Alaska Air Group, Inc. · NYSE:ALK
Alaska Air — JPMorgan Aviation & Transportation Conference 2009
24 slides from Alaska Air's conference presentation, Mar 10, 2009
Slide 1: JPMorgan Aviation & Transportation Conference
March 10, 2009 JPMorgan Aviation & Transportation Conference This presentation may include forward-looking statements regarding the performance of Alaska Air Group or its subsidiaries. Actual results may differ materially from these projections. Please see our most recent Annual Report on Form 10-K
Slide 2: Alaska and Horizon operating statistics
16.8 million passengers/yr. 9,600 employees 110 aircraft 60 cities served 430 daily departures 7.4 million passengers/yr. 3,700 employees 58 aircraft 47 cities served 390 daily departures
Slide 3: Our long-term strategy hasn't changed
Employees • Excellent careers, retirement security • One of the best places to work Financial Health • 8-10% annual growth • 10% pretax profit margin • “Weatherproofed” to economic downturns Investors • Return on investment • New capital for growth Customers • Airline with best value • Operational e
Slide 4: Focused on achieving adequate ROIC
Focused on achieving adequate ROIC Invested Capital Alaska $2.5B (110 aircraft) Horizon $1.0B (58 aircraft) Air Group $3.5B (168 aircraft)
Slide 5: History of outperforming the industry
History of outperforming the industry -8,000 -6,000 -4,000 -2,000 2,000 4,000 6,000 8,000 -150 -100 -50 2001 2002 2003 2004 2005 2006 2007 2008 Industry Alaska Air Group Industry includes: (2001-2006) ALK, AWA, AMR, CAL, DAL, NWAC, LUV, UAL, LCC (2007-2008) AMR, ALK, CAL, DAL, NWA, JBLU, AAI, LUV, U
Slide 6: Our strategy for the current economy
Our strategy for the current economy 1. Preserve our strong balance sheet 3. Cut capacity and redeploy aircraft Leverage existing strengths 5. Reduce fuel consumption 4. Control non-fuel costs 2. Maximize unit revenues
Slide 7: Relatively low leverage outside bankruptcy
48% 75% 81% 92% 95% 99% 106% 132% 133% Relatively low leverage outside bankruptcy -10% 40% 90% 140% Alaska Air Group Adjusted Debt-to-Capitalization – Q4 2008 Source: Company 10-Ks for FY 2008 FPA-PS
Slide 8: Strong cash position and multiple sources of liquidity
Possible sources of liquidity • $185 million available on line of credit • Pre-delivery payment facility • Unencumbered aircraft, spare parts and engines • Forward sale of miles 9% 10% 13% 13% 15% 16% 17% 17% 29% 0% 10% 20% 30% 40% 50% US Airways Group United Air Tran AMR Delta Southwest Jet Blue Co
Slide 9: Our conservatism extends to hedges
Our conservatism extends to hedges Alaska primarily uses “caps” Source: Public Data, Bloomberg 3-3-09 Totals are annualized or estimated from Jet or heating oil positions Values shown are crude oil equivalents Collateral data as of 12/31/08 Collateral Hedged $/BBL $0 $240 million $117 million $69 mi
Slide 10: Maximizing revenues is our 2009 Key Initiative
Maximizing revenues is our 2009 Key Initiative • Better yield management • Mileage Plan (FFP) changes • Advertising • Ancillary revenue opportunities consistent with our brand
Slide 11: Capacity reduced and redeployed
-20% -15% -10% 5% 0% 5% 10% 2008 Actual -15% -10% -5% O% 5% 10% 2008 Actual Capacity reduced and redeployed year-over-year % available seat mile (ASM) growth IR -10% -7% Q109 2009 forecast 0% Q109 2009 forecast -15% -9% -9% Q109 2009 forecast -17% -12% Q109 2009 forecast -21% -11% Departures Capacit
Slide 12: Capacity down, but West Coast remains competitive
