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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
January 22, 2025
(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 2.02. Results of Operations And Financial Condition
On January 22, 2025 Alaska Air Group, Inc. (Air Group) issued a press release and certain supplemental materials reporting financial results for the fourth quarter and full year of 2024.
ITEM 7.01. Regulation FD Disclosure
Pursuant to 17 CFR Part 243 (Regulation FD), the Company is submitting information relating to its financial and operational outlook in a press release as well as supplemental materials. The press release is attached as Exhibit 99.1. Supplemental information is attached as Exhibit 99.2.
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 a 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 9.01. Financial Statements and Other Exhibits
Pro Forma Financial Information
The unaudited pro forma condensed combined financial information of Air Group for the quarters ended March 31, 2024, June 30, 2024, and September 30, 2024, and for the year ended December 31, 2024, is attached as Exhibit 99.3.
ITEM 9.01 Financial Statements and Other Exhibits | | | | | | | | |
| | Fourth Quarter and Full Year 2024 Earnings Press Release dated January 22, 2025 |
| | Supplemental Earnings Materials |
| | Unaudited pro forma condensed combined financial information of the Company for the year ended December 31, 2024, and for the quarters ended March 31, 2024, June 30, 2024, and September 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: January 22, 2025
/s/ EMILY HALVERSON
Emily Halverson
Vice President Finance and Controller
Exhibit 99.1
January 22, 2025 | | | | | | | | |
| Media contact: | | Investor/analyst contact: |
| Media Relations | | Ryan St. John |
| (206) 304-0008 | | VP Finance, Planning and Investor Relations |
| | ALKInvestorRelations@alaskaair.com |
Alaska Air Group reports fourth quarter and full year 2024 results
Reported record full year revenue of $11.7 billion
Fourth quarter and full year adjusted earnings per share exceed high end of previously reported guidance
Repurchased approximately $250 million in outstanding shares in the fourth quarter
Announced record performance-based pay, totaling six weeks pay for most Alaska and Horizon employees
SEATTLE — Alaska Air Group Inc. (NYSE: ALK) today reported financial results for the fourth quarter and full year ended December 31, 2024.
Air Group completed 2024 on a high note, with record revenues of $11.7 billion and a GAAP pretax margin of 4.6%. On an adjusted basis, the full year pretax margin of 7.1% is expected to be amongst the best in the industry despite the completed acquisition of Hawaiian Airlines and fleet grounding in the first quarter of the year.
"This was a transformational year as we brought Hawaiian Airlines into Alaska Air Group and began our journey to unlock $1 billion in incremental pretax profit over the next three years,” said CEO Ben Minicucci. “We’re proud that our incentive plan will reward Alaska Airlines and Horizon Air employees with nearly six weeks of pay, which we believe will lead the industry. Looking forward, our vision is clear and we’re focused on executing our strategic plan – leveraging the strengths of our combined network, enhancing the end-to-end travel experience for our guests, and delivering value for everyone who depends on us."
Quarter in Review
Air Group’s consolidated results reported in the fourth quarter and full year 2024 include Hawaiian Airlines as of September 18, 2024 while prior comparable periods exclude any Hawaiian results. Discussion of fourth quarter results and forward-looking guidance refer to pro forma historical results as provided in prior 8-K filings and represented below.
| | | | | | | | | | | | | | | | | |
| Q4 2024 vs Q4 2023 Pro Forma, except EPS | | | | | Prior Expectation | | Actual Results |
| Capacity (ASMs) | | | | | Up ~1.5% | | Up 2.5% |
| | | | | | | |
| | | | | | | |
| RASM | | | | | Up mid-to-high single digits | | Up 7.0% |
| CASMex | | | | | Up low-double digits | | Up 8.6% |
| Adjusted earnings per share | | | | | $0.40 to $0.50 | | $0.97 |
Our GAAP pretax margin for the fourth quarter was 2.2% and GAAP earnings per share was $0.55. On an adjusted basis, our pretax margin was 3.9% and earnings per share was $0.97, which exceeded our latest guidance by approximately $0.50 at the midpoint driven by revenue and cost improvement across our business as well as lower non-operating expenses. Due to these same out-performance factors, full year adjusted EPS of $4.87 also surpassed the better end of our prior guidance range.
Fourth quarter revenue was stronger than expected across both Alaska and Hawaiian, building on the strength seen in the fall, and exiting the year with momentum driven by sustained leisure demand and an uptick in corporate travel which improved close in demand. With mild winter weather to end the year, we delivered reliable operational performance for our guests throughout the holiday travel period, with higher-than-expected completion rate and load factor. After inflecting positive in August, unit revenues improved nearly 6 points sequentially from 1% in the third quarter to 7% in the fourth quarter. This momentum has continued, with ongoing close-in strength in early Q1 bookings. Combined with a stable industry capacity backdrop, we are encouraged by these early indications for Q1 and a constructive start to 2025.
Unit cost performance in the fourth quarter also exceeded our guidance, up 8.6% as compared to pro forma 2023, as disciplined non-fuel cost performance offset higher performance-based pay accruals and better completion rates drove higher capacity. Throughout 2024, unit costs remained pressured from constrained capacity as a result of aircraft delivery delays, but are expected to improve through 2025 as we normalize resource levels and capacity compared to 2024.
Alaska Accelerate
Following a great close to 2024, we continue to build on our strong foundation and execute on Alaska Accelerate - our vision for the future. This strategy is focused on building scale, relevance and loyalty to connect our guests to the world with a remarkable travel experience rooted in safety, care and performance and deliver $1 billion in incremental profit over the next 3 years.
"Our success this year and our optimistic look ahead is built upon a proven strategy that puts the guest at the center of everything we do and unlocks new opportunities across our business," said Chief Commercial Officer, Andrew Harrison. "We’re poised to capitalize on the strength of a combined global network, a powerful loyalty program, two beloved brands, and a remarkable travel experience that meets guests’ needs at every phase of the travel journey."
First Quarter & Full Year 2025 Guidance
For the first quarter and full year 2025, we expect the following results compared to pro forma historical results as if the acquisition had occurred on January 1, 2023.
| | | | | | | | | | | |
| Q1 2025 Expectation | | FY 2025 Expectation |
| Capacity (ASMs) % change versus pro forma 2024 | Up 2.5% to 3.5% | | Up 2% to 3% |
| RASM % change versus pro forma 2024 | Up high-single digits | | |
| CASMex % change versus pro forma 2024 | Up low-single digits to mid-single digits | | |
| | | |
| Adjusted earnings (loss) per share | ($0.70) to ($0.50) | | >$5.75 |
Financial Results and Updates:
•Reported net income for the fourth quarter and full year 2024 under Generally Accepted Accounting Principles (GAAP) of $71 million, or $0.55 per share, and $395 million, or $3.08 per share. These results compare to net loss for the fourth quarter and net income for the full year 2023 of $2 million, or $0.02 per share, and $235 million, or $1.83 per share.
•Reported net income for the fourth quarter and full year 2024, excluding special items and other adjustments, of $125 million, or $0.97 per share, and $625 million, or $4.87 per share. These results compare to net income for the fourth quarter and full year 2023, excluding special items and other adjustments, of $38 million, or $0.30 per share, and $583 million, or $4.53 per share.
•Generated an adjusted pretax margin of 7.1% for the full year 2024, among the highest in the industry.
•Generated $1.5 billion in operating cash flow for the full year 2024.
•Completed $2 billion in financing, backed by the Company's Mileage Plan program, and retired $1.6 billion of certain debt acquired with Hawaiian Airlines.
•Repurchased 3.9 million shares of common stock for approximately $250 million in the fourth quarter, bringing total repurchases to 5.5 million shares for $312 million in 2024.
•Authorized a new $1 billion dollar share repurchase plan to be executed over the next four years, with repurchases beginning in January 2025.
•Alaska and Horizon employees earned $325 million of incentive pay in 2024 by achieving profitability, safety, sustainability, and operational targets. The payout represents approximately six weeks of pay for most employees.
Operational Updates:
•Reached an Agreement in Concept with Alaska flight attendants for an updated collective bargaining agreement in January 2025.
•Announced the launch of Seattle as an international gateway with nonstop routes to Tokyo Narita and Seoul Incheon in 2025, with plans to add 12 international widebody destinations by 2030.
•Approved to fly nonstop service between San Diego International Airport and Ronald Reagan Washington National Airport, making Alaska the only airline to operate this route.
•Expanding service from the states of Alaska and Oregon beginning this summer, including nonstop service from Anchorage to Detroit and Sacramento; Portland to Houston, Fairbanks, and Eugene; and Medford to San Diego.
