x | 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 of Incorporation) | (I.R.S. Employer Identification No.) |
19300 International Boulevard, Seattle, Washington 98188 |
Telephone: (206) 392-5040 |
Common Stock, $0.01 Par Value | New York Stock Exchange |
ITEM 1. OUR BUSINESS |
2016(a) | 2015 | 2014 | 2013 | 2012 | ||||||||||
Mainline passenger revenue | 69 | % | 70 | % | 70 | % | 70 | % | 71 | % | ||||
Regional passenger revenue | 15 | % | 15 | % | 15 | % | 16 | % | 16 | % | ||||
Other revenue | 14 | % | 13 | % | 13 | % | 12 | % | 11 | % | ||||
Freight and Mail revenue | 2 | % | 2 | % | 2 | % | 2 | % | 2 | % | ||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
(a) | Includes information for Virgin America for the period December 14, 2016 through December 31, 2016. |
2016 (a) | 2015 | 2014 | 2013 | 2012 | ||||||||||
West Coast | 34 | % | 36 | % | 36 | % | 34 | % | 35 | % | ||||
Transcon/midcon | 29 | % | 24 | % | 22 | % | 22 | % | 19 | % | ||||
Hawaii and Costa Rica | 17 | % | 18 | % | 18 | % | 19 | % | 20 | % | ||||
Alaska | 14 | % | 15 | % | 15 | % | 16 | % | 17 | % | ||||
Mexico | 5 | % | 6 | % | 6 | % | 7 | % | 7 | % | ||||
Canada | 1 | % | 1 | % | 3 | % | 2 | % | 2 | % | ||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
(a) | Includes information for Virgin America for the period December 14, 2016 through December 31, 2016. |
2016 (a) | 2015 | 2014 | 2013 | 2012 | ||||||||||
West Coast | 30 | % | 31 | % | 31 | % | 28 | % | 29 | % | ||||
Transcon/midcon | 30 | % | 27 | % | 25 | % | 25 | % | 22 | % | ||||
Hawaii | 19 | % | 20 | % | 20 | % | 21 | % | 22 | % | ||||
Alaska | 15 | % | 16 | % | 16 | % | 18 | % | 18 | % | ||||
Mexico | 6 | % | 6 | % | 7 | % | 7 | % | 8 | % | ||||
Canada | — | % | — | % | 1 | % | 1 | % | 1 | % | ||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||
Average Stage Length | 1,225 | 1,195 | 1,182 | 1,177 | 1,161 |
(a) | Includes information for Virgin America for the period December 14, 2016 through December 31, 2016. |
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||
West Coast | 60 | % | 62 | % | 66 | % | 66 | % | 68 | % | ||||
Pacific Northwest | 16 | % | 19 | % | 19 | % | 21 | % | 20 | % | ||||
Canada | 5 | % | 7 | % | 8 | % | 9 | % | 9 | % | ||||
Alaska | 4 | % | 5 | % | 4 | % | 2 | % | 2 | % | ||||
Midcon | 15 | % | 6 | % | 2 | % | 1 | % | — | % | ||||
Mexico | — | % | 1 | % | 1 | % | 1 | % | 1 | % | ||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||
Average Stage Length | 381 | 348 | 339 | 329 | 332 |
• | offering our guests more travel destinations and better mileage credit/redemption opportunities, including elite qualifying miles on all of our major U.S. and international airline partners; |
• | giving our frequent flyer program a competitive advantage because of our partnership with carriers from all three of the major global alliances; |
• | giving us access to more connecting traffic from other airlines; and |
• | providing members of our alliance partners’ frequent flyer programs an opportunity to travel on Alaska, Virgin America and our regional affiliates while earning mileage credit in our partners’ programs. |
Codeshare | |||||
Frequent Flyer Agreement | Alaska Flight # on Flights Operated by Other Airline | Other Airline Flight # on Flights Operated by Alaska / Horizon / SkyWest | |||
Major U.S. or International Airlines | |||||
Aeromexico | Yes | No | Yes | ||
American Airlines | Yes | Yes | Yes | ||
Air France | Yes | No | Yes | ||
British Airways | Yes | No | Yes | ||
Cathay Pacific Airways | Yes | No | Yes | ||
Delta Air Lines(b) | Yes(b) | Yes(b) | Yes(b) | ||
Emirates | Yes | No | Yes | ||
Icelandair | Yes | No | Yes | ||
Hainan Airlines | Yes | No | No | ||
KLM | Yes | No | Yes | ||
Korean Air | Yes | No | Yes | ||
LAN S.A. | Yes | No | Yes | ||
Fiji Airways(a) | Yes | No | Yes | ||
Qantas | Yes | No | Yes | ||
Regional Airlines | |||||
Rav'n Alaska | Yes | Yes | No | ||
PenAir(a) | Yes | Yes | No |
(a) | These airlines do not have their own frequent flyer program. However, Alaska's Mileage PlanTM members can earn and redeem miles on these airlines' route systems. |
(b) | Codeshare and frequent flyer agreements with Delta terminate on April 30, 2017. |
Codeshare | |||||
Frequent Flyer Agreement | Virgin America Flight # on Flights Operated by Other Airline | Other Airline Flight # on Flights Operated by Virgin America | |||
Major U.S. or International Airlines | |||||
China Airlines | No | No | Yes | ||
China Eastern | No | No | Yes | ||
China Southern | No | No | Yes | ||
Emirates | Yes | No | No | ||
Hawaiian Airlines | Yes(a) | No | Yes | ||
Singapore Airlines | Yes | No | Yes | ||
Virgin Australia | Yes | No | Yes |
(a) | Ability to redeem award flights only (no mileage accrual on Hawaiian Airlines flight segments). |
2016(a) | 2015 | 2014 | 2013 | 2012 | |||||
Air Group Marketed Revenues | 92% | 90% | 91% | 90% | 90% | ||||
Codeshare Agreements: | |||||||||
American Airlines | 3% | 4% | 3% | 2% | 3% | ||||
Delta Air Lines | 1% | 2% | 2% | 4% | 3% | ||||
Others | 1% | 1% | 1% | 1% | 1% | ||||
Interline Agreements: | |||||||||
Domestic Interline | 2% | 2% | 2% | 2% | 2% | ||||
International Interline | 1% | 1% | 1% | 1% | 1% | ||||
Total Operating Revenue | 100% | 100% | 100% | 100% | 100% |
(a) | Includes information for Virgin America for the period December 14, 2016 through December 31, 2016. |
2016 (a) | 2015 | 2014 | 2013 | 2012 | ||||||||||
Crude oil | 69 | % | 62 | % | 72 | % | 71 | % | 65 | % | ||||
Refining margins | 20 | % | 26 | % | 18 | % | 19 | % | 25 | % | ||||
Other(b) | 11 | % | 12 | % | 10 | % | 10 | % | 10 | % | ||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||
Aircraft fuel expense | 18 | % | 22 | % | 32 | % | 34 | % | 35 | % |
(a) | Includes information for Virgin America for the period December 14, 2016 through December 31, 2016. |
(b) | Other includes gains and losses on settled fuel hedges, unrealized mark-to-market fuel hedge gains or losses, taxes and other into-plane costs. |
• | Safety record |
• | Customer service and reputation |
• | Fares and ancillary services |
• | Routes served, flight schedules, codesharing and interline relationships, and frequent flyer programs |
• | Direct to customer: It is less expensive for us to sell through our direct channels at alaskaair.com and virginamerica.com. As a result, we continue to take steps to drive more business to our websites. In addition, we believe this channel is preferable from a branding and customer-relationship standpoint in that we can establish ongoing communication with the customer and tailor offers accordingly. |
• | Traditional and online travel agencies: Both traditional and online travel agencies typically use Global Distribution Systems (GDS) to obtain their fare and inventory data from airlines. Bookings made through these agencies result in a fee that is charged to the airline. Many of our large corporate customers require us to use these agencies. Some of our competitors do not use this distribution channel and, as a result, have lower ticket distribution costs. |
• | Reservation call centers: The Alaska call centers are located in Phoenix, AZ, Kent, WA, and Boise, ID. Virgin America uses an outsourced call center. We generally charge a $15 fee for booking reservations through the Alaska call centers and $20 for booking reservations through the Virgin America call centers. We plan on combining the reservations call centers over the next several months as part of our integration efforts. |
2016 (a) | 2015 | 2014 | 2013 | 2012 | ||||||||||
Direct to customer | 61 | % | 60 | % | 57 | % | 55 | % | 54 | % | ||||
Traditional agencies | 23 | % | 23 | % | 25 | % | 27 | % | 27 | % | ||||
Online travel agencies | 11 | % | 11 | % | 12 | % | 13 | % | 13 | % | ||||
Reservation call centers | 5 | % | 6 | % | 6 | % | 5 | % | 6 | % | ||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
(a) | Includes results for Virgin America for the period December 14, 2016 through December 31, 2016. |
• | general economic conditions and resulting changes in passenger demand, |
• | pricing initiatives by us or our competitors, |
• | increases in competition at our primary airports, and |
• | increases or decreases in passenger and volume-driven variable costs. |
Union | Employee Group | Number of Employees | Contract Status | ||||
Air Line Pilots Association International (ALPA) | Pilots | 1,834 | Amendable 03/31/2018 | ||||
Association of Flight Attendants (AFA) | Flight attendants | 3,921 | Amendable 12/17/2019 | ||||
International Association of Machinists and Aerospace Workers (IAM) | Ramp service and stock clerks | 634 | Amendable 7/19/2018 | ||||
IAM | Clerical, office and passenger service | 3,032 | Amendable 1/1/2019 | ||||
Aircraft Mechanics Fraternal Association (AMFA) (a) | Mechanics, inspectors and cleaners | 684 | Amendable 10/17/2016 | ||||
Mexico Workers Association of Air Transport | Mexico airport personnel | 86 | Amendable 9/29/2016 | ||||
Transport Workers Union of America (TWU) | Dispatchers | 49 | Amendable 3/24/2019 |
Union | Employee Group | Number of Employees | Contract Status | ||||
International Brotherhood of Teamsters (IBT) | Pilots | 618 | Amendable 12/14/2024 | ||||
AFA | Flight attendants | 623 | Amendable 07/18/2019 | ||||
IBT | Mechanics and related classifications | 271 | Amendable 12/16/2020 | ||||
National Automobile, Aerospace, Transportation and General Workers | Station personnel in Vancouver and Victoria, BC, Canada | 38 | Amendable 2/14/2019 | ||||
TWU | Dispatchers | 18 | Amendable 8/26/2018 |
Union | Employee Group | Number of Employees | Contract Status | ||||
ALPA | Pilots | 714 | Not completed | ||||
TWU | Inflight teammates | 1,068 | Not completed |
Name | Position | Age | Air Group or Subsidiary Officer Since | |||
Bradley D. Tilden | Chairman and Chief Executive Officer of Alaska Air Group, Inc., Chairman of Alaska Airlines, Inc., Horizon Air Industries, Inc. and Virgin America Inc. | 56 | 1994 | |||
Benito Minicucci | President and Chief Operating Officer of Alaska Airlines, Inc. and Chief Executive Officer of Virgin America Inc. | 50 | 2004 | |||
Brandon S. Pedersen | Executive Vice President/Finance and Chief Financial Officer of Alaska Air Group, Inc. and Alaska Airlines, Inc., and Chief Financial Officer of Virgin America Inc. | 50 | 2003 | |||
Andrew R. Harrison | Executive Vice President and Chief Commercial Officer of Alaska Airlines, Inc. | 46 | 2008 | |||
David L. Campbell | President and Chief Executive Officer of Horizon Air Industries, Inc. | 55 | 2014 | |||
Kyle B. Levine | Vice President Legal and General Counsel of Alaska Air Group, Inc. and Alaska Airlines, Inc. and Chief Ethics and Compliance Officer of Alaska Air Group, Inc. | 45 | 2016 |
• | DOT: In order to provide passenger and cargo air transportation in the U.S., a domestic airline is required to hold a certificate of public convenience and necessity issued by the DOT. Subject to certain individual airport capacity, noise and other restrictions, this certificate permits an air carrier to operate between any two points in the U.S. Certificates do not expire, but may be revoked for failure to comply with federal aviation statutes, regulations, orders or the terms of the certificates. While airlines are permitted to establish their own fares without government regulation, the DOT has jurisdiction over the approval of international codeshare agreements, marketing alliance agreements between major domestic carriers, international and some domestic route authorities, Essential Air Service market subsidies, carrier liability for personal or property damage, and certain airport rates and charges disputes. International treaties may also contain restrictions or requirements for flying outside of the U.S. and impose different carrier liability limits than those applicable to domestic flights. The DOT has been active in implementing a variety of “consumer protection” regulations, covering subjects such as advertising, passenger communications, denied boarding compensation and tarmac delay response. Airlines are subject to enforcement actions that are brought by the DOT from time to time for alleged violations of consumer protection and other economic regulations. We are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate. |
• | FAA: The FAA, through Federal Aviation Regulations (FARs), generally regulates all aspects of airline operations, including establishing personnel, maintenance and flight operation standards. Domestic airlines are required to hold a valid air carrier operating certificate issued by the FAA. Pursuant to these regulations, we have established, and the FAA has approved, our operations specifications and a maintenance program for each type of aircraft we operate. Each maintenance program provides for the ongoing maintenance of the relevant aircraft type, ranging from frequent routine inspections to major overhauls. From time to time the FAA issues airworthiness directives (ADs) that must be incorporated into our aircraft maintenance program and operations. All airlines are subject to enforcement actions that are brought by the FAA from time to time for alleged violations of FARs or ADs. At this time, we are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate. |
• | TSA: Airlines serving the U.S. must operate a TSA-approved Aircraft Operator Standard Security Program (AOSSP), and comply with TSA Security Directives (SDs) and regulations. Under TSA authority, we are required to collect a September 11 Security Fee of $5.60 per one-way trip from passengers and remit that sum to the government to fund aviation security measures. Airlines are subject to enforcement actions that are brought by the TSA from time to time for alleged violations of the AOSSP, SDs or security regulations. We are not aware of any enforcement proceedings that could either materially affect our financial position or impact our authority to operate. |
ITEM 1A. RISK FACTORS |
• | congestion and/or space constraints at airports or air traffic control problems; |
• | lack of operational approval (e.g. new routes, aircraft deliveries, etc.); |
• | adverse weather conditions; |
• | increased security measures or breaches in security; |
• | contagious illness and fear of contagion; |
• | changes in international treaties concerning air rights; |
• | international or domestic conflicts or terrorist activity; and |
• | other changes in business conditions. |
• | significantly reduce passenger traffic and yields as a result of a potentially dramatic drop in demand for air travel; |
• | significantly increase security and insurance costs; |
• | make war risk or other insurance unavailable or extremely expensive; |
• | increase fuel costs and the volatility of fuel prices; |
• | increase costs from airport shutdowns, flight cancellations and delays resulting from security breaches and perceived safety threats; and |
• | result in a grounding of commercial air traffic by the FAA. |
• | the inability to successfully combine the Virgin America business with that of Alaska's in a manner that permits us to achieve anticipated net synergies and other anticipated benefits of the acquisition; |
• | the inability to successfully attract and retain Virgin America guests upon integration with Alaska; |
• | the challenges associated with operating aircraft types new to our operations, specifically the Airbus A319 and A320; |
• | the challenges associated with an expanded or new presence in more congested airports and markets; |
• | the challenges associated with integrating complex systems, technology, aircraft fleets, networks, facilities and other assets in a seamless manner that minimizes any adverse impact on guests, suppliers, employees and other constituents; |
• | the challenges associated with integrating Virgin America employees into Alaska's workforce while maintaining our focus on providing consistent, high quality customer service, including seniority list integration, negotiation of transition process agreements and, in the case of the pilot workgroups, negotiation of a joint collective bargaining agreement; and |
• | potential unknown liabilities, liabilities that are significantly larger than we currently anticipate, and unforeseen increased expenses or delays, including costs to integrate Virgin America’s business that may exceed our current estimates. |
• | require a substantial portion of cash flows from operations for debt service payments and operating lease payments, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes; and |
• | limit our flexibility in planning for, or reacting to, changes in its business and the airline industry and, consequently, negatively affect our competitive position. |
ITEM 1B. UNRESOLVED STAFF COMMENTS |
ITEM 2. PROPERTIES |
Aircraft Type | Seats | Owned | Leased | Total | Average Age in Years | ||||||||
B737 Freighter & Combis | 0/72 | 6 | — | 6 | 23.2 | ||||||||
B737-400 | 144 | 3 | 7 | 10 | 20.9 | ||||||||
B737 NextGen | 124-181 | 129 | 10 | 139 | 7.3 | ||||||||
A319 | 119 | — | 10 | 10 | 9.2 | ||||||||
A320 | 146-149 | 10 | 43 | 53 | 6.3 | ||||||||
Total Mainline Fleet | 148 | 70 | 218 | 8.2 | |||||||||
Q400 | 76 | 37 | 15 | 52 | 10.0 | ||||||||
E175 | 76 | — | 15 | 15 | 0.8 | ||||||||
Total Regional Fleet | 37 | 30 | 67 | 7.9 | |||||||||
Total | 185 | 100 | 285 | 8.2 |
ITEM 3. LEGAL PROCEEDINGS |
ITEM 4. MINE SAFETY DISCLOSURES |
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |
2016 | 2015 | ||||||||||||||
High | Low | High | Low | ||||||||||||
First Quarter | $ | 83.05 | $ | 61.58 | $ | 70.83 | $ | 57.73 | |||||||
Second Quarter | 83.09 | 54.53 | 68.68 | 58.15 | |||||||||||
Third Quarter | 71.57 | 56.47 | 82.75 | 62.59 | |||||||||||
Fourth Quarter | 91.88 | 65.60 | 87.16 | 73.00 |
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA |
Year Ended December 31 (in millions, except per-share amounts): | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||
CONSOLIDATED OPERATING RESULTS (audited) | |||||||||||||||||||
Operating Revenues | $ | 5,931 | $ | 5,598 | $ | 5,368 | $ | 5,156 | $ | 4,657 | |||||||||
Operating Expenses | 4,582 | 4,300 | 4,406 | 4,318 | 4,125 | ||||||||||||||
Operating Income | 1,349 | 1,298 | 962 | 838 | 532 | ||||||||||||||
Nonoperating income (expense), net of interest capitalized(a) | (4 | ) | 14 | 13 | (22 | ) | (18 | ) | |||||||||||
Income before income tax | 1,345 | 1,312 | 975 | 816 | 514 | ||||||||||||||
Net Income | $ | 814 | $ | 848 | $ | 605 | $ | 508 | $ | 316 | |||||||||
Average basic shares outstanding | 123.557 | 128.373 | 135.445 | 139.910 | 141.416 | ||||||||||||||
Average diluted shares outstanding | 124.389 | 129.372 | 136.801 | 141.878 | 143.568 | ||||||||||||||
Basic earnings per share | $ | 6.59 | $ | 6.61 | $ | 4.47 | $ | 3.63 | $ | 2.23 | |||||||||
Diluted earnings per share | $ | 6.54 | $ | 6.56 | $ | 4.42 | $ | 3.58 | $ | 2.20 | |||||||||
Cash dividends declared per share | $ | 1.10 | $ | 0.80 | $ | 0.50 | $ | 0.20 | — | ||||||||||
CONSOLIDATED FINANCIAL POSITION (audited) | |||||||||||||||||||
At End of Period (in millions): | |||||||||||||||||||
Total assets(b) | $ | 9,962 | $ | 6,530 | $ | 6,059 | $ | 5,719 | $ | 5,350 | |||||||||
Long-term debt, including current portion(b) | $ | 2,964 | $ | 683 | $ | 798 | $ | 865 | $ | 1,025 | |||||||||
Shareholders' equity | $ | 2,931 | $ | 2,411 | $ | 2,127 | $ | 2,029 | $ | 1,421 | |||||||||
OPERATING STATISTICS (unaudited)(e) | |||||||||||||||||||
Consolidated:(c) | |||||||||||||||||||
Revenue passengers (000) | 34,289 | 31,883 | 29,278 | 27,414 | 25,896 | ||||||||||||||
RPMs (000,000) "traffic" | 37,209 | 33,578 | 30,718 | 28,833 | 27,007 | ||||||||||||||
ASMs (000,000) "capacity" | 44,135 | 39,914 | 36,078 | 33,672 | 31,428 | ||||||||||||||
Load factor | 84.3% | 84.1% | 85.1% | 85.6% | 85.9% | ||||||||||||||
Yield | 13.45¢ | 14.27¢ | 14.91¢ | 14.80¢ | 14.92¢ | ||||||||||||||
PRASM | 11.34¢ | 12.01¢ | 12.69¢ | 12.67¢ | 12.82¢ | ||||||||||||||
RASM | 13.44¢ | 14.03¢ | 14.88¢ | 14.74¢ | 14.82¢ | ||||||||||||||
CASMex(d) | 8.23¢ | 8.30¢ | 8.36¢ | 8.47¢ | 8.48¢ | ||||||||||||||
Mainline: | |||||||||||||||||||
Revenue passengers (000) | 24,838 | 22,869 | 20,972 | 19,737 | 18,526 | ||||||||||||||
RPMs (000,000) "traffic" | 33,489 | 30,340 | 27,778 | 26,172 | 24,417 | ||||||||||||||
ASMs (000,000) "capacity" | 39,473 | 35,912 | 32,430 | 30,411 | 28,180 | ||||||||||||||
Load factor | 84.8% | 84.5% | 85.7% | 86.1% | 86.6% | ||||||||||||||
Yield | 12.24¢ | 12.98¢ | 13.58¢ | 13.33¢ | 13.45¢ | ||||||||||||||
PRASM | 10.38¢ | 10.97¢ | 11.64¢ | 11.48¢ | 11.65¢ | ||||||||||||||
CASMex(d) | 7.30¢ | 7.39¢ | 7.45¢ | 7.54¢ | 7.56¢ | ||||||||||||||
Regional (c): | |||||||||||||||||||
Revenue passengers (000) | 9,452 | 9,015 | 8,306 | 7,677 | 7,371 | ||||||||||||||
RPMs (000,000) "traffic" | 3,720 | 3,238 | 2,940 | 2,661 | 2,590 | ||||||||||||||
ASMs (000,000) "capacity" | 4,662 | 4,002 | 3,648 | 3,261 | 3,247 | ||||||||||||||
Load factor | 79.8% | 80.9% | 80.6% | 81.6% | 79.8% | ||||||||||||||
Yield | 24.42¢ | 26.37¢ | 27.40¢ | 29.20¢ | 28.81¢ | ||||||||||||||
PRASM | 19.49¢ | 21.34¢ | 22.08¢ | 23.83¢ | 22.98¢ |
(a) | Capitalized interest was $25 million, $34 million, $20 million, $21 million and $18 million for 2016, 2015, 2014, 2013 and 2012. |
(b) | In the first quarter of 2016, we retrospectively adopted Accounting Standards Update 2015-03 "Simplifying the Presentation of Debt Issuance Costs." Prior year amounts have been adjusted to reflect a reclassification of debt issuance costs. |
(c) | Includes flights under Capacity Purchase Agreements operated by SkyWest and PenAir. |
(d) | See reconciliation to the most directly related Generally Accepted Accounting Principles ("GAAP") measure in the "Results of Operations" section. |
(e) | See "Glossary of Terms" for definitions of the abbreviated terms. |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Year in Review—highlights from 2016 outlining some of the major events that happened during the year and how they affected our financial performance. |
• | Results of Operations—an in-depth analysis of our revenues by segment and our expenses from a consolidated perspective for the three years presented in our consolidated financial statements. To the extent material to the understanding of segment profitability, we more fully describe the segment expenses per financial statement line item. Financial and statistical data is also included here. This section includes forward-looking statements regarding our view of 2017. When providing forward-looking statements on future expectations, we will provide the impact of Virgin America as a separate component of expected changes from 2016. Virgin America was acquired on December 14, 2016 and plays a significant role in the year-over-year change. Further information about the acquisition of Virgin America can be found in Note 2 to the consolidated financial statements. |
• | Liquidity and Capital Resources—an overview of our financial position, analysis of cash flows, sources and uses of cash, contractual obligations and commitments and off-balance sheet arrangements. |
• | Critical Accounting Estimates—a discussion of our accounting estimates that involve significant judgment and uncertainties. |
• | Air Group completed its acquisition of Virgin America Inc. ("Virgin America") on December 14, 2016. |
• | Results for 2016 include the results of operations and cash flows for Virgin America from December 14, 2016 through December 31, 2016, including the impact of purchase accounting. Periods presented prior to the acquisition date do not include Virgin America's results. |
• | Announced a 9% increase in the quarterly dividend, from $0.275 per share to $0.30 per share in February 2017. This is the fourth time we have raised the dividend since initiating the quarterly dividend in July 2013, with a cumulative increase of 200% since that time. |
• | Reported full-year net income under Generally Accepted Accounting Principles ("GAAP") of $814 million, or $6.54 per diluted share. These results compared to full year 2015 net income of $848 million, or $6.56 per diluted share. |
• | Reported full-year 2016 net income, excluding special items, of $911 million, an 8% increase from 2015, and adjusted diluted earnings per share of $7.32, a 12% increase from 2015. |
• | Paid $0.275 per-share quarterly cash dividend in the fourth quarter, bringing total dividend payments in 2016 to $136 million. |
• | Generated approximately $1.4 billion of operating cash flow and $708 million of free cash flow in 2016. |
• | Grew passenger revenues by 4% compared to full-year 2015. |
• | Generated full-year adjusted pretax margin of 24% in 2016, in line with 2015. |
• | Lowered consolidated unit costs, excluding fuel and special items, for the seventh consecutive year, to the lowest level ever. Mainline unit costs excluding fuel and special items have declined 14 of the last 15 years. |
• | Held $1.6 billion in unrestricted cash and marketable securities as of December 31, 2016. |
• | Became the first major U.S. airline to receive approval from the Federal Aviation Administration for its Safety Management System. |
• | Ranked best airline in the U.S. by the Wall Street Journal's "2016 Airline Scorecard" for the fourth year in a row. |
• | Ranked highest in customer satisfaction among traditional carriers in North America in 2016 by J.D. Power and Associates for the ninth year in a row. |
• | Ranked highest in customer satisfaction with airline loyalty rewards programs in 2016 by J.D. Power and Associates for the third consecutive year. |
• | Ranked first in the U.S. News & World Report's list of Best Airline Rewards Programs for the second consecutive year. |
• | Ranked among Forbes' 2016 "America's Best Employers." |
• | Named No. 1 on-time carrier in North America for the seventh year in a row by FlightStats in January 2017. |
• | Received the Department of Defense 2016 Freedom Award, the highest recognition given to employers by the U.S. government for their support of National Guard and Reserve members. |
• | Received 15th Diamond Award of Excellence from the Federal Aviation Administration, recognizing both Alaska and Horizon's aircraft technicians for their commitment to training. |
• | Ranked first in the commercial aviation division and first place overall at the 2016 Annual International Aerospace Maintenance Competition, surpassing over 50 teams from around the world. |
• | Named the No. 1 cargo carrier by Logistics Management magazine as part of its annual Quest for Quality awards. |
• | Joined Standard and Poor's 500 Index. Companies included in the S&P 500 are chosen by the S&P Index Committee based on their size, earnings history and liquidity, among other factors. |
• | Ranked among the Fortune 500 for the third year in a row. |
• | Ranked among the top "green companies" in the United States by Newsweek. |
• | Ranked among the top 100 socially just companies in the United States by Forbes. |
• | Received the Seattle-Tacoma International Airport Green Gateway Environmental Excellence Award for the second year in a row, as a result of efforts in reducing emissions, recycling and waste reduction and lowered energy consumption. |
• | Rated Best U.S. Airline by Conde Nast Traveler in their "Annual Readers' Choice Awards" for nine years in a row. |
• | Ranked Best Domestic Airline in Travel + Leisure "World's Best Awards" for nine years in a row. |
• | Rated the number one carrier in the 2016 Airline Quality Report for the fourth consecutive year, an annual analysis of airline performance metrics conducted by Wichita State University and Embry-Riddle Aeronautical University. |
• | Rated "Best Airline in North America" for the second year in a row and "Best Low-Cost Airline in the U.S." for the seventh year in a row by Skytrax World Airline Awards. |
• | Awarded a record $159 million in incentive pay to employees for 2016, including $32 million earned by Virgin America employees in 2016 prior to the acquisition. |
• | Reached a tentative agreement with Alaska's aircraft technicians on a new collective bargaining agreement. |
• | Alaska received a perfect score of 100% for workplace equality on the 2017 Corporate Equality Index ("CEI"). Virgin America received a score of 95%. |
• | Announced enhanced benefits to the Alaska Airlines Visa Signature credit card and the Alaska Airlines Visa Business credit card including the elimination of foreign transaction fees and increased bonus miles. |
• | Announced a new codeshare agreement and frequent flyer partnership with Japan Airlines, providing Alaska guests seamless travel and mileage earning opportunities. |
• | Launched premium class service on Alaska, including more legroom, complimentary alcoholic beverages and premium snacks. |
• | Flew the first three commercial flights using sustainable alcohol-to-jet biofuel made from U.S. grown corn and alternative jet fuel made from forest residuals, continuing Alaska's commitment to reduce its carbon emissions. |
• | Placed order for 33 firm Embraer 175 ("E175") regional jets and 30 options, to be flown by subsidiary Horizon Air, with first delivery scheduled in 2017. |
• | Added 19 Boeing 737-900ERs aircraft to the operating fleet in 2016, bringing the total fleet to 155 Boeing aircraft. |
• | Added 5 Airbus A320 aircraft to Virgin America's fleet in 2016, bringing the total fleet to 63 Airbus aircraft. |
• | Added 17 new markets in 2016 across the Alaska Air Group and Virgin America networks. |
• | Increased fuel efficiency (as measured by seat-miles per gallon) by 1.4% over 2015. |
• | Donated nearly $13 million to support nonprofits in our local communities, focusing on youth & education, medical (research/transportation) and community outreach. |
• | By eliminating fuel expense and certain special items (including merger-related costs) from our unit metrics, we believe that we have better visibility into the results of operations and 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 lead to 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. |
• | Cost per ASM ("CASM") excluding fuel and certain special items, such as merger-related costs, 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. |
