* September quarter 2020 GAAP pre-tax loss of
* September quarter 2020 adjusted pre-tax loss of
*
"While our September quarter results demonstrate the magnitude of the pandemic on our business, we have been encouraged as more customers travel and we are seeing a path of progressive improvement in our revenues, financial results and daily cash burn," said
September Quarter Financial Results
Adjusted pre-tax loss of
Total adjusted revenue of
Total operating expense, which includes the
At the end of the September quarter, the company had
During the September quarter cash burn (see Note A) averaged
Revenue Environment
"With a slow and steady build in demand, we are restoring flying to meet our customers' needs, while staying nimble with our capacity in light of COVID-19," said
Setting the
Taking great care of
Through the voluntary separation and early retirement programs, voluntary unpaid leaves, job sharing and other initiatives, the company has been able to avoid involuntary furloughs for ground and flight attendant employees
Launching a "Stop the Spread. Save Lives." campaign to emphasize the six core health actions that protect
Improving the customer experience
Emphasizing health and safety with the
Reducing complexity for customers by eliminating change fees for nearly all domestic fares and redeposit/reissuance fees on domestic reward tickets for SkyMiles Members
Taking a customer-centric approach to refunds, with approximately
Simplifying the fleet
Restructuring its Airbus and CRJ aircraft order books to better match the timing of aircraft deliveries with network and financial needs over the next several years. The restructuring reduces aircraft purchase commitments by more than
Accelerating its fleet simplification strategy, which is intended to modernize and streamline the company's fleet, enhance the customer experience and generate cost savings. The company has announced plans to accelerate retirements of nearly 400 aircraft by 2025, including more than 200 in 2020.
Cost Performance
Total adjusted operating expense for the September quarter decreased
Non-operating expense for the quarter was
"Our results this quarter were underpinned by a strong focus on costs, as we reduced adjusted operating expenses by more than 50 percent, similar to the June quarter, despite flying 23 points more capacity," said
Balance Sheet, Cash and Liquidity
At the end of the September quarter, the company had total debt and finance lease obligations of
Subsequent to the end of the quarter, the company repaid the
At the end of the September quarter, the company's Air Traffic Liability stood at
CARES Act Accounting, Fleet Restructuring and Voluntary Separation and Early Retirement Program Charges
In the September quarter, the company received
During the September quarter, the company made the decision to retire its 717-200 fleet and the remainder of its 767-300ER fleet by 2025 and its CRJ-200 fleet by 2023. As a result of these decisions, the company recorded
The company offered voluntary separation and early retirement programs to employees during the September quarter. Approximately 18,000 employees participated in the programs, with most leaving the company
September Quarter Results
September quarter results have been adjusted primarily for the CARES Act grant recognition and restructuring charges described above.
About
Today, and always, nothing is more important than the health and safety of our customers and employees. Since the onset of the COVID-19 pandemic,
With our mission of connecting the people and cultures of the globe,
Forward Looking Statements
Statements in this press release that are not historical facts, including statements regarding our estimates, expectations, beliefs, intentions, projections or strategies for the future, may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. All forward looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the estimates, expectations, beliefs, intentions, projections and strategies reflected in or suggested by the forward-looking statements. Risks and uncertainties that could cause differences between actual results and forward-looking statements include, but are not limited to, the material adverse effect that the COVID-19 pandemic is having on our business; the impact of incurring significant debt in response to the pandemic; the possible effects of accidents involving our aircraft; breaches or security lapses in our information technology systems; disruptions in our information technology infrastructure; our dependence on technology in our operations; the performance of our significant investments in and commercial relationships with, airlines in other parts of the world; failure to comply with the financial and other covenants in our financing agreements; labor issues; the effects of weather, natural disasters and seasonality on our business; the effects of an extended disruption in services provided by third parties; the cost of aircraft fuel; the availability of aircraft fuel; failure or inability of insurance to cover a significant liability at
Additional information concerning risks and uncertainties that could cause differences between actual results and forward-looking statements is contained in our
Forward Looking Projections.
Pre-Tax (Loss)/Income and Net (Loss)/Income, adjusted. In the current period, pre-tax (loss)/income and net (loss)/income, adjusted exclude the following items directly related to the impact of COVID-19 and our response for comparability with the prior period:
Restructuring charges. We recognized
CARES Act grant recognition. We recognized
Impairments and equity method losses. These charges relate to the write-down of our investment in
Pension settlement charges. These charges were recognized in connection with the voluntary programs.
We also regularly adjust pre-tax (loss)/income and net (loss)/income for the following items to determine pre-tax (loss)/income and net (loss)/income, adjusted for the reasons described below. We include the income tax effect of adjustments when presenting net (loss)/income, adjusted.
