Alaska Air (ALK) 25 Apr 192019 Q1 Earnings call transcript

Company Profile

Participants

Matt Grady	Director, IR
Bradley Tilden	Chairman, CEO & President
Benito Minicucci	President & COO, Alaska Airlines, Inc. and CEO, Virgin America, Inc.
Andrew Harrison	Chief Revenue Officer, Chief Commercial Officer and EVP
Brandon Pedersen	CFO, EVP, Finance & Treasurer
Christopher Berry	VP, Finance & Controller
Shane Tackett	EVP, Planning and Strategy
Helane Becker	Cowen and Company
Rajeev Lalwani	Morgan Stanley
Duane Pfennigwerth	Evercore ISI
Jamie Baker	JPMorgan Chase & Co.
Catherine O'Brien	Goldman Sachs Group
Joseph DeNardi	Stifel, Nicolaus & Company
Hunter Keay	Wolfe Research
Michael Linenberg	Deutsche Bank
Brandon Oglenski	Barclays Bank
Jose Caiado	Crédit Suisse
Darryl Genovesi	Vertical Research Partners
Daniel Mckenzie	The Buckingham Research Group
Kevin Crissey	Citigroup

Call transcript

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Operator

Good afternoon. My name is Catherine, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Alaska Air Group First Quarter Earnings Release Conference Call. Today's call is being recorded and will be accessible for future playback at www.alaskaair.com. [Operator Instructions]. to of call Investor like Air to now Director Group's Relations, would turn over the Alaska I Matt Grady.

Matt Grady

during afternoon quarter Officer, In and COO, Good for Andrew our CEO, will Harrison; management the Brandon Catherine. and quarter Pedersen. $X Minicucci; portion our Group answer Several team for from our are you Thanks, President CFO, Tilden; of joining hear our to Air updates first prepared also our our million. XXXX call. and your today's GAAP the call. members questions Q&A Ben Brad of earnings remarks, you Alaska thank of us This hand Chief Commercial on other net afternoon, income first reported

special income share call adjusted $XX Group Excluding of first merger-related quarter adjusted adjusted charges, the of ahead compare costs, Air in to earnings of the per earnings income per million net mark-to-market net and of adjusted $X.XX These results XXXX. first of of and reported consensus. fuel $X.XX and $XX adjustments million share hedging

in his have measures such to Brad as non-GAAP over reconciliation a provided between will opening in our we On earnings fuel. future non-GAAP can our refer Risk excluding GAAP turn As remarks. the regarding now usual, forward-looking Factors statements Information materially which and could I measures financial certain directly call as actual adjusted earnings may costs, will today's differ that call, affect include release. and we reminder, comments from for found on And the most comparable filings. today be our a our to performance, SEC And unit results. business will today's

Bradley Tilden

work to profit the at in afternoon, to a lot to we multiyear and and plan to business discussed by made our November, would the margins encouraged performing over like, our produce everyone. got business progress XX% Last Investor still quarter. quarter we XX% Though the we good our we as do in first Matt, we're get Thanks, averaging of Day cycle.

those achieve the by operations. the quarter Viewed parts We controllable also that lens, results of were performance in margins improving first to our discussed our solid. intent through

On And ahead cost began outperformed delivering initiatives the on side, some schedule. our ASMs the we of our fewer to better schedule and on cases, guidance planned we in than revenue side, than despite completing productivity planned. by deliver

to fares last satisfied indicated exclude that are though gaining to we noise results, in in higher So we if two somewhat drive the impact we we're the traction, value, were significant not by masked business. and with a said, control of when more returns to even they in factors: February That drop headed unusual and making storms second, most factors our right series that quarter. extended the and through the which we're substantial significantly long-term operations; underlying in improvements direction. business we're first, winter California in New a a had transcon of items revenues. disrupted close-in in York-based To These deliver our believe of it Investor we momentum directly, we see impact at we the Day. and in quarter XXXX the our we initiatives And do these the on our put margins and created, adjust events, on see our track we markets, as

winter has Northwest got employees I thank significant skill who weather storms, Pacific the seen through terrific our determination to most us through first XX years. in the the Regarding their want and