•Hawaiian received two A330-300 freighter aircraft from Amazon during the fourth quarter, bringing the total within the airline's fleet to six.
Commercial Updates:
•Announced improvements to Alaska's Mileage Plan for 2025, including more milestone rewards and new ways to earn elite qualifying miles.
•Introduced Alaska's new premium credit card, which will be available late summer 2025 and will provide holders exclusive travel benefits and perks.
•Launched Huaka'i by Hawaiian, a free program for HawaiianMiles members that offers kama‘āina (Hawai'i residents) exclusive travel benefits when flying with Hawaiian Airlines.
The following table reconciles the company's reported GAAP net income (loss) per share (EPS) for the three and twelve months ended December 31, 2024 and 2023 to adjusted amounts. | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended December 31, |
| | 2024 | | 2023 |
| (in millions, except per share amounts) | Dollars | | Per Share | | Dollars | | Per Share |
| Net income (loss) | $ | 71 | | | $ | 0.55 | | | $ | (2) | | | $ | (0.02) | |
| Mark-to-market fuel hedge adjustments | (6) | | | (0.05) | | | 12 | | | 0.09 | |
| Unrealized gain on foreign debt | (10) | | | (0.08) | | | — | | | — | |
| Special items - operating | 91 | | | 0.71 | | | 37 | | | 0.29 | |
| Special items - net non-operating | (17) | | | (0.13) | | | 4 | | | 0.03 | |
| | | | | | | |
Income tax effect of adjustments above(a) | (4) | | | (0.03) | | | (13) | | | (0.09) | |
| Adjusted net income | $ | 125 | | | $ | 0.97 | | | $ | 38 | | | $ | 0.30 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Twelve Months Ended December 31, |
| | 2024 | | 2023 |
| (in millions, except per share amounts) | Dollars | | Per Share | | Dollars | | Per Share |
| Net income | $ | 395 | | | $ | 3.08 | | | $ | 235 | | | $ | 1.83 | |
| Mark-to-market fuel hedge adjustments | (28) | | | (0.22) | | | (2) | | | (0.02) | |
| Unrealized gain on foreign debt | (10) | | | (0.08) | | | — | | | — | |
| Special items - operating | 345 | | | 2.69 | | | 443 | | | 3.44 | |
| Special items - net non-operating | (16) | | | (0.12) | | | 18 | | | 0.14 | |
| | | | | | | |
Income tax effect of adjustments above(a) | (61) | | | (0.48) | | | (111) | | | (0.86) | |
| Adjusted net income | $ | 625 | | | $ | 4.87 | | | $ | 583 | | | $ | 4.53 | |
(a) Certain integration costs are non deductible for tax purposes, resulting in a smaller income tax effect for current year adjustments.
A conference call regarding the fourth quarter and full year results will be streamed online at 8:30 a.m. PST on January 23, 2025. 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, 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 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 and in our subsequent SEC filings. 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.
Alaska Air Group, Inc. is based in Seattle and comprised of subsidiaries Alaska Airlines, Hawaiian Holdings, Inc., 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 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 31 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.”
###
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) |
| Alaska Air Group, Inc. | | | | | | | | | | | |
| | Three Months Ended December 31, | | Twelve Months Ended December 31, |
| (in millions, except per share amounts) | 2024 | | 2023 | | Change | | 2024 | | 2023 | | Change |
| Operating Revenue | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Passenger revenue | $ | 3,178 | | | $ | 2,326 | | | 37 | % | | $ | 10,654 | | | $ | 9,526 | | | 12 | % |
| Loyalty program other revenue | 224 | | | 165 | | | 36 | % | | 733 | | | 648 | | | 13 | % |
| Cargo and other revenue | 132 | | | 62 | | | 113 | % | | 348 | | | 252 | | | 38 | % |
| Total Operating Revenue | 3,534 | | | 2,553 | | | 38 | % | | 11,735 | | | 10,426 | | | 13 | % |
| | | | | | | | | | | | |
| Operating Expenses | | | | | | | | | | | |
| Wages and benefits | 1,119 | | | 782 | | | 43 | % | | 3,588 | | | 3,041 | | | 18 | % |
| Variable incentive pay | 161 | | | 51 | | | 216 | % | | 358 | | | 200 | | | 79 | % |
| | | | | | | | | | | |
| Aircraft fuel, including hedging gains and losses | 702 | | | 709 | | | (1) | % | | 2,506 | | | 2,641 | | | (5) | % |
| Aircraft maintenance | 229 | | | 121 | | | 89 | % | | 620 | | | 488 | | | 27 | % |
| Aircraft rent | 65 | | | 47 | | | 38 | % | | 207 | | | 208 | | | — | % |
| Landing fees and other rentals | 249 | | | 178 | | | 40 | % | | 781 | | | 680 | | | 15 | % |
| Contracted services | 133 | | | 99 | | | 34 | % | | 444 | | | 389 | | | 14 | % |
| Selling expenses | 106 | | | 72 | | | 47 | % | | 349 | | | 303 | | | 15 | % |
| Depreciation and amortization | 190 | | | 121 | | | 57 | % | | 583 | | | 451 | | | 29 | % |
| Food and beverage service | 93 | | | 65 | | | 43 | % | | 287 | | | 241 | | | 19 | % |
| Third-party regional carrier expense | 62 | | | 54 | | | 15 | % | | 243 | | | 218 | | | 11 | % |
| Other | 261 | | | 185 | | | 41 | % | | 854 | | | 729 | | | 17 | % |
| Special items - operating | 91 | | | 37 | | | 146 | % | | 345 | | | 443 | | | (22) | % |
| | | | | | | | | | | |
| Total Operating Expenses | 3,461 | | | 2,521 | | | 37 | % | | 11,165 | | | 10,032 | | | 11 | % |
| Operating Income | 73 | | | 32 | | | 128 | % | | 570 | | | 394 | | | 45 | % |
| | | | | | | | | | | |
| Non-operating Income (Expense) | | | | | | | | | | | |
| Interest income | 32 | | | 18 | | | 78 | % | | 101 | | | 80 | | | 26 | % |
| Interest expense | (56) | | | (31) | | | 81 | % | | (171) | | | (121) | | | 41 | % |
| Interest capitalized | 10 | | | 6 | | | 67 | % | | 29 | | | 27 | | | 7 | % |
| Special items - net non-operating | 17 | | | (4) | | | NM | | 16 | | | (18) | | | NM |
| Other - net | 3 | | | (17) | | | NM | | — | | | (39) | | | (100) | % |
| Total Non-operating Income (Expense) | 6 | | | (28) | | | NM | | (25) | | | (71) | | | (65) | % |
| Income Before Income Tax | 79 | | | 4 | | | | | 545 | | | 323 | | | |
| Income tax expense | 8 | | | 6 | | | | | 150 | | | 88 | | | |
| Net Income (Loss) | $ | 71 | | | $ | (2) | | | | | $ | 395 | | | $ | 235 | | | |
| | | | | | | | | | | | |
| Basic Earnings (Loss) Per Share | $ | 0.56 | | | $ | (0.02) | | | | | $ | 3.13 | | | $ | 1.84 | | | |
| Diluted Earnings (Loss) Per Share | $ | 0.55 | | | $ | (0.02) | | | | | $ | 3.08 | | | $ | 1.83 | | | |
| Weighted Average Shares Outstanding used for computation: | | | | | | | | | | | |
| Basic | 126.047 | | | 127.376 | | | | | 126.136 | | | 127.375 | | | |
| Diluted | 128.931 | | | 127.376 | | | | | 128.372 | | | 128.708 | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | | | |
| Alaska Air Group, Inc. | | | |
As of December 31 (in millions) | 2024 | | 2023 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 1,201 | | | $ | 281 | |
| Restricted cash | 29 | | | — | |
| Marketable securities | 1,274 | | | 1,510 | |
| Total cash, restricted cash, and marketable securities | 2,504 | | | 1,791 | |
| Receivables - net | 558 | | | 383 | |
| Inventories and supplies - net | 199 | | | 116 | |
| Prepaid expenses | 307 | | | 176 | |
| Other current assets | 192 | | | 239 | |
| Total Current Assets | 3,760 | | | 2,705 | |
| | | |
| Property and Equipment | | | |
| Aircraft and other flight equipment | 12,270 | | | 10,425 | |
| Other property and equipment | 2,173 | | | 1,814 | |
| Deposits for future flight equipment | 883 | | | 491 | |
| 15,326 | | | 12,730 | |
| Less accumulated depreciation and amortization | (4,548) | | | (4,342) | |
| Total Property and Equipment - Net | 10,778 | | | 8,388 | |
| | | |
| Other Assets | | | |
| Operating lease assets | 1,302 | | | 1,195 | |
| Goodwill | 2,721 | | | 1,943 | |
| Intangible assets - net | 873 | | | 90 | |
| Other noncurrent assets | 334 | | | 292 | |
| Total Other Assets | 5,230 | | | 3,520 | |
| | | |
| Total Assets | $ | 19,768 | | | $ | 14,613 | |
| | | | | | | | | | | |
| CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) | | | |
| Alaska Air Group, Inc. | | | |
As of December 31 (in millions except share amounts) | 2024 | | 2023 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 186 | | | $ | 207 | |
| Accrued wages, vacation and payroll taxes | 1,001 | | | 584 | |
| Air traffic liability | 1,712 | | | 1,136 | |
| Other accrued liabilities | 997 | | | 800 | |
| Deferred revenue | 1,592 | | | 1,221 | |
| Current portion of long-term debt | 442 | | | 289 | |
| Current portion of operating lease liabilities | 207 | | | 158 | |
