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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
December 10, 2024
(Date of earliest event reported)
ALASKA AIR GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation) | | | | | | | | |
1-8957 | | 91-1292054 |
(Commission File Number) | | (IRS Employer Identification No.) |
| | | | | | | | | | | | | | |
19300 International Boulevard | Seattle | Washington | | 98188 |
(Address of Principal Executive Offices) | | (Zip Code) |
(206) 392-5040
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Ticker Symbol | Name of each exchange on which registered |
Common stock, $0.01 par value | ALK | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
☐ Emerging growth company
If an emerging growth company, indicate by check mark 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. ☐
This document is also available on our website at http://investor.alaskaair.com
ITEM 7.01. Regulation FD Disclosure
On December 10, 2024, the Company hosted its Investor Day in New York and live via webcast. In conjunction with Investor Day, the Company issued a press release, which is furnished as Exhibit 99.1 to this Form 8-K. Materials used in the Investor Day presentation are furnished as Exhibit 99.2 to this Form 8-K.
Fourth Quarter adjusted earnings per share is now expect to be 40-50 cents, up from our previous guidance of 20-40 cents, primarily due to stronger revenue performance and lower non-operating expense. October and November close-in bookings were strong and November revenue performed better than expected despite Thanksgiving travel return patterns shifting to early December. December revenue is outperforming our previous expectation due to stronger holiday demand. Non-operating expense is lower as we proactively paid down additional debt in the quarter, reducing our overall interest costs.
Capacity is slightly lower than our previous expectations due to challenging weather in the quarter and CASMex is slightly higher due to higher profit-sharing accruals on improved earnings. The rest of our cost structure is performing in line with expectations.
As a result of the fourth quarter improvement, we now expect full year adjusted earnings per share to be $4.25 to $4.50 vs. our previous expectation of $3.50 to $4.50.
| | | | | | | | | | | | | | |
| | Updated Q4 Expectation | | Previous Q4 2024 Expectation |
Capacity (ASMs) % change versus 2023 | | Up ~1.5% | | Up 1.5% to 2.5% |
CASMex % change versus 2023 | | Up low double digits | | Up high single digits |
RASM % change versus 2023 | | Up mid-to-high single digits | | Up mid single digits |
Economic fuel cost per gallon | | $2.55 to $2.65 | | $2.55 to $2.65 |
Non-operating expense | | ~$45 million | | ~$50 million |
Adjusted earnings per share | | $0.40 to $0.50 | | $0.20 to $0.40 |
In accordance with General Instruction B.2 of Form 8-K, the information under this item shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. This report will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of regulation FD.
ITEM 8.01 Other Events
On December 9, 2024, the board of directors of Alaska Air Group approved a share repurchase program authorizing the company to buy back up to $1 billion of its common stock. Under the share repurchase program, the Company intends to repurchase shares using open market stock purchases, negotiated transactions, or through other means in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act. The program will begin after the existing repurchase program is complete.
ITEM 9.01 Financial Statements and Exhibits
As previously disclosed, on December 2, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Hawaiian Holdings, Inc., a Delaware corporation, and Marlin Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Alaska (“Merger Sub”). On September 18, 2024, pursuant to the Merger Agreement, Merger Sub merged with and into Hawaiian, with Hawaiian surviving as a wholly owned subsidiary of the Company (the “Merger”). The Company is making available certain unaudited pro forma condensed combined statements of operations for the quarter-to-date periods ending March 31, 2024 and June 30, 2024. This statements are filed as Exhibit 99.3 to this report.
(d) Exhibits
| | | | | | | | |
| | |
| | Press Release |
| | Investor Day Presentation |
| | Unaudited pro forma condensed combined financial information of the Company for the quarter-to-date periods ending March 31, 2024 and June 30, 2024. |
104 | | Cover Page Interactive Data File - embedded within the Inline XBRL Document |
Signatures
Pursuant to the requirements 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.
