Company Quick10K Filing
Quick10K
Alaska Air Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$60.30 124 $7,450
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-08-07 Officers, Regulation FD, Exhibits
8-K 2019-07-25 Earnings, Regulation FD, Exhibits
8-K 2019-07-11 Regulation FD, Exhibits
8-K 2019-06-13 Regulation FD, Exhibits
8-K 2019-05-15 Shareholder Vote
8-K 2019-04-25 Earnings, Regulation FD, Exhibits
8-K 2019-04-11 Regulation FD, Exhibits
8-K 2019-03-14 Regulation FD, Exhibits
8-K 2019-02-13 Regulation FD, Exhibits
8-K 2019-01-24 Earnings, Regulation FD, Exhibits
8-K 2019-01-24 Earnings, Regulation FD, Exhibits
8-K 2019-01-14 Regulation FD, Exhibits
8-K 2018-12-14 Regulation FD, Exhibits
8-K 2018-11-27 Regulation FD, Exhibits
8-K 2018-11-16 Regulation FD, Exhibits
8-K 2018-10-25 Earnings, Regulation FD, Exhibits
8-K 2018-10-12 Regulation FD, Exhibits
8-K 2018-09-17 Regulation FD, Exhibits
8-K 2018-08-14 Regulation FD, Exhibits
8-K 2018-07-26 Earnings, Regulation FD, Exhibits
8-K 2018-07-16 Regulation FD, Exhibits
8-K 2018-06-19 Officers
8-K 2018-06-15 Regulation FD, Exhibits
8-K 2018-05-15 Regulation FD, Exhibits
8-K 2018-05-08 Shareholder Vote, Other Events
8-K 2018-04-23 Earnings, Regulation FD, Exhibits
8-K 2018-04-13 Regulation FD, Exhibits
8-K 2018-03-13 Regulation FD, Exhibits
8-K 2018-01-25 Earnings, Regulation FD, Exhibits
8-K 2018-01-22 Officers, Regulation FD, Exhibits
8-K 2018-01-12 Officers, Regulation FD, Exhibits
8-K 2018-01-04 Officers
GGB Gerdau 6,050
MMSI Merit Medical Systems 3,160
IFRX Inflarx 1,100
PAR Par Technology 392
AFI Armstrong Flooring 304
YRCW YRC Worldwide 197
NM Navios Maritime Holdings 44
MOG Moog 0
PALA Palayan Resources 0
GREAT Greater Cannabis Company 0
ALK 2019-06-30
Part I
Item 1. Condensed Consolidated Financial Statements
Note 1. General and Summary of Significant Accounting Policies
Note 2. Revenue
Note 3. Fair Value Measurements
Note 4. Long-Term Debt
Note 5. Leases
Note 6. Employee Benefit Plans
Note 7. Commitments and Contingencies
Note 8. Shareholders' Equity
Note 9. Operating Segment Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 alk10-q22019ex101.htm
EX-31.1 alk10-q22019ex311.htm
EX-31.2 alk10-q22019ex312.htm
EX-32.1 alk10-q22019ex321.htm
EX-32.2 alk10-q22019ex322.htm

Alaska Air Group Earnings 2019-06-30

ALK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019
 
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from                      to                      

Commission File Number 1-8957
ALASKA AIR GROUP, INC.
 
Delaware
 
91-1292054
(State of Incorporation)
 
(I.R.S. Employer Identification No.)

Title of each class
Name of each exchange on which registered
Ticker Symbol
Common stock, $0.01 par value
New York Stock Exchange
ALK
 
19300 International Boulevard,
Seattle,
WA
98188
 
Telephone:
(206)
392-5040
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer  
Non-accelerated filer   
(Do not check if a smaller reporting company)
Smaller reporting company  
Emerging growth company  

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes  No
 
The registrant has 123,272,253 common shares, par value $0.01, outstanding at July 31, 2019.

This document is also available on our website at http://investor.alaskaair.com.




ALASKA AIR GROUP, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2019

 TABLE OF CONTENTS

 

As used in this Form 10-Q, the terms “Air Group,” the “Company,” “our,” “we” and "us" refer to Alaska Air Group, Inc. and its subsidiaries, unless the context indicates otherwise. Alaska Airlines, Inc., Virgin America Inc. (through July 20, 2018, at which point it was legally merged into Alaska Airlines, Inc), and Horizon Air Industries, Inc. are referred to as “Alaska,” “Virgin America” and “Horizon” and together as our “airlines.”
 

