ALK - Earnings call transcript Q4 2017

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Operator

Good morning. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Alaska Air Group Fourth Quarter and Full Year 2017 Earnings Release Conference Call. Today's call is being recorded and will be accessible for future playback at www.alaskaair.com. All lines have been placed on mute to prevent any background noise. there a remarks, analysts. session speakers' the will question-and-answer be for After Instructions] you. [Operator Thank now the Grady. I Alaska to like would turn Director Investor Air call of Relations, Matt Group's to over

Matt Grady

you Thanks, morning, fourth XXXX call. Julie. earnings us everyone. thank quarter Good for for And our joining

today on will Brad and cost our who On Commercial hand of update cash will and Earlier Several answer an of Group flow; revenue our overview Harrison, outlook. income million. Tilden, performance team provide questions. net Air our Officer, $XXX members discuss performance management senior the call reported are of business; who GAAP our will fourth this your to who our an morning, Andrew Alaska Chief also quarter the share CFO, on are CEO, Brandon help Pedersen, and

$XXX related merger legislation, net adjustments, Group special call $XXX costs, tax and per consensus. or reform $X.XX a of hedging and mark-to-market with adjusted ahead Air tax million Excluding of of share recent million reported first adjusted $X.XX associated earnings benefit fuel income

today can include our filings. As risk our comments that on results. significantly our future from may in will a actual Information our forward-looking statements affect factors could be expectations, reminder, found which business regarding differ SEC

measures refer unit financial will We to earnings certain such and adjusted as non-GAAP costs excluding fuel.

GAAP measures in non-GAAP and our provided have comparable the reconciliation a release. directly We most between earnings

Comparative And that, call better labeled both to insights have year. of We to on business I full will Brad. We this combined help into comparisons unaudited meaningful is Combined over X fourth from to Statistics investors make the overall the of airlines quarter certain provides data year's supplementary and last earnings turn how the with performing. think investors also Page our release included results

Brad Tilden

good everyone. Matt, Thanks, morning, and

For compared income share XXXX. $XXX or reported share in adjusted of $X.XX to per we or net million $X.XX $XXX million per XXXX,

$XXX to share, in per million million we share or earned compared the $X.XX XXXX. $XXX quarter, or For per $X.XX

some we in with well As with pressure step-function as we fly. some markets on call, shared capacity quarter our new as we where third under deal competitive increases, are you as significant earnings our cost

our As call, work spring capturing as we'll the integration majority this through the of we optimistic begin way our we about talk on activity issues as by these of complete we we future, are and this the about advantages merger. the as early

minute integration As per an to X% our confidence our example of where dividend frame are to in we the a a like you our in in share. board $X.XX announced our future, for I'd take today to increase journey.

As the in believe you on to value journey us. bring years we continue ahead. doing this depends know, to embarked everyone we on who because We wanted we this

And has long-term power. We industry success advantage drives we where are real in an and competitive both durable believe advantage. staying that and Alaska current competitive

with the bring cost the closed We with little of months realize we we synergy our very our substantially revenue. with offering target, with XX $XXX $XX combined fantastic our prior the capability, advantage just expect as to expected, employees that's work merger results original cost way XX, with XXXX, of have of this our The network, guests, with this all our our service with and low most the we route people of Today, XXXX operational clear to with million and in together. December forecast. ago. importantly, history growing of fares, our in all on have company million the the consistent masked or Of the very the processes to with we provide

buying, profit have is is potential XXXX. of however give in us and decades. will revenue April $XXX that just and shopping, or in months create Andrew at will be just well check-in PSS the which system, employees, airport system, expect More important the branded last just our faster we a have and and realizing merger XX, moment. the begin through which value potential is single merger Alaska common million in single of new as we're On through rapid flight equal will We substantial, pace closing, we'll the most couple the we digital work the point, network the for customers will the experience. a At be the will than ahead full continue to in of than in as years believe industry. reach synergies and mergers our airport the grow We XX% scheduling to our that a as XX synergies to further incredible a of as our revenue that merger describe believe a we'll getting that and platform that after owners, transition to to

follows. merger accomplishments specific the Some few months last related are as from

decisions The XX Virgin rapidly airports. Airbus systems will colors. credit-card ratio and transaction FAA, the financed and received We with We adjusted and with in a a and and as and accretive from we for which first the of purchase prerequisite Alaska certificate an And far paint us operate passenger aircraft the Virgin in the PSS airplane XX co-locate that April. holders and a of top new all and cutover. yesterday excess out adding converted acquired our Virgin know, to the single the effort Virgin merger-related customers, operations XX one you brought activities already XX%. cash back program made we single America back Alaska a shop our our of the Herculean came other finance to airline like and We We've built to loyalty America growth. as have network, out also HR at of delivery debt-to-cap Alaska rest operating is route of interior members allows co-located America. all loyalty routes on a of have We and in for house. America We've payroll single XX new in grown both

On than agreements and single personally crew laid and pause back and still growth as important of of with bargaining that have achievements remaining people system. important and year scheduling on flight work single priority entire the we'll the I want reservation our customer planning attendants team thank One a pilots April have believe to XX our agents. future their our crew our joint and many service while labor to XXXX, front, collective prosperity. we contributions In so we're And this do, technicians. last maintenance at we'll our point, in for both more after have light move we for to with closed we look and having year, XX,XXX a believe I is our our foundation

share levels payout employee with proudly million which for averaged pay about per our employees. $XXX We out. at share tomorrow X.X% pay in of of annual Xth are as employees year. month paid we bonuses This is averages pay profits will that incentive year in frontline This consecutive year's one the Air have per additional of Group

in we our markets, greater levers the continue But will pressure There driving revenue can competitive volume revenue. segmentation revenue. Airbus that by fleet and capacity significant tapping for continued cross-fleeting undertaking unit of we to in level As expect us. of And by to number XXXX, have in will markets. this front and reconfiguring work plan in growth, we up-sell of this our opportunities we high there are capacity is loyalty By pressure hold substantial that business attack put look on post-PSS. year. most our by into importantly, We at and

