Alaska Air Group (NYSE: ALK) today reported financial results for the third quarter ending September 30, 2023, and provided outlook for the fourth quarter ending December 31, 2023.

"I am grateful to our people for delivering industry-leading operational performance and strong cost discipline this quarter," said CEO Ben Minicucci. "Our 11.4% adjusted pretax margin is among the best in the industry despite external headwinds. Our investments in our all-Boeing fleet, premium seating on 100% of our aircraft and access for our loyalty members to a global alliance provide our guests with a premium domestic product that rivals any in the industry."

Financial Highlights:

  • Reported net income for the third quarter of 2023 under Generally Accepted Accounting Principles (GAAP) of $139 million, or $1.08 per share, compared to a net income of $40 million, or $0.31 per share, for the third quarter of 2022.
  • Reported net income for the third quarter of 2023, excluding special items and mark-to-market fuel hedge accounting adjustments, of $237 million, or $1.83 per share, compared to $325 million, or $2.53 per share, for the third quarter of 2022.
  • Recorded $2.8 billion in operating revenue.
  • Reduced CASM excluding fuel and special items by 5% compared to the third quarter of 2022.
  • Repurchased 248,988 shares of common stock for approximately $13 million, bringing total repurchases to $70 million for the nine months ended September 30, 2023.
  • Generated $271 million in operating cash flow for the third quarter of 2023.
  • Held $2.5 billion in unrestricted cash and marketable securities as of September 30, 2023.
  • Ended the quarter with a debt-to-capitalization ratio of 48%, within the target range of 40% to 50%.

Operational Updates:

  • Finished the third quarter with an industry-leading completion rate of 99.7%.
  • Completed Alaska's transition to an all-Boeing fleet with the retirement of its A321neo aircraft in September, and reached an agreement to sell the ten A321neos to American Airlines, with aircraft sales beginning in the fourth quarter of 2023.
  • Received five 737-9 aircraft and two E175 aircraft during the quarter, bringing the totals in the Alaska and Horizon fleets to 56 and 41.
  • Provided support and relief to the Maui community following the devastating August wildfires, bringing aid to the island and donating nearly 30 million miles to assist with ongoing efforts.
  • Announced new nonstop daily service between San Diego and Atlanta, which will be the 37th nonstop destination from San Diego and the most of any airline serving the airport.
  • Launched the Mobile Verify program, providing guests with the ability to securely verify their passports before arriving to the airport for international travel.
  • Announced establishment of the Airline Venture Lab with UP.Labs, a partnership designed to build startups aimed at solving strategic challenges facing the airline industry.
  • Through Alaska Star Ventures, invested in Assaia, whose aim is to utilize artificial intelligence to optimize aircraft turn times and improve on-time performance.
  • Launched a new partnership with Portland-based Stumptown Coffee Roasters to create a custom coffee blend which will be introduced on all flights by the end of 2023.

Awards and Recognition:

  • Named for the third year in a row to Newsweek's list of America's Best Customer Service.
  • Recognized by Forbes as one of America's Best Employers for Women.

The following table reconciles the company's reported GAAP net income per share (EPS) for the three and nine months ended September 30, 2023 and 2022 to adjusted amounts.

Three Months Ended September 30,

2023

2022

(in millions, except per-share amounts)

Dollars

Diluted EPS

Dollars

Diluted EPS

GAAP net income per share

$               139

$              1.08

$                 40

$              0.31

Mark-to-market fuel hedge adjustments

(35)

(0.27)

131

1.02

Special items - fleet transition and other(a)

156

1.20

155

1.21

Special items - labor and related(b)

—

—

90

0.70

Special items - net non-operating(c)

8

0.06

—

—

Income tax effect of reconciling items above

(31)

(0.24)

(91)

(0.71)

Non-GAAP adjusted net income per share

$               237

$              1.83

$               325

$              2.53

Nine Months Ended September 30,

2023

2022

(in millions, except per-share amounts)

Dollars

Diluted EPS

Dollars

Diluted EPS

GAAP net income per share

$               237

$              1.84

$                 36

$              0.28

Mark-to-market fuel hedge adjustments

(14)

(0.11)

64

0.50

Special items - fleet transition and other(a)

355

2.75

376

2.94

Special items - labor and related(b)

51

0.39

90

0.70

Special items - net non-operating(c)

14

0.11

—

—

Income tax effect of reconciling items above

(98)

(0.76)

(128)

(1.00)

Non-GAAP adjusted net income per share

$               545

$              4.22

$               438

$              3.42

(a)

Special items - fleet transition and other in the three and nine months ended September 30, 2023 and 2022 is primarily for impairment charges and accelerated costs associated with the retirement of Airbus and Q400 aircraft.

