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Delaware
|
|
91-1292054
|
(State of Incorporation)
|
|
(I.R.S. Employer Identification No.)
|
19300 International Boulevard, Seattle, Washington 98188
|
Telephone: (206) 392-5040
|
Large accelerated filer
x
|
Accelerated filer
¨
|
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
¨
|
Emerging growth company
¨
|
|
•
|
the competitive environment in our industry;
|
•
|
changes in our operating costs, including fuel, which can be volatile;
|
•
|
our ability to meet our cost reduction goals;
|
•
|
our ability to achieve anticipated synergies and timing thereof in connection with our acquisition of Virgin America;
|
•
|
our ability to successfully integrate the operations of Virgin America into those of Alaska;
|
•
|
labor disputes and our ability to attract and retain qualified personnel;
|
•
|
operational disruptions;
|
•
|
general economic conditions, including the impact of those conditions on customer travel behavior;
|
•
|
the concentration of our revenue from a few key markets;
|
•
|
an aircraft accident or incident;
|
•
|
actual or threatened terrorist attacks, global instability and potential U.S. military actions or activities;
|
•
|
our reliance on automated systems and the risks associated with changes made to those systems;
|
•
|
changes in laws and regulations.
|
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(in millions)
|
March 31, 2018
|
|
December 31, 2017
|
||||
ASSETS
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
177
|
|
|
$
|
194
|
|
Marketable securities
|
1,351
|
|
|
1,427
|
|
||
Total cash and marketable securities
|
1,528
|
|
|
1,621
|
|
||
Receivables—net
|
350
|
|
|
341
|
|
||
Inventories and supplies—net
|
62
|
|
|
57
|
|
||
Prepaid expenses and other current assets
|
174
|
|
|
133
|
|
||
Total Current Assets
|
2,114
|
|
|
2,152
|
|
||
|
|
|
|
||||
Property and Equipment
|
|
|
|
|
|
||
Aircraft and other flight equipment
|
7,567
|
|
|
7,559
|
|
||
Other property and equipment
|
1,287
|
|
|
1,222
|
|
||
Deposits for future flight equipment
|
560
|
|
|
494
|
|
||
|
9,414
|
|
|
9,275
|
|
||
Less accumulated depreciation and amortization
|
3,011
|
|
|
2,991
|
|
||
Total Property and Equipment—Net
|
6,403
|
|
|
6,284
|
|
||
|
|
|
|
||||
Goodwill
|
1,943
|
|
|
1,943
|
|
||
Intangible assets
|
132
|
|
|
133
|
|
||
Other noncurrent assets
|
256
|
|
|
234
|
|
||
Other Assets
|
2,331
|
|
|
2,310
|
|
||
|
|
|
|
||||
Total Assets
|
$
|
10,848
|
|
|
$
|
10,746
|
|
(in millions, except share amounts)
|
March 31, 2018
|
|
December 31, 2017
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Accounts payable
|
$
|
102
|
|
|
$
|
120
|
|
Accrued wages, vacation and payroll taxes
|
299
|
|
|
418
|
|
||
Air traffic liability
|
1,122
|
|
|
806
|
|
||
Other accrued liabilities
|
433
|
|
|
400
|
|
||
Deferred revenue
|
649
|
|
|
635
|
|
||
Current portion of long-term debt
|
387
|
|
|
307
|
|
||
Total Current Liabilities
|
2,992
|
|
|
2,686
|
|
||
|
|
|
|
||||
Long-Term Debt, Net of Current Portion
|
2,062
|
|
|
2,262
|
|
||
Other Liabilities and Credits
|
|
|
|
|
|
||
Deferred income taxes
|
372
|
|
|
370
|
|
||
Deferred revenue
|
1,102
|
|
|
1,090
|
|
||
Obligation for pension and postretirement medical benefits
|
458
|
|
|
453
|
|
||
Other liabilities
|
423
|
|
|
425
|
|
||
|
2,355
|
|
|
2,338
|
|
||
Commitments and Contingencies
|
|
|
|
|
|
||
Shareholders' Equity
|
|
|
|
|
|
||
Preferred stock, $0.01 par value, Authorized: 5,000,000 shares, none issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value, Authorized: 400,000,000 shares, Issued: 2018 - 130,378,645 shares; 2017 - 129,903,498 shares, Outstanding: 2018 - 123,350,124 shares; 2017 - 123,060,638 shares
|
1
|
|
|
1
|
|
||
Capital in excess of par value
|
190
|
|
|
164
|
|
||
Treasury stock (common), at cost: 2018 - 7,028,521 shares; 2017 - 6,842,860 shares
|
(531
|
)
|
|
(518
|
)
|
||
Accumulated other comprehensive loss
|
(440
|
)
|
|
(380
|
)
|
||
Retained earnings
|
4,219
|
|
|
4,193
|
|
||
|
3,439
|
|
|
3,460
|
|
||
Total Liabilities and Shareholders' Equity
|
$
|
10,848
|
|
|
$
|
10,746
|
|
|
Three Months Ended March 31,
|
||||||
(in millions, except per share amounts)
|
2018
|
|
2017
|
||||
Operating Revenues
|
|
|
|
||||
Passenger revenue
|
$
|
1,685
|
|
|
$
|
1,602
|
|
Mileage plan other revenue
|
107
|
|
|
100
|
|
||
Cargo and other
|
40
|
|
|
38
|
|
||
Total Operating Revenues
|
1,832
|
|
|
1,740
|
|
||
Operating Expenses
|
|
|
|
||||
Wages and benefits
|
536
|
|
|
450
|
|
||
Variable incentive pay
|
39
|
|
|
31
|
|
||
Aircraft fuel, including hedging gains and losses
|
409
|
|
|
339
|
|
||
Aircraft maintenance
|
107
|
|
|
87
|
|
||
Aircraft rent
|
74
|
|
|
65
|
|
||
Landing fees and other rentals
|
126
|
|
|
115
|
|
||
Contracted services
|
81
|
|
|
81
|
|
||
Selling expenses
|
78
|
|
|
83
|
|
||
Depreciation and amortization
|
94
|
|
|
90
|
|
||
Food and beverage service
