Alaska Air Group, Inc. · NYSE:ALK
Alaska Air — Investor Day (March 2022)
72 slides from Alaska Air's investor day presentation, Mar 24, 2022
Slide 1: Alaska Air Group Investor Day
ALASKA AIR GROUP INVESTOR DAY
Slide 2: Slide 2
Slide 3: Safe Harbor
Safe Harbor This presentation may contain forward-looking statements subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. These statements relate to f
Slide 4: Ben Minicucci, Chief Executive Officer
BEN MINICUCCI CHIEF EXECUTIVE OFFICER Alaska, ©)
Slide 5: What We Believe
WHAT WE BELIEVE 6 © 0 @ DO THE
Slide 6: Creating Value for Our Stakeholders
CREATING VALUE FOR OUR (- »> =~ Our People ov 4 PROFITABLE Profitable growth Owners + ou creates value for jiuests GROWTH all our stakeholders. Neen 4
Slide 7: Our Commitment to Sustainability
OUR COMMITMENT TO SUSTAINABILITY Environmental Social === #Governance
Slide 8: Global Airline of the Year
GLOBAL AIRLINE OF mal HE YEA Mt Excellence, innovation Community, eco and and leadership technology leadership | Strong financial discipline Consistent high standards in customer service Consistent and excellent safety record | Excellent labor relations
Slide 9: Our team
Our team ells 3a ANDREW HARRISON ANDY SCHNEIDER ~—_ BEN MINICUCCI CHARU JAIN CONSTANCE VON cco SVP Peopl CEO SVP ial Merchandising & ail - Innovation F 7.“ oa INDUSTRY TENURE Fa DIANA BIRKETT JOE SPRAGUE KYLE LEVINE NAT PIEPER SANGITA WOERNER SHANE TACKETT RAKOW President Horizon _ SVPLegal& SVPFlee
Slide 10: Our Competitive Advantages
OUR COMPETITIVE ADVANTAGES
Slide 11: We have out-performed industry pre-tax margins for over decades
We have out-performed industry pre-tax margins for over 2 decades | (49%) (64%)
Slide 12: Even in the pandemic recovery period we outperformed peers
Even in the pandemic recovery period we outperformed peers 2021 Stage length adjusted 2021 2H adjusted pre-tax CASM ex. fuel margin % 15% better PMaska. 11.21 | 2% “1% (7%) | (11%) 9.57 l A ¥ jetBlue Industry PMaska.
Slide 13: Competitive advantages have enabled us to outgrow the industry
Our competitive advantages and strong financial performance have enabled us to outgrow the industry Compound annual capacity While maintaining an excellent growth rate 2014 - 2019 operation Alaska grew pals [ over 3x faster = 3%, 84% 83% 85% Industry ZMaska. 2014 2015 2016 2017 2018 2019 2021 Mi Ala
Slide 14: Our Runway to Profitable Growth
OUR RUNWAY T0 PROFITABLE GROWTH POWERFUL ee | EFFICIENT | COMPELLING | BRAND & aN foe FLEET PRODUCT | UNPARALLELED | BUSINES i i Loyalty
Slide 15: Andrew Harrison, Chief Commercial Officer
ANDREW HARRISON CHIEF COMMERCIAL OFFICER Alaska, ©)
Slide 16: Our Runway to Profitable Growth
OUR RUNWAY T0 PROFITABLE GROWTH POWERFUL ee | EFFICIENT | COMPELLING | BRAND & TE THORE FLEET PRODUCT | UNPARALLELED I l LOYALTY
Slide 17: Delivering $400 million in incremental revenue
Delivering $400 million in incremental revenue LOYALTY & PRODUCT 9 195M
Slide 18: Liberia .
Liberia .
