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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2023
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number
1-8957
ALASKA AIR GROUP, INC.
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Delaware
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91-1292054
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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19300 International Boulevard,
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Seattle,
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WA
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98188
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Telephone:
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(206)
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392-5040
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Ticker Symbol
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Name of each exchange on which registered
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Common stock, $0.01 par value
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ALK
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New York Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange
Act.
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
(Do not check if a smaller reporting company)
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes
☐
No
☒
The registrant has
128,053,077
common shares, par value $0.01, outstanding at October 31, 2023.
This document is also available on our website at http://investor.alaskaair.com.
ALASKA AIR GROUP, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023
TABLE OF CONTENTS
As used in this Form 10-Q, the terms “Air Group,” the “Company,” “our,” “we” and "us" refer to Alaska Air Group, Inc. and its subsidiaries, unless the context indicates otherwise. Alaska Airlines, Inc. and Horizon Air Industries, Inc. are referred to as “Alaska” and “Horizon” and together as our “airlines.”
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Cautionary Note Regarding Forward-Looking Statements
In addition to historical information, this Form 10-Q contains forward-looking statements within the meaning of 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. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or the Company’s present expectations.
You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this report was filed with the SEC. We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. For a discussion of our risk factors, see Item 1A. "Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2022. Some of these risks include competition, labor costs, relations and availability, general economic conditions including those associated with pandemic recovery, increases in operating costs including fuel, inability to meet cost reduction, ESG and other strategic goals, seasonal fluctuations in demand and financial results, supply chain risks, events that negatively impact aviation safety and security, and changes in laws and regulations that impact our business. Please consider our forward-looking statements in light of those risks as you read this report.
PART I
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|
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
ALASKA AIR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
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|
|
|
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(in millions)
|
September 30, 2023
|
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December 31, 2022
|
|
ASSETS
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|
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Current Assets
|
|
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|
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Cash and cash equivalents
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$
|
647
|
|
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$
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338
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|
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Marketable securities
|
1,804
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|
|
2,079
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|
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Total cash and marketable securities
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2,451
|
|
|
2,417
|
|
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Receivables - net
|
341
|
|
|
296
|
|
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Inventories and supplies - net
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122
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|
|
104
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|
|
Prepaid expenses
|
187
|
|
|
163
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|
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Assets held for sale
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385
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|
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3
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|
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Other current assets
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158
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|
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57
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|
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Total Current Assets
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3,644
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|
|
3,040
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|
|
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Property and Equipment
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|
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Aircraft and other flight equipment
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10,015
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9,053
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Other property and equipment
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1,756
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|
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1,661
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Deposits for future flight equipment
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538
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|
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670
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|
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12,309
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11,384
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Less accumulated depreciation and amortization
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4,283
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|
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4,127
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Total Property and Equipment - Net
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8,026
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|
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7,257
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Other Assets
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|
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Operating lease assets
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1,171
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1,471
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Goodwill and intangible assets
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2,034
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|
|
2,038
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|
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Other noncurrent assets
|
290
|
|
|
380
|
|
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Total Other Assets
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3,495
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|
|
3,889
|
|
|
|
|
|
|
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Total Assets
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$
|
15,165
|
|
|
$
|
14,186
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
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(in millions, except share amounts)
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September 30, 2023
|
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December 31, 2022
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
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Current Liabilities
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|
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Accounts payable
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$
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229
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|
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$
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221
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|
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Accrued wages, vacation and payroll taxes
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561
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|
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619
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|
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Air traffic liability
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1,359
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|
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1,180
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|
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Other accrued liabilities
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806
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|
|
846
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Deferred revenue
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1,233
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|
|
1,123
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|
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Current portion of operating lease liabilities
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150
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|
|
228
|
|
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Current portion of long-term debt and finance leases
|
736
|
|
|
276
|
|
|
Total Current Liabilities
|
5,074
|
|
|
4,493
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|
|
|
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Long-Term Debt, Net of Current Portion
|
2,128
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|
|
1,883
|
|
|
|
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Noncurrent Liabilities
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|
|
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Long-term operating lease liabilities, net of current portion
|
1,113
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|
|
1,393
|
|
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Deferred income taxes
|
662
|
|
|
574
|
|
|
Deferred revenue
|
1,366
|
|
|
1,374
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|
|
Obligation for pension and post-retirement medical benefits
|
368
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|
|
348
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|
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Other liabilities
|
361
|
|
|
305
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|
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Total Noncurrent Liabilities
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3,870
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|
|
3,994
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|
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Commitments and Contingencies (Note 7)
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Shareholders' Equity
|
|
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|
|
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: 2023 -
138,004,646
shares; 2022 -
136,883,042
shares, Outstanding: 2023 -
127,120,173
shares; 2022 -
127,533,916
shares
|
1
|
|
|
1
|
|
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Capital in excess of par value
|
659
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|
|
577
|
|
|
Treasury stock (common), at cost: 2023 -
10,884,473
shares; 2022 -
9,349,944
shares
|
(
744
)
|
|
|
(
674
)
|
|
|
Accumulated other comprehensive loss
|
(
360
)
|
|
|
(
388
)
|
|
|
Retained earnings
|
4,537
|
|
|
4,300
|
|
|
|
4,093
|
|
|
3,816
|
|
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Total Liabilities and Shareholders' Equity
|
$
|
15,165
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|
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$
|
14,186
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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|
|
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|
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|
|
|
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|
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Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
(in millions, except per share amounts)
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Operating Revenue
|
|
|
|
|
|
|
|
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Passenger revenue
|
$
|
2,618
|
|
|
$
|
2,615
|
|
|
$
|
7,200
|
|
|
$
|
6,544
|
|
|
Mileage Plan other revenue
|
159
|
|
|
146
|
|
|
483
|
|
|
433
|
|
|
Cargo and other revenue
|
62
|
|
|
67
|
|
|
190
|
|
|
190
|
|
|
Total Operating Revenue
|
2,839
|
|
|
2,828
|
|
|
7,873
|
|
|
7,167
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
Wages and benefits
|
782
|
|
|
686
|
|
|
2,259
|
|
|
1,931
|
|
|
Variable incentive pay
|
45
|
|
|
48
|
|
|
149
|
|
|
140
|
|
|
Aircraft fuel, including hedging gains and losses
|
694
|
|
|
877
|
|
|
1,932
|
|
|
2,000
|
|
|
Aircraft maintenance
|
118
|
|
|
92
|
|
|
367
|
|
|
331
|
|
|
Aircraft rent
|
48
|
|
|
76
|
|
|
161
|
|
|
222
|
|
|
Landing fees and other rentals
|
183
|
|
|
161
|
|
|
502
|
|
|
435
|
|
|
Contracted services
|
100
|
|
|
83
|
|
|
290
|
|
|
243
|
|
|
Selling expenses
|
84
|
|
|
82
|
|
|
231
|
|
|
218
|
|
|
Depreciation and amortization
|
113
|
|
|
104
|
|
|
330
|
|
|
310
|
|
|
Food and beverage service
|
62
|
|
|
52
|
|
|
176
|
|
|
143
|
|
|
Third-party regional carrier expense
|
58
|
|
|
53
|
|
|
164
|
|
|
145
|
|
|
Other
|
185
|
|
|
207
|
|
|
544
|
|
|
536
|
|
|
Special items - fleet transition and other
|
156
|
|
|
155
|
|
|
355
|
|
|
376
|
|
|
Special items - labor and related
|
—
|
|
|
90
|
|
|
51
|
|
|
90
|
|
|
Total Operating Expenses
|
2,628
|
|
|
2,766
|
|
|
7,511
|
|
|
7,120
|
|
|
Operating Income
|
211
|
|
|
62
|
|
|
362
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating Income (Expense)
|
|
|
|
|
|
|
|
|
Interest income
|
23
|
|
|
17
|
|
|
62
|
|
|
35
|
|
|
Interest expense
|
(
34
)
|
|
|
(
31
)
|
|
|
(
90
)
|
|
|
(
84
)
|
|
|
Interest capitalized
|
7
|
|
|
3
|
|
|
21
|
|
|
8
|
|
|
Special items - net non-operating
|
(
8
)
|
|
|
—
|
|
|
(
14
)
|
|
|
—
|
|
|
Other - net
|
(
6
)
|
|
|
14
|
|
|
(
22
)
|
|
|
38
|
|
|
Total Non-operating Income (Expense)
|
(
18
)
|
|
|
3
|
|
|
(
43
)
|
|
|
(
3
)
|
|
|
Income Before Income Tax
|
193
|
|
|
65
|
|
|
319
|
|
|
44
|
|
|
Income tax expense
|
54
|
|
|
25
|
|
|
82
|
|
|
8
|
|
|
Net Income
|
$
|
139
|
|
|
$
|
40
|
|
|
$
|
237
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share:
|
$
|
1.09
|
|
|
$
|
0.32
|
|
|
$
|
1.86
|
|
|
$
|
0.28
|
|
|
Diluted Earnings Per Share:
|
$
|
1.08
|
|
|
$
|
0.31
|
|
|
$
|
1.84
|
|
|
$
|
0.28
|
|
|
Shares used for computation:
|
|
|
|
|
|
|
|
|
Basic
|
127.187
|
|
|
126.783
|
|
|
127.375
|
|
|
126.440
|
|
|
Diluted
|
129.188
|
|
|
128.370
|
|
|
129.085
|
|
|
128.087
|
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
(in millions)
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Net Income
|
$
|
139
|
|
|
$
|
40
|
|
|
$
|
237
|
|
|
$
|
36
|
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
Marketable securities
|
2
|
|
|
(
26
)
|
|
|
18
|
|
|
(
86
)
|
|
|
Employee benefit plans
|
3
|
|
|
1
|
|
|
11
|
|
|
2
|
|
|
Interest rate derivative instruments
|
—
|
|
|
5
|
|
|
(
1
)
|
|
|
18
|
|
|
Total other comprehensive income (loss), net of tax
|
$
|
5
|
|
|
$
|
(
20
)
|
|
|
$
|
28
|
|
|
$
|
(
66
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income (Loss), Net of Tax
|
$
|
144
|
|
|
$
|
20
|
|
|
$
|
265
|
|
|
$
|
(
30
)
|
|
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Common Stock Outstanding
|
|
Common Stock
|
|
Capital in Excess of Par Value
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Loss
|
|
Retained Earnings
|
|
Total
|
|
|
|
|
|
Balance at December 31, 2022
|
127.534
|
|
|
$
|
1
|
|
|
$
|
577
|
|
|
$
|
(
674
)
|
|
|
$
|
(
388
)
|
|
|
$
|
4,300
|
|
|
$
|
3,816
|
|
|
|
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(
142
)
|
|
|
(
142
)
|
|
|
|
|
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
23
|
|
|
|
|
|
|
Common stock repurchase
|
(
0.414
)
|
|
|
—
|
|
|
—
|
|
|
(
18
)
|
|
|
—
|
|
|
—
|
|
|
(
18
)
|
|
|
|
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued under stock plans
|
0.123
|
|
|
—
|
|
|
(
2
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(
2
)
|
|
|
|
|
|
|
Balance at March 31, 2023
|
127.243
|
|
|
$
|
1
|
|
|
$
|
587
|
|
|
$
|
(
692
)
|
|
|
$
|
(
365
)
|
|
|
$
|
4,158
|
|
|
$
|
3,689
|
|
|
|
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
240
|
|
|
240
|
|
|
|
|
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Common stock repurchase
|
(
0.872
)
|
|
|
—
|
|
|
—
|
|
|
(
39
)
|
|
|
—
|
|
|
—
|
|
|
(
39
)
|
|
|
|
|
|
|
Stock-based compensation
|
0.017
|
|
|
—
|
|
|
26
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for employee stock purchase plan
|
0.924
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
|
|
|
|
|
Stock issued under stock plans
|
0.036
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
Balance at June 30, 2023
|
127.348
|
|
|
$
|
1
|
|
|
$
|
648
|
|
|
$
|
(
731
)
|
|
|
$
|
(
365
)
|
|
|
$
|
4,398
|
|
|
$
|
3,951
|
|
|
|
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
139
|
|
|
139
|
|
|
|
|
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
|
|
|
|
Common stock repurchase
|
(
0.249
)
|
|
|
—
|
|
|
—
|
|
|
(
13
)
|
|
|
—
|
|
|
—
|
|
|
(
13
)
|
|
|
|
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued under stock plans
|
0.021
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Balance at September 30, 2023
|
127.120
|
|
$
|
1
|
|
|
$
|
659
|
|
|
$
|
(
744
)
|
|
|
$
|
(
360
)
|
|
|
$
|
4,537
|
|
|
$
|
4,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Common Stock Outstanding
|
|
Common Stock
|
|
Capital in Excess of Par Value
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Loss
|
|
Retained Earnings
|
|
Total
|
|
|
|
|
|
Balance at December 31, 2021
|
125.906
|
|
|
$
|
1
|
|
|
$
|
494
|
|
|
$
|
(
674
)
|
|
|
$
|
(
262
)
|
|
|
$
|
4,242
|
|
|
$
|
3,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(
143
)
|
|
|
(
143
)
|
|
|
|
|
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(
30
)
|
|
|
—
|
|
|
(
30
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued under stock plans
|
0.182
|
|
|
—
|
|
|
(
4
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(
4
)
|
|
|
|
|
|
|
Balance at March 31, 2022
|
126.088
|
|
|
$
|
1
|
|
|
$
|
503
|
|
|
$
|
(
674
)
|
|
|
$
|
(
292
)
|
|
|
$
|
4,099
|
|
|
$
|
3,637
|
|
|
|
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
139
|
|
|
139
|
|
|
|
|
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(
16
)
|
|
|
—
|
|
|
(
16
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
0.017
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for employee stock purchase plan
|
0.643
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
|
|
|
|
Stock issued under stock plans
|
0.012
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Balance at June 30, 2022
|
126.760
|
|
|
$
|
1
|
|
|
$
|
542
|
|
|
$
|
(
674
)
|
|
|
$
|
(
308
)
|
|
|
$
|
4,238
|
|
|
$
|
3,799
|
|
|
|
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
40
|
|
|
|
|
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(
20
)
|
|
|
—
|
|
|
(
20
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
|
|
|
|
Stock issued under stock plans
|
0.074
|
|
|
—
|
|
|
(
1
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(
1
)
|
|
|
|
|
|
|
Balance at September 30, 2022
|
126.834
|
|
$
|
1
|
|
|
$
|
549
|
|
|
$
|
(
674
)
|
|
|
$
|
(
328
)
|
|
|
$
|
4,278
|
|
|
$
|
3,826
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(in millions)
|
|
|
|
|
|
2023
|
|
2022
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
$
|
237
|
|
|
$
|
36
|
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
330
|
|
|
310
|
|
|
Stock-based compensation and other
|
|
|
|
|
|
73
|
|
|
33
|
|
|
Special items - fleet transition and other
|
|
|
|
|
|
344
|
|
|
376
|
|
|
Special items - labor and related
|
|
|
|
|
|
51
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Changes in deferred income taxes
|
|
|
|
|
|
90
|
|
|
—
|
|
|
Increase in accounts receivable
|
|
|
|
|
|
(
45
)
|
|
|
(
59
)
|
|
|
Increase in air traffic liability
|
|
|
|
|
|
179
|
|
|
304
|
|
|
Increase in deferred revenue
|
|
|
|
|
|
102
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal income tax refund
|
|
|
|
|
|
—
|
|
|
260
|
|
|
Other - net
|
|
|
|
|
|
(
258
)
|
|
|
26
|
|
|
Net cash provided by operating activities
|
|
|
|
|
|
1,103
|
|
|
1,409
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Property and equipment additions
|
|
|
|
|
|
|
|
|
|
Aircraft and aircraft purchase deposits
|
|
|
|
|
|
(
669
)
|
|
|
(
688
)
|
|
|
Other flight equipment
|
|
|
|
|
|
(
153
)
|
|
|
(
156
)
|
|
|
Other property and equipment
|
|
|
|
|
|
(
169
)
|
|
|
(
103
)
|
|
|
Total property and equipment additions
|
|
|
|
|
|
(
991
)
|
|
|
(
947
)
|
|
|
Purchases of marketable securities
|
|
|
|
|
|
(
519
)
|
|
|
(
1,670
)
|
|
|
Sales and maturities of marketable securities
|
|
|
|
|
|
806
|
|
|
1,731
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investing activities
|
|
|
|
|
|
(
106
)
|
|
|
(
2
)
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
(
810
)
|
|
|
(
888
)
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt, net of issuance costs
|
|
|
|
|
|
313
|
|
|
—
|
|
|
Long-term debt payments
|
|
|
|
|
|
(
242
)
|
|
|
(
333
)
|
|
|
Common stock repurchases
|
|
|
|
|
|
(
70
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financing activities
|
|
|
|
|
|
11
|
|
|
37
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
|
12
|
|
|
(
296
)
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
|
|
305
|
|
|
225
|
|
|
Cash, cash equivalents, and restricted cash at beginning of period
|
|
|
|
|
|
369
|
|
|
494
|
|
|
Cash, cash equivalents, and restricted cash at end of the period
|
|
|
|
|
|
$
|
674
|
|
|
$
|
719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(in millions)
|
|
|
|
|
|
2023
|
|
2022
|
|
Supplemental disclosure:
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
Interest, net of amount capitalized
|
|
|
|
|
|
$
|
85
|
|
|
$
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes, net of refunds received
|
|
|
|
|
|
14
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
Right-of-use assets acquired through operating leases
|
|
|
|
|
|
120
|
|
|
419
|
|
|
Operating leases converted to finance leases
|
|
|
|
|
|
505
|
|
|
—
|
|
|
Property and equipment acquired through the issuance of debt
|
|
|
|
|
|
179
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of cash, cash equivalents, and restricted cash:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
647
|
|
|
688
|
|
|
Restricted cash included in Other noncurrent assets
|
|
|
|
|
|
27
|
|
|
31
|
|
|
Total cash, cash equivalents, and restricted cash at end of the period
|
|
|
|
|
|
$
|
674
|
|
|
$
|
719
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1.
