ALASKA AIR GROUP INC
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 2, 2024
ALK$38.94+0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0000766421-24-000031
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-02.
0000766421-24-000045
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 163 previous paragraphs and 208 current paragraphs.
94 unchanged; 45 reworded; 60 added; 24 removed; 0 previous and 9 current paragraphs rearranged.
Tables are not compared: 17 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (60)
Current report
SECOND QUARTER REVIEW
Current report
We reported consolidated pretax income for the second quarter of 2024 of $316 million, compared to $325 million in the prior year. Despite challenges in the domestic fare environment, the Company achieved record quarterly revenue of $2.9 billion due to growth in our premium cabins and the continued strength of our loyalty program. Total operating expenses increased $74 million compared to the prior year. While fuel costs rose year over year due to increased flying and higher per gallon costs, the Company's focus on managing its non-fuel operating costs led to CASMex improvement of nearly 2% compared to the prior year.
Current report
Labor Updates
Current report
In June 2024, Alaska reached a tentative agreement with its flight attendants represented by the Association of Flight Attendants (AFA) for an updated collective bargaining agreement. Voting is expected to take place in mid-August. In the second quarter, we accrued $30 million which approximates the retroactive pay offered to flight attendants for the service period through June 30, 2024. This expense is classified within Special items - operating in the unaudited Condensed Consolidated Statements of Operations.
Current report
Passenger revenue for the second quarter of 2024 increased $53 million, or 2%, on a 2% increase in passenger traffic, partially offset by a slight decrease in yield. Passenger traffic growth was driven by increased gauge and departures throughout the network. Increased revenue from the premium cabins also contributed to the year over year improvement.
Current report
Mileage Plan other revenue for the second quarter of 2024 increased by $4 million, or 2%. The increase was driven by higher award redemption on partner airlines and incremental commissions from third party partners.
Current report
Wages increased $16 million, or 3%, driven by increased wage rates across multiple labor groups since the prior year. The increase was partially offset by certain nonrecurring stock awards granted in the second quarter of 2023.
Current report
Variable incentive pay
Current report
Variable incentive pay expense decreased by $8 million, or 14%, in the second quarter of 2024. The decrease was driven by a lower assumed payout percentage compared to the prior year, partially offset by an increased wage base.
Current report
Landing fees and other rentals increased by $6 million, or 4%, in the second quarter of 2024. Landing fees increased due to the volume of departures and landed weight. Increases to terminal rents were primarily due to growth throughout the network, but were largely offset by favorable settlements received during the quarter from certain airports.
Current report
Contracted services
Current report
Contracted services increased by $11 million, or 12%, in the second quarter of 2024, driven by higher rates charged by vendors as well as increased passengers throughout our network.
Current report
Food and beverage service
Current report
Food and beverage service increased by $7 million, or 12%, in the second quarter of 2024. The increase was driven by a combination of growth in revenue passengers, additional onboard offerings, and higher costs for food, food service supplies, and transportation.
Current report
Third-party regional carrier expense
Current report
Third-party regional carrier expense, which represents expenses associated with SkyWest under the CPA with Alaska, increased by $10 million, or 19%, in the second quarter of 2024. The increase in third-party regional carrier expense was driven by increased SkyWest-operated departures and block hours.
Current report
Special items - operating
Current report
We recorded $146 million of operating special items in the second quarter of 2024, compared to $186 million in the same period in 2023. Refer to Note 12 to the consolidated financial statements for details.
Current report
Mainline reported a pretax profit of $387 million in the second quarter of 2024, compared to a pretax profit of $479 million in the same period in 2023. The $92 million decrease was driven by a $17 million decrease in passenger revenue, a $48 million increase in non-fuel operating expenses, and a $30 million increase in economic fuel expense.