• | Adjusted income before income tax and CASM excluding fuel (and other items as specified in our plan documents) are important metrics for the employee incentive plan, which covers the majority of 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 merger-related costs and mark-to-market hedging adjustments, 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. |
Twelve Months Ended December 31, | |||||||||||||||
2016 | 2015 | ||||||||||||||
(in millions, except per-share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
Reported GAAP net income and diluted EPS | $ | 814 | $ | 6.54 | $ | 848 | $ | 6.56 | |||||||
Mark-to-market fuel hedge adjustments | (13 | ) | (0.11 | ) | — | — | |||||||||
Special items—merger-related costs and other(a) | 117 | 0.94 | 32 | 0.25 | |||||||||||
Income tax effect on special items(b) | (24 | ) | (0.19 | ) | (12 | ) | (0.10 | ) | |||||||
Special tax (benefit)/expense(c) | 17 | 0.14 | (26 | ) | (0.20 | ) | |||||||||
Non-GAAP adjusted net income and diluted EPS | $ | 911 | $ | 7.32 | $ | 842 | $ | 6.51 |
(a) | Refer to Note 11 to the consolidated financial statement for the description of special items. |
(b) | Certain merger-related costs are non-deductible for tax purposes, resulting in a smaller income tax effect for current year adjusting items. |
(c) | Special tax (benefit)/expense represents the discrete impacts of adjustments to our position on income sourcing in various states. |
Twelve Months Ended December 31, | ||||||||||
2016 | 2015 | % Change | ||||||||
Consolidated: | ||||||||||
Total CASM | 10.38 | ¢ | 10.77 | ¢ | (3.6 | ) | ||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 1.88 | 2.39 | (21.3 | ) | ||||||
Special items—merger-related costs and other(a) | 0.27 | 0.08 | 237.5 | |||||||
CASM, excluding fuel and special items | 8.23 | ¢ | 8.30 | ¢ | (0.8 | ) | ||||
Mainline: | ||||||||||
Total CASM | 9.39 | ¢ | 9.77 | ¢ | (3.9 | ) | ||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 1.79 | 2.29 | (21.8 | ) | ||||||
Special items—merger-related costs and other(a) | 0.30 | 0.09 | 233.3 | |||||||
CASM, excluding fuel and special items | 7.30 | ¢ | 7.39 | ¢ | (1.2 | ) |
(a) | Refer to Note 11 to the consolidated financial statement for the description of special items. |
Twelve Months Ended December 31, | |||||||||
2016 | 2015 | Change | 2014 | Change | |||||
Consolidated Operating Statistics:(a) | |||||||||
Revenue passengers (000) | 34,289 | 31,883 | 7.5% | 29,278 | 8.9% | ||||
RPMs (000,000) "traffic" | 37,209 | 33,578 | 10.8% | 30,718 | 9.3% | ||||
ASMs (000,000) "capacity" | 44,135 | 39,914 | 10.6% | 36,078 | 10.6% | ||||
Load factor | 84.3% | 84.1% | 0.2 pts | 85.1% | (1.0) pts | ||||
Yield | 13.45¢ | 14.27¢ | (5.7)% | 14.91¢ | (4.3)% | ||||
PRASM | 11.34¢ | 12.01¢ | (5.6)% | 12.69¢ | (5.4)% | ||||
RASM | 13.44¢ | 14.03¢ | (4.2)% | 14.88¢ | (5.7)% | ||||
CASM excluding fuel and special items(b) | 8.23¢ | 8.30¢ | (0.8)% | 8.36¢ | (0.7)% | ||||
Economic fuel cost per gallon(b) | $1.52 | $1.88 | (19.1)% | $3.08 | (39.0)% | ||||
Fuel gallons (000,000) | 554 | 508 | 9.1% | 469 | 8.3% | ||||
ASM's per gallon | 79.7 | 78.6 | 1.4% | 76.9 | 2.2% | ||||
Average number of full-time equivalent employees (FTEs) | 14,760 | 13,858 | 6.5% | 12,739 | 8.8% | ||||
Mainline Operating Statistics: | |||||||||
Revenue passengers (000) | 24,838 | 22,869 | 8.6% | 20,972 | 9.0% | ||||
RPMs (000,000) "traffic" | 33,489 | 30,340 | 10.4% | 27,778 | 9.2% | ||||
ASMs (000,000) "capacity" | 39,473 | 35,912 | 9.9% | 32,430 | 10.7% | ||||
Load factor | 84.8% | 84.5% | 0.3 pts | 85.7% | (1.2) pts | ||||
Yield | 12.24¢ | 12.98¢ | (5.7)% | 13.58¢ | (4.4)% | ||||
PRASM | 10.38¢ | 10.97¢ | (5.4)% | 11.64¢ | (5.8)% | ||||
CASM excluding fuel and special items(b) | 7.30¢ | 7.39¢ | (1.2)% | 7.45¢ | (0.8)% | ||||
Economic fuel cost per gallon(b) | $1.52 | $1.87 | (18.7)% | $3.07 | (39.1)% | ||||
Fuel gallons (000,000) | 474 | 439 | 8.0% | 407 | 7.9% | ||||
ASM's per gallon | 83.3 | 81.8 | 1.8% | 79.7 | 2.6% | ||||
Average number of FTEs | 11,447 | 10,750 | 6.5% | 9,910 | 8.5% | ||||
Aircraft utilization | 10.5 | 10.8 | (2.8)% | 10.5 | 2.9% | ||||
Average aircraft stage length | 1,225 | 1,195 | 2.5% | 1,182 | 1.1% | ||||
Mainline operating fleet at period-end | 218 a/c | 147 a/c | 71 a/c | 137 a/c | 10 a/c | ||||
Regional Operating Statistics:(c) | |||||||||
Revenue passengers (000) | 9,452 | 9,015 | 4.8% | 8,306 | 8.5% | ||||
RPMs (000,000) "traffic" | 3,720 | 3,238 | 14.9% | 2,940 | 10.1% | ||||
ASMs (000,000) "capacity" | 4,662 | 4,002 | 16.5% | 3,648 | 9.7% | ||||
Load factor | 79.8% | 80.9% | (1.1) pts | 80.6% | 0.3 pts | ||||
Yield | 24.42¢ | 26.37¢ | (7.4)% | 27.40¢ | (3.8)% | ||||
PRASM | 19.49¢ | 21.34¢ | (8.7)% | 22.08¢ | (3.4)% |
(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. |
Twelve Months Ended December 31, | |||||||||
(in millions) | 2016 | 2015 | % Change | ||||||
Passenger | |||||||||
Mainline | $ | 4,098 | $ | 3,939 | 4 | ||||
Regional | 908 | 854 | 6 | ||||||
Total passenger revenue | $ | 5,006 | $ | 4,793 | 4 | ||||
Freight and mail | 108 | 108 | — | ||||||
Other—net | 817 | 697 | 17 | ||||||
Total operating revenues | $ | 5,931 | $ | 5,598 | 6 |
Twelve Months Ended December 31, | ||||||||||
(in millions) | 2016 | 2015 | % Change | |||||||
Fuel expense | $ | 831 | $ | 954 | (13 | ) | ||||
Non-fuel expenses | 3,634 | 3,314 | 10 | |||||||
Special items—merger-related costs and other | 117 | 32 | 266 | |||||||
Total Operating Expenses | $ | 4,582 | $ | 4,300 | 7 |
Twelve Months Ended December 31, | ||||||||||
(in millions) | 2016 | 2015 | % Change | |||||||
Wages | $ | 1,022 | $ | 945 | 8 | |||||
Medical and other benefits | 192 | 153 | 25 | |||||||
Defined contribution plans | 67 | 60 | 12 | |||||||
Pension—Defined benefit plans | 25 | 28 | (11 | ) | ||||||
Payroll taxes | 76 | 68 | 12 | |||||||
Total wages and benefits | $ | 1,382 | $ | 1,254 | 10 |
Twelve Months Ended December 31, | |||||||||||||||
2016 | 2015 | ||||||||||||||
(in millions, except for per gallon amounts) | Dollars | Cost/Gal | Dollars | Cost/Gal | |||||||||||
Raw or "into-plane" fuel cost | $ | 828 | $ | 1.49 | $ | 935 | $ | 1.84 | |||||||
Losses on settled hedges | 16 | 0.03 | 19 | 0.04 | |||||||||||
Consolidated economic fuel expense | $ | 844 | $ | 1.52 | $ | 954 | $ | 1.88 | |||||||
Mark-to-market fuel hedge adjustments | (13 | ) | (0.02 | ) | — | — | |||||||||
GAAP fuel expense | $ | 831 | $ | 1.50 | $ | 954 | $ | 1.88 | |||||||
Fuel gallons | 554 | 508 |
Twelve Months Ended December 31, | |||||||||||||||
2015 | 2014 | ||||||||||||||
(in millions, except per-share amounts) | Dollars | Diluted EPS | Dollars | Diluted EPS | |||||||||||
Reported GAAP net income and diluted EPS | $ | 848 | $ | 6.56 | $ | 605 | $ | 4.42 | |||||||
Mark-to-market fuel hedge adjustments | — | — | (23 | ) | (0.16 | ) | |||||||||
Special items | 32 | 0.25 | $ | (30 | ) | $ | (0.22 | ) | |||||||
Income tax effect of special items | (12 | ) | (0.10 | ) | 19 | 0.14 | |||||||||
Special income tax benefit(a) | (26 | ) | (0.20 | ) | — | — | |||||||||
Non-GAAP adjusted net income and diluted EPS | $ | 842 | $ | 6.51 | $ | 571 | $ | 4.18 |
(a) | Special tax benefit represents the discrete impacts of adjustments to our position on income sourcing in various states. |
Twelve Months Ended December 31, | ||||||||||
2015 | 2014 | % Change | ||||||||
Consolidated: | ||||||||||
Total operating expenses per ASM (CASM) | 10.77 | ¢ | 12.21 | ¢ | (11.8 | ) | ||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 2.39 | 3.93 | (39.2 | ) | ||||||
Special items | 0.08 | (0.08 | ) | NM | ||||||
CASM, excluding fuel and special items | 8.30 | ¢ | 8.36 | ¢ | (0.7 | ) | ||||
Mainline: | ||||||||||
Total operating expenses per ASM (CASM) | 9.77 | ¢ | 11.15 | ¢ | (12.4 | ) | ||||
Less the following components: | ||||||||||
Aircraft fuel, including hedging gains and losses | 2.29 | 3.79 | (39.6 | ) | ||||||
Special items | 0.09 | (0.09 | ) | NM | ||||||
CASM, excluding fuel and special items | 7.39 | ¢ | 7.45 | ¢ | (0.8 | ) |
Twelve Months Ended December 31, | ||||||||||
(in millions) | 2015 | 2014 | % Change | |||||||
Passenger | ||||||||||
Mainline | $ | 3,939 | $ | 3,774 | 4 | |||||
Regional | 854 | 805 | 6 | |||||||
Total passenger revenue | $ | 4,793 | $ | 4,579 | 5 | |||||
Freight and mail | 108 | 114 | (5 | ) | ||||||
Other—net | 697 | 675 | 3 | |||||||
Total operating revenues | $ | 5,598 | $ | 5,368 | 4 |
Twelve Months Ended December 31, | ||||||||||
(in millions) | 2015 | 2014 | % Change | |||||||
Fuel expense | $ | 954 | $ | 1,418 | (33 | ) | ||||
Non-fuel expenses | 3,314 | 3,018 | 10 | |||||||
Special items | 32 | (30 | ) | NM | ||||||
Total Operating Expenses | $ | 4,300 | $ | 4,406 | (2 | ) |
Twelve Months Ended December 31, | |||||||||
(in millions) | 2015 | 2014 | % Change | ||||||
Wages | $ | 945 | $ | 862 | 10 | ||||
Medical and other benefits | 153 | 150 | 2 | ||||||
Defined contribution plans | 60 | 53 | 13 | ||||||
Pension—defined benefit plans | 28 | 9 | 211 | ||||||
Payroll taxes | 68 | 62 | 10 | ||||||
Total wages and benefits | $ | 1,254 | $ | 1,136 | 10 |
Twelve Months Ended December 31, | |||||||||||||||
2015 | 2014 | ||||||||||||||
(in millions, except for per gallon amounts) | Dollars | Cost/Gal | Dollars | Cost/Gal | |||||||||||
Raw or "into-plane" fuel cost | $ | 935 | $ | 1.84 | $ | 1,400 | $ | 2.99 | |||||||
Losses on settled hedges | 19 | 0.04 | 41 | 0.09 | |||||||||||
Consolidated economic fuel expense | $ | 954 | $ | 1.88 | $ | 1,441 | $ | 3.08 | |||||||
Mark-to-mark fuel hedge adjustments | — | — | (23 | ) | (0.05 | ) | |||||||||
GAAP fuel expense | $ | 954 | $ | 1.88 | $ | 1,418 | $ | 3.03 | |||||||
Fuel gallons | 508 | 469 |
• | Our existing cash and marketable securities balance of $1.6 billion and our expected cash from operations; |
• | Our 52 unencumbered aircraft in the operating fleet as of December 31, 2016, that could be financed, if necessary; and |
• | Our combined $200 million bank line-of-credit facilities, with none currently outstanding. |
(in millions, except per share and debt-to-capital amounts) | December 31, 2016 | December 31, 2015 | Change | ||
Cash and marketable securities | $1,580 | $1,328 | $252 | ||
Cash, marketable securities and unused lines of credit as a percentage of trailing twelve months revenue | 31% | 28% | 3 pts | ||
Long-term debt, net of current portion | 2,645 | 569 | 2,076 | ||
Shareholders’ equity | 2,931 | 2,411 | 520 | ||
Long-term debt-to-capital ratio(a) | 59% | 27% | 32 pts |
(a) | Calculated using the present value of remaining aircraft lease payments for aircraft that are in our operating fleet as of the balance sheet date. |
(in millions) | 2016 Actuals | 2017 | 2018 | 2019 | 2020 | ||||||||||||||
Aircraft and aircraft purchase deposits - firm(a) | $ | 528 | $ | 805 | $ | 685 | $ | 595 | $ | 290 | |||||||||
Other flight equipment | 53 | 145 | 135 | 95 | 55 | ||||||||||||||
Other property and equipment | 97 | 215 | 205 | 90 | 75 | ||||||||||||||
Total property and equipment additions | $ | 678 | $ | 1,165 | $ | 1,025 | $ | 780 | $ | 420 | |||||||||
Option aircraft and aircraft deposits, if exercised | $ | — | $ | 60 | $ | 235 | $ | 705 | $ | 1,415 |
(a) | Excludes orders with cancellation options. |
Actual Fleet Count | Expected Fleet Activity(a) | ||||||||||||||||
Aircraft | Dec 31, 2015 | Dec 31, 2016 | 2017 Changes | Dec 31, 2017 | 2018 - 2019 Changes | Dec 31, 2019 | |||||||||||
B737 Freighters & Combis(b) | 6 | 6 | (3 | ) | 3 | — | 3 | ||||||||||
B737 Passenger Aircraft(b) | 141 | 149 | 2 | 151 | 15 | 166 | |||||||||||
Airbus Passenger Aircraft | — | 63 | 5 | 68 | 4 | 72 | |||||||||||
Total Mainline Fleet | 147 | 218 | 4 | 222 | 19 | 241 | |||||||||||
Q400(c) | 52 | 52 | — | 52 | (15 | ) | 37 | ||||||||||
E175(c) | 5 | 15 | 18 | 33 | 20 | 53 | |||||||||||
CRJ700(c) | 8 | — | — | — | — | — | |||||||||||
Total Regional Fleet | 65 | 67 | 18 | 85 | 5 | 90 | |||||||||||
Total | 212 | 285 | 22 | 307 | 24 | 331 |
(a) | The expected fleet counts at December 31, 2017, 2018 and 2019 are subject to change. |
(b) | 2017 changes in passenger aircraft reflect delivery of 14 Boeing 737-900ER aircraft, retirement of 10 B737-400 aircraft and the conversion of two B737-700 aircraft into freighters. The freighter and combi changes reflect retirement of five combis and one freighter and the reintroduction of three B737-700 aircraft as freighters. |
(c) | Aircraft are either owned or leased by Horizon or operated under capacity purchase agreement with a third party. |
Approximate % of Expected Fuel Requirements | Weighted-Average Crude Oil Price per Barrel | Average Premium Cost per Barrel | |||
First Quarter 2017 | 50% | $60 | $2 | ||
Second Quarter 2017 | 50% | $62 | $2 | ||
Third Quarter 2017 | 40% | $63 | $2 | ||
Fourth Quarter 2017 | 30% | $65 | $3 | ||
Full Year 2017 | 42% | $62 | $2 | ||
First Quarter 2018 | 20% | $65 | $3 | ||
Second Quarter 2018 | 10% | $67 | $2 | ||
Full Year 2018 | 7% | $65 | $2 |
(in millions) | 2017 | 2018 | 2019 | 2020 | 2021 | Beyond 2021 | Total | ||||||||||||||||||||
Current and long-term debt obligations | $ | 321 | $ | 351 | $ | 424 | $ | 451 | $ | 424 | $ | 1,007 | $ | 2,978 | |||||||||||||
Operating lease commitments(a) | 425 | 389 | 368 | 336 | 292 | 1,124 | 2,934 | ||||||||||||||||||||
Aircraft maintenance deposits(b) | 59 | 61 | 65 | 68 | 63 | 90 | 406 | ||||||||||||||||||||
Aircraft purchase commitments (c) | 926 | 848 | 694 | 354 | 277 | 361 | 3,460 | ||||||||||||||||||||
Interest obligations(d) | 90 | 78 | 66 | 54 | 40 | 96 | 424 | ||||||||||||||||||||
Aircraft maintenance and parts management (e) | 30 | 32 | 35 | 37 | 40 | — | 174 | ||||||||||||||||||||
Other obligations(f) | 80 | 84 | 89 | 94 | 98 | 692 | 1,137 | ||||||||||||||||||||
Total | $ | 1,931 | $ | 1,843 | $ | 1,741 | $ | 1,394 | $ | 1,234 | $ | 3,370 | $ | 11,513 |
(a) | Operating lease commitments generally include aircraft operating leases, airport property and hangar leases, office space, and other equipment leases. Included here are Airbus aircraft operated by Virgin America and E175 aircraft that are operated by SkyWest under a capacity purchase agreement. |
(b) | Aircraft maintenance deposits relate to leased Airbus aircraft. |
(c) | Represents non-cancelable contractual payment commitments for aircraft and engines. |
(d) | For variable-rate debt, future obligations are shown above using interest rates forecast as of December 31, 2016. |
(e) | Includes minimum obligations under a parts management and maintenance agreement with a third-party vendor. |
(f) | Includes minimum obligations associated with the SkyWest third-party CPA. Refer to Note 9 in the consolidated financial statements for further information. |
1. | The rate at which we defer sales proceeds related to services sold through non-airline partners: |
2. | The number of miles that will not be redeemed for travel (breakage): |
3. | The number of miles used per award: |
4. | The number of awards redeemed for travel on our airlines versus other airlines: |
5. | The costs that will be incurred to provide award travel for miles earned by guests who fly on us or our airline partners: |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||||||||||||||||||
(in millions, except per share) | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||
Operating revenues | $ | 1,347 | $ | 1,269 | $ | 1,494 | $ | 1,437 | $ | 1,566 | $ | 1,515 | $ | 1,524 | $ | 1,377 | |||||||||||||||
Operating income | 290 | 238 | 418 | 372 | 400 | 433 | 241 | 255 | |||||||||||||||||||||||
Net income | 184 | 149 | 260 | 234 | 256 | 274 | 114 | 191 | |||||||||||||||||||||||
Basic earnings per share(a) | 1.47 | 1.13 | 2.11 | 1.80 | 2.08 | 2.15 | 0.92 | 1.52 | |||||||||||||||||||||||
Diluted earnings per share(a) | 1.46 | 1.12 | 2.10 | 1.79 | 2.07 | 2.14 | 0.92 | 1.51 |
(a) | For earnings per share, the sum of the quarters may not equal the total for the full year due to rounding. |
As of December 31 (in millions) | 2016 | 2015 | ||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 328 | $ | 73 | ||||
Marketable securities | 1,252 | 1,255 | ||||||
Total cash and marketable securities | 1,580 | 1,328 | ||||||
Receivables—less allowance for doubtful accounts of $1 and $1 | 302 | 212 | ||||||
Inventories and supplies—net | 47 | 51 | ||||||
Prepaid expenses and other current assets | 121 | 72 | ||||||
Total Current Assets | 2,050 | 1,663 | ||||||
Property and Equipment | ||||||||
Aircraft and other flight equipment | 6,947 | 5,690 | ||||||
Other property and equipment | 1,103 | 955 | ||||||
Deposits for future flight equipment | 545 | 771 | ||||||
8,595 | 7,416 | |||||||
Less accumulated depreciation and amortization | 2,929 | 2,614 | ||||||
Total Property and Equipment—Net | 5,666 | 4,802 | ||||||
Other Assets | ||||||||
Goodwill | 1,934 | — | ||||||
Intangible assets | 143 | — | ||||||
Other noncurrent assets | 169 | 65 | ||||||
Total Other Assets | 2,246 | 65 | ||||||
Total Assets | $ | 9,962 | $ | 6,530 |
As of December 31 (in millions except share amounts) | 2016 | 2015 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 92 | $ | 63 | ||||
Accrued wages, vacation and payroll taxes | 397 | 298 | ||||||
Air traffic liability | 849 | 669 | ||||||
Other accrued liabilities | 878 | 661 | ||||||
Current portion of long-term debt | 319 | 114 | ||||||
Total Current Liabilities | 2,535 | 1,805 | ||||||
Long-Term Debt, Net of Current Portion | 2,645 | 569 | ||||||
Other Liabilities and Credits | ||||||||
Deferred income taxes | 463 | 682 | ||||||
Deferred revenue | 640 | 431 | ||||||
Obligation for pension and postretirement medical benefits | 331 | 270 | ||||||
Other liabilities | 417 | 362 | ||||||
Total Other Liabilities and Credits | 1,851 | 1,745 | ||||||
Commitments and Contingencies (Note 9) | ||||||||
Shareholders' Equity | ||||||||
Preferred stock, $0.01 par value, Authorized: 5,000,000 shares, none issued or outstanding | — | — | ||||||
Common stock, $0.01 par value, Authorized: 200,000,000 shares, Issued: 2016 - 129,189,634 shares; 2015 - 128,442,099 shares, Outstanding: 2016 - 123,328,051 shares; 2015 - 125,175,325 shares | 1 | 1 | ||||||
Capital in excess of par value | 110 | 73 | ||||||
Treasury stock (common), at cost: 2016 - 5,861,583 shares; 2015 - 3,266,774 shares | (443) | (250) | ||||||
Accumulated other comprehensive loss | (305) | (303) | ||||||
Retained earnings | 3,568 | 2,890 | ||||||
2,931 | 2,411 | |||||||
Total Liabilities and Shareholders' Equity | $ | 9,962 | $ | 6,530 |
Year Ended December 31 (in millions, except per-share amounts) | 2016 | 2015 | 2014 | ||||||||
Operating Revenues | |||||||||||
Passenger | |||||||||||
Mainline | $ | 4,098 | $ | 3,939 | $ | 3,774 | |||||
Regional | 908 | 854 | 805 | ||||||||
Total passenger revenue | 5,006 | 4,793 | 4,579 | ||||||||
Freight and mail | 108 | 108 | 114 | ||||||||
Other—net | 817 | 697 | 675 | ||||||||
Total Operating Revenues | 5,931 | 5,598 | 5,368 | ||||||||
Operating Expenses | |||||||||||
Wages and benefits | 1,382 | 1,254 | 1,136 | ||||||||
Variable incentive pay | 127 | 120 | 116 | ||||||||
Aircraft fuel, including hedging gains and losses | 831 | 954 | 1,418 | ||||||||
Aircraft maintenance | 270 | 253 | 229 | ||||||||
Aircraft rent | 114 | 105 | 110 | ||||||||
Landing fees and other rentals | 320 | 296 | 279 | ||||||||
Contracted services | 247 | 214 | 196 | ||||||||
Selling expenses | 225 | 211 | 199 | ||||||||
Depreciation and amortization | 363 | 320 | 294 | ||||||||
Food and beverage service | 126 | 113 | 93 | ||||||||
Third-party regional carrier expense | 95 | 72 | 58 | ||||||||
Other | 365 | 356 | 308 | ||||||||
Special items—merger-related costs and other | 117 | 32 | (30 | ) | |||||||
Total Operating Expenses | 4,582 | 4,300 | 4,406 | ||||||||
Operating Income | 1,349 | 1,298 | 962 | ||||||||
Nonoperating Income (Expense) | |||||||||||
Interest income | 27 | 21 | 21 | ||||||||
Interest expense | (55 | ) | (42 | ) | (48 | ) | |||||
Interest capitalized | 25 | 34 | 20 | ||||||||
Other—net | (1 | ) | 1 | 20 | |||||||
(4 | ) | 14 | 13 | ||||||||
Income before income tax | 1,345 | 1,312 | 975 | ||||||||
Income tax expense | 531 | 464 | 370 | ||||||||
Net Income | $ | 814 | $ | 848 | $ | 605 | |||||
Basic Earnings Per Share | $ | 6.59 | $ | 6.61 | $ | 4.47 | |||||
Diluted Earnings Per Share | $ | 6.54 | $ | 6.56 | $ | 4.42 | |||||
Shares used for computation: | |||||||||||
Basic | 123.557 | 128.373 | 135.445 | ||||||||
Diluted | 124.389 | 129.372 | 136.801 | ||||||||
Cash dividend declared per share | $ | 1.10 | $ | 0.80 | $ | 0.50 |
Year Ended December 31 (in millions) | 2016 | 2015 | 2014 | ||||||||
Net Income | $ | 814 | $ | 848 | $ | 605 | |||||
Other Comprehensive Income (Loss): | |||||||||||
Related to marketable securities: | |||||||||||
Unrealized holding gains (losses) arising during the period | 1 | (6 | ) | 2 | |||||||
Reclassification of (gains) losses into Other-net nonoperating income (expense) | (1 | ) | 1 | (2 | ) | ||||||
Income tax benefit (expense) | — | 2 | — | ||||||||
Total | — | (3 | ) | — | |||||||
Related to employee benefit plans: | |||||||||||
Actuarial gains (losses) related to pension and other postretirement benefit plans | (43 | ) | 10 | (210 | ) | ||||||
Reclassification of net pension expense into Wages and benefits | 20 | 14 | 9 | ||||||||
Income tax benefit (expense) | 12 | (14 | ) | 76 | |||||||
Total | (11 | ) | 10 | (125 | ) | ||||||
Related to interest rate derivative instruments: | |||||||||||
Unrealized holding gains (losses) arising during the period | 8 | (5 | ) | (8 | ) | ||||||
Reclassification of losses into Aircraft rent | 6 | 6 | 6 | ||||||||
Income tax benefit (expense) | (5 | ) | (1 | ) | — | ||||||
Total | 9 | — | (2 | ) | |||||||
Other Comprehensive Income (Loss) | (2 | ) | 7 | (127 | ) | ||||||
Comprehensive Income | $ | 812 | $ | 855 | $ | 478 |
(in millions) | Common Stock Outstanding | Common Stock | Capital in Excess of Par Value | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total | |||||||||||||||||||
Balances at December 31, 2013 | 137.492 | $ | 1 | $ | 606 | $ | (2 | ) | $ | (183 | ) | $ | 1,607 | $ | 2,029 | |||||||||||
2014 net income | — | — | — | — | — | 605 | 605 | |||||||||||||||||||
Other comprehensive income/(loss) | — | — | — | — | (127 | ) | — | (127 | ) | |||||||||||||||||
Common stock repurchase | (7.317 | ) | — | (346 | ) | (2 | ) | — | — | (348 | ) | |||||||||||||||
Stock-based compensation | — | — | 16 | — | — | — | 16 | |||||||||||||||||||
Cash dividend declared | — | — | — | — | — | (68 | ) | (68 | ) | |||||||||||||||||
Stock issued for employee stock purchase plan | 0.299 | — | 9 | — | — | — | 9 | |||||||||||||||||||
Stock issued under stock plans | 1.007 | — | 11 | — | — | — | 11 | |||||||||||||||||||
Balances at December 31, 2014 | 131.481 | 1 | 296 | (4 | ) | (310 | ) | 2,144 | 2,127 | |||||||||||||||||
2015 net income | — | — | — | — | — | 848 | 848 | |||||||||||||||||||
Other comprehensive income/(loss) | — | — | — | — | 7 | — | 7 | |||||||||||||||||||
Common stock repurchase | (7.208 | ) | — | (259 | ) | (246 | ) | — | — | (505 | ) | |||||||||||||||
Stock-based compensation | — | — | 17 | — | — | — | 17 | |||||||||||||||||||
Cash dividend declared | — | — | — | — | — | (102 | ) | (102 | ) | |||||||||||||||||
Stock issued for employee stock purchase plan | 0.281 | — | 13 | — | — | — | 13 | |||||||||||||||||||
Stock issued under stock plans | 0.621 | — | 6 | — | — | — | 6 | |||||||||||||||||||
Balances at December 31, 2015 | 125.175 | 1 | 73 | (250 | ) | (303 | ) | 2,890 | 2,411 | |||||||||||||||||
2016 net income | — | — | — | — | — | 814 | 814 | |||||||||||||||||||
Other comprehensive income/(loss) | — | — | — | — | (2 | ) | — | (2 | ) | |||||||||||||||||
Common stock repurchase | (2.595 | ) | — | — | (193 | ) | — | — | (193 | ) | ||||||||||||||||
Stock-based compensation | — | — | 19 | — | — | — | 19 | |||||||||||||||||||
Cash dividend declared | — | — | — | — | — | (136 | ) | (136 | ) | |||||||||||||||||
Stock issued for employee stock purchase plan | 0.309 | — | 17 | — | — | — | 17 | |||||||||||||||||||
Stock issued under stock plans | 0.439 | — | 1 | — | — | — | 1 | |||||||||||||||||||
Balances at December 31, 2016 | 123.328 | $ | 1 | $ | 110 | $ | (443 | ) | $ | (305 | ) | $ | 3,568 | $ | 2,931 |
Year Ended December 31 (in millions) | 2016 | 2015 | 2014 | |||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 814 | $ | 848 | $ | 605 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 363 | 320 | 294 | |||||||||
Stock-based compensation and other | 26 | 25 | 6 | |||||||||
Changes in certain assets and liabilities: | ||||||||||||
Changes in deferred tax provision | 94 | 56 | 114 | |||||||||
(Increase) decrease in accounts receivable | (46 | ) | 47 | (110 | ) | |||||||
Increase (decrease) in air traffic liability | 9 | 38 | 67 | |||||||||
Increase (decrease) in deferred revenue | 83 | 57 | 40 | |||||||||
Changes in pension and other postretirement benefits | 23 | 36 | (18 | ) | ||||||||
Other—net | 20 | 157 | 32 | |||||||||
Net cash provided by operating activities | 1,386 | 1,584 | 1,030 | |||||||||
Cash flows from investing activities: | ||||||||||||
Property and equipment additions: | ||||||||||||
Aircraft and aircraft purchase deposits | (528 | ) | (681 | ) | (498 | ) | ||||||
Other flight equipment | (53 | ) | (79 | ) | (131 | ) | ||||||
Other property and equipment | (97 | ) | (71 | ) | (65 | ) | ||||||
Total property and equipment additions | (678 | ) | (831 | ) | (694 | ) | ||||||
Acquisition of Virgin America, net of cash acquired | (1,951 | ) | — | — | ||||||||
Purchases of marketable securities | (960 | ) | (1,327 | ) | (949 | ) | ||||||
Sales and maturities of marketable securities | 962 | 1,175 | 1,092 | |||||||||
Proceeds from disposition of assets and changes in restricted deposits | 5 | 53 | 10 | |||||||||
Net cash used in investing activities | (2,622 | ) | (930 | ) | (541 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of long-term debt, net of issuance costs | 2,044 | — | 51 | |||||||||
Long-term debt payments | (249 | ) | (116 | ) | (119 | ) | ||||||
Common stock repurchases | (193 | ) | (505 | ) | (348 | ) | ||||||
Cash dividend paid | (136 | ) | (102 | ) | (68 | ) | ||||||
Other financing activities | 25 | 35 | 22 | |||||||||
Net cash provided by (used in) financing activities | 1,491 | (688 | ) | (462 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | 255 | (34 | ) | 27 | ||||||||
Cash and cash equivalents at beginning of year | 73 | 107 | 80 | |||||||||
Cash and cash equivalents at end of year | $ | 328 | $ | 73 | $ | 107 | ||||||
Supplemental disclosure: | ||||||||||||
Cash paid during the year for: | ||||||||||||
Interest, net of amount capitalized | $ | 24 | $ | 8 | $ | 28 | ||||||
Income taxes, net of refunds received | 459 | 349 | 326 |
Aircraft and related flight equipment: | |
Boeing 737 and Airbus 319/320 aircraft | 20-25 years |
Bombardier Q400 aircraft | 15 years |
Buildings | 25 - 30 years |
Minor building and land improvements | 10 years |
Capitalized leases and leasehold improvements | Generally shorter of lease term or estimated useful life |
Computer hardware and software | 3-10 years |
Other furniture and equipment | 5-10 years |
2016 | 2015 | ||||||
Current Liabilities: | |||||||
Other accrued liabilities | $ | 484 | $ | 368 | |||
Other Liabilities and Credits: | |||||||
Deferred revenue | 638 | 427 | |||||
Other liabilities | 21 | 19 | |||||
Total | $ | 1,143 | $ | 814 |
2016 | 2015 | 2014 | |||||||||
Passenger revenues | $ | 293 | $ | 267 | $ | 246 | |||||
Other—net revenues | 429 | 329 | 295 | ||||||||
Total frequent flyer program revenues | $ | 722 | $ | 596 | $ | 541 |
December 14, 2016 | |||
Number of shares of Virgin America common stock issued and outstanding | 44.645 | ||
Multiplied by cash consideration for each share of common stock per the merger agreement | $ | 57.00 | |
Cash consideration paid for common stock issued and outstanding | 2,545 | ||
Accelerated and vested equity awards attributable to pre-acquisition service | 51 | ||
Total Purchase Price | $ | 2,596 |
December 14, 2016 | |||
Cash and cash equivalents | $ | 645 | |
Receivables | 44 | ||
Prepaid expenses and other current assets | 16 | ||
Property and equipment | 560 | ||
Intangible assets | 143 | ||
Goodwill | 1,934 | ||
Other assets | 84 | ||
Total assets | 3,426 | ||
Accounts payable | 22 | ||
Accrued wages, vacation and payroll taxes | 51 | ||
Air traffic liabilities | 172 | ||
Other accrued liabilities | 196 | ||
Current portion of long-term debt | 125 | ||
Long-term debt, net of current portion | 360 | ||
Deferred income taxes | (304 | ) | |
Deferred revenue | 126 | ||
Other liabilities | 82 | ||
Total liabilities | 830 | ||
Total purchase price | $ | 2,596 |
(in millions, except per share amounts) | Years Ended December 31, | |||||||
2016 | 2015 | |||||||
Revenue | $ | 7,511 | $ | 7,111 | ||||
Net Income | 1,008 | 914 |
December 31, 2016 | Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||
Cash | $ | 283 | $ | — | $ | — | $ | 283 | |||||||
Cash equivalents | 45 | — | — | 45 | |||||||||||
Cash and cash equivalents | 328 | — | — | 328 | |||||||||||
U.S. government and agency securities | 290 | — | (3 | ) | 287 | ||||||||||
Foreign government bonds | 36 | — | — | 36 | |||||||||||
Asset-backed securities | 138 | — | — | 138 | |||||||||||
Mortgage-backed securities | 89 | — | — | 89 | |||||||||||
Corporate notes and bonds | 693 | 2 | (4 | ) | 691 | ||||||||||
Municipal securities | 11 | — | — | 11 | |||||||||||
Marketable securities | 1,257 | 2 | (7 | ) | 1,252 | ||||||||||
Total | $ | 1,585 | $ | 2 | $ | (7 | ) | $ | 1,580 |
December 31, 2015 | Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||
Cash | $ | 4 | $ | — | $ | — | $ | 4 | |||||||
Cash equivalents | 69 | — | — | 69 | |||||||||||
Cash and cash equivalents | 73 | — | — | 73 | |||||||||||
U.S. government and agency securities | 254 | — | (1 | ) | 253 | ||||||||||
Foreign government bonds | 31 | — | — | 31 | |||||||||||
Asset-backed securities | 130 | — | — | 130 | |||||||||||
Mortgage-backed securities | 117 | — | (1 | ) | 116 | ||||||||||
Corporate notes and bonds | 711 | 1 | (4 | ) | 708 | ||||||||||
Municipal securities | 17 | — | — | 17 | |||||||||||
Marketable securities | 1,260 | 1 | (6 | ) | 1,255 | ||||||||||
Total | $ | 1,333 | $ | 1 | $ | (6 | ) | $ | 1,328 |
2016 | 2015 | 2014 | |||||||||
Proceeds from sales and maturities | $ | 962 | $ | 1,175 | $ | 1,092 | |||||
