Alaska Air Group reports second quarter 2021 results

 

Financial Results:

• Reported net income for the second quarter of 2021 under Generally Accepted Accounting Principles (GAAP) of $397 million, or $3.15 per share, compared to a net loss of $214 million, or $1.74 per share in the second quarter of 2020. 
• Reported a net loss for the second quarter of 2021, excluding CARES Act Payroll Support Program (PSP) wage offsets, special items and mark-to-market fuel hedge accounting adjustments, of $38 million, or $0.30 per share, compared to an adjusted net loss of $439 million or $3.57 per share, in the second quarter of 2020. 
• Reported a debt-to-capitalization ratio, including short-term borrowings related to COVID-19, of 56%. 
• Held $4.0 billion in unrestricted cash and marketable securities as of June 30, 2021. 
• Generated $840 million in operating cash flow in the second quarter, inclusive of $489 million of PSP funding, bolstered by improved advance bookings on a surge in demand for air travel. Excluding PSP funding, quarterly operating cash flows improved over $580 million from the first quarter of 2021. 

Operational Updates:

• Announced plans to grow our mainline and regional fleets, exercising options for 13 Boeing 737-9 MAX with deliveries in 2023 and 2024, and nine E175 to be operated by Horizon Air with deliveries in 2022 and 2023. In addition, expanded our long-term capacity agreement with SkyWest Airlines by eight aircraft to be delivered in 2022. 
• Announced new service to Central America with new routes to Belize from Seattle and Los Angeles, with service slated to begin in November 2021. 
• Issued recall notices to all pilots on incentive lines for return to work by October 2021. 
• Continued our history of providing meaningful incentive programs to our employees with $67 million in cash bonuses earned to date. 
• Announced seven new domestic routes aimed at providing our West Coast guests more options to sun-filled destinations, including three new routes serving Boise, Idaho. 

Liquidity Updates:

• Received $664 million through a combination of grants and loans from the U.S. Treasury under an extension of the PSP. 
• Repaid approximately $570 million in debt, including the full $135 million loan from the U.S. Treasury made available under the CARES Act and the $363 million outstanding balance on two credit facilities.

Sustainability Updates:

• Announced five-part pathway to achieve a net zero carbon footprint by 2040, putting the airline on track to meet the annual carbon intensity target that is part of its performance-based pay program for all employees. 
• First airline to implement network optimization software, Flyways, using artificial intelligence and machine learning to optimize air traffic and enable more fuel-efficient flight paths for aggregate savings of fuel, carbon emissions and time. 
• Partnered with Boeing to launch a 737-9 ecoDemonstrator to test advanced technologies that can enhance the safety and sustainability of air travel.  The aircraft will conduct five months of flight tests across the U.S.
• Revealed "Our Commitment" aircraft in partnership with long-time partner UNCF, a symbol of the airline's commitments to increase diverse representation in our leadership, advance education as a critical component of equity, and to make Alaska Airlines a place where everyone feels they belong. 

Alaska Air Group Inc. today reported second quarter 2021 GAAP net income of $397 million, or $3.15 per share, compared to a net loss of $214 million, or $1.74 per share in the second quarter of 2020. Excluding the impact of payroll support program wage offsets, special items and mark-to-market fuel hedge adjustments, the company reported an adjusted net loss of $38 million, or $0.30 per diluted share, compared to an adjusted net loss of $439 million, or $3.57 per diluted share in 2020.

"As we put the worst of last year's downturn behind us, Alaska is back on the path to profitability," said CEO Ben Minicucci. "We are executing our plan, rebuilding our network, leveraging our capacity to meet growing demand, and delivering exceptional service and value to our guests. I'm incredibly proud and grateful for how hard our employees are working and how they show up for each other and our guests every day with focus on safety, operational excellence and care."