our the growth of and While about XXXX of we focused growth optimize we bulk our XXXX, XXXX plan and will represents and in and network. XXXX, XXXX, the on advantage years Field growth stabilize the for take XX% network and the we few slow it X% is as rest. refine Paine the to expanding expect our flying last in substantial in approximately to of today Of

in free increase and As XXXX, with Brandon expending share flow will capital we capacity cash moment, a decline XXXX lower to and the to growth. consistent in expect

has people. hallmark side, our a assets, been cost one to greatest the business our of for our On of second only And years. our cost advantage is relative

productivity. will and advantage We low this on industry-leading sustain by overhead focusing

which do a a As will I mentioned face in earlier, detail in moment. Brandon you step for cost, increase function we

I'll opportunities Group compared will now, clear operations. we us brings second This we seize structure. share XXXX. down to cost on-time X over that Air in points our which about there to last rank are at control year, to For level was the performance improve Though our operational performance

ATC with struggle the room quarter first we like for and delays, we weather in external While winter improvement. challenging have factors

now to positive move provide the focused performance than momentum Beck more on Muehlen, through on made other pilot we where a I three veterans of and where brief finally XXXX. Air like X related Horizon, this changes. as on-time XXXX, single in von up, Group brought update For Gary our We've was months cancellation. points We're Constance operated we've a without year-over-year. we fourth several and leadership maintaining

regional poised between develop We front-line as companies. a country. to owners. of end in grow spring. By our on the fares. will everyone we're starting summary, further this the We competitive great for and way some be companies year networks the value on will last serving a long of as Alaska us, future great between this being complete headquarters consolidating Seattle, in costs matter real the leadership In employees operation based we're both best the you for Horizon's by are focus in our has things And to the to our the April, and operate our two to company as superior who economies and including career most, people, talent laid one two early enhancing of that better close depends our finally, And run our we on and full integration very the low about we the optimistic future, with route building in and service low pathways we've performing and be foundation a for bring largely pilots. attention solid best advantage. balanced country of running

working talented is And this the in. appreciate to team incredible to to want again, employees hard tuning their for commitment We call turn I'll very to I Alaska. ensure now once a thank Brandon. you over have all And continues. We our

Brandon Pedersen

Brad, good everybody. Thanks, and morning,

- were pressure bringing of at year best $XXX time XX% while for million significant million. fourth competitive busy ever, prices, full quarter rapid As This you've the airlines. two came year increase a we've integrating fuel growth, we heard, income net third and then all was to adjusted us of and income net $XXX in reported in

cost practices management back both that cost final came in positive. we But can better our operation be improved. today. office with slightly in know start that's in QX the than the guidance, our cost Let's and also

XXXX marks tuned not basics. And new productivity, pressures track our on is mindset will regional on and cost what This those integration management. mix of of apples-to-apples are relatively returned a restated. drivers So last our power morning's their changes finally frugality, it's about. the XXX-XXX XXXX about cutting to after which guests the in with small. care with an of pension about cost leaders the knowing on to growing one XXXX is our recognition and making these low this our a engines, explains well, fare management hour Instead, and and are rules numbers for accounting rates like smart trade-offs. CASMex diet. is is new way consolidated pilots, deal to the flying. low results about the success. changes up The happen Cost on This needs I It be every by to update to the XXXX business the fuel X.X% keeping information the day All-in be presentation our the expected costs required in costs to vital XXXX. work confirming model powers a of should is that costs. revenue This the talked investor by higher quarter about basis, expense,

metric it be business. result that did our multiple cycles us items, through excludes to our recognizes underlying our On not those hard XXXX need is goals. unit point increase new in a produce I'll for leaders strong for cost to specific my keep to offer a create about X% cost X.X% that would that down Excluding of to CASM divisional couple items. is the underscore costs capacity, on big But work the the the budget low. plan

XX%. and than of a X.X% to set have by budget. we as goal less our costs, CASM overhead than more the a for percentage First, is budget overhead and growing X% that measured in overhead non-fuel declined be Total by only

attendant is X a pilot every and points division. Horizon budgeted productivity X Second, we've operationally and flight great improvements productivity budgeted to every example in up respectively. with operational nearly be

three drive the CASMex increase. X% QX things expect We increase to

pilot higher, increase with benefits in and that the due to wages mainline much of are First, rates.

any expense the expense, our QX record four paid quarters, Second, year given in driven. deal, the the be by the expect event particularly program, this will up increase nothing last year-over-year is to hour far by our operational in maintenance largest rewards of of expected almost for operational power And we higher XX% is some incentive challenges. which pay third, some of

can will giving costs. We that attendant a with depend That's growth, year in to cost will cost somewhat us comes accordingly. XXXX, of by represents harder great budget it down to excess committed is hit Of cash. but unionized surpassing was also have under we If line, planning of course, billion and growth a If the when more our XXXX we deal is fuel year the unit in revise cost capacity consecutive having This Bottom and CapEx that earn XXXX $X.X contract we're $X.X though and through mark One was a QX and to with each and XXXX workforce cost for smaller QX. of attendants. a flow $XXX excluding flat flight gets the billion, our we'll of but related those income visibility. cost they a team XX% dry, operating in much a for possible The this increases our deal merger represent guidance, of flow timing about those have carriers. our fourth in rise record should our in CASM hardly of maintains ended XX% capacity $XXX it hope slightly In think cost targets ex of guidance it mainline from of soon. an in XXXX. to we'll XXXX, an done even expect QX in XXXX million structure increase the on decline have unit XXXX's the than want the now, we a deal. year cash us, mainline to and QX, our working to our operational billion. was mindset directionally and $X over open free go. jets flow done, be we that we delivery new billion, of consolidated payroll on resulting XXX item the costs already ex again legacy is rewards. is the course, just flight fleet cost bringing reach and XXXX, We're end will cost. to of not XX the cash will, This advantage year, of and integration be where cash agreement, Total could down we'll the get as take thinking And aircraft. that we them get million highest with impact over operations depend $X

