T | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
£ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 91-1292054 | |
(State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) |
Large accelerated filer T | Accelerated filer £ | Non-accelerated filer £ | Smaller reporting company £ |
• | changes in our operating costs, primarily fuel, which can be volatile; |
• | general economic conditions, including the impact of those conditions on customer travel behavior; |
• | the competitive environment in our industry; |
• | our ability to meet our cost reduction goals; |
• | operational disruptions; |
• | an aircraft accident or incident; |
• | labor disputes and our ability to attract and retain qualified personnel; |
• | our significant indebtedness; |
• | the concentration of our revenue from a few key markets; |
• | actual or threatened terrorist attacks, global instability and potential U.S. military actions or activities; |
• | our reliance on automated systems and the risks associated with changes made to those systems; |
• | changes in laws and regulations. |
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
(in millions) | June 30, 2012 | December 31, 2011 | |||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 35.4 | $ | 102.2 | |||
Marketable securities | 1,150.0 | 1,038.7 | |||||
Total cash and marketable securities | 1,185.4 | 1,140.9 | |||||
Receivables - net | 169.4 | 136.4 | |||||
Inventories and supplies - net | 47.8 | 44.3 | |||||
Deferred income taxes | 152.1 | 134.2 | |||||
Fuel hedge contracts | 22.0 | 46.7 | |||||
Prepaid expenses and other current assets | 121.7 | 93.0 | |||||
Total Current Assets | 1,698.4 | 1,595.5 | |||||
Property and Equipment | |||||||
Aircraft and other flight equipment | 4,099.5 | 4,041.8 | |||||
Other property and equipment | 857.1 | 762.3 | |||||
Deposits for future flight equipment | 331.4 | 262.5 | |||||
5,288.0 | 5,066.6 | ||||||
Less accumulated depreciation and amortization | 1,740.6 | 1,665.1 | |||||
Total Property and Equipment - Net | 3,547.4 | 3,401.5 | |||||
Fuel Hedge Contracts | 39.3 | 70.2 | |||||
Other Assets | 138.5 | 127.8 | |||||
Total Assets | $ | 5,423.6 | $ | 5,195.0 |
(in millions except share amounts) | June 30, 2012 | December 31, 2011 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 110.8 | $ | 103.6 | |||
Accrued aircraft rent | 9.7 | 31.6 | |||||
Accrued wages, vacation and payroll taxes | 134.7 | 163.8 | |||||
Other accrued liabilities | 558.5 | 513.3 | |||||
Air traffic liability | 667.2 | 489.4 | |||||
Current portion of long-term debt | 183.4 | 207.9 | |||||
Total Current Liabilities | 1,664.3 | 1,509.6 | |||||
Long-Term Debt, Net of Current Portion | 957.1 | 1,099.0 | |||||
Other Liabilities and Credits | |||||||
Deferred income taxes | 447.5 | 362.9 | |||||
Deferred revenue | 414.0 | 410.2 | |||||
Obligation for pension and postretirement medical benefits | 452.9 | 463.4 | |||||
Other liabilities | 204.8 | 176.7 | |||||
1,519.2 | 1,413.2 | ||||||
Commitments and Contingencies | |||||||
Shareholders' Equity | |||||||
Preferred stock, $1 par value Authorized: 5,000,000 shares, none issued or outstanding | — | — | |||||
Common stock, $1 par value Authorized: 100,000,000 shares, Issued: 2012 - 70,723,900 shares; 2011 - 75,733,044 shares | 70.7 | 37.9 | |||||
Capital in excess of par value | 674.2 | 840.0 | |||||
Treasury stock (common), at cost: 2012 - 0 shares; 2011 - 4,783,494 shares | — | (125.3 | ) | ||||
Accumulated other comprehensive loss | (380.8 | ) | (390.0 | ) | |||
Retained earnings | 918.9 | 810.6 | |||||
1,283.0 | 1,173.2 | ||||||
Total Liabilities and Shareholders' Equity | $ | 5,423.6 | $ | 5,195.0 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in millions except per share amounts) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Operating Revenues | |||||||||||||||
Passenger | |||||||||||||||
Mainline | $ | 862.7 | $ | 774.2 | $ | 1,586.1 | $ | 1,433.5 | |||||||
Regional | 187.6 | 179.0 | 360.4 | 340.6 | |||||||||||
Total passenger revenue | 1,050.3 | 953.2 | 1,946.5 | 1,774.1 | |||||||||||
Freight and mail | 30.6 | 29.1 | 55.0 | 54.0 | |||||||||||
Other - net | 132.3 | 127.9 | 251.0 | 247.3 | |||||||||||
Total Operating Revenues | 1,213.2 | 1,110.2 | 2,252.5 | 2,075.4 | |||||||||||
Operating Expenses | |||||||||||||||
Wages and benefits | 258.9 | 242.8 | 515.5 | 492.1 | |||||||||||
Variable incentive pay | 21.5 | 17.9 | 37.5 | 34.3 | |||||||||||
Aircraft fuel, including hedging gains and losses | 431.8 | 397.5 | 750.6 | 592.0 | |||||||||||
Aircraft maintenance | 54.5 | 49.1 | 104.6 | 102.4 | |||||||||||
Aircraft rent | 29.0 | 29.0 | 57.0 | 59.5 | |||||||||||
Landing fees and other rentals | 60.5 | 59.9 | 123.0 | 117.8 | |||||||||||
Contracted services | 50.5 | 46.6 | 98.2 | 90.1 | |||||||||||
Selling expenses | 44.2 | 45.8 | 85.3 | 85.6 | |||||||||||
Depreciation and amortization | 65.8 | 61.7 | 129.5 | 122.0 | |||||||||||
Food and beverage service | 19.6 | 17.1 | 37.4 | 32.2 | |||||||||||
Other | 61.1 | 58.2 | 125.7 | 118.9 | |||||||||||
Fleet transition expenses | — | 26.8 | — | 36.9 | |||||||||||
Total Operating Expenses | 1,097.4 | 1,052.4 | 2,064.3 | 1,883.8 | |||||||||||
Operating Income | 115.8 | 57.8 | 188.2 | 191.6 | |||||||||||
Nonoperating Income (Expense) | |||||||||||||||
Interest income | 5.1 | 6.3 | 10.0 | 13.9 | |||||||||||
Interest expense | (17.2 | ) | (20.0 | ) | (33.8 | ) | (43.4 | ) | |||||||
Interest capitalized | 3.5 | 1.6 | 8.0 | 3.4 | |||||||||||
Other - net | 1.9 | 1.3 | 3.3 | 2.2 | |||||||||||
(6.7 | ) | (10.8 | ) | (12.5 | ) | (23.9 | ) | ||||||||
Income before income tax | 109.1 | 47.0 | 175.7 | 167.7 | |||||||||||
Income tax expense | 41.6 | 18.2 | 67.4 | 64.7 | |||||||||||
Net Income | $ | 67.5 | $ | 28.8 | $ | 108.3 | $ | 103.0 | |||||||
Basic Earnings Per Share: | $ | 0.95 | $ | 0.40 | $ | 1.52 | $ | 1.43 | |||||||
Diluted Earnings Per Share: | $ | 0.93 | $ | 0.39 | $ | 1.50 | $ | 1.40 | |||||||
Shares used for computation: | |||||||||||||||
Basic | 70.996 | 71.965 | 71.069 | 71.977 | |||||||||||
Diluted | 72.200 | 73.473 | 72.325 | 73.551 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(in millions) | 2012 | 2011 | 2012 | 2011 | |||||||||||
Net Income | $ | 67.5 | $ | 28.8 | $ | 108.3 | $ | 103.0 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Related to marketable securities: | |||||||||||||||
Unrealized holding gains arising during the period | 0.6 | 3.9 | 4.3 | 1.7 | |||||||||||
Reclassification adjustment for gains included in net income | (1.5 | ) | (0.9 | ) | (2.5 | ) | (1.5 | ) | |||||||
Income tax expense (benefit) | 0.3 | (1.2 | ) | (0.7 | ) | (0.2 | ) | ||||||||
Total | (0.6 | ) | 1.8 | 1.1 | — | ||||||||||
Related to employee benefit plans: | |||||||||||||||
Prior service cost arising during period | 9.8 | 6.4 | 19.7 | 12.7 | |||||||||||
Income tax benefit | (3.7 | ) | (2.4 | ) | (7.4 | ) | (4.8 | ) | |||||||
Total | 6.1 | 4.0 | 12.3 | 7.9 | |||||||||||
Related to interest rate derivative instruments: | |||||||||||||||
Unrealized holding losses arising during the period | (6.4 | ) | (3.3 | ) | (3.2 | ) | (1.1 | ) | |||||||
Income tax expense (benefit) | 2.5 | 1.2 | (1.0 | ) | 0.4 | ||||||||||
Total | (3.9 | ) | (2.1 | ) | (4.2 | ) | (0.7 | ) | |||||||
Other comprehensive income | 1.6 | 3.7 | 9.2 | 7.2 | |||||||||||
Comprehensive income | $ | 69.1 | $ | 32.5 | $ | 117.5 | $ | 110.2 |
Six Months Ended June 30, | |||||||
(in millions) | 2012 | 2011 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 108.3 | $ | 103.0 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Fleet transition expenses | — | 36.9 | |||||
Depreciation and amortization | 129.5 | 122.0 | |||||
Stock-based compensation and other | 5.5 | 7.3 | |||||
Changes in certain assets and liabilities: | |||||||
Changes in fair values of open fuel hedge contracts | 45.3 | (25.0 | ) | ||||
