2014

Alaska Air Group Reports Record Third Quarter 2013 Results

SEATTLE, Oct. 24, 2013 /PRNewswire/ --

Financial Highlights:

  • Reported record third quarter net income, excluding special items, of $157 million, or $2.21 per diluted share, compared to adjusted net income of $150 million, or $2.09 per diluted share in the prior-year quarter. This quarter's results compare to a First Call analyst consensus estimate of $2.14 per share.
  • Recorded net income for the third quarter under Generally Accepted Accounting Principles (GAAP) of $289 million or $4.08 per diluted share, compared to net income of $163 million, or $2.27 per diluted share in 2012.
  • Achieved trailing 12-month return on invested capital of 13.0 percent compared to 12.7 percent in the 12 months ended Sept. 30, 2012.
  • Lowered adjusted debt-to-total-capitalization ratio by 7.0 percentage points, to 47.0 percent, from Dec. 31, 2012.
  • Paid a $0.20 per-share quarterly cash dividend on August 22 totaling $14 million. This is the first time since 1992 that Alaska Air Group has paid a dividend.
  • Repurchased 537,008 shares of common stock for $32 million in the third quarter. For the year, the company has repurchased 1,454,790 shares for $83 million.
  • Modified the affinity card agreement with Bank of America and extended it through 2017, estimated to generate $55 million in additional cash flows on an annual basis.
  • Held $1.4 billion in unrestricted cash and marketable securities as of Sept. 30, 2013.

Operational Highlights:

  • Held the No. 1 spot in U.S. Department of Transportation on-time performance among the 10 largest U.S. airlines for the 12 months ended August 2013.
  • Named most fuel-efficient airline in the U.S. in a report released by the International Council on Clean Transportation.
  • Named Airline Industry Leader in the 2013 Temkin Customer Service Rankings.
  • Surpassed 1 million customer downloads of the Alaska Airlines mobile apps.
  • Began new routes between Portland and Atlanta and between Portland and Dallas.

Alaska Air Group, Inc., (NYSE: ALK) today reported third quarter 2013 GAAP net income of $289 million, or $4.08 per diluted share, compared to $163 million, or $2.27 per diluted share in the third quarter of 2012. Excluding the impact of mark-to-market fuel hedge adjustments of $20 million ($12 million after tax, or $0.17  per diluted share), and a one-time special revenue item of $192 million ($120 million after tax, or $1.70 per diluted share) that primarily resulted from the application of new accounting rules associated with the modified affinity card agreement, the company reported record adjusted net income of $157 million, or $2.21 per diluted share, compared to adjusted net income of $150 million, or $2.09 per diluted share, in 2012.

"These results represent our best quarter ever and mark Alaska's 18th consecutive quarterly profit," Alaska Air Group CEO Brad Tilden said. "This is noteworthy given significant additional competition in some of our core markets. The balance and strength of our network combined with the ability of our people to respond quickly to changing business conditions are enabling us to succeed in this highly competitive industry."

The following table reconciles the company's reported GAAP net income and earnings per diluted share (EPS) during the third quarters of 2013 and 2012 to adjusted amounts:


Three Months Ended September 30,


2013


2012

(in millions, except per-share amounts)

Dollars


Diluted EPS


Dollars


Diluted EPS

Reported GAAP net income

$

289



$

4.08



$

163



$

2.27


Mark-to-market fuel hedge adjustments, net of tax

(12)



(0.17)



(13)



(0.18)


Special revenue item, net of tax

(120)



(1.70)






Non-GAAP adjusted income and per-share amounts

$

157



$

2.21



$

150



$

2.09


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 simulcast via the Internet at 8:30 a.m. Pacific time on Oct. 24, 2013. It can be accessed through the company's website at 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. and Horizon Air Industries, Inc. are referred to as "Alaska" and "Horizon," 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, 2012. Some of these risks include general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our significant 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, a subsidiary of Alaska Air Group (NYSE: ALK), together with its partner regional airlines, serves 95 cities through an expansive network in Alaska, the Lower 48, Hawaii, Canada and Mexico. Alaska Airlines has ranked "Highest in Customer Satisfaction Among Traditional Network Carriers" in the J.D. Power and Associates North America Airline Satisfaction StudySM for six consecutive years from 2008 to 2013. For reservations, visit www.alaskaair.com. For more news and information, visit the Alaska Airlines Newsroom at www.alaskaair.com/newsroom.


CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Alaska Air  Group, Inc.























Three Months Ended September 30,



Nine Months Ended September 30,

(in millions, except per-share amounts)

2013


2012


Change


2013


2012


Change

Operating Revenues:












Passenger












Mainline

$

960



$

905



6

%


2,651



2,491



6

%

Regional

208



198



5

%


582



559



4

%

Total passenger revenue

1,168



1,103



6

%


3,233



3,050



6

%

Freight and mail

32



30



7

%


88



85



4

%

Other - net

165



139



19

%


433



390



11

%

Special mileage plan revenue

192





NM


192





NM

Total Operating Revenues

1,557



1,272



22

%


3,946



3,525



12

%













Operating Expenses:












Wages and benefits

285



255



12

%


806



771



5

%

Variable incentive pay

26



24



8

%


68



61



11

%

Aircraft fuel, including hedging gains and losses

363



337



8

%


1,115



1,087



3

%

Aircraft maintenance

54



56



(4)%



187



160



17

%

Aircraft rent

29



29



%


89



86



3

%

Landing fees and other rentals

71



61



16

%


207



185



12

%

Contracted services

54



50



8

%


161



149



8

%

Selling expenses

47



46



2

%


137



131



5

%

Depreciation and amortization

67



66



2

%


203



195



4

%

Food and beverage service

22



20



10

%


63



58



9

%

Other

69



59



17

%


202



184



10

%

Total Operating Expenses

1,087



1,003



8

%


3,238



3,067



6

%

Operating Income

470



269



75

%


708



458



55

%













Nonoperating Income (Expense):












Interest income

5



5





14



15




Interest expense

(13)



(15)





(42)



(49)




Interest capitalized

6



4





15



12




Other - net

(5)



2





(4)



6





(7)



(4)





(17)



(16)




Income Before Income Tax

463



265





691



442




Income tax expense

174



102





261



170




Net Income

$

289



$

163





430



272
















Basic Earnings Per Share:

$

4.13



$

2.30





$

6.12



$

3.83




Diluted Earnings Per Share:

$

4.08



$

2.27





$

6.04



$

3.77
















Shares Used for Computation:












Basic

69.780



70.963





70.152



70.852




Diluted

70.692



71.883





71.106



72.059
















Cash dividend declared per share:

$

0.20







$

0.20














CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

Alaska Air Group, Inc.







(in millions)

September 30, 2013


December 31, 2012

Cash and marketable securities

$

1,445



$

1,252






Total current assets

1,935



1,737


Property and equipment-net

3,792



3,609


Other assets

135



159


Total assets

5,862



5,505






Air traffic liability

627



534


Current portion of long-term debt

111



161


Other current liabilities

912



806


Current liabilities

1,650



1,501


Long-term debt

782



871


Other liabilities and credits

1,628



1,712


Shareholders' equity

1,802



1,421


Total liabilities and shareholders' equity

$

5,862



$

5,505






Debt to Capitalization, adjusted for operating leases

47%:53%



54%:46%






Number of common shares outstanding

69.651



70.377






OPERATING STATISTICS SUMMARY (unaudited)


Alaska Air Group, Inc.