|
50
|
|
|
45
|
|
||
Third-party regional carrier expense
|
37
|
|
|
27
|
|
||
Other
|
141
|
|
|
131
|
|
||
Special items—merger-related costs
|
6
|
|
|
39
|
|
||
Special items—other
|
25
|
|
|
—
|
|
||
Total Operating Expenses
|
1,803
|
|
|
1,583
|
|
||
Operating Income
|
29
|
|
|
157
|
|
||
Nonoperating Income (Expense)
|
|
|
|
||||
Interest income
|
8
|
|
|
7
|
|
||
Interest expense
|
(24
|
)
|
|
(25
|
)
|
||
Interest capitalized
|
5
|
|
|
4
|
|
||
Other—net
|
(12
|
)
|
|
(1
|
)
|
||
Total Nonoperating Income (Expense)
|
(23
|
)
|
|
(15
|
)
|
||
Income Before Income Tax
|
6
|
|
|
142
|
|
||
Income tax expense
|
2
|
|
|
49
|
|
||
Net Income
|
$
|
4
|
|
|
$
|
93
|
|
|
|
|
|
||||
Basic Earnings Per Share:
|
$
|
0.03
|
|
|
$
|
0.75
|
|
Diluted Earnings Per Share:
|
$
|
0.03
|
|
|
$
|
0.75
|
|
Shares used for computation:
|
|
|
|
||||
Basic
|
123.155
|
|
|
123.495
|
|
||
Diluted
|
123.630
|
|
|
124.299
|
|
||
|
|
|
|
||||
Cash dividend declared per share:
|
$
|
0.32
|
|
|
$
|
0.30
|
|
|
Three Months Ended March 31,
|
||||||
(in millions)
|
2018
|
|
2017
|
||||
Net Income
|
$
|
4
|
|
|
$
|
93
|
|
|
|
|
|
||||
Other Comprehensive Income (Loss):
|
|
|
|
||||
Related to marketable securities:
|
|
|
|
||||
Unrealized holding gain (loss) arising during the period
|
(13
|
)
|
|
3
|
|
||
Reclassification of (gain) loss into Other—net nonoperating income (expense)
|
2
|
|
|
—
|
|
||
Income tax effect
|
3
|
|
|
(1
|
)
|
||
Total
|
(8
|
)
|
|
2
|
|
||
|
|
|
|
||||
Related to employee benefit plans:
|
|
|
|
||||
Reclassification of net pension expense into Wages and benefits
|
7
|
|
|
6
|
|
||
Income tax effect
|
(2
|
)
|
|
(2
|
)
|
||
Total
|
5
|
|
|
4
|
|
||
|
|
|
|
||||
Related to interest rate derivative instruments:
|
|
|
|
||||
Unrealized holding gain (loss) arising during the period
|
6
|
|
|
1
|
|
||
Reclassification of (gain) loss into Aircraft rent
|
1
|
|
|
—
|
|
||
Income tax effect
|
(2
|
)
|
|
(1
|
)
|
||
Total
|
5
|
|
|
—
|
|
||
|
|
|
|
||||
Other Comprehensive Income
|
2
|
|
|
6
|
|
||
|
|
|
|
||||
Comprehensive Income
|
$
|
6
|
|
|
$
|
99
|
|
|
Three Months Ended March 31,
|
||||||
(in millions)
|
2018
|
|
2017
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
4
|
|
|
$
|
93
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
94
|
|
|
90
|
|
||
Stock-based compensation and other
|
8
|
|
|
13
|
|
||
Changes in certain assets and liabilities:
|
|
|
|
||||
Changes in deferred tax provision
|
2
|
|
|
44
|
|
||
Increase in air traffic liability
|
316
|
|
|
364
|
|
||
Increase in deferred revenue
|
26
|
|
|
31
|
|
||
Other—net
|
(144
|
)
|
|
(165
|
)
|
||
Net cash provided by operating activities
|
306
|
|
|
470
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
||
Property and equipment additions:
|
|
|
|
|
|
||
Aircraft and aircraft purchase deposits
|
(135
|
)
|
|
(160
|
)
|
||
Other flight equipment
|
(29
|
)
|
|
(20
|
)
|
||
Other property and equipment
|
(71
|
)
|
|
(36
|
)
|
||
Total property and equipment additions, including capitalized interest
|
(235
|
)
|
|
(216
|
)
|
||
Purchases of marketable securities
|
(238
|
)
|
|
(557
|
)
|
||
Sales and maturities of marketable securities
|
301
|
|
|
285
|
|
||
Other investing activities
|
8
|
|
|
—
|
|
||
Net cash used in investing activities
|
(164
|
)
|
|
(488
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Long-term debt payments
|
(120
|
)
|
|
(101
|
)
|
||
Common stock repurchases
|
(12
|
)
|
|
—
|
|
||
Dividends paid
|
(39
|
)
|
|
(37
|
)
|
||
Other financing activities
|
15
|
|
|
11
|
|
||
Net cash used in financing activities
|
(156
|
)
|
|
(127
|
)
|
||
Net increase (decrease) in cash, cash equivalents, and restricted cash
|
(14
|
)
|
|
(145
|
)
|
||
Cash, cash equivalents, and restricted cash at beginning of year
|
197
|
|
|
328
|
|
||
Cash, cash equivalents, and restricted cash at end of the period
|
$
|
183
|
|
|
$
|
183
|
|
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Interest (net of amount capitalized)
|
$
|
24
|
|
|
$
|
26
|
|
Income taxes
|
—
|
|
|
2
|
|
||
|
|
|
|
||||
Reconciliation of cash, cash equivalents, and restricted cash at end of the period
|
|
|
|
||||
Cash and cash equivalents
|
$
|
177
|
|
|
$
|
183
|
|
Restricted cash included in Prepaid expenses and other current assets
|
6
|
|
|
—
|
|
||
Total cash, cash equivalents, and restricted cash at end of the period
|
$
|
183
|
|
|
$
|
183
|
|
|
|
|
|
|
December 31, 2017
|
||||||||||
|
As Reported
|
|
Adjustments - Revenue Recognition
|
|
As Adjusted
|
||||||
Current Assets:
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
$
|
127
|
|
|
$
|
6
|
|
|
$
|
133
|
|
Current Liabilities:
|
|
|
|
|
|
||||||
Air traffic liability
|
937
|
|
|
(131
|
)
|
|
806
|
|
|||
Deferred revenue
|
518
|
|
|
117
|
|
|
635
|
|
|||
Other liabilities and credits:
|
|
|
|
|
|
||||||
Deferred income taxes
|
454
|
|
|
(84
|
)
|
|
370
|
|
|||
Deferred revenue
|
699
|
|
|
391
|
|
|