Registrant
Date: December 10, 2024
/s/ EMILY HALVERSON
Emily Halverson
Vice President Finance and Controller
Exhibit 99.1
Dec. 10, 2024
Media Contact: Investor / Analyst Contact:
Media Relations Ryan St. John
(206) 304-0008 VP, Finance, Planning & Investor Relations
Newsroom@alaskaair.com ALKInvestorRelations@alaskaair.com
Alaska Air Group introduces “Alaska Accelerate,” its three-year strategic plan to deliver $1 billion in incremental profit following combination with Hawaiian Airlines
•Alaska Air Group to unlock significant short- and long-term value creation to drive double digit margins of 11-13% and EPS to at least $10 by 2027; acquisition synergy estimates increased to at least $500 million by 2027
•Launching a new global gateway from Seattle with nonstop routes to Tokyo Narita (NRT) and Seoul Incheon (ICN), and expanding to at least 12 international widebody destinations by 2030
•Introducing a premium credit card with industry-leading benefits for guests, built for the global traveler to explore the expanding network
NEW YORK – Alaska Air Group, Inc. (NYSE: ALK) will host its previously announced 2024 Investor Day at 1 p.m. Eastern time today in New York City. In its first presentation since acquiring Hawaiian Airlines, the company will unveil Alaska Accelerate, its vision for the combined company, including how it will power commercial performance, achieve medium-term financial targets, and unlock significant value creation into the future.
“There has never been a more exciting time to be a part of Alaska Air Group,” said Ben Minicucci, chief executive officer. “We have built a winning business model that has enabled us to outperform the industry over the past two decades. Now, with the combination with Hawaiian Airlines, we will transform our business and solidify our competitive advantage for years to come.”
Alaska Accelerate
Alaska Accelerate is architected to deliver on the combined airline’s vision of connecting guests to the world with a remarkable travel experience rooted in safety, care and performance. Significant investments in the commercial organization will propel the company forward, revolving around four main goals:
1.Connect our guests to the world: Enabling the power of an expanded network by opening a global gateway in Seattle with long-haul widebody aircraft, seamlessly blending two route networks to optimize connections and deepen relevance for guests. Alaska and Hawaiian now operates over 1,400 daily flights to over 140 cities and can take people to over 1,200 destinations worldwide with global partners and through the oneworld Alliance.
2.Be Hawai‘i’s trusted airline: Providing Hawai‘i residents access to an expanded network, greater connectivity wherever they want to fly, and a dedicated loyalty program, Huakai‘i by Hawaiian.
3.Deliver a remarkable travel experience: Investing in its existing end-to-end premium experience including enhanced airport lobbies and lounges in our hubs, expanded premium seat capacity, a new loyalty platform, and a premium credit card offering.
4.Diversify our future: Maximizing opportunities to create and grow revenue across the business from cargo growth to innovation and investing in technologies for the future.
Enabling significant value creation
This acceleration of Alaska Air Group’s strengths and competitive advantages will enable significant value creation and deliver industry-leading financial results.
The company’s new 2027 financial targets will include:
•$1 billion in incremental profit
•Earnings per share of at least $10
•Double digit pretax profit margins 11-13%
•No margin dilution in year 1 following the merger
•Synergy estimates doubled to at least $500M
“To win in our industry, you must have relevance and loyalty, and that’s exactly what we are accelerating over the next three years,” said Shane Tackett, chief financial officer. “The combination with Hawaiian gives us the scale to be stronger than either of us could have been on our own – giving guests what they want, where and when they want it. And it will drive substantial financial results that will continue to set us apart from our competitors.”
Expanding commercial growth and opportunity
With contributions coming across network, product, loyalty and cargo, the commercial organization will drive the vast majority of the expected profit growth over the next three years - unlocking an additional $800M in revenue.
“We expect an unprecedented level of revenue growth at Alaska over the next three years,” said Andrew Harrison, chief commercial officer. “We’re focused on strengthening the commercial levers that drive the greatest guest satisfaction, and ultimately preference. Our guests will benefit from more premium seats, an enhanced loyalty program with even more ways to earn and redeem miles, and new global destinations to the places they most want to go.”