number to teams minimize we keep the Our flights. guests of other cancel. and end did our canceling each to safe, beyond X,XXX went We had and to above flights up and

as the optimistic the of behind we're $XXX provide investments making mature year, with people and and guests million in cancels to travel ahead, harness initiatives grow across who XXXX. on reaccommodating our environment. all in We're and the improve realize a opportunities this We're who focus keep have. We're looking stable diligently growth outstanding is Virgin an The to our And our dealing use Our revenue coming should us. and and upon moving we rest the our job teams to margins track We to share. pricing these worked investing product, customer organization we'll during the grateful of the let season our to we're service synergies platform. and reservations operating and us, integration impacted. more great this realize our potential our together better per energies summer agents were earnings did one on time. it team with and to to and recent America almost about airline of And slowed largely what is

X% back do our and the our a we'll these today. will we things, lot will be cover pace that powerful larger believe network, to advantage moderate and profitability As competitive the business a more given our today. at annual And a appropriate of get to route albeit, got we leveraging size more growing as our improve, X% over airline, also margins is to We improve. we

this to I'm President pleased Ben point, our turn at and Chief Officer. the to Operating So over call Minicucci,

with commercial made expanded Ben, over September As we in our Ben responsibilities of structure. changes to year a the reminder, took old you. to on last

Benito Minicucci

responding as After pleased flat and update today everyone. an participating these total year-over-year on $X.X business. years you provide your revenues increased to in revenues capacity, quarter, good grew In X.X%. billion prepared Q&A, participate in afternoon, to roughly and remarks on our unit calls and with during first Brad, X.X% questions the our Thanks, I'm to of

like year, the quarter. the share encouraged echo also our multiyear improved X.X%, prior versus we our to improved XXXX. points comments better XX basis faced adjusted than pretax that I'd and earnings progress margin towards we're goals Brad's making challenges to per despite last we're Our with

With integration core. streamlining turned to our complete, at the almost business our improving the has attention and

product, roadmap, make to productivity. greater headway we're building experience, our our awareness on and of improving starting aligning initiatives on brand, the implement we our As our guest

efforts Coast All customers of loyalty our new strategy these of guest in back markets. to building attracting tie and West

our began examples synergies team's most accomplishments: of recent as material to few of Here are swap Boeing appropriate we the more into we routes. first, aircraft our capture revenue Airbus and a

of lower June. aircraft XX will a higher the renovations those aircrafts, unit fleeted cost March, our capacity-constrained moment. during As had second, XX repainted and we'll interior in the gauge, will with provide complete margins XX update Airbus now also our our all in Boeing on we are by full season; we've Andrew This improve swing, Airbus further of most a and into forward, cross demand. especially markets peak summer overflow going

with X Key network past performance exceeded thus our and guests. of they've team significant controllable adapt made revenue far we substantially we in as from people January. with flight Field really storms, to fully-integrated Fare fourth, employees it launched This respond And attended February, move partners. over our expectations. our goals; our on we've product. to and Flight leadership generated the as as we most Path has our we our the one together product these culture lineup Paine improved challenged and recovered strategic questions guests, series care began enhance winter are metrics months, us our although the has operationally our new it forward together our our navigated face-to-face March, from helped January our international zero our pricing we through Sixth, product departures attendants our bring flying quite in not completed launched least, took and team Third, to operating and but April. added of a on and In and as Over some toward XX; performance incremental financial on new connections was in teams last the was change And have workshops great and zero and us reinforce last as in fifth, sessions departures in we of week, one Saver XX,XXX program, global team. and March service years. well to continue looking good to our

at over our accessible, cabins, and airport our valuable the guests. ever and employee the Wi-Fi for steps at guest experience more offering, of terminal are We uniforms, attractive of in Each upgrading opening are Satellite than Seattle the making also with North airline the our the June.