fuel efficiency XX in per be mainline the An among Our best to against about best ASMs the fleet rising fuel but efficient hedge gallon. continue industry prices, the is will at the it's about worth XX% in the $XX six year. prices we have level months our noting of for of at place first hedges in that with fuel consumption expected also strike

side, of regional we XX and to we're EXXXs with - SkyWest. delivery CPA expect schedule the Horizon, On arrangement between our take

to XXXX, will next-gen $XXX modern, that XXXX, In borrowing undrawn XX% EXXXs. mainline end bringing XX regional year. total, including and the of free our expect and and of comfortable we jets fleet uncapped own at of billion which number by QXXXs credit, our retire We clear, XX will expect units end to $X be the to XX of capacity the million exceed lines grow in EXXX and the versatile of

In our which across about we've each two which options in plan to of We growth generating above fleet said, figures I about and optimize we're In and XXXX. been cash - our growth skyline Further, on and significantly We've to billion. time guided enhance tailwind be convenient to quarter, accordingly. last of XX% a to impact types CapEx a GDP deliveries very CapEx the network committed cash had CapEx all The Free assumed allow in assume and and we'd all range anticipated that at place above short, my cash still $X.X for we'll is years, $XXX advantage take and for a tax looking about We're expect at fuel the loss, total new be of refine, XXXX as the and billion, last flows. beyond rising substantial exercise to moves these provides prices pressure. to X% talk delivery should million. targeting XXXX comments XXXX be which benefit nice flow XXXX, free the $X XXXX Brad that. we flow and of growth. competitive the will

effective book rate and Our about XXXX XX% consideration of should XX.X%, be rate after for cash between our acquired should our NOLs. effective be XX% but

X Our have on the rules and prepayment QX. a improve debt, equity. debt-to-cap million the to with Including adoption billion the even interest our We end with $X.X with couple to of on investment-grade the partly under adjusted the the stronger. down positioned debt a XX%, We laid We're end rate related our leases, fixed. to goal in year and is sheet year. from debt in by ended point $X.X of roughly by balance new $XX debt-to-cap X.X% hit to the last of of balance recognition of headwind of year of XXXX range mid-XX% sheet of of face that the also continues will to QX, balance points environment and having at We stands the in end improvement XX%, by should our debt sheet committed we expect rising driven XXXX. of down as debt-to-cap in revenue get getting remain to billion total well

XXXX, million dividends we $XX During to returned and in via million repurchases. shareholders in share $XXX $XXX million

want will in mentioned, per dividend turn the release, to times before quarter. increasing by we for XXXX. provided We've a as timing flows. simply share now increased We've I standard I'll be although through we're I the of defer With be revenues, call pricing of and have you've to update in our for five it investors Big dividends there to will in again has Andrew. reported ours instead. since our revenue to impact recognition. that the their for do that revenues Brad do that important cash recognition $X.XX of now an It's travel, airlines effective impact used QX X% on impact over portion XXXX. new the Andrew, over understand of As the have question seen nothing to call to information investor more And to press earned miles method a initiated it on out emphasize incremental that, of both to picture flight revenue revenue costs. help to related It's turn or cost will the with like and

Andrew Harrison

morning, and everybody. Brandon, Thanks, good

When current approximately quarter appreciate billion total in $X.X drivers each important capacity revenues growth. this environmental XX% grew behind we've to it's start X% a There stick real following for look opportunities performance revenue very of factor for our As fundamentals competitive X% I sound, performance, this, on it's revenue and with lie down important growth. and are the CASM million to fourth that rose $X to just the want at since an and Revenues quarter on is XXXX elevated significant performance. reported time. fourth X% one our that at ahead to capacity. to year-over-year X% a are you specific improved

Looking in was X% in QX. X% from up at QX capacity our network, increase a competitive to

improve capacity increase in quarter. our and going that to to conditions points capacity another total forward, ability to I'm compete We was in during and in detail will expected X.X% shortly. X% quarter second Same-store these to X XXXX overtime, TRASM X%. competitive X.X%. is quarter TRASM, represent same-stores first in our markets get X to which discuss Looking will the and points by XX% of the better, we grew ASMs these approximately down markets believe

increases, down pressure is driven decline Most as a factoring X.X subset same-store TRASM our pricing by and flat The nominal after California. about pockets TRASM. markets was However, of capacity length show for continue stage being either of industry markets positive or in of to point. remain

represented Turning capacity markets, less decline in XX% the points X.X TRASM. markets overall of of our X contributed year total new approximately and in one operation XX the than remaining to points

TRASM markets well to so Finally, the currently XX new on two want XXXX XX into And points long-term I our of break, post drill this. levels launched commenced expectations. specific in below summer operated many

markets First, grow promotional these and loyalty has more activity to on the both support impact point quarter. than X

that with share and And by X gives confidence and lead awareness product profitable Virgin importantly, to metrics points. recent are growth to that year-over-year the Our is points are associated X of increased low our ahead fully basis. long-term and the over in new performance most tell seeing our for California great guests, We of in of California has results unaided months loyalty profitability. the market that strong initiatives with Alaska's now our market, routes are in will we service, initial this offerings our our And performance health tracking course too guests to near-term and continue then to health strong data brand it's at improvement fare expect and second, will challenging mature showing already newest schedule. brand have our expectations. least us six preference of in The greater These trends. our resonating operated on the XXXX. early call the additions on while America these exceeds Markets on network. year-over-year are results, me

the seeing our card performance. optimism Mileage credit we for our quality our efforts system strong and groundwork revenue volume the wide in XXXX addition, programs Plan the future are of laid that and fuels growth In

new weighted the growth Looking capacity the are expected to headwinds X.X%, guidance of in down same as More points X% of The California is now X.X% forward, and for guidance quarter, in X annualizing is X.X%. be launched quarter growth fourth Alaska's flying this reflected competitive year than to the and last this comes in promotional TRASM full first capacity markets, activity. X%. pricing on the new we growth year. XXXX from capacity guidance