Changes in deferred income taxes | 57.5 | 57.8 | |||||
Increase in air traffic liability | 177.8 | 172.1 | |||||
Increase (decrease) in deferred revenue | 3.8 | (16.8 | ) | ||||
Increase in other long-term liabilities | 4.9 | 53.8 | |||||
Pension contribution | (23.6 | ) | (22.2 | ) | |||
Other - net | (53.3 | ) | (120.2 | ) | |||
Net cash provided by operating activities | 455.7 | 368.7 | |||||
Cash flows from investing activities: | |||||||
Property and equipment additions: | |||||||
Aircraft and aircraft purchase deposits | (228.4 | ) | (214.8 | ) | |||
Other flight equipment | (6.7 | ) | (11.1 | ) | |||
Other property and equipment | (19.7 | ) | (15.2 | ) | |||
Total property and equipment additions | (254.8 | ) | (241.1 | ) | |||
Assets constructed for others (Terminal 6 at LAX) | (50.0 | ) | (44.6 | ) | |||
Purchases of marketable securities | (537.2 | ) | (427.7 | ) | |||
Sales and maturities of marketable securities | 430.4 | 459.0 | |||||
Proceeds from disposition of assets and changes in restricted deposits | 0.9 | 12.5 | |||||
Net cash used in investing activities | (410.7 | ) | (241.9 | ) | |||
Cash flows from financing activities: | |||||||
Long-term debt payments | (165.4 | ) | (125.4 | ) | |||
Proceeds from sale-leaseback transactions | 49.3 | — | |||||
Common stock repurchases | (26.3 | ) | (33.3 | ) | |||
Proceeds and tax benefit from issuance of common stock | 14.0 | 14.9 | |||||
Other financing activities | 16.6 | (5.5 | ) | ||||
Net cash used in financing activities | (111.8 | ) | (149.3 | ) | |||
Net decrease in cash and cash equivalents | (66.8 | ) | (22.5 | ) | |||
Cash and cash equivalents at beginning of year | 102.2 | 89.5 | |||||
Cash and cash equivalents at end of the period | $ | 35.4 | $ | 67.0 | |||
Supplemental disclosure: | |||||||
Cash paid (refunded) during the period for: | |||||||
Interest (net of amount capitalized) | $ | 24.6 | $ | 39.7 | |||
Income taxes | (2.5 | ) | 0.1 | ||||
Non-cash transactions: | |||||||
Assets constructed related to Terminal 6 at LAX | 25.8 | — |
Three Months Ended June 30, 2011 | Six Months Ended June 30, 2011 | ||||||||||||||
As Reclassified | Reported | As Reclassified | Reported | ||||||||||||
Operating Revenues | |||||||||||||||
Passenger | |||||||||||||||
Mainline | $ | 774.2 | $ | 819.9 | $ | 1,433.5 | $ | 1,522.3 | |||||||
Regional | 179.0 | 194.3 | 340.6 | 370.8 | |||||||||||
Total passenger revenue | 953.2 | 1,014.2 | 1,774.1 | 1,893.1 | |||||||||||
Freight and mail | 29.1 | 29.1 | 54.0 | 54.0 | |||||||||||
Other - net | 127.9 | 66.9 | 247.3 | 128.3 | |||||||||||
Total Operating Revenues | $ | 1,110.2 | $ | 1,110.2 | $ | 2,075.4 | $ | 2,075.4 |
June 30, 2012 | Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||
Cash | $ | 23.2 | $ | — | $ | — | $ | 23.2 | |||||||
Commercial paper, money market funds and other securities | 12.2 | — | — | 12.2 | |||||||||||
Cash and cash equivalents | 35.4 | — | — | 35.4 | |||||||||||
U.S. government and agency securities | 366.0 | 2.8 | — | 368.8 | |||||||||||
Foreign government bonds | 41.4 | 0.9 | — | 42.3 | |||||||||||
Asset-back securities | 90.3 | 0.4 | — | 90.7 | |||||||||||
Mortgage-back securities | 109.6 | 0.9 | (0.1 | ) | 110.4 | ||||||||||
Corporate notes and bonds | 516.8 | 6.5 | (0.5 | ) | 522.8 | ||||||||||
Municipal securities | 14.9 | 0.1 | — | 15.0 | |||||||||||
Marketable securities | 1,139.0 | 11.6 | (0.6 | ) | 1,150.0 | ||||||||||
Total | $ | 1,174.4 | $ | 11.6 | $ | (0.6 | ) | $ | 1,185.4 |
December 31, 2011 | Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||
Cash | $ | 62.1 | $ | — | $ | — | $ | 62.1 | |||||||
Money market funds | 40.1 | — | — | 40.1 | |||||||||||
Cash and cash equivalents | 102.2 | — | — | 102.2 | |||||||||||
U.S. government and agency securities | 292.5 | 3.4 | — | 295.9 | |||||||||||
Foreign government bonds | 24.9 | 0.5 | — | 25.4 | |||||||||||
Asset-back securities | 58.2 | 0.1 | (0.3 | ) | 58.0 | ||||||||||
Mortgage-back securities | 124.1 | 1.1 | (0.3 | ) | 124.9 | ||||||||||
Corporate notes and bonds | 518.0 | 7.0 | (2.4 | ) | 522.6 | ||||||||||
Municipal securities | 11.8 | 0.1 | — | 11.9 | |||||||||||
Marketable securities | 1,029.5 | 12.2 | (3.0 | ) | 1,038.7 | ||||||||||
Total | $ | 1,131.7 | $ | 12.2 | $ | (3.0 | ) | $ | 1,140.9 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Proceeds from sales and maturities | $ | 242.3 | $ | 145.0 | $ | 430.4 | $ | 459.0 | |||||||
Gross realized gains | 2.0 | 1.4 | 3.6 | 3.3 | |||||||||||
Gross realized losses | 0.5 | 0.4 | 0.8 | 1.7 | |||||||||||
Other-than-temporary impairments on investments | — | — | 0.3 | — |
Less than 12 months | Greater than 12 months | ||||||||||||||||||||||
June 30, 2012 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Total Fair Value | Total Unrealized Losses | |||||||||||||||||
Mortgage-backed obligations | $ | 26.3 | $ | (0.1 | ) | $ | — | $ | — | $ | 26.3 | $ | (0.1 | ) | |||||||||
Corporate notes and bonds | 106.3 | (0.5 | ) | — | — | 106.3 | (0.5 | ) | |||||||||||||||
Total | $ | 132.6 | $ | (0.6 | ) | $ | — | $ | — | $ | 132.6 | $ | (0.6 | ) |
Less than 12 months | Greater than 12 months | ||||||||||||||||||||||
December 31, 2011 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Total Fair Value | Total Unrealized Losses | |||||||||||||||||
Asset-backed obligations | $ | 31.7 | $ | (0.1 | ) | $ | 1.1 | $ | (0.2 | ) | $ | 32.8 | $ | (0.3 | ) | ||||||||
Mortgage-backed obligations | 35.1 | (0.2 | ) | 1.9 | (0.1 | ) | 37.0 | (0.3 | ) | ||||||||||||||
Corporate notes and bonds | 137.4 | (2.4 | ) | 1.0 | — | 138.4 | (2.4 | ) | |||||||||||||||
Total | $ | 204.2 | $ | (2.7 | ) | $ | 4.0 | $ | (0.3 | ) | $ | 208.2 | $ | (3.0 | ) |
June 30, 2012 | December 31, 2011 | ||||||
Derivative Instruments Not Designated as Hedges | |||||||
Fuel hedge contracts | |||||||
Fuel hedge contracts, current assets | $ | 22.0 | $ | 46.7 | |||
Fuel hedge contracts, noncurrent assets | 39.3 | 70.2 | |||||
Fuel hedge contracts, current liabilities | — | (10.3 | ) | ||||
Derivative Instruments Designated as Hedges | |||||||
Interest rate swaps | |||||||
Other accrued liabilities | (5.7 | ) | (5.2 | ) | |||
Other liabilities | (26.3 | ) | (23.6 | ) | |||
Losses in Accumulated Other Comprehensive Loss (AOCL) | (32.0 | ) | (28.8 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Derivative Instruments Not Designated as Hedges | |||||||||||||||
Fuel hedge contracts | |||||||||||||||
Gains (losses) recognized in aircraft fuel expense | $ | (81.4 | ) | $ | (54.4 | ) | $ | (62.9 | ) | $ | 40.1 | ||||
Derivative Instruments Designated as Hedges | |||||||||||||||
Interest rate swaps | |||||||||||||||
Losses recognized in aircraft rent | (1.4 | ) | (1.6 | ) | (2.9 | ) | (3.1 | ) | |||||||
Losses recognized in Other Comprehensive Income (OCI) | (7.8 | ) | (4.9 | ) | (6.1 | ) | (4.2 | ) |
June 30, 2012 | Level 1 | Level 2 | Total | ||||||||
Assets | |||||||||||
Marketable securities | |||||||||||
U.S. government and agency securities | $ | 368.8 | $ | — | $ | 368.8 | |||||
Foreign government bonds | — | 42.3 | 42.3 | ||||||||
Asset-back securities | — | 90.7 | 90.7 | ||||||||
Mortgage-back securities | — | 110.4 | 110.4 | ||||||||
Corporate notes and bonds | — | 522.8 | 522.8 | ||||||||
Municipal securities | — | 15.0 | 15.0 | ||||||||
Derivative instruments | |||||||||||
Fuel hedge contracts | — | 61.3 | 61.3 | ||||||||
Liabilities | |||||||||||
Derivative instruments | |||||||||||
Interest rate swap agreements | — | (32.0 | ) | (32.0 | ) |
December 31, 2011 | Level 1 | Level 2 | Total | ||||||||
Assets | |||||||||||
Marketable securities | |||||||||||
U.S. government and agency securities | $ | 295.9 | $ | — | $ | 295.9 | |||||
Foreign government bonds | — | 25.4 | 25.4 | ||||||||
Asset-back securities | — | 58.0 | 58.0 | ||||||||
Mortgage-back securities | — | 124.9 | 124.9 | ||||||||
Corporate notes and bonds | — | 522.6 | 522.6 | ||||||||