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

	Three Months Ended June 30,
	2021								2020
(in millions, except per-share amounts)	Dollars				Diluted EPS				Dollars				Diluted EPS
GAAP net income (loss) per share	$	397			$	3.15			$	(214)			$	(1.74)
Payroll support program wage offset	(503)				(3.99)				(362)				(2.94)
Mark-to-market fuel hedge adjustments	(46)				(0.37)				(6)				(0.05)
Special items - impairment charges and other	(4)				(0.03)				69				0.56
Special items - restructuring charges	(23)				(0.18)				—				—
Special items - merger-related costs	—				—				1				0.01
Income tax effect of reconciling items above	141				1.12				73				0.59
Non-GAAP adjusted net loss per share	$	(38)			$	(0.30)			$	(439)			$	(3.57)
	Six Months Ended June 30,
	2021								2020
(in millions, except per-share amounts)	Dollars				Diluted EPS				Dollars				Diluted EPS
GAAP net income (loss) per share	$	266			$	2.12			$	(446)			$	(3.62)
Payroll support program wage offset	(914)				(7.27)				(362)				(2.94)
Mark-to-market fuel hedge adjustments	(68)				(0.54)				3				0.02
Special items - impairment charges and other	14				0.11				229				1.86
Special items - restructuring charges	(12)				(0.10)				—				—
Special items - merger-related costs	—				—				4				0.03
Income tax effect of reconciling items above	240				1.91				31				0.25
Non-GAAP adjusted net loss per share	$	(474)			$	(3.77)			$	(541)			$	(4.40)

Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables. A glossary of financial terms can be found on the last page of this release.

A conference call regarding the second quarter results will be streamed online at 8:30 a.m. PDT on July 22, 2021. It can be accessed at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call.

References in this update to "Air Group," "Company," "we," "us," and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified.

This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements.  For a comprehensive discussion of potential risk factors, see Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2020. Some of these risks include the risks associated with contagious illnesses and contagion, such as COVID-19, general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our indebtedness, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, and changes in laws and regulations. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance, or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.

Alaska Airlines and its regional partners serve more than 120 destinations across the United States and to Mexico, Canada and Costa Rica. The airline emphasizes Next-Level Care for its guests, along with providing low fares, award-winning customer service and sustainability efforts. Alaska is a member of oneworld. With the global alliance and the airline's additional partners, guests can travel to more than 1,000 destinations on more than 20 airlines while earning and redeeming miles on flights to locations around the world. Learn more about Alaska at newsroom.alaskaair.com and blog.alaskaair.com. Alaska Airlines and Horizon Air are subsidiaries of Alaska Air Group (NYSE: ALK).

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Alaska Air Group, Inc.
	Three Months Ended June 30,											Six Months Ended June 30,
(in millions, except per-share amounts)	2021				2020				Change			2021				2020				Change
Operating Revenues:
Passenger revenue	$	1,352			$	309			338	%		$	2,011			$	1,790			12	%
Mileage Plan other revenue	118				73				62	%		212				182				16	%
Cargo and other	57				39				46	%		101				85				19	%
Total Operating Revenues	1,527				421				263	%		2,324				2,057				13	%
Operating Expenses:
Wages and benefits	510				472				8	%		1,003				1,084				(7)	%
Payroll support program wage offset	(503)				(362)				39	%		(914)				(362)				152	%
Variable incentive pay	34				16				113	%		67				23				191	%
Aircraft fuel, including hedging gains and losses	274				59				364	%		477				443				8	%
Aircraft maintenance	102				45				127	%		183				160				14	%
Aircraft rent	62				74				(16)	%		124				155				(20)	%
Landing fees and other rentals	144				83				73	%		273				214				28	%
Contracted services	54				30				80	%		105				102				3	%
Selling expenses	41				4				925	%		74				59				25	%
Depreciation and amortization	98				107				(8)	%		195				215				(9)	%
Food and beverage service	35				7				400	%		58				56				4	%
Third-party regional carrier expense	37				26				42	%		67				63				6	%
Other	117				78				50	%		222				221				—	%
Special items - impairment charges and other	(4)				69				(106)	%		14				229				(94)	%
Special items - restructuring charges	(23)				—			.	NM			(12)				—				NM
Special items - merger-related costs	—				1				(100)	%		—				4				(100)	%
Total Operating Expenses	978				709				38	%		1,936				2,666				(27)	%
Operating Income (Expense)	549				(288)				(291)	%		388				(609)				(164)	%
Nonoperating Income (Expense):
Interest income	6				7				(14)	%		13				16				(19)	%
Interest expense	(39)				(17)				129	%		(71)				(30)				137	%
Interest capitalized	3				1				200	%		6				4				50	%
Other - net	9				6				50	%		19				11				73	%
Total Nonoperating Income (Expense)	(21)				(3)				NM			(33)				1				NM
Income (Loss) Before Income Tax	528				(291)							355				(608)
Income tax expense (benefit)	131				(77)							89				(162)
Net Income (Loss)	$	397			$	(214)						$	266			$	(446)
Basic Income (Loss) Per Share:	$	3.18			$	(1.74)						$	2.13			$	(3.62)
Diluted Income (Loss) Per Share:	$	3.15			$	(1.74)						$	2.12			$	(3.62)
Shares Used for Computation:
Basic	124.977				123.296							124.640				123.058
Diluted	126.037				123.296							125.676				123.058
Cash dividend declared per share:	$	—			$	—						$	—			$	0.375