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
The condensed consolidated financial statements include the accounts of Air Group, or the Company, and its primary subsidiaries, Alaska and Horizon. The condensed consolidated financial statements also include McGee Air Services (McGee), a ground services subsidiary of Alaska, and other immaterial business units. All intercompany balances and transactions have been eliminated. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. It should be read in conjunction with the consolidated financial statements and accompanying notes in the Form 10-K for the year ended December 31, 2022. In the opinion of management, all adjustments have been made that are necessary to fairly present the Company’s financial position as of September 30, 2023 and the results of operations for the three and nine months ended September 30, 2023 and 2022. Such adjustments were of a normal recurring nature. Certain rows, columns, figures, or percentages may not recalculate due to rounding.
In preparing these statements, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities, as well as the reported amounts of revenue and expenses, including impairment charges. Due to seasonal variations in the demand for air travel, the volatility of aircraft fuel prices, changes in global economic conditions, changes in the competitive environment, and other factors, operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of operating results for the entire year.
NOTE 2.
FLEET TRANSITION
In the first quarter of 2022, the Company announced plans to accelerate the transition of its mainline operations to an all-Boeing 737 fleet. It also announced plans to transition its regional operations to an all-Embraer fleet. The removal of all A320 and Q400 aircraft from operating service was completed in January 2023. The removal of all A321neo aircraft from operating service was completed in September 2023. At September 30, 2023, Alaska had reached agreements with multiple lessors to exit its
ten
A321neo operating leases and purchase the aircraft.
Three
aircraft purchases closed by September 30, 2023. Subsequent to quarter end, Alaska finalized an agreement to sell the
ten
aircraft to American Airlines. The remaining
seven
purchases and all sales to American Airlines are expected to occur in the fourth quarter of 2023 and first quarter of 2024. As a result of the new agreements, the operating leases associated with the
seven
aircraft that were not purchased by September 30, 2023 were considered modified, and upon evaluation were reclassified as finance leases.
Valuation of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or circumstances indicate that the total carrying value of an asset or asset group may not be recoverable. In the second quarter, the Company performed an impairment analysis for the A321neo fleet and recorded an impairment charge of $156 million.
In the third quarter, the Company determined there was additional impairment related to the A321neo fleet due to new purchase activity in the period. The Company estimated the fair market value for the A321neo aircraft using available market price information with adjustments based on quantitative and qualitative considerations. Based on this fair market value, the Company recorded an impairment charge of $
123
million, reflecting the amount by which carrying value exceeded fair value of the aircraft. This charge is included within Special items - fleet transition and other in the condensed consolidated statements of operations.
Other Fleet Related Disclosure
The
ten
A321neo aircraft that have been removed from operating service are classified as Assets held for sale in the condensed consolidated balance sheets as of September 30, 2023.
Seven
of these aircraft are classified as finance leases, whose lease liabilities are reflected within Current portion of long-term debt and finance leases and total $
452
million as of September 30, 2023. Interest expense associated with the finance leases of $
8
million for the third quarter of 2023 was recognized within Special items - net non-operating in the condensed consolidated statements of operations.
Special charges were also recognized during the three and nine months ended September 30, 2023 for other fleet transition costs, including accelerated aircraft ownership expenses, certain aircraft maintenance work performed as a result of the fleet retirements, adjustments to estimated costs to return the A320 fleet, and penalty rent for Airbus aircraft which have not yet been returned to the lessor as of the lease expiration date.
The following table summarizes our special charges for fleet transition costs for the three and nine months ended September 30, 2023 and 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
(in millions)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Impairment of long-lived assets
(a)
|
|
$
|
120
|
|
|
$
|
—
|
|
|
$
|
271
|
|
|
$
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
Other fleet transition costs
|
|
36
|
|
|
155
|
|
|
84
|
|
|
306
|
|
|
Special items - fleet transition and other
|
|
$
|
156
|
|
|
$
|
155
|
|
|
$
|
355
|
|
|
$
|
376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Net of other immaterial activity recognized in the three and nine months ended September 30, 2023.
NOTE 3.
REVENUE
Ticket revenue is recorded as Passenger revenue, and represents the primary source of the Company's revenue. Also included in Passenger revenue is passenger ancillary revenue such as bag fees, on-board food and beverage, and certain revenue from the frequent flyer program. Mileage Plan other revenue includes brand and marketing revenue from the co-branded credit card and other partners, and certain interline frequent flyer revenue, net of commissions. Cargo and other revenue includes freight and mail revenue, and to a lesser extent, other ancillary revenue products such as lounge membership and certain commissions.
The Company disaggregates revenue by segment in Note 10. The level of detail within the Company’s condensed consolidated statements of operations, segment disclosures, and in this footnote depict the nature, amount, timing, and uncertainty of revenue and how cash flows are affected by economic and other factors.
Passenger Ticket and Ancillary Services Revenue
Passenger revenue recognized in the condensed consolidated statements of operations (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Passenger ticket revenue, net of taxes and fees
|
$
|
2,226
|
|
|
$
|
2,252
|
|
|
$
|
6,081
|
|
|
$
|
5,536
|
|
|
Passenger ancillary revenue
|
135
|
|
|
127
|
|
|
362
|
|
|
337
|
|
|
Mileage Plan passenger revenue
|
257
|
|
|
236
|
|
|
757
|
|
|
671
|
|
|
Total Passenger revenue
|
$
|
2,618
|
|
|
$
|
2,615
|
|
|
$
|
7,200
|
|
|
$
|
6,544
|
|
Mileage Plan Loyalty Program
Mileage Plan revenue included in the condensed consolidated statements of operations (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Passenger revenue
|
$
|
257
|
|
|
$
|
236
|
|
|
$
|
757
|
|
|
$
|
671
|
|
|
Mileage Plan other revenue
|
159
|
|
|
146
|
|
|
483
|
|
|
433
|
|
|
Total Mileage Plan revenue
|
$
|
416
|
|
|
$
|
382
|
|
|
$
|
1,240
|
|
|
$
|
1,104
|
|
Cargo and Other Revenue
Cargo and other revenue included in the condensed consolidated statements of operations (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Cargo revenue
|
$
|
29
|
|
|
$
|
37
|
|
|
$
|
97
|
|
|
$
|
102
|
|
|
Other revenue
|
33
|
|
|
30
|
|
|
93
|
|
|
88
|
|
|
Total Cargo and other revenue
|
$
|
62
|
|
|
$
|
67
|
|
|
$
|
190
|
|
|
$
|
190
|
|
Air Traffic Liability and Deferred Revenue
Passenger ticket and ancillary services liabilities
The Company recognized Passenger revenue of
$
33
million
and
$
65
million
from the prior year-end air traffic liability balance for the three months ended September 30, 2023 and 2022, and
$
621
million
and
$
587
million
from the prior year-end air traffic liability balance for the nine months ended September 30, 2023 and 2022.
Mileage Plan assets and liabilities
The Company records a receivable for amounts due from the affinity card partner and from other partners as mileage credits are sold until the payments are collected. The Company had
$
91
million
of such receivables as of September 30, 2023 and $
83
million as of December 31, 2022.
The table below presents a roll forward of the total frequent flyer liability (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2023
|
|
2022
|
|
Total Deferred Revenue balance at January 1
|
$
|
2,497
|
|
|
$
|
2,358
|
|
|
Travel miles and companion certificate redemption - Passenger revenue
|
(
712
)
|
|
|
(
632
)
|
|
|
Miles redeemed on partner airlines - Other revenue
|
(
86
)
|
|
|
(
45
)
|
|
|
Increase in liability for mileage credits issued
|
900
|
|
|
800
|
|
|
Total Deferred Revenue balance at September 30
|
$
|
2,599
|
|
|
$
|
2,481
|
|
NOTE 4. FAIR VALUE MEASUREMENTS
In determining fair value, there is a three-level hierarchy based on the reliability of the inputs used. Level 1 refers to fair values based on quoted prices in active markets for identical assets or liabilities. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 refers to fair values estimated using significant unobservable inputs.
Fair Value of Financial Instruments on a Recurring Basis
As of September 30, 2023, total cost basis for all marketable securities was $
1.9
billion, compared to a total fair value of $
1.8
billion. The decline in value is primarily due to changes in interest rates. Management does not believe any unrealized losses are the result of expected credit losses based on its evaluation of industry and duration exposure, credit ratings of the securities, liquidity profiles, and other observable information as of September 30, 2023.
Fair values of financial instruments on the condensed consolidated balance sheets (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023
|
|
December 31, 2022
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency securities
|
$
|
508
|
|
|
$
|
—
|
|
|
$
|
508
|
|
|
$
|
505
|
|
|
$
|
—
|
|
|
$
|
505
|
|
|
Equity mutual funds
|
5
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
Foreign government bonds
|
—
|
|
|
10
|
|
|
10
|
|
|
—
|
|
|
25
|
|
|
25
|
|
|
Asset-backed securities
|
—
|
|
|
216
|
|
|
216
|
|
|
—
|
|
|
261
|
|
|
261
|
|
|
Mortgage-backed securities
|
—
|
|
|
123
|
|
|
123
|
|
|
—
|
|
|
196
|
|
|
196
|
|
|
Corporate notes and bonds
|
—
|
|
|
889
|
|
|
889
|
|
|
—
|
|
|
1,025
|
|
|
1,025
|
|
|
Municipal securities
|
—
|
|
|
53
|
|
|
53
|
|
|
—
|
|
|
62
|
|
|
62
|
|
|
Total Marketable securities
|
513
|
|
|
1,291
|
|
|
1,804
|
|
|
510
|
|
|
1,569
|
|
|
2,079
|
|
|
Derivative instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel hedge contracts - call options
|
—
|
|
|
40
|
|
|
40
|
|
|
—
|
|
|
44
|
|
|
44
|
|
|
Interest rate swap agreements
|
—
|
|
|
13
|
|
|
13
|
|
|
—
|
|
|
15
|
|
|
15
|
|
|
Total Assets
|
$
|
513
|
|
|
$
|
1,344
|
|
|
$
|
1,857
|
|
|
$
|
510
|
|
|
$
|
1,628
|
|
|
$
|
2,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company uses the market and income approach to determine the fair value of marketable securities. U.S. government securities and equity mutual funds are Level 1 as the fair value is based on quoted prices in active markets. Foreign government bonds, asset-backed securities, mortgage-backed securities, corporate notes and bonds, and municipal securities are Level 2 as the fair value is based on standard valuation models that are calculated based on observable inputs such as quoted interest rates, yield curves, credit ratings of the security and other observable market information.
The Company uses the market approach and the income approach to determine the fair value of derivative instruments. The fair value for fuel hedge call options is determined utilizing an option pricing model based on inputs that are readily available in active markets or can be derived from information available in active markets. In addition, the fair value considers the exposure to credit losses in the event of non-performance by counterparties. Interest rate swap agreements are Level 2 as the fair value of these contracts are determined based on the difference between the fixed interest rate in the agreements and the observable interest SOFR-based forward rates at period end multiplied by the total notional value.