momentum all continues We still to a these ahead. on fronts. build work Our have lot of

our guest and building good our network, ultimately, loyalty, are We progress optimizing profitability. increasing making

guests, the valuable about let of still growth. service, over this continue award-winning years done generous growth, profitable will airport this asked I'll Virgin briefly Before our are merger We and confident the I his comment growth like has our over today, merger. we answer is Andrew network opportunity what short and heading still returns. updates. we've turn program for our our however, We're especially year profitable stay But We're California, our can turn we We leveraging advantages call costs, historically. our beyond with our this was the to delivering always in in investments a for deliver the we given that And to I to we our call with leverage will just potential. some and to lots pause Andrew, year, increase would started for our recent with year, investors this especially, America the And thinking growth our and slower mature longer-term A acquired that ahead getting low said have loyalty to competitive taking on growth changed. as that, that our our and upward. on the we owners, no. trajectory to assets is whether employees see commercial on

Andrew Harrison

performance, our service, we Thanks, I'll everyone. given see Ben, quarter to today. revenues product Today, first what QX covering we revenue where and and and good know our be afternoon, updates

Ben lasted and storms quarter, the first winter collapse of severe total pricing period XX-week RASM an unit to our markets, As in delivered billion, outperform still increase our transcon a peers revenues growth. close-in on revenue industry in rose for goal X.X% domestic X.X%. $X.X to of Despite just California-based and on we that the navigating stated, the

quarter The first can challenges. present

their fares, our revenue to full over see past into firmed was quarter's fares and summer. Given reach spring with but weakest, on When synergies call. set rates have year choppy close-in quarter. initiatives run noise our the us, and it's highlighted Close-in mid-second other month seasonally positive this we the we last and this heading which are behind especially momentum

Before turning in our quarter. more X.X% though, increase that the like the the in to to insight puts I and into resulted takes RASM future provide first would

of terms guests the our chose product up as Saver and to than exceeded these, on in increase. initiatives RASM expectations So more our Fare, of tailwinds, a of contributed we component of points ramped planned. out the and largest XXX basis combined buy synergies schedule

areas the to initiative pockets As Saver as and we QX, many rates other saw well initiatives reached this unit as of our the environment strength quarter. we run Due yield pricing, in Coast compared delivered to to only their positive regions improved tailwind so, expect up revenues strength and of West grow. that in slightly. was significantly of X XX operating our some

Mileage Our Total to Xx X.X% loyalty member grow, especially overall also Plan cardholders than California. credit revenues in our revenues. grew and continue base faster or

to in headwinds. they February moving million by QX directly the reduced points. winter basis and caused cancellations The Now storms $XX XX and X,XXX QX by RASM revenues

Since to not In consistent above-average close-in addition, Metro our January the departure in operating impact to saw way These prices were specifically guidance. close-in we These negative the QX our prices, network two XX% on had trajectory of year. representing purchased the for think York mid-March. variance sell experience airports, Los and significant from the to San our however, Francisco the weakness and markets, generally rebounded pricing California were RASM to of do since, most affect Angeles significantly date seasonal have mid-March revenue regions with through in continued typical of one and close XXX isolated, transcon and Close-in original their pattern. fares to basis a markets this New weakness in QX. for rest tickets material, of about and explains Boston firm

been summer. and optimistic We the we on spring to year. since guidance first softness other in September into as was are market of only last transcon pricing This was revenue original has head region the in due Hawaii our experience to that reflected cautiously California the lower in quarter. pricing

Importantly, some and in remained Hawaii has of though cases has late stable still negative, quite improved. in pricing

images number product to focus a Saver through margins also I ahead, team's revenues. and of on to commercial other and that higher And would continues Looking contributors, unit improvements improving we're this while to the briefly. year major be like our Fares are summarize network implementing

from departures XX weeks at convenience Results of live positive. X been north greater operation to Field, first have service month, utility few last for our of began guests First is Seattle. off which Paine very destinations offering our the for and that a