| Current portion of finance lease liabilities | 8 | | | 64 | |
| Total Current Liabilities | 6,145 | | | 4,459 | |
| | | |
| Noncurrent Liabilities | | | |
| Long-term debt, net of current portion | 4,491 | | | 2,182 | |
| Operating lease liabilities, net of current portion | 1,198 | | | 1,125 | |
| Finance lease liabilities, net of current portion | 47 | | | — | |
| Deferred income taxes | 934 | | | 695 | |
| Deferred revenue | 1,664 | | | 1,382 | |
| Obligation for pension and post-retirement medical benefits | 460 | | | 362 | |
| Other liabilities | 457 | | | 295 | |
| Total Noncurrent Liabilities | 9,251 | | | 6,041 | |
| | | |
| Commitments and Contingencies | | | |
| | | |
| Shareholders' Equity | | | |
Preferred stock, $0.01 par value, Authorized: 5,000,000 shares, none issued or outstanding | — | | | — | |
Common stock, $0.01 par value, Authorized: 400,000,000 shares, Issued: 2024 - 141,449,174 shares; 2023 - 138,960,830 shares, Outstanding: 2024 - 123,119,199 shares; 2023 - 126,090,353 shares | 1 | | | 1 | |
| Capital in excess of par value | 811 | | | 695 | |
Treasury stock (common), at cost: 2024 - 18,329,975 shares; 2023 - 12,870,477 shares | (1,131) | | | (819) | |
| Accumulated other comprehensive loss | (239) | | | (299) | |
| Retained earnings | 4,930 | | | 4,535 | |
| Total Shareholders' Equity | 4,372 | | | 4,113 | |
| Total Liabilities and Shareholders' Equity | $ | 19,768 | | | $ | 14,613 | |
| | | | | | | | | | | | | | | | | |
| SUMMARY CASH FLOW (unaudited) | | | | | |
| Alaska Air Group, Inc. | | | | | |
| (in millions) | Year Ended December 31, 2024 | | Nine Months Ended September 30, 2024(a) | | Three Months Ended December 31, 2024(b) |
| Cash Flows from Operating Activities: | | | | | |
| Net income | $ | 395 | | | $ | 324 | | | $ | 71 | |
| Adjustments to reconcile net income to net cash provided by operating activities | 577 | | | 451 | | | 126 | |
| Changes in working capital | 492 | | | 415 | | | 77 | |
| Net cash provided by operating activities | 1,464 | | | 1,190 | | | 274 | |
| | | | | |
| Cash Flows from Investing Activities: | | | | | |
| Property and equipment additions | (1,281) | | | (851) | | | (430) | |
| Acquisition of Hawaiian Airlines, net of cash acquired | (659) | | | (659) | | | — | |
| Supplier proceeds | 162 | | | 162 | | | — | |
| Other investing activities | 1,144 | | | 912 | | | 232 | |
| Net cash used in investing activities | (634) | | | (436) | | | (198) | |
| | | | | |
| Cash Flows from Financing Activities | 119 | | | 7 | | | 112 | |
| | | | | |
| Net increase in cash and cash equivalents | 949 | | | 761 | | | 188 | |
| Cash, cash equivalents, and restricted cash at beginning of period | 308 | | | 308 | | | 1,069 | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 1,257 | | | $ | 1,069 | | | $ | 1,257 | |
(a) As reported in Form 10-Q for the third quarter of 2024.
(b) Cash flows for the three months ended December 31, 2024 can be calculated by subtracting cash flows for the nine months ended
September 30, 2024, as reported in Form 10-Q for the third quarter 2024, from the year ended December 31, 2024.
(c) Cash, cash equivalents, and restricted cash shown in the Summary Cash Flow consists of restricted cash presented within Restricted Cash as well as certain restricted cash balances presented within Other noncurrent assets in the condensed consolidated balance sheets.
SPECIAL ITEMS (unaudited)
Air Group has classified certain operating and non-operating activity as special items due to their unusual or infrequently occurring nature. We believe disclosing information about these items separately improves comparable year-over-year analysis and allows stakeholders to better understand our results of operations. A description of the special items is provided below.
Fleet transition: Fleet transition costs (benefits) are associated with the retirement and disposition of Airbus acquired from Virgin America and Q400 aircraft.
Labor agreements: Labor agreement costs in 2024 are for retroactive pay for Alaska flight attendants pursuant to the agreement in concept reached in January 2025. Costs in 2023 are for contractual changes to Alaska pilots' sick leave benefits.
Integration costs: Integration costs are associated with the acquisition of Hawaiian Airlines and primarily consist of legal and professional fees, change in control payments, and other employee-related expenses.
Litigation: Litigation costs represent expenses associated with the Virgin trademark license agreement with the Virgin Group and recorded following a negative ruling in an appeal case in 2024.
Net non-operating: The income in 2024 is for gains on Hawaiian debt extinguishment in the fourth quarter. The expense in 2023 is primarily for interest expense associated with certain Virgin America A321neo lease agreements which were modified as part of Alaska's fleet transition.
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| Three Months Ended December 31, | | Twelve Months Ended December 31, |
| (in millions) | 2024 | | 2023 | | 2024 | | 2023 |
| Operating Expenses | | | | | | | |
| Fleet transition | $ | (40) | | | $ | 30 | | | $ | 11 | | | $ | 385 | |
| Labor agreements | 43 | | | — | | | 73 | | | 51 | |
| Integration costs | 80 | | | 7 | | | 208 | | | 7 | |
| Litigation | 8 | | | — | | | 53 | | | — | |
| Special items - operating | $ | 91 | | | $ | 37 | | | $ | 345 | | | $ | 443 | |
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| Non-operating Income (Expense) | | | | | | | |
| Special items - net non-operating | $ | 17 | | | $ | (4) | | | $ | 16 | | | $ | (18) | |
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| OPERATING STATISTICS SUMMARY (unaudited) | | | | | | | | |
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| Full year amounts below reflect the results of operations for Hawaiian Airlines for the period September 18, 2024 through December 31, 2024. |
| Three Months Ended December 31, | | Twelve Months Ended December 31, |
| 2024 | | 2023 | | Change | | 2024 | | 2023 | | Change |
Consolidated Operating Statistics:(a) | | | | | | | | | | | |
| Revenue passengers (000) | 14,339 | | 10,903 | | 32% | | 49,238 | | 44,557 | | 11% |
| RPMs (000,000) "traffic" | 19,068 | | 14,153 | | 35% | | 63,871 | | 57,362 | | 11% |
| ASMs (000,000) "capacity" | 22,744 | | 17,077 | | 33% | | 76,167 | | 68,524 | | 11% |
| Load factor | 83.8% | | 82.9% | | 0.9 pts | | 83.9% | | 83.7% | | 0.2 pts |
| Yield | 16.67¢ | | 16.43¢ | | 1% | | 16.68¢ | | 16.61¢ | | —% |
| PRASM | 13.97¢ | | 13.62¢ | | 3% | | 13.99¢ | | 13.90¢ | | 1% |
| RASM | 15.54¢ | | 14.95¢ | | 4% | | 15.41¢ | | 15.21¢ | | 1% |
CASMex(b) | 11.57¢ | | 10.31¢ | | 12% | | 10.80¢ | | 10.06¢ | | 7% |
Economic fuel cost per gallon(b)(c) | $2.54 | | $3.42 | | (26)% | | $2.74 | | $3.21 | | (15)% |
Fuel gallons (000,000)(c) | 279 | | 204 | | 37% | | 925 | | 824 | | 12% |
| ASMs per gallon | 81.6 | | 83.7 | | (3)% | | 82.3 | | 83.2 | | (1)% |
| Departures (000) | 131 | | 103 | | 27% | | 461 | | 414 | | 11% |
| Average full-time equivalent employees (FTEs) | 30,396 | | 23,117 | | 31% | | 25,751 | | 23,319 | | 10% |
Operating fleet(d) | 392 | | 314 | | 78 a/c | | 392 | | 314 | | 78 a/c |
| Alaska Airlines Operating Statistics: | | | | | | | | | | | |
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| RPMs (000,000) "traffic" | 13,306 | | 13,008 | | 2% | | 53,680 | | 52,975 | | 1% |
| ASMs (000,000) "capacity" | 15,754 | | 15,708 | | —% | | 63,873 | | 63,292 | | 1% |
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| Economic fuel cost per gallon | $2.55 | | $3.38 | | (25)% | | $2.74 | | $3.18 | | (14)% |
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| Hawaiian Airlines Operating Statistics: | | | | | | | | | | | |
| RPMs (000,000) "traffic" | 4,509 | | — | | n/a | | 5,143 | | — | | n/a |
| ASMs (000,000) "capacity" | 5,481 | | — | | n/a | | 6,245 | | — | | n/a |
Economic fuel cost per gallon(c) | $2.44 | | — | | n/a | | $2.43 | | — | | n/a |
Regional Operating Statistics:(e) | | | | | | | | | | | |
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| RPMs (000,000) "traffic" | 1,253 | | 1,145 | | 9% | | 5,048 | | 4,387 | | 15% |
| ASMs (000,000) "capacity" | 1,509 | | 1,369 | | 10% | | 6,049 | | 5,232 | | 16% |
| Economic fuel cost per gallon | $2.74 | | $3.67 | | (25)% | | $2.93 | | $3.41 | | (14)% |
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(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)Excludes operations under the Air Transportation Services Agreement (ATSA) with Amazon.