Gross realized gains | 3 | 2 | 4 | ||||||||
Gross realized losses | (1 | ) | (3 | ) | (2 | ) |
December 31, 2016 | Cost Basis | Fair Value | |||||
Due in one year or less | $ | 182 | $ | 182 | |||
Due after one year through five years | 1,070 | 1,065 | |||||
Due after five years through 10 years | 5 | 5 | |||||
Due after 10 years | — | — | |||||
Total | $ | 1,257 | $ | 1,252 |
2016 | 2015 | ||||||
Derivative Instruments Not Designated as Hedges | |||||||
Fuel hedge contracts | |||||||
Prepaid expenses and other current assets | $ | 17 | $ | 2 | |||
Other assets | 3 | 2 | |||||
Derivative Instruments Designated as Hedges | |||||||
Interest rate swaps | |||||||
Other accrued liabilities | (5 | ) | (5 | ) | |||
Other liabilities | — | (13 | ) | ||||
Losses in accumulated other comprehensive loss (AOCL) | (5 | ) | (18 | ) |
2016 | 2015 | 2014 | |||||||||
Derivative Instruments Not Designated as Hedges | |||||||||||
Fuel hedge contracts | |||||||||||
Gains (losses) recognized in Aircraft fuel | $ | (3 | ) | $ | (19 | ) | $ | (18 | ) | ||
Derivative Instruments Designated as Hedges | |||||||||||
Interest rate swaps | |||||||||||
Gains (losses) recognized in Aircraft rent | (6 | ) | (6 | ) | (6 | ) | |||||
Gains (losses) recognized in other comprehensive income (OCI) | 8 | (5 | ) | (8 | ) |
December 31, 2016 | Level 1 | Level 2 | Total | ||||||||
Assets | |||||||||||
Marketable securities | |||||||||||
U.S. government and agency securities | $ | 287 | $ | — | $ | 287 | |||||
Foreign government bonds | — | 36 | 36 | ||||||||
Asset-backed securities | — | 138 | 138 | ||||||||
Mortgage-backed securities | — | 89 | 89 | ||||||||
Corporate notes and bonds | — | 691 | 691 | ||||||||
Municipal securities | — | 11 | 11 | ||||||||
Derivative instruments | |||||||||||
Fuel hedge contracts—call options | — | 20 | 20 | ||||||||
Liabilities | |||||||||||
Derivative instruments | |||||||||||
Interest rate swap agreements | — | (5 | ) | (5 | ) |
December 31, 2015 | Level 1 | Level 2 | Total | ||||||||
Assets | |||||||||||
Marketable securities | |||||||||||
U.S. government and agency securities | $ | 253 | $ | — | $ | 253 | |||||
Foreign government bonds | — | 31 | 31 | ||||||||
Asset-backed securities | — | 130 | 130 | ||||||||
Mortgage-backed securities | — | 116 | 116 | ||||||||
Corporate notes and bonds | — | 708 | 708 | ||||||||
Municipal securities | — | 17 | 17 | ||||||||
Derivative instruments | |||||||||||
Fuel hedge contracts—call options | — | 4 | 4 | ||||||||
Liabilities | |||||||||||
Derivative instruments | |||||||||||
Interest rate swap agreements | — | (18 | ) | (18 | ) |
2016 | 2015 | ||||||
Carrying amount | $ | 1,179 | $ | 520 | |||
Fair value | 1,199 | 557 |
2016 | 2015 | ||||||
Fixed-rate notes payable due through 2028 | $ | 1,179 | $ | 520 | |||
Variable-rate notes payable due through 2028 | 1,803 | 166 | |||||
Less debt issuance costs | (18 | ) | (3 | ) | |||
Long-term debt | 2,964 | 683 | |||||
Less current portion | 319 | 114 | |||||
$ | 2,645 | $ | 569 | ||||
Weighted-average fixed-interest rate | 4.4 | % | 5.7 | % | |||
Weighted-average variable-interest rate | 2.4 | % | 1.8 | % |
Total | |||
2017 | $ | 321 | |
2018 | 351 | ||
2019 | 424 | ||
2020 | 451 | ||
2021 | 424 | ||
Thereafter | 1,007 | ||
Total principal payments | $ | 2,978 |
2016 | 2015 | ||||||
Excess of tax over book depreciation | $ | 1,282 | $ | 1,110 | |||
Intangibles | 39 | — | |||||
Other—net | 26 | 23 | |||||
Gross deferred tax liabilities | 1,347 | 1,133 | |||||
Mileage Plan™ | (310 | ) | (208 | ) | |||
Inventory obsolescence | (23 | ) | (22 | ) | |||
Deferred gains | (8 | ) | (8 | ) | |||
Employee benefits | (196 | ) | (167 | ) | |||
Fuel hedge contracts | — | (5 | ) | ||||
Acquired net operating losses | (289 | ) | — | ||||
Other—net | (62 | ) | (41 | ) | |||
Gross deferred tax assets | (888 | ) | (451 | ) | |||
Valuation allowance | 4 | — | |||||
Net deferred tax (assets) liabilities | $ | 463 | $ | 682 |
2016 | 2015 | 2014 | |||||||||
Current income tax expense: | |||||||||||
Federal | $ | 392 | $ | 397 | $ | 229 | |||||
State | 48 | 30 | 27 | ||||||||
Total current income tax expense | 440 | 427 | 256 | ||||||||
Deferred income tax expense: | |||||||||||
Federal | 77 | 60 | 103 | ||||||||
State | 14 | (23 | ) | 11 | |||||||
Total deferred income tax expense | 91 | 37 | 114 | ||||||||
Income tax expense | $ | 531 | $ | 464 | $ | 370 |
2016 | 2015 | 2014 | |||||||||
Income before income tax | $ | 1,345 | $ | 1,312 | $ | 975 | |||||
Expected tax expense | 471 | 459 | 341 | ||||||||
Nondeductible expenses | 20 | 4 | 4 | ||||||||
State income taxes | 28 | 19 | 25 | ||||||||
State income sourcing | 13 | (15 | ) | — | |||||||
Other—net | (1 | ) | (3 | ) | — | ||||||
Actual tax expense | $ | 531 | $ | 464 | $ | 370 | |||||
Effective tax rate | 39.5 | % | 35.4 | % | 37.9 | % |
Jurisdiction | Period |
Federal | 2006 to 2015 (a)(b) |
Alaska | 2012 to 2015 |
California | 2006 to 2015(a) |
Oregon | 2003 to 2015(a) |
(a) | The 2003, 2004, 2008-2010 and 2011 Oregon tax returns are subject to examination only to the extent of net operating loss carryforwards from those years that were utilized in 2010 and later years. The 2006-2012 Federal and California Virgin America tax returns are subject to examination only to the extent of net operating loss carryforwards from those years that were utilized in 2012 and later years. |
(b) | Income tax years 2012 and 2013 are currently under exam by the Internal Revenue Service. |
2016 | 2015 | 2014 | |||||||||
Balance at January 1, | $ | 22 | $ | 3 | $ | 2 | |||||
Additions based on tax positions and settlements related to the current year | 3 | 19 | 1 | ||||||||
Additions from acquisitions | 8 | — | — | ||||||||
Balance at December 31, | $ | 33 | $ | 22 | $ | 3 |
2016 | 2015 | ||
Discount rates (a) | 4.29% to 4.50% | 4.55% to 4.69% | |
Rate of compensation increases(a) | 2.12% to 2.59% | 2.06% to 2.65% |
(a) | Varies by plan and related work group. |
2016 | 2015 | 2014 | |||
Discount rates(a) | 4.55% to 4.69% | 4.20% | 4.85% | ||
Expected return on plan assets(a) | 6.00% to 6.50% | 6.50% | 6.75% | ||
Rate of compensation increases(a) | 2.06% to 2.65% | 2.85% to 3.91% | 2.90% to 3.93% |
(a) | Varies by plan and related work group. |
Target | 2016 | 2015 | |||||
Asset category: | |||||||
Domestic equity securities | 22% - 33% | 30 | % | 28 | % | ||
Non-U.S. equity securities | 9% - 16% | 12 | % | 12 | % | ||
Fixed income securities | 48% - 67% | 53 | % | 55 | % | ||
Real estate | 0% - 8% | 5 | % | 5 | % | ||
Plan assets | 100 | % | 100 | % |
2016 | 2015 | Fair Value Hierarchy | |||||||
Fund type: | |||||||||
U.S. equity market fund | $ | 545 | $ | 491 | 1 | ||||
Non-U.S. equity fund | 218 | 208 | 1 | ||||||
Credit bond index fund | 992 | 953 | 1 | ||||||
Plan assets in common commingled trusts | $ | 1,755 | $ | 1,652 | |||||
Real estate | 91 | 85 | (a) | ||||||
Total plan assets | $ | 1,846 | $ | 1,737 |
(a) | In accordance with Subtopic 820-10, certain investments that are measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. |
2016 | 2015 | ||||||
Projected benefit obligation ("PBO") | |||||||
Beginning of year | $ | 1,898 | $ | 2,050 | |||
Service cost | 37 | 41 | |||||
Interest cost | 73 | 84 | |||||
Plan settlement | — | (62 | ) | ||||
Actuarial (gain) loss | 104 | (140 | ) | ||||
Benefits paid | (69 | ) | (75 | ) | |||
End of year | $ | 2,043 | $ | 1,898 | |||
Plan assets at fair value | |||||||
Beginning of year | $ | 1,737 | $ | 1,917 | |||
Actual return on plan assets | 178 | (43 | ) | ||||
Employer contributions | — | — | |||||
Plan settlement | — | (62 | ) | ||||
Benefits paid | (69 | ) | (75 | ) | |||
End of year | $ | 1,846 | $ | 1,737 | |||
Funded status (unfunded) | $ | (197 | ) | $ | (161 | ) | |
Percent funded | 90 | % | 92 | % |
2016 | 2015 | ||||||
Accrued benefit liability-long term | $ | 225 | $ | 173 | |||
Plan assets-long term (within Other noncurrent assets) | (28 | ) | (12 | ) | |||
Total liability recognized | $ | 197 | $ | 161 |
2016 | 2015 | ||||||
Prior service credit | $ | (10 | ) | $ | (11 | ) | |
Net loss | 509 | 499 | |||||
Amount recognized in AOCL (pretax) | $ | 499 | $ | 488 |
2016 | 2015 | 2014 | |||||||||
Service cost | $ | 37 | $ | 41 | $ | 33 | |||||
Interest cost | 73 | 84 | 81 | ||||||||
Expected return on assets | (108 | ) | (122 | ) | (117 | ) | |||||
Amortization of prior service credit | (1 | ) | (1 | ) | (1 | ) | |||||
Recognized actuarial loss | 25 | 26 | 13 | ||||||||
Settlement expense (special item) | — | 14 | — | ||||||||
Net pension expense | $ | 26 | $ | 42 | $ | 9 |
Total | |||
2017 | $ | 85 | |
2018 | 93 | ||
2019 | 96 | ||
2020 | 109 | ||
2021 | 109 | ||
2022– 2026 | 652 |
• | Performance-Based Pay ("PBP") is a program that rewards the majority of Air Group employees. The program is based on four separate metrics related to Air Group profitability, safety, achievement of unit-cost goals and employee engagement as measured by customer satisfaction. |
• | The Operational Performance Rewards Program entitles the majority of Air Group employees to quarterly payouts of up to $300 per person if certain operational and customer service objectives are met. |
Aircraft Leases | Facility Leases | Aircraft Purchase Commitments | Capacity Purchase Agreements | Aircraft Maintenance Deposits | Aircraft Maintenance and Parts Management | ||||||||||||||||||
2017 | $ | 302 | $ | 123 | $ | 926 | $ | 76 | $ | 59 | $ | 30 | |||||||||||
2018 | 316 | 73 | 848 | 80 | 61 | 32 | |||||||||||||||||
2019 | 305 | 63 | 694 | 85 | 65 | 35 | |||||||||||||||||
2020 | 279 | 57 | 354 | 90 | 68 | 37 | |||||||||||||||||
2021 | 242 | 50 | 277 | 94 | 63 | 40 | |||||||||||||||||
Thereafter | 953 | 171 | 361 | 676 | 90 | — | |||||||||||||||||
Total | $ | 2,397 | $ | 537 | $ | 3,460 | $ | 1,101 | $ | 406 | $ | 174 |
2016 | 2015 | 2014 | ||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||
2015 $1 billion Repurchase Program | 2,594,809 | $ | 193 | 1,517,277 | $ | 120 | — | $ | — | |||||||||||
2014 $650 million Repurchase Program | — | — | 5,691,051 | 385 | 5,497,427 | 265 | ||||||||||||||
2012 $250 million Repurchase Program | — | — | — | — | 1,819,304 | 83 | ||||||||||||||
Total | 2,594,809 | $ | 193 | 7,208,328 | $ | 505 | 7,316,731 | $ | 348 |
2016 | 2015 | ||||||
Related to marketable securities | $ | (3 | ) | $ | (3 | ) | |
Related to employee benefit plans | (299 | ) | (288 | ) | |||
Related to interest rate derivatives | (3 | ) | (12 | ) | |||
$ | (305 | ) | $ | (303 | ) |
2016 | 2015 | 2014 | |||||||||
Stock options | $ | 2 | $ | 2 | $ | 3 | |||||
Stock awards | 11 | 11 | 10 | ||||||||
Deferred stock awards | 1 | 1 | 1 | ||||||||
Employee stock purchase plan | 5 | 3 | 2 | ||||||||
Stock-based compensation | $ | 19 | $ | 17 | $ | 16 | |||||
Tax benefit related to stock-based compensation | $ | 7 | $ | 7 | $ | 6 |
Amount | Weighted-Average Period | ||||
Stock options | $ | 2 | 1.1 | ||
Stock awards | 21 | 0.9 | |||
Unrecognized stock-based compensation | $ | 23 | 0.9 |
2016 | 2015 | 2014 | |||||||||
Expected volatility | 51 | % | 53 | % | 65 | % | |||||
Expected term | 6 years | 6 years | 6 years | ||||||||
Risk-free interest rate | 1.23 | % | 1.67 | % | 1.87 | % | |||||
Expected dividend yield | 1.50 | % | 1.25 | % | 1.25 | % | |||||
Weighted-average grant date fair value per share | $ | 27.14 | $ | 28.71 | $ | 21.70 | |||||
Estimated fair value of options granted (millions) | $ | 2 | $ | 3 | $ | 3 |
Shares | Weighted- Average Exercise Price Per Share | Weighted- Average Contractual Life (Years) | Aggregate Intrinsic Value (in millions) | |||||||||
Outstanding, December 31, 2015 | 540,345 | $ | 31.58 | 6.3 | $ | 26 | ||||||
Granted | 79,340 | 65.63 | ||||||||||
Exercised | (158,758 | ) | 23.62 | |||||||||
Canceled | — | — | ||||||||||
Forfeited or expired | (7,253 | ) | 49.66 | |||||||||
Outstanding, December 31, 2016 | 453,674 | $ | 40.02 | 6.2 | $ | 22 | ||||||
Exercisable, December 31, 2016 | 199,676 | $ | 25.35 | 5.1 | $ | 13 | ||||||
Vested or expected to vest, December 31, 2016 | 453,435 | $ | 40.03 | 6.2 | $ | 22 |
(in millions) | 2016 | 2015 | 2014 | ||||||||
Intrinsic value of option exercises | $ | 9 | $ | 14 | $ | 20 | |||||
Cash received from stock option exercises | 3 | 4 | 6 | ||||||||
Tax benefit related to stock option exercises | 3 | 5 | 7 | ||||||||
Fair value of options vested | 3 | 3 | 2 |
Number of Units | Weighted-Average Grant Date Fair Value | Weighted- Average Contractual Life (Years) | Aggregate Intrinsic Value (in millions) | |||||||||
Non-vested, December 31, 2015 | 470,715 | $ | 38.09 | 0.8 | $ | 38 | ||||||
Granted | 374,863 | 63.53 | ||||||||||
Vested | (366,319 | ) | 32.87 | |||||||||
Forfeited | (39,166 | ) | 40.35 | |||||||||
Non-vested, December 31, 2016 | 440,093 | $ | 63.86 | 1.4 | $ | 39 |
• | Mainline - includes Alaska's and Virgin America’s scheduled air transportation for passengers and cargo throughout the U.S., and in parts of Canada, Mexico, Costa Rica and Cuba. |
• | Regional - includes Horizon's and other third-party carriers’ scheduled air transportation for passengers across a shorter distance network within the U.S. under CPAs. This segment includes the actual revenues and expenses associated with regional flying, as well as an allocation of corporate overhead incurred by Air Group on behalf of the regional operations. |
• | Horizon - includes the capacity sold to Alaska under CPA. Expenses include those typically borne by regional airlines such as crew costs, ownership costs and maintenance costs. |
Year Ended December 31, 2016 | Mainline(a) | Regional | Horizon | Consolidating & Other(b) | Air Group Adjusted(c) | Special Items(d) | Consolidated | ||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 4,098 | $ | — | $ | — | $ | — | $ | 4,098 | $ | — | $ | 4,098 | |||||||||||||
Regional | — | 908 | — | — | 908 | — | 908 | ||||||||||||||||||||
Total passenger revenues | 4,098 | 908 | — | — | 5,006 | — | 5,006 | ||||||||||||||||||||
CPA revenues | — | — | 424 | (424 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 104 | 5 | — | (1 | ) | 108 | — | 108 | |||||||||||||||||||
Other-net | 738 | 74 | 4 | 1 | 817 | — | 817 | ||||||||||||||||||||
Total operating revenues | 4,940 | 987 | 428 | (424 | ) | 5,931 | — | 5,931 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 2,883 | 769 | 407 | (425 | ) | 3,634 | 117 | 3,751 | |||||||||||||||||||
Fuel expense | 719 | 125 | — | — | 844 | (13 | ) | 831 | |||||||||||||||||||
Total operating expenses | 3,602 | 894 | 407 | (425 | ) | 4,478 | 104 | 4,582 | |||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 26 | — | 1 | — | 27 | — | 27 | ||||||||||||||||||||
Interest expense | (42 | ) | — | (9 | ) | (4 | ) | (55 | ) | — | (55 | ) | |||||||||||||||
Other | 19 | — | 1 | 4 | 24 | — | 24 | ||||||||||||||||||||
3 | — | (7 | ) | — | (4 | ) | — | (4 | ) | ||||||||||||||||||
Income (loss) before income tax | $ | 1,341 | $ | 93 | $ | 14 | $ | 1 | $ | 1,449 | $ | (104 | ) | $ | 1,345 |
Year Ended December 31, 2015 | Mainline | Regional | Horizon | Consolidating & Other(b) | Air Group Adjusted(c) | Special Items(d) | Consolidated | ||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 3,939 | $ | — | $ | — | $ | — | $ | 3,939 | $ | — | $ | 3,939 | |||||||||||||
Regional | — | 854 | — | — | 854 | — | 854 | ||||||||||||||||||||
Total passenger revenues | 3,939 | 854 | — | — | 4,793 | — | 4,793 | ||||||||||||||||||||
CPA revenues | — | — | 408 | (408 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 103 | 5 | — | — | 108 | — | 108 | ||||||||||||||||||||
Other-net | 621 | 72 | 4 | — | 697 | — | 697 | ||||||||||||||||||||
Total operating revenues | 4,663 | 931 | 412 | (408 | ) | 5,598 | — | 5,598 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 2,653 | 695 | 375 | (409 | ) | 3,314 | 32 | 3,346 | |||||||||||||||||||
Fuel expense | 823 | 131 | — | — | 954 | — | 954 | ||||||||||||||||||||
Total operating expenses | 3,476 | 826 | 375 | (409 | ) | 4,268 | 32 | 4,300 | |||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 19 | — | — | 2 | 21 | — | 21 | ||||||||||||||||||||
Interest expense | (28 | ) | — | (10 | ) | (4 | ) | (42 | ) | — | (42 | ) | |||||||||||||||
Other | 28 | — | 1 | 6 | 35 | — | 35 | ||||||||||||||||||||
19 | — | (9 | ) | 4 | 14 | — | 14 | ||||||||||||||||||||
Income (loss) before income tax | $ | 1,206 | $ | 105 | $ | 28 | $ | 5 | $ | 1,344 | $ | (32 | ) | $ | 1,312 |
Year Ended December 31, 2014 | Mainline | Regional | Horizon | Consolidating & Other(b) | Air Group Adjusted(c) | Special Items(d) | Consolidated | ||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Passenger | |||||||||||||||||||||||||||
Mainline | $ | 3,774 | $ | — | $ | — | $ | — | $ | 3,774 | $ | — | $ | 3,774 | |||||||||||||
Regional | — | 805 | — | — | 805 | — | 805 | ||||||||||||||||||||
Total passenger revenues | 3,774 | 805 | — | — | 4,579 | — | 4,579 | ||||||||||||||||||||
CPA revenues | — | — | 371 | (371 | ) | — | — | — | |||||||||||||||||||
Freight and mail | 109 | 5 | — | — | 114 | — | 114 | ||||||||||||||||||||
Other-net | 592 | 78 | 5 | — | 675 | — | 675 | ||||||||||||||||||||
Total operating revenues | 4,475 | 888 | 376 | (371 | ) | 5,368 | — | 5,368 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||
Operating expenses, excluding fuel | 2,417 | 623 | 349 | (371 | ) | 3,018 | (30 | ) | 2,988 | ||||||||||||||||||
Fuel expense | 1,251 | 190 | — | — | 1,441 | (23 | ) | 1,418 | |||||||||||||||||||
Total operating expenses | 3,668 | 813 | 349 | (371 | ) | 4,459 | (53 | ) | 4,406 | ||||||||||||||||||
Nonoperating income (expense) | |||||||||||||||||||||||||||
Interest income | 20 | — | — | 1 | 21 | — | 21 | ||||||||||||||||||||
Interest expense | (32 | ) | — | (12 | ) | (4 | ) | (48 | ) | — | (48 | ) | |||||||||||||||
Other | 39 | (1 | ) | 2 | — | 40 | — | 40 | |||||||||||||||||||
27 | (1 | ) | (10 | ) | (3 | ) | 13 | — | 13 | ||||||||||||||||||
Income (loss) before income tax | $ | 834 | $ | 74 | $ | 17 | $ | (3 | ) | $ | 922 | $ | 53 | $ | 975 |
(a) | Includes Alaska activity for the full period and Virgin America financial results for the period December 14, 2016 through December 31, 2016, and the impacts associated with purchase accounting as of December 14, 2016. |
(b) | Includes consolidating entries, Parent Company and other immaterial business units. |
(c) | The adjusted column excludes certain charges described in (d) and represents the financial information that is reviewed by management to assess performance of operations and determine capital allocations. |
(d) | Includes accounting adjustments related to mark-to-market fuel hedge accounting charges (all years), merger-related costs (2016), pension settlement charge (2015), litigation-related matter (2015), non-cash curtailment gain (2014) and a gain related to a legal matter (2014). |
2016 | 2015 | 2014 | |||||||||
Depreciation and amortization: | |||||||||||
Mainline | $ | 296 | $ | 268 | $ | 243 | |||||
Horizon | 67 | 52 | 51 | ||||||||
Consolidated | $ | 363 | $ | 320 | $ | 294 | |||||
Capital expenditures: | |||||||||||
Mainline | $ | 608 | $ | 821 | $ | 659 | |||||
Horizon | 70 | 10 | 35 | ||||||||
Consolidated | $ | 678 | $ | 831 | $ | 694 | |||||
Total assets at end of period: | |||||||||||
Mainline | $ | 15,260 | $ | 8,127 | |||||||
Horizon | 690 | 717 | |||||||||
Consolidating & Other | (5,988 | ) | (2,314 | ) | |||||||
Consolidated | $ | 9,962 | $ | 6,530 |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. CONTROLS AND PROCEDURES |
ITEM 9B. OTHER INFORMATION |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. EXECUTIVE COMPENSATION |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS |
Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||
Plan category | (a) | (b) | (c) | ||||
Equity compensation plans approved by security holders | 1,228,448(1) | $40.02(2) | 11,847,713 | ||||
Equity compensation plans not approved by security holders | — | Not applicable | — | ||||
Total | 1,228,448 | $40.02 | 11,847,713 |
(1) | Of these shares, 453,674 were subject to options then outstanding under the 2008 Plan, 645,862 were subject to outstanding restricted, performance and deferred stock unit awards granted under the 2008 Plan and 128,912 were subject to outstanding restricted stock unit awards granted under the 2016 Plan. No options were outstanding under the 2016 plan. Outstanding performance awards are reflected in the table assuming that the target level of performance will be achieved. |
(2) | This number does not reflect the 774,474 shares that were subject to outstanding stock unit awards granted under the 2008 and 2016 Plans. |
(3) | Of the aggregate number of shares that remained available for future issuance, no shares were available under the 2008 Plan, 5,642,418 shares were available under the 2016 Plan and 6,205,295 shares were available under the ESPP. Subject to certain express limits of the 2016 Plan, shares available for award purposes under the 2016 Plan generally may be used for any type of award authorized under that plan including options, stock appreciation rights, and other forms of awards granted or denominated in shares of our common stock including, without limitation, stock bonuses, restricted stock, restricted stock units and performance shares. Full-value shares issued under the 2016 Plan are counted against the share limit as 1.7 shares for every one share issued. This table does not give effect to that rule. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 15. EXHIBITS |
1. | Exhibits: See Exhibit Index. |
ALASKA AIR GROUP, INC. | ||||
By: | /s/ BRADLEY D. TILDEN | Date: | February 28, 2017 | |
Bradley D. Tilden | ||||
Chief Executive Officer |
/s/ BRADLEY D. TILDEN | Chairman and Chief Executive Officer (Principal Executive Officer) | |
Bradley D. Tilden | ||
/s/ BRANDON S. PEDERSEN | Executive Vice President/Finance and Chief Financial Officer (Principal Financial Officer) | |
Brandon S. Pedersen | ||
/s/ CHRISTOPHER M. BERRY | Vice President Finance and Controller (Principal Accounting Officer) | |
Christopher M. Berry | ||
/s/ PATRICIA M. BEDIENT | Director | |
Patricia M. Bedient | ||
/s/ MARION C. BLAKEY | Director | |
Marion C. Blakey | ||
/s/ PHYLLIS J. CAMPBELL | Director | |
Phyllis J. Campbell | ||
/s/ DHIREN R. FONSECA | Director | |
Dhiren R. Fonseca | ||
/s/ JESSIE J. KNIGHT, JR. | Director | |
Jessie J. Knight, Jr. | ||
/s/ DENNIS F. MADSEN | Director | |
Dennis F. Madsen | ||
/s/ HELVI K. SANDVIK | Director | |
Helvi K. Sandvik | ||
/s/ KATHERINE J. SAVITT | Director | |
Katherine J. Savitt | ||
/s/ J. KENNETH THOMPSON | Director | |
J. Kenneth Thompson | ||
/s/ ERIC K. YEAMAN | Director | |
Eric K. Yeaman |
Exhibit Number | Exhibit Description | Form | Date of First Filing | Exhibit Number | File Number |
3.1 | Amended and Restated Certificate of Incorporation of Registrant | 10-Q | August 6, 2014 | 3.1 | |
3.2 | Bylaws of Registrant, as amended December 9, 2015 | 8-K | December 15, 2015 | 3.2 | |
10.1# | Aircraft General Terms Agreement, dated June 15, 2005, between the Boeing Company and Alaska Airlines, Inc. | 10-Q | August 5, 2005 | 10.1 | |
10.2# | Purchase Agreement No. 2497, dated June 15, 2005, between the Boeing Company and Alaska Airlines, Inc. | 10-Q | August 5, 2005 | 10.2 | |
10.3# | Supplemental Agreement No. 23 to Purchase Agreement No. 2497 between The Boeing Company and Alaska Airlines, Inc. | 10-Q/A | August 2, 2011 | 10.1 | |
10.4# | Supplemental Agreement No. 29 to Purchase Agreement No. 2497 between The Boeing Company and Alaska Airlines, Inc. | 10-K | February 14, 2013 | 10.1 | |
10.5# | Purchase Agreement No. 3866 between The Boeing Company and Alaska Airlines, Inc. | 10-K | February 14, 2013 | 10.2 | |
10.6# | Supplemental Agreement No. 39 to Purchase Agreement No. 2497 between The Boeing Company and Alaska Airlines, Inc. | 10-Q | May 7, 2015 | 10.1 | |
10.7# | Purchase Agreement, dated April 11, 2016, between Embraer S.A. and Horizon Air Industries, Inc. | 10-Q | May 9, 2016 | 10.1 | |
10.8^ | A320 Aircraft Purchase Agreement, dated as of December 29, 2010, between Airbus S.A.S. and Virgin America Inc. | S-1/A^ | October 7, 2014 | 10.15 | |
10.9* | Alaska Air Group, Inc. 2008 Performance Incentive Plan, Form of Nonqualified Stock Option Agreement | 10-Q | August 4, 2011 | 10.3 | |
10.10* | Alaska Air Group, Inc. 2008 Performance Incentive Plan, Form of Performance Stock Unit Award Agreement | 10-Q | August 4, 2011 | 10.4 | |
10.11* | Alaska Air Group, Inc. 2008 Performance Incentive Plan, Form of Stock Unit Award Agreement | 10-Q | August 4, 2011 | 10.5 | |
10.12* | Alaska Air Group, Inc. 2008 Performance Incentive Plan, Amended for Stock-Split | 10-K | February 11, 2016 | 10.10 | |
10.13* | Alaska Air Group, Inc. 2016 Performance Incentive Plan | 8-K | May 18, 2016 | 10.1 | |
10.14* | Alaska Air Group, Inc. 2016 Performance Incentive Plan, Form of Nonqualified Stock Option Agreement | 10-Q | August 2, 2016 | 10.1 | |
10.15* | Alaska Air Group, Inc. 2016 Performance Incentive Plan, Form of Incentive Stock Option Agreement | 10-Q | August 2, 2016 | 10.2 | |
10.16* | Alaska Air Group, Inc. 2016 Performance Incentive Plan, Form of Performance Stock Unit Award Agreement | 10-Q | August 2, 2016 | 10.3 | |
10.17* | Alaska Air Group, Inc. 2016 Performance Incentive Plan, Form of Stock Unit Award Agreement | 10-Q | August 2, 2016 | 10.4 | |
10.18*† | Alaska Air Group, Inc. 2010 Employee Stock Purchase Plan, as Amended for the Offering Period Commencing March 1, 2017 | 10-K | February 28, 2017 | ||
10.19* | Alaska Air Group, Inc. Stock Deferral Plan for Non-Employee Directors | 10-K | February 11, 2016 | 10.12 | |
10.20* | Alaska Air Group, Inc. Nonqualified Deferred Compensation Plan, as amended | 10-Q | August 4, 2011 | 10.1 | |
10.21* | 1995 Elected Officers Supplementary Retirement Plan, as amended | 10-Q | August 4, 2011 | 10.2 | |
10.22* | Form of Alaska Air Group, Inc. Change of Control Agreement for named executive officers, as amended and restated October 16, 2014 | 10-K | February 11, 2016 | 10.15 | |
10.23*† | Alaska Air Group Performance Based Pay Plan, as amended and restated June 19, 2015 | 10-K | February 28, 2017 | ||
21† | Subsidiaries of Registrant | ||||
23.1† | Consent of Independent Registered Public Accounting Firm (KPMG LLP) | ||||
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 | ||||
† | Filed herewith | ||||
* | Indicates management contract or compensatory plan or arrangement. | ||||
# | Pursuant to 17 CFR 240.24b-2, confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission. | ||||
^ | Filed by Virgin America Inc., File Number 333-197660 |
1. | PURPOSE |
2. | DEFINITIONS |
(a) | “Account” means the bookkeeping account maintained by the Company, or by a record keeper on behalf of the Company, for a Participant pursuant to Section 7(a). |
(b) | “Board” means the Board of Directors of the Company. |
(c) | “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. |
(d) | “Commission” means the U.S. Securities and Exchange Commission. |
(e) | “Committee” means the committee appointed by the Board to administer the Plan pursuant to Section 12. |
(f) | “Common Stock” means the common stock, par value $1.00 per share, of the Company, and such other securities or property as may become the subject of Options pursuant to an adjustment made under Section 17. |
(g) | “Compensation” means an Eligible Employee’s base pay, inclusive of overtime and any employer paid leave. Compensation also includes any amounts contributed as salary reduction contributions to a plan qualifying under Section 401(k), 125, or 129 of the Code. Any other form of remuneration is excluded from Compensation, including (but not limited to) the following: cash bonuses, severance pay, hiring bonuses, prizes, awards, relocation or housing allowances, stock option exercises, stock appreciation right payments, the vesting or grant of restricted stock, the payment of stock units, performance awards, auto allowances, tuition reimbursement, perquisites, non-cash compensation and other forms of imputed income. Notwithstanding the foregoing, Compensation shall not include any amounts deferred under or paid from any nonqualified deferred compensation plan maintained by the Company or any Subsidiary (including, without limitation, the Company’s Nonqualified Deferred Compensation Plan). |
(h) | “Contributions” means the bookkeeping amounts credited to the Account of the Participant pursuant to this Plan, equal in amount to the amount of Compensation that the Participant has elected to contribute for the purchase of Common Stock under and in accordance with this Plan. |
(i) | “Company” means Alaska Air Group, Inc., a Delaware corporation, and its successors. |
(j) | “Effective Date” means March 11, 2010, the date on which this Plan was initially adopted by the Board. |
(k) | “Eligible Employee” means, subject to Section 3, any employee of the Company, or of any Subsidiary which has been designated in writing by the Committee as a “Participating Subsidiary”; provided, however, that “Eligible Employee” shall not include any employee whose customary employment is for less than five (5) months in a calendar year. |
(l) | “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended from time to time. |
(m) | “Exercise Date” means, with respect to an Offering Period, the last day of that Offering Period. |
(n) | “Fair Market Value” on any date means: |
(1) | if the Common Stock is listed or admitted to trade on a national securities exchange, the closing price of a share of Common Stock on such date on the principal national securities exchange on which the Common Stock is so listed or admitted to trade, or, if there is no trading of the Common Stock on such date, then the closing price of a share of Common Stock on such exchange on the next preceding date on which there was trading in the shares of Common Stock; |
(2) | in the absence of exchange data required to determine Fair Market Value pursuant to the foregoing, the value as established by the Committee as of the relevant time for purposes of this Plan. |
(o) | “Grant Date” means, with respect to an Offering Period, the first day of that Offering Period. |
(p) | “Individual Limit” has the meaning given to such term in Section 4(b). |