Next Seattle with to year. our at flights our being also guests transcon expanding satellite our installed Pacific opens beta year. to Singapore complete of to square-foot Fourth, and our is which interiors increases and also guest on in And for XX,XXX new on all featuring next and global on Alaska our satellite Cathay improve to is guests. and installing North and Kong, count track Seattle website. Airlines terminal We'll a experience. partners our Each XXx fleet We're on total date, bandwidth Wi-Fi, out be XX lastly, Global current from Partners seat we're Japan is through align across aircraft direct the offerings, opening XXX-XXX will we're new And retrofits flights year. this network by a Airbus Narita, testing ability seats. Satellite to Airlines operating flights aircraft cabin Francisco to Hong is next lounge of builds a And Class book international in third, rooftop June the the time directly Airbus mix XX the lounge San our this be renovation on new and installed new already by First greater Premium that mid-next of for Singapore.

these of optimistic the into second are reasons, all quarter. we For heading

growth X% and Our capacity eases growth is ASM a X.X%. to modest competitive

is synergies XXX reflects range basis X% of pricing of basis the point to basis from initiatives, and points RASM Hawaii. benefit Easter improvement Easter, sequential expect timing - points we X% up which revenues XXX continued guidance of a offset softness assumes in the and QX from XXX incremental headwinds by Our of from

the is to to a we leverage the turn than in by outperform significant the QX domestic our did greater peers domestic target year. and RASM outperform we the over XXX plan, margin with in QX, I'll And our call it Brandon. opportunities basis for points As self-help by industry expect our full that, to

Brandon Pedersen

much, Andrew. Thanks

Air profit or recap. $XX up net share, share $X.XX first a posted of XXXX. per million to Just or from adjusted $X.XX per Group million $XX in quarter

quarter the lower. was and our fewer are more better ASMs half our productivity Unit ability despite confidence slower our about unit points points need our to us completing of only the this On make the faced. cost margins the or business last we've up today been source on factoring timing, outlook of a pretax margin guidance was higher were basis the work full are, and we half performance low is that the have overhead and surface, improvement competitive more steady the low we is X.X% toward in Overall, execution was revenue across still of since upward despite modestly much quarter, gives returns. but result improved initial substantial demonstrates our indicates versus XXX comments more the more target. protect years, despite growth. increased climb the manage begun than the advantage. ended This result after CASMex QX solid margin Notably, - and XXX year, And focus progress than we our pleased and We costs. in the better structure the the in headwinds result first we've and sides organization. achieve year QX. cost up and importantly, of cost our to to have do key costs on fuel for on costs My About to basis both cost with of than planned. will XXXX, planned

me did you couple where Let of this in of examples well we a QX. give

group lower productivity res points in this First, second, last in lower prior was XXXX, of better quarter; better better performance was mainline trailed was really adjusting This items, year last after third, was but the pilot than X.X timing full res reductions host a and X.X planned spend reflecting to the synergies, management productivity a than Kudos planned. great, in for a some than points we and areas. year; still XX% overhead team year. spend other productivity strong our cost for than made and X%

our also reduction vendor to addition, relationships. In cost efforts our extended

pricing this year the and Investor external structure. engaging real As that vendors adjustments are we're renegotiate will recognize the at out have other effort of supply that made our and want their we rates chain mentioned leading we for Day, to help to leading the team business our us and cost many deliver to the initiatives - partners continue for to lean thank this pay, I savings. starting to

the to Looking quarter. second

We to as capacity. be be the up maintenance continued higher well the sequential X% X% this our growth timing, as year of on mix first impact which substantially a increase approximately expect regional The reflect to in CASMex of current half in higher costs XXXX. continues front-loaded

guidance previous now capacity since this than consistent initial is points XXX performance our QX overall represent our with better is While basis guidance, it growth QX does our lower plan.