Activity and Maturities for Marketable Securities
Maturities for marketable securities (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023
|
Cost Basis
|
|
Fair Value
|
|
Due in one year or less
|
$
|
403
|
|
|
$
|
395
|
|
|
Due after one year through five years
|
1,386
|
|
|
1,320
|
|
|
Due after five years
|
73
|
|
|
68
|
|
|
Due after 10 years
|
18
|
|
|
16
|
|
|
No maturity date
|
4
|
|
|
5
|
|
|
Total
|
$
|
1,884
|
|
|
$
|
1,804
|
|
Fair Value of Other Financial Instruments
The Company uses the following methods and assumptions to determine the fair value of financial instruments that are not recognized at fair value as described below.
Cash, Cash Equivalents, and Restricted Cash
: Cash equivalents consist of highly liquid investments with original maturities of three months or less, such as money market funds, commercial paper, and certificates of deposit. They are carried at cost, which approximates fair value.
The Company's restricted cash balances are primarily used to guarantee various letters of credit, self-insurance programs, or other contractual rights. Restricted cash consists of highly liquid securities with original maturities of three months or less. They are carried at cost, which approximates fair value.
Debt
: To estimate the fair value of all fixed-rate debt as of September 30, 2023, the Company uses the income approach by discounting cash flows or estimation using quoted market prices, utilizing borrowing rates for comparable debt over the remaining life of the outstanding debt. The estimated fair value of the fixed-rate Enhanced Equipment Trust Certificate (EETC) debt is Level 2, as it is estimated using observable inputs, while the estimated fair value of $
566
million of other fixed-rate debt, including PSP notes payable, is classified as Level 3, as it is not actively traded and is valued using discounted cash flows which is an unobservable input.
Fixed-rate debt on the condensed consolidated balance sheets and the estimated fair value of long-term fixed-rate debt (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023
|
|
December 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate debt
|
$
|
1,520
|
|
|
$
|
1,660
|
|
|
|
|
|
|
|
Estimated fair value
|
$
|
1,372
|
|
|
$
|
1,473
|
|
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are recognized or disclosed at fair value on a nonrecurring basis, including property, plant and equipment, operating and finance lease assets, goodwill, and intangible assets. These assets are subject to fair valuation when there is evidence of impairment. Refer to Note 2 for details regarding impairment charges recorded in the three and nine months ended September 30, 2023.
NOTE 5.
LONG-TERM DEBT
Long-term debt obligations on the condensed consolidated balance sheets (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023
|
|
December 31, 2022
|
|
Fixed-rate notes payable due through 2029
|
$
|
85
|
|
|
$
|
113
|
|
|
Fixed-rate PSP notes payable due through 2031
|
600
|
|
|
600
|
|
|
Fixed-rate EETC payable due through 2025 & 2027
|
835
|
|
|
947
|
|
|
Variable-rate notes payable due through 2035
|
907
|
|
|
514
|
|
|
Less debt issuance costs
|
(
15
)
|
|
|
(
15
)
|
|
|
Total debt
|
2,412
|
|
|
2,159
|
|
|
Less current portion
(a)
|
284
|
|
|
276
|
|
|
Long-term debt, less current portion
|
$
|
2,128
|
|
|
$
|
1,883
|
|
|
|
|
|
|
|
Weighted-average fixed-interest rate
|
3.4
|
%
|
|
3.5
|
%
|
|
Weighted-average variable-interest rate
|
6.8
|
%
|
|
5.8
|
%
|
(a) Excludes finance lease liabilities recognized within Current portion of long-term debt and finance leases in the condensed consolidated balance sheets as of September 30, 2023.
Approximately $
216
million of the Company's total variable-rate notes payable are effectively fixed via interest rate swaps at September 30, 2023, resulting in an effective weighted-average interest rate for the full debt portfolio of
4.3
%.
During the nine months ended September 30, 2023, the Company incurred debt of $
495
million from multiple lenders and sources. New debt includes proceeds of $
316
million which is secured by aircraft. Additionally, $
179
million was incurred as part of an agreement to finance certain E175 deliveries. Debt from this agreement is reflected as a non-cash transaction within the supplemental disclosures in the condensed consolidated statements of cash flows. Also during the nine months ended September 30, 2023, the Company made scheduled debt payments of $
240
million and prepayments of $
2
million.
Debt Maturity
At September 30, 2023, long-term debt principal payments for the next five years and thereafter are as follows (in millions):
|
|
|
|
|
|
|
|
|
Total
|
|
Remainder of 2023
|
$
|
45
|
|
|
2024
|
286
|
|
|
2025
|
343
|
|
|
2026
|
292
|
|
|
2027
|
597
|
|
|
Thereafter
|
864
|
|
|
Total Principal Payments
|
$
|
2,427
|
|
Bank Lines of Credit
Alaska has three credit facilities totaling $
626
million as of September 30, 2023. One of the credit facilities for $
150
million expires in March 2025 and is secured by certain accounts receivable, spare engines, spare parts, and ground service equipment. A second credit facility, which is secured by aircraft, was amended by the Company in the third quarter to increase its size to $
400
million and extend its term to June 2026. Both facilities have variable interest rates based on SOFR plus a specified margin. A third credit facility for $
76
million expires in June 2024 and is secured by aircraft.
Alaska has secured letters of credit against the third facility, but has no plans to borrow using either of the other two facilities. All credit facilities have a requirement to maintain a minimum unrestricted cash and marketable securities balance of $
500
million. Alaska was in compliance with this covenant at September 30, 2023.
NOTE 6.
EMPLOYEE BENEFIT PLANS
Net periodic benefit costs for qualified defined-benefit plans include the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Service cost
|
$
|
8
|
|
|
$
|
12
|
|
|
$
|
22
|
|
|
$
|
34
|
|
|
Pension expense included in Wages and benefits
|
8
|
|
|
12
|
|
|
22
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
27
|
|
|
17
|
|
|
81
|
|
|
49
|
|
|
Expected return on assets
|
(
28
)
|
|
|
(
32
)
|
|
|
(
85
)
|
|
|
(
96
)
|
|
|
Amortization of prior service cost (credit)
|
—
|
|
|
(
1
)
|
|
|
—
|
|
|
(
1
)
|
|
|
Recognized actuarial loss
|
5
|
|
|
2
|
|
|
17
|
|
|
6
|
|
|
Pension expense included in Non-operating Income (Expense)
|
$
|
4
|
|
|
$
|
(
14
)
|
|
|
$
|
13
|
|
|
$
|
(
42
)
|
|
NOTE 7. COMMITMENTS AND CONTINGENCIES
Future minimum payments for commitments as of September 30, 2023 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft-Related Commitments
(a)
|
|
Capacity Purchase Agreements and Other Obligations
(b)
|
|
|
|
Remainder of 2023
|
|
$
|
460
|
|
|
$
|
56
|
|
|
|
|
2024
|
|
1,754
|
|
|
224
|
|
|
|
|
2025
|
|
1,438
|
|
|
227
|
|
|
|
|
2026
|
|
688
|
|
|
219
|
|
|
|
|
2027
|
|
334
|
|
|
220
|
|
|
|
|
Thereafter
|
|
591
|
|
|
739
|
|
|
|
|
Total
|
|
$
|
5,265
|
|
|
$
|
1,685
|
|
|
|
(a)
Includes contractual commitments for aircraft, engines, and aircraft maintenance. Option deliveries are excluded from minimum commitments until exercise.
(b)
Primarily comprised of non-lease costs associated with capacity purchase agreements, as well as other various sponsorship agreements and investment commitments.
Aircraft Commitments
Aircraft purchase commitments include contractual commitments for aircraft and engines. Details for contractual aircraft commitments as of September 30, 2023 are outlined below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Firm Orders
|
|
Options and Other Rights
|
|
Total
|
|
Aircraft Type
|
2023-2027
|
|
2025-2030
|
|
2023-2030
|
|
B737
|
89
|
|
105
|
|
194
|
|
E175
|
9
|
|
13
|
|
22
|
|
Total
|
98
|
|
118
|
|
216
|
The B737 fleet commitments outlined above represent the contractual commitments as defined in Alaska's existing order with Boeing as of September 30, 2023. Boeing has communicated to Alaska that certain B737 deliveries contracted in 2023 are expected to be delayed into 2024.
Alaska has contractual agreements as of September 30, 2023 to purchase
seven
of its leased A321neo aircraft. These transactions are expected to occur in the fourth quarter of 2023 and first quarter of 2024. The obligations for these aircraft, including both the remaining lease payments and subsequent purchase, are reflected within Current portion of long-term debt and finance leases in the condensed consolidated balance sheets as of September 30, 2023 and are not reflected in the tables above. Refer to Note 2 to the condensed consolidated financial statements for additional details.
Aircraft Maintenance
Aircraft maintenance commitments include contractual commitments for engine maintenance agreements requiring monthly payments based upon utilization, such as flight hours, cycles, and age of the aircraft. In turn, these maintenance agreements transfer certain risks to the third-party service provider. Alaska has contracts for maintenance on its B737-800 and B737-900ER aircraft engines through 2026 and 2032, respectively. Horizon has a contract for maintenance on certain E175 aircraft engines through 2033.
Contingencies
The Company is a party to routine litigation matters incidental to its business and with respect to which no material liability is expected. Liabilities for litigation related contingencies are recorded when a loss is determined to be probable and estimable.
As part of the 2016 acquisition of Virgin America, Alaska assumed responsibility for the Virgin trademark license agreement with the Virgin Group. In 2019, pursuant to that agreement's venue provision, the Virgin Group sued Alaska in England, alleging that the agreement requires Alaska to pay $
8
million per year as a minimum annual royalty through 2039, adjusted annually for inflation and irrespective of Alaska's actual use (or non-use) of the mark. The possible range of contractual liability is between $
10
million and $
160
million. Alaska stopped making royalty payments in 2019 after ending all use of the Virgin brand. On February 16, 2023, the commercial court issued a ruling adopting Virgin Group’s interpretation of the license agreement. The Company has appealed the decision and believes the claims in the case are without factual and legal merit, a position supported by Virgin America’s representations during pre-merger due diligence. Alaska also commenced a separate claim for breach of the agreement against the Virgin Group that may affect the Company’s total liability in the matter.
NOTE 8.
SHAREHOLDERS' EQUITY
Common Stock Repurchase
In August 2015, the Board of Directors authorized a $
1
billion share repurchase program. In March 2020, the Company suspended the share repurchase program as required by the CARES Act. These restrictions ended on October 1, 2022. The Company restarted the share repurchase program in February 2023 pursuant to the existing repurchase program. As of September 30, 2023, the Company has repurchased
9.1
million shares for $
613
million under this program. No shares were repurchased in 2022.
Share purchase activity (in millions, except share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2023
|
|
|
|
|
|
Nine Months Ended
September 30, 2023
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
2015 Repurchase Program—$1 billion
|
248,988
|
|
|
$
|
13
|
|
|
|
|
|
|
1,534,529
|
|
|
$
|
70
|
|
|
|
|
|
CARES Act Warrant Issuances
As taxpayer protection required under the Payroll Support Program (PSP) under the CARES Act, the Company granted the U.S. government a total of
1,455,437
warrants to purchase ALK common stock in 2020 and 2021. An additional
427,080
warrants were issued in conjunction with a draw on the CARES Act Loan in 2020. These warrants are non-voting, freely transferable, may be settled as net shares or in cash at the Company's option, and have a five-year term.
As of September 30, 2023, there are
1,882,517
total warrants outstanding, with a weighted average strike price of $
39.06
. The value of the warrants was estimated using a Black-Scholes option pricing model. The total fair value of all outstanding warrants was $
30
million, recorded in stockholders' equity at issuance.
Earnings
Per Share (EPS)
Diluted EPS is calculated by dividing net income by the average number of common shares outstanding plus the number of additional common shares that would have been outstanding assuming the exercise of in-the-money stock options, restricted stock units, and warrants, using the treasury-stock method. Anti-dilutive common stock equivalents excluded from the calculation of diluted earnings per share were
1.2
million and
1.9
million for the three and nine months ended September 30, 2023, and
1.4
million and
1.7
million for the three and nine months ended September 30, 2022.
NOTE 9.
ACCUMULATED OTHER COMPREHENSIVE LOSS
A roll forward of the amounts included in accumulated other comprehensive loss, net of tax (in millions), is shown below for the three and nine months ended September 30, 2023 and 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable Securities
|
|
Employee Benefit Plan
|
|
Interest Rate Derivatives
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2023, net of tax effect of $
116
|
$
|
(
64
)
|
|
|
$
|
(
311
)
|
|
|
$
|
10
|
|
|
$
|
(
365
)
|
|
|
Reclassifications into earnings, net of tax impact of $(
1
)
|
2
|
|
3
|
|
—
|
|
5
|
|
Change in value, net of tax impact of $
0
|
—
|
|
—
|
|
—
|
|
—
|
|
Balance at September 30, 2023, net of tax effect of $
115
|
$
|
(
62
)
|
|
|
$
|
(
308
)
|
|
|
$
|
10
|
|
|
$
|
(
360
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2022, net of tax effect of $
122
|
$
|
(
80
)
|
|
|
$
|
(
319
)
|
|
|
$
|
11
|
|
|
$
|
(
388
)
|
|
|
Reclassifications into earnings, net of tax effect of $(
5
)
|
9
|
|
|
11
|
|
|
—
|
|
|
20
|
|
|
Change in value, net of tax effect of $(
2
)
|
9
|
|
|
—
|
|
|
(
1
)
|
|
|
8
|
|
|
Balance at September 30, 2023, net of tax effect of $
115
|
$
|
(
62
)
|
|
|
$
|
(
308
)
|
|
|
$
|
10
|
|
|
$
|
(
360
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable Securities
|
|
Employee Benefit Plan
|
|
Interest Rate Derivatives
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2022, net of tax effect of $
98
|
$
|
(
64
)
|
|
|
$
|
(
251
)
|
|
|
$
|
7
|
|
|
$
|
(
308
)
|
|
|
Reclassifications into earnings, net of tax impact of $
0
|
2
|
|
1
|
|
—
|
|
3
|
|
Change in value, net of tax impact of $
6
|
(
28
)
|
|
—
|
|
5
|
|
(
23
)
|
|
Balance at September 30, 2022, net of tax effect of $
104
|
$
|
(
90
)
|
|
|
$
|
(
250
)
|
|
|
$
|
12
|
|
|
$
|
(
328
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021, net of tax effect of $
83
|
(
4
)
|
|
|
(
252
)
|
|
|
(
6
)
|
|
|
(
262
)
|
|
|
Reclassifications into earnings, net of tax effect of $
1
|
6
|
|
|
2
|
|
|
—
|
|
|
8
|
|
|
Change in value, net of tax effect of $
20
|
(
92
)
|
|
|
—
|
|
|
18
|
|
|
(
74
)
|
|
|
Balance at September 30, 2022, net of tax effect of $
104
|
$
|
(
90
)
|
|
|
$
|
(
250
)
|
|
|
$
|
12
|
|
|
$
|
(
328
)
|
|
NOTE 10.