(q) | “Offering Period” means the six (6) month period commencing on each Grant Date; provided, however, that the Committee may declare, as it deems appropriate and in advance of the applicable Offering Period, a shorter (not to be less than three months) Offering Period or a longer (not to exceed 27 months) Offering Period. Unless otherwise expressly provided by the Committee in advance of a particular Offering Period, the Grant Date for that Offering Period may not occur on or before the Exercise Date for the immediately preceding Offering Period. |
(r) | “Option” means the stock option to acquire shares of Common Stock granted to a Participant pursuant to Section 8. |
(s) | “Option Price” means the per share exercise price of an Option as determined in accordance with Section 8(b). |
(t) | “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company in which each corporation (other than the Company) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain. |
(u) | “Participant” means an Eligible Employee who has elected to participate in this Plan and who has filed a valid and effective Subscription Agreement to make Contributions pursuant to Section 6. |
(v) | “Participating Subsidiary” shall have the meaning given to such term in Section 19(c). |
(w) | “Plan” means this Alaska Air Group, Inc. 2010 Employee Stock Purchase Plan, as it may be amended or restated from time to time. |
(x) | “Subscription Agreement” means the written agreement or applicable electronic form of agreement filed by an Eligible Employee with the Company pursuant to Section 6 to participate in this Plan. |
(y) | “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations (beginning with the Company) in which each corporation (other than the last corporation) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one or more of the other corporations in the chain. |
3. | ELIGIBILITY |
4. | STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS |
(a) | Aggregate Share Limit. Subject to the provisions of Section 17, the capital stock that may be delivered under this Plan will be shares of the Company’s authorized but unissued Common Stock. The maximum number of shares of Common Stock that may be delivered pursuant to Options granted under this Plan is 8,000,000 shares, subject to adjustments pursuant to Section 17. |
(b) | Individual Share Limit. The maximum number of shares of Common Stock that any one individual may acquire upon exercise of his or her Option with respect to any one Offering Period is 8,000, subject to adjustments pursuant to Section 17 (the “Individual Limit”). The Committee may amend the Individual Limit, effective no earlier than the first Offering Period commencing after the adoption of such amendment, without stockholder approval. |
(c) | Shares Not Actually Delivered. Shares that are subject to or underlie Options, which for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall again, except to the extent prohibited by law, be available for subsequent Options under this Plan. |
5. | OFFERING PERIODS |
6. | PARTICIPATION |
(a) | Enrollment. An Eligible Employee may become a participant in this Plan by completing a Subscription Agreement on a form approved by and in a manner prescribed by the Committee (or its delegate). To become effective, a Subscription Agreement must be signed by the Eligible Employee and be filed with the Company at the time specified by the Committee, but in all cases prior to the start of the Offering Period with respect to which it is to become effective, and must set forth a whole percentage (or, if the Committee so provides, a stated amount) of the Eligible Employee’s Compensation to be credited to the Participant’s Account as Contributions each pay period. |
(b) | Contribution Limits. Notwithstanding the foregoing, a Participant may not elect to contribute less than one percent (1%) nor more than ten percent (10%) (or such other limit as the Committee may establish prior to the start of the applicable Offering Period) of his or her Compensation during any one pay period as Plan Contributions. The Committee also may prescribe other limits, rules or procedures for Contributions. |
(c) | Content and Duration of Subscription Agreements. Subscription Agreements shall contain the Eligible Employee’s authorization and consent to the Company’s withholding from his or her Compensation the amount of his or her Contributions. An Eligible Employee’s Subscription Agreement, and his or her participation election and withholding consent thereon, shall remain valid for all Offering Periods until (1) the Eligible Employee’s participation terminates pursuant to the terms hereof, (2) the Eligible Employee files a new Subscription Agreement that becomes effective, or (3) the Committee requires that a new Subscription Agreement be executed and filed with the Company. |
7. | METHOD OF PAYMENT OF CONTRIBUTIONS |
(a) | Participation Accounts. The Company shall maintain on its books, or cause to be maintained by a record keeper, an Account in the name of each Participant. The percentage of Compensation elected to be applied as Contributions by a Participant shall be deducted from such Participant’s Compensation on each payday during the period for payroll deductions set forth below and such payroll deductions shall be credited to that Participant’s Account as soon as administratively practicable after such date. A Participant may not make any additional payments to his or her Account. A Participant’s Account |
(b) | Payroll Deductions. Subject to such other rules as the Committee may adopt, payroll deductions with respect to an Offering Period shall commence as of the first day of the payroll period which coincides with or immediately follows the applicable Grant Date and shall end on the last date of the payroll period which coincides with or immediately proceeds the applicable Exercise Date, unless sooner terminated by the Participant as provided in Section 7(d) or until his or her participation terminates pursuant to Section 11. |
(c) | Changes in Contribution Elections for Next Offering Period; One-Time Reduction Permitted During an Offering Period. A Participant may discontinue, increase, or decrease the level of his or her Contributions (within the Plan limits) by completing and filing with the Company, on such terms as the Committee (or its delegate) may prescribe, a new Subscription Agreement which indicates such election. Subject to any other timing requirements that the Committee may impose, an election pursuant to this Section 7(c) shall be effective with the first Offering Period that commences after the Company’s receipt of such election, provided that a Participant may, on one occasion only during an Offering Period, elect to decrease (but not increase) the level of his or her Contributions (subject to Section 6(b)) by filing a new Subscription Agreement with the Company indicating such election, which election shall be effective as soon as administratively practicable following its receipt by the Company. Except as contemplated by the foregoing proviso and Section 7(d) and 7(e), changes in Contribution levels may not take effect during an Offering Period. Other modifications or suspensions of Subscription Agreements are not permitted. |
(d) | Withdrawal During an Offering Period. A Participant may terminate his or her Contributions during an Offering Period (and receive a distribution of the balance of his or her Account in accordance with Section 11) by completing and filing with the Company, in such form and on such terms as the Committee (or its delegate) may prescribe, a written withdrawal form or applicable electronic withdrawal form which shall be signed by the Participant. Such termination shall be effective as soon as administratively practicable after its receipt by the Company. A withdrawal election pursuant to this Section 7(d) with respect to an Offering Period shall only be effective, however, if it is received by the Company prior to the Exercise Date of the Offering Period (or such earlier deadline that the Committee may reasonably require to process the withdrawal prior to the applicable Exercise Date). Partial withdrawals of Accounts are not permitted. |
(e) | Discontinuance of Contributions During an Offering Period. A Participant may discontinue his or her Contributions at any time during an Offering Period by completing and filing with the Company, on such terms as the Committee (or its delegate) may prescribe, a new Subscription Agreement which indicates such election. If a Participant elects to discontinue his or her Contributions pursuant to this Section 7(e), the Contributions previously credited to the Participant’s Account for that Offering Period shall be used to exercise the Participant’s Option as of the applicable Exercise Date in accordance with Section 9 (unless the Participant makes a timely withdrawal election in accordance with Section 7(d), in which case such Participant’s Account shall be paid to him or her in cash in accordance with Section 11(a)). |
(f) | Leaves of Absence. During leaves of absence approved by the Company or a Participating Subsidiary and meeting the requirements of Regulation 1.421-1(h)(2) under the Code, a Participant may elect to continue participation in this Plan by delivering cash payments to the Company on his or her normal paydays equal to the reduction in his or her Plan Contributions caused by his or her leave. |
8. | GRANT OF OPTION |
(a) | Grant Date; Number of Shares. On each Grant Date, each Eligible Employee who is a Participant during that Offering Period shall be granted an Option to purchase a number of shares of Common Stock. The Option shall be exercised on the Exercise Date. The |
(b) | Option Price. The Option Price per share of the shares subject to an Option for an Offering Period shall be the lesser of: (i) 85% of the Fair Market Value of a Share on the Grant Date of that Offering Period; or (ii) 85% of the Fair Market Value of a Share on the Exercise Date of that Offering Period; provided, however, that the Committee may provide prior to the start of any Offering Period that the Option Price for that Offering Period shall be determined by applying a discount amount (not to exceed 15%) to either (1) the Fair Market Value of a share of Common Stock on that Grant Date of that Offering Period, or (2) the Fair Market Value of a share of Common Stock on the Exercise Date of that Offering Period, or (3) the lesser of the Fair Market Value of a share of Common Stock on the Grant Date of that Offering Period or the Fair Market Value of a share of Common Stock on the Exercise Date of that Offering Period. Notwithstanding anything to the contrary in the preceding provisions of this Section 8(b), in no event shall the Option Price per share be less than the par value of a share of Common Stock. |
(c) | Limits on Share Purchases. Notwithstanding anything else contained herein, the maximum number of shares subject to an Option for an Offering Period shall be subject to the Individual Limit in effect on the Grant Date of that Offering Period (subject to adjustment pursuant to Section 17) and any person who is otherwise an Eligible Employee shall not be granted any Option (or any Option granted shall be subject to compliance with the following limitations) or other right to purchase shares under this Plan to the extent: |
(1) | it would, if exercised, cause the person to own stock (within the meaning of Section 423(b)(3) of the Code) possessing 5% or more of the total combined voting power or value of all classes of stock of the Company, or of any Parent, or of any Subsidiary; or |
(2) | such Option causes such individual to have rights to purchase stock under this Plan and any other plan of the Company, any Parent, or any Subsidiary which is qualified under Section 423 of the Code which accrue at a rate which exceeds $25,000 of the fair market value of the stock of the Company, of any Parent, or of any Subsidiary (determined at the time the right to purchase such stock is granted, before giving effect to any discounted purchase price under any such plan) for each calendar year in which such right is outstanding at any time. |
9. | EXERCISE OF OPTION |
(a) | Purchase of Shares. Unless a Participant withdraws pursuant to Section 7(d) or the Participant’s Plan participation is terminated as provided in Section 11, his or her Option for the purchase of shares shall be exercised automatically on the Exercise Date for that Offering Period, without any further action on the Participant’s part, and the maximum number of whole shares of Common Stock subject to such Option (subject to the limits of Section 8(c)) shall be purchased at the Option Price with the balance of such Participant’s Account. |
(b) | Account Balance Remaining After Purchase. If any amount which is not sufficient to purchase a whole share remains in a Participant’s Account after the exercise of his or her Option on the Exercise Date: (1) such amount shall be credited to such Participant’s Account for the next Offering Period, if he or she is then a Participant; or (2) if such Participant is not a Participant in the next Offering Period, or if the Committee so elects, such amount shall be refunded to such Participant as soon as administratively practicable |
10. | DELIVERY OF SHARES |
11. | TERMINATION OF EMPLOYMENT; CHANGE IN ELIGIBLE STATUS |
(a) | General. Except as provided in Section 11(b) below, if a Participant ceases to be an Eligible Employee for any reason (including, without limitation, due to the Participant’s death, disability, resignation or retirement, or due to a layoff or other termination of employment with or without cause), or if the Participant elects to withdraw from the Plan pursuant to Section 7(d), at any time prior to the last day of an Offering Period in which he or she participates, such Participant’s Account shall be paid to him or her (or, in the event of the Participant’s death, to the person or persons entitled thereto under Section 13) in cash, and such Participant’s Option and participation in the Plan shall automatically terminate as of the time that the Participant ceased to be an Eligible Employee. |
(b) | Change in Eligible Status; Leave. If a Participant (1) ceases to be an Eligible Employee during an Offering Period but remains an employee of the Company or a Subsidiary through the Exercise Date (for example, and without limitation, due to a change in the Participant’s employer from the Company or a Participating Subsidiary to a non-Participating Subsidiary, if the Participant’s employer ceases to maintain the Plan as a Participating Subsidiary but otherwise continues as a Subsidiary, or if the Participant’s customary level of employment no longer satisfies the requirements set forth in the definition of Eligible Employee), or (2) during an Offering Period commences a sick leave, military leave, or other leave of absence approved by the Company or a Participating Subsidiary, and the leave meets the requirements of Treasury Regulation Section 1.421-1(h)(2) and the Participant is an employee of the Company or a Subsidiary or on such leave as of the applicable Exercise Date, such Participant’s Contributions shall cease (subject to Section 7(d)), and the Contributions previously credited to the Participant’s Account for that Offering Period shall be used to exercise the Participant’s Option as of the applicable |
(c) | Re-Enrollment. A Participant’s termination from Plan participation precludes the Participant from again participating in this Plan during that Offering Period. However, such termination shall not have any effect upon his or her ability to participate in any succeeding Offering Period, provided that the applicable eligibility and participation requirements are again then met. A Participant’s termination from Plan participant shall be deemed to be a revocation of that Participant’s Subscription Agreement and such Participant must file a new Subscription Agreement to resume Plan participation in any succeeding Offering Period. |
(d) | Change in Subsidiary Status. For purposes of this Plan, if a Subsidiary ceases to be a Subsidiary, each person employed by that Subsidiary will be deemed to have terminated employment for purposes of this Plan, unless the person continues as an employee of the Company or another Subsidiary. |
12. | ADMINISTRATION |
(a) | The Committee. The Board shall appoint the Committee, which shall be composed of not less than two members of the Board. The Board may, at any time, increase or decrease the number of members of the Committee, may remove from membership on the Committee all or any portion of its members, and may appoint such person or persons as it desires to fill any vacancy existing on the Committee, whether caused by removal, resignation, or otherwise. The Board may also, at any time, assume the administration of all or a part of this Plan, in which case references (or relevant references in the event the Board assumes the administration of only certain aspects of this Plan) to the “Committee” shall be deemed to be references to the Board. Action of the Committee with respect to this Plan shall be taken pursuant to a majority vote or by the unanimous written consent of its members. No member of the Committee shall be entitled to act on or decide any matters relating solely to himself or herself or solely to any of his or her rights or benefits under this Plan. |
(b) | Powers and Duties of the Committee. Subject to the express provisions of this Plan, the Committee shall supervise and administer this Plan and shall have the full authority and discretion: (1) to construe and interpret this Plan and any agreements defining the rights and obligations of the Company, any Subsidiary, and Participants under this Plan; (2) to further define the terms used in this Plan; (3) to prescribe, amend and rescind rules and regulations relating to the administration of this Plan (including, without limitation, deadlines for making elections or for providing any notices contemplated by this Plan, which deadlines may be more restrictive than any deadlines otherwise contemplated by this Plan); and (4) to make all other determinations and take such other action as contemplated by this Plan or as may be necessary or advisable for the administration of this Plan or the effectuation of its purposes. Notwithstanding anything else contained in this Plan to the contrary, the Committee may also adopt rules, procedures or sub-plans applicable to particular Subsidiaries or locations, which sub-plans may be designed to be outside the scope of Section 423 of the Code and need not comply with the otherwise applicable provisions of this Plan. |
(c) | Decisions of the Committee are Binding. Any action taken by, or inaction of, the Company, any Subsidiary, the Board or the Committee relating or pursuant to this Plan and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. |
(d) | Indemnification. Neither the Board nor any Committee, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan, and all such persons shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) |
(e) | Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Committee or the Board, as the case may be, may obtain and may rely upon the advice of experts, including professional advisors to the Company. No director, officer or agent of the Company or any Participating Subsidiary shall be liable for any such action or determination taken or made or omitted in good faith. |
(f) | Delegation. The Committee may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Company or a Subsidiary. |
13. | DESIGNATION OF BENEFICIARY |
14. | TRANSFERABILITY |
15. | USE OF FUNDS; INTEREST |
16. | REPORTS |
17. | ADJUSTMENTS OF AND CHANGES IN THE STOCK |
18. | POSSIBLE EARLY TERMINATION OF PLAN AND OPTIONS |
19. | TERM OF PLAN; AMENDMENT OR TERMINATION |
(a) | Effective Date; Termination. Subject to Section 19(b), this Plan shall become effective as of the Effective Date. No new Offering Periods shall commence on or after March 1, 2020 and this Plan shall terminate as of the Exercise Date on or immediately following such date unless sooner terminated pursuant to Section 18 or this Section 19. In the event that all of the shares of Common Stock made available under this Plan are subscribed prior to the expiration of this Plan, this Plan shall terminate at the end of that Offering Period and the shares available shall be allocated for purchase by Participants in that Offering Period on a pro-rata basis determined with respect to Participants’ Account balances. |
(b) | Board Amendment Authority. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part and without notice. Stockholder approval for any amendment or modification shall not be required, except to the extent required by law or applicable stock exchange rules, or required under Section 423 of the Code in order to preserve the intended tax consequences of this Plan. No Options may be granted during any suspension of this Plan or after the termination of this Plan, but the Committee will retain jurisdiction as to Options then outstanding in accordance with the terms of this Plan. No amendment, modification, or termination pursuant to this Section 19(b) shall, without written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of such Participant or obligations of the Company under any Option granted under this Plan prior to the effective date of such change. Changes contemplated by Section 17 or Section 18 shall not be deemed to constitute changes or amendments requiring Participant consent. |
(c) | Certain Additional Committee Authority. Notwithstanding the amendment provisions of Section 19(b) and without limiting the Board’s authority thereunder and without limiting the Committee’s authority pursuant to any other provision of this Plan, the Committee shall have the right (1) to designate from time to time the Subsidiaries whose employees may be eligible to participate in this Plan (including, without limitation, any Subsidiary that may first become such after the date stockholders first approve this Plan) (each a “Participating Subsidiary”), and (2) to change the service and other qualification requirements sets forth under the definition of Eligible Employee in Section 2 (subject to the requirements of Section 423(b) of the Code and applicable rules and regulations thereunder). Any such change shall not take effect earlier than the first Offering Period that starts on or after the effective date of such change. Any such change shall not require stockholder approval. |
20. | NOTICES |
21. | CONDITIONS UPON ISSUANCE OF SHARES |
22. | PLAN CONSTRUCTION |
(a) | Section 16. It is the intent of the Company that transactions involving Options under this Plan (other than “Discretionary Transactions” as that term is defined in Rule 16b-3(b)(1) promulgated by the Commission under Section 16 of the Exchange Act, to the extent there are any Discretionary Transactions under the Plan), in the case of Participants who are or may be subject to the prohibitions of Section 16 of the Exchange Act, satisfy the requirements for exemption under Rule 16b-3(c) promulgated by the Commission under Section 16 of the Exchange Act to the maximum extent possible. Notwithstanding the foregoing, the Company shall have no liability to any Participant for Section 16 consequences of Options or other events with respect to this Plan. |
(b) | Section 423. Except as the Committee may expressly provide in the case of one or more sub-plans adopted pursuant to Section 12(b), this Plan and Options are intended to qualify under Section 423 of the Code. Accordingly, all Participants are to have the same rights and privileges (within the meaning of Section 423(b)(5) of the Code and except as not required thereunder to qualify this Plan under Section 423) under this Plan, subject to differences in Compensation among Participants and subject to the Contribution and share limits of this Plan. |
(c) | Interpretation. If any provision of this Plan or of any Option would otherwise frustrate or conflict with the intents expressed above, that provision to the extent possible shall be interpreted so as to avoid such conflict. If the conflict remains irreconcilable, the Committee may disregard the provision if it concludes that to do so furthers the interest of the Company and is consistent with the purposes of this Plan as to such persons in the circumstances. |
23. | EMPLOYEES’ RIGHTS |
(a) | No Employment Rights. Nothing in this Plan (or in any Subscription Agreement or other document related to this Plan) will confer upon any Eligible Employee or Participant any right to continue in the employ or other service of the Company or any Subsidiary, constitute any contract or agreement of employment or other service or effect an employee’s status as an employee at will, nor shall interfere in any way with the right of the Company or any Subsidiary to change such person’s compensation or other benefits or to terminate his or her employment or other service, with or without cause. Nothing contained in this Section 23(a), however, is intended to adversely affect any express independent right of any such person under a separate employment or service contract other than a Subscription Agreement. |
(b) | No Rights to Assets of the Company. No Participant or other person will have any right, title or interest in any fund or in any specific asset (including shares of Common Stock) of the Company or any Subsidiary by reason of any Option hereunder. Neither the provisions of this Plan (or of any Subscription Agreement or other document related to this Plan), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan will create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company or any Subsidiary and any Participant, Beneficiary or other person. To the extent that a Participant, Beneficiary or other person acquires a right to receive payment pursuant to this Plan, such right will be no greater than the right of any unsecured general creditor of the Company. |
(c) | No Stockholder Rights. A Participant will not be entitled to any privilege of stock ownership as to any shares of Common Stock not actually delivered to and held of record by the Participant. No adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery. |
24. | MISCELLANEOUS |
(a) | Governing Law. This Plan, the Options, Subscription Agreements and other documents related to this Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware. |
(b) | Severability. If any provision shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of this Plan shall continue in effect. |
(c) | Captions and Headings. Captions and headings are given to the sections of this Plan solely as a convenience to facilitate reference. Such captions and headings shall not be deemed in any way material or relevant to the construction of interpretation of this Plan or any provision hereof. |
(d) | No Effect on Other Plans or Corporate Authority. The adoption of this Plan shall not affect any other Company or Subsidiary compensation or incentive plans in effect. Nothing in this Plan will limit or be deemed to limit the authority of the Board or Committee (1) to establish any other forms of incentives or compensation for employees of the Company or any Subsidiary (with or without reference to the Common Stock), or (2) to grant or assume options (outside the scope of and in addition to those contemplated by this Plan) in connection with any proper corporate purpose; to the extent consistent with any other plan or authority. Benefits received by a Participant under an Option granted pursuant to this Plan shall not be deemed a part of the Participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company or any Subsidiary, except where the Committee or the Board (or the Board of Directors of the Subsidiary that sponsors such plan or arrangement, as applicable) expressly otherwise provides or authorizes in writing. |
25. | TAX WITHHOLDING |
26. | NOTICE OF SALE |
1. | ELIGIBILITY |
2. | CALCULATION OF THE AWARD |
3. | PERFORMANCE WEIGHTING |
4. | PERFORMANCE GOALS AND APPLICABLE PERFORMANCE WEIGHTING FACTORS |
5. | DISCRETIONARY FACTOR |
6. | TIMING OF AWARDS |
8. | AMENDMENT |
a. | This Plan, including its attachments, constitutes the entire understanding relating to an Award to any employee of Alaska or Horizon, and supersedes all prior oral or written agreements, representations or commitments relating to such Awards. |
b. | This Plan is not a commitment of the Company, Alaska or Horizon, to any officer or employee of such company, to continue that individual in its employ in order to qualify for an Award. Nothing contained in this Plan may be considered to be a promise of continued employment. Any employee who shall file suit against his or her employer for wrongful termination shall automatically cease to be a Plan Participant. |
c. | This Plan and the rights and obligations provided for herein shall be construed and interpreted in accordance with the law of the state of Washington, excluding its conflicts of law rules. |
d. | No unpaid Award will be subject to the debts, liabilities, contracts or engagements of any Plan Participant, and may not be alienated, pledged, garnished or sold, and any attempt to do so shall be void. |
e. | All Awards are subject to applicable federal, state, and local deductions. |
f. | This Plan is intended to be an exception to, or otherwise be in compliance with, Section 409A of the Internal Revenue Code of 1986, as amended. This Plan shall be interpreted to comply with Section 409A. Further, it is the intent of the Company that, in the case of Section 162(m) Awards, this Plan, each such Award, any amounts paid with respect to such Awards, shall qualify as performance-based compensation or will otherwise be exempt from deductibility limitations under Section 162(m). Any provision, application or interpretation of this Plan inconsistent with this intent to satisfy the standards in Section 162(m) as to the Section 162(m) Awards shall be disregarded. |
a. | Operational Performance. Operational Performance is equally divided into three categories: |
1. | Safety (10%) |
Threshold | 4 or fewer “Level 3” safety events |
Target | 3 or fewer “Level 3” safety events |
Maximum | 1 or fewer “Level 3” safety events |