1,090
|
|
|||
Other liabilities
|
451
|
|
|
(26
|
)
|
|
425
|
|
|||
Shareholders' Equity:
|
|
|
|
|
|
||||||
Retained earnings
|
4,454
|
|
|
(261
|
)
|
|
4,193
|
|
|
Three Months Ended March 31, 2017
|
||||||||||||||
|
As Reported
|
|
Adjustments - Revenue Recognition
|
|
Adjustments - Retirement Benefits
|
|
As Adjusted
|
||||||||
Operating Revenues
|
|
|
|
|
|
|
|
||||||||
Passenger Revenue
|
$
|
1,484
|
|
|
$
|
118
|
|
|
$
|
—
|
|
|
$
|
1,602
|
|
Mileage plan other revenue
|
119
|
|
|
(19
|
)
|
|
—
|
|
|
100
|
|
||||
Cargo and other revenue
|
146
|
|
|
(108
|
)
|
|
—
|
|
|
38
|
|
||||
Total Operating Revenue
|
1,749
|
|
|
(9
|
)
|
|
—
|
|
|
1,740
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating Expenses
|
|
|
|
|
|
|
|
||||||||
Wages and benefits
|
448
|
|
|
—
|
|
|
2
|
|
|
450
|
|
||||
Selling expenses
|
81
|
|
|
2
|
|
|
—
|
|
|
83
|
|
||||
Special items—merger-related costs
|
40
|
|
|
(1
|
)
|
|
—
|
|
|
39
|
|
||||
All other operating expenses
|
1,011
|
|
|
—
|
|
|
—
|
|
|
1,011
|
|
||||
Total Operating Expenses
|
1,580
|
|
|
1
|
|
|
2
|
|
|
1,583
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating Income
|
169
|
|
|
(10
|
)
|
|
(2
|
)
|
|
157
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Nonoperating Income (Expense)
|
|
|
|
|
|
|
|
||||||||
Other—net
|
(3
|
)
|
|
—
|
|
|
2
|
|
|
(1
|
)
|
||||
All other nonoperating income (expense)
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
||||
|
(17
|
)
|
|
—
|
|
|
2
|
|
|
(15
|
)
|
||||
Income (loss) before income tax
|
152
|
|
|
(10
|
)
|
|
—
|
|
|
142
|
|
||||
Income tax expense (benefit)
|
53
|
|
|
(4
|
)
|
|
—
|
|
|
49
|
|
||||
Net Income (Loss)
|
$
|
99
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
93
|
|
|
Three Months Ended March 31, 2017
|
|||||||||
|
As Reported
|
|
Adjustments - Revenue Recognition
|
|
As Adjusted
|
|||||
Cash flows from operating activities:
|
|
|
|
|
|
|||||
Net income
|
$
|
99
|
|
|
(6
|
)
|
|
$
|
93
|
|
|
|
|
|
|
|
|||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|||||
Depreciation and amortization
|
90
|
|
|
—
|
|
|
90
|
|
||
Stock-based compensation and other
|
13
|
|
|
—
|
|
|
13
|
|
||
Changes in certain assets and liabilities:
|
|
|
|
|
|
|||||
Changes in deferred tax provision
|
48
|
|
|
(4
|
)
|
|
44
|
|
||
Increase in air traffic liability
|
369
|
|
|
(5
|
)
|
|
364
|
|
||
Increase in deferred revenue
|
1
|
|
|
30
|
|
|
31
|
|
||
Other—net
|
(150
|
)
|
|
(15
|
)
|
|
(165
|
)
|
||
Net cash provided by operating activities
|
470
|
|
|
—
|
|
|
470
|
|
||
|
|
|
|
|
|
|||||
Net cash used in investing activities
|
(488
|
)
|
|
—
|
|
|
(488
|
)
|
||
|
|
|
|
|
|
|||||
Net cash used in financing activities
|
(127
|
)
|
|
—
|
|
|
(127
|
)
|
||
|
|
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents
|
(145
|
)
|
|
—
|
|
|
(145
|
)
|
||
Cash and cash equivalents at beginning of year
|
328
|
|
|
—
|
|
|
328
|
|
||
Cash and cash equivalents at end of the period
|
$
|
183
|
|
|
—
|
|
|
$
|
183
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Passenger ticket revenue, including ticket breakage and net of taxes and fees
|
$
|
1,428
|
|
|
$
|
1,358
|
|
Passenger ancillary revenue
|
118
|
|
|
116
|
|
||
Mileage Plan
TM
passenger revenue
|
139
|
|
|
128
|
|
||
Total passenger revenue
|
$
|
1,685
|
|
|
$
|
1,602
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Passenger revenue
|
$
|
139
|
|
|
$
|
128
|
|
Mileage Plan
TM
other revenue
|
107
|
|
|
100
|
|
||
Total Mileage Plan™ revenue
|
$
|
246
|
|
|
$
|
228
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Cargo revenue
|
$
|
26
|
|
|
$
|
24
|
|
Other revenue
|
14
|
|
|
14
|
|
||
Total Cargo and other revenue
|
$
|
40
|
|
|
$
|
38
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Total Deferred Revenue balance at January 1
|
$
|
1,726
|
|
|
$
|
1,535
|
|
Travel miles and companion certificate redemption - Passenger revenue
|
(139
|
)
|
|
(128
|
)
|
||
Miles redeemed on partner airlines - Other revenue
|
(19
|
)
|
|
(23
|
)
|
||
Increase in liability for mileage credits issued
|
183
|
|
|
185
|
|
||
Total Deferred Revenue balance at March 31
|
$
|
1,751
|
|
|
$
|
1,569
|
|
March 31, 2018
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Assets
|
|
|
|
|
|
||||||
Marketable securities
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
$
|
330
|
|
|
$
|
—
|
|
|
$
|
330
|
|
Foreign government bonds
|
—
|
|
|
32
|
|
|
32
|
|
|||
Asset-backed securities
|
—
|
|
|
208
|
|
|
208
|
|
|||
Mortgage-backed securities
|
—
|
|
|
86
|
|
|
86
|
|
|||
Corporate notes and bonds
|
—
|
|
|
685
|
|
|
685
|
|
|||
Municipal securities
|
—
|
|
|
10
|
|
|
10
|
|
|||
Total Marketable securities
|
330
|
|
|
1,021
|
|
|
1,351
|
|
|||
Derivative instruments
|
|
|
|
|
|
||||||
Fuel hedge—call options
|
—
|
|
|
35
|
|
|
35
|
|
|||
Interest rate swap agreements
|
—
|
|
|
13
|
|
|
13
|
|
|||
Total Assets
|
330
|
|
|
1,069
|
|
|
1,399
|
|
|||