Municipal securities | — | 11.9 | 11.9 | ||||||||
Derivative instruments | |||||||||||
Fuel hedge contracts | — | 116.9 | 116.9 | ||||||||
Liabilities | |||||||||||
Derivative instruments | |||||||||||
Fuel hedge contracts | — | (10.3 | ) | (10.3 | ) | ||||||
Interest rate swap agreements | — | (28.8 | ) | (28.8 | ) |
June 30, 2012 | December 31, 2011 | ||||||
Carrying amount | $ | 933.3 | $ | 1,002.5 | |||
Fair value | 1,016.3 | 1,075.8 |
June 30, 2012 | December 31, 2011 | ||||||
Proprietary assets of T6 at LAX | $ | 16.3 | $ | 8.7 | |||
Assets constructed for others (T6 at LAX) | 219.2 | 143.4 | |||||
Other property and equipment | $ | 235.5 | $ | 152.1 | |||
Other liabilities | $ | 46.3 | $ | 17.7 |
June 30, 2012 | December 31, 2011 | ||||||
Current Liabilities: | |||||||
Other accrued liabilities | $ | 289.1 | $ | 271.4 | |||
Other Liabilities and Credits: | |||||||
Deferred revenue | 397.8 | 392.2 | |||||
Other liabilities | 17.2 | 16.9 | |||||
Total | $ | 704.1 | $ | 680.5 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Passenger revenues | $ | 48.2 | $ | 54.2 | $ | 90.8 | $ | 104.5 | |||||||
Other-net revenues | 55.2 | 51.6 | 102.7 | 97.2 | |||||||||||
Total Mileage Plan revenues | $ | 103.4 | $ | 105.8 | $ | 193.5 | $ | 201.7 |
June 30, 2012 | December 31, 2011 | ||||||
Fixed-rate notes payable due through 2024 | $ | 933.3 | $ | 1,002.5 | |||
Variable-rate notes payable due through 2023 | 207.2 | 304.4 | |||||
Long-term debt | 1,140.5 | 1,306.9 | |||||
Less current portion | 183.4 | 207.9 | |||||
$ | 957.1 | $ | 1,099.0 | ||||
Weighted-average fixed-interest rate | 5.9 | % | 5.8 | % | |||
Weighted-average variable-interest rate | 2.0 | % | 1.9 | % |
Total | |||
Remainder of 2012 | $ | 108.6 | |
2013 | 160.9 | ||
2014 | 117.1 | ||
2015 | 113.4 | ||
2016 | 110.6 | ||
Thereafter | 529.9 | ||
Total principal payments | $ | 1,140.5 |
Qualified | Nonqualified | Postretirement Medical | |||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
Service cost | $ | 9.5 | $ | 9.0 | $ | 0.2 | $ | 0.2 | $ | 1.3 | $ | 1.5 | |||||||||||
Interest cost | 18.3 | 18.3 | 0.5 | 0.5 | 1.3 | 1.8 | |||||||||||||||||
Expected return on assets | (23.2 | ) | (22.1 | ) | — | — | — | — | |||||||||||||||
Amortization of prior service cost | (0.3 | ) | (0.2 | ) | — | — | 0.2 | 0.1 | |||||||||||||||
Recognized actuarial loss | 9.9 | 6.1 | 0.2 | 0.2 | (0.2 | ) | 0.3 | ||||||||||||||||
Net periodic benefit costs | $ | 14.2 | $ | 11.1 | $ | 0.9 | $ | 0.9 | $ | 2.6 | $ | 3.7 |
Qualified | Nonqualified | Postretirement Medical | |||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
Service cost | $ | 19.1 | $ | 18.0 | $ | 0.4 | $ | 0.4 | $ | 2.5 | $ | 3.0 | |||||||||||
Interest cost | 36.5 | 36.6 | 1.0 | 1.1 | 2.7 | 3.6 | |||||||||||||||||
Expected return on assets | (46.5 | ) | (44.2 | ) | — | — | — | — | |||||||||||||||
Amortization of prior service cost | (0.5 | ) | (0.4 | ) | — | — | 0.3 | 0.2 | |||||||||||||||
Recognized actuarial loss | 19.8 | 12.2 | 0.4 | 0.3 | (0.3 | ) | 0.6 | ||||||||||||||||
Net periodic benefit costs | $ | 28.4 | $ | 22.2 | $ | 1.8 | $ | 1.8 | $ | 5.2 | $ | 7.4 |
June 30, 2012 | Aircraft Leases | Facility Leases | Aircraft Commitments | Capacity Purchase Agreements | Engine Maintenance | ||||||||||||||
Remainder of 2012 | $ | 41.8 | $ | 31.8 | $ | 181.8 | $ | 9.7 | $ | 20.9 | |||||||||
2013 | 141.6 | 42.5 | 333.2 | 17.4 | 31.9 | ||||||||||||||
2014 | 126.1 | 38.5 | 194.6 | 17.7 | 26.4 | ||||||||||||||
2015 | 104.4 | 27.0 | 48.0 | 18.0 | 10.1 | ||||||||||||||
2016 | 81.9 | 17.2 | 18.4 | 18.3 | — | ||||||||||||||
Thereafter | 130.7 | 137.9 | 36.8 | 26.5 | — | ||||||||||||||
Total | $ | 626.5 | $ | 294.9 | $ | 812.8 | $ | 107.6 | $ | 89.3 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||
2012 Repurchase Program | 506,000 | $ | 17.5 | — | $ | — | 709,000 | $ | 24.6 | — | $ | — | |||||||||||||||
2011 Repurchase Program | — | — | 63,000 | 2.1 | 46,340 | 1.7 | 63,000 | 2.1 | |||||||||||||||||||
2010 Repurchase Program | — | — | 155,600 | 4.9 | — | — | 1,023,600 | 31.2 | |||||||||||||||||||
506,000 | $ | 17.5 | 218,600 | $ | 7.0 | 755,340 | $ | 26.3 | 1,086,600 | $ | 33.3 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Horizon Fleet Transition - CRJ-700 | $ | — | $ | 20.8 | $ | — | $ | 30.9 | |||||||
Horizon Fleet Transition - Q200 | — | 6.0 | — | 6.0 | |||||||||||
Total | $ | — | $ | 26.8 | $ | — | $ | 36.9 |
Three Months Ended June 30, 2012 | |||||||||||||||||||||||||||
Alaska | |||||||||||||||||||||||||||
Mainline | Regional | Horizon | Consolidating | Air Group Adjusted(a) | Special Items | Consolidated | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 862.7 | $ | — | $ | — | $ | — | $ | 862.7 | $ | — | $ | 862.7 | |||||||||||||
Regional | — | 187.6 | — | — | 187.6 | — | 187.6 | ||||||||||||||||||||
Total passenger revenues | 862.7 | 187.6 | — | — | 1,050.3 | — | 1,050.3 | ||||||||||||||||||||
CPA revenues | — | — | 89.2 | (89.2 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 29.5 | 1.1 | — | — | 30.6 | — | 30.6 | ||||||||||||||||||||
Other-net | 115.4 | 15.1 | 1.8 | — | 132.3 | — | 132.3 | ||||||||||||||||||||
Total operating revenues | 1,007.6 | 203.8 | 91.0 | (89.2 | ) | 1,213.2 | — | 1,213.2 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 532.2 | 139.0 | 83.1 | (88.7 | ) | 665.6 | — | 665.6 | |||||||||||||||||||
Economic fuel(c) | 316.7 | 45.5 | — | — | 362.2 | 69.6 | 431.8 | ||||||||||||||||||||
Total operating expenses | 848.9 | 184.5 | 83.1 | (88.7 | ) | 1,027.8 | 69.6 | 1,097.4 | |||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 4.4 | — | — | 0.7 | 5.1 | — | 5.1 | ||||||||||||||||||||
Interest expense | (12.7 | ) | — | (4.1 | ) | (0.4 | ) | (17.2 | ) | — | (17.2 | ) | |||||||||||||||
Other | 5.1 | — | 0.4 | (0.1 | ) | 5.4 | — | 5.4 | |||||||||||||||||||
(3.2 | ) | — | (3.7 | ) | 0.2 | (6.7 | ) | — | (6.7 | ) | |||||||||||||||||
Income (loss) before income tax | $ | 155.5 | $ | 19.3 | $ | 4.2 | $ | (0.3 | ) | $ | 178.7 | $ | (69.6 | ) | $ | 109.1 |
Three Months Ended June 30, 2011 | |||||||||||||||||||||||||||
Alaska | |||||||||||||||||||||||||||
Mainline | Regional | Horizon | Consolidating | Air Group Adjusted(a) | Special Items | Consolidated | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 774.2 | $ | — | $ | — | $ | — | $ | 774.2 | $ | — | $ | 774.2 | |||||||||||||
Regional | — | 179.0 | — | — | 179.0 | — | 179.0 | ||||||||||||||||||||
Total passenger revenues | 774.2 | 179.0 | — | — | 953.2 | — | 953.2 | ||||||||||||||||||||
CPA revenues | — | — | 93.5 | (93.5 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 28.0 | 1.0 | 0.1 | — | 29.1 | — | 29.1 | ||||||||||||||||||||
Other-net | 110.7 | 15.4 | 1.8 | — | 127.9 | — | 127.9 | ||||||||||||||||||||
Total operating revenues | 912.9 | 195.4 | 95.4 | (93.5 | ) | 1,110.2 | — | 1,110.2 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel(b) | 498.4 | 138.1 | 83.8 | (92.2 | ) | 628.1 | 26.8 | 654.9 | |||||||||||||||||||
Economic fuel(c) | 285.2 | 41.4 | — | — | 326.6 | 70.9 | 397.5 | ||||||||||||||||||||
Total operating expenses | 783.6 | 179.5 | 83.8 | (92.2 | ) | 954.7 | 97.7 | 1,052.4 | |||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 7.1 | — | — | (0.8 | ) | 6.3 | — | 6.3 | |||||||||||||||||||
Interest expense | (16.3 | ) | — | (4.4 | ) | 0.7 | (20.0 | ) | — | (20.0 | ) | ||||||||||||||||
Other | 2.3 | — | 0.2 | 0.4 | 2.9 | — | 2.9 | ||||||||||||||||||||
(6.9 | ) | — | (4.2 | ) | 0.3 | (10.8 | ) | — | (10.8 | ) | |||||||||||||||||
Income (loss) before income tax | $ | 122.4 | $ | 15.9 | $ | 7.4 | $ | (1.0 | ) | $ | 144.7 | $ | (97.7 | ) | $ | 47.0 |
Six Months Ended June 30, 2012 | |||||||||||||||||||||||||||
Alaska | |||||||||||||||||||||||||||
Mainline | Regional | Horizon | Consolidating | Air Group Adjusted(a) | Special Items | Consolidated | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 1,586.1 | $ | — | $ | — | $ | — | $ | 1,586.1 | $ | — | $ | 1,586.1 | |||||||||||||
