Alaska Air Group, reported its second quarter 2018 results during the week which demonstrated a GAAP net income of $193 million, or $1.56 per diluted share, compared to $293 million, or $2.36 per diluted share in the second quarter of 2017. Excluding the impact of merger-related costs and mark-to-market fuel hedge adjustments, the company reported adjusted net income of $206 million, or $1.66 per diluted share, compared to $309 million, or $2.48 per diluted share, in 2017.
"In the last year and a half, we've made tremendous progress bringing Alaska Airlines and Virgin America together," said CEO Brad Tilden. "We're on very solid footing today thanks to the fantastic efforts of our employees, who delivered exceptional on-time performance and earned our 11th consecutive J.D. Power award for highest in customer satisfaction - all while completing the most complex part of our integration."
Financial Highlights:
Reported net income for the second quarter under Generally Accepted Accounting Principles (GAAP) of $193 million, or $1.56 per diluted share, compared to net income of $293 million, or $2.36 per diluted share in the second quarter of 2017. As the company has recently implemented new accounting standards, including the standards relating to revenue recognition and retirement benefits, 2017 financial information has been adjusted.
Reported second quarter 2018 adjusted diluted earnings per share of $1.66 compared to $2.48 reported in the second quarter of 2017. Second quarter adjusted net income excluding special items such as merger-related costs and mark-to-market fuel hedge accounting adjustments was $206 million compared to $309 million in the second quarter of 2017. This quarter's adjusted results compare to the First Call analyst consensus estimate of $1.63 per share.
Paid a $0.32 per-share quarterly cash dividend in the second quarter, a 7% increase over the dividend paid in the second quarter of 2017.
Repurchased a total of 389,739 shares of common stock for approximately $25 million in the first six months of 2018.
Generated approximately $725 million of operating cash flow, including merger-related costs and other special items.
Held $1.6 billion in unrestricted cash and marketable securities as of June 30, 2018.
Operational Highlights:
Transitioned to a single Passenger Service System (PSS) in April 2018, enabling us to provide one reservation system, one website and one inventory of flights to our guests.
Reached a merger transition agreement with the Transport Workers Union (TWU) to combine Boeing and Airbus dispatchers into a single group.
Completed Premium Class rollout on our Boeing 737-800, 900 and 900ER fleets.
Added Aer Lingus as a global Mileage Plan partner.
Added two Boeing 737-900ER aircraft and two Airbus A321neo aircraft to the mainline operating fleet in the second quarter of 2018. Added four Embraer 175 (E175) regional jets to Horizon Air's fleet in the second quarter of 2018 and four E175 aircraft operated by SkyWest Airlines.
Recognition and Awards:
Ranked "Highest in Customer Satisfaction Among Traditional Carriers" in 2018 by J.D. Power for the 11th year in a row.
Received top honors in three Skytrax World Airline Awards categories including "Best Regional Airline in North America," "Best Airline Staff in North America," and "Best Cabin Crew in the USA."
Virgin America was rated Best Domestic Airline in Travel + Leisure "World's Best Awards" for 11 years in a row.
Ranked among Forbes' 2018 "America's Best Employers" for the fourth year in a row.
Awarded "Best Food and Beverage in the Americas" by Airline Passenger Service Experience Association (APEX) passenger choice awards for 2018.
Received 17th Diamond Award of Excellence from the Federal Aviation Administration, recognizing both Alaska and Horizon's aircraft technicians for their commitment to training.
The following table reconciles the company's reported GAAP net income and earnings per diluted share (diluted EPS) for the three and six months ended June 30, 2018 and 2017 to adjusted amounts.
Three Months Ended June 30,
| |||||||||||||||
2018
|
2017 (a)
| ||||||||||||||
(in millions, except per-share amounts)
|
Dollars
|
Diluted EPS
|
Dollars
|
Diluted EPS
| |||||||||||
GAAP net income and diluted EPS
|
$
|
193
|
$
|
1.56
|
$
|
293
|
$
|
2.36
| |||||||
Mark-to-market fuel hedge adjustments
|
(22)
|
(0.18)
|
2
|
0.02
| |||||||||||
Special items—merger-related costs
|
39
|
0.31
|
24
|
0.19
| |||||||||||
Income tax effect
|
(4)
|
(0.03)
|
(10)
|
(0.09)
| |||||||||||
Non-GAAP adjusted net income and diluted EPS
|
$
|
206
|
$
|
1.66
|
$
|
309
|
$
|
2.48
| |||||||
Six Months Ended June 30,
| |||||||||||||||
2018
|
2017 (a)
| ||||||||||||||
(in millions, except per-share amounts)
|
Dollars
|
Diluted EPS
|
Dollars
|
Diluted EPS
| |||||||||||
GAAP net income and diluted EPS
|
$
|
197
|
$
|
1.59
|
$
|
386
|
$
|
3.10
| |||||||
Mark-to-market fuel hedge adjustments
|
(35)
|
(0.28)
|
12
|
0.10
| |||||||||||
Special items—employee tax reform bonus
|
25
|
0.20
|
—
|
—
| |||||||||||
Special items—merger-related costs
|
45
|
0.36
|
63
|
0.51
| |||||||||||
Income tax effect
|
(8)
|
(0.06)
|
(28)
|
(0.23)
| |||||||||||
Non-GAAP adjusted net income and diluted EPS
|
$
|
224
|
$
|
1.81
|
$
|
433
|
$
|
3.48
| |||||||
(a)
|
Certain historical information has been adjusted to reflect the adoption of new accounting standards.
|