The commercial growth begins today with benefits for every guest and customer.
Connecting our guests to the world
The company will begin offering new nonstop flights on A330 aircraft to key Asian leisure and business markets in 2025 – connecting Seattle to Tokyo Narita in Japan and Seoul Incheon in South Korea.
Daily nonstop Seattle-Tokyo Narita service starts in May 2025, offering guests an enticing nonstop option between the Pacific Northwest and Japan. Flights can be purchased now at alaskaair.com and hawaiianairlines.com. Nonstop Seattle-Seoul Incheon service is scheduled to begin in October 2025, with fares available for purchase early next year.
For more information about the new Seattle service to Tokyo Narita and Seoul Incheon, as well as additional network and schedule changes, visit Alaska Airlines’ News Hub.
Scaling our premium experience
Announced in July, Alaska will increase its premium seat mix on its Boeing narrowbody fleet to 29%, with plans to expand premium cabins on the widebody fleet being developed.
Alaska will continue to expand the Lounge program, building off the recently-opened remodel in San Francisco. Planned Lounges in San Diego International Airport and Honolulu’s Daniel K. Inouye International Airport will join the portfolio, followed by a new flagship international lounge in Seattle by 2027.
These investments will serve to sustain and improve an already industry-leading net promoter score for both Alaska Airlines and Hawaiian Airlines – 20 points above the legacy carriers’ average.
Creating a valuable loyalty ecosystem
In addition to previously announced enhancements to the award-winning Mileage Plan, Alaska will launch a premium credit card built for the global traveler, including an innovative Global Companion Award Certificate, 3x miles on all eligible foreign and dining purchases, an even faster path to elite status and more. The premium credit card will be perfect for the guest looking to get the most out of the expanded Alaska Air Group network.
Interested guests can join an early-access list to receive an exclusive link to apply for the new premium credit card, which is expected to be available in summer 2025. Pre-register your interest at alaskaair.com/premium-card by Dec. 31, 2024, for an exclusive offer.
Growing cargo and diversifying revenue
Building on the decades-long expertise of serving communities reliant on air travel and freight, the combined network and widebody fleet is poised to double in revenue over the next few years. The expanded cargo organization is led by industry veterans and is estimated to unlock margins that are two to three times the system average.
As Asia represents 22% of the total global air cargo market, the new passenger service between the continental United States and Japan and South Korea are the first steps to
directly connect Alaska’s Seattle flagship cargo hub to the world’s most lucrative cargo markets.
Full Year 2025 Outlook
Looking ahead, the company anticipates its synergy targets and commercial initiatives will allow for no dilution to adjusted pretax margin in 2025 compared to 2024. Further, it expects to grow EPS by 30% and produce positive free cash flow, while investing in the fleet, balance sheet and shareholder returns.
| | | | | |
2025 Metric | Expectation |
Capacity | Up 2% to 3% |
Earnings Per Share | At least $5.75 |
Capital Expenditures | $1.4 to $1.5 billion |
Share Repurchases | ~ $250 million |
Webcast information
Alaska’s Investor Day presentation will be available via webcast at news.alaskaair.com/investor-relations starting at 1 p.m. Eastern time and concluding at approximately 3 p.m. Eastern time. The webcast and presentation materials can be accessed through Alaska’s investor relations website. A replay will be available following the conclusion of the event.
About Alaska Air Group
Alaska Air Group, Inc. is based in Seattle and comprised of subsidiaries Alaska Airlines, Hawaiian Airlines, Horizon Air and McGee Air Services. With our recent acquisition of Hawaiian Airlines, we now serve more than 140 destinations throughout North America, Central America, Asia and across the Pacific. We are committed to safety, remarkable customer care, operational excellence, financial performance and sustainability. Alaska Airlines is a member of the oneworld Alliance. With oneworld and our additional global partners, our guests have more choices than ever to purchase, earn or redeem on alaskaair.com across 30 airlines and more than 1,000 worldwide destinations. Book travel throughout the Pacific on Hawaiian Airlines at hawaiianairlines.com. Learn more about Alaska Airlines at news.alaskaair.com and Hawaiian Airlines at newsroom.hawaiianairlines.com/blog. Alaska Air Group is traded on the New York Stock Exchange (NYSE) as “ALK.”