(d)Includes aircraft owned and leased by Alaska, Hawaiian, and Horizon as well as aircraft operated by third-party regional carriers under capacity purchase agreements. Excludes all aircraft removed from operating service.
(e)Data presented includes information related to flights operated by Horizon and third-party carriers.
GAAP TO NON-GAAP RECONCILIATIONS (unaudited)
Alaska Air Group, Inc.
We are providing reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. Amounts in the tables below are rounded to the nearest million. As a result, a manual recalculation of certain figures using these rounded amounts may not agree directly to the actual figures presented in the tables below.
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| Adjusted Income Before Income Tax Reconciliation | | | | |
| | Three Months Ended December 31, | | Twelve Months Ended December 31, |
| (in millions) | 2024 | 2023 | | 2024 | 2023 |
| Income before income tax | $ | 79 | | | $ | 4 | | | $ | 545 | | | $ | 323 | |
| Adjusted for: | | | | | | | |
| Mark-to-market fuel hedge adjustment | (6) | | | 12 | | | (28) | | | (2) | |
| Unrealized gain on foreign debt | (10) | | | — | | | (10) | | | — | |
| Special items - operating | 91 | | | 37 | | | 345 | | | 443 | |
| Special items - net non-operating | (17) | | | 4 | | | (16) | | | 18 | |
| Adjusted income before income tax | $ | 137 | | | $ | 57 | | | $ | 836 | | | $ | 782 | |
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| Pretax margin | 2.2 | % | | 0.2 | % | | 4.6 | % | | 3.1 | % |
| Adjusted pretax margin | 3.9 | % | | 2.2 | % | | 7.1 | % | | 7.5 | % |
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| Adjusted Income Before Income Tax, excluding Hawaiian Reconciliation |
| (in millions) | Twelve Months Ended December 31, 2024 |
| Operating Revenue | $ | 11,735 | |
| Adjusted for: | |
| Hawaiian Airlines Operating Revenue | 869 | |
| Operating Revenue, excluding Hawaiian | $ | 10,866 | |
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| Income before income tax | $ | 545 | |
| Adjusted for: | |
| Mark-to-market fuel hedge adjustment | (28) | |
| Unrealized gain on foreign debt | (10) | |
| Special items - operating | 345 | |
| Special items - net non-operating | (16) | |
| Hawaiian Airlines pretax loss | 58 | |
| Adjusted income before income tax, excluding Hawaiian | $ | 894 | |
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| Adjusted pretax margin, excluding Hawaiian | 8.2 | % |
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| CASMex Reconciliation |
| | Three Months Ended December 31, | | Twelve Months Ended December 31, |
| (in millions) | 2024 | | 2023 | | 2024 | | 2023 |
| Total operating expenses | $ | 3,461 | | | $ | 2,521 | | | $ | 11,165 | | | $ | 10,032 | |
| Less the following components: | | | | | | | |
| Aircraft fuel, including hedging gains and losses | 702 | | | 709 | | | 2,506 | | | 2,641 | |
| Freighter costs | 37 | | | 15 | | | 84 | | | 53 | |
| Special items - operating | 91 | | | 37 | | | 345 | | | 443 | |
| Total operating expenses, excluding fuel, freighter costs, and special items | $ | 2,631 | | | $ | 1,760 | | | $ | 8,230 | | | $ | 6,895 | |
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| ASMs | 22,744 | | | 17,077 | | | 76,167 | | | 68,524 | |
| CASMex | 11.57 | ¢ | | 10.31 | ¢ | | 10.80 | ¢ | | 10.06 | ¢ |
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| CASMex, excluding Hawaiian Reconciliation |
| (in millions) | Twelve Months Ended December 31, 2024 |
| Total operating expenses | $ | 11,165 | |
| Less the following components: | |
| Aircraft fuel, including hedging gains and losses | 2,506 | |
| Freighter costs | 84 | |
| Special items - operating | 345 | |
Hawaiian Airlines non-fuel operating expenses(a) | 681 | |
| Total operating expenses, excluding fuel, freighter costs, special items, and Hawaiian | $ | 7,549 | |
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| Consolidated ASMs | 76,167 | |
| Less Hawaiian ASMs: | 6,245 | |
| Consolidated ASMs, excluding Hawaiian | 69,922 | |
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| CASMex, excluding Hawaiian | 10.80 | ¢ |
(a) Amount excludes $20 million of Hawaiian Airlines freighter costs already included within Freighter costs.