For X.X%, our basis XX lowered reflecting savings the points in the year, full CASMex have by guidance we QX. to captured we

As guidance in deals of any the year may does a not new our XXXX. labor reminder, full complete include we cost impact

Turning to than which the million billion of lower about QX in $XXX over flow higher debt continue cash costs, allocation ended $XXX in and operations Increased free Total ex we're was period. nearly XXXX. priority. CapEx cash a for overall our flow ex this throughout deleverage, including flow, same with three our cash million the improvement free to was million of repaid far balance first in debt year-over-year This cash allowing We consistent net resulted by million was $XXX merger-related of This $XXX We've is quarter million lead free $XX pace remains to $XXX in capital integration balance XXXX, on profits pre-payments. the million while the $XXX to cash. reduce us costs, from net million which in and $X.X should flow to XXXX. year, so about sheet. months #X in CapEx of

We also acquire $XXX billion our this the crossed more million quarter, and borrowed the stood at Virgin of end of retired line of adjusted With now at should NGs America. undrawn somewhat $X we and Embraer than a and We have more quarter-end about unencumbered of $X XX%. debt-to-cap XXXs, XX%, credit. now than XX leases, year Boeing we to milestone billion having

debt-to-cap As returned to we the currently repaid share pursue We to expect aggregate end. achieve by we've yielding also to $XXX debt, which that balanced million approach other to is repurchases. our returns via million consistent to flexibility our and exceed we'll $XX shareholders are the closer And greater about capital dividend, allocation. owners, have we still XX%, X.X% year with and increase capital once returns to to opportunities

few despite Let experience. enhancing me are synergies hard business returning the by is We're the generating. and nature themes. mother revenue to financial improve Merger creating setbacks close and of this to guest returns working initiatives from momentum. factors a We're today's other

program continues grow faster to loyalty Our than growth. passenger

cost Our improved. outlook has

balance this is is significant gives for runway strong, Nothing our industry in and without challenges. Our term. longer expanded us network footprint sheet growth

rest the that, in ahead. of shareholder year. our QX are advantages And in behind your go With deliver to And questions. value the the with leveraging superior noise optimistic years competitive let's forward our we to of for we look to outlook us, the

Operator

Instructions]. [Operator

Becker of line with Cowen. the from Helane comes question first Your

Helane Becker

the the questions. confidence trajectory some that revenues just So the of cadence quarter? of bookings you you during what talk give in about for and terms June you degree in One, numbers see or can the hitting quarter two of second the

Andrew Harrison

Helane, Andrew. it's

you guidance But done nearly an firstly, growth have today, sort acceleration there's I then at three we April to looking think in, the we that as there. I of just at good the revenue our the months it and as well going see all visibility the just environment sit range, about see feel come advances today, next are of we as looking fare from can being with at and today. very how things equal sits that's

Helane Becker

Okay.

specifically speak to? are of strength areas So you there that can

Andrew Harrison

as I we're were of patterns are about in softer would across regions, Hawaii. and of - in booking think But seeing fare is we our little I bit the environment talked seeing say, what normal up. headwinds comments and a spring we most we head summer regions that strength the couple and firming prepared into in the our both

feel we move as pretty forward. good we So about that

Helane Becker

then And for just Okay. Andrew, you on and loyalty card. another question

and mentioned guess. comps? that - but exceed You continues the I grow, slowed has Are growth you the grow card the off expectations, it seeing rate tougher to to continues your

Andrew Harrison

was still hit, without we'll the And - quarter. getting California growth Plan double-digit systemwide would growth first in and into rate. both I fact, growth in the card in details, the credit Mileage double

very would we're we're good I even the So momentum in say growing increases. base that seeing that off still

Operator

comes question line Lalwani the next Your Morgan Rajeev of with from Stanley.

Rajeev Lalwani

question for a you, Andrew, first.

terms made of pretty You a ability to outperform your bold in statement forward. going on RASM

above Some maybe are. Spirit, your kind so dissimilar a guide, that points X% that Southwest sort about pretty where of RASM, I at from low-single-digit, it's there? be not if your you peers are alluding Can just mean, of just X number. in highlighting would of too even big you comfort your look XQ talk JetBlue, growth to you're and X%,

your them But it in kind today. hear line with terms of about of are more just I'd of thinking to how love some you in about So you're comments?

