Alaska Air Group on Thursday reported a third-quarter net loss of $431 million, or $3.49 per share.
A year ago, the Seattle-based parent company of Alaska Airlines and regional subsidiary Horizon Air made a profit of $322 million or $2.60 per share in the third quarter.
The loss was higher than in the previous three months — the second quarter net loss was $214 million or $1.73 per share — due mainly to $440 million in restructuring charges and one-time write-offs.
"We are gaining momentum as we climb our way out of this crisis," said Alaska Air CEO Brad Tilden. "Each of the last six months has been better than the month before in terms of flights offered and passengers carried."
Despite a partial recovery from impact of the coronavirus pandemic, domestic air travel remains less than half the level of a year ago, and U.S. airlines are bleeding money.
Alaska's revenue from passengers during the quarter was down 74% year-on-year.
In September, Alaska Air's total revenue was down 66% compared to last year.
The number of passengers flown last month was 68% lower than September 2019 and the airline's active fleet capacity was half of what it was a year earlier. Even so, planes were flying on average only 47% full.
Huge airline industry losses
All the major U.S. airlines are seeing huge losses.
American Airlines on Thursday reported a quarterly loss of $2.4 billion, with passenger revenue down 92% year-over-year.
Southwest lost $1.2 billion, with passenger revenue down 72% year-over-year.
Delta Air Lines, Alaska's biggest rival at Sea-Tac airport, last week reported a massive net loss of $5.4 billion, with passenger revenue down 83% year-over-year.
And United Airlines reported last week a net loss of $1.8 billion, with passenger revenue down 84% year-over-year.
Alaska's $431 million net quarterly loss was reduced by an injection of $398 million in government cash from the Payroll Support Program (PSP).
At the same time, the loss was increased by two factors:
A one-time accounting write-off of $121 million for the early retirement of 10 Airbus A320 aircraft inherited from the 2016 acquisition of Virgin America.
A $322 million charge for restructuring related to layoffs.
Burning through $4 million a day
During the quarter, excluding the impact of Coronavirus Aid, Relief, and Economic Security Act (CARES Act) funds and loans, Alaska consumed $399 million in cash or an average of $4 million per day — meaning it spent that much more than it took in.
After the pandemic paralyzed the airline system, Alaska took steps to slow this "cash burn" by parking planes and reducing employment mainly through voluntary furloughs. In May, CEO Tilden set a goal of reaching zero cash burn by year's end.
Alaska progressed steadily toward that goal through June when its cash burn hit $4 million a day, down from $5.5 million a day in May. Thursday's results suggest the rate of cash burn has flattened.
With the expiration of the government's Payroll Support Program at the end of September, layoffs have begun throughout the airline industry.
Alaska has so far avoided mass layoffs because 720 employees volunteered for early outs or early retirements, and another 4,468 took voluntary leave.
That has reduced layoffs at Alaska to just over 300 people, not counting more than 200 flight attendants who were laid off for just a month and will return to work in November.
Increased U.S. government support
Last month, the U.S. government finalized its loan agreement with Alaska under the CARES Act increasing the available loan amount to $1.9 billion.
At the end of September, the company had $3.7 billion in cash on hand, with available government loans increasing its liquidity to $5.5 billion.
Separately on Thursday, Alaska announced an agreement with Microsoft in which the software giant commits to purchase sustainable aviation fuel to cover its employee business travel on flights from Seattle to San Francisco, San Jose and Los Angeles.
The sustainable fuel is typically blended with regular fuel. The fuel for the Microsoft agreement, produced mostly in California from renewable materials such as used cooking oil, will be provided by Dutch company SkyNRG.
This amounts to a subsidy by Microsoft of sustainable fuels, which remain two to three times more expensive than regular jet fuel.