I the our to express run that are outside to just I recession of returns XX impact we sustainable of we're years. cost months business America, single my network to is results, complete, fourth spend The XX Brad call optimize expansion the earlier, our is current this As the first ago, of year our every just our mind mentioned past that that and you on outlook, done above acquisition I capital, and is delivering now reservation is with built which our to performance Virgin what largely these addresses calls. only only I've about quarterly closed we this focus goal just in Bearing the XXXX this want XXXX. in our what reflecting Alaska's quarter is team this system. talking away quarter executive shareholders to reason in have over company and week earnings decade. raise over this with And months from a arguably was great past And always the a owners. single-largest have three XXth moment of while shared

network the achieved we comparing two on to in materialize the insist will in past anywhere results. to approximately critical required following: the new will Virgin current performance that access levers not Airbus over carriers on serve full gain months. upside partners The wide-body first, metal to This reflected will to but one are started is, system some but California, about the generate ago, it shareholders. will that's from single of our begin the reservation be delivering from to opportunities nine XX including unlock revenue years to obviously that all revenues our a reality international continue markets this who need results, our day, the returns acquired departures post-PSS to eight is we to include current While with America, we reflected six future

moving XXXX. revenue QX, commence gauge network aircraft and and and cross-fleeting maximize significant effect by the Airbus profitability. beginning with ensure This QX right full we that to have the in market will build our to around trip the leverage Boeing and of will cost E-commerce at the the We the differences to right resources will the the channels incremental achieved will whether long we've ensure will guest digital via free loyalty or we up acquisition growth term. and single since that that revenue a and over significant on continue capitalize experience, to in air, airport this drive

it able and represents you and on today tapping evaluate families participate. take, a just calls. to the represent access the is and more share will particular Premium of the reconfigured address a This increase able potential There aircraft. will beginning on to up ancillary in bundles in. one synergy upgrades. we increase carriers meaningful those, with First seats and ability revenues legacy of opportunities of approach to are these would obtain sell will mainline to Basic just which whatever and additional approximately with Our in Airbus above others. the that We're our And will enter will Airbus on September, for in Class reduce will not and full incremental committed This economy of for to introduction opportunity fleet, of segmentation the our be we seats, ways first service result us before are executing have ancillary and up revenues. we to gain not only incremental stated Airbus into targets are sell XX% revenue been and sell we are opportunity CASM we the for to participate merger. And up us our single Class number system, our and future the Elites will fair better to reservation drive both finally, fleet

revenues have domestic single carriers system capacity these taken reasons to a ability in While challenges. switch core of our all for network that U.S. the represent our we increase the reservation the integrate, to to full will adding significant about while above weather XX%

again. we'll to is across competitive do Our believe since able history my us that new and And adversity optimizing our one established that built upon is is turn today only network. becoming just that markets enter the landscape handful ahead, a and our in And face attention fully product newly of has year will resulted stronger. it always in the pricing we to firm the we'll be

So with questions. let's that, your go to

Operator

[Operator question Raymond from comes Instructions] first Syth with Your Savi James.

line is open. Your

Savanthi Syth

on I good up Hey, kind it operational just historical like if behind I was improvement morning. you're seems and still quarter in fourth the levels. could wondering follow of

the Just And is year. through the that kind Northwest the out you go wondering in you've improvement maybe versus California. the expectation separate the of as issues by that kind had what for of

Ben Minicucci

the within is Good it's quarter operational Yeah, Ben. saw this the fourth Alaska right. morning, the you're great and Savi, in in a Virgin process improvement We with XXXX our we've network. done merger of put one things

same past. So in Alaska of framework, the mentality is everything the now same the operating operated within how we

to is the excellence. our So really lead honest to industry just goal, operational in be

Savanthi Syth

Ben? timing the that, What's around

Ben Minicucci

[indiscernible]. starting now, Starting

Savanthi Syth

down - just right, if CASMex the reach the drivers that question All given that and ask goal? that, any on slower follow-up the of the to and XXXX flat targeting help on of I will growth, in may XXXX,

Ben Minicucci

and XXXX and about growth So, asking in XXXX? capital our Savi, spending capacity you're

Savanthi Syth

Or target. cost the side cost of more the than things

Ben Minicucci

Brandon, you? why don't

Brandon Pedersen

at There end It's day, really, Savi. two And we're down to I Yeah, I that's being watching I being starting is things It's it's prepared mindset back It's back the things that said structural now get to mentioned. really Brandon. need XXXX CASM. we've we about think the of and some to frugal But cost to to consider. keen It's right, the the productivity. may of increases. flat we remarks. think office. in on as And our the be in today where overhead. need the really All hey, had years already

Savanthi Syth

Okay. Got it. Helpful. Thank you.

Brad Tilden

Savi. Thanks,

Operator

Your your comes Didora is Andrew, America. Bank Andrew question from next line of with open.

Andrew George Didora

to part Maybe gone guess, to that and little operating scale way. how think morning, good through big follow-up are it the you've worse for you've just a California bit ask rank a your the Hi, I Pacific different would of everyone, think do integration, I back where Alaska a was in now ever Northwest guess, they pre-merger? you in been question. I thank operations Savi's now, year bigger a get can and California would you in for to you versus a they your questions. operations?