Capacity down, but West Coast remains competitive Sources: Industry - Latest published schedules – Updated for Q109 ASM Change Q1 2009 vs. Q1 2008 -11.0% -4.0% -8.0% -14.0% -16.0% -2.0% -11.0% 1.0% -20% -16% -12% -8% -4% 0% 4% Domestic U.S. Mainline West Coast Mainline SEA to Bay Area SEA to LA Basi
Slide 13: Redeployments improve our network
Redeployments improve our network
Slide 14: Capacity reductions put pressure on non-fuel unit costs
Capacity reductions put pressure on non-fuel unit costs Cost per available seat mile excluding fuel 8.73¢ 8.52¢ 8.33¢ 7.92¢ 7.0¢ 7.5¢ 8.0¢ 8.5¢ 9.0¢ 2001 2002 2003 2004 2005 2006 8.01¢ 7.81¢ 2007 7.50¢ 2008 7.49¢ 8.10¢ 2009 guidance 2009 CASM ex fuel per guidance issued with Q4 2008 earnings release
Slide 15: Non-fuel costs better than legacies' but more work needed
1000 1250 1500 1750 2000 Stage Length (miles) Alaska Mainline CASM ex Fuel by stage length trendline Southwest AirTran Alaska American United Continental Jet Blue US Airways Delta Non-fuel costs better than legacies’ but more work needed Source : Q4 08 earnings releases Major Airline CASM ex Fuel by
Slide 16: Young, all-737 fleet simplifies our operation, cuts costs
15 13 12.3 11.8 10.1 9.4 7.3 5.6 3.6 Source: 10K reports, as of Dec. 31, 2008; Delta number from 4Q 08 earnings release; United number from 2007 10-K Young, all-737 fleet simplifies our operation, cuts costs American United Delta US Air Southwest Continental Alaska AirTran JetBlue Average fleet age
Slide 17: Decline in fuel prices will help offset lower RASM
$0 $25 $50 $75 $100 $125 $150 Decline in fuel prices will help offset lower RASM $1 per barrel = $9 million pretax $45 per barrel now $100 per barrel avg in 2008 $5 per barrel = 1.3% RASM
Slide 18: Alaska's aircraft most fuel-efficient in operation today
Better Alaska’s aircraft most fuel-efficient in operation today • Alaska Domestic Mission Rules • Nominal fuel burn • Pax/Bag weight = 220 lb • 100% load factor 10.76 11.16 11.65 12.38 12.63 12.75 13.12 15.36 16.49 737-900 172 seats 737-800 157 seats A320 149 seats 757-200 182 seats 737-700 124 seat
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Slide 20: This is a "people" business
Employees • Excellent careers, retirement security • One of the best places to work Financial Health • 8-10% annual growth • 10% pretax profit margin • “Weatherproofed” to economic downturns Investors • Return on investment • New capital for growth Customers • Airline with best value • Operational e
Slide 21: Highest in Customer Satisfaction
• J.D. Power and Associates North America Airlines Satisfaction Study – June 16, 2008 • More than 19,000 business and leisure travelers surveyed • Alaska garnered high marks for: – Aircraft – Boarding/deplaning/baggage – Check-in – Flight crews – Reservations Source: J.D. Power & Associates, June 20
Slide 22: Award-Winning Mileage Plan
2007 Program of the Year Best Elite-Level Program Best Web Site 2006 Best Elite-Level Program Best Web Site Best Member Communications 2005 Best Elite-Level Program Best Member Communications Award-Winning Mileage Plan 2004 Best Program Best Web Site Best Member Communications 2003 Best Program Best
Slide 23: World class partners drive additional revenue
World class partners drive additional revenue and increase network utility
Slide 24: Air Group well positioned to weather the current environment
Alaska Air Group well positioned to weather the current environment • Track record of good stewardship • Realistic about today • Optimistic about tomorrow – Strong balance sheet – Young, fuel-efficient, simple fleet – Positioned to benefit from growth through network of code-share partners – Preferr
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