Threshold | 4 or fewer “Level 3” safety events |
Target | 3 or fewer “Level 3” safety events |
Threshold | Total of 6 months with OPR score of 85% or higher |
Target | Total of 8 months with OPR score of 85% or higher |
Maximum | Total of 11 months with OPR score of 85% or higher |
Threshold | Total of 6 months with OPR score of 85% or higher |
Target | Total of 8 months with OPR score of 85% or higher |
Maximum | Total of 11 months with OPR score of 85% or higher |
3. | CASM (cost per available seat mile) ex. fuel (10%). |
b. | Financial Performance. (70% of the total) |
Pay Group/Position | Participation Rate |
ALASKA CHIEF EXECUTIVE OFFICER | 120% |
ALASKA PRESIDENT | 90% |
ALASKA EXECUTIVE VICE PRESIDENTS | 85% |
ALASKA SENIOR VICE PRESIDENTS | 75% |
HORIZON AIR PRESIDENT | 75% |
ALASKA VICE PRESIDENTS SERVING ON MANAGEMENT’S EXECUTIVE COMMITTEE | 65% |
ALASKA AND HORIZON VICE PRESIDENTS | 50% |
ALASKA AND HORIZON MANAGING DIRECTORS | 35% |
ALASKA AND HORIZON DIRECTORS | 15% |
ALASKA AND HORIZON MANAGERS AND SUPERVISORS* | 7.5% |
OTHER ALASKA AND HORIZON PARTICIPANTS | 5% |
*Includes managers and supervisors with direct reports, employees in Grade Level I (Alaska) or Level 117 (Horizon) and above, and managers and supervisors whose core responsibility is leading vendor/contractor teams in their daily work. |
Name | State of Incorporation |
Alaska Airlines, Inc. | Alaska |
Virgin America Inc. | Delaware |
Horizon Air Industries, Inc. | Washington |
McGee Air Services, Inc. (a) | Delaware |
ASA Assurance, Inc. | Hawaii |
Air Group Leasing, Inc. | Delaware |
(a) | McGee Air Services, Inc. is a subsidiary of Alaska Airlines, Inc. |
1. | I have reviewed this annual report on Form 10-K of Alaska Air Group, Inc. for the period ended December 31, 2016; |
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 | |
Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of Alaska Air Group, Inc. for the period ended December 31, 2016; |
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 | |
Executive Vice President/Finance and 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 | |
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 | |
Executive Vice President/Finance and Chief Financial Officer |
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DOCUMENT AND ENTITY INFORMATION - USD ($) $ in Billions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Feb. 22, 2017 |
Jun. 30, 2015 |
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Entity Information [Line Items] | |||
Entity Registrant Name | ALASKA AIR GROUP, INC. | ||
Entity Central Index Key | 0000766421 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-K | ||
Document Fiscal Year Focus | 2016 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 123,468,367 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 7.1 | ||
Document Period End Date | Dec. 31, 2016 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Allowance for doubtful accounts | $ 1 | $ 1 |
Stockholders' Equity: | ||
Preferred Stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 129,189,634 | 128,442,099 |
Common Stock, Shares, Outstanding | 123,328,051 | 125,175,325 |
Treasury Stock, Shares | 5,861,583 | 3,266,774 |
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Basis of Presentation The consolidated financial statements include the accounts of Air Group, or the Company, and its primary subsidiaries, Alaska, Horizon and, starting December 14, 2016, Virgin America. The Company conducts substantially all of its operations through these subsidiaries. All significant intercompany balances and transactions have been eliminated. These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and their preparation requires the use of management’s estimates. Actual results may differ from these estimates. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year. Cash and Cash Equivalents Cash equivalents consist of highly liquid investments with original maturities of three months or less, such as money market funds, commercial paper and certificates of deposit. They are carried at cost, which approximates market value. The Company reduces cash balances when funds are disbursed. Due to the time delay in funds clearing the banks, the Company normally maintains a negative balance in its cash disbursement accounts, which is reported as a current liability. The amount of the negative cash balance was $15 million and $12 million at December 31, 2016 and 2015 and is included in accounts payable, with the change in the balance during the year included in other financing activities in the consolidated statements of cash flows. The Company's restricted cash balances are primarily used to guarantee various letters of credit, self-insurance programs or other contractual rights. Restricted cash consists of highly liquid securities with original maturities of three months or less. They are carried at cost, which approximates fair value. Marketable Securities Investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. All cash equivalents and short-term investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in market value, excluding other-than-temporary impairments, are reflected in accumulated other comprehensive loss ("AOCL"). Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. The Company uses a systematic methodology that considers available quantitative and qualitative evidence in evaluating potential impairment. If the cost of an investment exceeds its fair value, management evaluates, among other factors, general market conditions, credit quality of debt instrument issuers, the duration and extent to which the fair value is less than cost, the Company's intent and ability to hold, or plans to sell, the investment. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to Other—net in the consolidated statements of operations and a new cost basis in the investment is established. Receivables Receivables are due on demand and consist primarily of airline traffic (including credit card) receivables, Mileage Plan™ partner receivables, amounts due from other airlines related to interline agreements, government tax authorities and other miscellaneous amounts due to the Company, and are net of an allowance for doubtful accounts. Management determines the allowance for doubtful accounts based on known troubled accounts and historical experience applied to an aging of accounts. Inventories and Supplies—net Expendable aircraft parts, materials and supplies are stated at average cost and are included in inventories and supplies—net. An obsolescence allowance for expendable parts is accrued based on estimated lives of the corresponding fleet type and salvage values. The allowance for expendable inventories was $36 million and $37 million at December 31, 2016 and 2015, respectively. Inventory and supplies—net also includes fuel inventory of $16 million and $14 million at December 31, 2016 and 2015, respectively. Repairable and rotable aircraft parts inventories are included in flight equipment. Property, Equipment and Depreciation Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives less an estimated salvage value, which are as follows:
Salvage values used for aircraft are 10% of the fair value, but as aircraft near the end of their useful lives, management updates the salvage value estimates based on current market conditions and expected use of the aircraft. “Related flight equipment” includes rotable and repairable spare inventories, which are depreciated over the associated fleet life unless otherwise noted. Beginning October 1, 2016, the Company changed its accounting estimate for the expected useful life of the B737 NextGen aircraft, which includes the B737-700, -800, -900, -900ER aircraft and the related parts, from 20 years to 25 years. The change in estimate was precipitated by management's annual accounting policy review, which considered market studies, asset performance and intended use, as well as industry benchmarking. The change in estimate was applied prospectively effective October 1, 2016. The impact of this change in estimate in 2016 is a $17 million decrease to depreciation and amortization expense. Capitalized interest, based on the Company’s weighted-average borrowing rate, is added to the cost of the related asset, and is depreciated over the estimated useful life of the asset. Maintenance and repairs are expensed when incurred. Major modifications that extend the life or improve the usefulness of aircraft are capitalized and depreciated over their estimated period of use. The Company evaluates long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the total carrying amount of an asset or asset group may not be recoverable. The Company groups assets for purposes of such reviews at the lowest level, at which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. An impairment loss is considered when estimated future undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition are less than its carrying amount. If the asset or asset group is not considered recoverable, a write-down equal to the excess of the carrying amount over the fair value will be recorded. Goodwill Goodwill represents the excess of purchase price over the fair value of the related net assets acquired in the Company's acquisition of Virgin America and is not amortized. As of December 31, 2016 the goodwill balance, based on a provisional purchase price allocation, was $1.9 billion. No goodwill impairment test occurred in 2016, as the acquisition was completed late in the fourth quarter. In future periods, the Company will review goodwill for impairment at least annually, or more frequently if events or circumstances indicate than an impairment may exist. The Company will perform this impairment at the reporting unit level. If fair value of the reporting unit exceeds the carrying amount, an impairment charge may be recorded. Intangible Assets Intangible assets as of December 31, 2016 were recorded as a result of the acquisition of Virgin America, and consist primarily of indefinite-lived airport slots, finite-lived airport gates and finite-lived customer relationships. Finite-lived intangibles are amortized over their estimated useful lives. Indefinite-lived intangibles are not amortized but are tested at least annually for impairment using a similar methodology to property, equipment and goodwill as described above. Internally Used Software Costs The Company capitalizes costs to develop internal-use software that are incurred in the application development stage. Amortization commences when the software is ready for its intended use and the amortization period is the estimated useful life of the software, generally three to five years. Capitalized costs primarily include contract labor and payroll costs of the individuals dedicated to the development of internal-use software. Deferred Revenue Deferred revenue results primarily from the sale of Mileage Plan™ miles and Elevate® points to third-parties. It also includes the liability for Elevate® flown points outstanding at the acquisition date that was recorded at its estimated fair value as part of purchase price accounting. The related revenue is recognized when award transportation is provided or over the term of the applicable agreement. Operating Leases The Company leases aircraft, airport and terminal facilities, office space and other equipment under operating leases. Some of these lease agreements contain rent escalation clauses or rent holidays. For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other than the date of initial occupancy, the Company records minimum rental expenses on a straight-line basis over the terms of the leases in the consolidated statements of operations. Leased Aircraft Return Costs Cash payments associated with returning leased aircraft are accrued when it is probable that a cash payment will be made and that amount is reasonably estimable, usually no sooner than after the last scheduled maintenance event prior to lease return. Any accrual is based on the time remaining on the lease, planned aircraft usage and the provisions included in the lease agreement, although the actual amount due to any lessor upon return may not be known with certainty until lease termination. As leased aircraft are returned, any payments are charged against the established accrual. The accrual is part of other current and long-term liabilities and was not material as of December 31, 2016 and December 31, 2015. The expense is included in Aircraft maintenance in the consolidated statements of operations. Revenue Recognition Passenger revenue is recognized when the passenger travels. Tickets sold but not yet used are reported as air traffic liability until travel or date of expiration. Air traffic liability includes approximately $62 million and $42 million related to credits for future travel, as of December 31, 2016 and December 31, 2015, respectively. These credits are recognized into revenue either when the passenger travels or at the date of expiration, which is twelve months from issuance. Commissions to travel agents and related fees are expensed when the related revenue is recognized. Passenger traffic commissions and related fees not yet recognized are recorded as a prepaid expense. Taxes collected from passengers, including transportation excise taxes, airport and security fees and other fees, are recorded on a net basis within passenger revenue in the consolidated statements of operations. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized as revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are based on the Company’s historical data. Freight and mail revenues are recognized when the related services are provided. Other—net revenues are primarily related to the Mileage Plan™ and Elevate® programs. They are recognized as described in the “Frequent Flyer Programs” paragraph below. Other—net also includes certain ancillary or non-ticket revenues, such as checked-bag fees, reservations fees, ticket change fees, on-board food and beverage sales, and, to a much lesser extent, commissions from car and hotel vendors and sales of travel insurance. These items are recognized as revenue when the related services are provided. Airport lounge memberships are recognized as revenue over the membership period. Frequent Flyer Programs Alaska operates the Mileage Plan™ frequent flyer program, and Virgin America operates the Elevate® frequent flyer program. Both programs provide travel awards to members based on accumulated mileage or points. For miles or points earned by flying on the Company's airlines and through airline partners, the estimated cost of providing award travel is recognized as a selling expense and accrued as a liability, as miles are earned and accumulated. Alaska and Virgin America also sell services, including miles or points for transportation, to non-airline partners, such as hotels, car rental agencies and major banks that offer Alaska's and Virgin America's affinity credit cards. The Company defers revenue related to air transportation and certificates for discounted companion travel until the transportation is delivered. The deferred proceeds are recognized as passenger revenue for awards redeemed and flown on the Company's airlines and as Other—net revenue for awards redeemed and flown on other airlines (less the cost paid to the other airlines based on contractual agreements). The elements that represent use of the Alaska and Virgin America brands and access to frequent flyer member lists and advertising are recognized as commission income in the period that those elements are sold and included in Other—net revenue in the consolidated statements of operations. Frequent flyer program deferred revenue and liabilities included in the consolidated balance sheets (in millions):
The amounts recorded in other accrued liabilities relate primarily to deferred revenue expected to be realized within one year, which includes Mileage Plan™ awards that have been issued but not yet flown for $43 million and $37 million at December 31, 2016 and 2015. Frequent flyer program revenue included in the consolidated statements of operations (in millions):
Other—net revenue includes commission revenues of $329 million, $280 million, and $261 million in 2016, 2015, and 2014. Selling Expenses Selling expenses include credit card fees, global distribution systems charges, the estimated cost of frequent flyer travel awards earned through air travel, advertising, promotional costs, commissions and incentives. Advertising production costs are expensed as incurred. Advertising expense was $61 million, $55 million, and $49 million during the years ended December 31, 2016, 2015, and 2014. Derivative Financial Instruments The Company's operations are significantly impacted by changes in aircraft fuel prices and interest rates. In an effort to manage exposure to these risks, the Company periodically enters into fuel and interest rate derivative instruments. These derivative instruments are recognized at fair value on the balance sheet and changes in the fair value are recognized in AOCL or in the consolidated statements of operations, depending on the nature of the instrument. The Company does not hold or issue derivative fuel hedge contracts for trading purposes and does not apply hedge accounting. For cash flow hedges related to interest rate swaps, the effective portion of the derivative represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized in interest expense. Fair Value Measurements Accounting standards define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company has elected not to use the fair value option provided in the accounting standards for non-financial instruments. Accordingly, those assets and liabilities are carried at amortized cost. For financial instruments, the assets and liabilities are carried at fair value, which is determined based on the market approach or income approach, depending upon the level of inputs used. Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis include items such as property, plant and equipment, goodwill, intangible assets and certain other assets and liabilities. The Company determines the fair value of these items using Level 3 inputs, as described in Note 2 and Note 5. Income Taxes The Company uses the asset and liability approach for accounting for and reporting income taxes. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance would be established, if necessary, for the amount of any tax benefits that, based on available evidence, are not expected to be realized. As of December 31, 2016, there is a partial valuation allowance against net deferred tax assets. The Company accounts for unrecognized tax benefits in accordance with the applicable accounting standards. Virgin America has substantial federal and state net operating losses ("NOLs") for income tax purposes. The Company's ability to utilize Virgin America's NOLs could be limited if Virgin America had an “ownership change,” as defined in Section 382 of the Internal Revenue Code and similar state provisions. In general terms, an ownership change can occur whenever there is a collective shift in the ownership of a company by more than 50% by one or more “5% stockholders” within a three-year period. The occurrence of such a change generally limits the amount of NOL carryforwards a company could utilize in a given year to the aggregate fair market value of the company's common stock immediately prior to the ownership change, multiplied by the long-term tax-exempt interest rate in effect for the month of the ownership change. The acquisition constituted an ownership change and the potential for further limitations following the acquisition. See Note 7 to the consolidated financial statements for more discussion of the calculation. Stock-Based Compensation Accounting standards require companies to recognize as expense the fair value of stock options and other equity-based compensation issued to employees as of the grant date. These standards apply to all stock awards that the Company grants to employees as well as the Company’s Employee Stock Purchase Plan ("ESPP"), which features a look-back provision and allows employees to purchase stock at a 15% discount. All stock-based compensation expense is recorded in wages and benefits in the consolidated statements of operations. Earnings Per Share (EPS) Diluted EPS is calculated by dividing net income by the average common shares outstanding plus additional common shares that would have been outstanding assuming the exercise of in-the-money stock options and restricted stock units, using the treasury-stock method. In 2016, 2015, and 2014, antidilutive stock options excluded from the calculation of EPS were not material. Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers"(Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This comprehensive new standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In March 2016, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations" to clarify the guidance on determining whether the Company is considered the principal or the agent in a revenue transaction where a third party is providing goods or services to a customer. Entities are permitted to use either a full retrospective or cumulative effect transition method, and are required to adopt all parts of the new revenue standard using the same transition method. The new standard is effective for the Company on January 1, 2018. At this time, the Company believes the most significant impact to the financial statements will be to Mileage Plan™ revenues and liabilities. The Company currently uses the incremental cost approach for miles earned through travel. As this approach will be eliminated with the standard, the Company will be required to significantly increase its liability for earned miles through a relative selling price model. The Company continues to evaluate and model the full impact of the standard and currently plans to apply the full retrospective transition method. In April 2015, the FASB issued ASU 2015-03, "Interest—Imputation of Interest" (Subtopic 835-30), which requires debt issuance costs related to a debt liability be presented as a direct deduction from the carrying value of the debt liability. The amendment was adopted as of January 1, 2016. Prior period debt balances have been adjusted to reflect the adoption of the ASU. The adoption of the ASU had no impact on the statements of operations or retained earnings. In February 2016, the FASB issued ASU 2016-02, "Leases" (Topic 842), which requires lessees to recognize assets and liabilities for leases currently classified as operating leases. Under the new standard a lessee will recognize a liability on the balance sheet representing the lease payments owed, and a right-of-use-asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. The new standard is effective for the Company on January 1, 2019. Early adoption of the standard is permitted. At this time, the Company believes the most significant impact to the financial statements will relate to the recording of a right of use asset associated with leased aircraft. Other leases, including airports and real estate, equipment, software and other miscellaneous leases continue to be assessed for impact as it relates to ASU 2016-02. The Company has not yet determined whether it will early adopt the standard. In March 2016, the FASB issued ASU 2016-09, "Compensation—Stock Compensation" (Topic 718), which simplifies several aspects of accounting for employee share-based payment awards, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The ASU is effective for the Company beginning January 1, 2017. The adoption of the standard will not have a material impact on the Company's statements of operations or financial position. In January 2017, the FASB issued ASU 2017-04, "Intangibles—Goodwill and Other" (Topic 350), which eliminates step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The ASU is effective for the Company beginning January 1, 2019. Early adoption of the standard is permitted. Beginning in fiscal 2017 the Company will be required to perform an impairment test for goodwill arising from its acquisition of Virgin America and plans to adopt the standard in 2017. |
ACQUISITION OF VIRGIN AMERICA, INC. (Notes) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITION OF VIRGIN AMERICA, INC. | ACQUISITION OF VIRGIN AMERICA INC. Virgin America On December 14, 2016, the Company acquired 100% of the outstanding common shares and voting interest of Virgin America. Virgin America offers scheduled air transport throughout the United States and Mexico primarily from its focus cities of Los Angeles, San Francisco and, to a lesser extent, Dallas Love Field, to other major business and leisure destinations in North America. The Company believes the acquisition of Virgin America will provide broader national reach and position the Company to better serve people living on the West Coast. The combined airline will provide 1,200 daily departures to its guests, leveraging Alaska's strength in the Pacific Northwest with Virgin America's strength in California. The Company believes that combining loyalty programs and networks will provide greater benefits for its guests and expand its international partner portfolio, giving guests an even more expansive global reach. The results of Virgin America have been included in the consolidated financial statements since the acquisition date. For the year ended December 31, 2016, revenue and net income from Virgin America recognized in the Company's consolidated results of operations were $99 million and $15 million. Fair value of consideration transferred The fair value of consideration transferred on the closing date includes the value of the cash consideration and accelerated and vested equity awards attributable to pre-acquisition service. The purchase price is as follows (in millions, except per-share stock price):
Fair values of the assets acquired and the liabilities assumed The transaction has been accounted for as a business combination using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date. The fair values of the assets acquired and liabilities assumed were determined using the market, income and cost approaches. The purchase price allocation was prepared on a preliminary basis and is subject to further adjustments as additional information becomes available concerning the fair value of the assets acquired and liabilities assumed. The Company expects to continue obtaining information to assist it with determining the fair values of the net assets acquired during the measurement period. Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the acquisition date. Provisional fair value of the assets acquired and the liabilities assumed as of the acquisition date, December 14, 2016, (in millions) are as follows:
Intangible Assets Of the $143 million of acquired intangible assets, $89 million was provisionally assigned to airport slots. Airport slots are rights to take-off or land at a slot-controlled airport during a specific time period and are a means by which the FAA manages airspace/airport congestion. The Company acquired slots at three such airports—John F. Kennedy International, LaGuardia and Ronald Reagan Washington National. These slots either have no expiration dates or are expected to be renewed indefinitely in line with the FAA's past practice. They require no maintenance and do not have an established residual value. As the demands for air travel at these airports have remained very strong, the Company expects to use these slots in perpetuity and has determined these airport slots to be indefinite-lived intangible assets. They will not be amortized but rather tested for impairment annually, or more frequently when events and circumstances indicate that impairment may exist. Of the remaining $54 million, $40 million was provisionally assigned to customer relationships to be amortized on a straight-line basis over the estimated economic life of eight years and $14 million to airport gates to be amortized on straight-line basis over the remaining lease term of twelve years. As noted above, the fair value of the acquired identifiable intangible assets is provisional pending results of their final valuation. The Company considered examples of intangible assets that the FASB believes meet the criteria for recognition apart from goodwill, as well as any other intangible assets common to the airline industry, and did not identify any other such intangible assets acquired in the transaction. Goodwill Goodwill of $1.9 billion represents the excess of the purchase price over the fair value of the underlying net assets acquired and largely results from expected future synergies from combining operations as well as an assembled workforce, which does not qualify for separate recognition. Goodwill is not amortized to earnings, but instead is reviewed for impairment at least annually, absent any indicators of impairment. Repayment of related-party debt and merger-related costs Soon after the acquisition, the Company repaid $55 million of related-party debt held by Virgin America as of December 14, 2016 to comply with the change-of-control provision triggered by the transaction. As of December 31, 2016, the Company has incurred pretax merger-related costs of $117 million. Costs classified as merger-related are directly attributable to merger activities. These costs are classified as "Special items—merger-related costs and other" within the Statement of Operations. Refer to Note 11 for further information on special items. The Company expects to continue to incur merger-related costs in the future as the integration continues. Pro forma impact of the acquisition The unaudited pro forma financial information presented below represents a summary of the consolidated results of operations for the Company and Virgin America as if the acquisition of Virgin America had been consummated as of January 1, 2015. The pro forma results do not include any anticipated synergies, or other expected benefits of the acquisition. Accordingly, the unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been consummated as of January 1, 2015.