Forward Looking Statements
This presentation may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by our forward-looking statements, assumptions or beliefs. For a discussion of risks and uncertainties that may cause our forward-looking statements to differ materially, see Item 1A of the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024. Some of these risks include
competition, labor costs, relations and availability, general economic conditions, increases in operating costs including fuel, uncertainties regarding the ability to successfully integrate the operations of the recently completed acquisition of Hawaiian Holdings, Inc. and the ability to realize anticipated cost savings, synergies, or growth from the acquisition, 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. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed in our most recent Form 10-Q. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements made today to conform them to actual results. Over time, our actual results, performance or achievements may differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, assumptions or beliefs and such differences might be significant and materially adverse.
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Exhibit 99.3
Unaudited Pro Forma Condensed Combined Financial Information
Unaudited Pro Forma Information
The following presents certain unaudited pro forma condensed combined statements of operations for the quarter-to-date periods ending March 31, 2024 and June 30, 2024. The pro forma financial information is based upon the combined historical financial statements of Alaska Air Group, Inc., ("Air Group") and Hawaiian Holdings, Inc., (“Hawaiian”), after giving effect to Air Group’s purchase of all the issued and outstanding shares of Hawaiian by means of a merger (the “Merger”). The combined pro forma information includes adjustments in accordance with Article 11 of Regulation S-X to illustrate the effects of the merger as if it had occurred on January 1, 2023, the beginning of the earliest period presented.
Management believes pro forma combined operating results for prior periods are useful for the purpose of comparing our actual or expected future operating results, as it provides a relevant baseline for identifying trends in the overall operating performance of our business. Management also believes the recalculation of certain operating statistics, unit metrics and certain non-GAAP measures on a pro forma basis to be useful in review of operating results.
"Other Adjustments" in the unaudited pro forma combined statements of operations reflect the preliminary allocation of the purchase price to the acquired assets and liabilities based upon estimates of fair values. These adjustments are provisional and subject to further adjustment up to September 18, 2025 as additional information becomes available, additional analyses are performed and as warranted by changes in current conditions and future expectations. Differences between these preliminary estimates and the final acquisition accounting will occur and these differences could have a material impact on the unaudited pro forma condensed combined financial information and the Combined Company’s future results of operations.
The unaudited pro forma condensed combined financial information is presented for informational purposes only. Such information is not necessarily indicative of the operating results or financial position that actually would have been achieved if the Merger had been consummated on the dates indicated or that the Combined Company may achieve in future periods. Specifically, the unaudited pro forma condensed combined financial information does not include any projected synergies expected to be achieved as a result of the Merger or any associated costs that may be incurred to achieve any projected synergies. The unaudited pro forma condensed combined financial information also exclude the costs associated with any integration activities that may result from the Merger.