Andrew Harrison

Rajeev. Thanks,

deduct our of Easter There said, was guidance, we and you there then is you the initiatives I of the bonus continue basically see beat move just we quarter pretty what into we that unit the which we the we're initiatives to X.X, we day, revenue midpoint a good the our for others we were the and that mean, self-help. putting it's points And as X.X at second at growth basis seeing end guiding of from the for about that. in the if by from go comments self-help Firstly, to, what with as domestic are and industry, look made, that points. XXX Hawaii in feel that.

that come do is initiatives. from of we'll essentially, go to up, our come down, headwinds. So we all is fares If we're better, they have industries going might saying growth if what

of So today. sit we that's how sort

Rajeev Lalwani

you. And get discussion how about Okay. thing? some Brandon a going deliveries I obviously you're the year navigate what of think peers. causing it's headwinds training Can a for There's the talk question could progresses? lots the do? sort some that? and to as MAX start your And around been you of incremental of you for That

Brandon Pedersen

it's Rajeev, year. It ton us doesn't Brandon. impact really this a

We October. impact Ben, capacity the have three scheduled side? for you July MAX training might don't Obviously, but the we're or we the June, closely, want watching situation delivery comment certainly. and an on expect much on upside to of side,

Benito Minicucci

you're think I right.

I think we'll very with minimal see impact three airplanes. the

Operator

next line of question with Duane Pfennigwerth the Evercore. Your from comes

Duane Pfennigwerth

your Brandon, we as might missed year? it level you the hit expect would proceed when comments, that through in XX% I have to prepared but debt-to-cap

Brandon Pedersen

hit Did you We clarify. in mid-XXXX. XX%, would to Duane? that say likely Just early probably

Bradley Tilden

XX%.

Brandon Pedersen

we I XX%, would Yes. do in said, probably, to as mid-XXXX. early

Duane Pfennigwerth

profile next of any into and the with rate XXXX structure to then cost thoughts your your updated growth year? respect And

Benito Minicucci

and Alaska Ben. has But been it's airline. pause growth we're growth our we forward to on the last us, took just airline. increasing Like Duane, a remarks, year absorb said a you'll traditionally margins. growth a what from in focus see prepared We

X% anywhere from period time. a see over to You'll X% of

our that's right mindset So now.

Duane Pfennigwerth

the cost year? thoughts Brandon, next on structure longer-term And maybe just into the

Brandon Pedersen

specifics need do don't to but operation. important early low-cost and going will having to forward, committed more the have us. really I We have planning process, be think to to share They continue we're been us. into super important super a to point. this at we're to Costs

Operator

comes line Savi question from with Raymond James. next of Our Syth the

Unidentified Analyst

would in This any that complexities But could is good have by And that talk Matt Operational wrong rolled is terms on there? that. way, correct having me about please? gone like Saver I'm Savi. you're you markets first progress My of expectations the learnings be regard exceeding in Fares. target, if be it question if may for And It to potential with million on had target out? $XXX up? sounds

Bradley Tilden

operationally really been as some our new like start. exceeded that expectations. our the working a rollout right me call let - said, rolled works. thing on having did how issues out, we we're Saver with we handled what oversold we list, It's rollout of have now And questions we good this, When folks. with but those rollout. customer Matt, big like course, through this you some And managing changes frontline

to making those there things of had we're a were through. our So But would bit that. our well, are way and through way work say issues working we I

In we terms feel we totally look million. we think, - feel it said I - with dollars, about of initiatives, pretty look at comfortable our And we we total overall about good $XXX you going, we're only We'll it next a we've for few revenue when all And on we months. launched the that. on at that. improve months more four we optimistic traction give it's over more of as sense get that how but

Unidentified Analyst

Andrew comps for the then you going How half talk maybe initiatives on half? takes Could whomever. timing your And the of RASM there? Any trends? we - that are or Ben, All Thank think high-level maybe of color to back tough maybe and much about very in you right, just there. second great. can puts or

Andrew Harrison

Matt. Thanks

remarks, of our by done plan run shared full but we to on today's we initiatives our middle the on rate what the we call. guidance and we've give don't synergies quarter, beyond second it in or As any of outlook sort

