Shane Tackett
Executive Vice President Finance and Chief Financial Officer at Alaska Air Group
Thanks Andrew and good morning everyone. As you know, we finished the year with a successful investor day in December where we had the chance to speak to the future we are focused on creating at Air Group. And while we are in the early stages of building toward the vision, the strength of our fourth quarter results are a fantastic way to get started on that Future.
And while 2024 dealt us a tough start with the fleet grounding negatively impacting our Results by approximately $200 million, we closed the year strong and absent the impact of the grounding legacy, Alaska posted the industry's best adjusted pre tax margin. This result speaks to the strength and resilience of our company, our people and our business model. December closed particularly well for both Alaska and Hawaii.
In fact, Hawaiian posted its best absolute adjusted pre tax profit and margin in the month of December. We are now focused on our Alaska Accelerate plan, building on our fundamental strengths, safety and operational excellence, cost discipline and balance sheet strength, as well as building a strong commercial pillar that we believe is required for longer term success in this industry. In particular, we will be focused on building scale, relevance and loyalty across our network.
We are highly confident in our plan and our ability to execute and already are putting into action initiatives that will enable us to deliver on our financial targets. Turning to fourth quarter results, our adjusted earnings per share were $0.97, approximately $0.50
Above our guided midpoint. $0.25 of the EPS outperformance is directly attributable to the strength of our core business.
We also benefited from a renegotiation of certain interest payments and from a true up of our tax liability for the year. For the full year we reported earnings per share of $4.87 similarly above our previously guided range with an adjusted pre tax margin of 7.1%
Which was driven by continued underlying strength in the legacy Alaska business model and an improving trajectory of Hawaiian. Our total liquidity inclusive of on hand cash and undrawn lines of credit stood at $3.4 billion at year end.
Scheduled debt repayments for the quarter were approximately $65 million and are expected to be approximately $155 million in the first quarter. In October we raised $2 billion in the capital markets, borrowing against our valuable mileage plan program and achieving amongst the tightest spreads compared to similar debt issued previously by industry peers. In Q4 we used those new funds to repay $1.6
Billion of higher rate debt acquired from Hawaiian. Together with the renegotiation of interest payments, our debt raise and prepayment activity have improved the interest expense profile of the combined business. In 2025 we expect non operating expense to be about $40 million per quarter.
To end the year our debt to cap stood at 58% with our net debt to EBITDAR at 2.4 times. As we outlined last month, we expect to return to our long term target of less than 1 1/2 times leverage in 2026.
As Ben discussed in his remarks, we also repurchased $312 million of ALK stock in 2024. As we remain confident in our outlook and the value we're poised to drive for the business over the next few years. With these purchases we more than offset dilution and reduced our outstanding share count to 123 million shares resulting in a share count now on par with 2019 levels.
We have begun executing our new $1 billion share repurchase program in earnest in January which we intend to fully consume within the next four years. Our ultimate repurchase pace will be dependent on the margin profile and cash flow of the business over that time. Fourth quarter unit costs were up 8.6%
Year over year coming in slightly better than guidance. Despite higher performance based pay accruals normalizing for bonus pay, our core unit costs would have been two points lower. The teams across Alaska, Hawaiian and Horizon did a great job managing costs all the way through the end of the year.
For the full year, legacy Alaska unit costs ended up approximately 7% year over year despite the grounding and Boeing strike that reduced planned capacity materially and drove an approximate 2 point full year impact to CASM X. Turning to our outlook, while we've moved away from granular unit metric guidance, there are a few specifics to keep in mind. For 2025, our full year capacity growth of 2 to 3% assumes we will receive approximately 14737 Max aircraft and 3787 aircraft from Boeing this year.
We expect flat growth across our Alaska assets given assumed delivery timing and retirement of our oldest 737900 aircraft and expect a material increase in Hawaiian asset utilization, particularly within the A321 fleet. We expect first quarter capacity to be up 2.5 to 3.5%
Year over year. We expect unit costs to be up low to mid single digits in Q1 with greater improvement in the back half of the year. As productivity improves, synergy capture begins to ramp materially and we lap the extremely low growth rate for the second half of 2024.
A notable cost item for the year we expect will be the pending new contract we reached initial agreement on with our Alaska flight attendant. While it will be several more weeks before we learn if flight attendants approve the deal, the costs for the new agreement are assumed to be effective beginning January 1st and would represent approximately 1.5 points of unit cost pressure for the year.
For first quarter earnings we expect a loss per share of $0.50 to $0.70. This seasonality is, as you know, normal for Alaska, however, represents our expectation of a material improvement on a year over year basis.
While we will increasingly focus our commentary on combined results, I will note on today's call that our legacy Alaska assets are expected to break even in Q1, consistent with the goal we set for ourselves two years ago, and our Hawaiian Airlines assets are expected to improve by over $50 million in the first quarter compared to 2024. To summarize our guidance, in the first quarter we expect capacity to be up 2.5 to 3.5%,
RASM to be up high single digits, CASM X to be up low to mid single digits and a loss per share of 50 to 70 cents for the full year we still expect to deliver EPS of more than $5.75 on capacity growth of 2 to 3%. We also expect 1.4 to $1.5 billion of capex and to generate positive free cash flow. This year we've closed another strong year and have entered 2025 with more momentum and confidence than we felt in a long time.
We have a playbook to win in the industry in the years to come, including significant profit unlocked from synergies and initiatives which we have already begun executing on. And all of this is against a constructive industry backdrop. With many airlines increasingly focused on returning to threshold margin performance and guests who are increasingly loyal to airlines that can deliver better and more premium experiences end to end, we have a clear strategy of where we want to go and we're looking forward to delivering on our future vision from here forward.
And with that, let's go to your questions.