ALASKA AIR GROUP
Unaudited Pro Forma Condensed Combined Statement of Operations
Three Months Ended March 31, 2024
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As Reported | | Pro Forma |
(in millions, except statistical data) | Alaska | | Hawaiian | | Reclassification and Policy Adjustments | | Other | | | | | Condensed Combined Pro Forma |
| | | | | | | | | | | | |
Operating Revenue | | | | | | | | | | | | |
Passenger revenue | $ | 2,004 | | | $ | 583 | | | $ | 2 | | | $ | — | | | | | | $ | 2,589 | |
Mileage Plan other revenue | 164 | | | — | | | (29) | | | — | | | | | | 135 | |
Cargo and other revenue | 64 | | | 62 | | | 26 | | | — | | | | | | 152 | |
Total Operating Revenue | 2,232 | | | 645 | | | (1) | | | — | | | | | | 2,876 | |
Wages and benefits | 804 | | | 262 | | | (5) | | | — | | (a) | | | | 1,061 | |
Variable incentive pay | 44 | | | — | | | 5 | | | — | | | | | | 49 | |
Aircraft fuel, including hedging gains and losses | 565 | | | 189 | | | 5 | | | — | | | | | | 759 | |
Aircraft maintenance | 122 | | | 71 | | | 5 | | | — | | | | | | 198 | |
Aircraft rent | 47 | | | 30 | | | (6) | | | (7) | | | | | | 64 | |
Landing fees and other rentals | 165 | | | 43 | | | 4 | | | — | | | | | | 212 | |
Contracted services | 97 | | | — | | | 32 | | | — | | | | | | 129 | |
Selling expenses | 77 | | | 28 | | | 2 | | | — | | | | | | 107 | |
Depreciation and amortization | 126 | | | 33 | | | 2 | | | 17 | | | | | | 178 | |
Food and beverage service | 58 | | | — | | | 22 | | | — | | | | | | 80 | |
Third-party regional carrier expense | 54 | | | — | | | — | | | — | | | | | | 54 | |
Other | 205 | | | 46 | | | 19 | | | — | | | | | | 270 | |
Special items - operating | 34 | | | 8 | | | — | | | — | | | | | | 42 | |
Aircraft and passenger servicing | — | | | 45 | | | (45) | | | — | | | | | | — | |
Purchased services | — | | | 38 | | | (38) | | | — | | | | | | — | |
Total Operating Expenses | 2,398 | | | 793 | | | 2 | | | 10 | | | | | | 3,203 | |
Operating Income / (Loss) | (166) | | | (148) | | | (3) | | | (10) | | | | | | (327) | |
Non-operating Income (Expense) | (12) | | | (4) | | | 1 | | | (3) | | (b) | | | | (18) | |
Income (Loss) Before Income Tax | (178) | | | (152) | | | (2) | | | (13) | | | | | | (345) | |
Income tax expense / (benefit) | (46) | | | (15) | | | — | | | (3) | | (c) | | | | (64) | |
Net Income (Loss) | (132) | | | (137) | | | (2) | | | (10) | | | | | | (281) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
RPMs (000,000) "traffic" | 12,524 | | | 4,073 | | | | | | | | | | 16,597 |
ASMs (000,000) "capacity" | 15,378 | | | 5,051 | | | | | | | | | | 20,429 |
Load Factor | 81.4 | % | | 80.6 | % | | | | | | | | | 81.2 | % |
RASM | 14.51 | ¢ | | 12.78 | ¢ | | | | | | | | | 14.08 | ¢ |
| | | | | | | | | | | | |
| As Reported | | Pro Forma |
(in millions, except statistical data) | Alaska | | Hawaiian | | Reclassification and Policy Adjustments | | Other | | | | | Condensed Combined Pro Forma |
CASMex Reconciliation | | | | | | | | | | | | |
Non-fuel operating expense | $ | 1,833 | | | $ | 604 | | | $ | (3) | | | $ | 10 | | | | | | $ | 2,444 | |
Less the following components: | | | | | | | | | | | | |
Freighter costs | 15 | | | — | | | — | | | — | | | | | | 15 | |
Special items - operating | 34 | | | 8 | | | — | | | — | | | | | | 42 | |
Total non-fuel operating expenses, excluding freighter costs and special items | $ | 1,784 | | | $ | 596 | | | $ | (3) | | | $ | 10 | | | | | | $ | 2,387 | |