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| Fuel Reconciliation | | | | | | | |
| Three Months Ended December 31, |
| 2024 | | 2023 |
| (in millions, except for per gallon amounts) | Dollars | | Cost/Gal | | Dollars | | Cost/Gal |
| Raw or "into-plane" fuel cost | $ | 701 | | | $ | 2.51 | | | $ | 679 | | | $ | 3.33 | |
| Losses on settled hedges | 7 | | | 0.03 | | | 18 | | | 0.09 | |
| Economic fuel expense | $ | 708 | | | $ | 2.54 | | | $ | 697 | | | $ | 3.42 | |
| Mark-to-market fuel hedge adjustment | (6) | | | (0.02) | | | 12 | | | 0.06 | |
| Aircraft fuel, including hedging gains and losses | $ | 702 | | | $ | 2.52 | | | $ | 709 | | | $ | 3.48 | |
| Fuel gallons | | | 279 | | | | | 204 | |
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| Twelve Months Ended December 31, |
| 2024 | | 2023 |
| (in millions, except for per gallon amounts) | Dollars | | Cost/Gal | | Dollars | | Cost/Gal |
| Raw or "into-plane" fuel cost | $ | 2,496 | | | $ | 2.70 | | | $ | 2,579 | | | $ | 3.13 | |
| Losses on settled hedges | 38 | | | 0.04 | | | 64 | | | 0.08 | |
| Economic fuel expense | $ | 2,534 | | | $ | 2.74 | | | $ | 2,643 | | | $ | 3.21 | |
| Mark-to-market fuel hedge adjustment | (28) | | | (0.03) | | | (2) | | | — | |
| Aircraft fuel, including hedging gains and losses | $ | 2,506 | | | $ | 2.71 | | | $ | 2,641 | | | $ | 3.21 | |
| Fuel gallons | | | 925 | | | | | 824 | |
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| Debt-to-capitalization, including leases |
| (in millions) | December 31, 2024 | | December 31, 2023 |
| Long-term debt, net of current portion | $ | 4,491 | | | $ | 2,182 | |
| Capitalized operating leases | 1,405 | | | 1,283 | |
| Capitalized finance leases | 55 | | | 64 | |
| Adjusted debt, net of current portion of long-term debt | $ | 5,951 | | | $ | 3,529 | |
| Shareholders' equity | 4,372 | | | 4,113 | |
| Total invested capital | $ | 10,323 | | | $ | 7,642 | |
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| Debt-to-capitalization ratio, including leases | 58% | | 46% |
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| Adjusted net debt to earnings before interest, taxes, depreciation, amortization, rent, and special items |
| (in millions) | December 31, 2024 | | December 31, 2023 |
| Long-term debt | $ | 4,933 | | | $ | 2,471 | |
| Capitalized operating leases | 1,405 | | | 1,283 | |
| Capitalized finance leases | 55 | | | 64 | |
| Total adjusted debt | 6,393 | | | 3,818 | |
| Less: Total cash and marketable securities | 2,475 | | | 1,791 | |
| Adjusted net debt | $ | 3,918 | | | $ | 2,027 | |
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| (in millions) | Twelve Months Ended December 31, 2024 | | Twelve Months Ended December 31, 2023 |
| Operating Income | $ | 570 | | | $ | 394 | |
| Adjusted for: | | | |
| Special items - operating | 345 | | | 443 | |
| Mark-to-market fuel hedge adjustments | (28) | | | (2) | |
| Unrealized gain on foreign debt | (10) | | | — | |
| Depreciation and amortization | 583 | | 451 |
| Aircraft rent | 207 | | 208 |
| EBITDAR | $ | 1,667 | | | $ | 1,494 | |
| Adjusted net debt to EBITDAR | 2.4x | | 1.4x |
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| OPERATING SEGMENTS (unaudited) | | | | | | |
| Alaska Air Group, Inc. | | | | | | | | | | | | | |
| Three Months Ended December 31, 2024 |
| (in millions) | Alaska Airlines | | Hawaiian Airlines | | Regional | | Consolidating & Other(a) | | Air Group Adjusted(b) | | Adjustments(c) | | Consolidated |
| Operating Revenue | | | | | | | | | | | | | |
| Passenger revenue | $ | 2,073 | | | $ | 673 | | | $ | 432 | | | $ | — | | | $ | 3,178 | | | $ | — | | | $ | 3,178 | |
| Loyalty program other revenue | 161 | | | 48 | | | 15 | | | — | | | 224 | | | — | | | 224 | |
| Cargo and other revenue | 77 | | | 53 | | | — | | | 2 | | | 132 | | | — | | | 132 | |
| Total Operating Revenue | 2,311 | | | 774 | | | 447 | | | 2 | | | 3,534 | | | — | | | 3,534 | |
| Operating Expenses | | | | | | | | | | | | | |
| Operating expenses, excluding fuel | 1,736 | | | 619 | | | 330 | | | (17) | | | 2,668 | | | 91 | | | 2,759 | |
| Fuel expense | 447 | | | 172 | | | 89 | | | — | | | 708 | | | (6) | | | 702 | |
| Total Operating Expenses | 2,183 | | | 791 | | | 419 | | | (17) | | | 3,376 | | | 85 | | | 3,461 | |
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| Non-operating Income (Expense) | 14 | | | (27) | | | — | | | (8) | | | (21) | | | 27 | | | 6 | |
| Income (Loss) Before Income Tax | $ | 142 | | | $ | (44) | | | $ | 28 | | | $ | 11 | | | $ | 137 | | | $ | (58) | | | $ | 79 | |
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| Three Months Ended December 31, 2023 |
| (in millions) | Alaska Airlines | | Hawaiian Airlines | | Regional | | Consolidating & Other(a) | | Air Group Adjusted(b) | | Adjustments(c) | | Consolidated |
| Operating Revenue | | | | | | | | | | | | | |
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| Passenger revenue | $ | 1,928 | | | $ | — | | | $ | 398 | | | $ | — | | | $ | 2,326 | | | $ | — | | | $ | 2,326 | |
| Loyalty program other revenue | 152 | | | — | | | 13 | | | — | | | 165 | | | — | | | 165 | |
| Cargo and other revenue | 60 | | | — | | | — | | | 2 | | | 62 | | | — | | | 62 | |
| Total Operating Revenue | 2,140 | | | — | | | 411 | | | 2 | | | 2,553 | | | — | | | 2,553 | |
| Operating Expenses | | | | | | | | | | | | | |
| Operating expenses, excluding fuel | 1,499 | | | — | | | 289 | | | (13) | | | 1,775 | | | 37 | | | 1,812 | |
| Fuel expense | 592 | | | — | | | 105 | | | — | | | 697 | | | 12 | | | 709 | |
| Total Operating Expenses | 2,091 | | | — | | | 394 | | | (13) | | | 2,472 | | | 49 | | | 2,521 | |
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| Non-operating Income (Expense) | (12) | | | — | | | — | | | (12) | | | (24) | | | (4) | | | (28) | |
| Income (Loss) Before Income Tax | $ | 37 | | | $ | — | | | $ | 17 | | | $ | 3 | | | $ | 57 | | | $ | (53) | | | $ | 4 | |
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| OPERATING SEGMENTS (unaudited) | | | | | | |
| Alaska Air Group, Inc. | | | | | | | | | | | | | |
| Twelve Months Ended December 31, 2024 |
| (in millions) | Alaska Airlines | | Hawaiian Airlines | | Regional | | Consolidating & Other(a) | | Air Group Adjusted(b) | | Adjustments(c) | | Consolidated |
| Operating Revenue | | | | | | | | | | | | | |
| Passenger revenue | $ | 8,151 | | | $ | 757 | | | $ | 1,746 | | | $ | — | | | $ | 10,654 | | | $ | — | | | $ | 10,654 | |
| Loyalty program other revenue | 621 | | | 53 | | | 59 | | | — | | | 733 | | | — | | | 733 | |
| Cargo and other revenue | 279 | | | 59 | | | — | | | 10 | | | 348 | | | — | | | 348 | |
| Total Operating Revenue | 9,051 | | | 869 | | | 1,805 | | | 10 | | | 11,735 | | | — | | | 11,735 | |
| Operating Expenses | | | | | | | | | | | | | |
| Operating expenses, excluding fuel | 6,406 | | | 701 | | | 1,276 | | | (69) | | | 8,314 | | | 345 | | | 8,659 | |
| Fuel expense | 1,962 | | | 195 | | | 377 | | | — | | | 2,534 | | | (28) | | | 2,506 | |
| Total Operating Expenses | 8,368 | | | 896 | | | 1,653 | | | (69) | | | 10,848 | | | 317 | | | 11,165 | |
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| Non-operating Income (Expense) | 20 | | | (31) | | | — | | | (40) | | | (51) | | | 26 | | | (25) | |
| Income (Loss) Before Income Tax | $ | 703 | | | $ | (58) | | | $ | 152 | | | $ | 39 | | | $ | 836 | | | $ | (291) | | | $ | 545 | |
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| Twelve Months Ended December 31, 2023 |
| (in millions) | Alaska Airlines | | Hawaiian Airlines | | Regional | | Consolidating & Other(a) | | Air Group Adjusted(b) | | Adjustments(c) | | Consolidated |
| Operating Revenue | | | | | | | | | | | | | |
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| Passenger revenue | $ | 8,010 | | | $ | — | | | $ | 1,516 | | | $ | — | | | $ | 9,526 | | | $ | — | | | $ | 9,526 | |
| Loyalty program other revenue | 599 | | | — | | | 49 | | | — | | | 648 | | | — | | | 648 | |
| Cargo and other revenue | 244 | | | — | | | — | | | 8 | | | 252 | | | — | | | 252 | |
| Total Operating Revenue | 8,853 | | | — | | | 1,565 | | | 8 | | | 10,426 | | | — | | | 10,426 | |
| Operating Expenses | | | | | | | | | | | | | |
| Operating expenses, excluding fuel | 5,841 | | | — | | | 1,121 | | | (14) | | | 6,948 | | | 443 | | | 7,391 | |
| Fuel expense | 2,264 | | | — | | | 379 | | | — | | | 2,643 | | | (2) | | | 2,641 | |
| Total Operating Expenses | 8,105 | | | — | | | 1,500 | | | (14) | | | 9,591 | | | 441 | | | 10,032 | |
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| Non-operating Income (Expense) | (15) | | | — | | | — | | | (38) | | | (53) | | | (18) | | | (71) | |
| Income (Loss) Before Income Tax | $ | 733 | | | $ | — | | | $ | 65 | | | $ | (16) | | | $ | 782 | | | $ | (459) | | | $ | 323 | |
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(a)Includes consolidating entries, Air Group parent company, Horizon, 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, mark-to-market fuel hedge accounting adjustments, and unrealized gain on foreign debt.