OPERATING SEGMENT INFORMATION
Alaska Air Group has two operating airlines – Alaska and Horizon. Each is regulated by the U.S. Department of Transportation’s Federal Aviation Administration. Alaska has CPAs for regional capacity with Horizon and SkyWest, under which Alaska receives all passenger revenue.
Under U.S. GAAP, operating segments are defined as components of a business for which there is discrete financial information that is regularly assessed by the Chief Operating Decision Maker (CODM) in making resource allocation decisions. Financial performance for the operating airlines and CPAs is managed and reviewed by the Company's CODM as part of three reportable operating segments:
•
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, Costa Rica, and Belize.
•
Regional
- includes Horizon's and other third-party carriers’ scheduled air transportation for passengers across a shorter distance network within the U.S. and Canada under a CPA. This segment includes the actual revenue 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.
The CODM makes resource allocation decisions for these reporting segments based on flight profitability data, aircraft type, route economics and other financial information.
The "Consolidating and Other" column reflects Air Group parent company activity, McGee Air Services, consolidating entries and other immaterial business units of the company. The “Air Group Adjusted” column represents a non-GAAP measure that is used by the Company's CODM to evaluate performance and allocate resources. Adjustments are further explained below in reconciling to consolidated GAAP results.
Operating segment information is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2023
|
|
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating & Other
(a)
|
|
Air Group Adjusted
(b)
|
|
Special Items
(c)
|
|
Consolidated
|
|
Operating Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger revenue
|
$
|
2,225
|
|
|
$
|
393
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,618
|
|
|
$
|
—
|
|
|
$
|
2,618
|
|
|
CPA revenue
|
—
|
|
|
—
|
|
|
104
|
|
|
(
104
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Mileage Plan other revenue
|
146
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
159
|
|
|
—
|
|
|
159
|
|
|
Cargo and other revenue
|
60
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
62
|
|
|
—
|
|
|
62
|
|
|
Total Operating Revenue
|
2,431
|
|
|
406
|
|
|
104
|
|
|
(
102
)
|
|
|
2,839
|
|
|
—
|
|
|
2,839
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses, excluding fuel
|
1,484
|
|
|
297
|
|
|
89
|
|
|
(
92
)
|
|
|
1,778
|
|
|
156
|
|
|
1,934
|
|
|
Fuel expense
|
621
|
|
|
108
|
|
|
—
|
|
|
—
|
|
|
729
|
|
|
(
35
)
|
|
|
694
|
|
|
Total Operating Expenses
|
2,105
|
|
|
405
|
|
|
89
|
|
|
(
92
)
|
|
|
2,507
|
|
|
121
|
|
|
2,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating Income (Expense)
|
—
|
|
|
—
|
|
|
(
11
)
|
|
|
1
|
|
|
(
10
)
|
|
|
(
8
)
|
|
|
(
18
)
|
|
|
Income (Loss) Before Income Tax
|
$
|
326
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
(
9
)
|
|
|
$
|
322
|
|
|
$
|
(
129
)
|
|
|
$
|
193
|
|
|
Pretax Margin
|
|
|
|
|
|
|
|
|
11.4
|
%
|
|
|
|
6.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2022
|
|
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating & Other
(a)
|
|
Air Group Adjusted
(b)
|
|
Special Items
(c)
|
|
Consolidated
|
|
Operating Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger revenue
|
$
|
2,217
|
|
|
$
|
398
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,615
|
|
|
$
|
—
|
|
|
$
|
2,615
|
|
|
CPA revenue
|
—
|
|
|
—
|
|
|
93
|
|
|
(
93
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Mileage Plan other revenue
|
133
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
146
|
|
|
—
|
|
|
146
|
|
|
Cargo and other revenue
|
65
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
67
|
|
|
—
|
|
|
67
|
|
|
Total Operating Revenue
|
2,415
|
|
|
411
|
|
|
93
|
|
|
(
91
)
|
|
|
2,828
|
|
|
—
|
|
|
2,828
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses, excluding fuel
|
1,352
|
|
|
292
|
|
|
94
|
|
|
(
94
)
|
|
|
1,644
|
|
|
245
|
|
|
1,889
|
|
|
Fuel expense
|
625
|
|
|
121
|
|
|
—
|
|
|
—
|
|
|
746
|
|
|
131
|
|
|
877
|
|
|
Total Operating Expenses
|
1,977
|
|
|
413
|
|
|
94
|
|
|
(
94
)
|
|
|
2,390
|
|
|
376
|
|
|
2,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating Income (Expense)
|
8
|
|
|
—
|
|
|
(
5
)
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
Income (Loss) Before Income Tax
|
$
|
446
|
|
|
$
|
(
2
)
|
|
|
$
|
(
6
)
|
|
|
$
|
3
|
|
|
$
|
441
|
|
|
$
|
(
376
)
|
|
|
$
|
65
|
|
|
Pretax Margin
|
|
|
|
|
|
|
|
|
15.6
|
%
|
|
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2023
|
|
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating & Other
(a)
|
|
Air Group Adjusted
(b)
|
|
Special Items
(c)
|
|
Consolidated
|
|
Operating Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger revenue
|
$
|
6,143
|
|
|
$
|
1,057
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,200
|
|
|
$
|
—
|
|
|
$
|
7,200
|
|
|
CPA revenue
|
—
|
|
|
—
|
|
|
274
|
|
|
(
274
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Mileage Plan other revenue
|
447
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
483
|
|
|
—
|
|
|
483
|
|
|
Cargo and other revenue
|
184
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
190
|
|
|
—
|
|
|
190
|
|
|
Total Operating Revenue
|
6,774
|
|
|
1,093
|
|
|
274
|
|
|
(
268
)
|
|
|
7,873
|
|
|
—
|
|
|
7,873
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses, excluding fuel
|
4,342
|
|
|
832
|
|
|
260
|
|
|
(
261
)
|
|
|
5,173
|
|
|
406
|
|
|
5,579
|
|
|
Fuel expense
|
1,672
|
|
|
274
|
|
|
—
|
|
|
—
|
|
|
1,946
|
|
|
(
14
)
|
|
|
1,932
|
|
|
Total Operating Expenses
|
6,014
|
|
|
1,106
|
|
|
260
|
|
|
(
261
)
|
|
|
7,119
|
|
|
392
|
|
|
7,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating Income (Expense)
|
(
3
)
|
|
|
—
|
|
|
(
29
)
|
|
|
3
|
|
|
(
29
)
|
|
|
(
14
)
|
|
|
(
43
)
|
|
|
Income (Loss) Before Income Tax
|
$
|
757
|
|
|
$
|
(
13
)
|
|
|
$
|
(
15
)
|
|
|
$
|
(
4
)
|
|
|
$
|
725
|
|
|
$
|
(
406
)
|
|
|
$
|
319
|
|
|
Pretax Margin
|
|
|
|
|
|
|
|
|
9.2
|
%
|
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022
|
|
|
Mainline
|
|
Regional
|
|
Horizon
|
|
Consolidating & Other
(a)
|
|
Air Group Adjusted
(b)
|
|
Special Items
(c)
|
|
Consolidated
|
|
Operating Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Passenger revenue
|
$
|
5,488
|
|
|
$
|
1,056
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,544
|
|
|
$
|
—
|
|
|
$
|
6,544
|
|
|
CPA revenue
|
—
|
|
|
—
|
|
|
288
|
|
|
(
288
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Mileage Plan other revenue
|
392
|
|
|
41
|
|
|
—
|
|
|
—
|
|
|
433
|
|
|
—
|
|
|
433
|
|
|
Cargo and other revenue
|
186
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
190
|
|
|
—
|
|
|
190
|
|
|
Total Operating Revenue
|
6,066
|
|
|
1,097
|
|
|
288
|
|
|
(
284
)
|
|
|
7,167
|
|
|
—
|
|
|
7,167
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses, excluding fuel
|
3,808
|
|
|
843
|
|
|
291
|
|
|
(
288
)
|
|
|
4,654
|
|
|
466
|
|
|
5,120
|
|
|
Fuel expense
|
1,623
|
|
|
313
|
|
|
—
|
|
|
—
|
|
|
1,936
|
|
|
64
|
|
|
2,000
|
|
|
Total Operating Expenses
|
5,431
|
|
|
1,156
|
|
|
291
|
|
|
(
288
)
|
|
|
6,590
|
|
|
530
|
|
|
7,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating Income (Expense)
|
12
|
|
|
—
|
|
|
(
15
)
|
|
|
—
|
|
|
(
3
)
|
|
|
—
|
|
|
(
3
)
|
|
|
Income (Loss) Before Income Tax
|
$
|
647
|
|
|
$
|
(
59
)
|
|
|
$
|
(
18
)
|
|
|
$
|
4
|
|
|
$
|
574
|
|
|
$
|
(
530
)
|
|
|
$
|
44
|
|
|
Pretax Margin
|
|
|
|
|
|
|
|
|
8.0
|
%
|
|
|
|
0.6
|
%
|
(a)
Includes consolidating entries, Air Group 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 allocation and excludes certain charges.
(c)
Includes special items and mark-to-market fuel hedge accounting adjustments.
Total assets were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023
|
|
December 31, 2022
|
|
Mainline
|
$
|
20,468
|
|
|
$
|
19,733
|
|
|
Horizon
|
1,320
|
|
|
1,157
|
|
|
Consolidating & Other
|
(
6,623
)
|
|
|
(
6,704
)
|
|
|
Consolidated
|
$
|
15,165
|
|
|
$
|
14,186
|
|
|
|
|
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
OVERVIEW
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand our company, segment operations and the present business environment. MD&A is provided as a supplement to – and should be read in conjunction with – our consolidated financial statements and the accompanying notes. All statements in the following discussion that are not statements of historical information or descriptions of current accounting policy are forward-looking statements. Please consider our forward-looking statements in light of the risks referred to in this report’s introductory cautionary note and the risks mentioned in "Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022. This overview summarizes the MD&A, which includes the following sections:
•
Third Quarter Review
—highlights from the third quarter of 2023 outlining some of the major events that occurred during the period.
•
Results of Operations
—an in-depth analysis of our revenue by segment and our expenses from a consolidated perspective for the three and nine months ended September 30, 2023. 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 2023.
•
Liquidity and Capital Resources
—an overview of our financial position, analysis of cash flows, and relevant contractual obligations and commitments.
THIRD QUARTER REVIEW
Third Quarter Results
We recorded consolidated pretax income for the third quarter of 2023 under GAAP of $193 million, compared to consolidated pretax income of $65 million in the third quarter of 2022. Increased pretax income is primarily the result of a $183 million decrease in aircraft fuel costs, and an $81 million decrease in special operating and non-operating charges. These decreases were partially offset by a $134 million increase in other operating expense categories.
See “
Results of Operations
” below for further discussion of changes in revenue and operating expenses as compared to 2022, and our reconciliation of non-GAAP measures to the most directly comparable GAAP measure. A glossary of financial terms can be found at the end of this Item 2.
Operational Milestones
In the third quarter, our airlines leveraged our foundational strength of operational excellence, leading the industry in completion rate and finishing with an on-time performance higher than 80%. Additionally, Alaska completed its transition back to a single-fleet operator following the retirement of its A321neo aircraft in September. Subsequent to quarter end, Alaska reached an agreement with American Airlines to sell all ten A321neos, with sales expected to be completed by the first quarter of 2024.
Labor Update
Under the terms of the existing collective bargaining agreement with the Air Line Pilots Association (ALPA), Alaska's pilots' wages underwent a market review in the third quarter. Following this review, Alaska executed a Letter of Agreement with ALPA for a one-time market rate adjustment to increase pay rates effective September 1, 2023.
Alaska is actively negotiating for new contracts with its mainline flight attendants represented by the Association of Flight Attendants, whose contract became amendable in December 2022, and its mainline mechanics represented by the Aircraft Mechanics Fraternal Association, whose contract became amendable in October 2023. Horizon is actively negotiating for a new
contract with its pilots, represented by the International Brotherhood of Teamsters, whose contract becomes amendable in December 2024.
Outlook
For the fourth quarter of 2023, we anticipate our cost discipline and operational excellence will continue to benefit unit costs, with CASMex expected to be down 3% to 5% on capacity up 11% to 14% as compared to the prior year. Although we have seen some slowing in the demand environment, we expect our diversified product offerings and Mileage Plan revenue streams will lift total revenue up 1% to 4% over 2022. For the full year, headwinds from fuel prices which were not previously contemplated, coupled with decreased revenue expectations, have led us to reduce our expected full year adjusted pretax margin to 7% to 8%.
We continue to remain focused on setting intentional targets and taking the appropriate steps to deliver on those targets. Changes to the operating environment and industry trends could lead to adjustments to the guidance provided as management aligns our business to be appropriately responsive. As we leverage our network and diversified revenue offerings for growth, our people are focused on keeping costs low and running a strong operation. These are competitive advantages we have cultivated over many years that will continue to serve us in the remainder of 2023 and beyond.
RESULTS
OF OPERATIONS
ADJUSTED (NON-GAAP) RESULTS AND
PER-SHARE AMOUNTS
We believe disclosure of earnings excluding the impact of aircraft fuel and special items is useful information to investors because:
•
By excluding fuel expense and special items from our unit metrics, we believe that we have better visibility into the results of operations as we focus on cost-reduction and productivity 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 productivity, airport costs, maintenance costs, etc., which are more controllable by management.
•
Cost per ASM (CASM) excluding fuel expense and special items is one of the most important measures used by management and by our Board of Directors in assessing quarterly and annual cost performance.
•
CASM excluding fuel expense and special items is a measure commonly used by industry analysts and we believe it is an important metric by which they have historically compared our airline to others in the industry. The measure is also the subject of frequent questions from investors.
•
Adjusted income before income tax (and other items as specified in our plan documents) is an important metric for the employee annual incentive plan, which covers the majority of employees within the Alaska Air Group organization.
•
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 these items as noted above 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 revenue, we do not, nor are we able to, evaluate unit revenue 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 revenue 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.