Three Months Ended September 30,



Nine Months Ended September 30,



2013


2012


Change


2013


2012


Change

Consolidated Operating Statistics:(a)












Revenue passengers (000)

7,395



6,950



6.4

%


20,720



19,510



6.2

%

RPMs (000,000) "traffic"

7,671



7,186



6.8

%


21,852



20,287



7.7

%

ASMs (000,000) "capacity"

8,868



8,274



7.2

%


25,397



23,557



7.8

%

Load factor

86.5

%


86.9

%


(0.4 pts)



86.0

%


86.1

%


(0.1 pts)


Yield

15.23

¢


15.35

¢


(0.8%)



14.80

¢


15.03

¢


(1.5%)


PRASM

13.17

¢


13.33

¢


(1.2%)



12.73

¢


12.94

¢


(1.6%)


RASM(b)

15.39

¢


15.38

¢


0.1

%


14.78

¢


14.96

¢


(1.2%)


CASM excluding fuel(b)

8.16

¢


8.05

¢


1.4

%


8.36

¢


8.40

¢


(0.5%)


Economic fuel cost per gallon(c)

$

3.24



$

3.24



%


$

3.33



$

3.35



(0.6%)


Fuel gallons (000,000)

118



110



7.3

%


337



316



6.6

%

Average number of full-time equivalent employees

12,295



12,035



2.2

%


12,122



11,944



1.5

%













Mainline Operating Statistics:












Revenue passengers (000)

5,366



4,985



7.6

%


14,973



14,012



6.9

%

RPMs (000,000) "traffic"

6,963



6,483



7.4

%


19,864



18,351



8.2

%

ASMs (000,000) "capacity"

8,027



7,419



8.2

%


22,973



21,124



8.8

%

Load factor

86.7

%


87.4

%


(0.7 pts)



86.5

%


86.9

%


(0.4 pts)


Yield

13.78

¢


13.95

¢


(1.2%)



13.35

¢


13.57

¢


(1.6%)


PRASM

11.96

¢


12.19

¢


(1.9%)



11.54

¢


11.79

¢


(2.1%)


RASM

14.14

¢


14.21

¢


(0.5%)



13.56

¢


13.78

¢


(1.6%)


CASM excluding fuel(b)

7.33

¢


7.17

¢


2.2

%


7.42

¢


7.50

¢


(1.1%)


Economic fuel cost per gallon(c)

$

3.24



$

3.24



%


$

3.32



$

3.34



(0.6%)


Fuel gallons (000,000)

104



96



8.3

%


297



276



7.6

%

Average number of full-time equivalent employees

9,645



9,307



3.6

%


9,484



9,161



3.5

%

Aircraft utilization

11.0



11.0



%


10.8



10.7



0.9

%

Average aircraft stage length

1,157



1,156



0.1

%


1,177



1,152



2.2

%

Operating fleet

128



120



8 a/c


128



120



8 a/c













Regional Operating Statistics:(d)












Revenue passengers (000)

2,029



1,965



3.3

%


5,747



5,498



4.5

%

RPMs (000,000) "traffic"

708



703



0.7

%


1,988



1,936



2.7

%

ASMs (000,000) "capacity"

841



855



(1.6%)



2,424



2,433



(0.4%)


Load factor

84.2

%


82.2

%


2.0 pts


82.0

%


79.6

%


2.4 pts

Yield

29.41

¢


28.18

¢


4.4

%


29.27

¢


28.85

¢


1.5

%

PRASM

24.77

¢


23.17

¢


6.9

%


24.00

¢


22.96

¢


4.5

%

Operating fleet (Horizon only)

48



50



(2) a/c


48



50



(2) a/c

(a)

Except for full-time equivalent employees, data includes information related to third-party regional capacity purchase flying arrangements.

(b)

See a reconciliation of revenue excluding special items related to accounting changes and operating expenses excluding fuel and Note A for a discussion of why these measures may be important to investors in the accompanying pages.

(c)

See a reconciliation of economic fuel cost in the accompanying pages.

(d)

Data presented includes information related to flights operated by Horizon Air and third-party carriers. 















OPERATING SEGMENTS (unaudited)

Alaska Air Group, Inc.



