CASMex | 11.60 | ¢ | | 11.79 | ¢ | | | | | | | | | 11.68 | ¢ |
| | | | | | | | | | | | |
Adjusted Pretax Income | | | | | | | | | | | | |
Income before income tax | $ | (178) | | | $ | (152) | | | $ | (2) | | | $ | (13) | | | | | | $ | (345) | |
Adjusted for: | | | | | | | | | | | | |
Mark-to-market fuel hedge adjustment | (13) | | | (2) | | | — | | | — | | | | | | (15) | |
Special items - operating | 34 | | | 8 | | | — | | | — | | | | | | 42 | |
Special items - net non-operating | — | | | (14) | | | — | | | — | | | | | | (14) | |
Adjusted income before income tax | $ | (157) | | | $ | (160) | | | $ | (2) | | | $ | (13) | | | | | | $ | (332) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pretax margin | (8.0) | % | | (23.6) | % | | | | | | | | | (12.0) | % |
Adjusted pretax margin | (7.0) | % | | (24.8) | % | | | | | | | | | (11.4) | % |
| | | | | | | | | | | | |
Adjusted Net Income | | | | | | | | | | | | |
Net Income (Loss) | $ | (132) | | | $ | (137) | | | $ | (2) | | | $ | (10) | | | | | | $ | (281) | |
Adjusted for: | | | | | | | | | | | | |
Mark-to-market fuel hedge adjustments | (13) | | | (2) | | | — | | | — | | | | | | (15) | |
Special items - operating | 34 | | | 8 | | | — | | | — | | | | | | 42 | |
Special items - net non-operating | — | | | (14) | | | — | | | — | | | | | | (14) | |
Income tax effect of reconciling items above | (5) | | | 1 | | | — | | | — | | | | | | (4) | |
Adjusted Net Income (Loss) | $ | (116) | | | $ | (144) | | | $ | (2) | | | $ | (10) | | | | | | $ | (272) | |
ALASKA AIR GROUP
Unaudited Pro Forma Condensed Combined Statement of Operations
Three Months Ended June 30, 2024
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As Reported | | Pro Forma |
(in millions, except statistical data) | Alaska | | Hawaiian | | Reclassification and Policy Adjustments | | Other | | | | | Condensed Combined Pro Forma |
| | | | | | | | | | | | |
Operating Revenue | | | | | | | | | | | | |
Passenger revenue | $ | 2,651 | | | $ | 666 | | | $ | 3 | | | $ | — | | | | | | $ | 3,320 | |
Mileage Plan other revenue | 174 | | | — | | | (29) | | | — | | | | | | 145 | |
Cargo and other revenue | 72 | | | 66 | | | 27 | | | — | | | | | | 165 | |
Total Operating Revenue | 2,897 | | | 732 | | | 1 | | | — | | | | | | 3,630 | |
Wages and benefits | 782 | | | 265 | | | (5) | | | — | | (a) | | | | 1,042 | |
Variable incentive pay | 49 | | | — | | | 5 | | | — | | | | | | 54 | |
Aircraft fuel, including hedging gains and losses | 615 | | | 179 | | | 7 | | | — | | | | | | 801 | |
Aircraft maintenance | 129 | | | 70 | | | 5 | | | — | | | | | | 204 | |
Aircraft rent | 46 | | | 30 | | | (6) | | | (7) | | | | | | 63 | |
Landing fees and other rentals | 173 | | | 45 | | | 4 | | | — | | | | | | 222 | |
Contracted services | 106 | | | — | | | 33 | | | — | | | | | | 139 | |
Selling expenses | 84 | | | 29 | | | 2 | | | — | | | | | | 115 | |
Depreciation and amortization | 128 | | | 35 | | | 2 | | | 17 | | | | | | 182 | |
Food and beverage service | 67 | | | — | | | 23 | | | — | | | | | | 90 | |
Third-party regional carrier expense | 64 | | | — | | | — | | | — | | | | | | 64 | |
Other | 186 | | | 41 | | | 19 | | | — | | | | | | 246 | |
Special items - operating | 146 | | | 6 | | | — | | | — | | | | | | 152 | |
Aircraft and passenger servicing | — | | | 48 | | | (48) | | | — | | | | | | — | |
Purchased services | — | | | 39 | | | (39) | | | — | | | | | | — | |