Regional | — | 360.4 | — | — | 360.4 | — | 360.4 | ||||||||||||||||||||
Total passenger revenues | 1,586.1 | 360.4 | — | — | 1,946.5 | — | 1,946.5 | ||||||||||||||||||||
CPA revenues | — | — | 176.2 | (176.2 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 53.0 | 2.0 | — | — | 55.0 | — | 55.0 | ||||||||||||||||||||
Other-net | 218.2 | 29.1 | 3.7 | — | 251.0 | — | 251.0 | ||||||||||||||||||||
Total operating revenues | 1,857.3 | 391.5 | 179.9 | (176.2 | ) | 2,252.5 | — | 2,252.5 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 1,051.8 | 275.8 | 161.4 | (175.3 | ) | 1,313.7 | — | 1,313.7 | |||||||||||||||||||
Economic fuel(c) | 611.1 | 89.8 | — | — | 700.9 | 49.7 | 750.6 | ||||||||||||||||||||
Total operating expenses | 1,662.9 | 365.6 | 161.4 | (175.3 | ) | 2,014.6 | 49.7 | 2,064.3 | |||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 9.3 | — | — | 0.7 | 10.0 | — | 10.0 | ||||||||||||||||||||
Interest expense | (25.3 | ) | — | (8.1 | ) | (0.4 | ) | (33.8 | ) | — | (33.8 | ) | |||||||||||||||
Other | 10.4 | — | 0.8 | 0.1 | 11.3 | — | 11.3 | ||||||||||||||||||||
(5.6 | ) | — | (7.3 | ) | 0.4 | (12.5 | ) | — | (12.5 | ) | |||||||||||||||||
Income (loss) before income tax | $ | 188.8 | $ | 25.9 | $ | 11.2 | $ | (0.5 | ) | $ | 225.4 | $ | (49.7 | ) | $ | 175.7 |
Six Months Ended June 30, 2011 | |||||||||||||||||||||||||||
Alaska | |||||||||||||||||||||||||||
Mainline | Regional | Horizon | Consolidating | Air Group Adjusted(a) | Special Items | Consolidated | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 1,433.5 | $ | — | $ | — | $ | — | $ | 1,433.5 | $ | — | $ | 1,433.5 | |||||||||||||
Regional | — | 340.6 | — | — | 340.6 | — | 340.6 | ||||||||||||||||||||
Total passenger revenues | 1,433.5 | 340.6 | — | — | 1,774.1 | — | 1,774.1 | ||||||||||||||||||||
CPA revenues | — | — | 188.1 | (188.1 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 51.9 | 2.0 | 0.1 | — | 54.0 | — | 54.0 | ||||||||||||||||||||
Other-net | 212.7 | 30.4 | 4.2 | — | 247.3 | — | 247.3 | ||||||||||||||||||||
Total operating revenues | 1,698.1 | 373.0 | 192.4 | (188.1 | ) | 2,075.4 | — | 2,075.4 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel(b) | 996.1 | 271.0 | 174.0 | (186.2 | ) | 1,254.9 | 36.9 | 1,291.8 | |||||||||||||||||||
Economic fuel(c) | 523.6 | 79.5 | — | — | 603.1 | (11.1 | ) | 592.0 | |||||||||||||||||||
Total operating expenses | 1,519.7 | 350.5 | 174.0 | (186.2 | ) | 1,858.0 | 25.8 | 1,883.8 | |||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 15.8 | — | — | (1.9 | ) | 13.9 | — | 13.9 | |||||||||||||||||||
Interest expense | (36.0 | ) | — | (9.1 | ) | 1.7 | (43.4 | ) | — | (43.4 | ) | ||||||||||||||||
Other | 4.4 | — | 1.0 | 0.2 | 5.6 | — | 5.6 | ||||||||||||||||||||
(15.8 | ) | — | (8.1 | ) | — | (23.9 | ) | — | (23.9 | ) | |||||||||||||||||
Income (loss) before income tax | $ | 162.6 | $ | 22.5 | $ | 10.3 | $ | (1.9 | ) | $ | 193.5 | $ | (25.8 | ) | $ | 167.7 |
(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 charges. |
(b) | Refer to Note 12 for a summary of special charges. |
(c) | Represents adjustments to reflect the timing of gain or loss recognition resulting from mark-to-market fuel-hedge accounting. |
June 30, 2012 | December 31, 2011 | ||||||
Alaska(a) | $ | 4,994.9 | $ | 4,803.3 | |||
Horizon | 864.1 | 846.5 | |||||
Parent company | 1,589.4 | 1,583.5 | |||||
Elimination of inter-company accounts | (2,024.8 | ) | (2,038.3 | ) | |||
Consolidated | $ | 5,423.6 | $ | 5,195.0 |
(a) | There are no assets associated with purchased capacity flying at Alaska. |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Second Quarter in Review—highlights from the second quarter of 2012 outlining some of the major events that happened during the period and how they affected our financial performance. |
• | Results of Operations—an in-depth analysis of the results of our operations for the three and six months ended June 30, 2012. We believe this analysis will help the reader better understand our consolidated statements of operations. Financial and statistical data is also included here. This section includes forward-looking statements regarding our view of the remainder of 2012. |
• | Liquidity and Capital Resources—an analysis of cash flows, sources and uses of cash, contractual obligations, commitments, and an overview of financial position. |
New Non-Stop Routes (Launch Date) | |
Seattle to Fort Lauderdale (7/16) | Portland to Lihue (11/5) |
Portland to Washington, D.C. (8/28) | Bellingham to Kahului (11/8) |
Seattle to San Antonio (9/17) | Anchorage to Kona (11/10) |
San Diego to Orlando (10/11) |
• | Both periods include adjustments to reflect the timing of net unrealized mark-to-market losses related to our fuel hedge positions. For the second quarter of 2012, we recognized net mark-to-market losses of $69.6 million ($43.3 million after tax, or $0.60 per share) compared to losses of $70.9 million ($44.1 million after tax, or $0.60 per share) in the second quarter of 2011. |
• | In the second quarter of 2011, we incurred $26.8 million ($16.7 million after tax, or $0.23 per share) in expense as part of Horizon's fleet transition out of the CRJ-700 aircraft. |
• | We believe it is the basis by which we are evaluated by industry analysts; |
• | Our results excluding these items are most often used in internal management and board reporting and decision-making; |
• | Our results excluding these adjustments serve as the basis for our various employee incentive plans, thus the information allows investors to better understand the changes in variable incentive pay expense in our consolidated statements of operations; |
• | It is useful to monitor performance without these items as it improves a reader’s ability to compare our results to those of other airlines; and |
• | It is consistent with how we present information in our quarterly earnings press releases. |
Three Months Ended June 30, | |||||||||||||||
2012 | 2011 | ||||||||||||||
(in millions, except per share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
Net income and diluted EPS as reported | $ | 67.5 | $ | 0.93 | $ | 28.8 | $ | 0.39 | |||||||
Fleet transition costs, net of tax | — | — | 16.7 | 0.23 | |||||||||||
Mark-to-market fuel hedge adjustments, net of tax | 43.3 | 0.60 | 44.1 | 0.60 | |||||||||||
Non-GAAP adjusted income and per share amounts | $ | 110.8 | $ | 1.53 | $ | 89.6 | $ | 1.22 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||
Consolidated Operating Statistics:(a) | |||||||||||||||||||||
Revenue passengers (000) | 6,565 | 6,246 | 5.1 | % | 12,560 | 11,998 | 4.7 | % | |||||||||||||
Revenue passenger miles (RPM) (000,000) "traffic" | 6,869 | 6,293 | 9.2 | % | 13,101 | 12,146 | 7.9 | % | |||||||||||||
Available seat miles (ASM) (000,000) "capacity" | 7,939 | 7,469 | 6.3 | % | 15,283 | 14,581 | 4.8 | % | |||||||||||||
Load factor | 86.5 | % | 84.3 | % | 2.2 pts | 85.7 | % | 83.3 | % | 2.4 pts | |||||||||||
Yield | 15.29 | ¢ | 15.15 | ¢ | 0.9 | % | 14.86 | ¢ | 14.61 | ¢ | 1.7 | % | |||||||||
Passenger revenue per ASM (PRASM) | 13.23 | ¢ | 12.76 | ¢ | 3.7 | % | 12.74 | ¢ | 12.17 | ¢ | 4.7 | % | |||||||||
Revenue per ASM (RASM) | 15.28 | ¢ | 14.86 | ¢ | 2.8 | % | 14.74 | ¢ | 14.23 | ¢ | 3.6 | % | |||||||||
Operating expense per ASM (CASM) excluding fuel and fleet transition costs(b) | 8.38 | ¢ | 8.41 | ¢ | (0.4 | )% | 8.60 | ¢ | 8.61 | ¢ | (0.1 | )% | |||||||||
Economic fuel cost per gallon(b) | $ | 3.40 | $ | 3.28 | 3.7 | % | $ | 3.41 | $ | 3.08 | 10.7 | % | |||||||||
Fuel gallons (000,000) | 106.4 | 99.7 | 6.7 | % | 205.8 | 196.0 | 5.0 | % | |||||||||||||
Average number of full-time equivalent employees (FTE) | 11,965 | 11,807 | 1.3 | % | 11,899 | 11,846 | 0.4 | % | |||||||||||||
Mainline Operating Statistics: | |||||||||||||||||||||