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
Alaska Air Group, Inc.
(in millions)	June 30, 2021				December 31, 2020
Cash and cash equivalents	$	1,025			$	1,370
Marketable securities	2,926				1,976
Total cash and marketable securities	3,951				3,346
Other current assets	820				660
Current assets	4,771				4,006
Property and equipment - net	6,128				6,211
Operating lease assets	1,375				1,400
Goodwill	1,943				1,943
Intangible assets - net	103				107
Other assets	336				379
Total assets	14,656				14,046
Air traffic liability	1,533				1,073
Current portion of long-term debt	869				1,138
Current portion of operating lease liabilities	263				290
Other current liabilities	2,181				1,792
Current liabilities	4,846				4,293
Long-term debt	2,319				2,357
Long-term operating lease liabilities	1,222				1,268
Other liabilities and credits	2,945				3,140
Shareholders' equity	3,324				2,988
Total liabilities and shareholders' equity	$	14,656			$	14,046
Debt-to-capitalization ratio, including operating leases	56		%		61		%
Number of common shares outstanding	125.229				124.218

 

SUMMARY CASH FLOW (unaudited)
Alaska Air Group, Inc.
(in millions)	Six Months Ended  June 30, 2021				Three Months Ended  March 31, 2021(a)				Three Months Ended  June 30, 2021(b)
Cash Flows from Operating Activities:
Net income (loss)	$	266			$	(131)			$	397
Non-cash reconciling items	221				138				83
Changes in working capital	520				160				360
Net cash provided by (used in) operating activities	1,007				167				840
Cash Flows from Investing Activities:
Property and equipment additions	(102)				(27)				(75)
Other investing activities	(968)				(516)				(452)
Net cash provided by (used in) investing activities	(1,070)				(543)				(527)
Cash Flows from Financing Activities:	(281)				82				(363)
Net increase (decrease) in cash and cash equivalents	$	(344)			$	(294)			$	(50)
Cash, cash equivalents, and restricted cash at beginning of period	1,386				1,386				1,092
Cash, cash equivalents, and restricted cash at end of the period	$	1,042			$	1,092			$	1,042

(a)	As reported in Form 10-Q for the first quarter of 2021.
(b)	Cash flows for the three months ended June 30, 2021, can be calculated by subtracting cash flows for the three months ended March 31, 2021, as reported in Form 10-Q for the first quarter 2021, from the six months ended June 30, 2021.

