From Aviation Week:

Alaska Air Group intends to use its strong cash position to pay down long-term debt and repurchase shares, the carrier says.

The carrier expects to have a higher cash-to-revenue ratio than any of the U.S. major carriers in the first quarter, CEO William Ayer said June 15 at the Bank of America Merrill Lynch Global Transportation Conference. Alaska’s available cash is equivalent to 34% of its revenue in the past 12 months. While this has been extremely useful during the industry’s most volatile times, the carrier now “plans to lighten [its cash position] just a bit,” Ayer said.

If Alaska reduced its cash ratio to around 25-30% of annual revenue, “we would still have a lot of cash, but this would give us as much as $350 million we could put to work,” Ayer said. The airline’s board has approved a share repurchasing program to buy back up to $50 million of its common stock. In addition, the carrier will pre-pay long-term debt obligations over the next 18 months.

As of May 31, Alaska Air Group had $1.2 billion in cash and marketable securities. Ayer described Alaska’s strong balance sheet as the “key foundation” that gives it the “flexibility to work on everything else.”

On the question of mergers, Ayer said Alaska believes it is better off remaining independent. It assesses its options based on what offers the best return for shareholders, and at the moment its current business model provides that. If this wasn’t the case, the airline would at least go out and evaluate merger alternatives, Ayer said. “But for right now, we think we are on the right track, and [our plan] is the best way to take care of shareholders.”

Alaska’s mainline passenger unit revenue was up 13.3% year-on-year in May, and its load factor rose 4.6 points to 81.4%. Advance booked load factor is up four points year-on-year for June travel, two points for July, and is flat for August.
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Wow. Nice to know Alaska has enough money in the bank to "lighten the cash load" by buying stock (the senior officers are among the largest individual stock holders!) and "putting the money to work."

How about if they recall the furloughed 94 so they wouldn't have to keep shifting SEA trips to the PDX base due to lack of adequate reserve coverage?

 

Fish, if I didn't know you better, I would say the title alone is flamebait and worthy of an infraction!

Regarding all the accounting mumbo jumbo, I just wanna know what it's going to do for me as a shareholder. Will the stock price go up significantly? Get a dividend?

 

Of course it will. Especially if you want to sell your shares back to Alaska. The interesting comment is when Mr. Ayer said they would consider a merger if it was in the interest of the shareholders.

At this point, Alaska stock is way up there. So, you as an individual shareholder would probably NOT get a premium for your shares. That said, you would probably gain in a stock swap merger deal. Let's imagine the partner is Delta. You might realize a 3 or 4 for one share swap. In the long run, if the merged carrier does well, you would profit enormously.

I believe that the boys at Angle Lake very well could sell Alaska out of the Air Group. They would personally and corporately make a lot of money. They could use the resulting funds to acquire 100 seat E-190s for Horizon.

The benefits?

1. Historically when a trunk carrier buys a West Coast airline, they "promise" to continue serving the West Coast. But history tells us a different story. American did it with Air Cal and Reno Air. USAir did it with PSA. Delta did it with Western. They operated for a short time, but eventually diverted the assets into their East/West operation. That's how Alaska managed to enter the West Coast market and eventually dominate it.

2. Given that history, the Angle Lakers KNOW their history. Sell Alaska to the highest bidder (DAL or SWA) then get some E-190/195s and rebuild the system using Horizon. After all, the Horizon contract was just settled without the Horizon pilots taking big pay cuts.

3. Horizon? The current pay structure, especially the jet pay rates, don't make sense for a CRJ-70. However, that pay rate is VERY competitive if the QX guys were flying a 100 or 110 seat jet.

Call me a conspiracy theorist, but I see something coming down the pike. I'd prefer to end my career as an SWA pilot, but DAL narrowbodies are fine with me too.

 

After you guys buy Delta will you staple them or go date of hire?
fbh

 

Well, theres NO WAY it would be DoH. That isn't a component of the ALPA merger/frag policy. I imagine it would be some sort of ratio deal with the DAL guys insisting on widebody fences.

 

Fence anything larger than a 737.

 

Buying back 50M worth of stock now @ $ 50+ per share would be the last thing they would be doing if they were going to sell the airline or buy one. Just a place to dispose of cash when the big whirlpool gets plugged from dumping too much cash and there is no place else to put it.

 

Fishfreighter,

I think you are trying to make something out of nothing. As quoted in your OP, he said that if we weren't making a good return on investment then he would have to consider a merger possibility. However, the ROIC is increasing, using cash to pay down debt is a way to increase your ROIC by decreasing your debt payments. Capital spending is decreasing, productivity is increasing and share values are increasing. Things are going very well. There is no reason to even consider a merger.

Your bolding of selective parts of a sentence is called taking things out of context. I listened to the conference where those quotes were taken from, and you are making it much more ominous than it really was.

 

While I have no crystal ball, FAR TOO MUCH is being read into AK buying back shares. This is NOT what management would be doing if they were planning on selling the company. By repurchasing outstanding shares, AK is increasing the value of remaining shares outstanding. Nothing more than that!

 

This merger will happen eventually. Wait until the dust starts to settle with UAL/CAL. Watch carefully how the words that come out of Ayers mouth slowly change, eventually morphing into "it makes sense for our company and our people and the people of the great NW to consider the benefits of combining with another airline to forge further into the international arena."