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 information concerning factors that could cause results to differ. November 18, 2008 Exhibit 99.2 |
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 Dillingham King Salmon Kodiak Fairbanks Juneau Petersburg Wrangell Anchorage Yakutat Glacier Bay/ Cordova Gustavus Adak La Paz Vancouver Ontario Burbank Orange County Los Angeles Int'l Long Beach Denver Lihue Honolulu Seattle 6.9 million passengers/yr.* 3,700 employees 63 aircraft 47 cities served 390 daily departures 17.2 million passengers/yr.* 9,600 employees 110 aircraft 60 cities served 425 daily departures Data is as of Q308 except passengers/yr, which is as of December 31, 2007 Spokane Reno Sacramento Portland Boise San Jose San Francisco Int'l Oakland Ketchikan New Alaska Airlines Service: Maui – July 2008 Minneapolis – October 2008 Kona – November 2008 |
($8.3) ($11.0) ($2.4) ($7.6) ($5.8) $3.0 $5.0 $1.4 ($3.0) Nov ‘08 ($12) ($9) ($6) ($3) $0 $3 $6 2001 2002 2003 2004 2005 2006 2007 2008 est. 2009 est. ($68) ($31) $5 $55 $138 $92 $79 ($13) Nov ‘08 ($88) ($100) ($50) $0 $50 $100 $150 2001 2002 2003 2004 2005 2006 2007 2008 est.* 2009 est.* (in millions) Industry (in billions) Fuel has moderated and analysts are forecasting industry profits for 2009 *First Call mean estimate as of 10/29/08. Does not necessarily reflect the company’s internal forecast. Merrill Lynch for top ten US airlines – Nov 2008 Assumes oil at $100/bbl and $30/bbl crack spread ($5.4) July ‘08 Estimates at July 2008 ($60) July ‘08 |
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 |
Relatively low leverage outside bankruptcy 34% 75% 75% 78% 83% 88% 92% 93% 100% 114% -30% 20% 70% 120% Alaska Air Group Adjusted Debt-to-Capitalization – Q3 2008 Source: Company Q3 08 SEC filings FPA-PS 090308 |
11% 12% 14% 15% 17% 19% 19% 23% 29% 32% 0% 10% 20% 30% 40% 50% US Airways Group AirTran United Delta Jet Blue Continental American Northwest Alaska Air Group Southwest Strong cash position and multiple sources of liquidity Cash as a % of Revenues Q3 ‘08 Note: Calculated using unrestricted cash and short-term investments at September 30, 2008 divided by revenue for the 12 months ended September 30, 2008. As of October 21, Alaska Air Group had $1.18 billion in cash. *Does not include 9 aircraft pledged as collateral for line of credit. Source: Company earnings releases and 10Qs as of Q3 2008 Fuel hedging cash collateral 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 |
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) growth Q4 ‘08 Q1 ‘09 2009 forecast -17% -12% Q4 ‘08 Q1 ‘09 2009 forecast -21% -19% -11% 0% -9% -14% Indicates change in capacity Indicates change in departures |
Seat supply is being cut, but not as much on the West Coast Sources: Industry - Latest published schedules; AS – 8K filed 11-17-08 Carrier Mainline Only AirTran (6%) American (12%) Continental (24%) Delta (9%) Frontier (16%) JetBlue (9%) Northwest (16%) Southwest 1% United (17%) US Airways (11%) West Coast (5%) Alaska - system (7.5%) Domestic ASM Chg - 4Q 08 vs. 4Q 07 |
Spokane Spokane Vancouver Vancouver San Diego San Diego Butte Butte Bozeman Bozeman Orlando Orlando San Francisco San Francisco Zihuatanejo Zihuatanejo Cancun Cancun Mazatlan Mazatlan Calgary Calgary Los Angeles Los Angeles Mexico City Mexico City Los Cabos Los Cabos Denver Denver San Jose San Jose Puerto Vallarta Puerto Vallarta Orange County Orange County Burbank Burbank La Paz La Paz Boise Boise Las Vegas Las Vegas Loreto Loreto San Diego San Diego Ontario Ontario Oakland Oakland Long Beach Long Beach Portland Portland Seattle Seattle Klamath Falls Klamath Falls North Bend North Bend Eugene Eugene Santa Rosa Santa Rosa Sacramento Sacramento Reno Reno Redmond Redmond Discontinued markets and decreased capacity Jan ’07 – Dec ‘08 |
Flagstaff Flagstaff Anchorage Anchorage Boston Boston Los Angeles Los Angeles Spokane Spokane San Diego San Diego Palm Springs Palm Springs San Jose San Jose Lihue (Kauai) Lihue (Kauai) Honolulu (Oahu) Honolulu (Oahu) Kahului (Maui) Kahului (Maui) Kona (Hawaii) Kona (Hawaii) Santa Rosa Santa Rosa Seattle Seattle Portland Portland San Francisco San Francisco Eugene Eugene Boise Boise Minneapolis Minneapolis San Diego San Diego Sacramento Sacramento Las Vegas Las Vegas Cancun Cancun Eureka Eureka New markets and increased capacity Jan ’07 – Dec ‘08 |
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 |
Fuel continues to be the wildcard |
Source: 10K reports as of Dec. 31, 2007 A young, all-737 fleet simplifies our operation December 2008 737-800 46 737-700 20 737-900 12 737-400 38 All-737 Fleet 116 aircraft 17.5 15 13 12.8 10.8 10 9.4 7.6 4 3.1 0 3 6 9 12 15 18 Northwest American United Delta US Air Continental Southwest Alaska 2009 AirTran JetBlue Average fleet age (years) |
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 Better 10.76 11.16 11.65 12.38 12.63 12.75 13.12 15.36 16.49 3 8 13 18 737-900 172 seats 737-800 157 seats A320 149 seats 757-200 182 seats 737-700 124 seats 737-400 144 seats A319 122 seats MD-80 140 seats DC-9 140 125 seats Fuel gallons per passenger Source: The Boeing Company |
Moving to Q400 single type fleet ~50 aircraft December 2009 Q400 ~50 Q200 16 Q200 16 70 aircraft CRJ 700 21 Q400 33 December 2007 |
Horizon’s aircraft are among the most fuel-efficient 5.8 6.2 6.7 7.1 7.2 7.3 7.7 10.6 3 4 5 6 7 8 9 10 11 Q400 76 seats CRJ900 88 seats E190 99 seats CRJ700 70 seats Q200 37 seats CRJ200 50 seats E170 72 seats B1900 19 seats • 400 statute miles • 100% load factor Better Fuel gallons per passenger Source: Bombardier |
$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% |
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 |
Our non-fuel costs are better than legacy carriers’ but we have more work to do |
“You’ve got to be very realistic about where you are… but very optimistic about where you can be.” Steve Ballmer Microsoft CEO |
14.2 14.5 11.6 11.8 7.3 4.2 1.7 4.8 4.5 2.5 0 2 4 6 8 10 12 14 16 Jan Feb Mar Apr May Jun Jul Aug Sept Oct 0% 50% 100% Greatly improved on-time performance reduces costs DOT on-time performance |
• 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 tie with Continental Airlines among North American carriers Improved on-time, reliability and baggage handling means higher customer satisfaction |
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 |
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 two great brands – A track record of innovation • Focused on delivering shareholder returns |