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| SUPPLEMENTARY PRO FORMA COMPARATIVE FINANCIAL AND OPERATING INFORMATION (unaudited) |
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| We believe that analysis of specific financial and operational results on a pro forma basis provides more meaningful year-over-year comparisons. The table below provides results comparing the three months ended December 31, 2024 as reported to the pro forma three months ended December 31, 2023. Hawaiian's financial information has been conformed to reflect Air Group's historical financial statement presentation. This information does not purport to reflect what our financial and operational results would have been had the acquisition been consummated at the beginning of the periods presented. |
| Three Months Ended December 31, | | |
| 2024 As Reported | | 2023 Pro Forma(a) | | Change | | | | | | |
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| Passenger revenue | $ | 3,178 | | | $ | 2,928 | | | 9% | | | | | | |
| Loyalty program other revenue | 224 | | | 196 | | | 14% | | | | | | |
| Cargo and other revenue | 132 | | | 97 | | | 36% | | | | | | |
| Total Operating Revenue | 3,534 | | | 3,221 | | | 10% | | | | | | |
| Operating expenses, excluding fuel | 2,759 | | | 2,393 | | | 15% | | | | | | |
| Fuel expense | 702 | | | 919 | | | (24)% | | | | | | |
| Total Operating Expenses | 3,461 | | | 3,312 | | | 4% | | | | | | |
| Operating Income (Loss) | 73 | | | (91) | | | NM | | | | | | |
| Non-operating income (expense) | 6 | | | (38) | | | NM | | | | | | |
| Income (Loss) Before Tax | 79 | | | (129) | | | NM | | | | | | |
| Special items - operating | 91 | | | 15 | | | NM | | | | | | |
| Special items - net non-operating | (17) | | | (5) | | | NM | | | | | | |
| Mark-to-market fuel hedge adjustments | (6) | | | 16 | | | NM | | | | | | |
| Unrealized (gain)/loss on foreign debt | (10) | | | 7 | | | NM | | | | | | |
| Adjusted Income (Loss) Before Tax | $ | 137 | | | $ | (96) | | | NM | | | | | | |
| | | | | | | | | | | |
| Pretax Margin | 2.2 | % | | (4.0) | % | | | | | | | | |
| Adjusted Pretax Margin | 3.9 | % | | (3.0) | % | | | | | | | | |
| | | | | | | | | | | |
| Pro Forma Comparative Operating Statistics | | | | | | | | | | | |
| Revenue passengers (000) | 14,339 | | 13,559 | | 5.8% | | | | | | |
| RPMs (000,000) "traffic" | 19,068 | | 18,374 | | 3.8% | | | | | | |
| ASMs (000,000) "capacity" | 22,744 | | 22,181 | | 2.5% | | | | | | |
| Load factor | 83.8% | | 82.8% | | 1.0 pt | | | | | | |
| Yield | 16.67¢ | | 15.92¢ | | 4.7% | | | | | | |
| RASM | 15.54¢ | | 14.52¢ | | 7.0% | | | | | | |
| CASMex | 11.57¢ | | 10.65¢ | | 8.6% | | | | | | |
(a) As provided on Form 8-K filed with the SEC on October 31, 2024, with certain immaterial adjustments made to reflect permissible measurement period adjustments.
| | | | | | | | | | | |
| Pro Forma Comparative CASMex Reconciliation | | | |
| | Three Months Ended December 31, |
| (in millions) | 2024 As Reported | | 2023 Pro Forma(a) |
| Total operating expenses | $ | 3,461 | | | $ | 3,312 | |
| Less the following components: | | | |
| Aircraft fuel, including hedging gains and losses | 702 | | | 919 | |
| Freighter costs | 37 | | | 15 | |
| Special items - operating | 91 | | | 15 | |
| Total operating expenses, excluding fuel, freighter costs, and special items | $ | 2,631 | | | $ | 2,363 | |
| | | |
| ASMs | 22,744 | | | 22,181 | |
| CASMex | 11.57 | ¢ | | 10.65 | ¢ |
(a) As provided on Form 8-K filed with the SEC on October 31, 2024, with certain immaterial adjustments made to reflect permissible measurement period adjustments.
Note A: Pursuant to Regulation G, we are providing reconciliations of reported non-GAAP financial measures to their most directly comparable financial measures reported on a GAAP basis. We believe that consideration of these non-GAAP financial measures may be important to investors for the following reasons:
•By excluding certain costs from our unit metrics, we believe that we have better visibility into the results of operations. Our industry is highly competitive and is characterized by high fixed costs, so even a small reduction in non-fuel operating costs can result in a significant improvement in operating results. We believe that all U.S. carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management and investors to understand the impact of company-specific cost drivers which are more controllable by management. We adjust for expenses related directly to our freighter aircraft operations, including those costs incurred under the ATSA with Amazon, to allow for better comparability to other carriers that do not operate freighter aircraft. We also exclude certain special charges as they are unusual or nonrecurring in nature and adjusting for these expenses allows management and investors to better understand our cost performance.
•CASMex is one of the most important measures used by management and by the Air Group Board of Directors in assessing quarterly and annual cost performance. CASMex is also a measure commonly used by industry analysts, and we believe it is the basis 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 pretax income is an important metric for the employee incentive plan, which covers the majority of Air Group employees.
•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.
GLOSSARY OF TERMS
Adjusted net debt - long-term debt, including current portion, plus capitalized operating and finance leases, less cash, restricted cash, and marketable securities
Adjusted net debt to EBITDAR - represents net adjusted 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, freighter costs, and special items
CASMex - operating costs excluding fuel, freighter costs, and special items per ASM, or "unit cost"
Debt-to-capitalization ratio - represents adjusted debt (long-term debt plus capitalized operating and finance lease liabilities) 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 our fuel-hedging program and excluding operations under the Air Transportation Service Agreement (ATSA) with Amazon
Freighter Costs - operating expenses directly attributable to the operation of Alaska's B737 freighter aircraft and Hawaiian's A330-300 freighter aircraft exclusively performing cargo missions
Load Factor - RPMs as a percentage of ASMs; represents the number of available seats that were filled with paying passengers
PRASM - passenger revenue per ASM, or "passenger unit revenue"
RASM - operating revenue per ASMs, or "unit revenue"; operating revenue includes all passenger revenue, freight & mail, loyalty program revenue, and other ancillary revenue; represents the average total revenue for flying one seat one mile
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 passenger revenue for flying one passenger one mile
❑ ❑ ❑ ❑ ❑
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, June 30, 2024 and September 30, 2024 and the year-to-date period ending December 31, 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”). For the quarter-to-date period ended September 30, 2024, the Hawaiian column reflects results prior to the consummation of the merger, comprising the period of July 1, 2024 to September 17, 2024. 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. Differences from previously filed pro forma information reflects the impact of permissible measurement period adjustments and certain immaterial line item reclassifications to better conform presentation.