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
||||||
Derivative instruments
|
|
|
|
|
|
||||||
Interest rate swap agreements
|
—
|
|
|
(6
|
)
|
|
(6
|
)
|
|||
Total Liabilities
|
—
|
|
|
(6
|
)
|
|
(6
|
)
|
December 31, 2017
|
Level 1
|
|
Level 2
|
|
Total
|
||||||
Assets
|
|
|
|
|
|
||||||
Marketable securities
|
|
|
|
|
|
||||||
U.S. government and agency securities
|
$
|
328
|
|
|
$
|
—
|
|
|
$
|
328
|
|
Foreign government bonds
|
—
|
|
|
43
|
|
|
43
|
|
|||
Asset-backed securities
|
—
|
|
|
209
|
|
|
209
|
|
|||
Mortgage-backed securities
|
—
|
|
|
99
|
|
|
99
|
|
|||
Corporate notes and bonds
|
—
|
|
|
726
|
|
|
726
|
|
|||
Municipal securities
|
—
|
|
|
22
|
|
|
22
|
|
|||
Total Marketable securities
|
328
|
|
|
1,099
|
|
|
1,427
|
|
|||
Derivative instruments
|
|
|
|
|
|
||||||
Fuel hedge—call options
|
—
|
|
|
22
|
|
|
22
|
|
|||
Interest rate swap agreements
|
—
|
|
|
9
|
|
|
9
|
|
|||
Total Assets
|
328
|
|
|
1,130
|
|
|
1,458
|
|
|||
|
|
|
|
|
|
||||||
Liabilities
|
|
|
|
|
|
||||||
Derivative instruments
|
|
|
|
|
|
||||||
Interest rate swap agreements
|
—
|
|
|
(8
|
)
|
|
(8
|
)
|
|||
Total Liabilities
|
—
|
|
|
(8
|
)
|
|
(8
|
)
|
March 31, 2018
|
Cost Basis
|
|
Fair Value
|
||||
Due in one year or less
|
$
|
141
|
|
|
$
|
141
|
|
Due after one year through five years
|
1,207
|
|
|
1,187
|
|
||
Due after five years through 10 years
|
23
|
|
|
23
|
|
||
Total
|
$
|
1,371
|
|
|
$
|
1,351
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
Fixed-rate debt at cost
|
$
|
874
|
|
|
$
|
956
|
|
Non-recurring purchase price accounting fair value adjustment
|
3
|
|
|
3
|
|
||
Total fixed-rate debt
|
877
|
|
|
959
|
|
||
|
|
|
|
||||
Estimated fair value
|
871
|
|
|
959
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
Fixed-rate notes payable due through 2028
|
$
|
877
|
|
|
$
|
959
|
|
Variable-rate notes payable due through 2028
|
1,587
|
|
|
1,625
|
|
||
Less debt issuance costs
|
(15
|
)
|
|
(15
|
)
|
||
Total debt
|
2,449
|
|
|
2,569
|
|
||
Less current portion
|
387
|
|
|
307
|
|
||
Long-term debt, less current portion
|
$
|
2,062
|
|
|
$
|
2,262
|
|
|
|
|
|
||||
Weighted-average fixed-interest rate
|
4.2
|
%
|
|
4.2
|
%
|
||
Weighted-average variable-interest rate
|
3.3
|
%
|
|
2.8
|
%
|
|
Total
|
||
Remainder of 2018
|
$
|
266
|
|
2019
|
321
|
|
|
2020
|
439
|
|
|
2021
|
421
|
|
|
2022
|
246
|
|
|
Thereafter
|
768
|
|
|
Total
|
$
|
2,461
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Service cost
|
$
|
12
|
|
|
$
|
10
|
|
Pension expense included in Wages and benefits
|
12
|
|
|
10
|
|
||
|
|
|
|
||||
Interest cost
|
20
|
|
|
18
|
|
||
Expected return on assets
|
(27
|
)
|
|
(27
|
)
|
||
Recognized actuarial loss (gain)
|
8
|
|
|
7
|
|
||
Pension expense (benefit) included in Nonoperating
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
Aircraft Leases
|
|
Facility Leases
|
|
Aircraft Commitments
(a)
|
|
Capacity Purchase Agreements
(b)
|
|
Aircraft Maintenance Deposits
|
||||||||||
Remainder of 2018
|
$
|
265
|
|
|
$
|
58
|
|
|
$
|
610
|
|
|
$
|
100
|
|
|
$
|
60
|
|
2019
|
356
|
|
|
68
|
|
|
560
|
|
|
151
|
|
|
65
|
|
|||||
2020
|
330
|
|
|
61
|
|
|
514
|
|
|
159
|
|
|
68
|
|
|||||
2021
|
287
|
|
|
52
|
|
|
562
|
|
|
166
|
|
|
64
|
|
|||||
2022
|
264
|
|
|
33
|
|
|
303
|
|
|
174
|
|
|
52
|
|
|||||
Thereafter
|
1,037
|
|
|
141
|
|
|
141
|
|
|
1,205
|
|
|
38
|
|
|||||
Total
|
$
|
2,539
|
|
|
$
|
413
|
|
|
$
|
2,690
|
|
|
$
|
1,955
|
|
|
$
|
347
|
|
(a)
|
Includes non-cancelable contractual commitments for aircraft and engines, buyer furnished equipment, and aircraft maintenance and parts management.
|
(b)
|
Includes all non-aircraft lease costs associated with capacity purchase agreements.
|
|
Three Months Ended March 31,
|
||||||||||||
|
2018
|
|
2017
|
||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
||||||
2015 Repurchase Program—$1 billion
|
185,661
|
|
|
$
|
12
|
|
|
—
|
|
|
$
|
—
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
Related to marketable securities
|
$
|
(15
|
)
|
|
$
|
(5
|
)
|
Related to employee benefit plans
|
(431
|
)
|
|
(376
|
)
|
||
Related to interest rate derivatives
|
6
|
|
|
1
|
|
||
Total
|
$
|
(440
|
)
|
|
$
|
(380
|
)
|
•
|
Mainline
- includes scheduled air transportation on Alaska's Boeing or Airbus jet aircraft for passengers and cargo throughout the U.S., and in parts of Canada, Mexico, and Costa Rica.
|
•
|
Regional
- includes Horizon's and other third-party carriers’ scheduled air transportation for passengers across a shorter distance network within the U.S. under CPAs. This segment includes the actual revenues and expenses associated with regional flying, as well as an allocation of corporate overhead incurred by Air Group on behalf of the regional operations.
|
•
|
Horizon
- includes the capacity sold to Alaska under CPA. Expenses include those typically borne by regional airlines such as crew costs, ownership costs and maintenance costs.