Ben Minicucci

Good ATC We're little dealing again. Francisco. It's a on San is a California with tougher basis. morning. daily Obviously, programs with Ben

best the call putting right terms the One in like We process we do. we California. like strategies controllable to that, operate we departures said Part in doing of is one, of always I is can time have on of operational airplanes place on that now departing zero. in

is strategy. The ATC second with dealing part

different at airplanes focused schedule ATC team depart, got also with daily So we has day. type put structure management we how we schedule, we a a mitigation our on when on of basis and team implications, our times It of with the the dispatchers.

to really performance. the largest is mitigate on goal and extent basis, get highest - it network operational possible our to to So a really the

Andrew Harrison

this And, Harrison. Andrew Andrew, is

to with and hum. the able machine to why to time operations to think really block restructure we through hours, the that into XXXX block That's how to push and a this stabilize network, Virgin And your America in start changes confident to right, follow-up XXXX, walked with we're going this question I to into to it. network going the really and - to year start where one had get we Ben totally inheriting block understand we're it we separate into planned than Savi's. Just fly to changes acquired is and where are until We going move XXXX, wasn't for. as late times acquisition we we the

Andrew George Didora

you. Thank all had. Great. That's I

Brad Tilden

Thank you.

Operator

next comes line Joseph, with Stifel. Joseph is Your DeNardi question from open. your

Joseph DeNardi

you're changed outlook, Yeah, you on very options before seems going Brandon, much. just bit like thank about you're to that to and maybe thinking CapEx a earlier. forego were some it taking you guys thinking the about that's relative quite it how

guess, talk going what forward? changed So just what uses cash you the I can of through, and are

Brad Tilden

might Yeah, is Joe, this start with this. Brad. I

that, environments, aggressively. make in capital. has management a been other industry the then where to decision. we've Alaska good think of when has times itself, And we've have prided the got pretty team. the being been stewards as of you've I And grow that part One There to contrarian things right down been of chosen

about at are extraordinarily we look capability real. will confident say we I As are our the do think environment our today, advantage. We our competitive low operational cost,

three four ago. solidly Our years or same the aren't they the profitable. opportunities But network is were as

are time. the got decision steward you the make one at - a good capital, so right if of you've And to of right so,

grow over grow same So last years the not We'll bit, just going is looking something it's if Virgin of XX%, onto I look prices X% but XXXX, XX% years. as up. was X to like last America our XXXX or fuel that. barrel considerably. to a X%, And last and enough at $XX night, in growth those are you we hang a current market has the level. at each without up at the X% X%, back little position grow Capacity That's and X the been and our look we're months.

and going that as just for X% provide. we X% or we going we on we're us number, capital just that for this at what to being will of It think think providing environment and future, to we're do. to the great that that's an But argues We growth lower we capital and in As argues of growth. terms provide returns grow. don't want - a stewards look don't

Joseph DeNardi

Virgin, Can a maybe far integration at bit just Brad, would've one experience I track, the in about your a for Okay. little look airlines and Yeah, on largely other appetite you. When the for paid back in kind then little less talk - whether of with be looking acquiring or wanted to comfortable experience future? acquiring another more makes bit the your seems And M&A more future, better. think you maybe with you you that's helpful. to. at than thus you The and, you Virgin

Brad Tilden

than think good today. will us. - question a pushed just $X been Those don't a were that I got great billion brand the company It's marketers. great platform one. the people say, That platform that our has is experience an Virgin Joe, We've before. better we're considerably has I going to has answer. But

very, we're about company. that. to But bite us M&A inside If think of through itself, you excited California, I talking really a growing promoting Alaska getting activity, think We've activated a gotten the We're look loyalty. been something us way don't good very on terms in at It's going is in about the into terms future. thing I of other it's for lot. this

Joseph DeNardi

Thank you.

Brad Tilden

Thanks.

Operator

Your question Michael, Michael comes from open. line Deutsche next is Linenberg Bank. with your

Michael Linenberg

the you or as XX-K on delimit the maybe rate utilize And - I morning, XX-Q yeah, maybe Hey, a that. in acquisition Oh, hey, called thanks, out have the about with XX% have - Virgin of you to result your you don't I'm got may I that wrong Brandon, XX% you consideration the the your cash to of able if here. be Two tax know everyone. company, potentially on NOLs. or you fully acquired Good use that of of the going use hey. questions NOLs being NOLs you after believe your our talked Do would are acquisition? - to

Brandon Pedersen

started I NOLs think by through Yes, the a $XXX gross basis. so XXXX, of XXXX We the the don't with, on know, be year will. something million We of end that or think we we'll we year. tax

Michael Linenberg

then, Andrew. And to good. very question second just Okay,

has hear the be - California, you believe And color out - you? seeing out I'm quarter, pressure the it on in sizable If on maybe for could maybe I revenue the your some competitive some think pressures called transcons. called would be network. you you're some that, has a out given And called wondering you, of situation that quarter, you also of last on didn't I the And sort just great, that call. environment, I may was that that transcon I You just prior stabilized for this of - it's I'm provide your improved part or California.

Andrew Harrison

tell the strong. California. actually like about What and Yeah, I of have regions, do you load - but and is traffic up Transcon, we is question. to lot talk thanks don't factors will what a are for we extremely I in transcon

is America has on at the I've summer got what looking been with actually periods. seasonality the that think a that in network in basis and September/October merger months our with peak quarter and in stronger worse I the Virgin first the

go opportunity, shoulder better to have and network, so, real actually year this And these performance. as through periods to to we revenue we a our growth leverage restructure unit

California, about. feel that good very say would we I So

going of we weakness places feeling in our strengthen position. As things we're are my where of that the we a I have I to lot and remarks, a say, pressure, coming should significantly shared prepared feel lot

Michael Linenberg

Okay, it. Andrew. seasonality even Shane. Thanks, the I great. Thanks, on don't Yeah, that's very point. interesting about think

Andrew Harrison

Thank you.