Operator

Your line JP the of Morgan. Jamie Baker next question from with comes

Jamie Baker

to point labor was no contracts of expense progress. guidance - any careful out Your reflective incremental cost or

about against of expense? Not peer has Just and asking do kind your that, thinking how ask just you be to set so wage changed in competitors given that set the somewhat. who that wondering where peer particularly currently company market you market in the may has when wage evolved negotiate about what can set you I are? thinking to when rates fair because say yourself public, up use where we is, it establish post-merger,

Shane Tackett

Tackett. Obviously, I'll it's Jamie, Shane brief. be

productivity the at get to really way all do try major carriers our find generally drive term, to And as up. what and last folks think, It's and understand years. ways competitive they been are. the we our work our that's would that's only to I is labor of long for Obviously, find going over time, company formula same sort we the groups really, at to where XX over approach look or contracts, labor peers. a with at XX to groups the those look the

Jamie Baker

Okay.

fair hasn't carrier think way altered Yes, that. itself that, fair, as the matured. approach So confirming totally it's to say I'm been I any it's in has just that

Shane Tackett

Yes, think our contracts and changed. really Jamie, high terms mindset in productivity hasn't of I competitive

respect they two work that to I discussions, all these think make do folks feel and our need success. and they obviously of that contributions there's like the the contracts parties our have that in to they

Jamie Baker

a And question. a apologize season. several opinion. record. follow-up Virgin the sounding for the to play, like I've loyalty of calls of California on my this into quick asked about put kind broken acquisition Helane's I in Cool. But

stepped acknowledged They competition enthusiastically spoke very there traction. reward today You've about Southwest. rapid with up

want that not time. just Seattle to any I the of California, not seeing view I - over market? So aggressive but just not evidence hold in loyalty But some California, you're to to card that of confirm competed away that benefits more I'm are and that specific want competition confirm

Andrew Harrison

people people's term, [indiscernible] are people believe sort see are that you - But in. that to built their generous keep embedded the if programs of over we what to long we loyalty reward the Jamie, only offers have loyalty usual loyalty. just mechanisms the work glittery actually bring fundamentals deeply periodic bonus deals and and for

is and our is see a our earlier, able digits. both the is received. systemwide we being and that on And which as rate, smaller guests double growth what shared the that well California Mileage growth we is card what double we I our feel and base we've like growth, program on Plan so albeit And to to offer loyalty right been achieve, now

people it's moving as us continue out So roll get to products, But always new know we around. more. to

awareness good what higher. feel folks Our we We offer gets really about want join our who have club. to to to

Operator

question the with O'Brien comes of from Sachs. next Catherine Your line Goldman

Catherine O'Brien

you. Brandon, one So first is the for

potentially way should see is about move better if better that quarter the cost through Or are, that performance, further drove thinking anything we some if quarter execution? could did improvements as we March better that execution things the continue drive unique outlook year? there March to CASM of So the in they we the be that's that

Brandon Pedersen

anything I think particular, our number first call good it that think organization. across that quarter would specific I scheduling drove was don't "artificial." was the or team a good the did do I in really the job airline. drive Catie, In out a execution

this our required think I it's to have that, aim to but that what going we we hit do. derail anything see continue we I plan. important that That's forward. it's super, that's going good super to execution don't

Benito Minicucci

on Airbus network the product, a our people, airline we've massive, assets. massive on I but what of on Catie, how schedule utilization do it's looking got how And to at team of productivity only a getting before we press getting not configure a Boeing optimize the Ben. going think productivity maximizing the we airplanes, has and now, airplanes people, right it and we're maximizing with right to this merger. to of with How the the impact routes, full-court a we this had

on see mean, I improvement think you'll that's So just focus a and our steady that. I

Catherine O'Brien

great. the hopefully for And strong this Andrew. quarter Congrats then you to That's more come. one and performance on

the should of on that noting about in think not synergies, be how the would June you're initiatives if growth that we RASM your we quarter is Just and transcon noted that to rebound any fares call you earlier that into great. be assuming all you're internal incorporating guide? in So due should color

Andrew Harrison

we end, Catie, that everything I we said, fairly range, I'm decent that range, really the driven high X-point That think growth gave of the and by really of what we're seeing being a course. saying is a net initiatives. have a

that we like up not, the And hit we'll - the is probably the range. that To them to move we will we midpoint. see go the go, things goal way extent to the so extent

Operator

comes question DeNardi the line next Your with from of Joseph Stifel.