|
|
Three Months Ended March 31, 2018
|
||||||||||||||||||||||||||
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating & Other
(a)
|
|
Air Group Adjusted
(b)
|
|
Special Items
(c)
|
|
Consolidated
|
||||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Passenger revenues
|
$
|
1,442
|
|
|
$
|
243
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,685
|
|
|
$
|
—
|
|
|
$
|
1,685
|
|
CPA revenues
|
—
|
|
|
—
|
|
|
110
|
|
|
(110
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Mileage plan other revenue
|
98
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
107
|
|
|
—
|
|
|
107
|
|
|||||||
Cargo and other
|
39
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
40
|
|
|||||||
Total operating revenues
|
1,579
|
|
|
252
|
|
|
111
|
|
|
(110
|
)
|
|
1,832
|
|
|
—
|
|
|
1,832
|
|
|||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses, excluding fuel
|
1,131
|
|
|
239
|
|
|
104
|
|
|
(111
|
)
|
|
1,363
|
|
|
31
|
|
|
1,394
|
|
|||||||
Economic fuel
|
367
|
|
|
55
|
|
|
—
|
|
|
—
|
|
|
422
|
|
|
(13
|
)
|
|
409
|
|
|||||||
Total operating expenses
|
1,498
|
|
|
294
|
|
|
104
|
|
|
(111
|
)
|
|
1,785
|
|
|
18
|
|
|
1,803
|
|
|||||||
Nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest income
|
11
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
8
|
|
|
—
|
|
|
8
|
|
|||||||
Interest expense
|
(22
|
)
|
|
—
|
|
|
(5
|
)
|
|
3
|
|
|
(24
|
)
|
|
—
|
|
|
(24
|
)
|
|||||||
Interest capitalized
|
4
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|||||||
Other—net
|
(5
|
)
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
(12
|
)
|
|||||||
Total Nonoperating income (expense)
|
(12
|
)
|
|
(7
|
)
|
|
(4
|
)
|
|
—
|
|
|
(23
|
)
|
|
—
|
|
|
(23
|
)
|
|||||||
Income (loss) before income tax
|
$
|
69
|
|
|
$
|
(49
|
)
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
24
|
|
|
$
|
(18
|
)
|
|
$
|
6
|
|
|
Three Months Ended March 31, 2017
(d)
|
||||||||||||||||||||||||||
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating & Other
(a)
|
|
Air Group Adjusted
(b)
|
|
Special Items
(c)
|
|
Consolidated
|
||||||||||||||
Operating revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Passenger revenues
|
$
|
1,375
|
|
|
$
|
227
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,602
|
|
|
$
|
—
|
|
|
$
|
1,602
|
|
CPA revenues
|
—
|
|
|
—
|
|
|
97
|
|
|
(97
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Mileage plan other revenue
|
93
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
100
|
|
|
—
|
|
|
100
|
|
|||||||
Cargo and other
|
36
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
38
|
|
|||||||
Total operating revenues
|
1,504
|
|
|
235
|
|
|
98
|
|
|
(97
|
)
|
|
1,740
|
|
|
—
|
|
|
1,740
|
|
|||||||
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses, excluding fuel
|
1,000
|
|
|
200
|
|
|
103
|
|
|
(98
|
)
|
|
1,205
|
|
|
39
|
|
|
1,244
|
|
|||||||
Economic fuel
|
292
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
329
|
|
|
10
|
|
|
339
|
|
|||||||
Total operating expenses
|
1,292
|
|
|
237
|
|
|
103
|
|
|
(98
|
)
|
|
1,534
|
|
|
49
|
|
|
1,583
|
|
|||||||
Nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest income
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|||||||
Interest expense
|
(23
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(25
|
)
|
|
—
|
|
|
(25
|
)
|
|||||||
Interest capitalized
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|||||||
Other—net
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||||||
Total Nonoperating income (expense)
|
(13
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
(15
|
)
|
|||||||
Income (loss) before income tax
|
$
|
199
|
|
|
$
|
(2
|
)
|
|
$
|
(7
|
)
|
|
$
|
1
|
|
|
$
|
191
|
|
|
$
|
(49
|
)
|
|
$
|
142
|
|
(a)
|
Includes consolidating entries, Parent Company, McGee Air Services, and other immaterial business units.
|
(b)
|
The Air Group 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 income and charges.
|
(c)
|
Includes merger-related costs, mark-to-market fuel-hedge accounting charges, and other special items.
|
(d)
|
Certain historical information has been adjusted to reflect the adoption of new accounting standards.
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
Mainline
|
$
|
15,088
|
|
|
$
|
16,663
|
|
Horizon
|
945
|
|
|
929
|
|
||
Consolidating & Other
|
(5,185
|
)
|
|
(6,846
|
)
|
||
Consolidated
|
$
|
10,848
|
|
|
$
|
10,746
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
First
Quarter Review
—highlights from the
first
quarter of
2018
outlining some of the major events that happened during the period and how they affected our financial performance.
|
•
|
Results of Operations
—an in-depth analysis of our revenues by segment and our expenses from a consolidated perspective for the
three
months ended
March 31, 2018
. To the extent material to the understanding of segment profitability, we more fully describe the segment expenses per financial statement line item. Financial and statistical data is also included here. This section includes forward-looking statements regarding our view of the remainder of
2018
.
|
•
|
Liquidity and Capital Resources
—an overview of our financial position, analysis of cash flows, and relevant contractual obligations and commitments.
|
|
Forecast
Q2 2018 |
|
Q2 2017
|
|
% Change
|
Capacity (ASMs in millions)
|
16,910 - 16,960
|
|
15,612
|
|
~ 8.5%
|
Cost per ASM excluding fuel and special items (cents)
(a)
|
8.34¢ - 8.39¢
|
|
7.98¢
|
|
~ 4.8%
|
|
Forecast
Full Year 2018 |
|
Full Year 2017
|
|
% Change
|
Capacity (ASMs in millions)
|
65,980 - 66,130
|
|
62,072
|
|
~ 6.5%
|
Cost per ASM excluding fuel and special items (cents)
(a)
|
8.51¢ - 8.56¢
|
|
8.25¢
|
|
~ 3.5%
|
(a)
|
2017 CASMex reflects the impacts of the updated accounting standards, effective for the Company January 1, 2018.
|
•
|
By excluding fuel expense and certain special items (including merger-related costs) from our unit metrics, we believe that we have better visibility into the results of operations and our non-fuel cost initiatives. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can lead to 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 (CASM) excluding fuel and certain special items, such as merger-related costs, 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, which covers the majority of Air Group employees.