Operator

with question Stanley. Your Rajeev Morgan line next comes Rajeev, open. from Lalwani your is

Rajeev Lalwani

to a Southwest get to, you which up capacity. you about bit. just describing? we guessing what's thinking RASM, might gentlemen. time, like mean, given tough, Thanks to of lot cetera, then, RASM job us first start goal, laying get XQ of trying are capacity, out Andrew, your be a trying in the Thanks. I'm should Just for I when comparison the you're the guess, is competitive And et a Are you I and you. through questions. Two you to for just Can it? did walk of see stability to sort good how

Andrew Harrison

Sorry, Rajeev. Could of first sorry. your part I missed repeat question you something. that? specifically the to And I'm

Rajeev Lalwani

getting it or do start guessing When the level quarter, you a stability of I'm RASM it's not to trends? on second is? maybe

Andrew Harrison

now. things half, to second kick-in. revenues trends in our Got where, that's the especially shared feel earlier were too, the we trends seasonality today, we're equal forward, And right there We've things working so it. into up given focused some as better for got if unit in going should we we all shared we're we're all stability, that schedules Yeah, stability what earlier the really year, stability our of hoping as into of like in QX, half of back be fact, start move on northward but on. I the coming

Rajeev Lalwani

RASM in going you far positive Southwest like to And of then, that approaching in And maintaining talks is part are have forward, looking do question second something to general a Okay. the of you a where was that to? as that terms you're you about it goal way? just, want Or go? get different RASM, as

Andrew Harrison

costs focused need to what RASM get do returns really what get need do to we're it shareholders. needs they to do to higher profits. to to is think, what our needs on to I do, And do to

So on. that's focused really we're what

Rajeev Lalwani

capacity Okay. account cetera? one you that And the you et attendants the out, and the the that as a a that on growth and far X% doesn't down is laid as then, based or goal flight on for technicians, clarification, or so quick guess, More to into of Brendon, flat I CASM side. take does

Brandon Pedersen

on counts. Correct both

Rajeev Lalwani

you. Thank

Brandon Pedersen

Thanks, Rajeev.

Andrew Harrison

Rajeev. Thanks,

Operator

Keay with comes question line open. next your Wolfe from is Research. Hunter, Hunter Your

Hunter Keay

Hey, morning, fellows. thanks. Good

$XXX was and of the about $XXX originally you talked synergies So with deal, on this million million of side. revenue it

about in XXXX So $XX point XXXX. said sort to in those of RASM side, are, could synergies to leaving hundred a revenue you down couple on look this year. at revenue and get in And million, think only you're that X in this out as million presentation. capturing Is the on if commentary I flat to you given said you laid guess, we in majority that given a dollars of implies fair? the - XXXX in RASM going that on synergies, capacity, trajectory CASMex you of about fact, deceleration that And is pretty I strong be the

Andrew Harrison

tell but Andrew, and again. that that that's And up we we and opportunity don't I a that at, that a numbers, or also get we I synergy $XXX-plus sell - the believe. think million we will once up that's what in we Hunter, and looking that's not say are have running. year it the is and more segmentation is a ball, see what crystal you I This to now just

Hunter Keay

to in it some did you Can routes? kill length X% you scale capacity you. Thank in to the a little when moving growth you to we'll around? certain XXXX, What are And X% you on Was doing? we just can, Did growth? it routes you going were maybe the back? plans focus on talk bit you Okay. about not changed and underperforming be gauge specifically? the amount of Or Good. the up to X%. said just a market off just Was some to originally XXXX, function us what new think stage you planned - of extent start and certain you through going

Andrew Harrison

new take when to capacity plan, wanted term out, we the watching frankly added. the to environment our add and fuel adding last continue invest long you markets we're markets were of quite changed, economic and looked markets the but we that really has not there and environment, won't in, capacity this be don't need so to definitely going to capacity some if and of to But the year, core. the network have We be we that

So our fundamentally where to that's network is core it really the change, our major for but while. and footprint needs be a

Brad Tilden

have the those of to core in those, trying see bolster basis, I in get thinking to growth, sort We've we very, pay models But utility royal of going of and happen very are We're think, wanted Hunter, care that California. first into With I are will couple that is X% but invest exactly what working XXXX go, to take we'll got our well. want attention XXXX where do core. might core there. think know years, that or I'm I and customer going add then all we I to of we say. opportunities economic what beyond to to we've that. done think don't the our the to we Yeah, is last we the

Hunter Keay

all. Yeah. Thank you

Andrew Harrison

Thank you.

Operator

question from Dan McKenzie line with next Buckingham Your is Research. open. your comes Dan,

Dan McKenzie

anything here? first big to the guys. mean quarter you appreciated. is us overhang I if having things here understand So question could Hey, you a from in his these how help just dots wondering the all on can I just revenue process and cost integration are Thanks, the what connecting share investors time I'm so really is, think first guess good hard margins, can morning. the

quarter platform, international the cost partners this inefficiencies, you've What some first like are here, this might have mean So the the in the is potentially maybe perhaps you what single would that Airbus aircraft reservation didn't for got the for perspective? reconfigured, on imagine are meant? place, a just have

Brandon Pedersen

your just you Can sure just Brandon. can so it? I I question, it's understand Dan, repeat make

Dan McKenzie

a get Well, the the in just airlines. not big here, sense trying I'm quarter integrated are having a fully just yeah. of to first how revenue overhangs, the and cost by inefficiencies

merger things there here the just a April. is could a are sense get what in a dots. that lot what potentially completed, What in have of first say, meant, connecting So integration, this time trying could the sense - investors this of happened having December? after to it been a the I'm hard I'm the get if mean? of quarter just say, of might - after trying to have kind