(b)

Special items - labor and related is primarily for changes to Alaska pilots' sick leave benefits resulting from an agreement signed in the first quarter of 2023, and for a one-time payment to Alaska pilots following ratification of a new collective bargaining agreement in the third quarter of 2022.

(c)

Special items - net non-operating in the three and nine months ended September 30, 2023 is for interest expense associated with certain A321neo lease agreements which were modified as part of Alaska's fleet transition.

Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables. A glossary of financial terms can be found on the last page of this release.

Alaska will hold its quarterly conference call to discuss third quarter results at 8:30 a.m. PDT on October 19, 2023. A webcast of the call is available to the public at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the call.

Fourth Quarter and Full Year 2023 Forecast Information

Q4 Expectation

Capacity (ASMs) % change versus 2022

Up 11% to 14%

Total revenue % change versus 2022

Up 1% to 4%

Cost per ASM excluding fuel and special items (CASMex) % change versus 2022

Down 3% to 5%

Economic fuel cost per gallon

$3.30 to $3.40

Adjusted pretax margin %

0% to 2%

Full Year Expectation

Capacity (ASMs) % change versus 2022

Up 12% to 13%

Total revenue % change versus 2022

Up 7% to 8%

Cost per ASM excluding fuel and special items (CASMex) % change versus 2022

Down 1% to 2%

Adjusted pretax margin %

7% to 8%

Earnings per share(a)

$4.25 to $4.75

Capital expenditures

~$1.7 billion

(a)   Earnings per share guidance assumes a full year tax rate of approximately 25%

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

Alaska Air Group, Inc.

Three Months Ended September 30,

Nine Months Ended September 30,

(in millions, except per share amounts)

2023

2022

Change

2023

2022

Change

Operating Revenue

Passenger revenue

$        2,618

$        2,615

— %

$        7,200

$        6,544

10 %

Mileage Plan other revenue

159

146

9 %

483

433

12 %

Cargo and other revenue

62

67

(7) %

190

190

— %

Total Operating Revenue

2,839

2,828

— %

7,873

7,167

10 %

Operating Expenses

Wages and benefits

782

686

14 %

2,259

1,931

17 %

Variable incentive pay

45

48

(6) %

149

140

6 %

Aircraft fuel, including hedging gains and losses

694

877

(21) %

1,932

2,000

(3) %

Aircraft maintenance

118

92

28 %

367

331

11 %

Aircraft rent

48

76

(37) %

161

222

(27) %

Landing fees and other rentals

183

161

14 %

502

435

15 %

Contracted services

100

83

20 %

290

243

19 %

Selling expenses

84

82

2 %

231

218

6 %

Depreciation and amortization

113

104

9 %

330

310

6 %

Food and beverage service

62

52

19 %

176

143

23 %

Third-party regional carrier expense

58

53

9 %

164

145

13 %

Other

185

207

(11) %

544

536

1 %

Special items - fleet transition and other

156

155

1 %

355

376

(6) %

Special items - labor and related

—

90

(100) %

51

90

(43) %

Total Operating Expenses

2,628

2,766

(5) %

7,511

7,120

5 %

Operating Income

211

62

NM

362

47

NM

Non-operating Income (Expense)

Interest income

23

17

35 %

62

35

77 %

Interest expense

(34)

(31)

10 %

(90)

(84)

7 %

Interest capitalized

7

3

133 %

21

8

163 %

Special items - net non-operating

(8)

—

NM

(14)

—

NM

Other - net

(6)

14

(143) %

(22)

38

(158) %

Total Non-operating Expense

(18)

3

NM

(43)

(3)

NM

Income Before Income Tax

193

65

319

44

Income tax expense

54

25

82

8

Net Income

$           139

$             40

$           237

$             36

Basic Earnings Per Share

$          1.09

$          0.32

$          1.86

$          0.28

Diluted Earnings Per Share

$          1.08

$          0.31

$          1.84

$          0.28

Shares used for computation:

Basic

127.187

126.783

127.375

126.440

Diluted

129.188

128.370

129.085

128.087

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

Alaska Air Group, Inc.

