Alaska Air Group, Inc. · NYSE:ALK
Alaska Air — Imperial Capital Global Opportunities Conference 2008
26 slides from Alaska Air's conference presentation, Nov 18, 2008
Slide 1: Imperial Capital Global Opportunities
Imperial Capital Global Opportunities 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 informat
Slide 2: Alaska Airlines and Horizon Air route networks and key facts
Los Cabos Puerto Vallarta Manzanillo Ixtapa / Zihuantanejo Guadalajara Miami Orlando Loreto Mazatlan Washington, D.C. Boston New York (Newark) Chicago Mexico City Dallas/Ft Worth Palm Springs San Diego Las Vegas Phoenix Tucson Cancun Nome Barrow Prudhoe Bay Kotzebue Bethel Dutch Harbor Sitka Dilling
Slide 3: Mts le Grong
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Slide 4: Our five point response to the uncertain environment
Our five point response to the uncertain environment: 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 Leverage our existing strengths
Slide 5: 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 6: 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 • 6* unencumbered aircraft, including B737- 800s and Q400s • Forward sale of miles 11% 12% 14% 15% 17% 19% 19% 23% 29% 32% 0% 10% 20% 30% 40% 50% US Airways Group AirTran Uni
Slide 7: Reduce and redeploy capacity
9.5% 6.8% 9.4% 20.9% 5.8% 13.0% -6.6% -10% -5% 0% 5% 10% 15% 20% 25% 2001 2002 2003 2004 2005 2006 2007 2008 4.0% 4.4% 0.1% 7.1% 7.5% 8.0% 3.5% 0% 5% 10% 15% 20% 25% 2001 2002 2003 2004 2005 2006 2007 2008 Reduce and redeploy capacity forecast forecast year-over-year % available seat mile (ASM) grow
Slide 8: Seat supply is being cut, but not as much on the West Coast
Carrier Mainline Only Domestic ASM Chg - 4Q 08 vs. 4Q 07 Seat supply is being cut, but not as much on the West Coast Sources: Industry - Latest published schedules; AS – 8K filed 11-17-08 AirTran (6%) American (12%) Continental (24%) Delta (9%) Frontier (16%) JetBlue (9%) Northwest (16%) Southwest 1
Slide 9: Discontinued markets and decreased capacity
Spokane Vancouver San Diego Butte Bozeman Orlando San Francisco Zihuatanejo Cancun Mazatlan Calgary Los Angeles Mexico City Los Cabos Denver San Jose Puerto Vallarta Orange County Burbank La Paz Boise Las Vegas Loreto San Diego Ontario Oakland Long Beach Portland Seattle Klamath Falls North Bend Eug
Slide 10: New markets and increased capacity
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 11: We are pulling the levers to maximize unit revenues
We are pulling the levers to maximize unit revenues • Fare increases • Better yield management • Fuel surcharges on cargo • Mileage Plan (FFP) changes • Ancillary revenue opportunities consistent with our brand
Slide 12: Fuel continues to be the wildcard
Fuel continues to be the wildcard
Slide 13: A young, all-737 fleet simplifies our operation
737-800 46 737-700 20 737-900 12 737-400 38 17.5 15 13 12.8 10.8 10 9.4 7.6 4 3.1 Source: 10K reports as of Dec. 31, 2007 A young, all-737 fleet simplifies our operation December 2008 All-737 Fleet 116 aircraft Northwest American United Delta US Air Continental Southwest Alaska 2009 AirTran JetBlue
Slide 14: Alaska's aircraft most fuel-efficient in operation today
Better Alaska’s aircraft most fuel-efficient in operation today • Alaska Domestic Mission Rules • 1,000 statute miles • 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
Slide 15: Moving to Q400 single type fleet
Q400 ~50 Q200 16 CRJ 700 21 Q400 33 Moving to Q400 single type fleet ~50 aircraft December 2009 Q200 70 aircraft December 2007
Slide 16: Controlling costs
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Slide 17: 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 6% 26% 1% 17% 50% 50% 50%
Slide 18: 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 7.55¢ ?¢ 2009
Slide 19: Our non-fuel costs are better than legacy carriers' but we have more work to do
Our non-fuel costs are better than legacy carriers’ but we have more work to do
Slide 20: Quote from Steve Ballmer
“You’ve got to be very realistic about where you are… but very optimistic about where you can be.” Steve Ballmer Microsoft CEO
Slide 21: 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 22: 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 23: Partners drive additional revenue
Source: AAG revenue reports and APGDat. Size of line indicated relative volume. • Partners drive additional revenue to and from international points • Big opportunity in Asia
Slide 24: New airport check-in innovation
New =| ro of the Vanishing Airport Lines | Alaska Air Speeds Up Flow Of Passengers by Jettisoning Traditional Ticket Counters Prepare for Departure By SUSAN CAREY ‘Anchorage, Aska _agent Pas al the information “Pededto quickly tag the bags
Slide 25: 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 – Loyal customers and
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