Current report
Compared to the prior year, lower Mainline revenue is primarily attributable to weaker ticket yield, driven by a moderating domestic pricing environment. Non-fuel operating expenses increased, driven by higher wage rates across multiple labor groups and higher variable costs associated with overall network growth. Increased economic fuel cost was driven by higher per gallon costs and incremental fuel consumption.
Current report
Regional reported a pretax profit of $55 million in the second quarter of 2024, compared to a pretax profit of $41 million in the same period in 2023. The $14 million improvement was driven by higher passenger revenue consistent with the increase in traffic, partially offset by higher operating expenses associated with increased capacity.
Current report
Horizon reported a pretax profit of $8 million in the second quarter of 2024, compared to a pretax loss of $5 million in the same period in 2023. The $13 million improvement was driven by increased revenue consistent with increased capacity sold to Alaska, partially offset by increased expenses driven by the addition of five owned E175 aircraft added to Horizon's fleet since the second quarter of 2023. Cost reductions resulting from Horizon's transition to single fleet also contributed to this improvement.
Current report
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2024 TO SIX MONTHS ENDED JUNE 30, 2023
Current report
OPERATING REVENUE
Current report
Passenger revenue
Current report
Passenger revenue for the first six months of 2024 increased by $73 million, or 2%, driven by increased passenger traffic. Traffic growth was due to increased gauge and departures throughout the network. Strength in premium class products and increased redemptions by Mileage Plan members on both Alaska and partner airlines also contributed to this increase. These improvements were offset by lost revenue from the B737-9 grounding as well as a moderating domestic revenue environment in the second quarter.
Current report
We expect to see Passenger revenue growth for the remainder of 2024 compared to 2023 as a result of capacity growth plans, strength in the premium cabins, and continued recovery of corporate travel.
Current report
Mileage Plan other revenue
Current report
OPERATING EXPENSES
Current report
Fuel expense
Current report
Raw fuel expense decreased 1% in the first six months of 2024 compared to the first six months of 2023. While fuel consumption and per gallon costs of crude oil were higher, these increases were more than offset by lower refining margins.
Current report
Non-fuel expenses
Current report
Wages and benefits
Current report
Variable incentive pay
Current report
Variable incentive pay expense decreased by $11 million, or 11%, in the first six months of 2024. The decrease was driven by a lower assumed payout percentage compared to the prior year, partially offset by an increased wage base.
Current report
Aircraft rent
Current report
Landing fees and other rentals
Current report
Landing fees and other rentals increased by $19 million, or 6%, in the first six months of 2024. Higher terminal rent costs were due to rate and volume increases at many of our facilities. Landing fees increased due to the volume of departures and landed weight.
Current report
Contracted services
Current report
Contracted services increased by $13 million, or 7%, in the first six months of 2024, driven by higher rates charged by vendors as well as increased passengers throughout our network.
Showing the first 40 of 60 passages. Open the source sections for the rest.
Removed paragraphs (24)
Previous report
(a) Special items - fleet transition in the three months ended March 31, 2024 and 2023 is primarily for costs associated with the retirement of Airbus and Q400 aircraft, as well as gains on the sale of certain Q400 aircraft.
Previous report
(b) Special items - integration costs is associated with our proposed acquisition of Hawaiian Airlines.
Previous report
(c) Special items - labor and other is for changes to Alaska pilots' sick leave benefits resulting from an agreement signed in the first quarter of 2023.
Previous report
(a) Freighter costs in the three months ended March 31, 2024 and 2023 are not presented separately on the consolidated statements of operations.
Previous report
FIRST QUARTER REVIEW
Previous report
We reported a loss before income tax for the first quarter of 2024 of $178 million, compared to $199 million for the first quarter of 2023. Despite the impacts of Flight 1282 and the subsequent grounding of the B737-9 fleet, which are outlined more fully below, the Company recorded record first quarter revenue bolstered by strategic capacity deployment and strong leisure and business demand. Revenue improvement, combined with a $100 million decrease in aircraft fuel costs, offset by increased non-fuel operating expenses drove the year-over-year improvement in pretax loss.