|
•
|
CASM excluding fuel and certain special items is a measure commonly used by industry analysts and we believe it is an important metric 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 merger-related costs, and mark-to-market hedging adjustments, 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 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.
|
|
Three Months Ended March 31,
|
||||
|
2018
|
|
2017
|
|
Change
|
Consolidated Operating Statistics:
(a)
|
|
|
|
|
|
Revenue passengers (000)
|
10,489
|
|
10,008
|
|
4.8%
|
RPMs (000,000) "traffic"
|
12,403
|
|
11,707
|
|
5.9%
|
ASMs (000,000) "capacity"
|
15,480
|
|
14,394
|
|
7.5%
|
Load factor
|
80.1%
|
|
81.3%
|
|
(1.2) pts
|
Yield
(d)
|
13.59¢
|
|
13.69¢
|
|
(0.7)%
|
RASM
(d)
|
11.84¢
|
|
12.09¢
|
|
(2.1)%
|
CASM excluding fuel and special items
(b)(d)
|
8.81¢
|
|
8.38¢
|
|
5.1%
|
Economic fuel cost per gallon
(b)
|
$2.14
|
|
$1.78
|
|
20.2%
|
Fuel gallons (000,000)
|
197
|
|
184
|
|
7.1%
|
ASMs per fuel gallon
|
78.6
|
|
78.2
|
|
0.5%
|
Average full-time equivalent employees (FTEs)
|
21,266
|
|
18,682
|
|
13.8%
|
Mainline Operating Statistics:
|
|
|
|
|
|
Revenue passengers (000)
|
8,211
|
|
7,774
|
|
5.6%
|
RPMs (000,000) "traffic"
|
11,360
|
|
10,827
|
|
4.9%
|
ASMs (000,000) "capacity"
|
14,098
|
|
13,260
|
|
6.3%
|
Load factor
|
80.6%
|
|
81.7%
|
|
(1.1) pts
|
Yield
(d)
|
12.70¢
|
|
12.70¢
|
|
—%
|
RASM
(d)
|
11.20¢
|
|
11.39¢
|
|
(1.7)%
|
CASM excluding fuel and special items
(b)(d)
|
8.02¢
|
|
7.54¢
|
|
6.4%
|
Economic fuel cost per gallon
(b)
|
$2.13
|
|
$1.78
|
|
19.7%
|
Fuel gallons (000,000)
|
172
|
|
164
|
|
4.9%
|
ASMs per fuel gallon
|
82.0
|
|
80.8
|
|
1.5%
|
Average FTEs
|
16,013
|
|
15,007
|
|
6.7%
|
Aircraft utilization
|
11.2
|
|
10.8
|
|
3.7%
|
Average aircraft stage length
|
1,285
|
|
1,245
|
|
3.2%
|
Operating fleet
|
224
|
|
217
|
|
7 a/c
|
Regional Operating Statistics:
(c)
|
|
|
|
|
|
Revenue passengers (000)
|
2,278
|
|
2,234
|
|
2.0%
|
RPMs (000,000) "traffic"
|
1,043
|
|
880
|
|
18.5%
|
ASMs (000,000) "capacity"
|
1,382
|
|
1,134
|
|
21.9%
|
Load factor
|
75.5%
|
|
77.6%
|
|
(2.1 pts)
|
Yield
(d)
|
23.70¢
|
|
25.36¢
|
|
(6.5)%
|
RASM
(d)
|
18.26¢
|
|
20.14¢
|
|
(9.3)%
|
Operating fleet
|
83
|
|
73
|
|
10 a/c
|
(a)
|
Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.
|
(b)
|
See reconciliation of this non-GAAP measure to the most directly related GAAP measure in the accompanying pages.
|
(c)
|
Data presented includes information related to flights operated by Horizon and third-party carriers.
|
(d)
|
Certain historical information has been adjusted to reflect the adoption of new accounting standards.
|
|
Three Months Ended March 31,
|
||||||||||||||
|
2018
|
|
2017
|
||||||||||||
(in millions, except per share amounts)
|
Dollars
|
|
Diluted EPS
|
|
Dollars
|
|
Diluted EPS
|
||||||||
GAAP net income and diluted EPS
|
$
|
4
|
|
|
$
|
0.03
|
|
|
$
|
93
|
|
|
$
|
0.75
|
|
Mark-to-market fuel hedge adjustments
|
(13
|
)
|
|
(0.11
|
)
|
|
10
|
|
|
0.08
|
|
||||
Special items—employee tax reform bonus
|
25
|
|
|
0.20
|
|
|
—
|
|
|
—
|
|
||||
Special items—merger-related costs
|
6
|
|
|
0.05
|
|
|
39
|
|
|
0.30
|
|
||||
Income tax effect
|
(4
|
)
|
|
(0.03
|
)
|
|
(18
|
)
|
|
(0.14
|
)
|
||||
Non-GAAP adjusted net income and diluted EPS
|
$
|
18
|
|
|
$
|
0.14
|
|
|
$
|
124
|
|
|
$
|
0.99
|
|
|
Three Months Ended March 31,
|
|||||||||
(in cents)
|
2018
|
|
2017
|
|
% Change
|
|||||
Consolidated:
|
|
|
|
|
|
|||||
CASM
|
|
11.65
|
¢
|
|
|
11.00
|
¢
|
|
6
|
%
|
Less the following components:
|
|
|
|
|
|
|
||||
Aircraft fuel, including hedging gains and losses
|
2.64
|
|
|
2.36
|
|
|
12
|
%
|
||
Special items—merger-related costs and other
|
0.20
|
|
|
0.26
|
|
|
(23
|
)%
|
||
CASM excluding fuel and special items
|
|
8.81
|
¢
|
|
|
8.38
|
¢
|
|
5
|
%
|
|
|
|
|
|
|
|||||
Mainline:
|
|
|
|
|
|
|||||
CASM
|
|
10.72
|
¢
|
|
|
10.11
|
¢
|
|
6
|
%
|
Less the following components:
|
|
|
|
|
|
|
||||
Aircraft fuel, including hedging gains and losses
|
2.51
|
|
|
2.28
|
|
|
10
|
%
|
||
Special items—merger-related costs and other
|
0.19
|
|
|
0.29
|
|
|
(35
|
)%
|
||
CASM excluding fuel and special items
|
|
8.02
|
¢
|
|
|
7.54
|
¢
|
|
6
|
%
|
|
Three Months Ended March 31,
|
|||||||||
(in millions)
|
2018
|
|
2017
|
|
% Change
|
|||||
Passenger revenue
|
$
|
1,685
|
|
|
$
|
1,602
|
|
|
5
|
%
|
Mileage plan other revenue
|
107
|
|
|
100
|
|
|
7
|
%
|
||
Cargo and other
|
40
|
|
|
38
|
|
|
5
|
%
|
||
Total operating revenues
|
$
|
1,832
|
|
|
$
|
1,740
|
|
|
5
|
%
|