Three Months Ended September 30, 2013


Alaska











(in millions)

Mainline


Regional


Horizon


Consolidating


Air Group Adjusted(a)


Special Items(b)


Consolidated

Operating revenues














Passenger














Mainline

$

960



$



$



$



$

960



$



$

960


Regional



208







208





208


Total passenger revenues

960



208







1,168





1,168


CPA revenues





88



(88)








Freight and mail

31



1







32





32


Other-net

145



19



1





165



192



357


Total operating revenues

1,136



228



89



(88)



1,365



192



1,557
















Operating expenses














Operating expenses, excluding fuel

588



144



80



(88)



724





724


Economic fuel

337



46







383



(20)



363


Total operating expenses

925



190



80



(88)



1,107



(20)



1,087
















Nonoperating income (expense)














Interest income

5









5





5


Interest expense

(9)





(4)





(13)





(13)


Other

8



(8)



1





1





1



4



(8)



(3)





(7)





(7)


Income (loss) before income tax

$

215



$

30



$

6



$



$

251



$

212



$

463







Three Months Ended September 30, 2012


Alaska











(in millions)

Mainline


Regional


Horizon


Consolidating


Air Group Adjusted(a)


Special Items(b)


Consolidated

Operating revenues














Passenger














Mainline

$

905



$



$



$



$

905



$



$

905


Regional



198







198





198


Total passenger revenues

905



198







1,103





1,103


CPA revenues





96



(96)








Freight and mail

28



2







30





30


Other-net

121



16



2





139





139


Total operating revenues

1,054



216



98



(96)



1,272





1,272
















Operating expenses














Operating expenses, excluding fuel

532



145



86



(97)



666





666


Economic fuel

312



46







358



(21)



337


Total operating expenses

844



191



86



(97)



1,024



(21)



1,003
















Nonoperating income (expense)














Interest income

5









5





5


Interest expense

(11)





(4)





(15)





(15)


Other

6









6





6







(4)





(4)





(4)


Income (loss) before income tax

$

210



$

25



$

8



$

1



$

244



$

21



$

265


(a)

The adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocations and does not include certain revenues/charges. See Note A for further information in the accompanying pages.

(b)

Includes accounting adjustments related to Special mileage plan revenue and mark-to-market fuel-hedge accounting charges.















OPERATING SEGMENTS (unaudited)

Alaska Air Group, Inc.


























Nine Months Ended September 30, 2013


Alaska











(in millions)

Mainline


Regional


Horizon


Consolidating


Air Group Adjusted(a)


Special Items(b)


Consolidated

Operating revenues














Passenger














Mainline

$

2,651



$



$



$



$

2,651



$



$

2,651


Regional



582







582





582


Total passenger revenues

2,651



582







3,233





3,233


CPA revenues





274



(274)








Freight and mail

85



3







88





88


Other-net

380



49



4





433



192



625


Total operating revenues

3,116



634



278



(274)



3,754



192



3,946
















Operating expenses














Operating expenses, excluding fuel

1,704



440



253



(274)



2,123





2,123


Economic fuel

987



135







1,122



(7)



1,115


Total operating expenses

2,691



575



253



(274)



3,245



(7)



3,238
















Nonoperating income (expense)














Interest income

14









14





14


Interest expense

(30)





(10)



(2)



(42)





(42)


Other

19



(9)



1





11





11



3



(9)



(9)



(2)



(17)





(17)


Income (loss) before income tax

$

428



$

50



$

16



$

(2)



$

492



$

199



$

691







Nine Months Ended September 30, 2012


Alaska











(in millions)

Mainline


Regional


Horizon


Consolidating


Air Group Adjusted(a)


Special Items(b)


Consolidated

Operating revenues














Passenger














Mainline

$

2,491



$



$



$



$

2,491



$



$

2,491


Regional



559







559





559


Total passenger revenues

2,491



559







3,050





3,050


CPA revenues





272



(272)








Freight and mail

82



3







85





85


Other-net

339



45



6





390





390


Total operating revenues

2,912



607



278



(272)



3,525





3,525
















Operating expenses














Operating expenses, excluding fuel

1,583



421



248



(272)



1,980





1,980


Economic fuel

923



135







1,058



29



1,087


Total operating expenses

2,506



556



248



(272)



3,038



29



3,067
















Nonoperating income (expense)














Interest income

15









15





15


Interest expense

(37)





(12)





(49)





(49)


Other

17





1





18





18



(5)





(11)





(16)





(16)


Income (loss) before income tax

$

401



$

51



$

19



$



$

471



$

(29)



$

442


(a)    

The adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocations and does not include certain revenues/charges.  See Note A for further information in the accompanying pages.