Revenue passengers (000) | 4,752 | 4,533 | 4.8 | % | 9,027 | 8,640 | 4.5 | % | |||||||||||||
RPMs (000,000) "traffic" | 6,231 | 5,697 | 9.4 | % | 11,868 | 10,976 | 8.1 | % | |||||||||||||
ASMs (000,000) "capacity" | 7,130 | 6,702 | 6.4 | % | 13,705 | 13,055 | 5.0 | % | |||||||||||||
Load factor | 87.4 | % | 85.0 | % | 2.4 pts | 86.6 | % | 84.1 | % | 2.5 pts | |||||||||||
Yield | 13.85 | ¢ | 13.59 | ¢ | 1.9 | % | 13.36 | ¢ | 13.06 | ¢ | 2.3 | % | |||||||||
PRASM | 12.10 | ¢ | 11.55 | ¢ | 4.8 | % | 11.57 | ¢ | 10.98 | ¢ | 5.4 | % | |||||||||
RASM | 14.13 | ¢ | 13.62 | ¢ | 3.7 | % | 13.55 | ¢ | 13.01 | ¢ | 4.2 | % | |||||||||
CASM excluding fuel(b) | 7.46 | ¢ | 7.44 | ¢ | 0.3 | % | 7.67 | ¢ | 7.63 | ¢ | 0.5 | % | |||||||||
Economic fuel cost per gallon(b) | $ | 3.40 | $ | 3.27 | 4.0 | % | $ | 3.40 | $ | 3.07 | 10.7 | % | |||||||||
Fuel gallons (000,000) | 93.2 | 87.1 | 7.0 | % | 179.7 | 170.2 | 5.6 | % | |||||||||||||
Average number of full-time equivalent employees | 9,165 | 8,899 | 3.0 | % | 9,088 | 8,892 | 2.2 | % | |||||||||||||
Aircraft utilization | 10.9 | 10.5 | 3.8 | % | 10.6 | 10.5 | 1.0 | % | |||||||||||||
Average aircraft stage length | 1,149 | 1,104 | 4.1 | % | 1,151 | 1,111 | 3.6 | % | |||||||||||||
Mainline operating fleet at period-end | 120 | 117 | 3 a/c | 120 | 117 | 3 a/c | |||||||||||||||
Regional Operating Statistics:(c) | |||||||||||||||||||||
Revenue passengers (000) | 1,813 | 1,713 | 5.8 | % | 3,533 | 3,358 | 5.2 | % | |||||||||||||
RPMs (000,000) "traffic" | 638 | 596 | 7.0 | % | 1,233 | 1,170 | 5.4 | % | |||||||||||||
ASMs (000,000) "capacity" | 809 | 767 | 5.5 | % | 1,578 | 1,526 | 3.4 | % | |||||||||||||
Load factor | 78.9 | % | 77.7 | % | 1.2 pts | 78.1 | % | 76.7 | % | 1.4 pts | |||||||||||
Yield | 29.40 | ¢ | 30.03 | ¢ | (2.1 | )% | 29.23 | ¢ | 29.11 | ¢ | 0.4 | % | |||||||||
PRASM | 23.19 | ¢ | 23.34 | ¢ | (0.6 | )% | 22.84 | ¢ | 22.32 | ¢ | 2.3 | % |
(a) | Except for FTEs, data includes information related to regional CPA flying with Horizon, SkyWest and PenAir. |
(b) | See reconciliation of this measure to the most directly related GAAP measure in the "Results of Operations" section. |
(c) | Data presented includes information related to regional CPAs. |
Three Months Ended June 30, | |||||||||
(in millions) | 2012 | 2011 | % Change | ||||||
Passenger | |||||||||
Mainline | $ | 862.7 | $ | 774.2 | 11.4 | ||||
Regional | 187.6 | 179.0 | 4.8 | ||||||
Total passenger revenue | 1,050.3 | 953.2 | 10.2 | ||||||
Freight and mail | 30.6 | 29.1 | 5.2 | ||||||
Other - net | 132.3 | 127.9 | 3.4 | ||||||
Total operating revenues | $ | 1,213.2 | $ | 1,110.2 | 9.3 |
Three Months Ended June 30, | |||||||||
(in millions) | 2012 | 2011 | % Change | ||||||
Fuel expense | $ | 431.8 | $ | 397.5 | 8.6 | ||||
Non-fuel expenses | 665.6 | 654.9 | 1.6 | ||||||
Total Operating Expenses | $ | 1,097.4 | $ | 1,052.4 | 4.3 |
Three Months Ended June 30, | |||||||||
(in millions) | 2012 | 2011 | % Change | ||||||
Wages | $ | 179.4 | $ | 172.7 | 3.9 | ||||
Pension and defined-contribution retirement benefits | 25.8 | 22.6 | 14.2 | ||||||
Medical benefits | 27.8 | 26.4 | 5.3 | ||||||
Other benefits and payroll taxes | 25.9 | 21.1 | 22.7 | ||||||
Total wages and benefits | $ | 258.9 | $ | 242.8 | 6.6 |
Three Months Ended June 30, | ||||||||||
(in millions, except per gallon amounts) | 2012 | 2011 | % Change | |||||||
Fuel gallons consumed | 106.4 | 99.7 | 6.7 | |||||||
Raw price per gallon | $ | 3.29 | $ | 3.44 | (4.4 | ) | ||||
Total raw fuel expense | $ | 350.4 | $ | 343.1 | 2.1 | |||||
Net impact to fuel expense from fuel-hedging activities | 81.4 | 54.4 | 49.6 | |||||||
Aircraft fuel expense | $ | 431.8 | $ | 397.5 | 8.6 |
Three Months Ended June 30, | |||||||||
(in millions, except per gallon amounts) | 2012 | 2011 | % Change | ||||||
Raw fuel expense | $ | 350.4 | $ | 343.1 | 2.1 | ||||
(Gain) loss on settled hedges (net of cash settled) and premium expense recognized | 11.8 | (16.5 | ) | NM | |||||
Economic fuel expense | $ | 362.2 | $ | 326.6 | 10.9 | ||||
Fuel gallons consumed | 106.4 | 99.7 | 6.7 | ||||||
Economic fuel cost per gallon | $ | 3.40 | $ | 3.28 | 3.7 |
Three Months Ended June 30, | ||||||||||
2012 | 2011 | % Change | ||||||||
Consolidated: | ||||||||||
CASM | 13.82 | ¢ | 14.09 | ¢ | (1.9 | ) | ||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 5.44 | 5.32 | 2.3 | |||||||
Fleet transition costs | — | 0.36 | NM | |||||||
CASM excluding fuel and fleet transition costs | 8.38 | ¢ | 8.41 | ¢ | (0.4 | ) | ||||
Three Months Ended June 30, | ||||||||||
2012 | 2011 | % Change | ||||||||
Mainline: | ||||||||||
CASM | 12.60 | ¢ | 12.75 | ¢ | (1.2 | ) | ||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 5.14 | 5.31 | (3.2 | ) | ||||||
CASM excluding fuel | 7.46 | ¢ | 7.44 | ¢ | 0.3 |
• | By eliminating fuel expense and certain special items from our unit cost metrics, we believe that we have better visibility into the results of 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. |
• | 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. |
• | CASM excluding fuel (and other items as specified in our plan documents) is an important metric for the employee incentive plan that covers all 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, 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. |
Forecast Q3 2012 | Change Y-O-Y | Forecast Full Year 2012 | Change Y-O-Y | ||||
Consolidated: | |||||||
ASMs (000,000) "capacity" | 8,200 - 8,300 | ~ 6.5% | 31,350 - 31,450 | ~ 6% | |||
CASM excluding fuel and special items (cents) | 8.20 - 8.30 | 0.5% - 1.5% | 8.50 - 8.55 | ~ flat | |||
Forecast Q3 2012 | Change Y-O-Y | Forecast Full Year 2012 | Change Y-O-Y | ||||
Mainline: | |||||||
ASMs (000,000) "capacity" | 7,330 - 7,430 | ~ 6.5% | 28,100 - 28,200 | ~ 6% | |||
CASM excluding fuel (cents) | 7.35 - 7.45 | 1% - 2.5% | 7.60 - 7.65 | ~ 0.5% |
• | Both periods include adjustments to reflect the timing of net unrealized mark-to-market gains related to our fuel hedge positions. For the first six months of 2012, we recognized net mark-to-market losses of $49.7 million ($30.8 million after tax, or $0.42 per share) compared to gains of $11.1 million ($6.9 million after tax, or $0.09 per share) in the first six months of 2011. |
• | In the first six months of 2011, we incurred $36.9 million ($22.9 million after tax, or $0.31 per share) in expense as part of Horizon's fleet transition out of the CRJ-700 and Q200 aircraft. |
Six Months Ended June 30, | |||||||||||||||
2012 | 2011 | ||||||||||||||
(in millions, except per share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
Net income and diluted EPS as reported | $ | 108.3 | $ | 1.50 | $ | 103.0 | $ | 1.40 | |||||||
Fleet transition costs, net of tax | — | — | 22.9 | 0.31 | |||||||||||
Mark-to-market fuel hedge adjustments, net of tax | 30.8 | 0.42 | (6.9 | ) | (0.09 | ) | |||||||||
Non-GAAP adjusted income and per share amounts | $ | 139.1 | $ | 1.92 | $ | 119.0 | $ | 1.62 |
Six Months Ended June 30, | |||||||||
(in millions) | 2012 | 2011 | % Change | ||||||
Passenger | |||||||||
Mainline | $ | 1,586.1 | $ | 1,433.5 | 10.6 | ||||
Regional | 360.4 | 340.6 | 5.8 | ||||||
Total passenger revenue | 1,946.5 | 1,774.1 | 9.7 | ||||||
Freight and mail | 55.0 | 54.0 | 1.9 | ||||||
Other - net | 251.0 | 247.3 | 1.5 | ||||||
Total operating revenues | $ | 2,252.5 | $ | 2,075.4 | 8.5 |
Six Months Ended June 30, | |||||||||
(in millions) | 2012 | 2011 | % Change | ||||||
Fuel expense | $ | 750.6 | $ | 592.0 | 26.8 | ||||
Non-fuel expenses | 1,313.7 | 1,291.8 | 1.7 | ||||||
Total Operating Expenses | $ | 2,064.3 | $ | 1,883.8 | 9.6 |
Six Months Ended June 30, | |||||||||
(in millions) | 2012 | 2011 | % Change | ||||||
Wages | $ | 358.8 | $ | 349.3 | 2.7 | ||||
Pension and defined-contribution retirement benefits | 51.6 | 45.2 | 14.2 | ||||||