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CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES |
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Cash, Cash Equivalents, and Short-term Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES | CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES Components for cash, cash equivalents and marketable securities (in millions):
Unrealized losses from marketable securities are primarily attributable to changes in interest rates. Management does not believe any remaining unrealized losses represent other-than-temporary impairments based on the Company's evaluation of available evidence as of December 31, 2016. Activity for marketable securities (in millions):
Maturities for marketable securities (in millions):
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DERIVATIVE INSTRUMENTS |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT 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. As of December 31, 2016, the Company had fuel hedge contracts outstanding covering 394 million gallons of crude oil that will be settled from January 2017 to June 2018. Interest Rate Swap Agreements The Company is exposed to market risk from adverse changes in variable interest rates on long term debt and certain aircraft lease agreements. To manage this risk, the Company periodically enters into interest rate swap agreements. As of December 31, 2016, the Company has outstanding interest rate swap agreements with a third party designed to hedge the volatility of the underlying variable interest rates on lease agreements for six B737-800 aircraft, as well as two interest rate swap agreements with third parties designed to hedge the volatility of the underlying variable interest rates on $295 million of the debt obtained in 2016. All of the interest rate swap agreements stipulate that the Company pay a fixed interest rate and receive a floating interest rate over the term of the underlying contracts. The interest rate swap agreements expire from February 2020 through March 2021 to coincide with the lease termination dates and October 2022 through September 2026 to coincide with the debt maturity dates. All significant terms of the swap agreements match the terms of the underlying hedged items, and have been designated as qualifying hedging instruments, which are accounted for as cash flow hedges. As qualifying cash flow hedges, the interest rate swaps are recognized at fair value on the balance sheet, and changes in the fair value are recognized in accumulated other comprehensive income (loss). The effective portion of the derivative represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. To the extent the change in fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is recognized in interest expense, if material. Fair Values of Derivative Instruments Fair values of derivative instruments on the consolidated balance sheet (in millions):
The net cash paid for new fuel hedge positions and settlements was $19 million, $17 million and $9 million during 2016, 2015, and 2014. Pretax effect of derivative instruments on earnings and AOCL (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. No gains or losses related to interest rate swaps on variable rate debt have been recognized in interest expense during 2016. The amounts shown as recognized in OCI are prior to the losses recognized in aircraft rent during the period. The Company expects $4 million to be reclassified from OCI to aircraft rent and $1 million to interest expense 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 risk of counterparty 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 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 amount posted as collateral for these contracts is not material to the consolidated balance sheets as of December 31, 2016 and 2015. |
FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair Value of Financial Instruments on a Recurring Basis Fair values of financial instruments on the consolidated balance sheet (in millions):
The Company uses the market and income approach to determine the fair value of marketable securities. U.S. government securities are Level 1 as the fair value is based on quoted prices in active markets. Foreign government bonds, asset-backed securities, mortgage-backed securities, corporate notes and bonds, and municipal securities are Level 2 as the fair value is based on standard valuation models that are calculated based on observable inputs such as quoted interest rates, yield curves, credit ratings of the security and other observable market information. The Company uses the market approach and the income approach to determine the fair value of derivative instruments. Fuel hedge contracts that are not traded on a public exchange are Level 2 as the fair value is primarily based on inputs which are readily available in active markets or can be derived from information available in active markets. The fair value for call options is determined utilizing an option pricing model based on inputs that are readily available in active markets, or can be derived from information available in active markets. In addition, the fair value considers the exposure to credit losses in the event of non-performance by counterparties. Interest rate swap agreements are Level 2 as the fair value of these contracts is determined based on the difference between the fixed interest rate in the agreements and the observable LIBOR-based interest forward rates at period end, multiplied by the total notional value. The Company has no other financial assets that are measured at fair value on a nonrecurring basis at December 31, 2016. Fair Value of Other Financial Instruments The Company used the following methods and assumptions to determine the fair value of financial instruments that are not recognized at fair value as described below. Cash and Cash Equivalents: Carried at amortized costs which approximate fair value. Debt: The carrying amounts of the Company's variable-rate debt approximate fair values. For fixed-rate debt, the Company uses the income approach to determine the estimated fair value, by discounting cash flows using borrowing rates for comparable debt over the weighted life of the outstanding debt. The estimated fair value of the fixed-rate debt is Level 3 as certain inputs used are unobservable. Fixed-rate debt that is not carried at fair value on the consolidated balance sheet and the estimated fair value of long-term fixed-rate debt (in millions):
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LONG-TERM DEBT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT | LONG-TERM DEBT Long-term debt obligations (in millions):
During 2016, the Company's total debt increased $2.3 billion, primarily due to the addition of $2.0 billion of secured debt financing from multiple lenders to fund the acquisition of Virgin America. Approximately $1.6 billion of the loans are secured by a total of 56 aircraft, including 37 B737-900ER aircraft and 19 B737-800 aircraft. An additional $400 million is secured by Air Group's interest in certain aircraft purchase agreements. The remainder is due to assumed debt from Virgin America. During 2016, the Company made debt payments of $249 million, including $95 million of debt extinguishment that arose from the Virgin America acquisition, and $12 million related to prepayments of existing loans. The Company's variable-rate notes payable bear interest at a floating rate per annum equal to a margin plus the three or six-month LIBOR in effect at the commencement of each semi-annual or three-month period, as applicable. As of December 31, 2016, none of the Company's borrowings were restricted by financial covenants. Long-term debt principal payments for the next five years and thereafter (in millions):
Bank Line of Credit The Company has two $100 million credit facilities and one $52 million credit facility. All three facilities have variable interest rates based on LIBOR plus a specified margin. One of the $100 million facilities, which expires in September 2017, is secured by aircraft. The other $100 million facility, which expires in March 2017, is secured by certain accounts receivable, spare engines, spare parts and ground service equipment. The $52 million facility expires in October 2017 with a mechanism for annual renewal and is secured by two aircraft. The Company has secured letters of credit against the $52 million facility, but has no plans to borrow using either of the two remaining facilities. All three credit facilities have a requirement to maintain a minimum unrestricted cash and marketable securities balance of $500 million. The Company was in compliance with this covenant at December 31, 2016. |
INCOME TAXES |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES Deferred Income Taxes Deferred income taxes reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and such amounts for tax purposes. Primarily due to differences in depreciation rates for federal income tax purposes and for financial reporting purposes, the Company has generated a net deferred tax liability. Deferred tax (assets) and liabilities comprise the following (in millions):
Changes in net deferred tax liabilities resulted from 2016 activity and the acquisition of Virgin America. At December 31, 2016, as a result of the acquisition of Virgin America, discussed in Note 2, Virgin America had federal NOLs of approximately $773 million that expire beginning in 2028 and continuing through 2036, and state NOLs of approximately $344 million that expire beginning in 2027 and continuing through 2035. Virgin America has experienced multiple “ownership changes” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the most recent being its acquisition by the Company. Section 382 of the Code imposes an annual limitation on the amount of pre-ownership change NOLs of the corporation that experiences an ownership change. The limitation imposed by Section 382 of the Code for any post-ownership change year generally would be determined by multiplying the value of such corporation’s stock immediately before the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may, subject to certain limits, be carried over to later years, and the limitation may, under certain circumstances, be increased by built-in gains or reduced by built-in losses in the assets held by such corporation at the time of the ownership change. The combined company’s use of NOLs generated after the date of an ownership change would not be limited unless the combined company were to experience a subsequent ownership change. The combined company’s ability to use the NOLs will also depend on the amount of taxable income generated in future periods. The NOLs may expire before the combined company can generate sufficient taxable income to utilize the NOLs. Valuation allowances are provided to reduce the related deferred income tax assets to an amount which will, more likely than not, be realized. The Company has determined it is more likely than not that a portion of the state NOL carryforward will not be realized and, therefore, has provided a valuation allowance of $4 million for that portion. The Company has likewise concluded that it is more likely than not that all of its federal and the remaining state deferred income tax assets will be realized and thus no additional valuation allowance has been recorded. The Company reassesses the need for a valuation allowance each reporting period. Components of Income Tax Expense The components of income tax expense were as follows (in millions):
Income Tax Rate Reconciliation Income tax expense reconciles to the amount computed by applying the U.S. federal rate of 35% to income before income tax and accounting changes as follows (in millions):
In 2016, the Company incurred $39 million of acquisition-related costs that are not deductible under U.S. federal tax law. These expenses are included in Special items—merger-related costs and other on the Company’s consolidated statement of operations for the year ended December 31, 2016 and are reflected as a permanent unfavorable adjustment for the year ended December 31, 2016, in the table above. In the fourth quarter of 2015, the Company filed amended state tax returns for the years 2010 through 2013 to change the Company’s position on income sourcing in various states. These positions were also taken on 2014 and future filings, unless guidance or rules changed. In 2016, adjustments were made to the Company's position on income sourcing in various states due to updated guidance from state taxing authorities. The impact of this guidance is reflected as an unfavorable adjustment of approximately $17 million for the year ended December 31, 2016. Uncertain Tax Positions The Company has identified its federal tax return and its state tax returns in Alaska, Oregon and California as “major” tax jurisdictions. A summary of the Company's jurisdictions and the periods that are subject to examination are as follows:
Changes in the liability for unrecognized tax benefits during 2016, 2015 and 2014 are as follows (in millions):
At December 31, 2016, the total amount of unrecognized tax benefits is recorded as a liability and some have reduced the NOL carryover from the Virgin America acquisition. The Company added $3 million of reserves for uncertain tax positions in 2016, primarily due to changes in income sourcing for state income taxes and added $8 million related to the acquisition of Virgin America. These uncertain tax positions could change as a result of the Company's ongoing audits, settlement of issues, new audits and status of other taxpayer court cases. The Company cannot predict the timing of these actions. Due to the positions being taken in various jurisdictions, the amounts currently accrued are the Company's best estimate as of December 31, 2016. |
EMPLOYEE BENEFIT PLANS |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANS Four defined-benefit and five defined-contribution retirement plans cover various employee groups of Alaska and Horizon. Following the acquisition of Virgin America on December 14, 2016, there is a sixth defined contribution plan which covers the Virgin America employee groups. The defined-benefit plans provide benefits based on an employee’s term of service and average compensation for a specified period of time before retirement. The qualified defined-benefit pension plans are closed to new entrants. Accounting standards require recognition of the overfunded or underfunded status of an entity’s defined-benefit pension and other postretirement plan as an asset or liability in the consolidated financial statements and requires recognition of the funded status in AOCL. Qualified Defined-Benefit Pension Plans The Company’s pension plans are funded as required by the Employee Retirement Income Security Act of 1974. The defined-benefit plan assets consist primarily of marketable equity and fixed-income securities. The Company uses a December 31 measurement date for these plans. Weighted average assumptions used to determine benefit obligations:
Weighted average assumptions used to determine net periodic benefit cost:
The discount rates are determined using current rates earned on high-quality, long-term bonds with maturities that correspond with the estimated cash distributions from the pension plans. At December 31, 2016, the Company selected discount rates for each of the plans using a pool of higher-yielding bonds estimated to be more reflective of settlement rates, as management has taken steps to ultimately terminate or settle plans that are frozen and move toward freezing benefits in active plans in the future. In determining the expected return on plan assets, the Company assesses the current level of expected returns on risk-free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class is then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. Plan assets are invested in common commingled trust funds invested in equity and fixed income securities and in certain real estate assets. The target and actual asset allocation of the funds in the qualified defined-benefit plans, by asset category, are as follows:
The Company’s investment policy focuses on achieving maximum returns at a reasonable risk for pension assets over a full market cycle. In 2015, the Company separated the management of plan assets for the defined-benefit plan that covers the Company's non-union, management participants. This plan has been closed to new participants since 2003 and benefits were frozen effective January 1, 2014. These assets have a higher allocation to fixed income securities than the other plans. The Company uses a fund manager and invests in various asset classes to diversify risk. The Company determines the strategic allocation between equities, fixed income and real estate based on current funded status and other characteristics of the plans. As the funded status improves, the Company increases the fixed income allocation of the portfolio and decreases the equity allocation. Actual asset allocations are reviewed regularly and periodically rebalanced as appropriate. As of December 31, 2016, all assets other than real estate were invested in common commingled trust funds. The Company uses the net asset values of these funds to determine fair value as allowed using the practical expediency method outlined in the accounting standards. Fair value estimates for real estate are calculated using the present value of expected future cash flows based on independent appraisals, local market conditions and current and projected operating performance. Certain investments were previously misclassified in the fair value hierarchy disclosure in 2015 based on the Company's interpretation of relevant guidance. Upon further evaluation, investments in common commingled trusts were determined to have a readily determinable fair value and are now disclosed within the fair value hierarchy. Additionally, investments in the real estate limited partnership are measured at net asset value per share as a practical expedient and excluded from the fair value hierarchy. These changes in disclosure do not have a material impact on the financial statements and are consistent with presentation of amounts as of December 31, 2016 as shown below. Plan asset by fund category (in millions):
The following table sets forth the status of the qualified defined-benefit pension plans (in millions):
The accumulated benefit obligation for the combined qualified defined-benefit pension was $1.9 billion and $1.8 billion at December 31, 2016 and 2015. The amounts recognized in the consolidated balance sheets (in millions):
The amounts not yet reflected in net periodic benefit cost and included in AOCL (in millions):
The expected amortization of prior service credit and net loss from AOCL in 2017 is $1 million and $26 million, respectively, for the qualified defined-benefit pension plans. Net pension expense for the qualified defined-benefit plans included the following components (in millions):
In 2015, the Company recognized a settlement charge of $14 million related to lump sum settlements offered to terminated, vested plan participants. The result was a reduction in the projected benefit obligation of $62 million. The settlement charge reflects the remaining unamortized actuarial loss in AOCL associated with the settled obligation. There are no current statutory funding requirements for the Company’s plans in 2017, nor does the Company expect to contribute to the qualified defined-benefit pension plans during 2017. Future benefits expected to be paid over the next ten years under the qualified defined-benefit pension plans from the assets of those plans (in millions):
Nonqualified Defined-Benefit Pension Plan Alaska also maintains an unfunded, noncontributory defined-benefit plan for certain elected officers. This plan uses a December 31 measurement date. The assumptions used to determine benefit obligations and the net period benefit cost for the nonqualified defined-benefit pension plan are similar to those used to calculate the qualified defined-benefit pension plan. The plan's unfunded status, PBO and accumulated benefit obligation are immaterial. The net pension expense in prior year and expected future expense is also immaterial. Postretirement Medical Benefits The Company allows certain retirees to continue their medical, dental and vision benefits by paying all or a portion of the active employee plan premium until eligible for Medicare, currently age 65. This results in a subsidy to retirees, because the premiums received by the Company are less than the actual cost of the retirees’ claims. The accumulated postretirement benefit obligation for this subsidy is unfunded. The accumulated postretirement benefit obligation was $76 million and $64 million at December 31, 2016 and 2015 respectively. The net periodic benefit cost was not material in 2016 or 2015. During 2014, the Company made changes to the postretirement medical benefits for non-union personnel and certain labor groups to sunset the postretirement medical benefits effective in 2015. As a result of these changes, the Company recognized a partial curtailment gain of $25 million in 2014. The curtailment gain included $5 million associated with an embedded sick leave subsidy. This subsidy was used to establish a new compensated absence liability. The net impact of the curtailment gain of $20 million is included in special items in the income statement. Defined-Contribution Plans The defined-contribution plans are deferred compensation plans under section 401(k) of the Internal Revenue Code. All of these plans require Company contributions. Total expense for the defined-contribution plans was $67 million, $60 million and $54 million in 2016, 2015, and 2014. The Company also has a noncontributory, unfunded defined-contribution plan for certain elected officers of the Company who are ineligible for the nonqualified defined-benefit pension plan. Amounts recorded as liabilities under the plan are not material to the consolidated balance sheets at December 31, 2016 and 2015. Pilot Long-term Disability Benefits Alaska maintains a long-term disability plan for its pilots. The long-term disability plan does not have a service requirement. Therefore, the liability is calculated based on estimated future benefit payments associated with pilots that were assumed to be disabled on a long-term basis as of December 31, 2016 and does not include any assumptions for future disability. The liability includes the discounted expected future benefit payments and medical costs. The total liability was $25 million and $19 million, which was recorded net of a prefunded trust account of $3 million and $2 million, and included in long-term other liabilities on the consolidated balance sheets as of December 31, 2016 and December 31, 2015, respectively. Employee Incentive-Pay Plans The Company has employee incentive plans that pay employees based on certain financial and operational metrics. These metrics are set and approved annually by the Compensation Committee of the Board of Directors. The aggregate expense under these plans in 2016, 2015 and 2014 was $127 million, $120 million and $116 million. The Air Group plans are summarized below.
Virgin America operated three similar plans, including a traditional profit sharing plan, through 2016. The impact of these plans was immaterial for the period from the date of acquisition through December 31, 2016. Starting January 1, 2017 all employees will participate in the Air Group plans described above. |
COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Future minimum payments for commitments as of December 31, 2016 (in millions):
Lease Commitments Aircraft lease commitments include future obligations for all of the Company's operating airlines—Alaska, Virgin America and Horizon, as well as aircraft leases operated by third-parties. At December 31, 2016, the Company had lease contracts for 17 B737 aircraft, 15 Q400 aircraft and 53 Airbus aircraft. Additionally, as of December 31, 2016 the Company has 15 leased E175s with SkyWest. The Company has 10 scheduled lease deliveries of A321neo aircraft from 2017 through 2018 and five scheduled lease deliveries of E175s in 2017 to be operated by SkyWest. All lease contracts have remaining noncancelable lease terms ranging from 2017 to 2030. The Company has the option to increase capacity flown by SkyWest with eight additional E175 aircraft with deliveries in 2019. Options to lease are not reflected in the commitments table above. Facility lease commitments primarily include airport and terminal facilities and building leases. Total rent expense for aircraft and facility leases was $315 million, $295 million and $288 million, in 2016, 2015 and 2014. Aircraft Purchase Commitments Aircraft purchase commitments include non-cancelable contractual commitments for aircrafts and engines. As of December 31, 2016, the Company is committed to purchasing 54 B737 aircraft (22 B737 NextGen aircraft and 32 B737 MAX aircraft, with deliveries in 2017 through 2023) and 33 E175 aircraft with deliveries in 2017 through 2019. In addition, the Company has options to purchase 41 B737 aircraft, 30 A320neo aircraft and 30 E175 aircraft. Option payments are not reflected in the table above. Capacity Purchase Agreements ("CPAs") At December 31, 2016, Alaska had CPAs with three carriers, including the Company's wholly-owned subsidiary, Horizon. Horizon sells 100% of its capacity under a CPA with Alaska. In addition, Alaska has CPAs with SkyWest Airlines, Inc ("SkyWest") to fly certain routes in the Lower 48 and Canada and with Peninsula Airways, Inc ("PenAir") to fly certain routes in the state of Alaska. Under these agreements, Alaska pays the carriers an amount which is based on a determination of their cost of operating those flights and other factors intended to approximate market rates for those services. Future payments (excluding Horizon) are based on minimum levels of flying by the third-party carriers, which could differ materially due to variable payments based on actual levels of flying and certain costs associated with operating flights such as fuel. Aircraft Maintenance Deposits The Company is contractually required to make maintenance deposit payments to aircraft lessors, which represent maintenance reserves made solely to collateralize the lessor for future maintenance events should the Company not perform required maintenance. Under most leases, the lease agreements provide that maintenance reserves are reimbursable upon completion of the major maintenance event in an amount equal to the lesser of (i) the amount qualified for reimbursement from maintenance reserves held by the lessor associated with the specific major maintenance event or (ii) the qualifying costs related to the specific major maintenance event. Aircraft Maintenance and Parts Management The Company has a separate maintenance-cost-per-hour contract for management and repair of certain rotable parts to support airframe and engine maintenance and repair. This agreement requires monthly payments based upon utilization, such as flight hours, cycles and age of the aircraft, and, in turn, the agreement transfers certain risks to the third-party service provider. There are minimum payments under this agreement, which are reflected in the table above. Accordingly, payments could differ materially based on actual aircraft utilization. Contingencies The Company is a party to routine litigation matters incidental to its business and with respect to which no material liability is expected. Liabilities for litigation related contingencies are recorded when a loss is determined to be probable and estimable. In 2015, three flight attendants filed a class action lawsuit seeking to represent all Virgin America flight attendants for damages based on alleged violations of California and City of San Francisco wage and hour laws. Plaintiffs received class certification in November 2016. Virgin America filed a motion for summary judgment seeking to dismiss all claims on various federal preemption grounds. In January 2017, the Court denied in part and granted in part Virgin America’s motion. Virgin America believes the claims in this case are without factual and legal merit and intends to defend this lawsuit through, among other strategies, filing a motion for reconsideration of the Court’s certification decision and denial of summary judgment and, if necessary, a motion for certification of interlocutory appeal to the U.S. Court of Appeals for the Ninth Circuit. Management believes the ultimate disposition of these matters is not likely to materially affect the Company's financial position or results of operations. This forward-looking statement is based on management's current understanding of the relevant law and facts, and it is subject to various contingencies, including the potential costs and risks associated with litigation and the actions of arbitrators, judges and juries. |
SHAREHOLDER'S EQUITY |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDER'S EQUITY | SHAREHOLDERS' EQUITY Common Stock Changes During the second quarter of 2014, shareholders voted to increase the number of authorized shares from 100 million to 200 million shares and reduce the par value of common stock from $1 per share to $0.01 per share, and the Board of Directors declared a two-for-one stock split by means of a stock distribution. The additional shares were distributed on July 9, 2014, to the shareholders of record on June 23, 2014. Dividends During 2016, the Board of Directors declared dividends of $1.10 per share. The Company paid dividends of $136 million, $102 million and $68 million to shareholders of record during 2016, 2015 and 2014. Subsequent to year-end, the Board of Directors declared a quarterly cash dividend of $0.30 per share to be paid in March 2017 to shareholders of record as of February 21, 2017. This is a 9% increase from the most recent quarterly dividends of $0.275 per share. Common Stock Repurchase In May 2014, the Board of Directors authorized a $650 million share repurchase program, which was completed in October 2015. In August 2015, the Board of Directors authorized a $1.0 billion share repurchase program, which was paused in the second quarter of 2016 in anticipation of the acquisition of Virgin America. At December 31, 2016, the Company held 5,861,583 shares in treasury. Management does not anticipate retiring common shares held in treasury for the foreseeable future. Share repurchase activity (in millions, except shares):
Accumulated Other Comprehensive Loss (AOCL) AOCL consisted of the following (in millions, net of tax):
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SPECIAL ITEMS SPECIAL ITEMS |
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SPECIAL ITEMS [Abstract] | |
Unusual or Infrequent Items Disclosure [Text Block] | SPECIAL ITEMS In 2016, the Company recognized special items of $117 million for merger-related costs associated with its acquisition of Virgin America. Costs classified as merger-related are directly attributable to merger activities. $39 million of these costs were not deductible under U.S. federal tax law, as discussed in Note 7. The Company also recognized a special tax expense of $17 million representing the impact of adjustments to the Company's position on income sourcing in various states. In 2015, the Company recognized special items of $32 million in aggregate. The special items comprise an expense of $14 million for a lump sum settlements offered to terminated and vested participants in the qualified defined benefit pension plans and a litigation-related matter. See Note 8 for more information regarding the pension settlement charge. The Company also recognized a special tax benefit of $26 million representing the discrete impacts of adjustments to the Company's position on income sourcing in various states. In 2014, the Company recognized special items of $30 million. As discussed in Note 8, a $20 million benefit was recognized related to the curtailment of certain postretirement benefit plans. Furthermore, in 2014 the Company recorded a one-time gain of $10 million associated with the settlement of a legal matter. |
STOCK-BASED COMPENSATION PLANS |
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STOCK-BASED COMPENSATION PLANS | STOCK-BASED COMPENSATION PLANS The table below summarizes the components of total stock-based compensation (in millions):
Unrecognized stock-based compensation for non-vested options and awards and the weighted-average period the expense will be recognized (in millions):
The Company has various equity incentive plans under which it may grant stock awards to directors, officers and employees. The Company also has an employee stock purchase plan. The Company is authorized to issue 17 million shares of common stock under these plans, of which 11,847,713 shares remain available for future grants of either options or stock awards as of December 31, 2016. Stock Options Stock options to purchase common stock are granted at the fair market value of the stock on the date of grant. The stock options granted have terms of up to ten years. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants:
The expected market price volatility is based on the historical volatility. The expected term is based on the estimated period of time until exercise based on historical experience. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected dividend yield is based on the estimated weighted average dividend yield over the expected term. The expected forfeiture rates are based on historical experience. The tables below summarize stock option activity for the year ended December 31, 2016:
Stock Awards Restricted Stock Units ("RSUs") are awarded to eligible employees and entitle the grantee to receive shares of common stock at the end of the vest period. The fair value of the RSUs is based on the stock price on the date of grant. The RSUs “cliff vest” after three years, or the period from the date of grant to the employee’s retirement eligibility, and expense is recognized accordingly. Performance Share Units (PSUs) are awarded to certain executives to receive shares of common stock if specific performance goals and market conditions are achieved. There are several tranches of PSUs which vest when performance goals and market conditions are met. The following table summarizes information about outstanding stock awards:
Deferred Stock Awards Deferred Stock Units ("DSUs") are awarded to members of its Board of Directors as part of their retainers. The underlying common shares are issued upon retirement from the Board, but require no future service period. As a result, the entire intrinsic value of the awards is expensed on the date of grant. Employee Stock Purchase Plan The ESPP allows employees to purchase common stock at 85% of the stock price on the first day of the offering period or the specified purchase date, whichever is lower. Employees may contribute up to 10% of their base earnings during the offering period to purchase stock. Employees purchased 308,920, 281,058 and 298,283 shares in 2016, 2015 and 2014 under the ESPP. |
OPERATING SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Segment Information | OPERATING SEGMENT INFORMATION Alaska Air Group has three operating airlines—Alaska, Virgin America and Horizon. Each is a regulated airline by the U.S. Department of Transportation’s Federal Aviation Administration. Alaska has CPAs for regional capacity with Horizon, as well as with third-party carriers SkyWest and PenAir, under which Alaska receives all passenger revenues. Under U.S. General Accepted Accounting Principles, operating segments are defined as components of a business for which there is discrete financial information that is regularly assessed by the Chief Operating Decision Maker ("CODM") in making resource allocation decisions. Financial performance for the operating airlines and CPAs is managed and reviewed by the Company's CODM as part of three reportable operating segments:
The CODM makes resource allocation decisions for these reporting segments based on flight profitability data, aircraft type, route economics and other financial information. The "Consolidating and Other" column reflects parent company activity, consolidating entries and other immaterial business units of the company. The “Air Group Adjusted” column represents a non-GAAP measure that is used by the Company CODM to evaluate performance and allocate resources. Adjustments are further explained below in reconciling to consolidated GAAP results. The operating segment information that follows (in millions) includes financial results for Virgin America for the period from December 14, 2016 to December 31, 2016 and the impact of purchase accounting as of December 14, 2016.
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GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||
Organization and Basis of Accounting, Policy [Policy Text Block] | Organization and Basis of Presentation The consolidated financial statements include the accounts of Air Group, or the Company, and its primary subsidiaries, Alaska, Horizon and, starting December 14, 2016, Virgin America. The Company conducts substantially all of its operations through these subsidiaries. All significant intercompany balances and transactions have been eliminated. These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and their preparation requires the use of management’s estimates. Actual results may differ from these estimates. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year. |
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Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents Cash equivalents consist of highly liquid investments with original maturities of three months or less, such as money market funds, commercial paper and certificates of deposit. They are carried at cost, which approximates market value. The Company reduces cash balances when funds are disbursed. Due to the time delay in funds clearing the banks, the Company normally maintains a negative balance in its cash disbursement accounts, which is reported as a current liability. The amount of the negative cash balance was $15 million and $12 million at December 31, 2016 and 2015 and is included in accounts payable, with the change in the balance during the year included in other financing activities in the consolidated statements of cash flows. The Company's restricted cash balances are primarily used to guarantee various letters of credit, self-insurance programs or other contractual rights. Restricted cash consists of highly liquid securities with original maturities of three months or less. They are carried at cost, which approximates fair value. |
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Marketable Securities, Available-for-sale Securities, Policy [Policy Text Block] | Marketable Securities Investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. All cash equivalents and short-term investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Changes in market value, excluding other-than-temporary impairments, are reflected in accumulated other comprehensive loss ("AOCL"). Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. The Company uses a systematic methodology that considers available quantitative and qualitative evidence in evaluating potential impairment. If the cost of an investment exceeds its fair value, management evaluates, among other factors, general market conditions, credit quality of debt instrument issuers, the duration and extent to which the fair value is less than cost, the Company's intent and ability to hold, or plans to sell, the investment. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to Other—net in the consolidated statements of operations and a new cost basis in the investment is established. |
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Receivables, Policy [Policy Text Block] | Receivables Receivables are due on demand and consist primarily of airline traffic (including credit card) receivables, Mileage Plan™ partner receivables, amounts due from other airlines related to interline agreements, government tax authorities and other miscellaneous amounts due to the Company, and are net of an allowance for doubtful accounts. Management determines the allowance for doubtful accounts based on known troubled accounts and historical experience applied to an aging of accounts. |
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Inventory, Policy [Policy Text Block] | Inventories and Supplies—net Expendable aircraft parts, materials and supplies are stated at average cost and are included in inventories and supplies—net. An obsolescence allowance for expendable parts is accrued based on estimated lives of the corresponding fleet type and salvage values. The allowance for expendable inventories was $36 million and $37 million at December 31, 2016 and 2015, respectively. Inventory and supplies—net also includes fuel inventory of $16 million and $14 million at December 31, 2016 and 2015, respectively. Repairable and rotable aircraft parts inventories are included in flight equipment. |
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Property, Plant and Equipment, Policy [Policy Text Block] | Property, Equipment and Depreciation Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives less an estimated salvage value, which are as follows:
Salvage values used for aircraft are 10% of the fair value, but as aircraft near the end of their useful lives, management updates the salvage value estimates based on current market conditions and expected use of the aircraft. “Related flight equipment” includes rotable and repairable spare inventories, which are depreciated over the associated fleet life unless otherwise noted. Beginning October 1, 2016, the Company changed its accounting estimate for the expected useful life of the B737 NextGen aircraft, which includes the B737-700, -800, -900, -900ER aircraft and the related parts, from 20 years to 25 years. The change in estimate was precipitated by management's annual accounting policy review, which considered market studies, asset performance and intended use, as well as industry benchmarking. The change in estimate was applied prospectively effective October 1, 2016. The impact of this change in estimate in 2016 is a $17 million decrease to depreciation and amortization expense. Capitalized interest, based on the Company’s weighted-average borrowing rate, is added to the cost of the related asset, and is depreciated over the estimated useful life of the asset. Maintenance and repairs are expensed when incurred. Major modifications that extend the life or improve the usefulness of aircraft are capitalized and depreciated over their estimated period of use. The Company evaluates long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the total carrying amount of an asset or asset group may not be recoverable. The Company groups assets for purposes of such reviews at the lowest level, at which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. An impairment loss is considered when estimated future undiscounted cash flows expected to result from the use of the asset or asset group and its eventual disposition are less than its carrying amount. If the asset or asset group is not considered recoverable, a write-down equal to the excess of the carrying amount over the fair value will be recorded. |
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Goodwill | Goodwill Goodwill represents the excess of purchase price over the fair value of the related net assets acquired in the Company's acquisition of Virgin America and is not amortized. As of December 31, 2016 the goodwill balance, based on a provisional purchase price allocation, was $1.9 billion. No goodwill impairment test occurred in 2016, as the acquisition was completed late in the fourth quarter. In future periods, the Company will review goodwill for impairment at least annually, or more frequently if events or circumstances indicate than an impairment may exist. The Company will perform this impairment at the reporting unit level. If fair value of the reporting unit exceeds the carrying amount, an impairment charge may be recorded. |
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Intangible Assets | Intangible Assets Intangible assets as of December 31, 2016 were recorded as a result of the acquisition of Virgin America, and consist primarily of indefinite-lived airport slots, finite-lived airport gates and finite-lived customer relationships. Finite-lived intangibles are amortized over their estimated useful lives. Indefinite-lived intangibles are not amortized but are tested at least annually for impairment using a similar methodology to property, equipment and goodwill as described above. |
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Internal Use Software, Policy [Policy Text Block] | Internally Used Software Costs The Company capitalizes costs to develop internal-use software that are incurred in the application development stage. Amortization commences when the software is ready for its intended use and the amortization period is the estimated useful life of the software, generally three to five years. Capitalized costs primarily include contract labor and payroll costs of the individuals dedicated to the development of internal-use software. |
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Revenue Recognition, Deferred Revenue [Policy Text Block] | Deferred Revenue Deferred revenue results primarily from the sale of Mileage Plan™ miles and Elevate® points to third-parties. It also includes the liability for Elevate® flown points outstanding at the acquisition date that was recorded at its estimated fair value as part of purchase price accounting. The related revenue is recognized when award transportation is provided or over the term of the applicable agreement. |
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Lease, Policy [Policy Text Block] | Operating Leases The Company leases aircraft, airport and terminal facilities, office space and other equipment under operating leases. Some of these lease agreements contain rent escalation clauses or rent holidays. For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other than the date of initial occupancy, the Company records minimum rental expenses on a straight-line basis over the terms of the leases in the consolidated statements of operations. |
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Leased Aircraft Return Costs [Policy Text Block] | Leased Aircraft Return Costs Cash payments associated with returning leased aircraft are accrued when it is probable that a cash payment will be made and that amount is reasonably estimable, usually no sooner than after the last scheduled maintenance event prior to lease return. Any accrual is based on the time remaining on the lease, planned aircraft usage and the provisions included in the lease agreement, although the actual amount due to any lessor upon return may not be known with certainty until lease termination. As leased aircraft are returned, any payments are charged against the established accrual. The accrual is part of other current and long-term liabilities and was not material as of December 31, 2016 and December 31, 2015. The expense is included in Aircraft maintenance in the consolidated statements of operations. |
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Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition Passenger revenue is recognized when the passenger travels. Tickets sold but not yet used are reported as air traffic liability until travel or date of expiration. Air traffic liability includes approximately $62 million and $42 million related to credits for future travel, as of December 31, 2016 and December 31, 2015, respectively. These credits are recognized into revenue either when the passenger travels or at the date of expiration, which is twelve months from issuance. Commissions to travel agents and related fees are expensed when the related revenue is recognized. Passenger traffic commissions and related fees not yet recognized are recorded as a prepaid expense. Taxes collected from passengers, including transportation excise taxes, airport and security fees and other fees, are recorded on a net basis within passenger revenue in the consolidated statements of operations. Due to complex pricing structures, refund and exchange policies, and interline agreements with other airlines, certain amounts are recognized as revenue using estimates regarding both the timing of the revenue recognition and the amount of revenue to be recognized. These estimates are based on the Company’s historical data. Freight and mail revenues are recognized when the related services are provided. Other—net revenues are primarily related to the Mileage Plan™ and Elevate® programs. They are recognized as described in the “Frequent Flyer Programs” paragraph below. Other—net also includes certain ancillary or non-ticket revenues, such as checked-bag fees, reservations fees, ticket change fees, on-board food and beverage sales, and, to a much lesser extent, commissions from car and hotel vendors and sales of travel insurance. These items are recognized as revenue when the related services are provided. Airport lounge memberships are recognized as revenue over the membership period. |
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Frequent Flier Program, Policy [Policy Text Block] | Frequent Flyer Programs Alaska operates the Mileage Plan™ frequent flyer program, and Virgin America operates the Elevate® frequent flyer program. Both programs provide travel awards to members based on accumulated mileage or points. For miles or points earned by flying on the Company's airlines and through airline partners, the estimated cost of providing award travel is recognized as a selling expense and accrued as a liability, as miles are earned and accumulated. Alaska and Virgin America also sell services, including miles or points for transportation, to non-airline partners, such as hotels, car rental agencies and major banks that offer Alaska's and Virgin America's affinity credit cards. The Company defers revenue related to air transportation and certificates for discounted companion travel until the transportation is delivered. The deferred proceeds are recognized as passenger revenue for awards redeemed and flown on the Company's airlines and as Other—net revenue for awards redeemed and flown on other airlines (less the cost paid to the other airlines based on contractual agreements). The elements that represent use of the Alaska and Virgin America brands and access to frequent flyer member lists and advertising are recognized as commission income in the period that those elements are sold and included in Other—net revenue in the consolidated statements of operations. |
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Advertising Cost, Policy, Expensed Advertising Cost [Policy Text Block] | Selling Expenses Selling expenses include credit card fees, global distribution systems charges, the estimated cost of frequent flyer travel awards earned through air travel, advertising, promotional costs, commissions and incentives. Advertising production costs are expensed as incurred. |
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Derivatives, Policy [Policy Text Block] | Derivative Financial Instruments The Company's operations are significantly impacted by changes in aircraft fuel prices and interest rates. In an effort to manage exposure to these risks, the Company periodically enters into fuel and interest rate derivative instruments. These derivative instruments are recognized at fair value on the balance sheet and changes in the fair value are recognized in AOCL or in the consolidated statements of operations, depending on the nature of the instrument. The Company does not hold or issue derivative fuel hedge contracts for trading purposes and does not apply hedge accounting. For cash flow hedges related to interest rate swaps, the effective portion of the derivative represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. To the extent the change in the fair value of the hedge does not perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized in interest expense. |
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Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value Measurements Accounting standards define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company has elected not to use the fair value option provided in the accounting standards for non-financial instruments. Accordingly, those assets and liabilities are carried at amortized cost. For financial instruments, the assets and liabilities are carried at fair value, which is determined based on the market approach or income approach, depending upon the level of inputs used. Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis include items such as property, plant and equipment, goodwill, intangible assets and certain other assets and liabilities. The Company determines the fair value of these items using Level 3 inputs, as described in Note 2 and Note 5. |
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Income Tax, Policy [Policy Text Block] | Income Taxes The Company uses the asset and liability approach for accounting for and reporting income taxes. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance would be established, if necessary, for the amount of any tax benefits that, based on available evidence, are not expected to be realized. As of December 31, 2016, there is a partial valuation allowance against net deferred tax assets. The Company accounts for unrecognized tax benefits in accordance with the applicable accounting standards. Virgin America has substantial federal and state net operating losses ("NOLs") for income tax purposes. The Company's ability to utilize Virgin America's NOLs could be limited if Virgin America had an “ownership change,” as defined in Section 382 of the Internal Revenue Code and similar state provisions. In general terms, an ownership change can occur whenever there is a collective shift in the ownership of a company by more than 50% by one or more “5% stockholders” within a three-year period. The occurrence of such a change generally limits the amount of NOL carryforwards a company could utilize in a given year to the aggregate fair market value of the company's common stock immediately prior to the ownership change, multiplied by the long-term tax-exempt interest rate in effect for the month of the ownership change. The acquisition constituted an ownership change and the potential for further limitations following the acquisition. See Note 7 to the consolidated financial statements for more discussion of the calculation. |
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Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | Stock-Based Compensation Accounting standards require companies to recognize as expense the fair value of stock options and other equity-based compensation issued to employees as of the grant date. These standards apply to all stock awards that the Company grants to employees as well as the Company’s Employee Stock Purchase Plan ("ESPP"), which features a look-back provision and allows employees to purchase stock at a 15% discount. All stock-based compensation expense is recorded in wages and benefits in the consolidated statements of operations. |
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Earnings Per Share, Policy [Policy Text Block] | Earnings Per Share (EPS) Diluted EPS is calculated by dividing net income by the average common shares outstanding plus additional common shares that would have been outstanding assuming the exercise of in-the-money stock options and restricted stock units, using the treasury-stock method. In 2016, 2015, and 2014, antidilutive stock options excluded from the calculation of EPS were not material. |
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New Accounting Pronouncements, Policy [Policy Text Block] | Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers"(Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This comprehensive new standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In March 2016, the FASB issued ASU 2016-08, "Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations" to clarify the guidance on determining whether the Company is considered the principal or the agent in a revenue transaction where a third party is providing goods or services to a customer. Entities are permitted to use either a full retrospective or cumulative effect transition method, and are required to adopt all parts of the new revenue standard using the same transition method. The new standard is effective for the Company on January 1, 2018. At this time, the Company believes the most significant impact to the financial statements will be to Mileage Plan™ revenues and liabilities. The Company currently uses the incremental cost approach for miles earned through travel. As this approach will be eliminated with the standard, the Company will be required to significantly increase its liability for earned miles through a relative selling price model. The Company continues to evaluate and model the full impact of the standard and currently plans to apply the full retrospective transition method. In April 2015, the FASB issued ASU 2015-03, "Interest—Imputation of Interest" (Subtopic 835-30), which requires debt issuance costs related to a debt liability be presented as a direct deduction from the carrying value of the debt liability. The amendment was adopted as of January 1, 2016. Prior period debt balances have been adjusted to reflect the adoption of the ASU. The adoption of the ASU had no impact on the statements of operations or retained earnings. In February 2016, the FASB issued ASU 2016-02, "Leases" (Topic 842), which requires lessees to recognize assets and liabilities for leases currently classified as operating leases. Under the new standard a lessee will recognize a liability on the balance sheet representing the lease payments owed, and a right-of-use-asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. The new standard is effective for the Company on January 1, 2019. Early adoption of the standard is permitted. At this time, the Company believes the most significant impact to the financial statements will relate to the recording of a right of use asset associated with leased aircraft. Other leases, including airports and real estate, equipment, software and other miscellaneous leases continue to be assessed for impact as it relates to ASU 2016-02. The Company has not yet determined whether it will early adopt the standard. In March 2016, the FASB issued ASU 2016-09, "Compensation—Stock Compensation" (Topic 718), which simplifies several aspects of accounting for employee share-based payment awards, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The ASU is effective for the Company beginning January 1, 2017. The adoption of the standard will not have a material impact on the Company's statements of operations or financial position. In January 2017, the FASB issued ASU 2017-04, "Intangibles—Goodwill and Other" (Topic 350), which eliminates step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The ASU is effective for the Company beginning January 1, 2019. Early adoption of the standard is permitted. Beginning in fiscal 2017 the Company will be required to perform an impairment test for goodwill arising from its acquisition of Virgin America and plans to adopt the standard in 2017. |
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Table Text Block] | Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives less an estimated salvage value, which are as follows:
Salvage values used for aircraft are 10% of the fair value, but as aircraft near the end of their useful lives, management updates the salvage value estimates based on current market conditions and expected use of the aircraft. “Related flight equipment” includes rotable and repairable spare inventories, which are depreciated over the associated fleet life unless otherwise noted. |
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Liabilities from Mileage Plan [Table Text Block] | Frequent flyer program deferred revenue and liabilities included in the consolidated balance sheets (in millions):
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Revenue from Mileage Plan [Table Text Block] | Frequent flyer program revenue included in the consolidated statements of operations (in millions):
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ACQUISITION OF VIRGIN AMERICA, INC. (Tables) |
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Schedule of Fair Value of Consideration Transferred | The fair value of consideration transferred on the closing date includes the value of the cash consideration and accelerated and vested equity awards attributable to pre-acquisition service. The purchase price is as follows (in millions, except per-share stock price):
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | Provisional fair value of the assets acquired and the liabilities assumed as of the acquisition date, December 14, 2016, (in millions) are as follows:
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Business Acquisition, Pro Forma Information | Accordingly, the unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been consummated as of January 1, 2015.