Previous report
Flight 1282 and B737-9 Updates
Previous report
Air Group's first quarter operation and results were significantly impacted by Flight 1282 in January and the B737-9 grounding which extended into February. These events negatively impacted results by $162 million in the first quarter, of which approximately $150 million relates to lost revenue and the remainder to incremental costs. The Company received $162 million in cash compensation from Boeing to address these financial damages, which was recorded as an offset to the cost basis of certain B737-9 aircraft. Subsequent to quarter end, Boeing issued Air Group $61 million in supplier credit memos to be used on future Boeing purchases.
Previous report
Labor Update
Previous report
In the first quarter, Alaska technicians, represented by the Aircraft Mechanics Fraternal Union (AMFA), ratified a new five-year Collective Bargaining Agreement (CBA) that includes wage increases and quality of life improvements.
Previous report
On a consolidated basis, Passenger revenue for the first quarter of 2024 increased $20 million, or 1% compared to the same period in 2023. While the B737-9 grounding resulted in approximately $150 million in lost revenue, meaningful improvements in corporate travel revenue and general close-in strength drove improvements in unit revenue to help offset this negative impact. Additionally, increased traffic on ten E175 aircraft added to our fleet since the first quarter of 2023 contributed positively to Passenger revenue.
Previous report
We expect to see further growth to Passenger revenue as we progress through 2024 driven by diverse revenue offerings, increased capacity, continued improvements to our strategic network, and further recovery of West Coast corporate travel.
Previous report
Cargo and other revenue
Previous report
On a consolidated basis, Cargo and other revenue for the first quarter of 2024 increased by $6 million, or 10%. The growth was driven by incremental lounge revenue and other miscellaneous increases.
Previous report
We expect to see further growth in Cargo and other revenue for the remainder of 2024, driven by increased freight volumes with the addition of a second B737-800 freighter to our fleet in the second quarter of 2024.
Previous report
Landing fees and other rentals increased by $13 million, or 9%, in the first quarter of 2024. The increase was driven primarily by higher terminal rent costs resulting from rate increases at many of our facilities, as well as non-recurring favorable settlements that were realized in 2023.
Previous report
We expect selling expenses to increase for the remainder of 2024 as compared to 2023, due primarily to higher sales and an increase in marketing costs as we continue to build our brand.
Previous report
Special items - fleet transition
Previous report
We recorded expenses associated with the Company's fleet transition of $26 million in the first quarter of 2024. These costs consist of certain aircraft maintenance work performed as a result of the fleet retirements, adjustments to estimated costs to return the A320 fleet, and holdover rent for Airbus aircraft which have not yet been returned to the lessor as of the lease expiration date.
Previous report
Special items - integration costs
Previous report
We recorded $8 million in integration costs associated with our proposed acquisition of Hawaiian Airlines. These costs primarily consist of professional services fees. We expect to incur additional integration costs as activities supporting the proposed acquisition continue.
Previous report
Mainline operations reported an adjusted pretax loss of $162 million in the first quarter of 2024, compared to a loss of $84 million in the same period in 2023. The $78 million decrease was driven by decreased passenger revenue as a result of the B737-9 grounding, as well as increased non-fuel operating expenses, which were primarily driven by higher wage rates across various labor groups and incremental ownership costs associated with 22 owned B737 aircraft added to Alaska's fleet since the first quarter of 2023. These increases were partially offset by decreased fuel costs due to lower per gallon costs and fewer gallons consumed.
Previous report
The $70 million net increase in our operating cash flows was due to a combination of factors. Payments made in 2024 for our 2023 incentive pay program were approximately $60 million lower than payments in 2023 for our 2022 program. Additionally, growth in our air traffic liability increased $35 million in the first quarter compared to the prior year. These amounts were partially offset by other changes in working capital accounts.