(b)  

Includes accounting adjustments related to Special mileage plan revenue and mark-to-market fuel-hedge accounting charges.

















Alaska Air Group, Inc.














RASM RECONCILIATION (unaudited)


Three Months Ended September 30,


Nine Months Ended September 30,

(in millions)

2013


2012


2013


2012

Total operating revenues

$

1,557



$

1,272



$

3,946



$

3,525


Less: special mileage plan revenue

192





192




Adjusted Revenue

$

1,365



$

1,272



$

3,754



$

3,525


Consolidated ASMs

8,868



8,274



25,397



23,557


RASM

15.39

¢


15.38

¢


14.78

¢


14.96

¢


CASM EXCLUDING FUEL RECONCILIATION (unaudited)


Three Months Ended September 30,


Nine Months Ended September 30,

(in cents)

2013


2012


2013


2012

Consolidated:








CASM

12.26

¢


12.12

¢


12.75

¢


13.02

¢

Less the following components:








Aircraft fuel, including hedging gains and losses

4.10



4.07



4.39



4.62


CASM excluding fuel

8.16

¢


8.05

¢


8.36

¢


8.40

¢









Mainline:








CASM

11.27

¢


11.09

¢


11.68

¢


12.00

¢

Less the following components:








Aircraft fuel, including hedging gains and losses

3.94



3.92



4.26



4.50


CASM excluding fuel

7.33

¢


7.17

¢


7.42

¢


7.50

¢









FUEL RECONCILIATIONS (unaudited)


Three Months Ended September 30,


2013


2012

(in millions, except for per-gallon amounts)

Dollars


Cost/Gallon


Dollars


Cost/Gallon

Raw or "into-plane" fuel cost

$

373



$

3.16



$

359



$

3.25


(Gains) losses on settled hedges

10



0.08



(1)



(0.01)


Consolidated economic fuel expense

383



3.24



358



3.24


Mark-to-market fuel hedge adjustment

(20)



(0.17)



(21)



(0.19)


GAAP fuel expense

$

363



$

3.07



$

337



$

3.05


Fuel gallons

118





110













Nine Months Ended September 30,


2013


2012

(in millions, except for per gallon amounts)

Dollars


Cost/Gallon


Dollars


Cost/Gallon

Raw or "into-plane" fuel cost

$

1,076



$

3.19



$

1,046



$

3.31


(Gains) losses on settled hedges

46



0.14



12



0.04


Consolidated economic fuel expense

$

1,122



$

3.33



$

1,058



$

3.35


Mark-to-market fuel hedge adjustment

(7)



(0.02)