 

OPERATING STATISTICS SUMMARY (unaudited)
Alaska Air Group, Inc.
	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Change		2021		2020		Change
Consolidated Operating Statistics:(a)
Revenue passengers (000)	8,712		1,485		486.7%		13,379		10,417		28.4%
RPMs (000,000) "traffic"	10,334		1,654		524.8%		15,727		12,310		27.8%
ASMs (000,000) "capacity"	13,413		4,307		211.4%		23,810		19,612		21.4%
Load factor	77.0%		38.4%		38.6 pts		66.1%		62.8%		3.3 pts
Yield	13.09¢		18.68¢		(29.9)%		12.79¢		14.54¢		(12.0)%
RASM	11.38¢		9.77¢		16.5%		9.76¢		10.49¢		(7.0)%
CASMex(b)	9.20¢		21.87¢		(57.9)%		9.95¢		12.00¢		(17.1)%
Economic fuel cost per gallon(b)	$1.90		$1.20		58.3%		$1.85		$1.77		4.5%
Fuel gallons (000,000)	168		54		211.1%		294		248		18.5%
ASM's per gallon	79.8		79.8		—%		81.0		79.1		2.4%
Average number of full-time equivalent employees (FTE)	19,001		15,836		20.0%		18,071		19,115		(5.5)%
Mainline Operating Statistics:
Revenue passengers (000)	6,151		905		579.7%		9,302		7,580		22.7%
RPMs (000,000) "traffic"	8,966		1,276		602.7%		13,555		10,858		24.8%
ASMs (000,000) "capacity"	11,611		3,363		245.3%		20,464		17,060		20.0%
Load factor	77.2%		37.9%		39.3 pts		66.2%		63.6%		2.6 pts
Yield	11.96¢		17.63¢		(32.2)%		11.64¢		13.44¢		(13.4)%
RASM	10.59¢		9.52¢		11.2%		9.09¢		9.94¢		(8.6)%
CASMex(b)	8.48¢		22.19¢		(61.8)%		9.17¢		11.17¢		(17.9)%
Economic fuel cost per gallon(b)	$1.88		$1.20		56.7%		$1.84		$1.78		3.4%
Fuel gallons (000,000)	135		38		255.3%		233		201		15.9%
ASM's per gallon	86.0		88.5		(2.8)%		87.8		84.9		3.4%
Average number of FTE's	14,021		12,340		13.6%		13,247		14,579		(9.1)%
Aircraft utilization	9.9		5.6		76.8%		9.2		8.8		4.5%
Average aircraft stage length	1,320		1,144		15.4%		1,313		1,270		3.4%
Operating fleet(d)	202		225		(23) a/c		202		225		(23) a/c
Regional Operating Statistics:(c)
Revenue passengers (000)	2,562		580		341.7%		4,077		2,837		43.7%
RPMs (000,000) "traffic"	1,367		378		261.6%		2,172		1,452		49.6%
ASMs (000,000) "capacity"	1,802		945		90.7%		3,346		2,552		31.1%
Load factor	75.9%		40.0%		35.9 pts		64.9%		56.9%		8.0 pts
Yield	20.48¢		22.12¢		(7.4)%		19.95¢		22.80¢		(12.5)%
RASM	16.41¢		10.63¢		54.4%		13.84¢		14.07¢		(1.6)%
Operating fleet	94		94		— a/c		94		94		— a/c

(a)	Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.
(b)	See a reconciliation of this non-GAAP measure and Note A for a discussion of the importance of this measure to investors in the accompanying pages.
(c)	Data presented includes information for flights operated by Horizon and third-party carriers.
(d)	Excludes all aircraft removed from operating service.

Given the unusual nature of 2020, we believe that some analysis of specific financial and operational results compared to 2019 provides meaningful insight. The table below includes comparative results from 2021 to 2019.