Total Operating Expenses | 2,575 | | | 787 | | | 2 | | | 10 | | | | | | 3,374 | |
Operating Income / (Loss) | 322 | | | (55) | | | (1) | | | (10) | | | | | | 256 | |
Non-operating Income (Expense) | (6) | | | (12) | | | 2 | | | (3) | | (b) | | | | (19) | |
Income (Loss) Before Income Tax | 316 | | | (67) | | | 1 | | | (13) | | | | | | 237 | |
Income tax expense / (benefit) | 96 | | | — | | | — | | | (3) | | (c) | | | | 93 | |
Net Income (Loss) | 220 | | | (67) | | | 1 | | | (10) | | | | | | 144 | |
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RPMs (000,000) "traffic" | 15,309 | | | 4,519 | | | | | | | | | | 19,828 |
ASMs (000,000) "capacity" | 18,196 | | | 5,230 | | | | | | | | | | 23,426 |
Load Factor | 84.1 | % | | 86.4 | % | | | | | | | | | 84.6 | % |
RASM | 15.92 | ¢ | | 13.99 | ¢ | | | | | | | | | 15.50 | ¢ |
| | | | | | | | | | | | |
| As Reported | | Pro Forma |
(in millions, except statistical data) | Alaska | | Hawaiian | | Reclassification and Policy Adjustments | | Other | | | | | Condensed Combined Pro Forma |
CASMex Reconciliation | | | | | | | | | | | | |
Non-fuel operating expense | $ | 1,960 | | | $ | 608 | | | $ | (5) | | | $ | 10 | | | | | | $ | 2,573 | |
Less the following components: | | | | | | | | | | | | |
Freighter costs | 13 | | | — | | | — | | | — | | | | | | 15 | |
Special items - operating | 146 | | | 6 | | | — | | | — | | | | | | 152 | |
Total non-fuel operating expenses, excluding freighter costs and special items | $ | 1,801 | | | $ | 602 | | | $ | (5) | | | $ | 10 | | | | | | $ | 2,406 | |
CASMex | 9.89 | ¢ | | 11.50 | ¢ | | | | | | | | | 10.27 | ¢ |
| | | | | | | | | | | | |
Adjusted Pretax Income | | | | | | | | | | | | |
Income before income tax | $ | 316 | | | $ | (67) | | | $ | 1 | | | $ | (13) | | | | | | $ | 237 | |
Adjusted for: | | | | | | | | | | | | |
Mark-to-market fuel hedge adjustment | (5) | | | — | | | — | | | — | | | | | | (5) | |
Special items - operating | 146 | | | 6 | | | — | | | — | | | | | | 152 | |
Special items - net non-operating | — | | | (10) | | | — | | | — | | | | | | (10) | |
Adjusted income before income tax | $ | 457 | | | $ | (71) | | | $ | 1 | | | $ | (13) | | | | | | $ | 374 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pretax margin | 10.9 | % | | (9.2) | % | | | | | | | | | 6.5 | % |
Adjusted pretax margin | 15.8 | % | | (9.7) | % | | | | | | | | | 10.4 | % |
| | | | | | | | | | | | |
Adjusted Net Income | | | | | | | | | | | | |
Net Income (Loss) | $ | 220 | | | $ | (67) | | | $ | 1 | | | $ | (10) | | | | | | $ | 144 | |
Adjusted for: | | | | | | | | | | | | |
Mark-to-market fuel hedge adjustments | (5) | | | — | | | — | | | — | | | | | | (5) | |
Special items - operating | 146 | | | 6 | | | — | | | — | | | | | | 152 | |
Special items - net non-operating | — | | | (10) | | | — | | | — | | | | | | (10) | |
Income tax effect of reconciling items above | (34) | | | — | | | — | | | — | | | | | | (34) | |
Adjusted Net Income (Loss) | $ | 327 | | | $ | (71) | | | $ | 1 | | | $ | (10) | | | | | | $ | 247 | |
Notes for the Pro Forma Adjustments
(a)Adjustments to non-fuel operating expense includes impacts of purchase accounting and related depreciation and amortization.
(b)To eliminate the historical amortization of debt fees and discount and to record the impact for interest expense related to the fair value adjustment of debt.
(c)To recognize the income tax impacts of other adjustments.
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