Shane Tackett
Executive Vice President, Finance & Chief Financial Officer at Alaska Air Group
Thanks, Andrew, and good morning, everyone.
Our $325 million adjusted net profit this quarter reflects both the strong demand backdrop we are experiencing and the strength of Alaska's business model. We are encouraged by the return to operational stability and reliability this quarter, and we are also encouraged by the absence of the extreme COVID-related volatility that had challenged us for more than 2 years. Our results largely landed within previously guided ranges with no major disruptions causing significant and unanticipated revisions, which seems like a small thing, but it's actually quite refreshing. Not only did we deliver a very strong quarter operationally and financially. But as Ben mentioned, we ratified 3 key labor deals as well. Completing these deals is an important step in ensuring we have contracts that recognize the contributions of our people and also allow us to fully focus on running a great operation, taking care of guests and pursuing our growth and financial performance road maps.
I'll briefly walk through highlights of our third quarter performance before discussing costs and labor contracts that are incorporated in our results and our fourth quarter guidance. On the back of the continued strong demand environment, we generated $174 million in cash flow from operations during the third quarter, bringing our year-to-date operating cash flow to $1.4 billion. Total liquidity, inclusive of on-hand cash and undrawn lines of credit remains at a healthy $3.6 billion, providing us 2 times the cash we need to run our business and ample funds to pay for our Boeing aircraft deliveries over the next year.
Our balance sheet remains strong with debt to cap at 49%. Debt payments during the quarter were approximately $100 million and remaining payments for the year are $50 million. And as you know, shareholder restrictions associated with our cares funding also officially rolled off at the end of September. With our strong operational and financial performance and solid balance sheet, we look forward to discussing potential shareholder returns with our Board next month.
Turning to costs, CASMex increased 19.3% in the third quarter versus 2019, 30 basis points above our guidance range. As a reminder, our practice is not to include new contract impacts in our guidance until ratified. Our new labor agreements added $35 million of cost that were not in our original guidance. And excluding these, our CASMex would have been up 16.8%, which would have been below the midpoint of our guidance range.
Other transient cost drivers in the quarter include $30 million associated with issuing each of our employees 90,000 mileage plan miles in recognition of all of their extraordinary work during the pandemic and our 90th anniversary as an airline and approximately $15 million in costs associated with carrying higher staffing complements relative to our flying that we believe will need in the future. These 2 items represent a 3-point impact to CASMex in the quarter. Turning to fourth quarter guidance and our longer-term thinking into 2023, let me begin by saying that our Q4 capacity remains artificially constrained as we focus on transition training our pilots to meet our deadline for retiring Q400s and A320s in January. We'll have both the added cost of these training events and have fewer pilots available to fly in revenue service during the quarter and into the first quarter of next year.
We expect fourth quarter capacity to be down 7% to 10% versus 2019, approximately 2 points sequentially worse versus the third quarter, where we were down 6.7%. We still expect full year capacity to be down 8% to 9% versus 2019. Our absolute costs will increase from the third to fourth quarter, entirely driven by our new labor agreements and expected strong payouts for our performance-based pay program, as we continue to expect to meet a number of our strategic and financial goals, including being amongst the top margin producers for the full year.
We expect CASMex to be up 20% to 23% in the quarter, approximately 4 points of this are structural costs related to our new labor agreements. 2 points are related to anticipated strong PBP program payouts and lower capacity and higher staffing complements or an approximate 4-point headwind during the quarter. Turning to fuel. While oil prices have moderated some over the quarter, they remain elevated and crack spreads continue to be both elevated and volatile. We expect fuel price per gallon to be $3.50 to $3.70 for the fourth quarter.
Our hedging program is expected to provide a significant benefit this year of around $170 million. For the full year, we now expect CASMex to be up 19% to 20%. However, we are reiterating our full year adjusted pretax margin guide of 6% to 9%, and we continue to expect to close the year with a month of the top pretax results industry-wide. Last quarter, we outlined that we were prioritizing securing labor deals and returning to a reliable operation above other considerations as those are foundational to the long-term success and financial performance of the company. They are also the foundation of being able to deliver higher levels of productivity and cost leverage going forward. Having solidified our operational reliability, our focus will now shift to leveraging growth in 2023 to reduce unit costs across Air Group.
While there will be some continued productivity and capacity drag from fleet transitions in the first half of the year, our business plan for next year will include a return to our 2019 size during the first half of 2023 and will also include a reduction in unit costs year-over-year. While we won't share specifics on 2023 guidance until our Q4 call, we are very much looking forward to leveraging the benefits of single fleet at Alaskan Horizon, higher levels of aircraft utilization and the significant benefits of updating from A320s to 737-9s and ultimately, 737-10s. These are all consistent with the road map we shared at Investor Day back in March and along with our commercial road map that is already producing and has further upside from here, I believe we are well positioned for continued improvement in our business in 2023 and beyond.
And with that, let's go to your questions.
