Alaska Air Group reports record third quarter income

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Written by Linda Hohnholz

Alaska Air Group reported record third quarter net income, excluding special items, of $200 million – a 27% increase over the third quarter of 2013.

Alaska Air Group reported record third quarter net income, excluding special items, of $200 million – a 27% increase over the third quarter of 2013.

Reported adjusted earnings per share of $1.47 per diluted share, a 32% increase over the third quarter of 2013 and ahead of First Call analyst consensus estimate of $1.42 per share.

Earned net income for the third quarter under Generally Accepted Accounting Principles (GAAP) of $198 million or $1.45 per diluted share, compared to net income of $289 million, or $2.04 per diluted share in 2013.

Recorded $84 million of incentive pay through the first nine months of 2014. This includes each Air Group employee earning at least $800 by meeting or exceeding monthly customer satisfaction and operational performance goals and tracking to earn above-target payouts for full-year goals.

Increased fuel efficiency (as measured by seat-miles per gallon) by 2.8% as part of our effort to be the airline leader in environmental stewardship.

Grew passenger revenues by 7%, compared to the third quarter of 2013.
Generated record adjusted pretax margin in the third quarter of 21.8% compared to 18.4% in 2013.

Generated 15.9% pretax margin for the trailing 12-month period ended Sept. 30, 2014, compared to 11.7% for the same period in the prior year.

Achieved trailing 12-month after-tax return on invested capital of 17.2% compared to 13.0% in the 12-month period ended Sept. 30, 2013.
Repurchased 3.4 million shares of common stock for $159 million in the third quarter of 2014, and 5.3 million shares for $242 million in the first nine months of 2014, representing 3.8% of the total shares outstanding at the beginning of the year.

Paid a $0.125 per-share quarterly cash dividend on September 4, bringing total dividend payments so far this year to $51 million.

Generated $1 billion in operating cash flows for the 12-months ended Sept. 30, 2014, generating $321 million of free cash flows.

Lowered adjusted debt-to-total-capitalization ratio to 31%.

Held $1.3 billion in unrestricted cash and marketable securities as of Sept. 30, 2014.

Became one of only two U.S. airlines with investment grade credit ratings.

Year-to-date highlights of Alaska Air Group’s five-year strategic plan:

Safety & Compliance

Launched Ready, Safe, Go safety campaign designed to increase safety awareness across the Air Group System.

People Focus

Reached a five-year agreement in concept with Alaska’s Flight Attendants.

Signed a six-year contract with Horizon’s Aircraft Technicians and Fleet Service Agents in June 2014.

Signed a new five-year contract with Alaska’s Clerical, Office, and Passenger Service employees (COPS) in April 2014.

Signed a four-year contract with Horizon’s Dispatchers in April 2014.
Completed “Gear Up” – an intensive leadership workshop for over 1,200 leaders at Alaska and Horizon.

Hassle-free Customer Experience

Ranked “Highest in Customer Satisfaction Among Traditional Carriers” in 2014 by J.D. Power for the seventh year in a row.

Ranked highest by frequent fliers in the first-ever J.D. Power Airline Loyalty/Rewards Program Satisfaction Report.

Launched online self-tag baggage options for passengers flying from Seattle to San Diego, Anchorage, or Juneau.

Became the launch customer of Boeing’s new, innovative, high-capacity 737 Space Bins, which will increase bag capacity in the cabin by 48%.

Energetic & Compelling Brand

Celebrated the opening of the Alaska Airlines Center sports complex at the University of Alaska Anchorage.

Sponsored Seattle’s bike share program that is guaranteed to put 500 bikes and 50 docking stations throughout the city of Seattle.

Committed to $1.5 million in grants to support job training for workers at the Seattle-Tacoma airport, in addition to a voluntary wage increase to $12 per hour for certain vendors.

Pledged $2.5 million to Seattle’s Museum of Flight to help create the Alaska Airlines Aerospace Education Center to guide students toward a future in science, technology, engineering and math (STEM), and sponsored Alaska Airlines Aviation Day in May 2014 to inspire youth to pursue careers in aviation.

Flew 12 relief flights to Los Cabos and Loreto, Mexico and transported approximately 2,000 passengers to safety following Hurricane Odile.

Low Fares, Low Costs, and Network Growth

Held the No. 1 spot in U.S. Department of Transportation on-time performance among the eight largest U.S. airlines for the twelve months ended August 2014.

Named No. 1 on-time carrier in North America for the fourth year in a row from FlightStats in February 2014.

Ordered ten additional Boeing 737-900ERs, which will further strengthen Alaska’s fuel efficient fleet.

Completed 92% of the cabin improvement project, with 67 aircraft upgraded with Recaro seats, all of which will have power at every seat.

Added split scimitar winglets to 23 aircraft, which would improve fuel efficiency by another 1.5%.

New routes launched and announced in the third quarter are as follows:

New Non-Stop Routes Launched in Q3
New Non-Stop Routes Announced (Launch Dates)
Seattle to Baltimore
Las Vegas to Mammoth Lakes (1/15/15)
Seattle to Albuquerque, New Mexico
San Diego to Kona (03/05/15)
Seattle to Detroit, Michigan

Alaska Air Group, Inc., today reported third quarter 2014 GAAP net income of $198 million, or $1.45 per diluted share, compared to $289 million, or $2.04 per diluted share in the third quarter of 2013. Excluding the impact of mark-to-market fuel hedge adjustments and a one-time special revenue item in the prior year, the company reported record adjusted net income of $200 million, or $1.47 per diluted share, compared to adjusted net income of $157 million, or $1.11 per diluted share, in 2013.

“This was our best quarterly result ever,” said CEO Brad Tilden. “I want to thank our 13,000 employees who are keeping a focus on playing our game, and working hard every day to run a great operation, keep fares low, and deliver award winning service to our customers. All of us at Alaska would like to thank our customers for their continued loyalty.”

About the author

Avatar of Linda Hohnholz

Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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