Although we are presenting these non-GAAP amounts for the reasons above, investors and other readers should not necessarily conclude that these amounts are nonrecurring, infrequent, or unusual in nature.
OPERATING STATISTICS SUMMARY (unaudited)
Below are operating statistics we use to measure operating performance. We often refer to unit revenue and adjusted unit costs, which are non-GAAP measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2023
|
|
2022
|
|
Change
|
|
2023
|
|
2022
|
|
Change
|
|
Consolidated Operating Statistics:
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers (000)
|
12,210
|
|
11,437
|
|
7%
|
|
33,654
|
|
31,137
|
|
8%
|
|
RPMs (000,000) "traffic"
|
15,718
|
|
14,143
|
|
11%
|
|
43,208
|
|
38,475
|
|
12%
|
|
ASMs (000,000) "capacity"
|
18,582
|
|
16,349
|
|
14%
|
|
51,447
|
|
45,743
|
|
12%
|
|
Load factor
|
84.6%
|
|
86.5%
|
|
(1.9) pts
|
|
84.0%
|
|
84.1%
|
|
(0.1) pts
|
|
Yield
|
16.66¢
|
|
18.48¢
|
|
(10)%
|
|
16.66¢
|
|
17.01¢
|
|
(2)%
|
|
RASM
|
15.28¢
|
|
17.30¢
|
|
(12)%
|
|
15.30¢
|
|
15.67¢
|
|
(2)%
|
|
CASMex
(b)
|
9.57¢
|
|
10.05¢
|
|
(5)%
|
|
10.05¢
|
|
10.17¢
|
|
(1)%
|
|
Economic fuel cost per gallon
(b)
|
$3.26
|
|
$3.66
|
|
(11)%
|
|
$3.14
|
|
$3.38
|
|
(7)%
|
|
Fuel gallons (000,000)
|
224
|
|
204
|
|
10%
|
|
620
|
|
573
|
|
8%
|
|
ASMs per fuel gallon
|
83.0
|
|
80.1
|
|
4%
|
|
83.0
|
|
79.8
|
|
4%
|
|
Departures (000)
|
111.8
|
|
110.4
|
|
1%
|
|
311.6
|
|
309.3
|
|
1%
|
|
Average full-time equivalent employees (FTEs)
|
23,879
|
|
22,878
|
|
4%
|
|
23,386
|
|
22,354
|
|
5%
|
|
Mainline Operating Statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers (000)
|
9,681
|
|
8,671
|
|
12%
|
|
26,735
|
|
23,557
|
|
13%
|
|
RPMs (000,000) "traffic"
|
14,471
|
|
12,846
|
|
13%
|
|
39,967
|
|
34,818
|
|
15%
|
|
ASMs (000,000) "capacity"
|
17,123
|
|
14,782
|
|
16%
|
|
47,584
|
|
41,221
|
|
15%
|
|
Load factor
|
84.5%
|
|
86.9%
|
|
(2.4) pts
|
|
84.0%
|
|
84.5%
|
|
(0.5) pts
|
|
Yield
|
15.37¢
|
|
17.26¢
|
|
(11)%
|
|
15.37¢
|
|
15.76¢
|
|
(2)%
|
|
RASM
|
14.20¢
|
|
16.34¢
|
|
(13)%
|
|
14.24¢
|
|
14.72¢
|
|
(3)%
|
|
CASMex
(b)
|
8.67¢
|
|
9.15¢
|
|
(5)%
|
|
9.12¢
|
|
9.24¢
|
|
(1)%
|
|
Economic fuel cost per gallon
(b)
|
$3.22
|
|
$3.61
|
|
(11)%
|
|
$3.11
|
|
$3.35
|
|
(7)%
|
|
Fuel gallons (000,000)
|
193
|
|
173
|
|
12%
|
|
538
|
|
484
|
|
11%
|
|
ASMs per fuel gallon
|
88.7
|
|
85.4
|
|
4%
|
|
88.4
|
|
85.2
|
|
4%
|
|
Departures (000)
|
72.3
|
|
65.3
|
|
11%
|
|
202.1
|
|
182.7
|
|
11%
|
|
Average full-time equivalent employees (FTEs)
|
18,619
|
|
17,453
|
|
7%
|
|
18,184
|
|
17,035
|
|
7%
|
|
Aircraft utilization
|
11.9
|
|
10.5
|
|
13%
|
|
11.5
|
|
10.4
|
|
11%
|
|
Average aircraft stage length
|
1,386
|
|
1,347
|
|
3%
|
|
1,379
|
|
1,348
|
|
2%
|
|
Operating fleet
(d)
|
220
|
|
232
|
|
(12) a/c
|
|
220
|
|
232
|
|
(12) a/c
|
|
Regional Operating Statistics:
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passengers (000)
|
2,529
|
|
2,767
|
|
(9)%
|
|
6,919
|
|
7,579
|
|
(9)%
|
|
RPMs (000,000) "traffic"
|
1,247
|
|
1,297
|
|
(4)%
|
|
3,241
|
|
3,657
|
|
(11)%
|
|
ASMs (000,000) "capacity"
|
1,459
|
|
1,567
|
|
(7)%
|
|
3,862
|
|
4,522
|
|
(15)%
|
|
Load factor
|
85.5%
|
|
82.8%
|
|
2.7 pts
|
|
83.9%
|
|
80.9%
|
|
3.0 pts
|
|
Yield
|
31.57¢
|
|
30.69¢
|
|
3%
|
|
32.61¢
|
|
28.88¢
|
|
13%
|
|
RASM
|
27.85¢
|
|
26.23¢
|
|
6%
|
|
28.30¢
|
|
24.26¢
|
|
17%
|
|
Departures (000)
|
39.5
|
|
45.2
|
|
(13)%
|
|
109.5
|
|
126.6
|
|
(14)%
|
|
Operating fleet
(d)
|
83
|
|
94
|
|
(11) a/c
|
|
83
|
|
94
|
|
(11) 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)
Excludes all aircraft removed from operating service.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2023 TO THREE MONTHS ENDED SEPTEMBER 30, 2022
Our consolidated net income for the three months ended September 30, 2023 was $139 million, or $1.08 per share, compared to a consolidated net income of $40 million, or $0.31 per share, for the three months ended September 30, 2022.
Excluding the impact of special items and mark-to-market fuel hedge adjustments, our adjusted net income for the third quarter of 2023 was $237 million, or $1.83 per share, compared to an adjusted net income of $325 million, or $2.53 per share, for the third quarter of 2022. The following table reconciles our adjusted net income per share (EPS) to amounts as reported in accordance with GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
2023
|
|
2022
|
|
(in millions, except per share amounts)
|
Dollars
|
|
Diluted EPS
|
|
Dollars
|
|
Diluted EPS
|
|
GAAP net income per share
|
$
|
139
|
|
|
$
|
1.08
|
|
|
$
|
40
|
|
|
$
|
0.31
|
|
|
Mark-to-market fuel hedge adjustments
|
(35)
|
|
|
(0.27)
|
|
|
131
|
|
|
1.02
|
|
|
Special items - fleet transition and other
|
156
|
|
|
1.20
|
|
|
155
|
|
|
1.21
|
|
|
Special items - labor and related
|
—
|
|
|
—
|
|
|
90
|
|
|
0.70
|
|
|
Special items - net non-operating
|
8
|
|
|
0.06
|
|
|
—
|
|
|
—
|
|
|
Income tax effect of reconciling items above
|
(31)
|
|
|
(0.24)
|
|
|
(91)
|
|
|
(0.71)
|
|
|
Non-GAAP adjusted net income per share
|
$
|
237
|
|
|
$
|
1.83
|
|
|
$
|
325
|
|
|
$
|
2.53
|
|
CASM excluding fuel and special items reconciliation is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
(in cents)
|
2023
|
|
2022
|
|
% Change
|
|
Consolidated:
|
|
|
|
|
|
|
CASM
|
14.14
|
¢
|
|
16.91
|
¢
|
|
(16)
|
%
|
|
Less the following components:
|
|
|
|
|
|
|
Aircraft fuel, including hedging gains and losses
|
3.73
|
|
|
5.36
|
|
|
(30)
|
%
|
|
Special items - fleet transition and other
|
0.84
|
|
|
0.95
|
|
|
(12)
|
%
|
|
Special items - labor and related
|
—
|
|
|
0.55
|
|
|
(100)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASM excluding fuel and special items
|
9.57
|
¢
|
|
10.05
|
¢
|
|
(5)
|
%
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
CASM
|
13.01
|
¢
|
|
16.20
|
¢
|
|
(20)
|
%
|
|
Less the following components:
|
|
|
|
|
|
|
Aircraft fuel, including hedging gains and losses
|
3.42
|
|
|
5.52
|
|
|
(38)
|
%
|
|
|
|
|
|
|
|
|
Special items - fleet transition and other
|
0.92
|
|
|
0.92
|
|
|
—
|
%
|
|
Special items - labor and related
|
—
|
|
|
0.61
|
|
|
(100)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASM excluding fuel and special items
|
8.67
|
¢
|
|
9.15
|
¢
|
|
(5)
|
%
|
OPERATING REVENUE
Total operating revenue was approximately flat in the third quarter of 2023 compared to the same period in 2022. The changes are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
(in millions)
|
2023
|
|
2022
|
|
% Change
|
|
Passenger revenue
|
$
|
2,618
|
|
|
$
|
2,615
|
|
|
—
|
%
|
|
Mileage Plan other revenue
|
159
|
|
|
146
|
|
|
9
|
%
|
|
Cargo and other revenue
|
62
|
|
|
67
|
|
|
(7)
|
%
|
|
Total Operating Revenue
|
$
|
2,839
|
|
|
$
|
2,828
|
|
|
—
|
%
|
Passenger revenue
On a consolidated basis, Passenger revenue for the third quarter of 2023 was approximately flat compared to the same period in 2022. While passenger traffic rose 11% due to increased departures flown by larger aircraft in our Mainline fleet, softening of the demand environment led to a 10% decrease in yield following record highs in the prior year. Additionally, cancellations for travel to Maui following wildfires in August resulted in approximately $20 million in decreased passenger revenue for the third quarter compared to the prior year.
Mileage Plan other revenue
On a consolidated basis, Mileage Plan other revenue for the third quarter of 2023 increased by $13 million, or 9%. The increase was driven by higher commissions from our bank card partners due to increased spend levels and annual membership fees.
OPERATING EXPENSES
Total operating expenses decreased $138 million, or 5%, compared to the third quarter of 2022. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
(in millions)
|
2023
|
|
2022
|
|
% Change
|
|
Fuel expense
|
$
|
694
|
|
|
$
|
877
|
|
|
(21)
|
%
|
|
Non-fuel operating expenses, excluding special items
|
1,778
|
|
|
1,644
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
Special items - fleet transition and other
|
156
|
|
|
155
|
|
|
1
|
%
|
|
Special items - labor and related
|
—
|
|
|
90
|
|
|
(100)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
$
|
2,628
|
|
|
$
|
2,766
|
|
|
(5)
|
%
|
Fuel expense
Aircraft fuel expense includes raw fuel expense (as defined below) plus the effect of mark-to-market adjustments to our fuel hedge portfolio as the value of that portfolio increases and decreases. Our aircraft fuel expense can be volatile because it includes these gains or losses in the value of the underlying instrument as crude oil prices and refining margins increase or decrease. Raw fuel expense is defined as the price that we generally pay at the airport, or the “into-plane” price, including taxes and fees. Raw fuel prices are impacted by world oil prices and refining costs, which can vary by region in the U.S. Raw fuel expense approximates cash paid to suppliers and does not reflect the effect of our fuel hedges.
Aircraft fuel expense decreased $183 million, or 21%, compared to the third quarter of 2022. The elements of the change are illustrated in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
2023
|
|
2022
|
|
|
|
|
(in millions, except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
|
|
|
|
Raw or "into-plane" fuel cost
|
$
|
711
|
|
|
$
|
3.18
|
|
|
$
|
775
|
|
|
$
|
3.80
|
|
|
|
|
|
(Gain)/loss on settled hedges
|
18
|
|
|
0.08
|
|
|
(29)
|
|
|
(0.14)
|
|
|
|
|
|
Consolidated economic fuel expense
|
$
|
729
|
|
|
$
|
3.26
|
|
|
$
|
746
|
|
|
$
|
3.66
|
|
|
|
|
|
Mark-to-market fuel hedge adjustments
|
(35)
|
|
|
(0.16)
|
|
|
131
|
|
|
0.64
|
|
|
|
|
|
GAAP fuel expense
|
$
|
694
|
|
|
$
|
3.10
|
|
|
$
|
877
|
|
|
$
|
4.30
|
|
|
|
|
|
Fuel gallons
|
|
|
224
|
|
|
|
|
204
|
|
|
|
|
Raw fuel expense decreased 8% in the third quarter of 2023 compared to the third quarter of 2022, due to lower per gallon costs, partially offset by increased fuel consumption. Raw fuel expense per gallon decreased by 16% due to lower all-in jet fuel prices. Jet fuel prices are impacted by the price of crude oil and refining margins associated with the conversion of crude oil to jet fuel, both of which have decreased in the third quarter of 2023 compared to the prior year. Fuel gallons consumed increased 10%, driven by increased capacity.
We also evaluate economic fuel expense, which we define as raw fuel expense adjusted for the cash we receive from hedge counterparties for hedges that settle during the period and for the premium expense that we paid for those contracts. A key difference between aircraft fuel expense and economic fuel expense is the timing of gain or loss recognition on our hedge portfolio. Economic fuel expense includes gains and losses only when they are realized for those contracts that were settled during the period based on their original contract terms. We believe this is the best measure of the effect that fuel prices are currently having on our business as it most closely approximates the net cash outflow associated with purchasing fuel for our operations. Accordingly, many industry analysts evaluate our results using this measure, and it is the basis for most internal management reporting and incentive pay plans.
Losses recognized for hedges that settled during the third quarter were $18 million in 2023, compared to gains of $29 million in the same period in 2022. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement.
