Alaska Airlines’ Cash, Cash Flow, and Liquidity




Alaska Airlines (ALK) had cash and marketable securities worth $1.2 billion at the end of fiscal 2014. The company also had a $200 million line of credit facility. The company’s ratio of cash and marketable securities as a percentage of its annual revenue has decreased from 32% in 2010 to 26% in 2014.

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Cash flows

Alaska Airlines grew its operating cash flows, driven by its growing revenues and earnings. Its operating cash flows grew from $553 million in 2010 to $1 billion in 2014. In 2014, Alaska used $541 million in investing activities, which includes capital expenditures along with the purchase and sale of marketable securities, debt instruments and property, as well as plants and equipment.

Also in 2014, Alaska Airlines spent over $694 million in capital expenditures, which was mostly spent to acquire new aircraft. Alaska Airlines plans to buy 73 B737s by 2022. Alaska spent over $462 million in cash for financing activities. The airline made a debt payment of $119 million, paid dividends of $68 million, and made stock repurchases of $348 million.

In 2013, Alaska made stock repurchases of $159 million, or about 5% of its market cap. In 2012, it made stock repurchases of $60 million, or about 2% of market cap.

Current ratio

The company’s current ratio as of the year ended 2014 was at 1.05, which was higher than any of its peers. This reflects its ability to pay its current liabilities comfortably. American Airlines had a current ratio of 0.9, followed by Southwest Airlines at 0.74, Delta Air Lines at 0.74, and United Continental Holdings at 0.65 for the year ended 2014. However, the current ratio of Alaska Airlines has decreased over the years. For the year ended 2010, the current ratio for Alaska Airlines was 1.17, which decreased to 1.06 for the year ended 2011.

Investors can gain exposure to Alaska Airlines by investing in the iShares Transportation Average ETF (IYT), which holds ~20% in airline stocks and ~6% in Alaska Airlines. The ETF also holds shares of JetBlue Airways (JBLU), Southwest Airlines (LUV) and Delta Air Lines (DAL).


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