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Alaska Airlines Drops $439 Million, But Plans to Join oneworld by End of 2020

Alaska Airlines Drops $439 Million, But Plans to Join oneworld by End of 2020
Joe Cortez

In a big day of reporting for the aviation industry, Alaska Airlines performed the best of all three reporting airlines. The Seattle-based carrier announced a net loss of $439 million for the second quarter of 2020 due to the COVID-19 pandemic, but plans on joining the Oneworld alliance before the end of 2020.

Alaska Airlines Group reported the best results of the three airlines reporting second quarter financials on July 23, 2020 – but only because they had the lowest losses due to the COVID-19 pandemic. In a press release, the airline reported a reported net loss excluding special offsets of $439 million for the quarter ending June 2020, for a lost of $3.54 per diluted share.

Losses Diametrically Different from Second Quarter 2019

When adding in special considerations, including funds from the Payroll Support Program and mark-to-market fuel hedge accounting adjustments, the airline says their GAAP reported net loss was only $214 million. However, the results were still almost the complete opposite from the same time period in 2019, when the airline earned $262 million.

Instead of focusing on the losses, Alaska Airlines reported the measures they took to reduce their burn rate from $400 million per month in March, to only $120 million per month by June. The airline grounded 89 mainline aircraft from their fleet, and eliminated 300 management positions from their payroll. In addition, the airline is offering early-out programs for frontline workers and pilots, in order to reduce expenses and maximize liquidity.

A portion of their reported liquidity comes from government support, alongside creative financing. The airline accepted a combined total of $1.2 billion of Payroll Support Program support, including $30 million to airline services subsidiary McGee Air Services. Additional cash came from financing on aircraft, including a $1.2 billion round of enhanced equipment trust certificates secured by 61 airframes in the company’s fleet. Alaska also hast the option to take an additional $1.1 billion in CARES Act loans from the federal government.

Despite Losses and Lack of Passengers, Alaska Will Join Oneworld in 2020

Passengers aren’t taking to the air due to the COVID-19 pandemic, and Alaska is no exception. Over the past three months, Alaska only flew around 1.5 million revenue passengers in the three-month period, a decrease of 87.7 percent compared to the same period in 2019. Accordingly, the load factor over that period was only 38.4 percent – almost a 50 percent drop from the same quarter last year.

However, there are some bright spots for Alaska. The airline is holding $3.8 billion in cash, with a debt-to-capitalization ratio of 51 percent. Alaska also received their formal invitation to join global airline alliance Oneworld on July 23, 2020, with the goal of fully joining the alliance by the end of the year, rapidly moving up their proposed timeline.

“Airlines are currently navigating the biggest demand contraction in the history of aviation,” Alaska Air Group CEO Brad Tilden said in a press release. “Being tested in moments like this reveals character, and I’m confident in our future because of the way our people are responding every day with grit, determination and perseverance. Those are the qualities that will carry our airline and our country through this crisis and beyond.”

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1 Comment

  1. Paella747

    July 25, 2020 at 9:40 am

    I really miss that old “Alaska” font on the side of the airplane.

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