FINANCIAL INFORMATION AND OPERATING STATISTICS - 2019 RESULTS (unaudited)
Alaska Air Group, Inc.
	Three Months Ended June 30,											Six Months Ended June 30,
	2021				2019				Change			2021				2019				Change
Passenger revenue	$	1,352			$	2,111			(36)	%		$	2,011			$	3,827			(47)	%
Mileage plan other revenue	118				118				—	%		212				228				(7)	%
Cargo and other	57				59				(3)	%		101				109				(7)	%
Total operating revenues	$	1,527			$	2,288			(33)	%		$	2,324			$	4,164			(44)	%
Operating expense, excluding fuel and special items	$	1,234			$	1,414			(13)	%		$	2,371			$	2,819			(16)	%
Economic fuel	274				502				(45)	%		477				922				(48)	%
Special items	(530)				8				NM			(912)				34				NM
Total operating expenses	$	978			$	1,924			(49)	%		$	1,936			$	3,775			(49)	%
Consolidated Operating Statistics(a):
Revenue passengers (000)	8,712				12,026				(28)	%		13,379				22,442				(40)	%
RPMs (000,000) "traffic"	10,334				14,638				(29)	%		15,727				27,087				(42)	%
ASMs (000,000) "capacity"	13,413				16,980				(21)	%		23,810				32,487				(27)	%
Load Factor	77.0%				86.2%				(9.2)	pts		66.1%				83.4%				(17.3)	pts
Yield	13.09¢				14.43¢				(9)	%		12.79¢				14.13¢				(9)	%
RASM	11.38¢				13.48¢				(16)	%		9.76¢				12.82¢				(24)	%
CASMex	9.20¢				8.33¢				10	%		9.95¢				8.68¢				15	%
FTEs	19,001				21,921				(13)	%		18,071				21,876				(17)	%

(a)	2019 comparative operating statistics have been recalculated using the information presented above, and as filed in our second quarter 2019 Form 10-Q

 

