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Alaska Air: Leisure travel is returning; debt reduction eyed in 2021
By Devika Patel
Knoxville, Tenn., April 22 – Alaska Air Group, Inc. plans to use $1 billion to $1.5 billion of its cash on hand to reduce debt, management said Thursday.
“We continue to hold $3.5 billion in on-hand liquidity,” executive vice president of finance and chief financial officer Shane Tackett said on the company’s first quarter ended March 31 earnings conference call on Thursday.
“Given booking trends and our balance sheet health, I anticipate that we will begin reducing our cash balance by retiring debt during the second half of the year, ultimately moving towards on-hand liquidity in the range of $2 billion to $2.5 billion,” Tackett said.
“As we bring capacity and costs back online, we will also prioritize reducing debt levels in the back half of the year,” chief executive officer Ben Minicucci also said on the call.
The company has already been reducing debt. Its adjusted net debt as of April 22 was just under $1.6 billion, down from $1.7 billion at the end of 2019.
The reductions are being funded from Alaska Air’s growing liquidity, which stems from a surge in demand, especially for leisure travel. Sustained future bookings are now at 80% of pre-Covid levels.
“There’s been a strong return of leisure demand,” Minicucci said.
“Today, sustained future bookings are roughly 80% of pre-Covid levels.
“On the strength of these increased bookings and solid cost management against our plan, we posted positive cash flow in March, excluding the impact of the PSP funding.
“Full quarter operating cash flow, inclusive of funds received under the PSP, was positive $167 million,” Minicucci said.
The balance sheet will continue to improve.
“We have a strong balance sheet that should continue to improve throughout the year,” Tackett said.
SeaTac, Wash.-based Alaska Air Group operates Alaska Airlines Inc. and Horizon Air Industries Inc.
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