Previous report
Cash Provided by Investing Activities
Reworded paragraphs (45)
Previous wording
•First Quarter Review -highlights from the first quarter of 2024 outlining some of the major events that occurred during the period.
Current wording
•Second Quarter Review -highlights from the second quarter of 2024 outlining some of the major events that occurred during the period.
Previous wording
•Results of Operations -an in-depth analysis of our consolidated revenue and expenses for the three months ended March 31, 2024. This section includes forward-looking statements regarding our view of the remainder of 2024.
Current wording
•Results of Operations -an in-depth analysis of our consolidated revenue and expenses for the three and six months ended June 30, 2024. This section includes forward-looking statements regarding our view of the remainder of 2024.
Previous wording
Although we are presenting these non-GAAP amounts for the reasons above, investors and other readers should not consider them a substitute for GAAP figures.
Current wording
Although we are presenting these non-GAAP amounts for the reasons above, investors and other readers should not consider them a substitute for GAAP figures. Amounts in the tables below are rounded to the nearest million. As a result, a manual recalculation of certain figures using these rounded amounts may not agree directly to the Company's actual figures presented in the tables below.
Previous wording
Alaska is in negotiations with its flight attendants represented by the Association of Flight Attendants (AFA) for an updated CBA. A mediator from the National Mediation Board is involved in the negotiations. Horizon has initiated negotiations with certain labor groups for updated CBAs, including its pilots, represented by the International Brotherhood of Teamsters; its flight attendants, represented by AFA; and its technicians, represented by AMFA.
Current wording
Horizon is in negotiations with certain labor groups for updated CBAs, including its pilots, represented by the International Brotherhood of Teamsters; its flight attendants, represented by AFA; and its technicians, represented by AMFA.
Previous wording
The following represents our expectations for the second quarter and full year 2024 results:
Current wording
The following represents the Company's expectations for the third quarter and full year 2024 results. Full year adjusted EPS guidance has been lowered by $0.25 at the midpoint to reflect the economics of a newly signed tentative agreement with Alaska's flight attendants and a moderating domestic revenue environment.
Previous wording
(a) Earnings per share guidance assumes a full year tax rate of approximately 25%
Current wording
(a) Adjusted earnings per share guidance assumes a full year tax rate of approximately 25%. Full year EPS guidance assumes an economic fuel cost per gallon of approximately $2.90 for FY 2024.
Previous wording
Total operating revenue increased $36 million, or 2%, in the first quarter of 2024 compared to the same period in 2023. The changes are summarized in the following table:
Current wording
Total operating revenue increased $59 million, or 2%, in the second quarter of 2024 compared to the same period in 2023. The changes are summarized in the following table:
Previous wording
Total operating expenses increased $16 million, or 1%, compared to the first quarter of 2023. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:
Current wording
Total operating expenses increased $74 million, or 3%, compared to the second quarter of 2023. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:
Previous wording
Aircraft fuel expense decreased $100 million, or 15%, compared to the first quarter of 2023. The elements of the change are illustrated in the following table:
Current wording
Aircraft fuel expense increased $42 million, or 7%, compared to the second quarter of 2023. The elements of the change are illustrated in the following table:
Previous wording
Raw fuel expense decreased 11% in the first quarter of 2024 compared to the first quarter of 2023, due to lower per gallon costs on decreased refining margins associated with the conversion of crude oil to jet fuel.
Current wording
Raw fuel expense increased 10% in the second quarter of 2024 compared to the second quarter of 2023 due to higher fuel consumption and per gallon costs of crude oil, partially offset by a decrease in refining margins associated with the conversion of crude oil to jet fuel.
Previous wording
Losses recognized for hedges that settled during the first quarter were $13 million in 2024, compared to losses of $12 million in the same period in 2023. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement. In 2023, we suspended our crude oil hedge program. Our final option position will settle in the first quarter of 2025.
