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Alaska Air Group reports first quarter 2017 results


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Financial Highlights:

  • Reported net income for the first quarter under Generally Accepted Accounting Principles ("GAAP") of $99 million or $0.79 per diluted share, compared to net income of $184 million, or $1.46 per diluted share in 2016. As the acquisition of Virgin America Inc. ("Virgin America") closed on Dec. 14, 2016, first quarter 2017 information reflects the results of Virgin America, including the impacts associated with purchase accounting. First quarter 2016 results do not include Virgin America.
  • Reported first quarter net income, excluding merger-related costs and mark-to-market fuel hedging adjustments, of $130 million, compared to $183 million in the first quarter of 2016. Adjusted diluted earnings per share were $1.05, compared to $1.45 in the first quarter of 2016. This quarter's results were in line with First Call analyst consensus estimate of $1.02 per share.
  • Paid $0.30 per-share quarterly cash dividend in the first quarter, a 9% increase over the dividend paid in the first quarter of 2016.
  • Total assets surpassed $10 billion for the first time in Air Group's history.
  • Generated approximately $470 million of operating cash flow and used approximately $215 million for capital expenditures, resulting in $255 million of free cash flow in the first quarter of 2017.
  • Held $1.7 billion in unrestricted cash and marketable securities as of March 31, 2017.

Operational Accomplishments and Highlights:

  • Released the single largest new market announcement in Air Group's history, adding 20 new nonstop markets from San Francisco International ("SFO"), San Jose International ("SJC") and San Diego ("SAN"). In total, announced 26 and launched six new routes during the quarter, highlighting the primary purpose of the Virgin America acquisition, which is to grow the combined airline and become the premier carrier for guests on the West Coast.
  • Reached a tentative agreement with the International Brotherhood of Teamsters to amend the eight-year contract with Horizon Air's pilots, which will provide Horizon the ability to attract and retain the best pilots in the regional industry.
  • Granted "Single Carrier Determination" by the National Mediation Board ("NMB") for Alaska Airlines and Virgin America, paving the way for labor integration and union representation. The NMB officially certified the Association of Flight Attendants as the union representative for Virgin America inflight teammates.
  • Took delivery of the first of 33 E175s to be flown by subsidiary Horizon Air.
  • Became the first airline to take delivery of the Airbus A321neo in April 2017. The aircraft is the first of five scheduled for delivery through 2017.
  • Launched various new in-flight amenities, including Free Chat, upgraded food and beverage options and Premium Class service.
  • Added Condor Airlines as an Alaska Mileage Plan partner.
  • Alaska Airlines: Ranked No. 1 in the "Airline Quality Rating" of performance and quality for 2016—a study performed by Embry-Riddle Aeronautical University focused on four major areas of airline performance aspects important to air travel consumers.
  • Alaska Airlines: Named one of top ten airlines in the world by TripAdvisor in 2017 Travelers' Choice awards.
  • Alaska Airlines: Won the "Best Rewards Program" for Alaska Mileage Plan for carriers in the "Americas" region in the sixth annual FlyerTalk Award.

Alaska Air Group, Inc., (NYSE: ALK) today reported first quarter 2017 GAAP net income of $99 million, or $0.79 per diluted share, compared to $184 million, or $1.46 per diluted share in the first quarter of 2016. Excluding the impact of special items and mark-to-market fuel hedge adjustments, the company reported adjusted net income of $130 million, or $1.05 per diluted share, compared to $183 million, or $1.45 per diluted share, in 2016.

"We are pleased to report a solid profit for the first quarter," said Alaska CEO Brad Tilden. "With the biggest integration decisions behind us, the hard work of executing the plan now lies ahead. We've laid a foundation for growth with our recent announcements of 37 new routes, and the leadership team is fully focused on running a great airline and doing the things we do well—taking care of our guests, building loyalty and operating on time."

The following table reconciles the company's reported GAAP net income and earnings per diluted share ("diluted EPS") during the first quarters of 2017 and 2016 to adjusted amounts:

 

Three Months Ended March 31,

 

2017

 

2016

(in millions, except per-share amounts)

Dollars

 

Diluted EPS

 

Dollars

 

Diluted EPS

Reported GAAP net income

$

99

   

$

0.79

   

$

184

   

$

1.46

 

Mark-to-market fuel hedge adjustments

10

   

0.08

   

(2)

   

(0.02)

 

Special items—merger-related costs

40

   

0.33

   

   

 

Income tax effect on special items and fuel hedge adjustments

(19)

   

(0.15)

   

1

   

0.01

 

Non-GAAP adjusted income and per-share amounts

$

130

   

$

1.05

   

$

183

   

$

1.45

 

 

Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables. A glossary of financial terms can be found on the last page of this release.

A conference call regarding the first quarter results will be simulcast online at 8:30 a.m. Pacific time on April 26, 2017. It can be accessed through the company's website at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call.

References in this news release to "Air Group," "company," "we," "us" and "our" refer to Alaska Air Group, Inc. and its subsidiaries, unless otherwise specified. Alaska Airlines, Inc., Horizon Air Industries, Inc., and Virgin America Inc. are referred to as "Alaska," "Horizon," and "Virgin America" respectively, and together as our "airlines."

This news release may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2016, as well as in other documents filed by the Company with the SEC after the date thereof. Some of these risks include general economic conditions, increases in operating costs including fuel, competition, labor costs and relations, our indebtedness, inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, changes in laws and regulations and risks inherent in the achievement of anticipated synergies and the timing thereof in connection with the acquisition of Virgin America. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance, or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse.

Alaska Airlines, together with Virgin America and its regional partners, flies 40 million customers a year to 118 destinations with an average of 1,200 daily flights across the United States and to Mexico, Canada, Costa Rica and Cuba. With Alaska and Alaska Global Partners, customers can earn and redeem miles on flights to more than 900 destinations worldwide. Alaska Mileage Plan ranked "Highest in Customer Satisfaction with Airline Loyalty Rewards Programs" in the J.D. Power Airline Loyalty/Rewards Program Satisfaction Report for the last three consecutive years.  Learn more about Alaska's award-winning service and unmatched reliability at newsroom.alaskaair.com and blog.alaskaair.com. Alaska Airlines, Virgin America and Horizon Air are subsidiaries of Alaska Air Group (NYSE: ALK).

For full report:

http://newsroom.alaskaair.com/2017-04-26-Alaska-Air-Group-reports-first-quarter-2017-results

 

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