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CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES (Tables) |
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Cash, Cash Equivalents, and Short-term Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash, Cash Equivalents and Short-term Investments [Table Text Block] | Components for cash, cash equivalents and marketable securities (in millions):
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Schedule of Realized Gain (Loss) [Table Text Block] | Activity for marketable securities (in millions):
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Schedule of Debt Investment Maturities [Table Text Block] | Maturities for marketable securities (in millions):
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DERIVATIVE INSTRUMENTS (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] | Fair values of derivative instruments on the consolidated balance sheet (in millions):
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Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block] | Pretax effect of derivative instruments on earnings and AOCL (in millions):
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FAIR VALUE MEASUREMENTS (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, by Balance Sheet Grouping [Table Text Block] | Fair values of financial instruments on the consolidated balance sheet (in millions):
Fixed-rate debt that is not carried at fair value on the consolidated balance sheet and the estimated fair value of long-term fixed-rate debt (in millions):
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LONG-TERM DEBT (Tables) |
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Schedule of Long-term Debt Instruments [Table Text Block] | Long-term debt obligations (in millions):
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Schedule of Maturities of Long-term Debt [Table Text Block] | Long-term debt principal payments for the next five years and thereafter (in millions):
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INCOME TAXES (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Deferred Tax Assets and Liabilities [Table Text Block] | Deferred tax (assets) and liabilities comprise the following (in millions):
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Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] | The components of income tax expense were as follows (in millions):
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Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] | Income tax expense reconciles to the amount computed by applying the U.S. federal rate of 35% to income before income tax and accounting changes as follows (in millions):
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Summary of Income Tax Contingencies [Table Text Block] | The Company has identified its federal tax return and its state tax returns in Alaska, Oregon and California as “major” tax jurisdictions. A summary of the Company's jurisdictions and the periods that are subject to examination are as follows:
Changes in the liability for unrecognized tax benefits during 2016, 2015 and 2014 are as follows (in millions):
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EMPLOYEE BENEFIT PLANS (Tables) - Qualified Defined Benefit [Member] |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assumptions Used [Table Text Block] | Weighted average assumptions used to determine benefit obligations:
Weighted average assumptions used to determine net periodic benefit cost:
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Schedule of Allocation of Plan Assets [Table Text Block] | The target and actual asset allocation of the funds in the qualified defined-benefit plans, by asset category, are as follows:
Plan asset by fund category (in millions):
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Schedule of Net Funded Status [Table Text Block] | The following table sets forth the status of the qualified defined-benefit pension plans (in millions):
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Schedule of Amounts Recognized in Balance Sheet [Table Text Block] | The amounts recognized in the consolidated balance sheets (in millions):
The amounts not yet reflected in net periodic benefit cost and included in AOCL (in millions):
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Schedule of Net Benefit Costs [Table Text Block] | Net pension expense for the qualified defined-benefit plans included the following components (in millions):
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Schedule of Expected Benefit Payments [Table Text Block] | Future benefits expected to be paid over the next ten years under the qualified defined-benefit pension plans from the assets of those plans (in millions):
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COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases and Unrecorded Unconditional Purchase Obligtaions [Table Text Block] | Future minimum payments for commitments as of December 31, 2016 (in millions):
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SHAREHOLDER'S EQUITY (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Treasury Stock by Class [Table Text Block] | Share repurchase activity (in millions, except shares):
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Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] | AOCL consisted of the following (in millions, net of tax):
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STOCK-BASED COMPENSATION PLANS (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block] | The table below summarizes the components of total stock-based compensation (in millions):
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Schedule of Unrecognized Compensation Cost, Nonvested Awards [Table Text Block] | Unrecognized stock-based compensation for non-vested options and awards and the weighted-average period the expense will be recognized (in millions):
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] | The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants:
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Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block] | The tables below summarize stock option activity for the year ended December 31, 2016:
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Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block] | The following table summarizes information about outstanding stock awards:
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OPERATING SEGMENT INFORMATION (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | operating segment information that follows (in millions) includes financial results for Virgin America for the period from December 14, 2016 to December 31, 2016 and the impact of purchase accounting as of December 14, 2016.
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GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CASH AND CASH EQUIVALENTS (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Accounting Policies [Abstract] | ||
Negative cash balance | $ 15 | $ 12 |
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - INVENTORIES AND SUPPLIES - NET (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Accounting Policies [Abstract] | ||
Allowance for all non-surplus expendable inventories | $ 36 | $ 37 |
Fuel inventory | $ 16 | $ 14 |
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - REVENUE RECOGNITION (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Accounting Policies [Abstract] | ||
Travel credits for future travel | $ 62 | $ 42 |
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - MILEAGE PLAN (Details) - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
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Mileage Plan [Line Items] | |||
Other accrued liabilities | $ 878 | $ 661 | |
Other liabilities | 417 | 362 | |
Deferred revenue | 640 | 431 | |
Deferred revenue from Mileage Plan awards issued but not yet flown | 43 | 37 | |
Passenger revenues | 5,006 | 4,793 | $ 4,579 |
Other-net revenues | 817 | 697 | 675 |
Total Operating Revenues | 5,931 | 5,598 | 5,368 |
Revenue From Mileage Plan [Member] | |||
Mileage Plan [Line Items] | |||
Passenger revenues | 293 | 267 | 246 |
Other-net revenues | 429 | 329 | 295 |
Total Operating Revenues | 722 | 596 | 541 |
Commission revenue | 329 | 280 | $ 261 |
Liabilities From Mileage Plan [Member] | |||
Mileage Plan [Line Items] | |||
Other accrued liabilities | 484 | 368 | |
Other liabilities | 21 | 19 | |
Deferred revenue | 638 | 427 | |
Liabilities | $ 1,143 | $ 814 |
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - SELLING EXPENSES (Details) - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
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Accounting Policies [Abstract] | |||
Advertising expense | $ 61 | $ 55 | $ 49 |
GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - STOCK-BASED COMPENSATION (Details) |
12 Months Ended |
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Dec. 31, 2016 | |
Employee stock purchase plan [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Purchase Date | 15.00% |
ACQUISITION OF VIRGIN AMERICA, INC. Fair value of consideration transferred (Details) - Virgin America Inc. [Member] $ / shares in Units, shares in Thousands, $ in Millions |
Dec. 14, 2016
USD ($)
$ / shares
shares
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Business Acquisition [Line Items] | |
Number of shares of Virgin America common stock issued and outstanding | shares | 44,645 |
Multiplied by cash consideration for each share of common stock per the merger agreement | $ / shares | $ 57.00 |
Cash consideration paid for common stock issued and outstanding | $ 2,545 |
Accelerated and vested equity awards attributable to pre-acquisition service | 51 |
Total Purchase Price | $ 2,596 |
ACQUISITION OF VIRGIN AMERICA, INC. Fair values of the assets acquired and the liabilities assumed (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 14, 2016 |
Dec. 31, 2015 |
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Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Goodwill | $ 1,934 | $ 0 | |
Virgin America Inc. [Member] | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Cash and cash equivalents | $ 645 | ||
Receivables | 44 | ||
Prepaid expenses and other current assets | 16 | ||
Property and equipment | 560 | ||
Intangible assets | 143 | ||
Goodwill | 1,934 | ||
Other assets | 84 | ||
Total assets | 3,426 | ||
Accounts payable | 22 | ||
Accrued wages, vacation and payroll taxes | 51 | ||
Air traffic liabilities | 172 | ||
Other accrued liabilities | 196 | ||
Current portion of long-term debt | 125 | ||
Long-term debt, net of current portion | 360 | ||
Deferred income taxes | (304) | ||
Deferred revenue | 126 | ||
Other liabilities | 82 | ||
Total liabilities | 830 | ||
Total purchase price | $ 2,596 |
ACQUISITION OF VIRGIN AMERICA, INC. Pro forma impact of the acquisition (Details) - Virgin America Inc. [Member] - USD ($) $ in Millions |
12 Months Ended | |
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Dec. 31, 2016 |
Dec. 31, 2015 |
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Business Acquisition [Line Items] | ||
Revenue | $ 7,511 | $ 7,111 |
Net Income | $ 1,008 | $ 914 |
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES (Details) - USD ($) $ in Millions |
12 Months Ended | |||
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Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
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Cash and Cash Equivalents [Abstract] | ||||
Cash | $ 283 | $ 4 | ||
Money Market Funds, at Carrying Value | 45 | 69 | ||
Cash equivalents | 45 | 69 | ||
Cash and cash equivalents | 328 | 73 | $ 107 | $ 80 |
Available-for-sale Securities, Current [Abstract] | ||||
Marketable securities, Cost Basis | 1,257 | 1,260 | ||
Marketable securities, Unrealized Gains | 2 | 1 | ||
Marketable securities, Unrealized Losses | (7) | (6) | ||
Marketable securities, Fair Value | 1,252 | 1,255 | ||
Cash and marketables securities, Cost Basis | 1,585 | 1,333 | ||
Cash and marketable securities, Unrealized Gains | 2 | 1 | ||
Cash and marketable securities, Unrealized Losses | (7) | (6) | ||
Total cash and marketable securities | 1,580 | 1,328 | ||
Available-for-sale Securities, Activity [Abstract] | ||||
Proceeds from sales and maturities | 962 | 1,175 | 1,092 | |
Gross realized gains | 3 | 2 | 4 | |
Gross realized losses | (1) | (3) | $ (2) | |
U.S. government and agency securities | ||||
Available-for-sale Securities, Current [Abstract] | ||||
Marketable securities, Cost Basis | 290 | 254 | ||
Marketable securities, Unrealized Gains | 0 | 0 | ||
Marketable securities, Unrealized Losses | (3) | (1) | ||
Marketable securities, Fair Value | 287 | 253 | ||
Foreign government bonds | ||||
Available-for-sale Securities, Current [Abstract] | ||||
Marketable securities, Cost Basis | 36 | 31 | ||
Marketable securities, Unrealized Gains | 0 | 0 | ||
Marketable securities, Unrealized Losses | 0 | 0 | ||
Marketable securities, Fair Value | 36 | 31 | ||
Asset-backed securities | ||||
Available-for-sale Securities, Current [Abstract] | ||||
Marketable securities, Cost Basis | 138 | 130 | ||
Marketable securities, Unrealized Gains | 0 | 0 | ||
Marketable securities, Unrealized Losses | 0 | 0 | ||
Marketable securities, Fair Value | 138 | 130 | ||
Mortgage-backed securities | ||||
Available-for-sale Securities, Current [Abstract] | ||||
Marketable securities, Cost Basis | 89 | 117 | ||
Marketable securities, Unrealized Gains | 0 | 0 | ||
Marketable securities, Unrealized Losses | 0 | (1) | ||
Marketable securities, Fair Value | 89 | 116 | ||
Corporate notes and bonds | ||||
Available-for-sale Securities, Current [Abstract] | ||||
Marketable securities, Cost Basis | 693 | 711 | ||
Marketable securities, Unrealized Gains | 2 | 1 | ||
Marketable securities, Unrealized Losses | (4) | (4) | ||
Marketable securities, Fair Value | 691 | 708 | ||
Municipal securities | ||||
Available-for-sale Securities, Current [Abstract] | ||||
Marketable securities, Cost Basis | 11 | 17 | ||
Marketable securities, Unrealized Gains | 0 | 0 | ||
Marketable securities, Unrealized Losses | 0 | 0 | ||
Marketable securities, Fair Value | $ 11 | $ 17 |
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES - MATURITIES (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Cost Basis [Abstract] | ||
Due in one year or less | $ 182 | |
Due after one year through five years | 1,070 | |
Due after five years through 10 years | 5 | |
Due after 10 years | 0 | |
Marketable securities, Cost Basis | 1,257 | $ 1,260 |
Fair Value [Abstract] | ||
Due in one year or less | 182 | |
Due after one year through five years | 1,065 | |
Due after five years through 10 years | 5 | |
Due after 10 years | 0 | |
Marketable securities, Fair Value | $ 1,252 | $ 1,255 |
DERIVATIVE INSTRUMENTS - BALANCE SHEET CLASSIFICATION (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Accumulated other comprehensive loss | $ (305) | $ (303) |
Fuel hedge contracts [Member] | Derivative Instruments Not Designated as Hedges [Member] | Fuel Hedge Contracts, Current [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets, Current | 17 | 2 |
Fuel hedge contracts [Member] | Derivative Instruments Not Designated as Hedges [Member] | Fuel Hedge Contracts, Noncurrent [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets, Noncurrent | 3 | 2 |
Interest rate swaps agreements [Member] | Derivative Instruments Designated as Hedges [Member] | Other Accrued Liabilities [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Liabilities, Current | (5) | (5) |
Interest rate swaps agreements [Member] | Derivative Instruments Designated as Hedges [Member] | Other Liabilities [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Liabilities, Noncurrent | 0 | (13) |
Interest rate swaps agreements [Member] | Derivative Instruments Designated as Hedges [Member] | Accumulated Other Comprehensive Loss [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Accumulated other comprehensive loss | $ 5 | $ 18 |
DERIVATIVE INSTRUMENTS - INCOME STATEMENT (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Gains (losses) recognized in aircraft rent [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Loss expected to be reclassified | $ 4 | ||
Gains (losses) recognized in Interest Expense [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Loss expected to be reclassified | 1 | ||
Derivative Instruments Not Designated as Hedges [Member] | Fuel hedge contracts [Member] | Gains (losses) recognized in aircraft fuel expense [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Losses recognized in income | (3) | $ (19) | $ (18) |
Cash Flow Hedging [Member] | Derivative Instruments Designated as Hedges [Member] | Interest rate swaps agreements [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Losses in accumulated other comprehensive loss | 8 | (5) | (8) |
Cash Flow Hedging [Member] | Derivative Instruments Designated as Hedges [Member] | Interest rate swaps agreements [Member] | Gains (losses) recognized in aircraft rent [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Losses recognized in income | $ (6) | $ (6) | $ (6) |
DERIVATIVE INSTRUMENTS - FAIR VALUE OF HEDGE POSITIONS (Details) gallons in Millions, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016
USD ($)
gallons
aircraft
agreement
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Derivative [Line Items] | |||
Net cash received (paid) to for new positions and settlements | $ (19) | $ (17) | $ (9) |
B737-800 [Member] | |||
Derivative [Line Items] | |||
Capital Leased Assets, Number of B737-800 Aircraft | aircraft | 6 | ||
Not Designated as Hedging Instrument [Member] | Fuel hedge contracts [Member] | |||
Derivative [Line Items] | |||
Fuel hedge contracts outstanding (in gallons) | gallons | 394 | ||
Secured Debt [Member] | Interest rate swaps agreements [Member] | |||
Derivative [Line Items] | |||
Number of interest rate swap agreements | agreement | 2 | ||
Derivative, Notional Amount | $ 295 |
FAIR VALUE MEASUREMENTS - FAIR VALUE OF ASSETS AND LIABILITIES (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale Securities, Current | $ 1,252 | $ 1,255 |
Fuel hedge contracts [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative instruments, assets | 20 | 4 |
Fuel hedge contracts [Member] | Level 1 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative instruments, assets | 0 | 0 |
Fuel hedge contracts [Member] | Level 2 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative instruments, assets | 20 | 4 |
Interest rate swaps agreements [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative instruments, liabilities | (5) | (18) |
Interest rate swaps agreements [Member] | Level 1 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative instruments, liabilities | 0 | 0 |
Interest rate swaps agreements [Member] | Level 2 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative instruments, liabilities | (5) | (18) |
U.S. government and agency securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale Securities, Current | 287 | 253 |
U.S. government and agency securities | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 287 | 253 |
U.S. government and agency securities | Level 1 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale Securities, Current | 287 | |
Marketable securities | 253 | |
U.S. government and agency securities | Level 2 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 0 | 0 |
Foreign government bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale Securities, Current | 36 | 31 |
Foreign government bonds | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 36 | 31 |
Foreign government bonds | Level 1 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 0 | 0 |
Foreign government bonds | Level 2 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 36 | 31 |
Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale Securities, Current | 138 | 130 |
Asset-backed securities | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 138 | 130 |
Asset-backed securities | Level 1 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 0 | 0 |
Asset-backed securities | Level 2 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 138 | 130 |
Mortgage-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale Securities, Current | 89 | 116 |
Mortgage-backed securities | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 89 | 116 |
Mortgage-backed securities | Level 1 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 0 | 0 |
Mortgage-backed securities | Level 2 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 89 | 116 |
Corporate notes and bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale Securities, Current | 691 | 708 |
Corporate notes and bonds | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 691 | 708 |
Corporate notes and bonds | Level 1 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 0 | 0 |
Corporate notes and bonds | Level 2 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 691 | 708 |
Municipal securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale Securities, Current | 11 | 17 |
Municipal securities | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 11 | 17 |
Municipal securities | Level 1 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | 0 | 0 |
Municipal securities | Level 2 [Member] | Recurring [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Marketable securities | $ 11 | $ 17 |
FAIR VALUE MEASUREMENTS - LONG-TERM DEBT (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Carrying Amount [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 1,179 | $ 520 |
Fair Value [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 1,199 | $ 557 |
LONG-TERM DEBT - SCHEDULE OF LONG-TERM DEBT (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Debt Instrument [Line Items] | |||
Long-term Debt | $ 2,964 | $ 683 | |
Less debt issuance costs | (18) | (3) | |
Less current portion | 319 | 114 | |
Long-term debt, net of current portion | $ 2,645 | $ 569 | |
Weighted-average fixed-interest rate | 4.40% | 5.70% | |
Weighted-average variable-interest rate | 2.40% | 1.80% | |
Proceeds from issuance of long-term debt, net of issuance costs | $ 2,044 | $ 0 | $ 51 |
Long-term debt payments | 249 | 116 | $ 119 |
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
2017 | 321 | ||
2018 | 351 | ||
2019 | 424 | ||
2020 | 451 | ||
2021 | 424 | ||
Thereafter | 1,007 | ||
Long-term Debt | 2,978 | ||
Fixed-rate notes payable due through 2028 | |||
Debt Instrument [Line Items] | |||
Long-term Debt | 1,179 | 520 | |
Variable-rate notes payable due through 2028 | |||
Debt Instrument [Line Items] | |||
Long-term Debt | $ 1,803 | $ 166 |
LONG-TERM DEBT LONG-TERM DEBT - SECURED DEBT (Details) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016
USD ($)
aircraft
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Debt Instrument [Line Items] | |||
Debt instrument, increase | $ 2,300 | ||
Secured debt, number of aircrafts securing debt financing | aircraft | 56 | ||
Long-term debt payments | $ 249 | $ 116 | $ 119 |
Repayments of debt | 12 | ||
Secured Debt [Member] | |||
Debt Instrument [Line Items] | |||
Proceeds from issuance of secured debt | 2,000 | ||
Secured Debt [Member] | Secured Debt, Aircraft Collateral [Member] | |||
Debt Instrument [Line Items] | |||
Proceeds from issuance of secured debt | 1,600 | ||
Secured Debt [Member] | Secured Debt, Aircraft Purchase Agreements [Member] | |||
Debt Instrument [Line Items] | |||
Proceeds from issuance of secured debt | $ 400 | ||
Boeing, 737-900ER [Member] | |||
Debt Instrument [Line Items] | |||
Secured debt, number of aircrafts securing debt financing | aircraft | 37 | ||
B737-800 [Member] | |||
Debt Instrument [Line Items] | |||
Secured debt, number of aircrafts securing debt financing | aircraft | 19 | ||
Virgin America Inc. [Member] | |||
Debt Instrument [Line Items] | |||
Long-term debt payments | $ 95 |
LONG-TERM DEBT - LINE OF CREDIT (Details) |
12 Months Ended |
---|---|
Dec. 31, 2016
USD ($)
aircraft
credit_facility
| |
Line of Credit Facility [Line Items] | |
Number of credit facilities | credit_facility | 3 |
Number of credit facilities, no borrowing | credit_facility | 2 |
Credit Facilities 1 and 2 [Member] | |
Line of Credit Facility [Line Items] | |
Number of credit facilities | credit_facility | 2 |
Credit Facility 1 [Member] | |
Line of Credit Facility [Line Items] | |
Line of credit facility, asset restrictions, unrestricted cash and marketable securities | $ | $ 500,000,000 |
Credit Facility 1 [Member] | Secured by aircraft [Member] | |
Line of Credit Facility [Line Items] | |
Line of credit facility, borrowing capacity | $ | $ 100,000,000 |
Number of credit facilities | credit_facility | 1 |
Credit Facility 2 [Member] | Secured by other [Member] | |
Line of Credit Facility [Line Items] | |
Line of credit facility, borrowing capacity | $ | $ 100,000,000 |
Credit Facility 3 [Member] | |
Line of Credit Facility [Line Items] | |
Line of credit facility, borrowing capacity | $ | $ 52,000,000 |
Number of aircrafts used as collateral | aircraft | 2 |
Credit Facility 3 [Member] | Secured by aircraft [Member] | |
Line of Credit Facility [Line Items] | |
Number of credit facilities | credit_facility | 1 |
Secured Debt [Member] | Credit Facility 2 [Member] | |
Line of Credit Facility [Line Items] | |
Line of credit facility, borrowing capacity | $ | $ 100,000,000 |
INCOME TAXES - DEFERRED TAX ASSETS AND LIABILITIES (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Excess of tax over book depreciation | $ 1,282 | $ 1,110 |
Deferred Tax Liabilities, Intangible Assets | 39 | 0 |
Other—net | 26 | 23 |
Gross deferred tax liabilities | 1,347 | 1,133 |
Mileage Plan | (310) | (208) |
Inventory obsolescence | (23) | (22) |
Deferred gains | (8) | (8) |
Employee benefits | (196) | (167) |
Fuel hedge contracts | 0 | (5) |
Acquired net operating losses | (289) | 0 |
Other—net | (62) | (41) |
Gross deferred tax assets | (888) | (451) |
Valuation allowance | 4 | 0 |
Net deferred tax liabilities | 463 | $ 682 |
Federal [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss | 773 | |
State [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss | $ 344 |
INCOME TAXES - COMPONENTS OF TAX EXPENSE (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Current tax expense (benefit): | |||
Federal | $ 392 | $ 397 | $ 229 |
State | 48 | 30 | 27 |
Total current | 440 | 427 | 256 |
Deferred tax expense: | |||
Federal | 77 | 60 | 103 |
State | 14 | (23) | 11 |
Total deferred | 91 | 37 | 114 |
Total tax expense related to income | $ 531 | $ 464 | $ 370 |
INCOME TAXES - EFFECTIVE INCOME TAX RECONCILIATION (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Business Acquisition [Line Items] | |||
U.S. federal tax rate | 35.00% | 35.00% | 35.00% |
Income before income tax | $ 1,345 | $ 1,312 | $ 975 |
Expected tax expense | 471 | 459 | 341 |
Nondeductible expenses | 20 | 4 | 4 |
State income taxes | 28 | 19 | 25 |
State income sourcing | 13 | (15) | 0 |
Other—net | (1) | (3) | 0 |
Total tax expense related to income | $ 531 | $ 464 | $ 370 |
Effective tax rate | 39.50% | 35.40% | 37.90% |
Special tax expense (benefit) | $ 17 | $ (26) | |
Additions based on tax positions and settlements related to the current year | 3 | $ 19 | $ 1 |
Virgin America Inc. [Member] | |||
Business Acquisition [Line Items] | |||
Nondeductible expenses | $ 39 |
INCOME TAXES INCOME TAXES - UNCERTAIN TAX POSITIONS (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Tax Disclosure [Abstract] | |||
Beginning balance | $ 22 | $ 3 | $ 2 |
Additions based on tax positions and settlements related to the current year | 3 | 19 | 1 |
Additions from acquisitions | 8 | 0 | 0 |
Ending balance | $ 33 | $ 22 | $ 3 |
EMPLOYEE BENEFIT PLANS EMPLOYEE BENEFIT PLANS - ADDITIONAL INFORMATION (Details) - plan |
1 Months Ended | 12 Months Ended |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2016 |
