Alaska Air Group reports Third Quarter 2018 results

SEATTLE, Oct. 25, 2018 /PRNewswire/ --

Financial Highlights:

• Reported net income for the third quarter under Generally Accepted Accounting Principles (GAAP) of $217 million, or $1.75 per diluted share, compared to net income of $259 million, or $2.09 per diluted share in the third quarter of 2017. As the company has recently implemented new accounting standards, including the standards relating to revenue recognition and retirement benefits, 2017 financial information has been adjusted.
• Reported net income for the third quarter, excluding special items such as merger-related costs and mark-to-market fuel hedge accounting adjustments, of $237 million, or $1.91 per diluted share, compared to $270 million or $2.18 per diluted share, in the third quarter of 2017. This quarter's adjusted results compare to the First Call analyst consensus estimate of $1.81 per share.
• Paid a $0.32 per-share quarterly cash dividend in the third quarter, a 7% increase over the dividend paid in the third quarter of 2017.
• Repurchased a total of 582,942 shares of common stock for approximately $37 million in the first nine months of 2018.
• Generated approximately $1 billion of operating cash flow in the first nine months of 2018, including merger-related costs and other special items.
• Held $1.4 billion in unrestricted cash and marketable securities as of Sept. 30, 2018.
• Reduced debt-to-capitalization ratio to 49% as of Sept. 30, 2018, compared to 53% as of Dec. 31, 2017, and down from 59% immediately following our acquisition of Virgin America. Reduced long-term debt balance to $1.7 billion as of Sept. 30, 2018 from $2.6 billion as of Dec. 31, 2016.

Operational Highlights:

• Updated food and beverage menus to highlight West Coast inspired fresh meals, snacks and local craft beers further enhancing the airline's onboard guest experience.
• Announced one new route to Columbus, Ohio, which will begin service in March 2019, and two new routes to El Paso, Texas, which will begin service in February 2019.
• Began our fleet-wide installation of satellite Wi-Fi, completing three Airbus aircraft during the quarter.
• Completed the painting of Alaska livery on 16 Airbus aircraft, and expect to have 33 completed by the end of the year.
• Finalized the integrated seniority list for our pilots; all groups except for aircraft technicians are now under a single contract and have an integrated seniority list.
• Added three Boeing 737-900ER aircraft to the mainline operating fleet and four Embraer 175 (E175) aircraft to the regional operating fleet in the third quarter of 2018.

Recognition and Awards:

• Named "Best U.S. Airline" by Condé Nast Traveler in their 2018 Reader's Choice Awards.
• Ranked as the top U.S. airline in the Dow Jones Sustainability Index (DJSI) for the second consecutive year, receiving top scores for "corporate governance" and "efficiency."
• Ranked "Best Airline" in the U.S. and Canada by KAYAK.
• Mileage Plan ranked first in the U.S. News & World Report's list of Best Airline Rewards Programs for the fourth consecutive year.
• Mileage Plan ranked in the top three airlines among traditional and low-cost carriers in the 2018 J.D. Power Loyalty Program study.
• Ranked among Forbes' 2018 global list for "World's Best Employers" and national list for "America's Best Employers for New Graduates."

Alaska Air Group, Inc., (NYSE: ALK) today reported third quarter 2018 GAAP net income of $217 million, or $1.75 per diluted share, compared to $259 million, or $2.09 per diluted share in the third quarter of 2017. Excluding the impact of merger-related costs and mark-to-market fuel hedge adjustments, the company reported adjusted net income of $237 million, or $1.91 per diluted share, compared to $270 million, or $2.18 per diluted share, in 2017.

"In the nearly two years since our merger closed, we've now completed approximately 90 percent of our integration milestones," said Alaska CEO Brad Tilden. "With that work now behind us, we are doubling down on what we do best - keeping fares low, delivering leading operational performance and offering top-rated customer service. The recent recognition by Condé Nast Traveler shows what our people can accomplish when we focus on what's most important and pull together as one team."

The following table reconciles the company's reported GAAP net income and earnings per diluted share (diluted EPS) for the three and nine months ended Sept. 30, 2018 and 2017 to adjusted amounts.

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 third quarter results will be streamed online at 8:30 a.m. Pacific time on Oct.  25, 2018. 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 news release to "Air Group," "company," "we," "us" and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified. Alaska Airlines, Inc., Horizon Air Industries, Inc., and Virgin America Inc. are referred to as "Alaska," "Horizon," and "Virgin America" respectively, and together as our "airlines."

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 Dec. 31, 2017, as well as in other documents filed by the Company with the SEC after the date thereof. Some of these risks include 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, changes in laws and regulations and risks inherent in the achievement of anticipated synergies and the timing thereof in connection with the acquisition of Virgin America. 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 fly 44 million guests a year to more than 115 destinations with an average of 1,200 daily flights across the United States and to Mexico, Canada and Costa Rica. With Alaska and Alaska Global Partners, guests can earn and redeem miles on flights to more than 900 destinations worldwide. Alaska Airlines ranked "Highest in Customer Satisfaction Among Traditional Carriers in North America" in the J.D. Power North America Airline Satisfaction Study for 11 consecutive years from 2008 to 2018. Learn about Alaska's award-winning service at newsroom.alaskaair.com and blog.alaskaair.com. Alaska Airlines and Horizon Air are subsidiaries of Alaska Air Group (NYSE: ALK).