(in millions)

September 30, 2023

December 31, 2022

ASSETS

Current Assets

Cash and cash equivalents

$                            647

$                            338

Marketable securities

1,804

2,079

Total cash and marketable securities

2,451

2,417

Receivables - net

341

296

Inventories and supplies - net

122

104

Prepaid expenses

187

163

Assets held for sale

385

3

Other current assets

158

57

Total Current Assets

3,644

3,040

Property and Equipment

Aircraft and other flight equipment

10,015

9,053

Other property and equipment

1,756

1,661

Deposits for future flight equipment

538

670

12,309

11,384

Less accumulated depreciation and amortization

4,283

4,127

Total Property and Equipment - net

8,026

7,257

Other Assets

Operating lease assets

1,171

1,471

Goodwill and intangible assets

2,034

2,038

Other noncurrent assets

290

380

Total Other Assets

3,495

3,889

Total Assets

$                      15,165

$                      14,186

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

Alaska Air Group, Inc.

(in millions, except share amounts)

September 30, 2023

December 31, 2022

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

Accounts payable

$                            229

$                            221

Accrued wages, vacation and payroll taxes

561

619

Air traffic liability

1,359

1,180

Other accrued liabilities

806

846

Deferred revenue

1,233

1,123

Current portion of operating lease liabilities

150

228

Current portion of long-term debt and finance leases

736

276

Total Current Liabilities

5,074

4,493

Long-Term Debt, Net of Current Portion

2,128

1,883

Noncurrent Liabilities

Long-term operating lease liabilities, net of current portion

1,113

1,393

Deferred income taxes

662

574

Deferred revenue

1,366

1,374

Obligation for pension and post-retirement medical benefits

368

348

Other liabilities

361

305

Total Noncurrent Liabilities

3,870

3,994

Commitments and Contingencies

Shareholders' Equity

Preferred stock, $0.01 par value, Authorized: 5,000,000 shares, none issued or

outstanding

—

—

Common stock, $0.01 par value, Authorized: 400,000,000 shares, Issued: 2023 -

138,004,646 shares; 2022 - 136,883,042 shares, Outstanding: 2023 - 127,120,173

shares; 2022 - 127,533,916 shares

1

1

Capital in excess of par value

659

577

Treasury stock (common), at cost: 2023 - 10,884,473 shares; 2022 - 9,349,944

shares

(744)

(674)

Accumulated other comprehensive loss

(360)

(388)

Retained earnings

4,537

4,300

4,093

3,816

Total Liabilities and Shareholders' Equity

$                      15,165

$                      14,186

SUMMARY CASH FLOW (unaudited)

Alaska Air Group, Inc.

(in millions)

Nine Months

Ended September 30,

2023

Six Months

Ended June 30,

2023(a)

Three Months

Ended September 30,

2023(b)

Cash Flows from Operating Activities:

Net Income

$                            237

$                          98

$                        139

Non-cash reconciling items

798

511

287

Changes in working capital

68

223

(155)

Net cash provided by operating activities

1,103

832

271

Cash Flows from Investing Activities:

Property and equipment additions

(991)

(634)

(357)

Other investing activities

181

155

26

Net cash used in investing activities

(810)

(479)

(331)

Cash Flows from Financing Activities:

12

(165)

177

Net increase in cash and cash equivalents

305

188

117

Cash, cash equivalents, and restricted cash at beginning of

period

369

369

557

Cash, cash equivalents, and restricted cash at end of the

period

$                            674

$                        557

$                        674

(a)

As reported in Form 10-Q for the second quarter of 2023.

(b)

Cash flows for the three months ended September 30, 2023, can be calculated by subtracting cash flows for the six months ended June 30, 2023, as reported in Form 10-Q for the second quarter 2023, from the nine months ended September 30, 2023.

OPERATING STATISTICS SUMMARY (unaudited)

Alaska Air Group, Inc.

