)



(0.09)


Non-GAAP adjusted net income (loss) per share

$

187



$

1.47



$

(399)



$

(3.23)











Nine Months Ended September 30,


2021


2020

(in millions, except per-share amounts)

Dollars


Diluted EPS


Dollars


Diluted EPS

GAAP net income (loss) per share

$

460



$

3.64



$

(877)



$

(7.12)


Payroll support program wage offset

(914)



(7.24)



(760)



(6.16)


Mark-to-market fuel hedge adjustments

(68)



(0.54)






Special items - impairment charges and other

5



0.04



350



2.84


Special items - restructuring charges

(12)



(0.09)



322



2.61


Special items - merger-related costs





5



0.04


Income tax effect of reconciling items above

242



1.92



20



0.16


Non-GAAP adjusted net loss per share

$

(287)



$

(2.27)



$

(940)



$

(7.63)


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 third quarter results will be streamed online at 8:30 a.m. PDT on October 21, 2021. 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. 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 its regional partners serve more than 120 destinations across the United States and to Mexico, Canada and Costa Rica. The airline emphasizes Next-Level Care for its guests, along with providing low fares, award-winning customer service and sustainability efforts. Alaska is a member of oneworld. With the global alliance and the airline's additional 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 September 30,


Nine Months Ended September 30,

(in millions, except per-share amounts)

2021


2020


Change


2021


2020


Change

Operating Revenues:












Passenger revenue

$

1,774



$

572



210

%


$

3,785



$

2,362



60

%

Mileage Plan other revenue

120



84



43

%


332



266



25

%

Cargo and other

59



45



31

%


160



130



23

%

Total Operating Revenues

1,953



701



179

%


4,277



2,758



55

%

Operating Expenses:












Wages and benefits

578



495



17

%


1,581



1,579



%

Payroll support program wage offset



(398)



(100)

%


(914)



(760)



20

%

Variable incentive pay

42



42



%


109



65



68

%

Aircraft fuel, including hedging gains and losses

376



125



201

%


853



568



50

%

Aircraft maintenance

89



84



6

%


272



244



11

%

Aircraft rent

64



74



(14)

%


188



229



(18)

%

Landing fees and other rentals

141



109



29

%


414



323



28

%

Contracted services

62



36



72

%


167



138



21

%

Selling expenses

49



24



104

%


123



83



48

%

Depreciation and amortization

99



105



(6)

%


294



320



(8)

%

Food and beverage service

39



14



179

%


97



70



39

%

Third-party regional carrier expense

39



29



34

%


106



92



15

%

Other

126



89



42

%


348



310



12

%

Special items - impairment charges and other

(9)



121



(107)

%


5



350



(99)

%

Special items - restructuring charges



322


.

(100)

%


(12)



322



(104)

%

Special items - merger-related costs



1



(100)

%




5



(100)

%

Total Operating Expenses

1,695



1,272



33

%


3,631



3,938



(8)

%

Operating Income (Expense)

258



(571)



(145)

%


646



(1,180)



(155)

%

Nonoperating Income (Expense):












Interest income

6



7



(14)

%


19



23



(17)

%

Interest expense

(30)



(34)



(12)

%


(101)



(64)



58

%

Interest capitalized

3



4



(25)

%


9



8



13

%

Other - net

8



5



60

%


27



16



69

%

Total Nonoperating Expense

(13)



(18)



(28)

%


(46)



(17)



171

%

Income (Loss) Before Income Tax

245



(589)





600



(1,197)




Income tax expense (benefit)

51



(158)





140



(320)




Net Income (Loss)

$

194



$

(431)





$

460



$

(877)
















Basic Income (Loss) Per Share:

$

1.55



$

(3.49)





$

3.69



$

(7.12)




Diluted Income (Loss) Per Share:

$

1.53



$

(3.49)





$

3.64



$

(7.12)
















Shares Used for Computation:












Basic

125.250



123.647





124.846



123.255




Diluted

127.188



123.647





126.325



123.255
















Cash dividend declared per share:

$



$





$



$

0.375
















CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)




Alaska Air Group, Inc.












(in millions)

September 30, 2021


December 31, 2020

ASSETS




Current Assets




Cash and cash equivalents

$

495



$

1,370


Marketable securities

2,700



1,976


Total cash and marketable securities

3,195



3,346


Receivables - net

536



480


Inventories and supplies - net

62



57


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

208



123


Total Current Assets

4,001



4,006






Property and Equipment




Aircraft and other flight equipment

8,076



7,761


Other property and equipment

1,446



1,398


Deposits for future flight equipment

378



583



9,900



9,742


Less accumulated depreciation and amortization

3,780



3,531


Total Property and Equipment - Net

6,120



6,211






Operating lease assets

1,370



1,400


Goodwill

1,943



...