2



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
Cautionary Note Regarding Forward-Looking Statements
In addition to historical information, this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words "believe," "expect," "will," "anticipate," "intend," "estimate," "project," "assume" or other similar expressions, although not all forward-looking statements contain these identifying words. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or the Company’s present expectations. Some of the things that could cause actual results to differ from our expectations are:

the competitive environment in our industry;
changes in our operating costs, including fuel, which can be volatile;
our ability to meet our cost reduction goals;
our ability to achieve anticipated synergies and timing thereof in connection with our acquisition of Virgin America;
our ability to successfully integrate the Boeing and Airbus operations;
labor disputes and our ability to attract and retain qualified personnel;
operational disruptions;
general economic conditions, including the impact of those conditions on customer travel behavior;
the concentration of our revenue from a few key markets;
an aircraft accident or incident;
actual or threatened terrorist attacks, global instability and potential U.S. military actions or activities;
our reliance on automated systems and the risks associated with changes made to those systems;
changes in laws and regulations.

You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this report was filed with the SEC. We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and materially adverse to our shareholders. For a discussion of these and other risk factors, see Item 1A. "Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2018, and Item 1A. "Risk Factors" included herein. Please consider our forward-looking statements in light of those risks as you read this report.


3



PART I
 
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
ALASKA AIR GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions)
June 30, 2019
 
December 31, 2018
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
244

 
$
105

Marketable securities
1,383

 
1,131

Total cash and marketable securities
1,627

 
1,236

Receivables—net
389

 
366

Inventories and supplies—net
55

 
60

Prepaid expenses and other current assets
147

 
125

Total Current Assets
2,218

 
1,787

 
 
 
 
Property and Equipment
 

 
 

Aircraft and other flight equipment
8,417

 
8,221

Other property and equipment
1,238

 
1,363

Deposits for future flight equipment
396

 
439

 
10,051

 
10,023

Less accumulated depreciation and amortization
3,307

 
3,242

Total Property and Equipment - Net
6,744

 
6,781

 
 
 
 
Operating lease assets
1,696

 

Goodwill
1,943

 
1,943

Intangible assets - net
125

 
127

Other noncurrent assets
225

 
274

Other Assets
3,989

 
2,344

 
 
 
 
Total Assets
$
12,951

 
$
10,912




4



CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions, except share amounts)
June 30, 2019
 
December 31, 2018
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
156

 
$
132

Accrued wages, vacation and payroll taxes
371

 
415

Air traffic liability
1,173

 
788

Other accrued liabilities
505

 
416

Deferred revenue
768

 
705

Current portion of operating lease liabilities
273

 

Current portion of long-term debt
288

 
486

Total Current Liabilities
3,534

 
2,942

 
 
 
 
Long-Term Debt, Net of Current Portion
1,538

 
1,617

 
 
 
 
Noncurrent Liabilities
 

 
 

Long-term operating lease liabilities, net of current portion
1,424

 

Deferred income taxes
582

 
512

Deferred revenue
1,181

 
1,169

Obligation for pension and postretirement medical benefits
522

 
503

Other liabilities
197

 
418

 
3,906

 
2,602

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: 2019 - 131,365,855 shares; 2018 - 130,813,476 shares, Outstanding: 2019 - 123,338,144 shares; 2018 - 123,194,430 shares
1

 
1

Capital in excess of par value
270

 
232

Treasury stock (common), at cost: 2019 - 8,027,711 shares; 2018 - 7,619,046 shares
(593
)
 
(568
)
Accumulated other comprehensive loss
(422
)
 
(448
)
Retained earnings
4,717

 
4,534

 
3,973

 
3,751

Total Liabilities and Shareholders' Equity
$
12,951

 
$
10,912



5



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in millions, except per share amounts)
2019
 
2018
 
2019
 
2018
Operating Revenues
 
 
 
 
 
 
 
Passenger revenue
$
2,111

 
$
1,997

 
3,827

 
3,681

Mileage Plan other revenue
118

 
108

 
228

 
215

Cargo and other
59

 
51

 
109

 
92

Total Operating Revenues
2,288

 
2,156

 
4,164

 
3,988

Operating Expenses
 
 
 