Three Months Ended September 30,

Nine Months Ended September 30,

2023

2022

Change

2023

2022

Change

Consolidated Operating Statistics:(a)

Revenue passengers (000)

12,210

11,437

7 %

33,654

31,137

8 %

RPMs (000,000) "traffic"

15,718

14,143

11 %

43,208

38,475

12 %

ASMs (000,000) "capacity"

18,582

16,349

14 %

51,447

45,743

12 %

Load factor

84.6 %

86.5 %

(1.9) pts

84.0 %

84.1 %

(0.1) pts

Yield

16.66¢

18.48¢

(10) %

16.66¢

17.01¢

(2) %

RASM

15.28¢

17.30¢

(12) %

15.30¢

15.67¢

(2) %

CASMex(b)

9.57¢

10.05¢

(5) %

10.05¢

10.17¢

(1) %

Economic fuel cost per gallon(b)

$3.26

$3.66

(11) %

$3.14

$3.38

(7) %

Fuel gallons (000,000)

224

204

10 %

620

573

8 %

ASMs per gallon

83.0

80.1

4 %

83.0

79.8

4 %

Departures (000)

111.8

110.4

1 %

311.6

309.3

1 %

Average full-time equivalent employees (FTEs)

23,879

22,878

4 %

23,386

22,354

5 %

Mainline Operating Statistics:

Revenue passengers (000)

9,681

8,671

12 %

26,735

23,557

13 %

RPMs (000,000) "traffic"

14,471

12,846

13 %

39,967

34,818

15 %

ASMs (000,000) "capacity"

17,123

14,782

16 %

47,584

41,221

15 %

Load factor

84.5 %

86.9 %

(2.4) pts

84.0 %

84.5 %

(0.5) pts

Yield

15.37¢

17.26¢

(11) %

15.37¢

15.76¢

(2) %

RASM

14.20¢

16.34¢

(13) %

14.24¢

14.72¢

(3) %

CASMex(b)

8.67¢

9.15¢

(5) %

9.12¢

9.24¢

(1) %

Economic fuel cost per gallon(b)

$3.22

$3.61

(11) %

$3.11

$3.35

(7) %

Fuel gallons (000,000)

193

173

12 %

538

484

11 %

ASMs per gallon

88.7

85.4

4 %

88.4

85.2

4 %

Departures (000)

72.3

65.3

11 %

202.1

182.7

11 %

Average full-time equivalent employees (FTEs)

18,619

17,453

7 %

18,184

17,035

7 %

Aircraft utilization

11.9

10.5

13 %

11.5

10.4

11 %

Average aircraft stage length

1,386

1,347

3 %

1,379

1,348

2 %

Operating fleet(d)

220

232

(12) a/c

220

232

(12) a/c

Regional Operating Statistics:(c)

Revenue passengers (000)

2,529

2,767

(9) %

6,919

7,579

(9) %

RPMs (000,000) "traffic"

1,247

1,297

(4) %

3,241

3,657

(11) %

ASMs (000,000) "capacity"

1,459

1,567

(7) %

3,862

4,522

(15) %

Load factor

85.5 %

82.8 %

2.7 pts

83.9 %

80.9 %

3.0 pts

Yield

31.57¢

30.69¢

3 %

32.64¢

28.88¢

13 %

RASM

27.85¢

26.23¢

6 %

28.33¢

24.26¢

17 %

Departures (000)

39.5

45.2

(13) %

109.5

126.6

(14) %

Operating fleet(d)

83

94

(11) a/c

83

94

(11) a/c

(a)

Except for FTEs, data includes information related to third-party regional capacity purchase flying arrangements.

(b)

See a reconciliation of this non-GAAP measure and Note A for a discussion of the importance of this measure to investors in the accompanying pages.

(c)

Data presented includes information for flights operated by Horizon and third-party carriers.

(d)

Excludes all aircraft removed from operating service.

OPERATING SEGMENTS (unaudited)

Alaska Air Group, Inc.

Three Months Ended September 30, 2023

(in millions)

Mainline

Regional

Horizon

Consolidating

& Other(a)

Air Group

Adjusted(b)

Special

Items(c)

Consolidated

Operating Revenue

Passenger revenue

$     2,225

$        394

$          —

$                  (1)

$     2,618

$          —

$        2,618

CPA revenue

—

—

104

(104)

—

—

—

Mileage Plan other revenue

146

13

—

—

159

—

159

Cargo and other revenue

60

—

—

2

62

—

62

Total Operating Revenue

2,431

407

104

(103)

2,839

—

2,839

Operating Expenses

Operating expenses, excluding fuel

1,484

297

89

(92)

1,778

156

1,934

Fuel expense

622

108

—

(1)

729

(35)

694

Total Operating Expenses

2,106

405

89

(93)

2,507

121

2,628

Non-operating Income (Expense)

