Shane Tackett
Executive Vice President Finance and Chief Financial Officer, Alaska Air Group at Alaska Air Group
Thanks, Andrew, and good morning, everyone. I'll start, as I always do, with an update on cash flow, liquidity and our balance sheet. We ended the year with $3.5 billion in total liquidity, inclusive of on-hand cash and undrawn lines of credit, which is essentially unchanged from Q3 and reflects $112 million in debt repayments during the quarter. Our Q4 cash flow from operations was $129 million, above our previous guidance, largely driven by stronger demand recovery than anticipated, given we were dealing with the now old news Delta variant as we came into the quarter.
Our balance sheet remains a bright spot in point of differentiation within the industry. This year, our debt-to-cap fell to 49%, 12 points below year-end 2020, placing us within our stated target range, and as Ben said, essentially back to our pre-COVID balance sheet strength. In fact, in a period marked by increasing debt across the industry, our adjusted net debt ended the year 40% lower than 2019. We're pleased to have received a credit upgrade in late December as well, moving us one step closer to an investment-grade rating. The weighted average effective rate of our outstanding debt is 3.3% and our debt service is entirely manageable going forward. Contractual debt repayments in 2022 are about $370 million, with $170 million in Q1. Given the low cost nature of our debt, we don't plan to make any significant prepayments during 2022.
Rounding out the strength of our balance sheet, our pension plans ended the year at 98% funded, the highest level we've achieved since 2013. Our strong balance sheet and ample liquidity put us in a terrific position to pay cash for the 32 737-9 aircraft deliveries we have in 2022. We feel very comfortable with our liquidity position, especially given our belief that we are back to annual profitability and consistent annual positive cash flow generation. By the end of 2022, I expect our total liquidity will step down to around $2.5 billion and our net debt-to-EBITDA to settle around 2 times or less.
Turning to the P&L, our 2.4% pre-tax profit was a solid outcome, given the circumstances in the quarter. Andrew spoke to the revenue results, and I'll dive into our costs. Our non-fuel costs were $1.4 billion in the fourth quarter, inclusive of approximately $25 million of unexpected costs from the December disruption. This was driven by approximately $18 million for overtime and wage premiums as we worked to stabilize the operation from staffing disruption and $7 million incurred for passenger remuneration, EIC and other related costs. Typical bad weather event for Alaska might last a couple of days and impact a single hub. The December event lasted an entire week, impacted both Seattle and Portland, and was exacerbated by the start of a surge in Omicron-related staffing shortages. In short, a literal perfect storm. As Andrew indicated, the revenue impact of our cancellations was $45 million. And given the $25 million in incremental costs, this event alone raised $70 million of profit from the December month and quarter.
The combination of lower ASM production and higher costs, resulted in our CASMex being up 12% versus 2019, outside the high end of our range. Absent the disruption, our cost results would have been in line with our guide. Looking ahead on costs, our commitment to returning to 2019 CASMex levels remains unchanged. We know we've got our work cut out for us. Our business model thrives on predictability and execution. And it is obvious that COVID has inserted a level of volatility into our industry that makes managing a high fixed cost business more difficult. 2022 will start off very challenged, but we fully expect it to sequentially improve materially as the year progresses. For the first quarter, Q1 CASMex is expected to be up 15% to 18% and capacity down 10% to 13% versus 2019. 7 points of this is purely driven by our late pull down of first quarter capacity. While the reduction will help ensure our ability to operate the flights we sell, given Omicron's impact on staffing, and is a hedge against lower closing demand, reality is we cannot pull out most cost this closer. Absent the capacity pull down, our unit cost guide would have been up 8% to 11%.
In addition, our costs in Q1 include two items contributing another 3.5 points of pressure that are worth detailing. First, approximately 2.5 points of our Q1 unit cost increase is related to lease return expenses for our Airbus aircraft. As previously noted, given the speed with which we plan to return to a single fleet, we will be incurring significant costs associated with returning these leased Airbus aircraft, primarily over the next two years. I currently expect the total lease return expense to be between $200 million and $275 million in total, with more than half of that being recorded this year. These transitory return costs begin in earnest in the first quarter of 2022, will peak by Q4 of this year and will then taper through 2023 as the last A320 leaves the fleet. So, while a headwind right now, it will become a tailwind to our cost structure in the next eight quarters, which will be further helped as we replace the 150-seat Airbus with the 178-seat more cost-efficient Boeing 737-9 aircraft.
Second, approximately 1 point of our expected Q1 unit costs are being driven by incremental training costs and wages of newly hired employees as we prepare to recover to pre-COVID capacity by the summer. To move from 80% to 85% of pre-COVID flying to 100% and then beyond, we must staff up early, given the throughput capacity of our hiring and training infrastructure. We expect fuel prices to be between $2.45 and $2.50 per gallon in Q1, also increased from the last quarter. Despite this quarter's cost guide, largely driven by the late pull down of capacity that I noted, we expect significant sequential improvement in unit costs as we recover capacity throughout the year. We expect full year 2022 unit costs inclusive of lease return expense to be up 3% to 6%, and on an ex-lease return basis, to be up 1% to 3%. This estimate implies returning to our pre-COVID cost structure during the second half of the year.
This entire pandemic and our recovery has been obviously unpredictable, but I'm excited about what lies ahead for Alaska. I truly believe we've set up our business to deliver superb results as demand fully stabilizes. With continued focus on our cost initiatives, fleet transition and our commercial opportunities, we have valuable levers that set us up for a great next couple of years.
And with that, let's go to your questions.