OPERATING SEGMENTS (unaudited)
Alaska Air Group, Inc.
	Three Months Ended June 30, 2021
(in millions)	Mainline				Regional				Horizon				Consolidating  & Other(a)				Air Group Adjusted(b)				Special  Items(c)				Consolidated
Operating Revenues
Passenger revenues	$	1,072			$	280			$	—			$	—			$	1,352			$	—			$	1,352
CPA revenues	—				—				111				(111)				—				—				—
Mileage Plan other revenue	102				16				—				—				118				—				118
Cargo and other	55				—				—				2				57				—				57
Total Operating Revenues	1,229				296				111				(109)				1,527				—				1,527
Operating Expenses
Operating expenses, excluding fuel	984				286				91				(127)				1,234				(530)				704
Economic fuel	253				66				—				1				320				(46)				274
Total Operating Expenses	1,237				352				91				(126)				1,554				(576)				978
Nonoperating Income (Expense)
Interest income	6				—				—				—				6				—				6
Interest expense	(34)				—				(5)				—				(39)				—				(39)
Interest capitalized	3				—				—				—				3				—				3
Other - net	9				—				—				—				9				—				9
Total Nonoperating Expense	(16)				—				(5)				—				(21)				—				(21)
Income (Loss) Before Income Tax	$	(24)			$	(56)			$	15			$	17			$	(48)			$	576			$	528
	Three Months Ended June 30, 2020
(in millions)	Mainline				Regional				Horizon				Consolidating  & Other(a)				Air Group Adjusted(b)				Special  Items(c)				Consolidated
Operating Revenues
Passenger revenues	$	225			$	84			$	—			$	—			$	309			$	—			$	309
CPA revenues	—				—				81				(81)				—				—				—
Mileage Plan other revenue	56				17				—				—				73				—				73
Cargo and other	39				—				—				—				39				—				39
Total Operating Revenues	320				101				81				(81)				421				—				421
Operating Expenses
Operating expenses, excluding fuel	746				210				68				(82)				942				(292)				650
Economic fuel	45				20				—				—				65				(6)				59
Total Operating Expenses	791				230				68				(82)				1,007				(298)				709
Nonoperating Income (Expense)
Interest income	11				—				—				(4)				7				—				7
Interest expense	(18)				—				(5)				6				(17)				—				(17)
Interest capitalized	1				—				—				—				1				—				1
Other - net	6				—				—				—				6				—				6
Total Nonoperating Income (Expense)	—				—				(5)				2				(3)				—				(3)
Income (Loss) Before Income Tax	$	(471)			$	(129)			$	8			$	3			$	(589)			$	298			$	(291)
	Six Months Ended June 30, 2021
(in millions)	Mainline				Regional				Horizon				Consolidating  & Other(a)				Air Group Adjusted(b)				Special  Items(c)				Consolidated
Operating Revenues
Passenger revenues	$	1,578			$	433			$	—			$	—			$	2,011			$	—			$	2,011
CPA revenues	—				—				215				(215)				—				—				—
Mileage Plan other revenue	182				30				—				—				212				—				212
Cargo and other	99				—				—				2				101				—				101
Total Operating Revenues	1,859				463				215				(213)				2,324				—				2,324
Operating Expenses
Operating expenses, excluding fuel	1,877				551				179				(236)				2,371				(912)				1,459
Economic fuel	427				118				—				—				545				(68)				477
Total Operating Expenses	2,304				669				179				(236)				2,916				(980)				1,936
Nonoperating Income (Expense)
Interest income	13				—				—				—				13				—				13
Interest expense	(61)				—				(10)				—				(71)				—				(71)
Interest capitalized	6				—				—				—				6				—				6
Other - net	19				—				—				—				19				—				19
Total Nonoperating Expense	(23)				—				(10)				—				(33)				—				(33)
Income (Loss) Before Income Tax	$	(468)			$	(206)			$	26			$	23			$	(625)			$	980			$	355
	Six Months Ended June 30, 2020
(in millions)	Mainline				Regional				Horizon				Consolidating  & Other(a)				Air Group Adjusted(b)				Special  Items(c)				Consolidated
Operating Revenues
Passenger revenues	$	1,459			$	331			$	—			$	—			$	1,790			$	—			$	1,790
CPA revenues	—				—				186				(186)				—				—				—
Mileage Plan other revenue	154				28				—				—				182				—				182
Cargo and other	83				—				—				2				85				—				85
Total Operating Revenues	1,696				359				186				(184)				2,057				—				2,057
Operating Expenses
Operating expenses, excluding fuel	1,905				479				160				(192)				2,352				(129)				2,223
Economic fuel	358				82				—				—				440				3				443
Total Operating Expenses	2,263				561				160				(192)				2,792				(126)				2,666
Nonoperating Income (Expense)
Interest income	25				—				—				(9)				16				—				16
Interest expense	(30)				—				(10)				10				(30)				—				(30)
Interest capitalized	4				—				—				—				4				—				4
Other - net	12				—				—				(1)				11				—				11
Total Nonoperating Income (Expense)	11				—				(10)				—				1				—				1
Income (Loss) Before Income Tax	$	(556)			$	(202)			$	16			$	8			$	(734)			$	126			$	(608)

(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. See Note A in the accompanying pages for further information.
(c)	Includes payroll support program wage offsets, special items and mark-to-market fuel hedge accounting adjustments.

 

GAAP TO NON-GAAP RECONCILIATIONS (unaudited)
Alaska Air Group, Inc.
CASM Excluding Fuel and Special Items Reconciliation
	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Consolidated:
CASM	7.29	¢		16.46	¢		8.13	¢		13.59	¢
Less the following components:
Payroll support program wage offset (benefit)	(3.75)			(8.40)			(3.84)			(1.85)
Aircraft fuel, including hedging gains and losses	2.04			1.37			2.00			2.26
Special items - impairment charges and other(a)	(0.03)			1.60			0.07			1.17
Special items - restructuring charges(b)	(0.17)			—			(0.05)			—
Special items - merger-related costs	—			0.02			—			0.01
CASM excluding fuel and special items	9.20	¢		21.87	¢		9.95	¢		12.00	¢
Mainline:
CASM	6.24	¢		15.79	¢		6.72	¢		12.39	¢
Less the following components:
Payroll support program wage offset (benefit)	(3.79)			(9.69)			(4.21)			(1.91)
Aircraft fuel, including hedging gains and losses	1.78			1.16			1.75			2.12
Special items - impairment charges and other(a)	(0.03)			2.11			0.07			0.99
Special items - restructuring charges(b)	(0.20)			—			(0.06)			—
Special items - merger-related costs	—			0.02			—			0.02
CASM excluding fuel and special items	8.48	¢		22.19	¢		9.17	¢		11.17	¢