Medical benefits | 52.9 | 52.3 | 1.1 | ||||||
Other benefits and payroll taxes | 52.2 | 45.3 | 15.2 | ||||||
Total wages and benefits | $ | 515.5 | $ | 492.1 | 4.8 |
Six Months Ended June 30, | |||||||||
(in millions, except per gallon amounts) | 2012 | 2011 | % Change | ||||||
Fuel gallons consumed | 205.8 | 196.0 | 5.0 | ||||||
Raw price per gallon | $ | 3.34 | $ | 3.23 | 3.4 | ||||
Total raw fuel expense | $ | 687.7 | $ | 632.1 | 8.8 | ||||
Net impact to fuel expense from fuel-hedging activities | 62.9 | (40.1 | ) | NM | |||||
Aircraft fuel expense | $ | 750.6 | $ | 592.0 | 26.8 |
Six Months Ended June 30, | |||||||||
(in millions, except per gallon amounts) | 2012 | 2011 | % Change | ||||||
Raw fuel expense | $ | 687.7 | $ | 632.1 | 8.8 | ||||
(Gain) loss on settled hedges (net of cash settled) and premium expense recognized | 13.2 | (29.0 | ) | NM | |||||
Economic fuel expense | $ | 700.9 | $ | 603.1 | 16.2 | ||||
Fuel gallons consumed | 205.8 | 196.0 | 5.0 | ||||||
Economic fuel cost per gallon | $ | 3.41 | $ | 3.08 | 10.7 |
Six Months Ended June 30, | ||||||||||
2012 | 2011 | % Change | ||||||||
Consolidated: | ||||||||||
CASM | 13.51 | ¢ | 12.92 | ¢ | 4.6 | |||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 4.91 | 4.06 | 20.9 | |||||||
Fleet transition costs | — | 0.25 | NM | |||||||
CASM excluding fuel and fleet transition costs | 8.60 | ¢ | 8.61 | ¢ | (0.1 | ) | ||||
Six Months Ended June 30, | ||||||||||
2012 | 2011 | % Change | ||||||||
Mainline: | ||||||||||
CASM | 12.50 | ¢ | 11.56 | ¢ | 8.1 | |||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 4.83 | 3.93 | 22.9 | |||||||
CASM excluding fuel | 7.67 | ¢ | 7.63 | ¢ | 0.5 |
• | Our existing cash and marketable securities balance of $1.2 billion (which represents 26% of trailing 12 months revenue) and our expected cash from operations; |
• | Aircraft financing – the 40 unencumbered aircraft (as of June 30, 2012) in our operating fleet that could be financed, if necessary; |
• | Our combined $200 million bank line-of-credit facilities (currently none outstanding). |
(in millions, except per share and debt-to-capital amounts) | June 30, 2012 | December 31, 2011 | Change | |||||||
Cash and marketable securities | $ | 1,185.4 | $ | 1,140.9 | 3.8 | % | ||||
Cash and marketable securities as a percentage of trailing twelve months revenue | 26 | % | 26 | % | (0.0) pts | |||||
Long-term debt, net of current portion | $ | 957.1 | $ | 1,099.0 | (14.8 | )% | ||||
Shareholders’ equity | $ | 1,283.0 | $ | 1,173.2 | 8.6 | % | ||||
Long-term debt-to-capital assuming aircraft operating leases are capitalized at seven times annualized rent | 58%:42% | 62%:38% | (4.0) pts |
2012 | 2013 | ||||||
Aircraft and aircraft purchase deposits | $ | 380 | $ | 295 | |||
Other flight equipment | 30 | 20 | |||||
Other property and equipment | 60 | 65 | |||||
Total property and equipment additions | $ | 470 | $ | 380 |
Aircraft | Delivery Period - Firm Orders | ||||||||||||||||
Remainder of 2012 | 2013 | 2014 | 2015 | Beyond 2015 | Total | ||||||||||||
Boeing 737-800 | — | — | 1 | 2 | — | 3 | |||||||||||
Boeing 737-900ER | 4 | 9 | 9 | — | — | 22 | |||||||||||
Total | 4 | 9 | 10 | 2 | — | 25 |
Approximate % of Expected Fuel Requirements | Weighted-Average Crude Oil Price per Barrel | Average Premium Cost per Barrel | |||
Third Quarter 2012 | 50% | $100 | $10 | ||
Fourth Quarter 2012 | 50% | $100 | $10 | ||
Remainder of 2012 | 50% | $100 | $10 | ||
First Quarter 2013 | 50% | $98 | $12 | ||
Second Quarter 2013 | 50% | $98 | $12 | ||
Third Quarter 2013 | 44% | $99 | $12 | ||
Fourth Quarter 2013 | 38% | $100 | $12 | ||
Full Year 2013 | 46% | $99 | $12 | ||
First Quarter 2014 | 33% | $100 | $12 | ||
Second Quarter 2014 | 28% | $99 | $12 | ||
Third Quarter 2014 | 22% | $98 | $12 | ||
Fourth Quarter 2014 | 17% | $100 | $11 | ||
Full Year 2014 | 25% | $99 | $12 | ||
First Quarter 2015 | 11% | $99 | $10 | ||
Second Quarter 2015 | 6% | $92 | $10 | ||
Full Year 2015 | 4% | $96 | $10 |
(in millions) | Remainder of 2012 | 2013 | 2014 | 2015 | 2016 | Beyond 2016 | Total | ||||||||||||||||||||
Current and long-term debt obligations | $ | 108.6 | $ | 160.9 | $ | 117.1 | $ | 113.4 | $ | 110.6 | $ | 529.9 | $ | 1,140.5 | |||||||||||||
Operating lease commitments(a) | 73.6 | 184.1 | 164.6 | 131.4 | 99.1 | 268.6 | 921.4 | ||||||||||||||||||||
Aircraft purchase commitments | 181.8 | 333.2 | 194.6 | 48.0 | 18.4 | 36.8 | 812.8 | ||||||||||||||||||||
Interest obligations(b) | 29.5 | 50.6 | 42.6 | 37.3 | 31.9 | 70.2 | 262.1 | ||||||||||||||||||||
Other obligations(c) | 30.6 | 49.3 | 44.1 | 28.1 | 18.3 | 26.5 | 196.9 | ||||||||||||||||||||
Total | $ | 424.1 | $ | 778.1 | $ | 563.0 | $ | 358.2 | $ | 278.3 | $ | 932.0 | $ | 3,333.7 |
(a) | Operating lease commitments generally include aircraft operating leases, airport property and hangar leases, office space, and other equipment leases. |
(b) | For variable-rate debt, future obligations are shown above using interest rates in effect as of June 30, 2012. |
(c) | Includes minimum obligations under our long-term power-by-the-hour maintenance agreements and obligations associated with third-party CPAs with SkyWest and PenAir. Refer to the "Commitments" note in the condensed consolidated financial statements for further information. |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
ITEM 4. CONTROLS AND PROCEDURES |
ITEM 1. LEGAL PROCEEDINGS |
ITEM 1A. RISK FACTORS |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares (or units) Purchased as Part of Publicly Announced Plans or Programs | Maximum remaining dollar value of shares that can be purchased under the plan | ||||||||||
April 1, 2012 - April 30, 2012(a) | 140,000 | $ | 34.95 | 140,000 | |||||||||
May 1, 2012 - May 31, 2012(a) | 154,000 | 33.48 | 154,000 | ||||||||||
June 1, 2012 - June 30, 2012(a) | 212,000 | 35.17 | 212,000 | ||||||||||
Total | 506,000 | $ | 34.59 | 506,000 | $ | 25,387,103 |
(a) | Purchased pursuant to a $50 million repurchase plan authorized by the Board of Directors in February 2012. This plan will expire in February 2013. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. MINE SAFETY DISCLOSURES |
ITEM 5. OTHER INFORMATION |
ITEM 6. EXHIBITS |
1. | Exhibits: See Exhibit Index. |
ALASKA AIR GROUP, INC. | |
/s/ BRANDON S. PEDERSEN | |
Brandon S. Pedersen | |
Vice President/Finance and Chief Financial Officer | |
(Principal Financial and Accounting Officer) | |
August 8, 2012 |
Exhibit Number | Exhibit Description |
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
1. | I have reviewed this annual report on Form 10-Q of Alaska Air Group, Inc. for the period ended June 30, 2012; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
e) | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors: |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By | /s/ BRADLEY D. TILDEN |
Bradley D. Tilden | |
President and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-Q of Alaska Air Group, Inc. for the period ended June 30, 2012; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors: |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By | /s/ BRANDON S. PEDERSEN |
Brandon S. Pedersen | |
Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By | /s/ BRADLEY D. TILDEN |
Bradley D. Tilden | |
President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By | /s/ BRANDON S. PEDERSEN |
Brandon S. Pedersen | |
Chief Financial Officer |
ASSETS CONSTRUCTED FOR OTHERS (TERMINAL 6 AT LAX) (DETAILS) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Sale Leaseback Transaction [Line Items] | ||
Other liabilities | $ 204.8 | $ 176.7 |
LAX airport project proprietary assets [Member]
|
||
Sale Leaseback Transaction [Line Items] | ||
Other property and equipment | 16.3 | 8.7 |
LAX airport project assets constructed for other [Member]
|
||
Sale Leaseback Transaction [Line Items] | ||
Other property and equipment | 219.2 | 143.4 |