Current wording
Losses recognized for hedges that settled during the second quarter were $10 million in 2024, compared to losses of $17 million in the same period in 2023. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement. In 2023, we suspended our crude oil hedge program. Our final option position will settle in the first quarter of 2025.
Previous wording
The table below provides the reconciliation of the operating expense line items, excluding fuel and other special items. Significant operating expense variances from 2023 are more fully described below.
Current wording
The table below provides the reconciliation of the operating expense line items, excluding fuel and special items. Significant operating expense variances from 2023 are more fully described below.
Previous wording
Wages and benefits increased by $81 million, or 11%, in the first quarter of 2024. The primary components of Wages and benefits are shown in the following table:
Current wording
Wages and benefits increased by $28 million, or 4%, in the second quarter of 2024. The primary components of Wages and benefits are shown in the following table:
Previous wording
Increased expense for medical and other benefits was primarily driven by an increase in the cost of medical services compared to the prior year. Increased expense for defined contribution plans was driven by the change in wages as well as higher matching contributions for various labor groups.
Current wording
The change in medical and other benefits was primarily driven by an increase in the cost of medical services compared to the prior year. Increased expense for defined contribution plans was driven by the change in wages as well as higher matching contributions for Alaska technicians.
Previous wording
Aircraft rent expense decreased by $12 million, or 20%, in the first quarter of 2024. The decrease was primarily driven by the retirement of ten leased A321neo aircraft fleet from operations, partially offset by the addition of one leased B737-9 and one leased B737-800 freighter since the first quarter of 2023.
Current wording
Aircraft rent expense decreased by $8 million, or 15%, in the second quarter of 2024. The decrease was primarily driven by the retirement of ten leased A321neo aircraft fleet from operations since the second quarter of 2023.
Previous wording
Depreciation and amortization increased by $22 million, or 21%, in the first quarter of 2024. The increase was primarily due to the addition of 22 owned B737 aircraft and ten owned E175 aircraft to our fleet since the first quarter of 2023. Incremental depreciation on ground service and other equipment also contributed to the increase.
Current wording
Depreciation and amortization increased by $15 million, or 13%, in the second quarter of 2024. The increase was primarily due to the addition of 22 owned B737 aircraft and five owned E175 aircraft to our fleet since the second quarter of 2023, as well as incremental depreciation on ground service and other equipment additions.
Previous wording
On a consolidated basis, Mileage Plan other revenue for the first quarter of 2024 increased by $10 million, or 6%. The increase was driven by higher commissions from our bank card partner primarily due to increased credit card acquisitions, as well as higher commission revenue from other third party partners.
Current wording
Mileage Plan other revenue increased $14 million, or 4%, in the first six months of 2024. The increase was driven by higher commissions from bank card and third party partners.
Previous wording
We expect to see continued strength in Mileage Plan other revenue for the remainder of 2024, enabled by higher commissions from increased card spend and incremental partner activity.
Current wording
We expect to see continued strength in Mileage Plan other revenue for the remainder of 2024, driven by higher commissions from increased card spend and acquisition bonuses, offset by incremental redemption on other air partners as compared to the prior year.
Previous wording
In the second quarter, we expect our economic fuel cost per gallon to range between $3.00 to $3.20.
Current wording
We expect our economic fuel cost per gallon in the third quarter to range between $2.85 to $2.95.
Previous wording
Wages increased $51 million, or 9%, driven by higher wage rates stemming from labor agreements reached with various represented labor groups since the first quarter of 2023, as well as additional impact from irregular operations following the B737-9 grounding. Increased expense for payroll taxes is consistent with the change in wages.
Current wording
Wages increased $67 million, or 6%, driven by increased wage rates across multiple labor groups since the prior year, as well as additional impact from irregular operations following the B737-9 grounding in the first quarter of 2024. The increase was partially offset by nonrecurring stock awards granted in the second quarter of 2023. Increased expense for payroll taxes is consistent with the change in wages.