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) | | | $ | — | | | | | | $ | 2,585 | |
| Mileage Plan other revenue | 164 | | | — | | | 29 | | | — | | | | | | 193 | |
| Cargo and other revenue | 64 | | | 62 | | | (27) | | | — | | | | | | 99 | |
| Total Operating Revenue | 2,232 | | | 645 | | | — | | | — | | | | | | 2,877 | |
| 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) | | | (9) | | | | | | 62 | |
| 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 | | | 18 | | | | | | 179 | |
| 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 | | | 9 | | | | | | 3,202 | |
| Operating Income / (Loss) | (166) | | | (148) | | | (2) | | | (9) | | | | | | (325) | |
| Non-operating Income (Expense) | (12) | | | (4) | | | 1 | | | (3) | | (b) | | | | (18) | |
| Income (Loss) Before Income Tax | (178) | | | (152) | | | (1) | | | (12) | | | | | | (343) | |
| Income tax expense / (benefit) | (46) | | | (15) | | | — | | | (3) | | (c) | | | | (64) | |
| Net Income (Loss) | (132) | | | (137) | | | (1) | | | (9) | | | | | | (279) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| 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) | | | $ | 9 | | | | | | $ | 2,443 | |
| Less the following components: | | | | | | | | | | | | |
| Freighter costs | 15 | | | — | | | 7 | | | — | | | | | | 22 | |
| Special items - operating | 34 | | | 8 | | | — | | | — | | | | | | 42 | |
| Total non-fuel operating expenses, excluding freighter costs and special items | $ | 1,784 | | | $ | 596 | | | $ | (10) | | | $ | 9 | | | | | | $ | 2,379 | |
| CASMex | 11.60 | ¢ | | 11.82 | ¢ | | | | | | | | | 11.65 | ¢ |
| | | | | | | | | | | | |
Adjusted Pretax Income | | | | | | | | | | | | |
| Income before income tax | $ | (178) | | | $ | (152) | | | $ | (1) | | | $ | (12) | | | | | | $ | (343) | |
| Adjusted for: | | | | | | | | | | | | |
| Mark-to-market fuel hedge adjustment | (13) | | | (2) | | | — | | | — | | | | | | (15) | |
| Unrealized gain on foreign debt | — | | | (9) | | | — | | | — | | | | | | (9) | |
| Special items - operating | 34 | | | 8 | | | — | | | — | | | | | | 42 | |
| Special items - net non-operating | — | | | (5) | | | — | | | — | | | | | | (5) | |
| Adjusted income before income tax | $ | (157) | | | $ | (160) | | | $ | (1) | | | $ | (12) | | | | | | $ | (330) | |
| | | | | | | | | | | | |
| Pretax margin | (8.0) | % | | (23.6) | % | | | | | | | | | (11.9) | % |
| Adjusted pretax margin | (7.0) | % | | (24.8) | % | | | | | | | | | (11.5) | % |
| | | | | | | | | | | | |
Adjusted Net Income | | | | | | | | | | | | |
| Net Income (Loss) | $ | (132) | | | $ | (137) | | | $ | (1) | | | $ | (9) | | | | | | $ | (279) | |
| Adjusted for: | | | | | | | | | | | | |
| Mark-to-market fuel hedge adjustments | (13) | | | (2) | | | — | | | — | | | | | | (15) | |
| Unrealized gain on foreign debt | — | | | (9) | | | — | | | — | | | | | | (9) | |
| Special items - operating | 34 | | | 8 | | | — | | | — | | | | | | 42 | |
| Special items - net non-operating | — | | | (5) | | | — | | | — | | | | | | (5) | |
| Income tax effect of reconciling items above | (5) | | | 1 | | | — | | | — | | | | | | (4) | |
| Adjusted Net Income (Loss) | $ | (116) | | | $ | (144) | | | $ | (1) | | | $ | (9) | | | | | | $ | (270) | |
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 | | | $ | (2) | | | $ | — | | | | | | $ | 3,315 | |
| Mileage Plan other revenue | 174 | | | — | | | 29 | | | — | | | | | | 203 | |
| Cargo and other revenue | 72 | | | 66 | | | (27) | | | — | | | | | | 111 | |
| Total Operating Revenue | 2,897 | | | 732 | | | — | | | — | | | | | | 3,629 | |
| 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) | | | (9) | | | | | | 61 | |
| 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 | | | 18 | | | | | | 183 | |
| 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 | | | 9 | | | | | | 3,373 | |
| Operating Income / (Loss) | 322 | | | (55) | | | (2) | | | (9) | | | | | | 256 | |
| Non-operating Income (Expense) | (6) | | | (12) | | | 2 | | | (3) | | (b) | | | | (19) | |
| Income (Loss) Before Income Tax | 316 | | | (67) | | | — | | | (12) | | | | | | 237 | |
| Income tax expense / (benefit) | 96 | | | — | | | — | | | (3) | | (c) | | | | 93 | |
| Net Income (Loss) | 220 | | | (67) | | | — | | | (9) | | | | | | 144 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| 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 | ¢ | | | | | | | | | 15.49 | ¢ |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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) | | | $ | 9 | | | | | | $ | 2,572 | |
| Less the following components: | | | | | | | | | | | | |
| Freighter costs | 13 | | | — | | | 10 | | | — | | | | | | 23 | |
| Special items - operating | 146 | | | 6 | | | — | | | — | | | | | | 152 | |
| Total non-fuel operating expenses, excluding freighter costs and special items | $ | 1,801 | | | $ | 602 | | | $ | (15) | | | $ | 9 | | | | | | $ | 2,397 | |
| CASMex | 9.89 | ¢ | | 11.50 | ¢ | | | | | | | | | 10.23 | ¢ |
| | | | | | | | | | | | |
| Adjusted Pretax Income | | | | | | | | | | | | |
| Income before income tax | $ | 316 | | | $ | (67) | | | $ | — | | | $ | (12) | | | | | | $ | 237 | |
| Adjusted for: | | | | | | | | | | | | |
| Mark-to-market fuel hedge adjustment | (5) | | | — | | | — | | | — | | | | | | (5) | |
| Unrealized gain on foreign debt | — | | | (7) | | | — | | | — | | | | | | (7) | |
| Special items - operating | 146 | | | 6 | | | — | | | — | | | | | | 152 | |
| Special items - net non-operating | — | | | (3) | | | — | | | — | | | | | | (3) | |
| Adjusted income before income tax | $ | 457 | | | $ | (71) | | | $ | — | | | $ | (12) | | | | | | $ | 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) | | | $ | — | | | $ | (9) | | | | | | $ | 144 | |
| Adjusted for: | | | | | | | | | | | | |
| Mark-to-market fuel hedge adjustments | (5) | | | — | | | — | | | — | | | | | | (5) | |
| Unrealized gain on foreign debt | — | | | (7) | | | — | | | — | | | | | | (7) | |
| Special items - operating | 146 | | | 6 | | | — | | | — | | | | | | 152 | |
| Special items - net non-operating | — | | | (3) | | | — | | | — | | | | | | (3) | |
| Income tax effect of reconciling items above | (34) | | | — | | | — | | | — | | | | | | (34) | |
| Adjusted Net Income (Loss) | $ | 327 | | | $ | (71) | | | $ | — | | | $ | (9) | | | | | | $ | 247 | |
ALASKA AIR GROUP
Unaudited Pro Forma Condensed Combined Statement of Operations
Three Months Ended September 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 | $ | 2,821 | | | $ | 604 | | | $ | (1) | | | $ | — | | | | | | $ | 3,424 | |
| Mileage Plan other revenue | 171 | | | — | | | 26 | | | — | | | | | | 197 | |
| Cargo and other revenue | 80 | | | 63 | | | (25) | | | — | | | | | | 118 | |
| Total Operating Revenue | 3,072 | | | 667 | | | — | | | — | | | | | | 3,739 | |
| Wages and benefits | 883 | | | 220 | | | (4) | | | — | | (a) | | | | 1,099 | |
| Variable incentive pay | 104 | | | — | | | 4 | | | — | | | | | | 108 | |
| Aircraft fuel, including hedging gains and losses | 624 | | | 153 | | | 6 | | | — | | | | | | 783 | |
| Aircraft maintenance | 140 | | | 67 | | | 6 | | | — | | | | | | 213 | |
| Aircraft rent | 49 | | | 27 | | | (6) | | | (6) | | | | | | 64 | |
| Landing fees and other rentals | 194 | | | 44 | | | 2 | | | — | | | | | | 240 | |
| Contracted services | 108 | | | — | | | 30 | | | — | | | | | | 138 | |
| Selling expenses | 82 | | | 28 | | | 1 | | | — | | | | | | 111 | |
| Depreciation and amortization | 139 | | | 31 | | | 2 | | | 15 | | | | | | 187 | |
| Food and beverage service | 69 | | | — | | | 23 | | | — | | | | | | 92 | |
| Third-party regional carrier expense | 63 | | | — | | | — | | | — | | | | | | 63 | |
| Other | 202 | | | 40 | | | 15 | | | — | | | | | | 257 | |
| Special items - operating | 74 | | | 4 | | | — | | | — | | | | | | 78 | |
| Aircraft and passenger servicing | — | | | 45 | | | (45) | | | — | | | | | | — | |