Non-fuel expenses
The table below provides the reconciliation of the operating expense line items, excluding fuel and other special items. Significant operating expense variances from 2022 are more fully described below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
(in millions)
|
2023
|
|
2022
|
|
% Change
|
|
Wages and benefits
|
$
|
782
|
|
|
$
|
686
|
|
|
14
|
%
|
|
Variable incentive pay
|
45
|
|
|
48
|
|
|
(6)
|
%
|
|
Aircraft maintenance
|
118
|
|
|
92
|
|
|
28
|
%
|
|
Aircraft rent
|
48
|
|
|
76
|
|
|
(37)
|
%
|
|
Landing fees and other rentals
|
183
|
|
|
161
|
|
|
14
|
%
|
|
Contracted services
|
100
|
|
|
83
|
|
|
20
|
%
|
|
Selling expenses
|
84
|
|
|
82
|
|
|
2
|
%
|
|
Depreciation and amortization
|
113
|
|
|
104
|
|
|
9
|
%
|
|
Food and beverage service
|
62
|
|
|
52
|
|
|
19
|
%
|
|
Third-party regional carrier expense
|
58
|
|
|
53
|
|
|
9
|
%
|
|
Other
|
185
|
|
|
207
|
|
|
(11)
|
%
|
|
Total non-fuel operating expenses, excluding special items
|
$
|
1,778
|
|
|
$
|
1,644
|
|
|
8
|
%
|
Wages and benefits
Wages and benefits increased by $96 million, or 14%, in the third quarter of 2023. The primary components of Wages and benefits are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
(in millions)
|
2023
|
|
2022
|
|
% Change
|
|
Wages
|
$
|
602
|
|
|
$
|
514
|
|
|
17
|
%
|
|
Pension - Defined benefit plans
|
7
|
|
|
11
|
|
|
(36)
|
%
|
|
Defined contribution plans
|
51
|
|
|
39
|
|
|
31
|
%
|
|
Medical and other benefits
|
85
|
|
|
85
|
|
|
—
|
%
|
|
Payroll taxes
|
37
|
|
|
37
|
|
|
—
|
%
|
|
Total Wages and benefits
|
$
|
782
|
|
|
$
|
686
|
|
|
14
|
%
|
Wages increased $88 million, or 17%, on 4% growth in FTEs. When combined with FTE increases, higher wage rates stemming from market adjustments and annual step increases were the primary driver for incremental year-over-year expense for wages.
Incremental expense for defined contribution plans was driven by the change in wages as well as higher matching contributions for several labor groups. Decreased defined benefit expense was driven by changes in actuarial assumptions.
Aircraft maintenance
Aircraft maintenance expense increased by $26 million, or 28%, in the third quarter of 2023. The increase was primarily driven by the new B737-900ER power-by-the-hour contract in 2023, as well as increased aircraft utilization.
Aircraft rent
Aircraft rent expense decreased by $28 million, or 37%, in the third quarter of 2023. The decrease was primarily driven by the retirement of 23 leased A320 aircraft. The A321neo fleet retirement also contributed to the decrease, as seven aircraft were reclassified from operating leases to finance leases and three aircraft were purchased during 2023. These decreases were partially offset by delivery of four leased B737-9 aircraft since the third quarter of 2022.
Landing fees and other rentals
Landing fees and other rentals increased by $22 million, or 14%, in the third quarter of 2023. The increase was driven primarily by higher terminal rent costs resulting from both rate and volume increases at many of our facilities. Landing fees also increased due to higher rates and larger landing weights due to a shift in the mix of flying from Regional to Mainline and upgauging our fleet.
Contracted services
Contracted services increased by $17 million, or 20%, in the third quarter of 2023. The increase was driven primarily by higher rates charged by vendors for services as well as an increase in passengers.
Food and beverage service
Food and beverage service increased by $10 million, or 19%, in the third quarter of 2023. The increase was driven by a combination of 7% growth in revenue passengers and higher costs for food, food service supplies, and transportation.
Other expense
Other expense decreased by $22 million, or 11%, in the third quarter of 2023. The decrease was primarily driven by one-time employee recognition costs of $28 million recorded in the third quarter of 2022, partially offset by increases to miscellaneous variable costs in 2023 consistent with increased capacity.
Special items - fleet transition and other
We recorded expenses associated with the Company's fleet transition of $156 million in the third quarter of 2023. Refer to Note 2 to the consolidated financial statements for additional details.
ADDITIONAL SEGMENT INFORMATION
Refer to Note 10 to the consolidated financial statements for a detailed description of each segment. Below is a summary of each segment's results.
Mainline
Mainline operations reported an adjusted pretax profit of $326 million in the third quarter of 2023, compared to a profit of $446 million in the same period in 2022. The $120 million decrease was driven primarily by a $132 million increase in non-fuel operating expenses. Compared to the prior year, non-fuel operating expenses increased primarily due to higher wage rates across various labor groups. Higher variable costs, largely consistent with the overall growth in capacity and departures, also contributed to the increase.
Regional
Regional operations reported adjusted pretax profit of $1 million in the third quarter of 2023, compared to a loss of $2 million in the same period in 2022. The $3 million improvement was driven by decreased fuel expense on less capacity and a lower price per gallon, partially offset by decreased revenue on less capacity and higher wage rates.
Horizon
Horizon reported an adjusted pretax profit of $4 million in the third quarter of 2023, compared to a loss of $6 million in the same period in 2022. The $10 million improvement was driven by updates to internal rates under Horizon's CPA with Alaska and cost savings following Horizon’s transition to a single fleet. These improvements were partially offset by higher interest expense associated with debt financing of new E175 deliveries in 2023.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2023 TO NINE MONTHS ENDED SEPTEMBER 30, 2022
Our consolidated net income for the nine months ended September 30, 2023 was $237 million, or $1.84 per share, compared to consolidated net income of $36 million, or $0.28 per share, for the nine months ended September 30, 2022.
Our adjusted net income for the nine months ended September 30, 2023 was $545 million, or $4.22 per share, compared to adjusted net income of $438 million, or $3.42 per share, for the nine months ended September 30, 2022. The following table reconciles our adjusted net income and adjusted EPS to amounts as reported in accordance with GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2023
|
|
2022
|
|
(in millions, except per share amounts)
|
Dollars
|
|
Diluted EPS
|
|
Dollars
|
|
Diluted EPS
|
|
GAAP net income per share
|
$
|
237
|
|
|
$
|
1.84
|
|
|
$
|
36
|
|
|
$
|
0.28
|
|
|
Mark-to-market fuel hedge adjustments
|
(14)
|
|
|
(0.11)
|
|
|
64
|
|
|
0.50
|
|
|
Special items - fleet transition and other
|
355
|
|
|
2.75
|
|
|
376
|
|
|
2.94
|
|
|
Special items - labor and related
|
51
|
|
|
0.39
|
|
|
90
|
|
|
0.70
|
|
|
Special items - net non-operating
|
14
|
|
|
0.11
|
|
|
—
|
|
|
—
|
|
|
Income tax effect of reconciling items above
|
(98)
|
|
|
(0.76)
|
|
|
(128)
|
|
|
(1.00)
|
|
|
Non-GAAP adjusted net income per share
|
$
|
545
|
|
|
$
|
4.22
|
|
|
$
|
438
|
|
|
$
|
3.42
|
|
CASM excluding fuel and special items reconciliation is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
(in cents)
|
2023
|
|
2022
|
|
% Change
|
|
Consolidated:
|
|
|
|
|
|
|
CASM
|
14.60
|
¢
|
|
15.56
|
¢
|
|
(6)
|
%
|
|
Less the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel, including hedging gains and losses
|
3.76
|
|
|
4.37
|
|
|
(14)
|
%
|
|
Special items - fleet transition and other
|
0.69
|
|
|
0.82
|
|
|
(16)
|
%
|
|
Special items - labor and related
|
0.10
|
|
|
0.20
|
|
|
(50)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASM excluding fuel and special items
|
10.05
|
¢
|
|
10.17
|
¢
|
|
(1)
|
%
|
|
|
|
|
|
|
|
|
Mainline:
|
|
|
|
|
|
|
CASM
|
13.47
|
¢
|
|
14.59
|
¢
|
|
(8)
|
%
|
|
Less the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel, including hedging gains and losses
|
3.49
|
|
|
4.44
|
|
|
(21)
|
%
|
|
Special items - fleet transition and other
|
0.75
|
|
|
0.69
|
|
|
9
|
%
|
|
Special items - labor and related
|
0.11
|
|
|
0.22
|
|
|
(50)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASM excluding fuel and special items
|
9.12
|
¢
|
|
9.24
|
¢
|
|
(1)
|
%
|
OPERATING REVENUE
Total operating revenue increased $706 million, or 10%, during the first nine months of 2023 compared to the same period in 2022. The changes are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
(in millions)
|
2023
|
|
2022
|
|
% Change
|
|
Passenger revenue
|
$
|
7,200
|
|
|
$
|
6,544
|
|
|
10
|
%
|
|
Mileage Plan other revenue
|
483
|
|
|
433
|
|
|
12
|
%
|
|
Cargo and other revenue
|
190
|
|
|
190
|
|
|
—
|
%
|
|
Total Operating Revenue
|
$
|
7,873
|
|
|
$
|
7,167
|
|
|
10
|
%
|
Passenger revenue
On a consolidated basis, Passenger revenue for the first nine months of 2023 increased by $656 million, or 10%, on a 12% increase in passenger traffic, partially offset by a 2% decrease in yield. The increase was primarily driven by increased departures flown by larger aircraft in our Mainline fleet. Redemptions by Mileage Plan members also provided a benefit over the prior year, with greater redemption on both Alaska and partner airlines.
We expect to see fourth quarter Passenger revenue consistent with the prior year due to increases in passenger traffic being offset by decreased yields.
Mileage Plan other revenue
On a consolidated basis, Mileage Plan other revenue increased $50 million, or 12%, in the first nine months of 2023. The increase was driven by higher commissions from our bank card partners due to increased spend levels, annual membership fees, and credit card acquisitions.
We expect to see continued strength in Mileage Plan other revenue for the remainder of 2023, enabled by higher commissions from increased card spend.
OPERATING EXPENSES
Total operating expenses increased $391 million, or 5%, compared to the first nine months of 2022. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
(in millions)
|
2023
|
|
2022
|
|
% Change
|
|
|
Fuel expense
|
$
|
1,932
|
|
|
$
|
2,000
|
|
|
(3)
|
%
|
|
|
Non-fuel operating expenses, excluding special items
|
5,173
|
|
|
4,654
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
Special items - fleet transition and other
|
355
|
|
|
376
|
|
|
(6)
|
%
|
|
|
Special items - labor and related
|
51
|
|
|
90
|
|
|
(43)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
$
|
7,511
|
|
|
$
|
7,120
|
|
|
5
|
%
|
|
Fuel expense
Aircraft fuel expense decreased $68 million, or 3%, compared to the nine months ended September 30, 2022. The elements of the change are illustrated in the table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2023
|
|
2022
|
|
(in millions, except for per gallon amounts)
|
Dollars
|
|
Cost/Gal
|
|
Dollars
|
|
Cost/Gal
|
|
Raw or "into-plane" fuel cost
|
$
|
1,899
|
|
|
$
|
3.06
|
|
|
$
|
2,103
|
|
|
$
|
3.67
|
|
|
(Gain)/loss on settled hedges
|
47
|
|
|
0.08
|
|
|
(167)
|
|
|
(0.29)
|
|
|
Consolidated economic fuel expense
|
$
|
1,946
|
|
|
$
|
3.14
|
|
|
$
|
1,936
|
|
|
$
|
3.38
|
|
|
Mark-to-market fuel hedge adjustments
|
(14)
|
|
|
(0.02)
|
|
|
64
|
|
|
0.11
|
|
|
GAAP fuel expense
|
$
|
1,932
|
|
|
$
|
3.12
|
|
|
$
|
2,000
|
|
|
$
|
3.49
|
|
|
Fuel gallons
|
|
|
620
|
|
|
|
|
573
|
|
Raw fuel expense decreased 10% in the first nine months of 2023 compared to the first nine months of 2022, due to lower per gallon costs, partially offset by increased fuel consumption. Raw fuel expense per gallon decreased by approximately 17% due to lower all-in jet fuel prices. Jet fuel prices are impacted by the price of crude oil and refining margins associated with the conversion of crude oil to jet fuel, both of which have decreased in the first nine months of 2023 compared to the prior year. Fuel gallons consumed increased 8%, driven by increased capacity.
Economic fuel expense includes losses recognized for hedges that settled in the first nine months of 2023 of $47 million, compared to gains of $167 million in the same period in 2022. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement.
We expect our economic fuel cost per gallon in the fourth quarter to range between $3.30 to $3.40 per gallon.
Non-fuel expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
(in millions)
|
2023
|
|
2022
|
|
% Change
|
|
Wages and benefits
|
$
|
2,259
|
|
|
$
|
1,931
|
|
|
17
|
%
|
|
Variable incentive pay
|
149
|
|
|
140
|
|
|
6
|
%
|
|
Aircraft maintenance
|
367
|
|
|
331
|
|
|
11
|
%
|
|
Aircraft rent
|
161
|
|
|
222
|
|
|
(27)
|
%
|
|
Landing fees and other rentals
|
502
|
|
|
435
|
|
|
15
|
%
|
|
Contracted services
|
290
|
|
|
243
|
|
|
19
|
%
|
|
Selling expenses
|
231
|
|
|
218
|
|
|
6
|
%
|
|
Depreciation and amortization
|
330
|
|
|
310
|
|
|
6
|
%
|
|
Food and beverage service
|
176
|
|
|
143
|
|
|
23
|
%
|
|
Third-party regional carrier expense
|
164
|
|
|
145
|
|
|
13
|
%
|
|
Other
|
544
|
|
|
536
|
|
|
1
|
%
|
|
Total non-fuel operating expenses, excluding special items
|
$
|
5,173
|
|
|
$
|
4,654
|
|
|
11
|
%
|
Wages and benefits
Wages and benefits increased by $328 million, or 17%, in the first nine months of 2023. The primary components of wages and benefits are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
(in millions)
|
2023
|
|
2022
|
|
% Change
|
|
Wages
|
$
|
1,736
|
|
|
$
|
1,467
|
|
|
18
|
%
|
|
Pension - Defined benefit plans
|
22
|
|
|
34
|
|
|
(35)
|
%
|
|
Defined contribution plans
|
151
|
|
|
116
|
|
|
30
|
%
|
|
Medical and other benefits
|
228
|
|
|
207
|
|
|
10
|
%
|
|
Payroll taxes
|
122
|
|
|
107
|
|
|
14
|
%
|
|
Total Wages and benefits
|
$
|
2,259
|
|
|
$
|
1,931
|
|
|
17
|
%
|
Wages increased $269 million, or 18%, on 5% growth in FTEs. When combined with FTE increases, higher wage rates stemming from market adjustments and annual step increases were the primary driver for incremental year-over-year expense for wages and related taxes. Higher stock-based compensation also contributed to the increase in wages, driven by additional stock award grants within the period.