Previous wording
We expect to see higher wages and benefits for the remainder of 2024 due to the increase in wage rates and additional agreements we may reach during the year with represented labor groups.
Current wording
We expect to see higher wages and benefits for the remainder of 2024 due to the impact of the new contract for Alaska flight attendants as well as increases in wage rates for other labor groups.
Previous wording
We expect aircraft rent to remain below 2023 levels for the remainder of 2024, due to the net reduction in leased aircraft described above.
Current wording
We expect aircraft rent will remain below 2023 levels for the remainder of 2024, due to the reduction in leased aircraft described above.
Previous wording
We expect landing fees and other rentals to increase for the remainder of 2024 as compared to 2023 due to increased capacity and higher rates at airports.
Current wording
We expect landing fees and other rentals to increase for the remainder of 2024 as compared to 2023 due to higher rates at airports and a greater volume of flying.
Previous wording
Selling expenses increased by $11 million, or 17%, in the first quarter of 2024. The increase was primarily driven by increased credit card commissions, as well as timing differences.
Current wording
Selling expenses increased by $14 million, or 10%, in the first six months of 2024. The increase was driven by incremental credit card commissions and additional marketing costs.
Previous wording
Other expense increased by $28 million, or 16%, in the first quarter of 2024. The increase was primarily driven by passenger remuneration and crew hotel costs due to the B737-9 grounding. Additional software expenses also contributed to the increase.
Current wording
Other expense increased $32 million, or 9%, in the first six months of 2024. The increase was primarily driven by passenger remuneration and crew hotel costs due to the B737-9 grounding. Additional software costs and other miscellaneous services also contributed to this increase.
Previous wording
Regional operations reported an adjusted pretax loss of $2 million in the first quarter of 2024, compared to a loss of $19 million in the same period in 2023. The $17 million improvement was driven by higher passenger revenue consistent with the increase in traffic, partially offset by higher operating expenses driven by increased capacity.
Current wording
Regional reported a pretax profit of $53 million in the first six months of 2024, compared to a pretax profit of $22 million in the same period in 2023. The $31 million improvement was driven by higher passenger revenue consistent with the increase in traffic, partially offset by higher operating expenses driven by increased capacity.
Previous wording
Horizon reported an adjusted pretax profit of $5 million in the first quarter of 2024, compared to a loss of $14 million in the same period in 2023. The $19 million improvement was driven by incremental revenue consistent with increased capacity sold to Alaska, as well as cost reductions resulting from Horizon's transition to a single fleet. These improvements were partially offset by increased expenses driven by the addition of ten owned E175 aircraft added to Horizon's fleet since the first quarter of 2023.
Current wording
Horizon reported a pretax profit of $13 million in the first six months of 2024, compared to a pretax loss of $19 million in the same period in 2023. The $32 million improvement was driven by incremental revenue consistent with increased capacity sold to Alaska, partially offset by increased expenses driven by the addition of five owned E175 aircraft added to Horizon's fleet since the second quarter of 2023. Cost reductions resulting from Horizon's transition to single fleet also contributed to this improvement.
Previous wording
Our primary sources of liquidity are:
Current wording
Our primary sources of liquidity as of June 30, 2024 are:
Previous wording
•Existing cash and marketable securities of $2.3 billion;
Current wording
•Existing cash and marketable securities of $2.5 billion;
Previous wording
•Cash flows from operations of $292 million;
Current wording
•Cash flows from operations in the first six months of 2024 of $872 million;
Previous wording
•Our Mileage Plan program and 63 unencumbered aircraft which could be financed, if necessary;
Current wording
•Our Mileage Plan program and 69 unencumbered aircraft which could be financed, if necessary.
Previous wording
During the three months ended March 31, 2024, we incurred new debt of $195 million and made debt payments of $102 million. We ended the quarter with a debt-to-capitalization ratio of 47%, within our target range of 40% to 50%. We continued share repurchases, spending $21 million in the first quarter, pursuant to the $1 billion repurchase plan authorized by the Board of Directors in August 2015.