Slide 19: We are a key player diversified across five hubs
We are a key player diversified across five hubs
Slide 20: We have profitable growth opportunities
We have profitable growth opportunities 70% of growth allocated ual ASM growth of ie ' to the Pacific Northwest ce) re] 4%-8% targeted through 2025 50% of growth allocated to California
Slide 21: Growth through 2025 will be highly efficient
Growth through 2025 will be highly efficient 10% NEW MARKETS 90% of growth is in existing markets
Slide 22: oneworld makes us more competitive in Seattle
oneworld makes us more competitive in Seattle Our guests have access to And can enjoy the benefits of more global partners Seattle’s #1 global alliance "1 A a 9 3 — ~ a INTERNATIONAL DAILY DEPARTURES INTERNATIONAL DESTINATIONS SERVED 2019 2022
Slide 23: oneworld improves California profitability
oneworld improves California profitability panes eode In aliens And the benefits are significant is increasing 2 American®, AIRLINES 2 Airlines % Focus City Focus City 2019 to 2021 Alaska Daily Seats 130% Alaska Total Guests 150% Partner Enabled Guests 90% 2019 2022 Pre-Tax Margin T 5x
Slide 24: We are investing in infrastructure
We are UU EEMODT In infrastructure ee 5 30% | 25K | More gates EB More sq. ft.
Slide 25: Lounge
lounge 2026 A=s —— ees =s —_
Slide 26: We are investing in infrastructure
We are investing in infrastructure Terminal 1 co-location with oneworld aj ” '
Slide 27: We are investing in infrastructure
We are investing in infrastructure More gates by © More sq. ft. by 2024
Slide 28: Nat Pieper, SVP Fleet, Finance & Alliances
NAT PIEPER SVP, FLEET, FINANCE & ALLIANCES Alaska, ©)
Slide 29: Our Runway to Profitable Growth
OUR RUNWAY T0 PROFITABLE GROWTH PMS EFFICIENT | *OMPELLI | BRAND & peas Ste LEET | PRODUCT | UNPARALLELED § "hres I I yt |
Slide 30: Single fleet strengthens our competitive advantages
Single fleet strengthens our competitive advantages Strong Low Costs, High Productivity Operational Excellence Suri Reduced pilot Single maintenance Optimal network Seamless equipment & maintenance cross program efficiency swaps CFM, Embraer training $75 million annual cost savings
Slide 31: Mainline to single fleet by 2023
Mainline to single fleet by 2023 Year end fleet counts 241 166 las 71 | 2019 2021 2023 = Airbus ™ Boeing 737 Bocing ergy Boeing
Slide 32: Our regional operation will also move to a single fleet
Our regional operation will also move to a single fleet Year end fleet counts 82 De Havilland > Q400 ee 62 oe Embraer ) a E175 5 2019 2021 2023 = De Havilland Q400 = Embraer E175
Slide 33: Fleet upgauge enhances profit and environmental efficiency
Fleet upgauge enhances profit and environmental efficiency Mainline fleet composition Upgauge benefits Small 1. Greater revenue opportunity 110-140 seats 20-25% Medium 43% 2 150-165 seats . More premium revenue 3. Lower cost per seat 70-75% Large 52% 4. Better environmental profile 175+ seats Today
Slide 34: MAX order book accelerates upgauge
737 MAX order book accelerates upgauge (= f 1 eo Largest, most efficient aircraft in fleet ’ I f 178 Ideal for long-haul, high-demand routes 1 62 Best for high-performance and = medium-sized markets
Slide 35: Greater premium revenue opportunity
Greater premium revenue opportunity Premium seat mix Premium fare advantage 25% 2.0x 1.3x 1.0x i 2023 Main Cabin — Premium Class First Class
Slide 36: Upgauge strategy is already delivering benefits
Upgauge strategy is already delivering benefits A320 737-9 j 150 178 Upgauge benefits Total Seats Total Seats 1. Greater revenue opportunity 16 19% more seats First 24 F Premium 2+ More premium revenue 33% more First Class seats 3. Lower cost per seat 14% reduction 138 eee 4. Better environmental pr
Slide 37: Fleet Evolution 2019-2026