Brandon Pedersen

revenues. remarks I centers, No, that cost year on. say million? those in dissipate that the I Yeah, it's specifically, really are extra on we year what our four and we and the is but it the million get if costs stuff $XX more might $XX frankly, through of year, kind even, first half are all a there of the say will, our integrated is, will put quantified had of as of it Is the the will And time kind comment of number just there through will as costs do the the costs that call incur first put of be I have that - specific quoted Sure. together. we friction, in it, of business all operations in don't made than million? that will we haven't this - in PSS, certainly time all company perhaps the months it you of the as than $X in without extra prepared goes integration the we that If

we the And a And the of April. side, move about synergy as talked revenue will in we described, as revenue revenue start to we've context new continue we Andrew the whole On behind grow unleash of then opportunity starting through us, have get once PSS bunch late it - and to the our year. opportunity. that in

it forward to X. to, figure But it's hard out it is some real. - do you there's math would've really, had can January but and pulled of quantify what say, had, we we So kind

really it's the is it real, move opportunities right, of and our is point we of Your XXXX one and to that see financial XXXX business. performance the second of into as improve half

Dan McKenzie

to respect what you you further on not embrace or elaborate for economy that move you on as be Yeah. having little remarks could with a similar, Thanks, basic Andrew, by And it? Brendon. the can the your direction? rollout bit it's costing timing today in any then, of something And what

Andrew Harrison

Dan, to And, I'll let you that. Shane talk more about

Shane Tackett

Thanks. Andrew Yeah, else everybody gone. I obviously, of of think segmentation, has that mentioned where sort basic

just Andrew we it and out or network. time. of out took airlines, which other and think mentioned, optimized, would I to We market I sort fully some it's to and to would once it a sort fully of have $XXX modeled that running roll million say, just more year every, get take north the impact. it's their think, of

going could an that. we We this something me-toos tend certainly say are as faster carriers. of be some international. to sort QX, example. expanding be still than us. I'll tend think to going I something hit I now be basic, that's than We like it we it motivated for the into not like would just of And look And think on them of are decided that, what we'll network go haven't but to like not that's And it's faster to do

bit business set. little need Our same It doesn't different. usually product is the

call might we're guys future like forward with the in to about to us. for talk this looking So being you look what able

Dan McKenzie

Okay. Thanks for the guys. time you

Andrew Harrison

Shane. Thanks,

Operator

question is line Baker open. with from Jamie next comes the Your JPMorgan. Jamie, your

Jamie Baker

everybody. morning, good Hey,

just be a understand already slowing XXXX. you had growth figure Just new X% I'm Day Investor mean, and significantly you to pretty I this after is? to going question trying were XXXX. on housekeeping indicated XXXX that this actually at how for

how whether - sort a of new genesis figure? original that's maybe reached could the opposed your figure? So the us give as when Could to you of

Brandon Pedersen

on hi. range it's for side eight nine X% desire the I in growing We've Brandon, think to as last the XXXX. that. high to grow to talked or We've a Brad X% to quarter, the Jamie, X% earlier. of seven been last in articulated alluded years Andrew or always X% about

we see of the environment, rising so, seeing. Brad days. to change And frankly, as And we that opportunity produce really the about, don't fuel the much capacity changes the that talked happened genesis has which XX in we're returns want are additional is last And to. the that kinds the things of that the just price

right on the higher XXXX to and than us I said, thought And back. level it last still and but so, going big is It's we over about really as we GDP, a XX days it's as the forward. wanted still for dial base it XXXX, XXXX,

Jamie Baker

feel for bit look, now acting we clarification. that have a for Christmas we having could that's starting and guides second, ahead any being random I the Okay, one, quarter. very But we the a the you got that to from the starting a industry just think first do you'd further the But of prove And, Any it. play once buybacks again from he's you guides with thought? limit of But industry? could random. through, this have competitive beholden and management perfect occasionally argue governor dividends again, present little appreciate And actual some that to much wildly another you, of Once a additional as catch-up on they to guide like knows? thoughts? one get we're you asking Thank inaccurate. airlines. may growth, also the opened you somewhat maybe Who benefit out given behavior earnings there. his see like pull kid already riskier earnings see kind actual is

Brad Tilden

steps. Baby Jamie, steps, Baby

Jamie Baker

yeah. Okay,

Brad Tilden

of unit guided revenues, a to a about we way In the CapEx. We've where did We've and It's we guided not time forward. But can talk what seriousness, what we on say about plan us, revenues. first guide all on landed on thinking unit you're would this control. to let's we right. and capacity. it going TRASM guided - We've really for that we long-term do I lot. near-term And is guide we say,

that's guiding comfortable rest, control. we in we're to we think what to I respond shareholders. what So get we'll best for the very our way And the on

Jamie Baker

perfect. Thank that's everybody. you, Cool,

Brad Tilden

you. Thank

Operator

comes is with Your Helane question Cowen. Becker your Helane, next line open. from

Helane Becker

very for operator. team, much, here. thanks the taking time Thanks Hi,

what's but adding, the Brad So, the Paine I connecting you're suppose, if behind expecting growth at that Field? And traffic the or want question, know not Andrew you're don't this looking answer to roots thought at I there.

Brad Tilden

for in hi. very, Sea-Tac. airport Hey, Maybe miles they very start, live Paine to roughly morning. Andrew know County in I to getting from difficult. the think Seattle Seattle, I'll who is But we'll weigh those XX Traffic, in. there's But the from Snohomish get long is delays

in is our going area. the city for customers County So to northern Snohomish an this enormous part live benefit the be of that

think or out I Paine think, our correct of might Andrew, an like you'll I option even that Sea-Tac XX% me, flying as something prefer more, of customers for it's XX% XX%, them. but

it. behind thinking the of some that's So

connectivity, Andrew, on In thinking terms we're but I Portland think of can maybe than more anywhere you elaborate else, that.