Current wording
During the three months ended June 30, 2024, we took free and clear delivery of six owned B737-9 aircraft and three owned B737-8 aircraft. We incurred new debt of $153 million and made debt payments of $47 million. We ended the quarter with a debt-to-capitalization ratio of 45%, within our target range of 40% to 50%.
Previous wording
(a)To best reflect our leverage at December 31, 2023, we included our capitalized finance lease balances, which are recognized within the Current portion of long-term debt and finance leases line in the condensed consolidated balance sheets.
Current wording
(a)To best reflect our leverage at December 31, 2023, we included our capitalized finance lease balances, which are recognized within the Current portion of long-term debt and finance leases line in the unaudited Condensed Consolidated Balance Sheets.
Previous wording
For the first three months of 2024, net cash provided by operating activities was $292 million, compared to $222 million in 2023. Cash provided by ticket sales and from our co-branded credit card agreement are the primary sources of our operating cash flow. Our primary use of operating cash flow is for operating expenses, including payments for employee wages and benefits, payments to suppliers for goods and services, and payments to lessors and airport authorities for rents and landing fees. Operating cash flow also includes payments to, or refunds from, federal, state, and local taxing authorities.
Current wording
For the first six months of 2024, cash provided by operating activities was $872 million, compared to cash provided by operating activities of $832 million in 2023. Cash provided by ticket sales and from our co-branded credit card agreement are the primary sources of our operating cash flow. Our primary use of operating cash flow is for operating expenses, including payments for employee wages and benefits, payments to suppliers for goods and services, and payments to lessors and airport authorities for rents and landing fees. Operating cash flow also includes payments to, or refunds from, federal, state, and local taxing authorities. The $40 million net increase in our operating cash flows was primarily due to a combination of changes in various working capital account balances.
Previous wording
Cash provided by investing activities was $318 million during the first three months of 2024, compared to $60 million in 2023. The change was due to a combination of factors. In the first quarter, the Company received $162 million in compensation from Boeing related to the B737-9 grounding, which is presented as Supplier proceeds. Total property and equipment expenditures decreased $67 million as we took no deliveries of B737-9 aircraft in the first quarter of 2024 compared to three owned B737-9 deliveries in the prior period, and due to changes in contractual terms of our aircraft purchase deposit schedule with Boeing. Cash flows from other investing activities increased $96 million due to the sale of certain A321neo aircraft. These changes were partially offset by decreased cash flows from net sales of marketable securities, which were $120 million in 2024, compared to $187 million in 2023.
Current wording
Cash used in investing activities was $135 million during the first six months of 2024, compared to cash used in investing activities of $479 million in 2023. In 2024, the Company received $162 million in supplier proceeds from Boeing related to the B737-9 grounding. The Company also received $180 million for the sale of certain owned aircraft and equipment. Total property and equipment expenditures decreased $47 million due to fewer deliveries of B737 aircraft in the first half of 2024 compared to 2023, and due to changes in contractual terms of our aircraft purchase deposit schedule with Boeing. This was partially offset by the purchase of a facility in Renton, Washington for $86 million in the second quarter of 2024. Finally, net sales of marketable securities decreased by $60 million compared to the prior year.
Previous wording
Cash Used in Financing Activities
Current wording
Cash Provided by (Used in) Financing Activities
Previous wording
Cash used in financing activities was $5 million during the first three months of 2024, compared to $114 million in 2023. The change was largely driven by $149 million in new debt proceeds in 2024 compared to zero in 2023, partially offset by increased cash used in other financing activities, of which the settlement of our final A321neo finance lease was the largest component.
Current wording
Cash provided by financing activities was $87 million during the first six months of 2024, compared to cash used in financing activities of $165 million in 2023. The increase was driven by $279 million in new debt proceeds in 2024 compared to zero in 2023, partially offset by increased cash used in other financing activities, of which the settlement of the final A321neo finance lease was the largest component.
