Alaska Air Group, Inc. · NYSE:ALK
Alaska Air — Credit Suisse Global Airline Conference 2008
23 slides from Alaska Air's conference presentation, Dec 2, 2008
Slide 1: Credit Suisse Global Airline 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 for additional information concerning factors that could caus
Slide 2: A track record of adapting quickly to change
A track record of adapting quickly to change 2002 - Transcon expansion 2003 - Unveiled Alaska 2010 Plan 2004 - Airport of the Future – Anchorage Closed OAK maintenance base 2005 - Order for up to 100 Boeing 737 aircraft 2006 - Horizon 25th anniversary Horizon Regional Airline of the Year 2007 - Alas
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Slide 4: Our strategy for the current economy
Our strategy for the current economy 1. Preserve our strong balance sheet 2. Cut capacity and redeploy aircraft 3. Maximize unit revenues 4. Reduce fuel consumption 5. Control our non-fuel costs
Slide 5: Strong cash position and multiple sources of liquidity
Possible sources of liquidity • $110 million available on line of credit • $172 million maximum pre-delivery payment facility • Unencumbered aircraft • Forward sale of miles Strong cash position and multiple sources of liquidity Cash as a % of Revenues Q3 ‘08 Note: Calculated using unrestricted cash
Slide 6: Relatively low leverage outside bankruptcy
34% 75% 75% 78% 83% 88% 92% 93% 100% 114% Relatively low leverage outside bankruptcy -30% 20% 70% 120% Alaska Air Group Adjusted Debt-to-Capitalization – Q3 2008 Source: Company Q3 08 SEC filings FPA-PS 090308
Slide 7: Reduce and redeploy capacity
-20% -15% -10% 5% 0% 5% 10% 2008 forecast -15% -10% -5% O% 5% 10% 2008 forecast Reduce and redeploy capacity year-over-year % available seat mile (ASM) growth -7.5% -10 to –12% -8% Q408 Q109 2009 forecast 0% Q408 Q109 2009 forecast -20% -14% -9% -9% Q408 Q109 2009 forecast -17% -12% -14% Q408 Q109 2
Slide 8: Capacity is coming out, but West Coast remains very competitive
ASM Chg - 4Q 08 vs. 4Q 07 Capacity is coming out, but West Coast remains very competitive Sources: Industry - Latest published schedules; AS – 8K filed 11-17-08 Domestic U.S. Mainline West Coast Mainline SEA to Bay Area SEA to LA Basin Alaska Industry
Slide 9: Redeployments improve the network
Flagstaff Anchorage Boston Los Angeles Spokane San Diego Palm Springs San Jose Lihue (Kauai) Honolulu (Oahu) Kahului (Maui) Kona (Hawaii) Santa Rosa Seattle Portland San Francisco Eugene Boise Minneapolis San Diego Sacramento Las Vegas Cancun Eureka Flagstaff Anchorage Boston Los Angeles Spokane San
Slide 10: Maximizing unit revenues remains an important goal
Maximizing unit revenues remains an important goal • Fare increases • Better yield management • Mileage Plan (FFP) changes • Ancillary revenue opportunities consistent with our brand
Slide 11: Fuel continues to be the wildcard
Fuel continues to be the wildcard
Slide 12: Alaska's all-737 fleet is one of the youngest
17.5 15 13 12.8 10.8 10 9.4 7.6 4 3.1 Source: 10K reports as of Dec. 31, 2007 Alaska’s all-737 fleet is one of the youngest Northwest American United Delta US Air Continental Southwest Alaska 2009 AirTran JetBlue Average fleet age (years)
Slide 13: 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 15: Improved fuel hedge strike prices
$0 $25 $50 $75 $100 $125 Q408 2009 2010 2011 Previous Position Current Position Improved fuel hedge strike prices 50% Percent hedged 8% 29% 1% 17% 50% 50% 50% • Updated November 25,2008
Slide 16: CASMx comparison: Alaska vs competitors
CASMx comparison: Alaska vs competitors YTD through Q3 5.80 5.96 6.76 7.01 7.40 7.43 7.55 7.86 8.32 JBLU AAI WN DL AS NW CO UA US Source: Press releases and 10-Q data, not SL adjusted
Slide 17: Capacity reductions will put pressure on non-fuel unit costs
Capacity reductions will 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 guidance Reflects 8K guidance as of 8/21/08 SA-IR 7.52¢ ?¢ 2009
Slide 18: Quote: be very realistic about where you are
“You’ve got to be very realistic about where you are… but very optimistic about where you can be.” Steve Ballmer Microsoft CEO
Slide 19: Greatly improved on-time performance reduces costs
14.2 14.5 11.6 11.8 7.3 4.2 1.7 4.8 4.5 2.5 Jan Feb Mar Apr May Jun Jul Aug Sept Oct 0% 50% 100% Greatly improved on-time performance reduces costs DOT on-time performance
Slide 20: Improved on-time, reliability and baggage handling means higher 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: PR Newswire, June 16, 2008 *In a
Slide 21: An 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 An Award-Winning Mileage Plan 2004 Best Program Best Web Site Best Member Communications 2003 Best Program B
Slide 22: World-class partners drive additional revenue
Source: AAG revenue reports and APGDat. Size of line indicated relative volume. Honolulu Lihue Guadalajara Orlando Loreto Mazatlan Chicago Mexico City Palm Springs San Diego Las Vegas Phoenix Tucson Cancun Vancouver Miami Washington, D.C. Boston New York (Newark) Dallas/Ft Worth Denver Spokane Reno
Slide 23: Alaska Air Group is well positioned to weather the current environment
Alaska Air Group is well positioned to weather the current environment • Realistic about today with credible plan • Optimistic about tomorrow – Strong balance sheet – Young, fuel-efficient, simple fleet – Positioned to benefit from growth through network of code-share partners – Preferred product –
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