|
Business Acquisition [Line Items] | ||
Number of defined benefit plans | 4 | |
Number of defined contribution plans | 5 | |
Virgin America Inc. [Member] | ||
Business Acquisition [Line Items] | ||
Number of defined contribution plans | 6 |
EMPLOYEE BENEFIT PLANS - ASSUMPTIONS (Details) - Qualified Defined Benefit [Member] |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Defined Benefit Plan, Weighted Average Assumptions Used in Calculating Net Periodic Benefit Cost [Abstract] | |||
Net period benefit costs, Weighted-average discount rate | 4.20% | 4.85% | |
Net period benefit costs, Weighted-average expected return on assets | 6.50% | 6.75% | |
Minimum [Member] | |||
Defined Benefit Plan, Weighted Average Assumptions Used in Calculating Benefit Obligation [Abstract] | |||
Benefit obligations, Weighted-average discount rate | 4.29% | 4.55% | |
Benefit obligations, Rate of compensation increase | 2.12% | 2.06% | |
Defined Benefit Plan, Weighted Average Assumptions Used in Calculating Net Periodic Benefit Cost [Abstract] | |||
Net period benefit costs, Weighted-average discount rate | 4.55% | ||
Net period benefit costs, Weighted-average expected return on assets | 6.00% | ||
Net period benefit costs, Rate of compensation increase | 2.06% | 2.85% | 2.90% |
Maximum [Member] | |||
Defined Benefit Plan, Weighted Average Assumptions Used in Calculating Benefit Obligation [Abstract] | |||
Benefit obligations, Weighted-average discount rate | 4.50% | 4.69% | |
Benefit obligations, Rate of compensation increase | 2.59% | 2.65% | |
Defined Benefit Plan, Weighted Average Assumptions Used in Calculating Net Periodic Benefit Cost [Abstract] | |||
Net period benefit costs, Weighted-average discount rate | 4.69% | ||
Net period benefit costs, Weighted-average expected return on assets | 6.50% | ||
Net period benefit costs, Rate of compensation increase | 2.65% | 3.91% | 3.93% |
EMPLOYEE BENEFIT PLANS - PLAN ASSETS (Details) - Qualified Defined Benefit [Member] - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Defined Benefit Plan Disclosure [Line Items] | |||
Plan asset allocations | 100.00% | 100.00% | |
Defined Benefit Plan, Assets, Target Allocations [Abstract] | |||
Plan Assets | $ 1,846 | $ 1,737 | $ 1,917 |
Level 2 [Member] | |||
Defined Benefit Plan, Assets, Target Allocations [Abstract] | |||
Plan Assets | $ 1,755 | $ 1,652 | |
Equity funds [Member] | U.S. | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Plan asset allocations | 30.00% | 28.00% | |
Defined Benefit Plan, Assets, Target Allocations [Abstract] | |||
Equities, Range Minimum | 22.00% | ||
Equities, Range Maximum | 33.00% | ||
Equity funds [Member] | U.S. | Level 2 [Member] | |||
Defined Benefit Plan, Assets, Target Allocations [Abstract] | |||
Plan Assets | $ 545 | $ 491 | |
Equity funds [Member] | Non-U.S. [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Plan asset allocations | 12.00% | 12.00% | |
Defined Benefit Plan, Assets, Target Allocations [Abstract] | |||
Equities, Range Minimum | 9.00% | ||
Equities, Range Maximum | 16.00% | ||
Equity funds [Member] | Non-U.S. [Member] | Level 2 [Member] | |||
Defined Benefit Plan, Assets, Target Allocations [Abstract] | |||
Plan Assets | $ 218 | $ 208 | |
Credit bond index fund [Member] | Level 2 [Member] | |||
Defined Benefit Plan, Assets, Target Allocations [Abstract] | |||
Plan Assets | $ 992 | $ 953 | |
Fixed Income Funds [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Plan asset allocations | 53.00% | 55.00% | |
Defined Benefit Plan, Assets, Target Allocations [Abstract] | |||
Equities, Range Minimum | 48.00% | ||
Equities, Range Maximum | 67.00% | ||
Real Estate [Member] | |||
Defined Benefit Plan Disclosure [Line Items] | |||
Plan asset allocations | 5.00% | 5.00% | |
Defined Benefit Plan, Assets, Target Allocations [Abstract] | |||
Equities, Range Minimum | 0.00% | ||
Equities, Range Maximum | 8.00% | ||
Real Estate [Member] | Level 3 [Member] | |||
Defined Benefit Plan, Assets, Target Allocations [Abstract] | |||
Plan Assets | $ 91 | $ 85 |
EMPLOYEE BENEFIT PLANS - FUNDED STATUS (Details) - Qualified Defined Benefit [Member] - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Benefit obligation | |||
Beginning of year | $ 1,898 | $ 2,050 | |
Service cost | 37 | 41 | $ 33 |
Interest cost | 73 | 84 | 81 |
Plan settlement | 0 | (62) | |
Actuarial (gain) loss | 104 | (140) | |
Benefits paid | (69) | (75) | |
End of year | 2,043 | 1,898 | 2,050 |
Plan assets at fair value | |||
Beginning of year | 1,737 | 1,917 | |
Actual return on plan assets | 178 | (43) | |
Employer contributions | 0 | 0 | |
Plan settlement | 0 | (62) | |
Benefits paid | (69) | (75) | |
End of year | 1,846 | 1,737 | $ 1,917 |
Funded status (unfunded) | $ (197) | $ (161) | |
Percent funded | 90.00% | 92.00% | |
Accumulated benefit obligation | $ 1,900 | $ 1,800 |
EMPLOYEE BENEFIT PLANS - AMOUNTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Pension and Other Postretirement Defined Benefit Plans, Liabilities [Abstract] | ||
Accrued benefit liability-long term | $ 331 | $ 270 |
Qualified Defined Benefit [Member] | ||
Pension and Other Postretirement Defined Benefit Plans, Liabilities [Abstract] | ||
Accrued benefit liability-long term | 225 | 173 |
Plan assets-long term (within Other noncurrent assets) | (28) | (12) |
Total liability recognized | 197 | 161 |
Pension and Other Postretirement Benefit Plans, Accumulated Other Comprehensive Income (Loss), before Tax [Abstract] | ||
Prior service credit | (10) | (11) |
Net loss | 509 | 499 |
Amount recognized in AOCL (pretax) | $ 499 | $ 488 |
EMPLOYEE BENEFIT PLANS - EXPECTED AMORTIZATION FROM AOCI (Details) - Qualified Defined Benefit [Member] $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2016
USD ($)
| |
Defined Benefit Plan Disclosure [Line Items] | |
Prior service credit | $ 1 |
Net loss | $ 26 |
EMPLOYEE BENEFIT PLANS - NET PENSION EXPENSE (Details) - Qualified Defined Benefit [Member] - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Defined Benefit Plan, Net Periodic Benefit Cost [Abstract] | |||
Service cost | $ 37 | $ 41 | $ 33 |
Interest cost | 73 | 84 | 81 |
Expected return on assets | (108) | (122) | (117) |
Amortization of prior service cost | (1) | (1) | (1) |
Recognized actuarial loss | 25 | 26 | 13 |
Settlement expense (special item) | 0 | 14 | 0 |
Net pension expense | 26 | 42 | $ 9 |
Plan settlement | $ 0 | $ 62 |
EMPLOYEE BENEFIT PLANS - FUTURE BENEFITS EXPECTED TO BE PAID (Details) - Qualified Defined Benefit [Member] $ in Millions |
Dec. 31, 2016
USD ($)
|
---|---|
Defined Benefit Plan Disclosure [Line Items] | |
2017 | $ 85 |
2018 | 93 |
2019 | 96 |
2020 | 109 |
2021 | 109 |
2022– 2026 | $ 652 |
EMPLOYEE BENEFIT PLANS EMPLOYEE BENEFIT PLANS - POSTRETIREMENT MEDICAL BENEFITS (Details) - Postretirement Medical Benefits [Member] - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | ||
Benefit obligation | $ 76 | $ 64 |
Recognized net gain (loss) due to curtailments | 25 | |
Recognized net gain (loss) due to curtailments, sick leave subsidy | 5 | |
Recognized net gain (loss) due to curtailments, special items | $ 20 |
EMPLOYEE BENEFIT PLANS - DEFINED CONTRIBUTION PLANS (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Compensation and Retirement Disclosure [Abstract] | |||
Total expense for the defined-contribution plans | $ 67 | $ 60 | $ 54 |
EMPLOYEE BENEFIT PLANS - PILOT LONG-TERM DISABILITY BENEFITS (Details) - Postretirement Health Coverage [Member] - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Defined Benefit Plan Disclosure [Line Items] | ||
Total liability net of a prefunded trust account | $ 25 | $ 19 |
Prefunded trust account | $ 3 | $ 2 |
EMPLOYEE BENEFIT PLANS - EMPLOYEE INCENTIVE-PAY PLANS (Details) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016
USD ($)
$ / Quarter
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Defined Benefit Plan Disclosure [Line Items] | |||
Variable incentive pay | $ | $ 127 | $ 120 | $ 116 |
Operational Performance Rewards Program entitles all Air Group employees to maximum quarterly payouts (in dollars per quarter) | $ / Quarter | 300 |
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES (Details) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016
USD ($)
aircraft
carriers
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Rent expense | $ 315 | $ 295 | $ 288 |
Capacity purchase arrangements, Carriers | carriers | 3 | ||
Horizon [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Capacity purchase arrangements, Percent | 100.00% | ||
Aircraft Commitments [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
2017 | $ 926 | ||
2018 | 848 | ||
2019 | 694 | ||
2020 | 354 | ||
2021 | 277 | ||
Thereafter | 361 | ||
Total | 3,460 | ||
Capacity Purchase Agreements[Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
2017 | 76 | ||
2018 | 80 | ||
2019 | 85 | ||
2020 | 90 | ||
2021 | 94 | ||
Thereafter | 676 | ||
Total | 1,101 | ||
Aircraft Leases [Member] | |||
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||
2017 | 302 | ||
2018 | 316 | ||
2019 | 305 | ||
2020 | 279 | ||
2021 | 242 | ||
Thereafter | 953 | ||
Total | 2,397 | ||
Facility Leases [Member] | |||
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||
2017 | 123 | ||
2018 | 73 | ||
2019 | 63 | ||
2020 | 57 | ||
2021 | 50 | ||
Thereafter | 171 | ||
Total | $ 537 | ||
B-737 [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Commited to purchase (in aircraft) | aircraft | 54 | ||
Option to purchase additional (in aircraft) | aircraft | 41 | ||
A-320-Neo [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Option to purchase additional (in aircraft) | aircraft | 30 | ||
B737-900ER [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Commited to purchase (in aircraft) | aircraft | 22 | ||
B737 MAX [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Commited to purchase (in aircraft) | aircraft | 32 | ||
Q400 [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Commited to purchase (in aircraft) | aircraft | 33 | ||
E-175 [Domain] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Option to purchase additional (in aircraft) | aircraft | 30 | ||
Property Subject to Operating Lease [Member] | B-737 [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Operating leases, number of leased assets (in aircraft) | aircraft | 17 | ||
Property Subject to Operating Lease [Member] | Q400 [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Operating leases, number of leased assets (in aircraft) | aircraft | 15 | ||
Property Subject to Operating Lease [Member] | Airbus [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Operating leases, number of leased assets (in aircraft) | aircraft | 53 | ||
Property Subject to Operating Lease [Member] | E-175 [Domain] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Operating leases, number of leased assets (in aircraft) | aircraft | 15 | ||
Property Available for Operating Lease [Member] | A321neo [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Property Subject to or Available for Operating Lease, Number of Optional Additional Units | aircraft | 10 | ||
Capacity Purchase Agreement with SkyWest [Member] | E175 [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Property Subject to or Available for Operating Lease, Number of Optional Additional Units | aircraft | 8 | ||
Capacity Purchase Agreement with SkyWest [Member] | Property Available for Operating Lease [Member] | E-175 [Domain] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Property Subject to or Available for Operating Lease, Number of Optional Additional Units | aircraft | 5 | ||
Aircraft Maintenance Deposits [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Other Commitment, Due after Fifth Year | $ 90 | ||
Other Commitment, Due in Fifth Year | 63 | ||
Other Commitment, Due in Fourth Year | 68 | ||
Other Commitment, Due in Third Year | 65 | ||
Other Commitment, Due in Second Year | 61 | ||
Other Commitment, Due in Next Twelve Months | 59 | ||
Other Commitment | 406 | ||
Aircraft Maintenance and Parts Management [Member] | |||
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |||
Other Commitment, Due after Fifth Year | 0 | ||
Other Commitment, Due in Fifth Year | 40 | ||
Other Commitment, Due in Fourth Year | 37 | ||
Other Commitment, Due in Third Year | 35 | ||
Other Commitment, Due in Second Year | 32 | ||
Other Commitment, Due in Next Twelve Months | 30 | ||
Other Commitment | $ 174 |
SHAREHOLDER'S EQUITY SHAREHOLDERS' EQUITY - STOCK CHANGES (Details) - $ / shares |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Stock Split [Line Items] | ||
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
prestocksplit [Domain] | ||
Stock Split [Line Items] | ||
Common stock, shares authorized | 100,000,000 | |
Common stock, par value | $ 1 |
SHAREHOLDER'S EQUITY SHAREHOLDERS' EQUITY - DIVIDENDS (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Feb. 21, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Subsequent Event [Line Items] | |||||
Cash dividend declared per share | $ 0.275 | $ 1.10 | $ 0.80 | $ 0.50 | |
Cash dividend paid | $ 136 | $ 102 | $ 68 | ||
Subsequent Event [Member] | |||||
Subsequent Event [Line Items] | |||||
Cash dividend declared per share | $ 0.30 | ||||
Dividend increase | 9.00% |
SHAREHOLDER'S EQUITY - COMMON STOCK REPURCHASE (Details) - USD ($) $ in Millions |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Aug. 31, 2015 |
May 01, 2014 |
|
Equity, Class of Treasury Stock [Line Items] | |||||
Common stock repurchase (in shares) | 2,594,809 | 7,208,328 | 7,316,731 | ||
Common stock repurchase | $ 193 | $ 505 | $ 348 | ||
2015 $1 billion Repurchase Program [Member] | |||||
Equity, Class of Treasury Stock [Line Items] | |||||
Share repurchase program, authorized amount | $ 1,000 | ||||
Common stock repurchase (in shares) | 2,594,809 | 1,517,277 | 0 | ||
Common stock repurchase | $ 193 | $ 120 | $ 0 | ||
2014 $650 million Repurchase Program | |||||
Equity, Class of Treasury Stock [Line Items] | |||||
Share repurchase program, authorized amount | $ 650 | ||||
Common stock repurchase (in shares) | 0 | 5,691,051 | 5,497,427 | ||
Common stock repurchase | $ 0 | $ 385 | $ 265 | ||
2012 $250 million Repurchase Program | |||||
Equity, Class of Treasury Stock [Line Items] | |||||
Common stock repurchase (in shares) | 0 | 0 | 1,819,304 | ||
Common stock repurchase | $ 0 | $ 0 | $ 83 |
SHAREHOLDER'S EQUITY SHAREHOLDERS' EQUITY - OTHER (Details) - shares |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Equity [Abstract] | ||
Treasury Stock, Shares | 5,861,583 | 3,266,774 |
SHAREHOLDER'S EQUITY SHAREHOLDERS' EQUITY - ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Equity [Abstract] | ||
Unrealized gain on marketable securities considered available-for-sale | $ (3) | $ (3) |
Related to employee benefit plans | (299) | (288) |
Related to interest rate derivatives | (3) | (12) |
Accumulated other comprehensive loss | $ (305) | $ (303) |
SPECIAL ITEMS SPECIAL ITEMS (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Special items—merger-related costs and other | $ 117 | $ 32 | $ (30) |
Nondeductible expenses | 20 | 4 | 4 |
Special tax expense (benefit) | 17 | (26) | |
Special Item, net of tax | 20 | ||
Gain related to litigation settlement | 10 | ||
Pension Plan [Member] | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Settlement expense (special item) | 0 | $ 14 | $ 0 |
Virgin America Inc. [Member] | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Special items—merger-related costs and other | 117 | ||
Nondeductible expenses | $ 39 |
STOCK-BASED COMPENSATION PLANS (Details) - USD ($) $ / shares in Units, $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation | $ 19 | $ 17 | $ 16 |
Tax benefit related to stock-based compensation | 7 | 7 | 6 |
Unrecognized stock-based compensation for non-vested options and awards | $ 23 | ||
Unrecognized stock-based compensation awards weighted-average period | 10 months 24 days | ||
Shares authorized under stock-based compensation plans (in shares) | 17,000,000 | ||
Shares remaining available for future grants (shares) | 11,847,713 | ||
Stock options [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation | $ 2 | $ 2 | $ 3 |
Unrecognized stock-based compensation for non-vested options and awards | $ 2 | ||
Unrecognized stock-based compensation awards weighted-average period | 1 year 1 month 6 days | ||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract] | |||
Expected volatility | 51.00% | 53.00% | 65.00% |
Expected term | 6 years | 6 years | 6 years |
Risk-free interest rate | 1.23% | 1.67% | 1.87% |
Expected dividend yield | 1.50% | 1.25% | 1.25% |
Weighted-average grant date fair value per share (in dollars per share) | $ 27.14 | $ 28.71 | $ 21.70 |
Estimated fair value of options granted (millions) | $ 2 | $ 3 | $ 3 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |||
Outstanding, beginning balance (in shares) | 540,345 | ||
Granted (in Shares) | 79,340 | ||
Exercised (in shares) | (158,758) | ||
Canceled (in shares) | 0 | ||
Forfeited or expired (in shares) | (7,253) | ||
Outstanding, ending balance (in shares) | 453,674 | 540,345 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | |||
Outstanding, beginning balance, Weighted-Average Exercise Price Per Share (in dollars per share) | $ 31.58 | ||
Granted, Weighted-Average Exercise Price Per Share (in dollars per share) | 65.63 | ||
Exercised, Weighted-Average Exercise Price Per Share (in dollars per share) | 23.62 | ||
Canceled, Weighted-Average Exercise Price Per Share (in dollars per share) | 0.00 | ||
Fofeited or expired, Weighted-Average Exercise Price Per Share (in dollars per share) | 49.66 | ||
Outstanding, ending balance, Weighted-Average Exercise Price Per Share (in dollars per share) | $ 40.02 | $ 31.58 | |
Outstanding, Weighted-Average Contractual Life | 6 years 2 months 12 days | 6 years 3 months 18 days | |
Outstanding, Aggregate Intrinsic Value | $ 22 | $ 26 | |
Exercisable, Outstanding (in shares) | 199,676 | ||
Exercisable, Weighted-Average Exercise Price Per Share (in dollars per share) | $ 25.35 | ||
Exercisable, Weighted-Average Contractual Life | 5 years 1 month 6 days | ||
Exercisable, Aggregate Intrinsic Value | $ 13 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest [Abstract] | |||
Vested or expected to vest, Shares | 453,435 | ||
Vested or expected to vest, Weighted-Average Exercise Price Per Share (in dollars per share) | $ 40.03 | ||
Vested or expected to vest, Weighted-Average Contractual Life | 6 years 2 months 12 days | ||
Vested or expected to vest, Aggregate Intrinsic Value | $ 22 | ||
Intrinsic value of option exercises | 9 | 14 | 20 |
Cash received from stock option exercises | 3 | 4 | 6 |
Tax benefit related to stock option exercises | 3 | 5 | 7 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value | 3 | 3 | 2 |
Stock awards [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation | 11 | $ 11 | 10 |
Unrecognized stock-based compensation for non-vested options and awards | $ 21 | ||
Unrecognized stock-based compensation awards weighted-average period | 10 months 24 days | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |||
Non-vested, beginning balance (in shares) | 470,715 | ||
Granted (in shares) | 374,863 | ||
Vested (in shares) | (366,319) | ||
Forfeited (in shares) | (39,166) | ||
Non-vested, ending balance (in shares) | 440,093 | 470,715 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract] | |||
Non-vested, beginning balance, Weighted-Average Grant Date Fair Value (in dollars per share) | $ 38.09 | ||
Granted, Weighted-Average Grant Date Fair Value (in dollars per share) | 63.53 | ||
Vested, Weighted-Average Grant Date Fair Value (in dollars per share) | 32.87 | ||
Forfeited, Weighted-Average Grant Date Fair Value (in dollars per share) | 40.35 | ||
Non-vested, ending balance, Weighted-Average Price Per Share (in dollars per share) | $ 63.86 | $ 38.09 | |
Non-vested, Weighted-Average Contractual Life | 1 year 4 months 24 days | 9 months 18 days | |
Non-vested, Total Instrinsic Value (in dollars) | $ 39 | $ 38 | |
Deferred stock awards [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation | 1 | 1 | 1 |
Employee stock purchase plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation | $ 5 | $ 3 | $ 2 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |||
Granted (in shares) | 308,920 | 281,058 | 298,283 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract] | |||
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent | 85.00% | ||
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Employee Subscription Rate | 10.00% |
OPERATING SEGMENT INFORMATION (Details) - USD ($) $ in Millions |
12 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
||||||||||
Operating revenues | ||||||||||||
Passenger, Mainline | $ 4,098 | $ 3,939 | $ 3,774 | |||||||||
Passenger, Regional | 908 | 854 | 805 | |||||||||
Total passenger revenue | 5,006 | 4,793 | 4,579 | |||||||||
CPA revenues | 0 | 0 | 0 | |||||||||
Freight and mail | 108 | 108 | 114 | |||||||||
Other Net and Special Revenue | 817 | 697 | 675 | |||||||||
Total Operating Revenues | 5,931 | 5,598 | 5,368 | |||||||||
Operating expenses | ||||||||||||
Operating expenses, excluding fuel | 3,751 | 3,346 | 2,988 | |||||||||
Special items—merger-related costs and other | 117 | 32 | (30) | |||||||||
Economic fuel | 831 | 954 | 1,418 | |||||||||
Total Operating Expenses | 4,582 | 4,300 | 4,406 | |||||||||
Nonoperating Income (Expense) | ||||||||||||
Interest income | 27 | 21 | 21 | |||||||||
Interest expense | (55) | (42) | (48) | |||||||||
Other | 24 | 35 | 40 | |||||||||
Nonoperating Income (Expense) Total | (4) | 14 | 13 | |||||||||
Income (loss) before income tax | 1,345 | 1,312 | 975 | |||||||||
Depreciation | 363 | 320 | 294 | |||||||||
Capital expenditures | 678 | 831 | 694 | |||||||||
Total assets | 9,962 | 6,530 | ||||||||||
Air Group Adjusted [Member] | ||||||||||||
Operating revenues | ||||||||||||
Passenger, Mainline | [1] | 4,098 | 3,939 | 3,774 | ||||||||
Passenger, Regional | [1] | 908 | 854 | 805 | ||||||||
Total passenger revenue | [1] | 5,006 | 4,793 | 4,579 | ||||||||
CPA revenues | [1] | 0 | 0 | 0 | ||||||||
Freight and mail | [1] | 108 | 108 | 114 | ||||||||
Other Net and Special Revenue | [1] | 817 | 697 | 675 | ||||||||
Total Operating Revenues | [1] | 5,931 | 5,598 | 5,368 | ||||||||
Operating expenses | ||||||||||||
Operating expenses, excluding fuel | [1] | 3,634 | 3,314 | 3,018 | ||||||||
Economic fuel | [1] | 844 | 954 | 1,441 | ||||||||
Total Operating Expenses | [1] | 4,478 | 4,268 | 4,459 | ||||||||
Nonoperating Income (Expense) | ||||||||||||
Interest income | [1] | 27 | 21 | 21 | ||||||||
Interest expense | [1] | (55) | (42) | (48) | ||||||||
Other | [1] | 24 | 35 | 40 | ||||||||
Nonoperating Income (Expense) Total | [1] | (4) | 14 | 13 | ||||||||
Income (loss) before income tax | [1] | 1,449 | 1,344 | 922 | ||||||||
Alaska Airlines [Member] | ||||||||||||
Nonoperating Income (Expense) | ||||||||||||
Depreciation | [2] | 296 | 268 | 243 | ||||||||
Capital expenditures | [2] | 608 | 821 | 659 | ||||||||
Total assets | [2] | 15,260 | 8,127 | |||||||||
Alaska Mainline [Member] | ||||||||||||
Operating revenues | ||||||||||||
Passenger, Mainline | 4,098 | 3,939 | 3,774 | |||||||||
Passenger, Regional | 0 | 0 | 0 | |||||||||
Total passenger revenue | 4,098 | 3,939 | 3,774 | |||||||||
CPA revenues | 0 | 0 | 0 | |||||||||
Freight and mail | 104 | 103 | 109 | |||||||||
Other Net and Special Revenue | 738 | 621 | 592 | |||||||||
Total Operating Revenues | 4,940 | 4,663 | 4,475 | |||||||||
Operating expenses | ||||||||||||
Operating expenses, excluding fuel | 2,883 | 2,653 | 2,417 | |||||||||
Economic fuel | 719 | 823 | 1,251 | |||||||||
Total Operating Expenses | 3,602 | 3,476 | 3,668 | |||||||||
Nonoperating Income (Expense) | ||||||||||||
Interest income | 26 | 19 | 20 | |||||||||
Interest expense | (42) | (28) | (32) | |||||||||
Other | 19 | 28 | 39 | |||||||||
Nonoperating Income (Expense) Total | 3 | 19 | 27 | |||||||||
Income (loss) before income tax | 1,341 | 1,206 | 834 | |||||||||
Alaska Regional [Member] | ||||||||||||
Operating revenues | ||||||||||||
Passenger, Mainline | 0 | 0 | 0 | |||||||||
Passenger, Regional | 908 | 854 | 805 | |||||||||
Total passenger revenue | 908 | 854 | 805 | |||||||||
CPA revenues | 0 | 0 | 0 | |||||||||
Freight and mail | 5 | 5 | 5 | |||||||||
Other Net and Special Revenue | 74 | 72 | 78 | |||||||||
Total Operating Revenues | 987 | 931 | 888 | |||||||||
Operating expenses | ||||||||||||
Operating expenses, excluding fuel | 769 | 695 | 623 | |||||||||
Economic fuel | 125 | 131 | 190 | |||||||||
Total Operating Expenses | 894 | 826 | 813 | |||||||||
Nonoperating Income (Expense) | ||||||||||||
Interest income | 0 | 0 | 0 | |||||||||
Interest expense | 0 | 0 | 0 | |||||||||
Other | 0 | 0 | (1) | |||||||||
Nonoperating Income (Expense) Total | 0 | 0 | (1) | |||||||||
Income (loss) before income tax | 93 | 105 | 74 | |||||||||
Horizon [Member] | ||||||||||||
Operating revenues | ||||||||||||
Passenger, Mainline | 0 | 0 | 0 | |||||||||
Passenger, Regional | 0 | 0 | 0 | |||||||||
Total passenger revenue | 0 | 0 | 0 | |||||||||
CPA revenues | 424 | 408 | 371 | |||||||||
Freight and mail | 0 | 0 | 0 | |||||||||
Other Net and Special Revenue | 4 | 4 | 5 | |||||||||
Total Operating Revenues | 428 | 412 | 376 | |||||||||
Operating expenses | ||||||||||||
Operating expenses, excluding fuel | 407 | 375 | 349 | |||||||||
Economic fuel | 0 | 0 | 0 | |||||||||
Total Operating Expenses | 407 | 375 | 349 | |||||||||
Nonoperating Income (Expense) | ||||||||||||
Interest income | 1 | 0 | 0 | |||||||||
Interest expense | (9) | (10) | (12) | |||||||||
Other | 1 | 1 | 2 | |||||||||
Nonoperating Income (Expense) Total | (7) | (9) | (10) | |||||||||
Income (loss) before income tax | 14 | 28 | 17 | |||||||||
Depreciation | 67 | 52 | 51 | |||||||||
Capital expenditures | 70 | 10 | 35 | |||||||||
Total assets | 690 | 717 | ||||||||||
Parent [Member] | ||||||||||||
Nonoperating Income (Expense) | ||||||||||||
Total assets | (5,988) | (2,314) | ||||||||||
Intersegment Eliminations | ||||||||||||
Operating revenues | ||||||||||||
Passenger, Mainline | 0 | 0 | 0 | |||||||||
Passenger, Regional | 0 | 0 | 0 | |||||||||
Total passenger revenue | 0 | 0 | 0 | |||||||||
CPA revenues | (424) | (408) | (371) | |||||||||
Freight and mail | (1) | 0 | 0 | |||||||||
Other Net and Special Revenue | 1 | 0 | 0 | |||||||||
Total Operating Revenues | (424) | (408) | (371) | |||||||||
Operating expenses | ||||||||||||
Operating expenses, excluding fuel | (425) | (409) | (371) | |||||||||
Economic fuel | 0 | 0 | 0 | |||||||||
Total Operating Expenses | (425) | (409) | (371) | |||||||||
Nonoperating Income (Expense) | ||||||||||||
Interest income | 0 | 2 | 1 | |||||||||
Interest expense | (4) | (4) | (4) | |||||||||
Other | 4 | 6 | 0 | |||||||||
Nonoperating Income (Expense) Total | 0 | 4 | (3) | |||||||||
Income (loss) before income tax | 1 | 5 | (3) | |||||||||
Special Charges [Member] | ||||||||||||
Operating revenues | ||||||||||||
Passenger, Mainline | [3] | 0 | 0 | 0 | ||||||||
Passenger, Regional | [3] | 0 | 0 | 0 | ||||||||
Total passenger revenue | [3] | 0 | 0 | 0 | ||||||||
CPA revenues | [3] | 0 | 0 | 0 | ||||||||
Freight and mail | [3] | 0 | 0 | 0 | ||||||||
Other Net and Special Revenue | [3] | 0 | 0 | 0 | ||||||||
Total Operating Revenues | [3] | 0 | 0 | 0 | ||||||||
Operating expenses | ||||||||||||
Operating expenses, excluding fuel | 117 | 32 | [3] | (30) | [3] | |||||||
Economic fuel | (13) | 0 | [3] | (23) | [3] | |||||||
Total Operating Expenses | [3] | 104 | 32 | (53) | ||||||||
Nonoperating Income (Expense) | ||||||||||||
Interest income | [3] | 0 | 0 | 0 | ||||||||
Interest expense | [3] | 0 | 0 | 0 | ||||||||
Other | [3] | 0 | 0 | 0 | ||||||||
Nonoperating Income (Expense) Total | [3] | 0 | 0 | 0 | ||||||||
Income (loss) before income tax | [3] | $ (104) | $ (32) | $ 53 | ||||||||
|
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