 
 

 
 

Wages and benefits
567

 
544

 
1,124

 
1,080

Variable incentive pay
44

 
38

 
79

 
77

Aircraft fuel, including hedging gains and losses
502

 
475

 
922

 
884

Aircraft maintenance
115

 
106

 
235

 
213

Aircraft rent
82

 
77

 
165

 
151

Landing fees and other rentals
113

 
110

 
245

 
236

Contracted services
70

 
76

 
142

 
157

Selling expenses
87

 
88

 
159

 
166

Depreciation and amortization
105

 
97

 
211

 
191

Food and beverage service
53

 
55

 
102

 
105

Third-party regional carrier expense
42

 
39

 
83

 
76

Other
136

 
141

 
274

 
282

Special items - merger-related costs
8

 
39

 
34

 
45

Special items - other

 

 

 
25

Total Operating Expenses
1,924

 
1,885

 
3,775

 
3,688

Operating Income
364

 
271

 
389

 
300

Nonoperating Income (Expense)
 
 
 
 
 

 
 

Interest income
11

 
10

 
20

 
18

Interest expense
(20
)
 
(25
)
 
(42
)
 
(49
)
Interest capitalized
3

 
4

 
7

 
9

Other—net
(7
)
 
(1
)
 
(17
)
 
(13
)
Total Nonoperating Income (Expense)
(13
)
 
(12
)
 
(32
)
 
(35
)
Income Before Income Tax
351

 
259

 
357

 
265

Income tax expense
89

 
66

 
91

 
68

Net Income
$
262

 
$
193

 
$
266

 
$
197

 
 
 
 
 
 
 
 
Basic Earnings Per Share:
$
2.12

 
$
1.57

 
$
2.15

 
$
1.60

Diluted Earnings Per Share:
$
2.11

 
$
1.56

 
$
2.14

 
$
1.59

Shares used for computation:
 
 
 
 
 
 
 

Basic
123.418

 
123.268

 
123.355

 
123.212

Diluted
124.301

 
124.036

 
124.179

 
123.953



6



CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS (unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in millions)
2019
 
2018
 
2019
 
2018
Net Income
$
262

 
$
193

 
$
266

 
$
197

 
 
 
 
 
 
 
 
Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Related to marketable securities:
 
 
 
 
 
 
 
Unrealized holding gain (loss) arising during the period
13

 
(4
)
 
27

 
(17
)
Reclassification of (gain) loss into Other - net nonoperating income (expense)

 
1

 
2

 
3

Income tax effect
(3
)
 

 
(7
)
 
3

Total
10

 
(3
)
 
22

 
(11
)
 
 
 
 
 
 
 
 
Related to employee benefit plans:
 
 
 
 
 
 
 
Reclassification of net pension expense into Wages and benefits and Other - net nonoperating income (expense)
8

 
7

 
16

 
14

Income tax effect
(2
)
 
(1
)
 
(4
)
 
(3
)
Total
6

 
6

 
12

 
11

 
 
 
 
 
 
 
 
Related to interest rate derivative instruments:
 
 
 
 
 
 
 
Unrealized holding gain (loss) arising during the period
(7
)
 
2

 
(12
)
 
8

Reclassification of (gain) loss into Aircraft rent

 

 
1

 
1

Income tax effect
2

 

 
3

 
(2
)
Total
(5
)
 
2

 
(8
)
 
7

 
 
 
 
 
 
 
 
Other Comprehensive Income
11

 
5

 
26

 
7

 
 
 
 
 
 
 
 
Comprehensive Income
$
273

 
$
198

 
$
292

 
$
204






7



CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)
(in millions)
Common Stock Outstanding
 
Common Stock
 
Capital in Excess of Par Value
 
Treasury Stock
 
Accumulated Other Comprehensive Income (Loss)
 
Retained Earnings
 
Total
Balances at December 31, 2018
123.194

 
$
1

 
$
232

 
$
(568
)
 
$
(448
)
 
$
4,534

 
$
3,751

Cumulative effect of accounting changes(a)

 

 

 

 

 
3

 
3

Net income

 

 

 

 

 
4

 
4

Other comprehensive income (loss)

 

 

 

 
15

 

 
15

Common stock repurchase
(0.215
)
 

 

 
(13
)
 

 

 
(13
)
Stock-based compensation

 

 
12

 

 

 

 
12

Cash dividend declared
($0.35 per share)

 

 

 

 

 
(43
)
 
(43
)
Stock issued for employee stock purchase plan
0.391

 

 
20

 

 

 
.
 