Previous wording
Material cash requirements include the following contractual and other obligations. In prior filings, we had indicated our expected capital expenditures for 2024 would be approximately $1.4 billion to $1.5 billion. Based on management's assumptions regarding aircraft delivery delays in 2024, described in more detail below, we now expect 2024 capital expenditures to be approximately $1.2 billion to $1.3 billion.
Current wording
Material cash requirements include the following contractual and other obligations.
Previous wording
As of March 31, 2024, Alaska had firm orders to purchase 80 B737 aircraft with deliveries between 2024 and 2027. Alaska also had rights for 105 additional B737 aircraft through 2030.
Current wording
As of June 30, 2024, Alaska had firm orders to purchase 72 B737 aircraft with deliveries between 2024 and 2027. Alaska also had rights for 105 additional B737 aircraft through 2030.
Previous wording
Alaska continues to experience delivery delays of B737 aircraft. Boeing has communicated that certain B737 aircraft are expected to be delivered later than the contracted delivery dates provided to Alaska. This includes certain B737-10 aircraft contracted for delivery in 2025 that have been moved to 2026, pending certification of the B737-10. We have incorporated these adjustments in the tables below, however, management expects that other Boeing aircraft deliveries may also be delayed later than negotiated delivery timeframes.
Current wording
Boeing has communicated to Alaska that certain B737 aircraft are expected to be delivered later than the contracted delivery dates. This includes certain B737-8 and B737-9 aircraft contracted for delivery in 2024 that have been moved to 2025, as well as certain B737-10 aircraft contracted for delivery in 2025 that have been moved to 2026, pending certification of the B737-10. We have incorporated these adjustments in the tables below, however, management expects that additional Boeing aircraft deliveries may also be delayed beyond what is depicted in the tables.
Showing the first 40 of 45 pairs. Open the source sections for the rest.
Rearranged current paragraphs (9)
Current report — wording carried from elsewhere
Total operating revenue increased $95 million, or 2%, during the first six months of 2024 compared to the same period in 2023. The changes are summarized in the following table:
Current report — wording carried from elsewhere
Total operating expenses increased $90 million, or 2%, compared to the first six months of 2023. We believe it is useful to summarize operating expenses as follows, which is consistent with the way expenses are reported internally and evaluated by management:
Current report — wording carried from elsewhere
Aircraft fuel expense decreased $58 million, or 5%, compared to the six months ended June 30, 2023. The elements of the change are illustrated in the table:
Current report — wording carried from elsewhere
Economic fuel expense includes losses recognized for hedges that settled in the first six months of 2024 of $23 million, compared to losses of $29 million in the same period in 2023. These amounts represent cash paid for premium expense, offset by any cash received from those hedges at settlement.
Current report — wording carried from elsewhere
Wages and benefits increased by $109 million, or 7%, in the first six months of 2024. The primary components of wages and benefits are shown in the following table:
Current report — wording carried from elsewhere
The change in medical and other benefits was primarily driven by an increase in the cost of medical services compared to the prior year. Increased expense for defined contribution plans was driven by the change in wages as well as higher matching contributions for Alaska technicians.
Current report — wording carried from elsewhere
Aircraft rent expense decreased by $20 million, or 18%, in the first six months of 2024. The decrease was primarily driven by the retirement of ten leased A321neo aircraft from operations.
Current report — wording carried from elsewhere
Depreciation and amortization increased by $37 million, or 17%, in the first six months of 2024. The increase was primarily due to the addition of 22 owned B737 aircraft and five owned E175 aircraft to our fleet since the second quarter of 2023, as well as incremental depreciation on ground service and other equipment additions.
Current report — wording carried from elsewhere
Refer to Note 11 to the consolidated financial statements for a detailed description of each segment. Below is a summary of each segment's results.