Fleet Evolution 2019-2026 Year end fleet counts Evolution 2019-2026 * Mainline and regional single fleet 323 by 2023 * Gauge: +1% annually * Premium seats: +62% ima [ai * Fleet age flat: 8.0 years in 2019, || 8.4 in 2026 2019. 2021 +2023. + 2026 ~+®° Newest-technology aircraft: "Boeing 737 Firm = Em
Slide 38: Sangita Woerner, SVP Marketing & Guest Experience
SANGITA WOERNER SVP MARKETING & GUEST EXPERIENCE Alaska, ©)
Slide 39: Our Runway to Profitable Growth
OUR RUNWAY T0 PROFITABLE GROWTH
Slide 40: Appealing to a broad range of guests
Appealing to a Fp: 1 ee Suited-up High Business Points Destination Opportunist Kids in Without Dollar Flyers Flyers Nomad Guy Focused Tow a Hitch Driven
Slide 41: Fantastic value: high quality product at a competitive fare
WE OFFER FANTASTIC VALUE: HIGH QUALITY PRODUCT AT A COMPETITIVE FARE Alaska, ©)
Slide 42: Seat comparison versus competitors
“tise QA DELTA 37" 3" 37” N/A 33” 34” 34” ms First Class Premium
Slide 43: Fresh food, boxed water, local brews, assigned seating
Fresh food Boxed water Local brews Assigned seating
Slide 44: Our Runway to Profitable Growth
OUR RUNWAY T0 PROFITABLE GROWTH
Slide 45: Alaska has incredible brand love
Alaska has incredible brand love " Costco u 7Mlaska — AIRLINES # amazon i #3 SE Microsoft #6 ae
Slide 46: Our care in action
Our care in action HERE FOR YOU... x .«-e AND YOUR WALLET. JOY VALUE IN FARES EMPOTHY _ VALUE IN QUALITY EASE? VALUE IN REWARDS
Slide 47: Investing in our people
Investing in our people Alaska CARERLvica? 12,000 =i EMPLOYEES LEADERS
Slide 48: Shouting CARE from the rooftops
Shouting CARE from the rooftops GARE IS a8 Ae
Slide 49: Unparalleled Loyalty
UNPARALLELED LOYALTY WN nerdwallet. Best-Of Awards 2021
Slide 50: Most generous program in the industry
Most generous program in the industry Mileage Plan rn é east 830% more niles Alaska Airlines SFO TO BOS | ROUND TRIP MILES EARNED Other Airlines Other Air 3,492 a en eee eee SAME TRIP, ME FARE MILES EARNED $221 Total annualvalue RYU5
Slide 51: Our member mix is more geographically diverse than ever
Our member mix is more geographically diverse than ever Concentration of Concentration of Mileage Plan members credit card holders Pacific Northwest i Other geographies
Slide 52: Our program is growing rapidly across our network
And our program is growing rapidly across our network Mileage Plan member growth vs Credit card holder growth vs ASMs since 2016 ASMs since 2016 Pacific Northwest i Other geographies
Slide 53: Renewed Bank of America co-brand agreement
We have renewed and enhanced our Bank of America co-brand agreement ey Total remuneration under the Renewed agreement highlights A renewed agreement is strong * Renewal extends through 2030 ¢ Expands guest benefits +30% * Accelerates growth plans across the West Coast LW CNER * Significant increase
Slide 54: Dean Athanasia, Bank of America
DEAN ATHANASIA BANK OF AMERICA PRESIDENT REGIONAL BANKING BANK OF AMERICA “Z
Slide 55: Alaska Airlines and Bank of America
“Maska yy AIRLINES BANK OF AMERICA
Slide 56: Shane Tackett, Chief Financial Officer
SHANE TACKETT CHIEF FINANCIAL OFFICER Alaska, ©)
Slide 57: Our Runway to Profitable Growth
OUR RUNWAY T0 PROFITABLE GROWTH EXPANSIVE ae | Molden RESILIENT EST COAST il BS en era BUSINESS NETWORI PRODUCT | UNPARALLELED |” MODEL | l l LTY |
Slide 58: The investment case for ALK is strong
The investment case for ALK is strong 1. Durable competitive advantages 2. Tenured and capable leadership team 6. Clear strategic roadmap that will deliver value
Slide 59: Our balance sheet is among the strongest in the industry
Our balance sheet is among the strongest in the industry, and we did not dilute shareholders Peer group debt to capitalization % as of December 31, 2021 Equity Issued No Yes Yes Yes No vs 2019 (pts) +8 +29 +17 +26 +40 i = - 1 Pe jetBlue