20

Stock issued under stock plans
0.134

 

 
(3
)
 

 

 

 
(3
)
Balances at March 31, 2019
123.504

 
$
1

 
$
261

 
$
(581
)
 
$
(433
)
 
$
4,498

 
$
3,746

Net income

 

 

 

 

 
262

 
262

Other comprehensive income (loss)

 

 

 

 
11

 

 
11

Common stock repurchase
(0.194
)
 

 

 
(12
)
 

 

 
(12
)
Stock-based compensation

 

 
9

 

 

 

 
9

Cash dividend declared
($0.35 per share)

 

 

 

 

 
(43
)
 
(43
)
Stock issued under stock plans
0.028

 

 

 

 

 

 

Balances at June 30, 2019
123.338

 
$
1

 
$
270

 
$
(593
)
 
$
(422
)
 
$
4,717

 
$
3,973


(a)
Represents the opening balance sheet adjustment recorded as a result of the adoption of the new lease accounting standard.

























8



CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)

(in millions)
Common Stock Outstanding
 
Common Stock
 
Capital in Excess of Par Value
 
Treasury Stock
 
Accumulated Other Comprehensive Income (Loss)
 
Retained Earnings
 
Total
Balances at December 31, 2017
123.061

 
$
1

 
$
164

 
$
(518
)
 
$
(380
)
 
$
4,193

 
$
3,460

Reclassification of tax effects to Retained Earnings

 

 

 

 
(62
)
 
62

 

Net income

 

 

 

 

 
4

 
4

Other comprehensive income (loss)

 

 

 

 
2

 

 
2

Common stock repurchase
(0.186
)
 

 

 
(13
)
 

 

 
(13
)
Stock-based compensation

 

 
12

 

 

 

 
12

Cash dividend declared
($0.32 per share)

 

 

 

 

 
(40
)
 
(40
)
Stock issued for employee stock purchase plan
0.312

 

 
17

 

 

 

 
17

Stock issued under stock plans
0.163

 

 
(3
)
 

 

 

 
(3
)
Balances at March 31, 2018
123.350

 
$
1

 
$
190

 
$
(531
)
 
$
(440
)
 
$
4,219

 
$
3,439

Net income

 

 

 

 

 
193

 
193

Other comprehensive income (loss)

 

 

 

 
5

 

 
5

Common stock repurchase
(0.204
)
 

 

 
(13
)
 

 

 
(13
)
Stock-based compensation

 

 
9

 

 

 

 
9

Cash dividend declared
($0.32 per share)

 

 

 

 

 
(39
)
 
(39
)
Stock issued under stock plans
0.058

 

 
(1
)
 

 

 

 
(1
)
Balances at June 30, 2018
123.204

 
$
1

 
$
198

 
$
(544
)
 
$
(435
)
 
$
4,373

 
$
3,593


























9



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
Six Months Ended June 30,
(in millions)
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
266

 
$
197

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
211

 
191

Stock-based compensation and other
16

 
17

Changes in certain assets and liabilities:
 
 
 
Changes in deferred tax provision
62

 
67

Increase in air traffic liability
385

 
306

Increase in deferred revenue
75

 
52

Other—net
18

 
(104
)
Net cash provided by operating activities
1,033

 
726

Cash flows from investing activities:
 

 
 

Property and equipment additions:
 

 
 

Aircraft and aircraft purchase deposits
(172
)
 
(271
)
Other flight equipment
(83
)
 
(56
)
Other property and equipment
(78
)
 
(96
)
Total property and equipment additions, including capitalized interest
(333
)
 
(423
)
Purchases of marketable securities
(885
)
 
(529
)
Sales and maturities of marketable securities
663

 
474

Other investing activities
25

 
10

Net cash used in investing activities
(530
)
 
(468
)
Cash flows from financing activities:
 

 
 

Proceeds from issuance of debt
254

 

Long-term debt payments
(532
)
 
(258
)
Common stock repurchases
(25
)
 
(25
)
Dividends paid
(86
)
 