|
Three Months Ended March 31,
|
|||||||||
(in millions)
|
2018
|
|
2017
|
|
% Change
|
|||||
Fuel expense
|
$
|
409
|
|
|
$
|
339
|
|
|
21
|
%
|
Non-fuel operating expenses, excluding special items
|
1,363
|
|
|
1,205
|
|
|
13
|
%
|
||
Special items—merger-related costs
|
6
|
|
|
39
|
|
|
(85
|
)%
|
||
Special items—employee tax reform bonus
|
25
|
|
|
—
|
|
|
NM
|
|
||
Total operating expenses
|
$
|
1,803
|
|
|
$
|
1,583
|
|
|
14
|
%
|
|
Three Months Ended March 31,
|
||||||||||||||
|
2018
|
|
2017
|
||||||||||||
(in millions, except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
||||||||
Raw or "into-plane" fuel cost
|
$
|
423
|
|
|
$
|
2.15
|
|
|
$
|
325
|
|
|
$
|
1.76
|
|
(Gains) losses on settled hedges
|
(1
|
)
|
|
(0.01
|
)
|
|
4
|
|
|
0.02
|
|
||||
Consolidated economic fuel expense
|
422
|
|
|
2.14
|
|
|
$
|
329
|
|
|
$
|
1.78
|
|
||
Mark-to-market fuel hedge adjustments
|
(13
|
)
|
|
(0.07
|
)
|
|
10
|
|
|
0.06
|
|
||||
GAAP fuel expense
|
$
|
409
|
|
|
$
|
2.07
|
|
|
$
|
339
|
|
|
$
|
1.84
|
|
Fuel gallons
|
197
|
|
|
|
|
184
|
|
|
|
|
Three Months Ended March 31,
|
|||||||||
(in millions)
|
2018
|
|
2017
|
|
% Change
|
|||||
Wages and benefits
|
$
|
536
|
|
|
$
|
450
|
|
|
19
|
%
|
Variable incentive pay
|
39
|
|
|
31
|
|
|
26
|
%
|
||
Aircraft maintenance
|
107
|
|
|
87
|
|
|
23
|
%
|
||
Aircraft rent
|
74
|
|
|
65
|
|
|
14
|
%
|
||
Landing fees and other rentals
|
126
|
|
|
115
|
|
|
10
|
%
|
||
Contracted services
|
81
|
|
|
81
|
|
|
—
|
%
|
||
Selling expenses
|
78
|
|
|
83
|
|
|
(6
|
)%
|
||
Depreciation and amortization
|
94
|
|
|
90
|
|
|
4
|
%
|
||
Food and beverage service
|
50
|
|
|
45
|
|
|
11
|
%
|
||
Third-party regional carrier expense
|
37
|
|
|
27
|
|
|
37
|
%
|
||
Other
|
141
|
|
|
131
|
|
|
8
|
%
|
||
Total non-fuel operating expenses, excluding special items
|
$
|
1,363
|
|
|
$
|
1,205
|
|
|
13
|
%
|
|
Three Months Ended March 31,
|
|||||||||
(in millions)
|
2018
|
|
2017
|
|
% Change
|
|||||
Wages
|
$
|
407
|
|
|
$
|
337
|
|
|
21
|
%
|
Pension—Defined benefit plans service cost
|
12
|
|
|
10
|
|
|
20
|
%
|
||
Defined contribution plans
|
28
|
|
|
25
|
|
|
12
|
%
|
||
Medical and other benefits
|
60
|
|
|
52
|
|
|
15
|
%
|
||
Payroll taxes
|
29
|
|
|
26
|
|
|
12
|
%
|
||
Total wages and benefits
|
$
|
536
|
|
|
$
|
450
|
|
|
19
|
%
|
•
|
Our existing cash and marketable securities balance of
$1.5 billion
, and our expected cash from operations;
|
•
|
Our
77
unencumbered operating aircraft that could be financed, if necessary;
|
•
|
Our combined bank line-of-credit facilities, with no outstanding borrowings, of
$400 million
. Information about these facilities can be found in
Note 5
to the condensed consolidated financial statements.
|
(in millions)
|
March 31, 2018
|
|
December 31, 2017
|
|
Change
|
||||
Cash and marketable securities
|
$
|
1,528
|
|
|
$
|
1,621
|
|
|
(6) %
|
Cash, marketable securities, and unused lines of credit as a percentage of trailing twelve months' revenue
|
24
|
%
|
|
26
|
%
|
|
(2) pt
|
||
Long-term debt, net of current portion
|
$
|
2,062
|
|
|
$
|
2,262
|
|
|
(9)%
|
Shareholders’ equity
|
$
|
3,439
|
|
|
$
|
3,460
|
|
|
(1)%
|
Long-term debt-to-capital including net present value of aircraft operating lease payments
(a)
|
53
|
%
|
|
53
|
%
|
|
0 pts
|
(a)
|
Calculated using the present value of remaining aircraft lease payments for aircraft in our operating fleet as of the balance sheet date.
|
(in millions)
|
2018
|
|
2019
|
|
2020
|
||||||
Targeted capital expenditures
|
$
|
1,000
|
|
|
$
|
750
|
|
|
$
|
750
|
|
|
Actual Fleet
|
|
Expected Fleet Activity
(a)
|
||||||||||||||
Aircraft
|
March 31, 2018
|
|
2018 Additions
|
|
2018 Removals
|
|
December 31, 2018
|
|
2019 Changes
|
|
December 31, 2019
|
||||||
B737 Freighters
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
B737 Passenger Aircraft
(c)
|
152
|
|
|
7
|
|
|
—
|
|
|
159
|
|
|
7
|
|
|
166
|
|
Airbus Passenger Aircraft
|
69
|
|
|
2
|
|
|
—
|
|
|
71
|
|
|
1
|
|
|
72
|
|
Total Mainline Fleet
|
224
|
|
|
9
|
|
|
—
|
|
|
233
|
|
|
8
|
|
|
241
|
|
Q400 operated by Horizon
(b)
|
47
|
|
|
—
|
|
|
(10
|
)
|
|
37
|
|
|
(7
|
)
|
|
30
|
|
E175 operated by Horizon
(b)
|
11
|
|
|
15
|
|
|
—
|
|
|
26
|
|
|
4
|
|
|
30
|
|
E175 operated by third party
(b)
|
25
|
|
|
7
|
|
|
—
|
|
|
32
|
|
|
—
|
|
|
32
|
|
Total Regional Fleet
|
83
|
|
|
22
|
|
|
(10
|
)
|
|
95
|
|
|
(3
|
)
|
|
92
|
|
Total
|
307
|
|
|
31
|
|
|
(10
|
)
|
|
328
|
|
|
5
|
|
|
333
|
|
(a)
|
The expected fleet counts at
December 31, 2018
and
2019
are subject to change.
