Alaska Air Group, Inc. · NYSE:ALK
Alaska Air — JPMorgan Aviation and Transportation Conference (March 2008)
16 slides from Alaska Air's conference presentation, Mar 25, 2008
Slide 1: The industry problem: Jet fuel increases are outpacing fare increases
Exhibit 99.2 The industry problem: Jet fuel increases are outpacing fare increases $2.83 40¢ Yield Jet Fuel Price $3.00 $2.17 $2.50 30¢ $1.97 $1.73 $2.00 20¢ $1.21 $1.50 $0.90 $0.86 $0.75 $0.71 $1.00 10¢ 14.48¢ 13.35¢ 12.34¢ 12.50¢ 12.19¢ 12.51¢ 13.76¢ 13.94¢ 13.73¢ $0.50 0¢ $0.00 Source: ATA and U.
Slide 2: Alaska is well prepared to weather another downturn
Alaska is well prepared to weather another downturn • Strong hedge portfolio • Young, fuel-efficient, simple fleet • Strong network of codeshare partners, poised to benefit from Trans-Pac growth • Good progress with cost reduction • Conservative balance sheet with strong liquidity • The PNW and Alas
Slide 3: Air Group has the second best hedge position in the industry
Air Group has the second best hedge position in the industry 1Q08 2008 2009 Hedged $/BBL² Hedged $/BBL² Hedged $/BBL² Southwest 75% $51 70% $51 55% $51 Alaska 50% $67 50% $74 13% $83 jetBlue¹ 35% $77 21% $80 - - AirTran¹ 37% $90 26% $90 - - American 35% $77 24% $79 - - US Airways¹ 50% $78 30% $82 -
Slide 4: An all-737 fleet by year-end
An all-737 fleet by year-end JetBlue 3.1 December 2008 AirTran 4 Alaska 2009 7.6 737-800 46 Southwest 9.4 737-700 20 Continental 10 737-900 US Air 10.8 737-400 38 12 Delta 12.8 United 13 American 15 Northwest 17.5 0 3 6 9 12 15 18 All-737 Fleet Average fleet age (years) 116 aircraft Source: 10K repo
Slide 5: Alaska's aircraft are the most fuel-efficient in operation today
Alaska’s aircraft are the most fuel-efficient in operation today 18 16.49 15.36 13.12 12.75 12.63 12.38 13 11.65 11.16 10.76 8 Better 3 A319 737-700W DC-9 140 MD-80 140 737-400 A320 737-800W 737-900W 757-200 122 seats 124 seats 125 seats seats 144 seats 149 seats 157 seats 172 seats 182 seats • Alas
Slide 6: Fleet changes and hedges significantly reduce fuel costs per ASM
Fleet changes and hedges significantly reduce fuel costs per ASM Fuel cost per ASM oil @ $100 per barrel Fleet changes = .4¢ (about $100 million) Raw cost 4.6¢ increase = ~60% Raw 4.2¢ w/2005 3.9¢ Raw fleet in 2008 Economic 2.9¢ Raw 2.4¢ Economic Alaska 2005 Alaska 2008
Slide 7: Horizon's fleet is being simplified
Horizon’s fleet is being simplified December 2006 August 2009 Q200 Q400 28 48 Q400 CRJ 700 20 CRJ 700 21 20 69 aircraft 68 aircraft
Slide 8: Horizon's aircraft are among the most fuel-efficient
Horizon’s aircraft are among the most fuel-efficient 11 Fuel gallons per passenger 10.6 10 9 8 7.7 7.1 7.2 7.3 7 6.7 6.2 5.8 6 5 Better 4 3 Q400 CRJ900 E190 CRJ700 Q200 CRJ200 E170 B1900 76 seats 88 seats 99 seats 70 seats 37 seats 50 seats 72 seats 19 seats • 400 statute miles • 100% load factor So
Slide 9: Strong partnerships position us well to capitalize on Trans-Pac growth
Strong partnerships position us well to capitalize on Trans-Pac growth Major Domestic Regionals International International Mileage Plan Only
Slide 10: Partners drive additional revenue to AAG from international
Barrow Kotzebue Prudhoe Bay Nome Europe/Middle East/Africa Bethel Fairbanks Northwest/KLM Air France Dillingham Anchorage British Adak Cordova King Salmon Dutch Yakutat Harbor Kodiak Glacier Bay/ Japan/Asia Gustavus Juneau Northwest Sitka Petersburg Wrangell Cathay Ketchikan Vancouver Seattle Partne
Slide 11: Possible growth to Asia and Europe out of SEA with B787
Possible growth to Asia and Europe out of SEA with B787 Anchorage Seattle Portland Los Angeles International Possible expansion out of LAX
Slide 12: We have a track record of unit cost improvements
We have a track record of unit cost improvements 9.0¢ Alaska Airlines cost per ASM excluding fuel 8.73¢ 8.52¢ 8.5¢ 8.34¢ 7.92¢ 8.01¢ 8.0¢ 7.81¢ 7.5¢ 7.50¢ 7.50¢ Continuous Improvement 7.0¢ 2001 2002 2003 2004 2005 2006 2007 2008 Estimate
Slide 13: We have a strong cash position and multiple sources of additional liquidity
We have a strong cash position and multiple sources of additional liquidity Cash as a % of Revenues Q4 2007 Jet Blue 29% Sources of additional Southwest 28% liquidity Northwest 24% • $185 million line of credit US Airways Group 24% facility Alaska Air Group 23% • $172 million maximum pre- Frontier 2
Slide 14: The Pacific Northwest and Alaska may fare better economically than other regions
The Pacific Northwest and Alaska may fare better economically than other regions Higher growth in real personal Housing prices are stable income is expected US Home Price Indices -Changes in December 2007 Real personal income growth forecasts 4% 0.5% 1.2% United States 6% 0% State of Washington 4% 4
Slide 15: Management and the Board are committed to providing returns to capital providers
Management and the Board are committed to providing returns to capital providers AAG ROIC History from 2003 to 2007 10% 7.9% 8% 6.1% 6% 5.3% 4% 3.4% 2% 0% 2004 2005 2006 2007 Adjusted for hedge MTM and unusual items
Slide 16: ALK shareholders have fared better than shareholders at other carriers
ALK shareholders have fared better than shareholders at other carriers since our initial stock repurchase Overall change in share price Overall change in share price Sept 13, 2007 through Feb 29, 2008 Sept 13, 2007 through Mar 12, 2008 10% 6% 10% 0% 0% -10% -10% -15% -20% -20% -20%-20% -30% -23% -24
Alaska Air Group — JPMorgan Aviation and Transportation Conference (March 2008) on 6ix