LAX airport project total cost [Member]
|
||
Sale Leaseback Transaction [Line Items] | ||
Other property and equipment | 235.5 | 152.1 |
LAX airport project reimbursement [Member]
|
||
Sale Leaseback Transaction [Line Items] | ||
Other liabilities | 46.3 | 17.7 |
LAX airport project capitalized interest [Member]
|
||
Sale Leaseback Transaction [Line Items] | ||
Other property and equipment | $ 6.0 | $ 4.5 |
SHAREHOLDER'S EQUITY SHAREHOLDERS' EQUITY, EARNINGS PER SHARE (Details) (Stock Options [Member])
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Stock Options [Member]
|
||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 0.2 | 0.1 | 0.2 | 0.2 |
SHAREHOLDER'S EQUITY SHAREHOLDER'S EQUITY, STOCK SPLIT (Details)
In Millions, unless otherwise specified |
Jun. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Common stock, shares outstanding | 70.7 | 35.5 |
MILEAGE PLAN MILEAGE PLAN (TABLES)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
|
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MILEAGE PLAN [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mileage Plan Liabilities [Table Text Block] | Alaska's Mileage Plan liabilities and deferrals are included in the consolidated balance sheets (in millions) as follows:
|
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Mileage Plan Revenue [Table Text Block] | Alaska's Mileage Plan revenue is included in the consolidated statements of operations (in millions) as follows:
|
OPERATING SEGMENT INFORMATION (DETAILS) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|||||||||||
Operating revenues | ||||||||||||||
Passenger, Mainline | $ 862.7 | $ 774.2 | $ 1,586.1 | $ 1,433.5 | ||||||||||
Passenger, Regional | 187.6 | 179.0 | 360.4 | 340.6 | ||||||||||
Total passenger revenue | 1,050.3 | 953.2 | 1,946.5 | 1,774.1 | ||||||||||
Segment Reporting Information, Intersegment Revenue | 0 | 0 | 0 | 0 | ||||||||||
Freight and mail | 30.6 | 29.1 | 55.0 | 54.0 | ||||||||||
Other - net | 132.3 | 127.9 | 251.0 | 247.3 | ||||||||||
Total Operating Revenues | 1,213.2 | 1,110.2 | 2,252.5 | 2,075.4 | ||||||||||
Operating expenses | ||||||||||||||
Operating expenses, excluding fuel | 665.6 | 654.9 | 1,313.7 | 1,291.8 | ||||||||||
Economic fuel | 431.8 | 397.5 | 750.6 | 592.0 | ||||||||||
Total Operating Expenses | 1,097.4 | 1,052.4 | 2,064.3 | 1,883.8 | ||||||||||
Nonoperating income (expense) | ||||||||||||||
Interest income | 5.1 | 6.3 | 10.0 | 13.9 | ||||||||||
Interest expense | (17.2) | (20.0) | (33.8) | (43.4) | ||||||||||
Other | 5.4 | 2.9 | 11.3 | 5.6 | ||||||||||
Nonoperating Income (Expense) Total | (6.7) | (10.8) | (12.5) | (23.9) | ||||||||||
Income (loss) before income tax | 109.1 | 47.0 | 175.7 | 167.7 | ||||||||||
Air Group Adjusted [Member]
|
||||||||||||||
Operating revenues | ||||||||||||||
Passenger, Mainline | 862.7 | [1] | 774.2 | [1] | 1,586.1 | [1] | 1,433.5 | [1] | ||||||
Passenger, Regional | 187.6 | [1] | 179.0 | [1] | 360.4 | [1] | 340.6 | [1] | ||||||
Total passenger revenue | 1,050.3 | [1] | 953.2 | [1] | 1,946.5 | [1] | 1,774.1 | [1] | ||||||
Segment Reporting Information, Intersegment Revenue | 0 | 0 | 0 | 0 | ||||||||||
Freight and mail | 30.6 | [1] | 29.1 | [1] | 55.0 | [1] | 54.0 | [1] | ||||||
Other - net | 132.3 | [1] | 127.9 | [1] | 251.0 | [1] | 247.3 | [1] | ||||||
Total Operating Revenues | 1,213.2 | [1] | 1,110.2 | [1] | 2,252.5 | [1] | 2,075.4 | [1] | ||||||
Operating expenses | ||||||||||||||
Operating expenses, excluding fuel | 665.6 | [1] | 628.1 | [1] | 1,313.7 | [1] | 1,254.9 | [1] | ||||||
Economic fuel | 362.2 | [1] | 326.6 | [1] | 700.9 | [1] | 603.1 | [1] | ||||||
Total Operating Expenses | 1,027.8 | [1] | 954.7 | [1] | 2,014.6 | [1] | 1,858.0 | [1] | ||||||
Nonoperating income (expense) | ||||||||||||||
Interest income | 5.1 | [1] | 6.3 | [1] | 10.0 | [1] | 13.9 | [1] | ||||||
Interest expense | (17.2) | [1] | (20.0) | [1] | (33.8) | [1] | (43.4) | [1] | ||||||
Other | 5.4 | [1] | 2.9 | [1] | 11.3 | [1] | 5.6 | [1] | ||||||
Nonoperating Income (Expense) Total | (6.7) | [1] | (10.8) | [1] | (12.5) | [1] | (23.9) | [1] | ||||||
Income (loss) before income tax | 178.7 | [1] | 144.7 | [1] | 225.4 | [1] | 193.5 | [1] | ||||||
Alaska Mainline [Member]
|
||||||||||||||
Operating revenues | ||||||||||||||
Passenger, Mainline | 862.7 | 774.2 | 1,586.1 | 1,433.5 | ||||||||||
Passenger, Regional | 0 | 0 | 0 | 0 | ||||||||||
Total passenger revenue | 862.7 | 774.2 | 1,586.1 | 1,433.5 | ||||||||||
Segment Reporting Information, Intersegment Revenue | 0 | 0 | 0 | 0 | ||||||||||
Freight and mail | 29.5 | 28.0 | 53.0 | 51.9 | ||||||||||
Other - net | 115.4 | 110.7 | 218.2 | 212.7 | ||||||||||
Total Operating Revenues | 1,007.6 | 912.9 | 1,857.3 | 1,698.1 | ||||||||||
Operating expenses | ||||||||||||||
Operating expenses, excluding fuel | 532.2 | 498.4 | 1,051.8 | 996.1 | ||||||||||
Economic fuel | 316.7 | 285.2 | 611.1 | 523.6 | ||||||||||
Total Operating Expenses | 848.9 | 783.6 | 1,662.9 | 1,519.7 | ||||||||||
Nonoperating income (expense) | ||||||||||||||
Interest income | 4.4 | 7.1 | 9.3 | 15.8 | ||||||||||
Interest expense | (12.7) | (16.3) | (25.3) | (36.0) | ||||||||||
Other | 5.1 | 2.3 | 10.4 | 4.4 | ||||||||||
Nonoperating Income (Expense) Total | (3.2) | (6.9) | (5.6) | (15.8) | ||||||||||
Income (loss) before income tax | 155.5 | 122.4 | 188.8 | 162.6 | ||||||||||
Alaska Regional [Member]
|
||||||||||||||
Operating revenues | ||||||||||||||
Passenger, Mainline | 0 | 0 | 0 | 0 | ||||||||||
Passenger, Regional | 187.6 | 179.0 | 360.4 | 340.6 | ||||||||||
Total passenger revenue | 187.6 | 179.0 | 360.4 | 340.6 | ||||||||||
Segment Reporting Information, Intersegment Revenue | 0 | 0 | 0 | 0 | ||||||||||
Freight and mail | 1.1 | 1.0 | 2.0 | 2.0 | ||||||||||
Other - net | 15.1 | 15.4 | 29.1 | 30.4 | ||||||||||
Total Operating Revenues | 203.8 | 195.4 | 391.5 | 373.0 | ||||||||||
Operating expenses | ||||||||||||||
Operating expenses, excluding fuel | 139.0 | 138.1 | 275.8 | 271.0 | ||||||||||
Economic fuel | 45.5 | 41.4 | 89.8 | 79.5 | ||||||||||
Total Operating Expenses | 184.5 | 179.5 | 365.6 | 350.5 | ||||||||||
Nonoperating income (expense) | ||||||||||||||
Interest income | 0 | 0 | 0 | 0 | ||||||||||
Interest expense | 0 | 0 | 0 | 0 | ||||||||||
Other | 0 | 0 | 0 | 0 | ||||||||||
Nonoperating Income (Expense) Total | 0 | 0 | 0 | 0 | ||||||||||
Income (loss) before income tax | 19.3 | 15.9 | 25.9 | 22.5 | ||||||||||
Horizon [Member]
|
||||||||||||||
Operating revenues | ||||||||||||||
Passenger, Mainline | 0 | 0 | 0 | 0 | ||||||||||
Passenger, Regional | 0 | 0 | 0 | 0 | ||||||||||
Total passenger revenue | 0 | 0 | 0 | 0 | ||||||||||
Segment Reporting Information, Intersegment Revenue | 89.2 | 93.5 | 176.2 | 188.1 | ||||||||||
Freight and mail | 0 | 0.1 | 0 | 0.1 | ||||||||||
Other - net | 1.8 | 1.8 | 3.7 | 4.2 | ||||||||||
Total Operating Revenues | 91.0 | 95.4 | 179.9 | 192.4 | ||||||||||
Operating expenses | ||||||||||||||
Operating expenses, excluding fuel | 83.1 | 83.8 | 161.4 | 174.0 | ||||||||||
Economic fuel | 0 | 0 | 0 | 0 | ||||||||||
Total Operating Expenses | 83.1 | 83.8 | 161.4 | 174.0 | ||||||||||
Nonoperating income (expense) | ||||||||||||||
Interest income | 0 | 0 | 0 | 0 | ||||||||||
Interest expense | (4.1) | (4.4) | (8.1) | (9.1) | ||||||||||
Other | 0.4 | 0.2 | 0.8 | 1.0 | ||||||||||
Nonoperating Income (Expense) Total | (3.7) | (4.2) | (7.3) | (8.1) | ||||||||||
Income (loss) before income tax | 4.2 | 7.4 | 11.2 | 10.3 | ||||||||||
Intersegment Elimination [Member]
|
||||||||||||||
Operating revenues | ||||||||||||||
Passenger, Mainline | 0 | 0 | 0 | 0 | ||||||||||
Passenger, Regional | 0 | 0 | 0 | 0 | ||||||||||
Total passenger revenue | 0 | 0 | 0 | 0 | ||||||||||
Segment Reporting Information, Intersegment Revenue | (89.2) | (93.5) | (176.2) | (188.1) | ||||||||||