|
(b)
|
Aircraft are either owned or leased by Horizon or operated under capacity purchase agreement with a third party.
|
(c)
|
Aircraft deliveries reflect the supplemental agreement entered with Boeing in the first quarter of 2018 which deferred certain B737 deliveries. Our first MAX9 delivery is scheduled for 2019.
|
|
Approximate % of Expected Fuel Requirements
|
|
Weighted-Average Crude Oil Price per Barrel
|
|
Average Premium Cost per Barrel
|
|||||
Second Quarter 2018
|
50
|
%
|
|
$
|
63
|
|
|
$
|
1
|
|
Third Quarter 2018
|
50
|
%
|
|
65
|
|
|
1
|
|
||
Fourth Quarter 2018
|
40
|
%
|
|
$
|
65
|
|
|
$
|
2
|
|
Remainder 2018
|
47
|
%
|
|
64
|
|
|
1
|
|
||
First Quarter 2019
|
30
|
%
|
|
67
|
|
|
2
|
|
||
Second Quarter 2019
|
20
|
%
|
|
68
|
|
|
2
|
|
||
Third Quarter 2019
|
10
|
%
|
|
70
|
|
|
2
|
|
||
Full Year 2019
|
15
|
%
|
|
$
|
68
|
|
|
$
|
2
|
|
(in millions)
|
Remainder of 2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Beyond 2022
|
|
Total
|
||||||||||||||
Current and long-term debt obligations
|
$
|
266
|
|
|
$
|
321
|
|
|
$
|
439
|
|
|
$
|
421
|
|
|
$
|
246
|
|
|
$
|
768
|
|
|
$
|
2,461
|
|
Operating lease commitments
(a)
|
323
|
|
|
424
|
|
|
391
|
|
|
339
|
|
|
297
|
|
|
1,178
|
|
|
2,952
|
|
|||||||
Aircraft maintenance deposits
(b)
|
60
|
|
|
65
|
|
|
68
|
|
|
64
|
|
|
52
|
|
|
38
|
|
|
347
|
|
|||||||
Aircraft commitments
(c)
|
610
|
|
|
560
|
|
|
514
|
|
|
562
|
|
|
303
|
|
|
141
|
|
|
2,690
|
|
|||||||
Interest obligations
(d)
|
62
|
|
|
82
|
|
|
69
|
|
|
50
|
|
|
37
|
|
|
72
|
|
|
372
|
|
|||||||
Other obligations
|
105
|
|
|
158
|
|
|
166
|
|
|
173
|
|
|
181
|
|
|
1,225
|
|
|
2,008
|
|
|||||||
Total
|
$
|
1,426
|
|
|
$
|
1,610
|
|
|
$
|
1,647
|
|
|
$
|
1,609
|
|
|
$
|
1,116
|
|
|
$
|
3,422
|
|
|
$
|
10,830
|
|
(a)
|
Operating lease commitments generally include aircraft operating leases, airport property and hangar leases, office space, and other equipment leases. Included here are E175 aircraft operated by SkyWest under a capacity purchase agreement.
|
(b)
|
Aircraft maintenance deposits relate to leased Airbus aircraft.
|
(c)
|
Represents non-cancelable contractual payment commitments for aircraft and engines, buyer furnished equipment, and aircraft maintenance and parts management.
|
(d)
|
For variable-rate debt, future obligations are shown above using forecasted interest rates as of
March 31, 2018
.
|
1.
|
The rate at which we defer sales proceeds related to services sold:
|
2.
|
The number of miles that will not be redeemed for travel (breakage):
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
ITEM 4. CONTROLS AND PROCEDURES
|
ITEM 1. LEGAL PROCEEDINGS
|
ITEM 1A. RISK FACTORS
|
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Total Number of
Shares Purchased
|
|
Average Price
Paid per Share
|
|
Maximum remaining
dollar value of shares
that can be purchased
under the plan
(in millions)
|
|||||
January 1, 2018 - January 31, 2018
|
69,412
|
|
|
$
|
69.59
|
|
|
|
||
February 1, 2018 - February 28, 2018
|
48,874
|
|
|
65.20
|
|
|
|
|||
March 1, 2018 - March 31, 2018
|
67,375
|
|
|
64.18
|
|
|
|
|||
Total
|
185,661
|
|
|
$
|
66.47
|
|
|
$
|
599
|
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4. MINE SAFETY DISCLOSURES
|
ITEM 5. OTHER INFORMATION
|
ITEM 6. EXHIBITS
|
1.
|
Exhibits:
See Exhibit Index.
|
ALASKA AIR GROUP, INC.
|
|
|
|
/s/ CHRISTOPHER M. BERRY
|
|
Christopher M. Berry
|
|
Vice President Finance and Controller
|
|
|
|
May 4, 2018
|
|
Exhibit
Number
|
Exhibit
Description
|
Form
|
Date of First Filing
|
Exhibit Number
|
3.1
|
10-Q
|
August 3, 2017
|
3.1
|
|
10.1*
|
10-K
|
February 15, 2018
|
10.25
|
|
10.2*
|
10-K
|
February 15, 2018
|
10.26
|
|
10.3†#
|
10-Q
|
|
|
|
31.1†
|
10-Q
|
|
|
|
31.2†
|
10-Q
|
|
|
|
32.1†
|
10-Q
|
|
|
|
32.2†
|
10-Q
|
|
|
|
101.INS†
|
XBRL Instance Document
|
|
|
|
101.SCH†
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL†
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF†
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB†
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE†
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
†
|
Filed herewith
|
|||
*
|
Indicates management contract or compensatory plan arrangement
|
|||
#
|
Pursuant to 17 CFR 240.24b-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission.
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
---|
DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
---|
No information found
No Customers Found
Price
Yield
Owner | Position | Direct Shares | Indirect Shares |
---|