Incremental expense for defined contribution plans was driven by the change in wages as well as higher matching contributions for several labor groups. Increased expense for medical and other benefits was primarily driven by an increase in claims compared to the prior year and incremental FTEs. Decreased defined benefit expense was driven by changes in actuarial assumptions.
We expect to see higher wages and benefits for the remainder of 2023 due to the increase in wage rates. Wages and benefits could also increase further in 2023 due to agreements we may reach in the fourth quarter with represented labor groups.
Aircraft maintenance
Aircraft maintenance expense increased by $36 million, or 11%, in the first nine months of 2023. The increase was primarily driven by the new B737-900ER power-by-the-hour contract and increased aircraft utilization, partially offset by $35 million of lease return costs in the first quarter of 2022 that did not recur in 2023 as all lease return costs associated with the Company's fleet transition have been recorded to Special items - fleet transition and other since the announcement of our fleet transition plan in the second quarter of 2022.
We expect aircraft maintenance to increase for the remainder of 2023 as compared to 2022 due primarily to the B737-900ER power-by-the-hour contract, which will total approximately $100 million for the year. Higher aircraft utilization will also contribute to an increase in aircraft maintenance.
Aircraft rent
Aircraft rent expense decreased by $61 million, or 27%, in the first nine months of 2023. The decrease was driven by the retirement of 23 leased A320 aircraft. The A321neo fleet retirement also contributed to the decrease, as seven aircraft were reclassified from operating leases to finance leases and three aircraft were purchased during 2023. These decreases were partially offset by delivery of four leased B737-9 aircraft since the third quarter of 2022.
We expect aircraft rent will remain below 2022 levels for the remainder of 2023, due to the net reduction in overall leased aircraft described above.
Landing fees and other rentals
Landing fees and other rentals increased by $67 million, or 15%, in the first nine months of 2023. The increase was driven primarily by higher terminal rent costs resulting from both rate and volume increases at many of our facilities. Landing fees also increased due to higher rates and larger landing weights due a shift in the mix of flying from Regional to Mainline and upgauging our fleet.
We expect landing fees and other rentals to increase for the remainder of 2023 as compared to 2022 due to increased capacity and higher rates at airports.
Contracted services
Contracted services increased by $47 million, or 19%, in the first nine months of 2023. The increase was primarily driven by higher rates charged by vendors for services as well as an increase in passengers.
We expect contracted services to increase for the remainder of 2023 as compared to 2022 due to the reasons described above.
Food and beverage service
Food and beverage service increased by $33 million, or 23%, in the first nine months of 2023. The increase was driven by a combination of 8% growth in revenue passengers and higher costs for food, food service supplies, and transportation.
We expect the factors described above will continue to have a similar impact on food and beverage service for the remainder of 2023 as compared to 2022.
Third-party regional carrier expense
Third-party regional carrier expense, which represents payments made to SkyWest under the CPA with Alaska, increased $19 million, or 13%, in the first nine months of 2023. The increase in third-party regional carrier expense is driven by incremental SkyWest-operated departures. SkyWest departures have risen due to the annualization of ten E175 aircraft operating under the CPA which were delivered during the first half of 2022. Higher wage rates for flight crews have also contributed to the increase.
We expect third-party regional carrier expense will continue to be higher for the remainder of 2023 as compared to 2022 due to incremental departures and block hours, as well as higher wage rates for flight crews.
Other expense
Other expense increased $8 million, or 1%, in the first nine months of 2023. Costs increased as a result of crew-related expenses due to contract improvements for Alaska pilots, coupled with additional professional services and software expenses. These increases were partially offset by one-time employee recognition costs of $28 million recorded in the third quarter of 2022.
We expect other expense will continue to be higher for the remainder of 2023 as compared to 2022 due to overall growth throughout our network.
Special items - fleet transition
We recorded expenses associated with the Company's fleet transition of $355 million in the first nine months of 2023. Refer to Note 2 to the consolidated financial statements for additional details.
Special items - labor and other
We recorded a nonrecurring expense of $51 million in the first quarter of 2023 due to a Letter of Agreement with Alaska pilots, represented by ALPA. The charge is a one-time adjustment of accrued benefits related to expected future cash payments of pilots' unused sick leave upon retirement.
ADDITIONAL SEGMENT INFORMATION
Refer to Note 10 to the consolidated financial statements for a detailed description of each segment. Below is a summary of each segment's results.
Mainline
Mainline operations reported an adjusted pretax profit of $757 million in the first nine months of 2023, compared to a profit of $647 million in the same period in 2022. The $110 million improvement was driven by a $708 million increase in operating revenue, partially offset by a $534 million increase in non-fuel operating expense and a $49 million increase in fuel expense.
As compared to the prior year, higher revenue is primarily attributable to a 15% increase in traffic driven by the increase in capacity. Non-fuel operating expenses increased, driven by higher wage rates and higher variable costs, largely consistent with the overall growth in capacity and departures. Additional gallons consumed and prior year gains from settled hedges drove the increase in fuel expense.
Regional
Regional operations reported an adjusted pretax loss of $13 million in the first nine months of 2023, compared to a loss of $59 million in the same period in 2022. The $46 million improvement was primarily driven by decreased fuel expense due to a lower price per gallon and fewer gallons consumed.
Horizon
Horizon reported an adjusted pretax loss of $15 million in the first nine months of 2023, compared to a loss of $18 million in the same period in 2022. The $3 million improvement was driven by decreased operating expenses consistent with less flying and other cost savings following Horizon’s transition to a single fleet, as well as updates to internal rates under Horizon’s CPA with Alaska. These improvements were partially offset by lower overall CPA revenue consistent with less flying, as well as higher interest expense associated with debt financing of new E175 deliveries in 2023.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are:
•
Existing cash and marketable securities of $2.5 billion;
•
Cash flows from operations of $1.1 billion;
•
62 unencumbered aircraft that could be financed, if necessary;
•
Combined bank line-of-credit facilities, with no outstanding borrowings, of $550 million.
During the three months ended September 30, 2023, we took free and clear delivery of five owned Boeing 737-9 aircraft. We incurred new of debt of $361 million and made debt payments totaling $93 million. We ended the quarter with a debt-to-capitalization ratio of 48%, within our target range of 40% to 50%. We continued share repurchases, spending $13 million in the third quarter, pursuant to the $1 billion repurchase plan authorized by the Board of Directors in August 2015.
We believe that our current cash and marketable securities balance, combined with available sources of liquidity, will be sufficient to fund our operations, meet our debt payment obligations, and remain in compliance with the financial debt covenants in existing financing arrangements for the foreseeable future.
In our cash and marketable securities portfolio, we invest only in securities that meet our primary investment strategy of maintaining and securing investment principal. The portfolio is managed by reputable firms that adhere to our investment policy that sets forth investment objectives, approved and prohibited investments, and duration and credit quality guidelines. Our policy, and the portfolio managers, are continually reviewed to ensure that the investments are aligned with our strategy.
The table below presents the major indicators of financial condition and liquidity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
September 30, 2023
|
|
December 31, 2022
|
|
Change
|
|
Cash and marketable securities
|
$
|
2,451
|
|
|
$
|
2,417
|
|
|
1 %
|
|
Cash, marketable securities, and unused lines of credit as a percentage of trailing twelve months' revenue
|
29
|
%
|
|
29
|
%
|
|
—
|
|
Long-term debt, net of current portion
|
2,128
|
|
|
1,883
|
|
|
13%
|
|
Shareholders’ equity
|
$
|
4,093
|
|
|
$
|
3,816
|
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt-to-capitalization, including operating and finance leases
|
|
|
|
|
|
|
(in millions)
|
September 30, 2023
|
|
December 31, 2022
|
|
Change
|
|
Long-term debt, net of current portion
|
$
|
2,128
|
|
|
$
|
1,883
|
|
|
13%
|
|
Capitalized operating leases
|
1,263
|
|
|
1,621
|
|
|
(22)%
|
|
Capitalized finance leases
(a)
|
452
|
|
|
—
|
|
|
NM
|
|
Adjusted debt, net of current portion of long-term debt
|
$
|
3,843
|
|
|
$
|
3,504
|
|
|
10%
|
|
Shareholders' equity
|
4,093
|
|
|
3,816
|
|
|
7%
|
|
Total invested capital
|
$
|
7,936
|
|
|
$
|
7,320
|
|
|
8%
|
|
|
|
|
|
|
|
|
Debt-to-capitalization, including operating and finance leases
|
48
|
%
|
|
48
|
%
|
|
—
|
(a)
To best reflect our leverage at September 30, 2023, we included our capitalized finance lease balances, which are recognized within the Current portion of long-term debt and finance leases line in the condensed consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net debt to earnings before interest, taxes, depreciation, amortization, special items, and rent
|
|
(in millions)
|
September 30, 2023
|
|
December 31, 2022
|
|
Current portion of long-term debt and finance leases
|
$
|
736
|
|
|
$
|
276
|
|
|
Current portion of operating lease liabilities
|
150
|
|
|
228
|
|
|
Long-term debt
|
2,128
|
|
|
1,883
|
|
|
Long-term operating lease liabilities, net of current portion
|
1,113
|
|
|
1,393
|
|
|
Total adjusted debt
|
4,127
|
|
|
3,780
|
|
|
Less: Cash and marketable securities
|
2,451
|
|
|
2,417
|
|
|
Adjusted net debt
|
$
|
1,676
|
|
|
$
|
1,363
|
|
|
|
|
|
|
|
(in millions)
|
Twelve Months Ended September 30, 2023
|
|
Twelve Months Ended December 31, 2022
|
|
GAAP Operating Income
(a)
|
$
|
385
|
|
|
$
|
70
|
|
|
Adjusted for:
|
|
|
|
|
Special items
|
520
|
|
|
580
|
|
|
Mark-to-market fuel hedge adjustments
|
(2)
|
|
|
76
|
|
|
Depreciation and amortization
|
435
|
|
|
415
|
|
|
Aircraft rent
|
230
|
|
|
291
|
|
|
EBITDAR
|
$
|
1,568
|
|
|
$
|
1,432
|
|
|
Adjusted net debt to EBITDAR
|
1.1x
|
|
1.0x
|
(a)
Operating Income can be reconciled using the trailing twelve month operating income as filed quarterly with the SEC.
The following discussion summarizes the primary drivers of the increase in our cash and marketable securities balance and our expectation of future cash requirements.
ANALYSIS OF OUR CASH FLOWS
Cash Provided by Operating Activities
For the first nine months of 2023, net cash provided by operating activities was $1.1 billion, compared to $1.4 billion in 2022. Cash provided by ticket sales and from our co-branded credit card agreement are the primary sources of our operating cash flow. Our primary use of operating cash flow is for operating expenses, including payments for employee wages and benefits, payments to suppliers for goods and services, and payments to lessors and airport authorities for rents and landing fees. Operating cash flow also includes payments to, or refunds from, federal, state, and local taxing authorities.
The $306 million net decrease in our operating cash flows was due to a combination of factors. 2022 operating cash flows included federal income tax refunds of $260 million. Additionally, growth in our air traffic liability decreased $125 million and payments made in 2023 for our 2022 performance-based pay program were approximately $110 million higher than payments in 2022 for our 2021 program. These amounts were partially offset by an improved net income compared to the prior year.
Cash Used in Investing Activities
Cash used in investing activities was $810 million during the first nine months of 2023, compared to $888 million in 2022. The change was due to a combination of factors. Marketable securities activity was $287 million of net sales during the first nine months of 2023, compared to $61 million in 2022. This amount was partially offset by an increase in capital expenditures, which were $44 million higher compared to 2022. Cash used in investing during the first nine months of 2023 was also impacted by the purchase of three previously leased A321neo aircraft, included in Other investing activities, which are expected to be sold to American Airlines in the fourth quarter of 2023 and first quarter of 2024.
Cash Provided by (Used in) Financing Activities
Cash provided by financing activities was $12 million during the first nine months of 2023, compared to cash used in financing activities of $296 million in 2022. The change was largely driven by $313 million in new debt proceeds and $91 million less in payments for outstanding long-term debt compared to 2022. These amounts were partially offset by common stock repurchases of $70 million in 2023 and a decrease of cash flows from other financing activities of $26 million.
MATERIAL CASH COMMITMENTS
Material cash requirements include the following contractual and other obligations:
Aircraft Commitments
As of September 30, 2023, Alaska has firm orders to purchase 89 B737 aircraft with deliveries between 2023 and 2027 and a firm commitment to lease one B737-9 aircraft with delivery in 2023. Alaska has rights for 105 additional B737-10 aircraft between 2026 and 2030. Alaska also has commitments to lease two B737-800 freighters with deliveries in 2023 and 2024.
Boeing has communicated to Alaska that certain B737 deliveries contracted in 2023 are expected to be delayed into 2024. The anticipated fleet delivery schedule outlined below reflects the expected impact of these delays. Alaska continues to work with Boeing to structure delivery timelines in a manner that supports Alaska's capacity growth plans.
As of September 30, 2023, Horizon has commitments to purchase nine E175 aircraft with deliveries between 2024 and 2026. Horizon has options to acquire 13 E175 aircraft between 2025 and 2026. The E175 deliveries expected through the end of 2024 are covered under a financing agreement executed in the second quarter of 2023. Capital expenditures for these deliveries, which are included within aircraft-related commitments in the contractual obligations table below, will be reflected as a non-cash transaction in the condensed consolidated statements of cash flows. Subsequent to quarter end, two of Horizon's 13 E175 options expired.
Options will be exercised only if we believe return on invested capital targets can be met over the long term. We intend to finance future aircraft deliveries and option exercises using cash flow from operations or long-term debt.