Slide 60: Our network positioning is improved versus 2019
Our network positioning is improved versus 2019 Change in domestic ASMs We have reshaped our network Q2 2019 to Q2 2022 * Connecting strength markets | West Coast | Coast | As Overlap | | As Overlap | and alliance hubs a rr ‘a. eee ) - * Growth in areas of strength Peer +3% 13% Peer 2 (23%) (28%) *
Slide 61: Our cost position is improving versus our competitors
Our cost position is improving versus our competitors CASMex fuel comparison, , adjusted for stage length Cost drivers through 2025 tT New labor deals wet | better ener | better abet better i] Inflation i Airport costs 11.21 < 7 J Roane pat io 1 Single fleet efficiencies Wi | Upgauging benefit 2016
Slide 62: WTI call option strike price and forward curve
• • • • Weighted-Average WTI Call Option Strike Price WTI Forward Curve
Slide 63: (1%) (3%) (2%) (5%) (7%) (7%) (8%) (8%) (11%) (8%) 0.2%
(1%) (3%) (2%) (5%) (7%) (7%) (8%) (8%) (11%) (8%) 0.2%
Slide 64: Cost and revenue initiatives will lead to continued margin outperformance
Our cost and revenue initiatives will lead to continued industry margin outperformance Historical pre-tax margins 11% 12% 12% 1% Bh ska BB industry (64%) OS GM oe © oO AM G&G CO PDP LY Md CC a a a a SI Si Si Si Year ALK Rank 2010 #1 2011 #1 2012 #1 2013 #1 2014 #1 2015 #1 2016 #1 2017 #1 2018 #3 201
Slide 65: The pandemic forced an industry reset and Alaska is leading the recovery
The pandemic forced an industry reset and Alaska is leading the recovery Alaska led the industry And delivered the #1 pre-tax in recovery margin for 2H 2021 jst to zero cash burn Maska. 1% 1st to positive operating cash flows excluding PSP funds ; = “U%) 1%) {st trom “i to profitability 1st to retur
Slide 66: 2022 Guidance and Long Term Targets
2022 GUIDANCE AND LONG TERM TARGETS Alaska. ©
Slide 67: We will be profitable in March and demand has been strong
We will be profitable in March and demand for future travel has been strong Q1 2022 guidance update Q2 and beyond Previous Current 2 Versus 2019 | Expectation | Expectation Capacity Total revenue CASMex Economic fuel PPG Down 10% to 13% Down 14% to 17% Up 15% to 18% $2.60 to $2.65 Down 11% to 12% Do
Slide 68: 2022 guidance & capital expenditures outlook
2022 guidance & capital expenditures outlook FY 2022 guidance Capital expenditures Previous Current Versus 2019 Expectation | Expectation ots an Capacity Up 2% to 6% | Up 1% to 3% Ries par $1.7B CASMex Up1%to3% Up 3%to 5% $1,026 $960 Adjusted Rie . 6% to 9% $696 tax margin % 292 Capital $1.6 to $17
Slide 69: Long term commitment to outperforming industry margins and shareholder returns
Long term we are committed to outperforming industry margins and re- implementing shareholder returns ROIC PRE-TAX MARGIN At least 200+ bps above cost of capital 11% - 13% and above and higher than industry peers industry FREE CASH SHAREHOLDER FLOW RETURNS Restore to conversion rate of 25% — 75% of
Slide 70: LUV JBLU AAL ALK DAL UAL AAL UAL DAL JBLU ALK LUV
LUV JBLU AAL ALK DAL UAL AAL UAL DAL JBLU ALK LUV
Slide 71: Net zero by 2040
Net zero by 2040 © Verified, durable carbon offsets, oes 2040 sequestration or direct air capture only as needed to close a gap to target _.. CARBON () cal OFFSETTING Electrified or hybrid TECHNOLOGY ® regional fleet Sustainable aviation fuel NOVEL PROPULSION (SAF) at a reasonable cost and scale @ N
Slide 72: Summary: Expansive West Coast network, efficient fleet, resilient model
EXPANSIVE WEST COAST NETWORK EFFICIENT COMPELLING PRODUCT FLEET * $400 million in * Single fleet for * Industry leading commercial mainline and pitch initiatives regional * Significant * Leveraging * Investing in frequency growth upgauge for products for a in core markets growth broad range of guest