MTM adjustments and settlements on hedges. Mark-to-market ("MTM") adjustments are defined as fair value changes recorded in periods other than the settlement period. Such fair value changes are not necessarily indicative of the actual settlement value of the underlying hedge in the contract settlement period. Settlements represent cash received or paid on hedge contracts settled during the applicable period.
Equity investment MTM adjustments. We previously recorded our proportionate share of losses from our equity investments in
MTM adjustments on investments. Unrealized gains/losses on our equity investments in
Operating Revenue, adjusted and Total Revenue Per Available Seat Mile ("TRASM"), adjusted. We adjust operating revenue and TRASM for third party refinery sales for the reasons described below. We make an adjustment related to
Third-party refinery sales. We adjust operating revenue and TRASM for refinery sales to third parties to determine operating revenue, adjusted and TRASM, adjusted because these revenues are not related to our airline segment. Operating revenue, adjusted and TRASM, adjusted therefore provides a more meaningful comparison of revenue from our airline operations to the rest of the airline industry.
Operating Expense, adjusted. In the current period, operating expense, adjusted excludes the following items directly related to the impact of COVID-19 and our response: restructuring charges and CARES Act grant recognition, as discussed above under the heading pre-tax (loss)/income and net (loss)/income, adjusted. We also adjust operating expense for MTM adjustments and settlements on hedges, third-party refinery sales and
Cash Burn. We present cash burn because management believes this metric is helpful to investors to evaluate the company's ability to maintain liquidity and return to cash generation. The company defines cash burn as net cash from operating activities and net cash used in investing activities, adjusted for (i) net purchases of short-term investments, (ii) strategic investments, (iii) net cash flows related to certain airport construction projects, (iv) proceeds from financing arrangements that are reported within investing activities, (v) CARES Act grant proceeds, and (vi) other charges that are not representative of our core operations, such as charges associated with our voluntary separation and early retirement programs. Adjustments include:
Net purchases of short-term investments. Net purchases of short-term investments represent the net purchase and sale activity of investments and marketable securities in the period, including gains and losses. We adjust for this activity to provide investors a better understanding of the company's free cash flow generated by our operations.
Strategic investments. Cash flows related to our investments in and related transactions with other airlines are included in our GAAP investing activities. We adjust for this activity because it provides a more meaningful comparison to our airline industry peers.
Net cash flows related to certain airport construction projects and other. Cash flows related to certain airport construction projects are included in our GAAP operating activities and capital expenditures. We have adjusted for these items, which were primarily funded by cash restricted for airport construction, to provide investors a better understanding of the company's free cash flow and capital expenditures that are core to our operational performance in the periods shown.
Proceeds from financing arrangements that are reported within investing activities. Cash flows from proceeds from financing arrangements that are reported within investing activities (such as certain sale-leaseback transactions) are removed from free cash flow in calculating daily cash burn to better illustrate the cash generated from our core operations.
CARES Act grant proceeds. Cash flows related to the CARES act payroll support program grant proceeds, reported within operating activities in GAAP results. We adjust free cash flow for this item in calculating daily cash burn to better illustrate the cash from our core operations.
Voluntary programs. Cash flows from the voluntary separation and early retirement programs offered to employees during the September quarter, reported within operating activities in GAAP results. We adjust free cash flow for this item in calculating daily cash burn to better illustrate the cash from our core operations.
Fuel expense, adjusted and Average fuel price per gallon, adjusted. The tables below show the components of fuel expense, including the impact of hedging and the refinery on fuel expense and average price per gallon. We then adjust for MTM adjustments and settlements on hedges and
Non-operating expense, adjusted. In the current period, non-operating expense, adjusted excludes the following items directly related to the impact of COVID-19 and our response: impairments and equity method losses, and pension settlement changes, as discussed above under the heading pre-tax (loss)/income and net (loss)/income, adjusted. We also adjust for equity investment MTM adjustments and MTM adjustments on investments to determine non-operating expense, adjusted for the same reasons described above in the heading pre-tax (loss)/income and net (loss)/income, adjusted.
Adjusted Net Debt.
Non-Fuel Unit Cost or Cost per Available Seat Mile, ("CASM-Ex"). In the current period, CASM-Ex excludes the following items directly related to the impact of COVID-19 and our response: restructuring charges and CARES Act grant recognition, as discussed above under the heading pre-tax (loss)/income and net (loss)/income, adjusted. We also adjust CASM for the following items to determine CASM-Ex for the reasons described below. We adjust for refinery sales to third parties for the same reason described under the heading operating revenue, adjusted and TRASM, adjusted. We adjust for
Aircraft fuel and related taxes. The volatility in fuel prices impacts the comparability of year-over-year financial performance. The adjustment for aircraft fuel and related taxes allows investors to understand and analyze our non-fuel costs and year-over-year financial performance.
Profit sharing. We adjust for profit sharing because this adjustment allows investors to better understand and analyze our recurring cost performance and provides a more meaningful comparison of our core operating costs to the airline industry.
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