Exhibit 99.1
Investor Update - November 19, 2020
References in this update to “Air Group,” “Company,” “we,” “us,” and “our” refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified.
This update includes forecasted operational and financial information for our consolidated operations such as capacity, total revenue and certain liquidity metrics. Please see the cautionary statement under “Forward-Looking Information.”
Forward-Looking Information
This update contains forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2019, the Company's Quarterly Report on Form 10-Q for the year ended September 30, 2020, as well as in other documents filed by the Company with the SEC after the date thereof. Some of these risks include the risks associated with contagious illnesses and contagion, such as COVID-19, general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our indebtedness, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, changes in laws and regulations, and risks inherent in the achievement of anticipated synergies and the timing thereof in connection with the acquisition of Virgin America. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance, or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.
| AIR GROUP - CONSOLIDATED | ||
This investor update provides information about recent developments and performance trends for Alaska Air Group (Air Group) and subsidiaries Alaska Airlines (Alaska) and Horizon Air (Horizon).
Capacity Updates
The public health and economic crises resulting from the outbreak of COVID-19 has had an unprecedented impact on our business. We are uncertain what shape the recovery will take, and we are continuously monitoring trends in demand to determine our capacity decisions as the situation unfolds. At this time, our planning assumptions are for our fourth quarter capacity to be down approximately 40%.
The table below summarizes recent results and our current preliminary expectations for November.
| August 2020 | September 2020 | October 2020 | Expected November 2020(a) | ||||||||||||||||||||
| Revenue passengers (000s) | 1,245 | 1,212 | 1,400 | ~ 1,200-1,300 | |||||||||||||||||||
| Revenue passengers year-over-year | Down 71% | Down 68% | Down 64% | Down 65-70% | |||||||||||||||||||
| ASMs year-over-year | Down 51% | Down 50% | Down 45% | Down ~ 40% | |||||||||||||||||||
| Passenger load factor | 46% | 47% | 49% | ~ 40-45% | |||||||||||||||||||
| Total revenue year-over-year | Down 72% | Down 66% | Down 62% | Down ~ 60-65% | |||||||||||||||||||
(a) Based on current expectations but no assurance can be given that such expectations will be achieved.
Liquidity Updates
October cash burn was approximately $97 million, which was lower than cash burn in September, primarily due to improved ticket sales. We expect November cash burn will be approximately $125 million to $150 million given recent softening in the demand environment. We believe that renewed restrictions by many state and local governments have negatively impacted demand in the immediate term. Future booking patterns remain difficult to predict given continued uncertainty in COVID-19 cases and timing of available vaccines and treatments. Our cash burn measurement includes all operating cash receipts and disbursements, such as cash from bookings net of refunds, other operational cash in (loyalty, cargo, etc.), plus investment earnings, offset by all cash expenditures including normal debt service and capital expenditures. Cash burn excludes financing raised or payroll support funding.
As of November 17, 2020, Air Group had cash and short-term investments of approximately $3.5 billion, which excludes any cash and short-term investments held at McGee and ASA Assurance, Inc.