—

—

(11)

1

(10)

(8)

(18)

Income (Loss) Before Income Tax

$        325

$            2

$            4

$                  (9)

$        322

$      (129)

$           193

Pretax Margin(d)

11.4 %

6.8 %

Three Months Ended September 30, 2022

(in millions)

Mainline

Regional

Horizon

Consolidating

& Other(a)

Air Group

Adjusted(b)

Special

Items(c)

Consolidated

Operating Revenue

Passenger revenue

$     2,217

$        398

$          —

$                  —

$     2,615

$          —

$        2,615

CPA revenue

—

—

93

(93)

—

—

—

Mileage Plan other revenue

133

13

—

—

146

—

146

Cargo and other revenue

65

—

—

2

67

—

67

Total Operating Revenue

2,415

411

93

(91)

2,828

—

2,828

Operating Expenses

Operating expenses, excluding fuel

1,352

292

94

(94)

1,644

245

1,889

Fuel expense

625

121

—

—

746

131

877

Total Operating Expenses

1,977

413

94

(94)

2,390

376

2,766

Non-operating Income (Expense)

8

—

(5)

—

3

—

3

Income (Loss) Before Income Tax

$        446

$          (2)

$          (6)

$                    3

$        441

$      (376)

$             65

Pretax Margin(d)

15.6 %

2.3 %

Nine Months Ended September 30, 2023

(in millions)

Mainline

Regional

Horizon

Consolidating

& Other(a)

Air Group

Adjusted(b)

Special

Items(c)

Consolidated

Operating Revenue

Passenger revenue

$     6,143

$     1,058

$          —

$                  (1)

$    7,200

$          —

$        7,200

CPA revenue

—

—

274

(274)

—

—

—

Mileage Plan other revenue

447

36

—

—

483

—

483

Cargo and other revenue

184

—

—

6

190

—

190

Total Operating Revenue

6,774

1,094

274

(269)

7,873

—

7,873

Operating Expenses

Operating expenses, excluding fuel

4,342

832

260

(261)

5,173

406

5,579

Fuel expense

1,673

274

—

(1)

1,946

(14)

1,932

Total Operating Expenses

6,015

1,106

260

(262)

7,119

392

7,511

Non-operating Income (Expense)

(3)

—

(29)

3

(29)

(14)

(43)

Income (Loss) Before Income Tax

$        756

$        (12)

$        (15)

$                  (4)

$       725

$      (406)

$           319

Pretax Margin(d)

9.2 %

4.1 %

Nine Months Ended September 30, 2022

(in millions)

Mainline

Regional

Horizon

Consolidating

& Other(a)

Air Group

Adjusted(b)

Special

Items(c)

Consolidated

Operating Revenue

Passenger revenue

$     5,488

$     1,056

$          —

$                  —

$    6,544

$          —

$        6,544

CPA revenue

—

—

288

(288)

—

—

—

Mileage Plan other revenue

392

41

—

—

433

—

433

Cargo and other revenue

186

—

—

4

190

—

190

Total Operating Revenue

6,066

1,097

288

(284)

7,167

—

7,167

Operating Expenses

Operating expenses, excluding fuel

3,808

843

291

(288)

4,654

466

5,120

Fuel expense

1,623

313

—

—

1,936

64

2,000

Total Operating Expenses

5,431

1,156

291

(288)

6,590

530

7,120

Non-operating Income (Expense)

12

—

(15)

—

(3)

—

(3)

Income (Loss) Before Income Tax

$        647

$        (59)

$        (18)

$                    4

$       574

$      (530)

$             44

Pretax Margin(d)

8.0 %

0.6 %

(a)

Includes consolidating entries, Air Group parent company, McGee Air Services, and other immaterial business units.

(b)

The Air Group Adjusted column represents the financial information that is reviewed by management to assess performance of operations and determine capital allocation and excludes certain charges. See Note A in the accompanying pages for further information.

(c)

Includes special items and mark-to-market fuel hedge accounting adjustments.

(d)

Figures in the tables above are rounded to the nearest million. As a result, manual recalculations may not agree directly to reported figures.

GAAP TO NON-GAAP RECONCILIATIONS (unaudited)

Alaska Air Group, Inc.

