Alaska Air Group reports record Q2 2014 results
SEATTLE, WA - Alaska Air Group reported record Second Quarter 2014 results. Financial Highlights:
SEATTLE, WA – Alaska Air Group reported record Second Quarter 2014 results.
Reported record second quarter net income, excluding special items, of $157 million – a 50% increase over the second quarter of 2013.
Reported adjusted earnings per share of $1.13 per diluted share, a 53% increase over the second quarter of 2013 and ahead of First Call analyst consensus estimate of $1.11 per share.
Earned net income for the second quarter under Generally Accepted Accounting Principles (GAAP) of $165 million or $1.19 per diluted share, compared to net income of $104 million, or $0.74 per diluted share in 2013.
Recorded $54 million of incentive pay through the first six months of 2014. This includes each Air Group employee earning at least $550 by meeting or exceeding monthly customer satisfaction and operational performance goals and tracking to earn above-target payouts for full-year goals.
Grew operating revenues by 9%.
Generated record adjusted pretax margin in the second quarter of 18.3% compared to 13.5% in 2013.
Generated 14.9% pretax margin for the trailing 12-month period ended June 30, 2014, compared to 11.8% for the same period in the prior year.
Ranked in the Fortune 500 for the first time in Air Group’s history.
Achieved trailing 12-month return on invested capital of 16.1% compared to 13.0% in the 12-month period ended June 30, 2013.
Rated BBB- by Fitch Ratings. Air Group is one of only two U.S. airlines with investment grade credit ratings.
Declared a 2-for-1 stock split that was effective July 9, 2014. All stock and per-share figures reflect the split retroactively.
Announced an additional $650 million repurchase program, representing approximately 10% of our stock market capitalization at the time of announcement.
Repurchased 1,108,334 shares of common stock for $53 million in the second quarter of 2014.
Paid a $0.125 per-share quarterly cash dividend on June 10, bringing total dividend payments so far this year to $34 million.
Lowered adjusted debt-to-total-capitalization ratio to 32%.
Produced operating cash flows of $1 billion and free cash flows of $366 million for the 12-month period ended June 30, 2014.
Held $1.5 billion in unrestricted cash and marketable securities as of June 30, 2014.
Maintained fully funded pension plans and had no net debt.
Customer Service and Operational Highlights:
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 J.D. Power’s first-ever Airline Loyalty/Rewards Program Satisfaction Report.
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 May 2014.
Named No. 1 on-time carrier in North America for the fourth year in a row from FlightStats in February 2014.
Received Airline Business Magazine’s 2014 Airline Strategy Award for Technology, Environment and Operations.
Signed a new five-year contract with Alaska’s clerical, office, and passenger service employees (COPS).
Reached agreement on a six-year contract with Horizon’s aircraft technicians and fleet service agents, represented by the International Brotherhood of Teamsters.
Completed 44% of the cabin improvement project, with 41 out of 94 aircraft upgraded with Recaro seats and power at every seat.
Added split scimitar winglets to 12 aircraft.
Increased fuel efficiency (as measured by seat-miles per gallon) by 2.5% as part of our effort to be the airline leader in environmental stewardship.
Became the launch customer of Boeing’s new, innovative, high-capacity 737 Space Bins, which will increase bag capacity in the cabin by 48%.
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.
New routes launched and announced in the second quarter are as follows:
New Non-Stop Routes Launched in Q2
New Non-Stop Routes Announced in Q2 (Launch Dates)
Salt Lake City to Portland, Oregon
Seattle to Baltimore (9/2/2014)
Salt Lake City to San Diego
Seattle to Albuquerque, New Mexico (9/18/2014)
Salt Lake City to Los Angeles
Portland to Los Cabos, Mexico (11/3/2014)*
Salt Lake City to San Jose, California
Portland to Puerto Vallarta (11/4/2014)*
Salt Lake City to Boise, Idaho
Seattle to Cancun (11/6/2014)
Salt Lake City to Las Vegas
Salt Lake City to San Francisco
Portland to Kalispell, Montana
Seattle to New Orleans
Seattle to Tampa, Florida
* Subject to government approval.
Alaska Air Group, Inc., (NYSE: ALK) today reported second quarter 2014 GAAP net income of $165 million, or $1.19 per diluted share, compared to $104 million, or $0.74 per diluted share in the second quarter of 2013. Excluding the impact of mark-to-market fuel hedge adjustments of $13 million ($8 million after tax, or $0.06 per diluted share), the company reported record adjusted net income of $157 million, or $1.13 per diluted share, compared to adjusted net income of $105 million, or $0.74 per diluted share, in 2013.
“We’re pleased to report our 21st consecutive quarterly profit and a record second quarter result,” said CEO Brad Tilden. “Through strong demand, a growing network, and steady support from our loyal customers, we were able to overcome the impact of substantial new competition.”
“I want to thank our people for continuing to work together to provide outstanding service to our customers. For the seventh consecutive year, Alaska employees recently earned the J.D. Power award for ‘Highest in Customer Satisfaction Among Traditional Carriers’. I am very proud of our team.”
The following table reconciles the company’s reported GAAP net income and earnings per diluted share (EPS) during the second quarters of 2014 and 2013 to adjusted amounts:
Three Months Ended June 30,
(in millions, except per-share amounts)
Reported GAAP net income
Mark-to-market fuel hedge adjustments, net of tax
Non-GAAP adjusted income and per-share amounts