Freight and mail | 0 | 0 | 0 | 0 | ||||||||||
Other - net | 0 | 0 | 0 | 0 | ||||||||||
Total Operating Revenues | (89.2) | (93.5) | (176.2) | (188.1) | ||||||||||
Operating expenses | ||||||||||||||
Operating expenses, excluding fuel | (88.7) | (92.2) | (175.3) | (186.2) | ||||||||||
Economic fuel | 0 | 0 | 0 | 0 | ||||||||||
Total Operating Expenses | (88.7) | (92.2) | (175.3) | (186.2) | ||||||||||
Nonoperating income (expense) | ||||||||||||||
Interest income | 0.7 | (0.8) | 0.7 | (1.9) | ||||||||||
Interest expense | (0.4) | 0.7 | (0.4) | 1.7 | ||||||||||
Other | (0.1) | 0.4 | 0.1 | 0.2 | ||||||||||
Nonoperating Income (Expense) Total | 0.2 | 0.3 | 0.4 | 0 | ||||||||||
Income (loss) before income tax | (0.3) | (1.0) | (0.5) | (1.9) | ||||||||||
Special Charges [Member]
|
||||||||||||||
Operating revenues | ||||||||||||||
Passenger, Mainline | 0 | 0 | 0 | 0 | ||||||||||
Passenger, Regional | 0 | 0 | 0 | 0 | ||||||||||
Total passenger revenue | 0 | 0 | 0 | 0 | ||||||||||
Segment Reporting Information, Intersegment Revenue | 0 | 0 | 0 | 0 | ||||||||||
Freight and mail | 0 | 0 | 0 | 0 | ||||||||||
Other - net | 0 | 0 | 0 | 0 | ||||||||||
Total Operating Revenues | 0 | 0 | 0 | 0 | ||||||||||
Operating expenses | ||||||||||||||
Operating expenses, excluding fuel | 0 | 26.8 | [2] | 0 | 36.9 | [2] | ||||||||
Economic fuel | 69.6 | [3] | 70.9 | [3] | 49.7 | [3] | (11.1) | [3] | ||||||
Total Operating Expenses | 69.6 | 97.7 | 49.7 | 25.8 | ||||||||||
Nonoperating income (expense) | ||||||||||||||
Interest income | 0 | 0 | 0 | 0 | ||||||||||
Interest expense | 0 | 0 | 0 | 0 | ||||||||||
Other | 0 | 0 | 0 | 0 | ||||||||||
Nonoperating Income (Expense) Total | 0 | 0 | 0 | 0 | ||||||||||
Income (loss) before income tax | $ (69.6) | $ (97.7) | $ (49.7) | $ (25.8) | ||||||||||
|
LONG-TERM DEBT - LINE OF CREDIT (DETAILS) (USD $)
In Millions, unless otherwise specified |
6 Months Ended |
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Jun. 30, 2012
|
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Line of Credit Facility [Line Items] | |
Line of Credit Facility, Minimum Asset Requirement Amount | $ 500 |
Secured by aircraft [Member]
|
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Line of Credit Facility [Line Items] | |
Line of Credit Facility, Maximum Borrowing Capacity | 100 |
Line of Credit Facility, Expiration Date | Mar. 29, 2013 |
Secured by other [Member]
|
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Line of Credit Facility [Line Items] | |
Line of Credit Facility, Maximum Borrowing Capacity | $ 100 |
Line of Credit Facility, Expiration Date | Mar. 31, 2016 |
SHAREHOLDER'S EQUITY, STOCK REPURCHASE (DETAILS) (USD $)
In Millions, except Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | 1 Months Ended | 3 Months Ended | 6 Months Ended | 1 Months Ended | 3 Months Ended | 6 Months Ended | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
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Jun. 30, 2011
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Jun. 30, 2012
|
Jun. 30, 2011
|
Feb. 29, 2012
February 2012 Stock Repurchase Program [Member]
|
Jun. 30, 2012
February 2012 Stock Repurchase Program [Member]
|
Jun. 30, 2011
February 2012 Stock Repurchase Program [Member]
|
Jun. 30, 2012
February 2012 Stock Repurchase Program [Member]
|
Jun. 30, 2011
February 2012 Stock Repurchase Program [Member]
|
Jun. 30, 2011
June 2011 Stock Repurchase Program [Member]
|
Jun. 30, 2012
June 2011 Stock Repurchase Program [Member]
|
Jun. 30, 2011
June 2011 Stock Repurchase Program [Member]
|
Jun. 30, 2012
June 2011 Stock Repurchase Program [Member]
|
Jun. 30, 2011
June 2011 Stock Repurchase Program [Member]
|
Jun. 30, 2010
June 2010 Stock Repurchase Program [Member]
|
Jun. 30, 2012
June 2010 Stock Repurchase Program [Member]
|
Jun. 30, 2011
June 2010 Stock Repurchase Program [Member]
|
Jun. 30, 2012
June 2010 Stock Repurchase Program [Member]
|
Jun. 30, 2011
June 2010 Stock Repurchase Program [Member]
|
|
Equity, Class of Treasury Stock [Line Items] | |||||||||||||||||||
Authorized amount under share repurchase program | $ 50 | $ 50 | $ 50 | ||||||||||||||||
Share repurchase activity (in shares) | 506,000 | 218,600 | 755,340 | 1,086,600 | 506,000 | 0 | 709,000 | 0 | 0 | 63,000 | 46,340 | 63,000 | 0 | 155,600 | 0 | 1,023,600 | |||
Share repurchase activity | $ 17.5 | $ 7.0 | $ 26.3 | $ 33.3 | $ 17.5 | $ 0 | $ 24.6 | $ 0 | $ 0 | $ 2.1 | $ 1.7 | $ 2.1 | $ 0 | $ 4.9 | $ 0 | $ 31.2 | |||
Common stock held in treasury retired | 4,829,834 |
DERIVATIVE INSTRUMENTS
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Jun. 30, 2012
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS Fuel Hedge Contracts The Company’s operations are inherently dependent upon the price and availability of aircraft fuel. To manage economic risks associated with fluctuations in aircraft fuel prices, the Company periodically enters into call options for crude oil and swap agreements for jet fuel refining margins. As of June 30, 2012, the Company had fuel hedge contracts outstanding covering 10.3 million barrels of crude oil that will be settled from July 2012 to June 2015. Refer to the contractual obligations and commitments section of Item 2 for further information. Interest Rate Swap Agreements The Company has interest rate swap agreements with a third party designed to hedge the volatility of the underlying variable interest rate in the Company's aircraft lease agreements for six Boeing 737-800 aircraft. The agreements stipulate that the Company pay a fixed interest rate over the term of the contract and receive a floating interest rate. All significant terms of the swap agreement match the terms of the lease agreements, including interest-rate index, rate reset dates, termination dates and underlying notional values. The agreements expire from February 2020 through March 2021 to coincide with the lease termination dates. Fair Values of Derivative Instruments Fair values of derivative instruments on the consolidated balance sheet (in millions):
The net cash received (paid) for new positions and settlements was $(11.1) million and $9.6 million during the three months ended June 30, 2012 and 2011, respectively. The net cash received (paid) for new positions and settlements was $(17.5) million and $15.0 million during the six months ended June 30, 2012 and 2011, respectively. Pretax effect of derivative instruments on earnings (in millions):
The amounts shown as recognized in aircraft rent for cash flow hedges (interest rate swaps) represent the realized losses transferred out of AOCL to aircraft rent. The amounts shown as recognized in OCI are prior to the losses recognized in aircraft rent during the period. The Company expects $5.7 million to be reclassified from OCI to aircraft rent within the next twelve months. Credit Risk and Collateral The Company is exposed to credit losses in the event of non-performance by counterparties to these derivative instruments. To mitigate exposure, the Company periodically reviews the counterparties' nonperformance by monitoring the absolute exposure levels and credit ratings. The Company maintains security agreements with a number of its counterparties which may require the Company to post collateral if the fair value of the selected derivative instruments fall below specified mark-to-market thresholds. The posted collateral does not offset the fair value of the derivative instruments and is included in "Prepaid expenses and other current assets" on the consolidated balance sheet. The Company posted collateral of $17.5 million and $0.9 million as of June 30, 2012 and December 31, 2011, respectively. The collateral was provided to one counterparty associated with the net liability position of the interest rate swap agreements offset by the net asset position of the fuel hedge contracts under a master netting arrangement. |