CASM Excluding Fuel and Special Items Reconciliation

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in cents)

2023

2022

2023

2022

Consolidated:

CASM

14.14 ¢

16.91 ¢

14.60 ¢

15.56 ¢

Less the following components:

Aircraft fuel, including hedging gains and losses

3.73

5.36

3.76

4.37

Special items - fleet transition and other(a)

0.84

0.95

0.69

0.82

Special items - labor and related(b)

—

0.55

0.10

0.20

CASM excluding fuel and special items

9.57 ¢

10.05 ¢

10.05 ¢

10.17 ¢

Mainline:

CASM

13.01 ¢

16.20 ¢

13.47 ¢

14.59 ¢

Less the following components:

Aircraft fuel, including hedging gains and losses

3.42

5.52

3.49

4.44

Special items - fleet transition and other(a)

0.92

0.92

0.75

0.69

Special items - labor and related(b)

—

0.61

0.11

0.22

CASM excluding fuel and special items

8.67 ¢

9.15 ¢

9.12 ¢

9.24 ¢

(a)

Special items - fleet transition and other in the three and nine months ended September 30, 2023 and 2022 is primarily for impairment charges and accelerated costs associated with the retirement of Airbus and Q400 aircraft.

(b)

Special items - labor and related is primarily for changes to Alaska pilots' sick leave benefits resulting from an agreement signed in the first quarter of 2023 and for a one-time payment to Alaska pilots following ratification of a new collective bargaining agreement in the third quarter of 2022.

Fuel Reconciliation

Three Months Ended September 30,

2023

2022

(in millions, except for per-gallon amounts)

Dollars

Cost/Gallon

Dollars

Cost/Gallon

Raw or "into-plane" fuel cost

$                   711

$                  3.18

$                   775

$                  3.80

Losses (gains) on settled hedges

18

0.08

(29)

(0.14)

Consolidated economic fuel expense

729

3.26

746

3.66

Mark-to-market fuel hedge adjustment

(35)

(0.16)

131

0.64

GAAP fuel expense

$                   694

$                  3.10

$                   877

$                  4.30

Fuel gallons

224

204

Nine Months Ended September 30,

2023

2022

(in millions, except for per gallon amounts)

Dollars

Cost/Gallon

Dollars

Cost/Gallon

Raw or "into-plane" fuel cost

$                1,899

$                  3.06

$                2,103

$                  3.67

Losses (gains) on settled hedges

47

0.08

(167)

(0.29)

Consolidated economic fuel expense

1,946

3.14

1,936

3.38

Mark-to-market fuel hedge adjustment

(14)

(0.02)

64

0.11

GAAP fuel expense

$                1,932

$                  3.12

$                2,000

$                  3.49

Fuel gallons

620

573

Debt-to-capitalization, including operating and finance leases

(in millions)

September 30, 2023

December 31, 2022

Long-term debt, net of current portion

$                           2,128

$                            1,883

Capitalized operating leases

1,263

1,621

Capitalized finance leases(a)

452

—

Adjusted debt, net of current portion of long-term debt

3,843

3,504

Shareholders' equity

4,093

3,816

Total Invested Capital

$                           7,936

$                            7,320

Debt-to-capitalization ratio, including operating and finance leases

48 %

48 %

(a)

To best reflect our leverage at September 30, 2023, we included our capitalized finance lease balances, which are recognized within the 'Current portion of long-term debt and finance leases' line of the condensed consolidated balance sheet.

Adjusted net debt to earnings before interest, taxes, depreciation, amortization, rent, and special items

(in millions)

September 30, 2023

December 31, 2022

Current portion of long-term debt and finance leases

$                                   736

$                                   276

Current portion of operating lease liabilities

150

228

Long-term debt

2,128

1,883

Long-term operating lease liabilities, net of current portion

1,113

1,393

Total adjusted debt

4,127

3,780

Less: Total cash and marketable securities

2,451

2,417

Adjusted net debt

$                               1,676

$                               1,363

(in millions)

Twelve Months Ended

September 30, 2023

Twelve Months Ended

December 31, 2022

GAAP Operating Income(a)

$                                   385

$                                     70

Adjusted for:

Special items

520

580

Mark-to-market fuel hedge adjustments

(2)

76

Depreciation and amortization

435

415

Aircraft rent

230

291

EBITDAR

$                               1,568

$                               1,432

Adjusted net debt to EBITDAR

1.1x

1.0x

(a)

Operating income can be reconciled using the trailing twelve month operating income as filed quarterly with the SEC.