To best reflect our expectations of future fleet activity, we have incorporated anticipated delivery delays and other modifications of our order book as agreed to in principle with Boeing into the following table, which summarizes our expected fleet count by year, as of November 2, 2023:
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|
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|
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|
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|
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|
|
|
|
|
|
Actual Fleet
|
|
Anticipated Fleet Activity
|
|
|
Aircraft
|
September 30, 2023
|
|
2023 Changes
|
|
|
|
Dec 31, 2023
|
|
2024 Changes
|
|
Dec 31, 2024
|
|
2025 Changes
|
|
Dec 31, 2025
|
|
|
B737-700 Freighters
|
3
|
|
|
—
|
|
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
|
B737-800 Freighters
|
—
|
|
|
1
|
|
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
|
B737-700
|
11
|
|
|
—
|
|
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|
|
B737-800
|
59
|
|
|
—
|
|
|
|
|
59
|
|
|
—
|
|
|
59
|
|
|
—
|
|
|
59
|
|
|
|
B737-900
|
12
|
|
|
—
|
|
|
|
|
12
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
12
|
|
|
|
B737-900ER
|
79
|
|
|
—
|
|
|
|
|
79
|
|
|
—
|
|
|
79
|
|
|
—
|
|
|
79
|
|
|
|
B737-8
|
—
|
|
|
1
|
|
|
|
|
1
|
|
|
7
|
|
|
8
|
|
|
12
|
|
|
20
|
|
|
|
B737-9
|
56
|
|
|
8
|
|
|
|
|
64
|
|
|
17
|
|
|
81
|
|
|
—
|
|
|
81
|
|
|
|
B737-10
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mainline Fleet
|
220
|
|
|
10
|
|
|
|
|
230
|
|
|
25
|
|
|
255
|
|
|
23
|
|
|
278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E175 operated by Horizon
|
41
|
|
|
—
|
|
|
|
|
41
|
|
|
3
|
|
|
44
|
|
|
3
|
|
|
47
|
|
|
|
E175 operated by third party
|
42
|
|
|
—
|
|
|
|
|
42
|
|
|
—
|
|
|
42
|
|
|
1
|
|
|
43
|
|
|
|
Total Regional Fleet
|
83
|
|
|
—
|
|
|
|
|
83
|
|
|
3
|
|
|
86
|
|
|
4
|
|
|
90
|
|
|
|
Total
|
303
|
|
|
10
|
|
|
|
|
313
|
|
|
28
|
|
|
341
|
|
|
27
|
|
|
368
|
|
|
Fuel Hedge Positions
All of our future oil positions are call options, which are designed to effectively cap the cost of the crude oil component of our jet fuel purchases. With call options, we are hedged against volatile crude oil price increases and, during a period of decline in crude oil prices, we only forfeit cash previously paid for hedge premiums. We typically hedge up to 50% of our expected consumption. Our crude oil positions are as follows:
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|
|
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|
|
|
|
|
|
|
|
|
|
Approximate % of Expected Fuel Requirements
|
|
Weighted-Average Crude Oil Price per Barrel
|
|
Average Premium Cost per Barrel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter of 2023
|
50
|
%
|
|
$96
|
|
$7
|
|
Full Year 2023
|
50
|
%
|
|
$96
|
|
$7
|
|
First Quarter of 2024
|
50
|
%
|
|
$90
|
|
$5
|
|
Second Quarter of 2024
|
40
|
%
|
|
$90
|
|
$5
|
|
Third Quarter of 2024
|
30
|
%
|
|
$88
|
|
$5
|
|
Fourth Quarter of 2024
|
20
|
%
|
|
$87
|
|
$5
|
|
Full Year 2024
|
35
|
%
|
|
$89
|
|
$5
|
|
First Quarter of 2025
|
10
|
%
|
|
$92
|
|
$5
|
|
Full Year 2025
|
2
|
%
|
|
$92
|
|
$5
|
Contractual Obligations
The following table provides a summary of our obligations as of November 2, 2023 and reflects anticipated delivery delays and other modifications of our order book as agreed to in principle with Boeing. For agreements with variable terms, amounts included reflect our minimum obligations.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Remainder of 2023
|
|
2024
|
|
2025
|
|
2026
|
|
2027
|
|
Beyond 2027
|
|
Total
|
|
Debt obligations
|
$
|
45
|
|
|
$
|
286
|
|
|
$
|
343
|
|
|
$
|
292
|
|
|
$
|
597
|
|
|
$
|
864
|
|
|
$
|
2,427
|
|
|
Lease commitments
(a)
|
454
|
|
|
265
|
|
|
195
|
|
|
194
|
|
|
188
|
|
|
841
|
|
|
2,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft-related commitments
(b)
|
460
|
|
|
1,211
|
|
|
1,337
|
|
|
1,093
|
|
|
587
|
|
|
591
|
|
|
5,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest obligations
(c)
|
23
|
|
|
120
|
|
|
104
|
|
|
102
|
|
|
92
|
|
|
150
|
|
|
591
|
|
|
CPA and other obligations
|
56
|
|
|
224
|
|
|
227
|
|
|
219
|
|
|
220
|
|
|
739
|
|
|
1,685
|
|
|
Total
|
$
|
1,038
|
|
|
$
|
2,106
|
|
|
$
|
2,206
|
|
|
$
|
1,900
|
|
|
$
|
1,684
|
|
|
$
|
3,185
|
|
|
$
|
12,119
|
|
(a)
Lease commitments include minimum payments for aircraft operated under operating leases and aircraft removed from operating service which remain under operating and finance leases, as we have remaining cash obligations under existing terms. It also includes minimum lease payments for facilities.
(b)
Includes contractual commitments for aircraft, engines, and aircraft maintenance. Option deliveries are excluded from minimum commitments until exercise.
(c)
For variable-rate debt, future obligations are shown above using interest rates forecast as of September 30, 2023.
Debt Obligations and Interest Obligations
The Company primarily issues debt to fund purchases of aircraft or other capital expenditures. During the nine months ended September 30, 2023, the Company incurred new debt of $495 million and repaid $242 million in existing debt. At September 30, 2023, our debt portfolio carries a weighted average interest rate of 4.3%. Interest is paid with regular debt service. Refer to Note 5 to the consolidated financial statements for further discussion of our debt and interest balances.
CPA and Other Obligations
We have obligations primarily associated with the non-lease components of our capacity purchase agreement between Alaska and SkyWest, as well as other various sponsorship agreements and investment commitments.
Leased Aircraft Return Costs
For many of our leased aircraft, contractual terms require us to return the aircraft in a specified state. As a result of these contractual terms, we will incur significant costs to return these aircraft at the termination of the lease. Costs to return leased aircraft are accrued when the costs are probable and reasonably estimable, usually over the twelve months prior to the lease return, unless a determination is made to remove the leased asset from operation. If the leased aircraft is removed from the operating fleet, the estimated cost to return is accrued at the time of removal. If a leased aircraft has a known early retirement date in the future, the estimated cost to return is accrued through the retirement date. Any accrual is based on the time remaining on the lease, planned aircraft usage, and the provisions included in the lease agreement, although the actual amount due to any lessor upon return may not be known with certainty until lease termination. A total of $165 million is accrued for upcoming lease returns at September 30, 2023, including costs recorded in prior year periods.
Credit Card Agreements
Alaska has agreements with a number of credit card companies to process the sale of tickets and other services. Under these agreements, there are material adverse change clauses that, if triggered, could result in the credit card companies holding back a reserve from our credit card receivables. Under one such agreement, we could be required to maintain a reserve if our credit rating is downgraded to or below a rating specified by the agreement or our cash and marketable securities balance fell below $500 million. Under another such agreement, we could be required to maintain a reserve if our cash and marketable securities balance fell below $500 million. We are not currently required to maintain any reserve under these agreements, but if we were, our financial position and liquidity could be materially harmed.
Sustainability Commitments
As part of our efforts to reach net-zero carbon emissions by 2040, we have outlined a five-part path that we expect to include operational efficiency, fleet renewal, sustainable aviation fuel (SAF), enabling new technologies including zero emission aircraft in the future, and using credible offsetting and removal technologies to close the gaps to our emissions target in future years. We anticipate these efforts will require cash outlays, not all of which are reflected in our contractual commitments. Finding and establishing relationships with suppliers to meet these commitments is in process. Currently, Alaska has agreements to purchase approximately 200 million gallons of neat SAF to be delivered through 2030. These agreements are dependent on suppliers' ability to obtain all required governmental and regulatory approvals, achieve commercial operation, and produce sufficient quantities of SAF. Financial commitments that have been contractually established and have met defined minimum obligations, including those related to Alaska Star Ventures, are included within the CPA and other obligations row in the above table.
Income Taxes
For federal income tax purposes, the majority of our property and equipment are fully depreciated over a seven-year life using an accelerated depreciation method or bonus depreciation, if available. For financial reporting purposes, the majority of our assets are depreciated over 15 to 25 years to an estimated salvage value using the straight-line basis. This difference has created a significant deferred tax liability. At some point in the future, the property and equipment difference will reverse into taxable income, potentially resulting in an increase in income taxes payable.
While it is possible that we could have material cash obligations for this deferred liability at some point in the future, we cannot estimate the timing of long-term cash flows with reasonable accuracy. Taxable income and cash taxes payable in the short term are impacted by many items, including the amount of book income generated (which can be volatile depending on revenue and fuel prices, among other factors out of our control), whether bonus depreciation provisions are available, as well as other legislative changes beyond our control. We believe we have the liquidity to make our future tax payments.
CRITICAL ACCOUNTING ESTIMATES
There have been no material changes to our critical accounting estimates during the three and nine months ended September 30, 2023. For information regarding our critical accounting estimates, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2022.
GLOSSARY OF AIRLINE TERMS
Adjusted net debt -
long-term debt, including current portion, plus capitalized operating and finance leases, less cash and marketable securities
Adjusted net debt to EBITDAR
- represents adjusted net debt divided by EBITDAR (trailing twelve months earnings before interest, taxes, depreciation, amortization, special items and rent)
Aircraft Utilization
- block hours per day; this represents the average number of hours per day our aircraft are in transit
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; represents all operating expenses including fuel and special items
CASMex
- operating costs excluding fuel and special items per ASM, or "unit cost"; 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 capitalized operating and finance leases) divided by total equity plus adjusted debt
Diluted Earnings per Share
- represents earnings per share (EPS) 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 settled fuel-hedging contracts in the period
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, Airbus A320, and Airbus A321neo jets and all associated revenue and costs
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 and SkyWest. In this segment, Regional records actual on-board passenger revenue, less costs such as fuel, distribution costs, and payments made to Horizon and SkyWest under the respective capacity purchased arrangement (CPA). Additionally, Regional includes an allocation of corporate overhead such as IT, finance, and 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
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|
|
|
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
There have been no material changes in market risk from the information provided in Item 7A. “Quantitative and Qualitative Disclosure About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2022.
|
|
|
|
|
ITEM 4. CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls and Procedures
As of September 30, 2023, an evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financial officer (collectively, our “certifying officers”), of the effectiveness of the design and operation of our disclosure controls and procedures. These disclosure controls and procedures are designed to ensure that the information required to be disclosed by us in our periodic reports filed with or submitted to the Securities and Exchange Commission (the SEC) is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, and includes, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our certifying officers, as appropriate, to allow timely decisions regarding required disclosure. Our certifying officers concluded, based on their evaluation, that disclosure controls and procedures were effective as of September 30, 2023.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Our internal control over financial reporting is based on the 2013 framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO Framework).
PART II
|
|
|
|
|
ITEM 1. LEGAL PROCEEDINGS
|
The Company is a party to routine litigation matters incidental to its business and with respect to which no material liability is expected. Liabilities for litigation related contingencies are recorded when a loss is determined to be probable and estimable.
As part of the 2016 acquisition of Virgin America, Alaska assumed responsibility for the Virgin trademark license agreement with the Virgin Group. In 2019, pursuant to that agreement's venue provision, the Virgin Group sued Alaska in England, alleging that the agreement requires Alaska to pay $8 million per year as a minimum annual royalty through 2039, adjusted annually for inflation and irrespective of Alaska's actual use (or non-use) of the mark. The possible range of contractual liability is between $10 million and $160 million. Alaska stopped making royalty payments in 2019 after ending all use of the Virgin brand. On February 16, 2023, the commercial court issued a ruling adopting Virgin Group’s interpretation of the license agreement. The Company has appealed the decision and believes the claims in the case are without factual and legal merit, a position supported by Virgin America’s representations during pre-merger due diligence. Alaska also commenced a separate claim for breach of the agreement against the Virgin Group that may affect the Company’s total liability in the matter.
See Part I, Item 1A. "Risk Factors," in our 2022 Form 10-K for a detailed discussion of risk factors affecting Alaska Air Group.
|
|
|
|
|
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
This table provides certain information with respect to our purchases of shares of our common stock during the third quarter of 2023.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 1, 2023 - July 31, 2023
|
141,538
|
|
|
$
|
51.08
|
|
|
|
|
August 1, 2023 - August 31, 2023
|
107,450
|
|
|
$
|
46.99
|
|
|
|
|
September 1, 2023 - September 30, 2023
|
—
|
|
|
$
|
—
|
|
|
|
|
Total
|
248,988
|
|
|
$
|
49.32
|
|
|
$
|
387
|
|
The shares were purchased pursuant to a $1 billion repurchase plan authorized by the Board of Directors in August 2015.
As of September 30, 2023, a total of 1,882,517 shares of the Company’s common stock have been issued to Treasury in connection with the Payroll Support Program. Each warrant is exercisable at a strike price of $31.61 (928,126 shares related to PSP1), $52.25 (305,499 shares related to PSP2), and $66.39 (221,812 shares related to PSP3) per share of common stock. An additional 427,080 warrants were issued in conjunction with a draw on the CARES Act Loan in 2020 at a strike price of $31.61. These warrants are non-voting, freely transferable, may be settled as net shares or in cash at the Company's option, and have a five-year term. Such warrants were issued to Treasury in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
|
|
|
|
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
|
None.
|
|
|
|
|
ITEM 4. MINE SAFETY DISCLOSURES
|
None.
|
|
|
|
|
ITEM 5. OTHER INFORMATION
|
During the three months ended September 30, 2023, no director or officer of Alaska Air Group adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement, as such terms are defined in Item 408(a) of Regulation S-K promulgated under the Securities Exchange Act of 1934.
The following documents are filed as part of this report:
1.
Exhibits:
See Exhibit Index.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
ALASKA AIR GROUP, INC.
|
|
|
|
|
|
/s/ EMILY HALVERSON
|
|
|
Emily Halverson
|
|
|
Vice President Finance and Controller
|
|
|
|
|
|
November 2, 2023
|
|
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
Number
|
Exhibit
Description
|
Form
|
Date of First Filing
|
Exhibit Number
|
|
3.1
|
|
10-Q
|
August 3, 2017
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
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8-K
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December 15, 2015
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3.2
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10.1#†
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10-Q
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10.2#†
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10-Q
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31.1†
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10-Q
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31.2†
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10-Q
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32.1†
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10-Q
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32.2†
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10-Q
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101.INS†
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XBRL Instance Document - The instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document.
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101.SCH†
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XBRL Taxonomy Extension Schema Document
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101.CAL†
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF†
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB†
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE†
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XBRL Taxonomy Extension Presentation Linkbase Document
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104†
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Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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†
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Filed herewith
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*
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Indicates management contract or compensatory plan or arrangement.
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#
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Certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K Item 601(b)(10).
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