| Purchased services | — | | | 35 | | | (35) | | | — | | | | | | — | |
| Total Operating Expenses | 2,731 | | | 694 | | | (1) | | | 9 | | | | | | 3,433 | |
| Operating Income / (Loss) | 341 | | | (27) | | | 1 | | | (9) | | | | | | 306 | |
| Non-operating Income (Expense) | (13) | | | (38) | | | 2 | | | (2) | | (b) | | | | (51) | |
| Income (Loss) Before Income Tax | 328 | | | (65) | | | 3 | | | (11) | | | | | | 255 | |
| Income tax expense / (benefit) | 92 | | | — | | | — | | | (3) | | (c) | | | | 89 | |
| Net Income (Loss) | 236 | | | (65) | | | 3 | | | (8) | | | | | | 166 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| RPMs (000,000) "traffic" | 16,970 | | | 4,103 | | | | | | | | | | 21,073 |
| ASMs (000,000) "capacity" | 19,847 | | | 4,760 | | | | | | | | | | 24,607 |
| Load Factor | 85.5 | % | | 86.2 | % | | | | | | | | | 85.6 | % |
| RASM | 15.48 | ¢ | | 14.00 | ¢ | | | | | | | | | 15.19 | ¢ |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | $ | 2,107 | | | $ | 541 | | | $ | (7) | | | $ | 9 | | | | | | $ | 2,650 | |
| Less the following components: | | | | | | | | | | | | |
| Freighter costs | 17 | | | — | | | 12 | | | — | | | | | | 29 | |
| Special items - operating | 74 | | | 3 | | | — | | | — | | | | | | 77 | |
| Total non-fuel operating expenses, excluding freighter costs and special items | $ | 2,016 | | | $ | 538 | | | $ | (19) | | | $ | 9 | | | | | | $ | 2,544 | |
| CASMex | 10.16 | ¢ | | 11.29 | ¢ | | | | | | | | | 10.34 | ¢ |
| | | | | | | | | | | | |
| Adjusted Pretax Income | | | | | | | | | | | | |
| Income before income tax | $ | 328 | | | $ | (65) | | | $ | 3 | | | $ | (11) | | | | | | $ | 255 | |
| Adjusted for: | | | | | | | | | | | | |
| Mark-to-market fuel hedge adjustment | (4) | | | — | | | — | | | — | | | | | | (4) | |
| Unrealized (gain)/loss on foreign debt | — | | | 13 | | | — | | | — | | | | | | 13 | |
| Special items - operating | 74 | | | 4 | | | — | | | — | | | | | | 78 | |
| Special items - net non-operating | 1 | | | — | | | — | | | — | | | | | | 1 | |
| Adjusted income before income tax | $ | 399 | | | $ | (48) | | | $ | 3 | | | $ | (11) | | | | | | $ | 343 | |
| | | | | | | | | | | | |
| Pretax margin | 10.7 | % | | (9.7) | % | | | | | | | | | 6.8 | % |
| Adjusted pretax margin | 13.0 | % | | (7.2) | % | | | | | | | | | 9.2 | % |
| | | | | | | | | | | | |
| Adjusted Net Income | | | | | | | | | | | | |
| Net Income (Loss) | $ | 236 | | | $ | (65) | | | $ | 3 | | | $ | (8) | | | | | | $ | 166 | |
| Adjusted for: | | | | | | | | | | | | |
| Mark-to-market fuel hedge adjustments | (4) | | | — | | | — | | | — | | | | | | (4) | |
| Unrealized (gain)/loss on foreign debt | — | | | 13 | | | — | | | — | | | | | | 13 | |
| Special items - operating | 74 | | | 4 | | | — | | | — | | | | | | 78 | |
| Special items - net non-operating | 1 | | | — | | | — | | | — | | | | | | 1 | |
| Income tax effect of reconciling items above | (18) | | | — | | | — | | | — | | | | | | (18) | |
| Adjusted Net Income (Loss) | $ | 289 | | | $ | (48) | | | $ | 3 | | | $ | (8) | | | | | | $ | 236 | |
ALASKA AIR GROUP
Unaudited Pro Forma Condensed Combined Statement of Operations
Twelve Months Ended December 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 | $ | 10,654 | | | $ | 1,853 | | | $ | (5) | | | $ | — | | | | | | $ | 12,502 | |
| Mileage Plan other revenue | 733 | | | — | | | 84 | | | — | | | | | | 817 | |
| Cargo and other revenue | 348 | | | 191 | | | (79) | | | — | | | | | | 460 | |
| Total Operating Revenue | 11,735 | | | 2,044 | | | — | | | — | | | | | | 13,779 | |
| Wages and benefits | 3,588 | | | 747 | | | (14) | | | — | | (a) | | | | 4,321 | |
| Variable incentive pay | 358 | | | — | | | 14 | | | — | | | | | | 372 | |
| Aircraft fuel, including hedging gains and losses | 2,506 | | | 521 | | | 18 | | | — | | | | | | 3,045 | |
| Aircraft maintenance | 620 | | | 208 | | | 16 | | | — | | | | | | 844 | |
| Aircraft rent | 207 | | | 87 | | | (18) | | | (24) | | | | | | 252 | |
| Landing fees and other rentals | 781 | | | 132 | | | 10 | | | — | | | | | | 923 | |
| Contracted services | 444 | | | — | | | 95 | | | — | | | | | | 539 | |
| Selling expenses | 349 | | | 85 | | | 5 | | | — | | | | | | 439 | |
| Depreciation and amortization | 583 | | | 99 | | | 6 | | | 51 | | | | | | 739 | |
| Food and beverage service | 287 | | | — | | | 68 | | | — | | | | | | 355 | |
| Third-party regional carrier expense | 243 | | | — | | | — | | | — | | | | | | 243 | |
| Other | 854 | | | 127 | | | 53 | | | — | | | | | | 1,034 | |
| Special items - operating | 345 | | | 18 | | | — | | | — | | | | | | 363 | |
| Aircraft and passenger servicing | — | | | 138 | | | (138) | | | — | | | | | | — | |
| Purchased services | — | | | 112 | | | (112) | | | — | | | | | | — | |
| Total Operating Expenses | 11,165 | | | 2,274 | | | 3 | | | 27 | | | | | | 13,469 | |
| Operating Income / (Loss) | 570 | | | (230) | | | (3) | | | (27) | | | | | | 310 | |
| Non-operating Income (Expense) | (25) | | | (54) | | | 5 | | | (8) | | (b) | | | | (82) | |
| Income (Loss) Before Income Tax | 545 | | | (284) | | | 2 | | | (35) | | | | | | 228 | |
| Income tax expense / (benefit) | 150 | | | (15) | | | — | | | (9) | | (c) | | | | 126 | |
| Net Income (Loss) | 395 | | | (269) | | | 2 | | | (26) | | | | | | 102 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| RPMs (000,000) "traffic" | 63,871 | | | 12,695 | | | | | | | | | | 76,566 |
| ASMs (000,000) "capacity" | 76,167 | | | 15,041 | | | | | | | | | | 91,208 |
| Load Factor | 83.9 | % | | 84.4 | % | | | | | | | | | 83.9 | % |
| RASM | 15.41 | ¢ | | 13.58 | ¢ | | | | | | | | | 15.11 | ¢ |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | $ | 8,659 | | | $ | 1,753 | | | $ | (15) | | | $ | 27 | | | | | | $ | 10,424 | |
| Less the following components: | | | | | | | | | | | | |
| Freighter costs | 84 | | | — | | | 27 | | | — | | | | | | 111 | |
| Special items - operating | 345 | | | 18 | | | — | | | — | | | | | | 363 | |
| Total non-fuel operating expenses, excluding freighter costs and special items | $ | 8,230 | | | $ | 1,735 | | | $ | (42) | | | $ | 27 | | | | | | $ | 9,950 | |
| CASMex | 10.80 | ¢ | | 11.54 | ¢ | | | | | | | | | 10.91 | ¢ |
| | | | | | | | | | | | |
| Adjusted Pretax Income | | | | | | | | | | | | |
| Income before income tax | $ | 545 | | | $ | (284) | | | $ | 2 | | | $ | (35) | | | | | | $ | 228 | |
| Adjusted for: | | | | | | | | | | | | |
| Mark-to-market fuel hedge adjustment | (28) | | | (2) | | | — | | | — | | | | | | (30) | |
| Unrealized (gain)/loss on foreign debt | (10) | | | (3) | | | — | | | — | | | | | | (13) | |
| Special items - operating | 345 | | | 18 | | | — | | | — | | | | | | 363 | |
| Special items - net non-operating | (16) | | | (8) | | | — | | | — | | | | | | (24) | |
| Adjusted income before income tax | $ | 836 | | | $ | (279) | | | $ | 2 | | | $ | (35) | | | | | | $ | 524 | |
| | | | | | | | | | | | |
| Pretax margin | 4.6 | % | | (13.9) | % | | | | | | | | | 1.7 | % |
| Adjusted pretax margin | 7.1 | % | | (13.6) | % | | | | | | | | | 3.8 | % |
| | | | | | | | | | | | |
| Adjusted Net Income | | | | | | | | | | | | |
| Net Income (Loss) | $ | 395 | | | $ | (269) | | | $ | 2 | | | $ | (26) | | | | | | $ | 102 | |
| Adjusted for: | | | | | | | | | | | | |
| Mark-to-market fuel hedge adjustments | (28) | | | (2) | | | — | | | — | | | | | | (30) | |
| Unrealized (gain)/loss on foreign debt | (10) | | | (3) | | | — | | | — | | | | | | (13) | |
| Special items - operating | 345 | | | 18 | | | — | | | — | | | | | | 363 | |
| Special items - net non-operating | (16) | | | (8) | | | — | | | — | | | | | | (24) | |
| Income tax effect of reconciling items above | (61) | | | 1 | | | — | | | — | | | | | | (60) | |
| Adjusted Net Income (Loss) | $ | 625 | | | $ | (263) | | | $ | 2 | | | $ | (26) | | | | | | $ | 338 | |
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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