Andrew Harrison

No, I mean, Brad's pretty much hit it on.

convenient to we serve that more for so them we way mean, markets capacity serve is markets in I because other we're move for it and guests are convenient does what in travel getting big that today, think able to our put us these provide for it I constrained. directly. us us And going a it's to metal in to want around guests. Sea-Tac allows for for more

Helane Becker

Got you, okay.

seeing ask you're that revenue - down was to starting trends, unit-revenue up difference. all going group peer that question I unit you like think guys But it seems revenue. a address to still I related a my on seeing unit and this questions. was with

Shane Tackett

again. Helane. hi, is Shane, This Yeah,

of to out, company want. And sort revenue industry You're sort performance absolute what fully are revenue committed our of absolutely interested we to how what I this us. production in sort to And right. we next get think the We're in the the several that's aware go figuring of and returns produce quarters. of directionality we're needs and of the

Helane Becker

Perfect. Thank you.

Brad Tilden

Thanks, Helane.

Operator

open. next Brandon Brandon, your comes from with Your question is line Oglenski Barclays.

Brandon Oglenski

as more call, Hey, and Alaskan you network. fears the think and in that to just quite quarter. third some maybe the last guys Virgin going But good there's about more you are good talk on I the And just talked and to to to me I lingering go we morning I getting back afternoon move we for the know forward Thank the integration, quarter call here. about everyone. going integration isn't that plan. want

comment And out significant you can revenue some the think I called you dynamic strategy think to the markets some of the out of feel you I talked Virgin. earlier at to do place core got about you Virgin? deficiencies? core an guys Andrew, in versus right transcon but pretty those And underperformance revenue question, how's you've guys playing of just further, fix Alaska

Andrew Harrison

parameters I enough the our on improved. What and you've and been and call, done Ben's year can't challenging very, not in under then understate Yeah, the network a that quarter has been share of getting very getting for new operational been not get to that our I parameters, planned, for call, rest that's December sales, to just and our I us. network two heard me which markets and on we that Californian those third under scheduled improved, already view how is inheriting on normal really includes same-store the our operating mean, mean, network a has are Brandon, There back pieces. XX

we as benefit over occurring these at at we into California international that think changes the XXXX connectivity, and these we greatly look look initiatives, from look XXXX, are I the will beyond. marketplace again specifically

Brad Tilden

factor up the load And California are whole year de-con new a markets, inter-Cal, California that over-year, as I would materially just [ph]. markets add in

excited the we're So that overall about demand and we're traffic seeing.

Brandon Oglenski

profitability question next in think deal And a go to a a going were back level, else. I I a layering time more at consensus X-hour higher handle. an saying, If Okay. the pilot put about of and think. year then okay, looking changes that in earnings little and headwinds at fuel synergies mean, some then, from difficult were I investors benchmarking talking But this is and just EPS But a back lot much XXXX. we be XXXX for we obviously everything time,

X-hour a about Now, tax we're talking a handle with lower rate.

should Or was the and level from should of guys hey, to the year this the of that we're now catch the ago, right to be looking year which on about when the bit we deal time we we should thinking synergies So to thinking, of a deal, a profitability modeling adding profitability? attainable when be synergies? fuel, is forward, that what are back you in level little ability basis be talking up given be

Brandon Pedersen

it's actually plans with focused know Brandon, on answer The can it adequate to in, your I lots that, change. And thing are industry labor comes comes shareholders. move, returns is out, to because capacity this dynamic only that question that I of markets say we to an don't the Brandon. competitive is delivering extraordinarily our

what say say forward. would is then was we're hard where I was we want versus now place that not can what and be what What So going it's improve I results say to we is is the now. looking to a are to

Brandon Oglenski

it. Appreciate

Brad Tilden

Thanks, Brandon.

Operator

question next Susan, from comes Your Donofrio Susan Macquarie with Capital. is open. line your

Susan Donofrio

Yes, hello, gentlemen.

Brandon Pedersen

Susan. Hi,

Brad Tilden

Good morning.

Susan Donofrio

to wondering two out to together? make doing the employee and touch-base cultures that just smooth the you're what Just wanted I'm just on sure side, are blending

Ben Minicucci

did our we Well, cherish great we Ben. an our the to if are airlines. one love, last lot then remember, we what - you reestablished the Good purpose great And morning, It's was said the culture. just Susan. values at had people Alaska. is on airline, the a of something and start, and we first people has a culture And of Virgin and creating things time, of airline which align a

are of That's Horizon our doing making the XX,XXX one one culture the Group every get are your is us i.e., thing things Alaska, So living purpose we sure that in aligned. of both. at Air

we're in second The the out operation. doing leaders thing getting we're is

a out are lot. We

I couple We're steady of of next running with as together Our And two out we we just best a coming making frontline the of weeks. And be last out a folks. weeks. just and importance progress. and the - a getting the have focusing the think out new talking going we're communication airline We've cadence on leaders lot, under to been team, Alaska coming about as together one out are can.

Susan Donofrio

Terrific. overall And then merger. on a up follow the just just

cetera, starting You didn't about known explaining had just res those more abate extra in cost you expect well an now market? you're just spoken your agents, et that getting are to that before things cost like some related to

Brandon Pedersen

way, a that that people like the our I'd of or Susan, abated. does Elevate the go I agents, been A move we a have moving this. to think we by deal they've because majority say of so. vast I program share transition, with safe once of lion's away. folks cost an it's And from whether will result Brandon. Plan. Yeah, into our really that comes it's customer res PSS, loyalty service from And our as it's thank flight to think of transition, Mileage changes But the people lot of that as in had transition get to Virgin flight because and through to Alaska

Susan Donofrio

an Great. just just follow-up. unrelated And what on seeing and Hawaiian then you now? just Can right market, you're comment the there

Andrew Harrison

how and Andrew it operating with regions. tuned again. very to years in got happy XX on We've Susan, today. running But finally and specifically don't we're We Yeah, is that been market we're that like we this comment now. have

Susan Donofrio

Thank Terrific. you.

Brad Tilden

Okay. guess, you last to us you telling next chatting quarter. We our all Thank in. is question. I for with had team you. forward that look want tuning We to Susan the thank

Operator

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Alaska Air (ALK) 25 Jan 182017 Q4 Earnings call transcript