(a)	Special items - impairment charges and other in the three and six months ended June 30, 2021 are primarily comprised of updated estimates of cost associated with leased aircraft that have been retired and removed from the operating fleet but not yet returned to the lessor.
(b)	Special items - restructuring charges in the three and six months ended June 30, 2021 represent adjustments to total cost for pilot incentive leaves as a result of updated recall timing from what was previously anticipated due to schedule changes, training limitations and other factors.

 

Fuel Reconciliation
	Three Months Ended June 30,
	2021								2020
(in millions, except for per-gallon amounts)	Dollars				Cost/Gallon				Dollars				Cost/Gallon
Raw or "into-plane" fuel cost	$	330			$	1.96			$	60			$	1.11
Losses (gains) on settled hedges	(10)				(0.06)				5				0.09
Consolidated economic fuel expense	320				1.90				65				1.20
Mark-to-market fuel hedge adjustment	(46)				(0.27)				(6)				(0.11)
GAAP fuel expense	$	274			$	1.63			$	59			$	1.09
Fuel gallons	168								54
	Six Months Ended June 30,
	2021								2020
(in millions, except for per gallon amounts)	Dollars				Cost/Gallon				Dollars				Cost/Gallon
Raw or "into-plane" fuel cost	$	552			$	1.87			$	430			$	1.73
Losses (gains) on settled hedges	(7)				(0.02)				10				0.04
Consolidated economic fuel expense	$	545			$	1.85			$	440			$	1.77
Mark-to-market fuel hedge adjustment	(68)				(0.23)				3				0.01
GAAP fuel expense	$	477			$	1.62			$	443			$	1.78
Fuel gallons	294								248

Debt-to-capitalization, adjusted for operating leases
(in millions)	June 30, 2021				December 31, 2020
Long-term debt, net of current portion	$	2,319			$	2,357
Capitalized operating leases	1,485				1,558
COVID-19 related borrowings(a)	425				734
Adjusted debt, net of current portion of long-term debt	4,229				4,649
Shareholders' equity	3,324				2,988
Total Invested Capital	$	7,553			$	7,637
Debt-to-capitalization ratio, including operating leases	56		%		61		%

(a)	To best reflect our leverage we included the remaining short-term borrowings stemming from the COVID-19 pandemic which are classified as current liabilities in the consolidated balance sheets.

 

Adjusted net debt to earnings before interest, taxes, depreciation, amortization and special items
(in millions)	June 30, 2021				December 31, 2020
Current portion of long-term debt	$	869			$	1,138
Current portion of operating lease liabilities	263				290
Long-term debt, net of current portion	2,319				2,357
Long-term operating lease liabilities, net of current portion	1,222				1,268
Total adjusted debt	4,673				5,053
Less: Cash and marketable securities	(3,951)				(3,346)
Adjusted net debt	$	722			$	1,707
(in millions)	Twelve Months Ended  June 30, 2021				Twelve Months Ended  December 31, 2020
GAAP Operating Loss(a)	$	(778)			$	(1,775)
Adjusted for:
Payroll Support Program grant wage offset and special items	(712)				71
Mark-to-market fuel hedge adjustments	(79)				(8)
Depreciation and amortization	400				420
Aircraft rent	268				299
EBITDAR	$	(901)			$	(993)
Adjusted net debt to EBITDAR	(0.8x)				(1.7x)

(a)	Operating loss can be reconciled using the trailing twelve month operating income as filed quarterly with the SEC.  Tags: Alaska Airlines