(79
)
Other financing activities
26

 
15

Net cash used in financing activities
(363
)
 
(347
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
140

 
(89
)
Cash, cash equivalents, and restricted cash at beginning of year
114

 
197

Cash, cash equivalents, and restricted cash at end of the period
$
254

 
$
108

 
 
 
 
Cash paid during the period for:
 
 
 
Interest (net of amount capitalized)
$
34

 
$
39

Income taxes

 

 
 
 
 
Reconciliation of cash, cash equivalents, and restricted cash at end of the period
 
 
 
Cash and cash equivalents
$
244

 
$
102

Restricted cash included in Prepaid expenses and other current assets
10

 
6

Total cash, cash equivalents, and restricted cash at end of the period
$
254

 
$
108



10



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation
 
The condensed consolidated financial statements include the accounts of Air Group, or the Company, and its primary subsidiaries, Alaska (including Virgin America in 2018) and Horizon. The condensed consolidated financial statements also include McGee Air Services, a ground services subsidiary of Alaska. The Company conducts substantially all of its operations through these subsidiaries. All significant intercompany balances and transactions have been eliminated. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. It should be read in conjunction with the consolidated financial statements and accompanying notes in the Form 10-K for the year ended December 31, 2018. In the opinion of management, all adjustments have been made that are necessary to fairly present the Company’s financial position as of June 30, 2019 and the results of operations for the three and six months ended June 30, 2019 and 2018. Such adjustments were of a normal recurring nature.

Certain reclassifications and rounding adjustments have been made to prior year financial statements to conform to classifications used in the current year.

In preparing these statements, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities, as well as the reported amounts of revenues and expenses. Due to seasonal variations in the demand for air travel, the volatility of aircraft fuel prices, changes in global economic conditions, changes in the competitive environment and other factors, operating results for the three and six months ended June 30, 2019 are not necessarily indicative of operating results for the entire year.

NOTE 2. REVENUE

Ticket revenue is recorded as Passenger revenue, and represents the primary source of the Company's revenue. Also included in Passenger revenue are passenger ancillary revenues, such as bag fees, on-board food and beverage, ticket change fees, and certain revenue from the frequent flyer program. Mileage Plan other revenue includes brand and marketing revenue from our co-branded credit card and other partners and certain interline frequent flyer revenue, net of commissions. Cargo and other revenue includes freight and mail revenue, and to a lesser extent, other ancillary revenue products such as lounge membership and certain commissions.

The Company disaggregates revenue by segment in Note 9. The details within the Company’s statements of operations, segment disclosures, and in this footnote depict the nature, amount, timing and uncertainty of revenue and how cash flows are affected by economic and other factors.

Passenger Ticket and Ancillary Services Revenue

Passenger revenue recognized in the condensed consolidated statements of operations (in millions):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Passenger ticket revenue, including ticket breakage and net of taxes and fees
$
1,792

 
$
1,693

 
$
3,231

 
$
3,121

Passenger ancillary revenue
147

 
137

 
271

 
254

Mileage Plan passenger revenue
172

 
167

 
325

 
306

Total Passenger revenue
$
2,111

 
$
1,997

 
$
3,827

 
$
3,681




11



Mileage Plan™ Loyalty Program

Mileage Plan™ revenue included in the condensed consolidated statements of operations (in millions):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Passenger revenue
$
172

 
$
167

 
$
325

 
$
306

Mileage Plan other revenue
118

 
108

 
228

 
215

Total Mileage Plan revenue
$
290

 
$
275

 
$
553

 
$
521



Cargo and Other

Cargo and other revenue included in the condensed consolidated statements of operations (in millions):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Cargo revenue
$
38

 
$
34

 
$
68

 
$
60

Other revenue
21

 
17

 
41

 
32

Total Cargo and other revenue
$
59

 
$
51

 
$
109

 
$
92



Air Traffic Liability and Deferred Revenue

Passenger ticket and ancillary services liabilities

The Company recognized Passenger revenue of $89 million and $79 million from the prior year-end air traffic liability balance for the three months ended June 30, 2019 and 2018, and $563 million and $513 million for the six months ended June 30, 2019 and 2018.

Mileage PlanTM liabilities

The Company records a receivable for amounts due from the bank partner and from other partners as mileage credits are sold until the payments are collected. The Company had $