29



0.09


GAAP fuel expense

$

1,115



$

3.31



$

1,087



$

3.44


Fuel gallons

337





316





Note A: Pursuant to Regulation G, we are providing disclosure of the reconciliation 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 eliminating fuel expense and certain special items from our unit metrics, we believe that we have better visibility into the results of operations without the consideration of accounting changes or our non-fuel cost-reduction initiatives. 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. In addition, we believe that all domestic carriers are similarly impacted by changes in jet fuel costs over the long run, so it is important for management (and thus investors) to understand the impact of (and trends in) company-specific cost drivers such as labor rates and productivity, airport costs, maintenance costs, etc., which are more controllable by management
  • Operating revenue per ASM (RASM) excludes a favorable, one-time "special" revenue item of $192 million primarily related to our modified affinity card agreement with Bank of America, executed in July 2013. In accordance with accounting standards, we recorded this one-time special revenue item in the the third quarter of 2013. This is purely an accounting change and the current period results do not reflect the economics of the agreement, rather it reflects a non-cash adjustment of the value of miles outstanding in the program. We believe it is appropriate to exclude this special revenue item from recurring revenues from operations.
  • Cost per ASM (CASM) excluding fuel and certain special items 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.
  • Operating revenue per ASM (RASM) excludes a favorable, one-time "special" revenue item of $192 million primarily related to our modified affinity card agreement with Bank of America, executed in July 2013. In accordance with accounting standards, we recorded this one-time special revenue item in the the third quarter of 2013. This is purely an accounting change and the current period results do not reflect the economics of the agreement, rather it reflects a non-cash adjustment of the value of miles outstanding in the program. We believe it is appropriate to exclude this special revenue item from recurring revenues from operations.
  • Adjusted Income before Income Taxes and CASM excluding fuel (and other items as specified in our plan documents) are important metrics for the employee incentive plan that covers all Air Group employees.
  • CASM excluding fuel and certain special items is a measure commonly used by industry analysts, and we believe it is the basis by which they compare our airlines to others in the industry. The measure is also the subject of frequent questions from investors.
  • 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 certain items, such as fleet transition costs or special revenues, 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 passenger unit revenues, we do not (nor are we able to) evaluate unit revenues 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 revenues 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.

Note B: Air Group has two operating airlines - Alaska Airlines and Horizon Air. Each is a regulated airline with separate management teams primarily in operational roles. To manage the two operating airlines, management views the business in three operating segments. Alaska operates a fleet of passenger jets (Alaska Mainline) and contracts with Horizon, SkyWest Airlines, Inc. (SkyWest), and Peninsula Airways, Inc. (PenAir) for regional capacity under which Alaska receives all passenger revenue from those flights (Alaska Regional). Horizon operates a fleet of turboprop aircraft and sells all of its capacity to Alaska pursuant to a capacity purchase arrangement (Horizon). The Company believes the amounts paid by Alaska to Horizon approximate current market rates received by other regional carriers for similar flying and are available to pay for various Horizon operating expenses such as crew expenses, maintenance, and aircraft ownership costs.  All inter-company revenues and expenses between Alaska and Horizon are eliminated in consolidation.

Glossary of Terms

Mainline - represents flying Boeing 737 jets and all associated revenues and costs

Regional - represents capacity purchased by Alaska from Horizon, SkyWest, and PenAir. In this segment, Alaska Regional records actual on-board passenger revenue, less costs such as fuel, distribution costs, and payments made to Horizon, SkyWest and PenAir under the respective capacity purchased arrangement (CPAs). Additionally, Alaska Regional includes an allocation of corporate overhead such as IT, finance, other administrative costs incurred by Alaska and on behalf of Horizon.

RPMs - revenue passenger miles, or "traffic"; represents the number of seats that were filled with paying passengers; one passenger traveling one mile is one RPM

ASMs - available seat miles, or "capacity"; represents total seats available across the fleet multiplied by the number of miles flown

Load Factor - RPMs as a percentage of ASMs; represents the number of available seats that were filled with paying passengers

Yield - passenger revenue per RPM; represents the average revenue for flying one passenger one mile

PRASM - passenger revenue per ASM; commonly called "passenger unit revenue"

RASM - operating revenue per ASMs, or "unit revenue"; operating revenue includes all passenger revenue, freight & mail, Mileage Plan, and other ancillary revenue; represents the average total revenue for flying one seat one mile

CASM - operating costs per ASM, or "unit cost"; represents all operating expenses including fuel and special items

CASMex - operating costs excluding fuel and special items per ASM; this metric is used to help track progress toward reduction of non-fuel operating costs since fuel is largely out of our control

Economic Fuel - best estimate of the cash cost of fuel, net of the impact of our fuel-hedging program

Aircraft Utilization - block hours per day; this represents the average number of hours our aircraft are flying

Aircraft Stage Length - represents the average miles flown per aircraft departure

Diluted Earnings per Share - represents earnings per share 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

Productivity - number of revenue passengers per full-time equivalent employee

Debt to Capitalization ratio - represents adjusted debt (long-term debt plus seven times annualized aircraft rent) divided by total equity plus adjusted debt

SOURCE Alaska Air Group



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