Joseph DeNardi

Andrew, capacity sort mid-single core on the kind I want I is on follow line these core what the top does you're growth expecting? just pretty of question. that from digit stronger leakage than just conservative demand to RASM benign, it kind low offset why RASM mean, base that of Because there there outlook initiatives? is I shouldn't produce competitive of some is is Or the to fare Is some guess, up, initiatives? X% of it either seem capacity of on somewhere?

Andrew Harrison

first we which think, guidance, quarter. [indiscernible] do the I one, is what in to we number have

little that. you wouldn't about guide, a being and prudent characterize argue bit heavily we're conservative guide. So I a necessarily against I more sober how would, we

Joseph DeNardi

Okay, brother I'll with along sorts join Brandon, and those lines. a question of improvement Virgin the I loyalty my an then okay. renegotiation BofA, a economic. And I guess with trigger Jamie why really understood never transaction of didn't kind

hear gotten and the have to assume you kind is clear think of guys something how talk to working there about you given BofA, the that loyalty of of economics is if that that love you I of what it would like is? better it. on can are we with late, kind opportunity So

Brandon Pedersen

He answer falls with It's actually into that and now squarely relationship area. perhaps, would a right that the good Andrew's if it's bank the you the owns Brandon, question.

Andrew Harrison

Yes. No.

we ago, that long we disclose not So - renegotiated too and... don't

Joseph DeNardi

wasn't ago, like was it, It three years Andrew?

Andrew Harrison

agreements the some, what Number years that very, of flies. on But small extension always tenure. have. continue these to ago. Bank of of in full sort one, I if Changes the think, especially if we've their never strong would side. have time we had condition, to market a America I a think is they're are we Yes, my to talk And But good are a build can positive things. gone couple in we very relationship few a to career continue there say how things, I

program and it our more there Bank best market be we'll and make may work for continue again, But out that of some there digest So to us today. data with America. the and

Operator

Keay with Wolfe line the from comes Research. Hunter question next of Your

Hunter Keay

some going $XX they of give much questions. guys to color was the cash? integration Brandon, million you got when why were million can up merger out? Number you XX done costs. on of And I've these three year-on-year? How that X, pulling me be

Christopher Berry

All right. of Brandon, Chris instead answer Hunter. them is going to

to crews America little half the tracking When into Alaska of Virgin noncash. XX the a former was about balances. It crew sort was vacation integrated So more it we onetime than of true-up system. related - or crew scheduling

associated rest things consolidating America paint Virgin was for as majority that's with and America the moving it The are that as noncash. costs former those. livery of So centers data IT lines like the Virgin some well of it

it's should primarily labor and - solely vacation was that through - the because - onetime be year-over-year not is our we that balances So nonrecurring. because impact of

Hunter Keay

When was done, Chris? it

Christopher Berry

When was it done.

because or yet. we started have really the which So has associated remaining not biggest with the maintenance integration,

And million were XX I from really so about $XXX date. good And be acquisition the said, charges the pretty that months, XX months. feel of still But million should about $XXX we think, $XXX to next I onetime million. over

Hunter Keay

Brad, the was of reasons the prone Chris and Okay. more yours and thought at you because make might urge lie-flats to of you years couple of airline - least ago you a then resisted - guys couple one downturn, said San a marketplace your which these But Pacific and I the insightful. Angeles. try has you're Not now changed. Northwest, actually before new you've really felt customers Los in and Francisco you to only look, markets was in because attract but

You've got are some your the seats. with card, success competitors having lie-flat and credit these

just do that's now? you thinking to fighting that Are guys we the are. you never to who urge it? we'll going you is and are it something how this just do So decided about have Or

Shane Tackett

Shane. it's Hunter,

question this I think I answered before.

of the the lot in thinking in is on you side changed. markets look premium of pricing some that at talking that the a fact, softness actually if of Our And haven't about, the you're cabin.

not be any sure would And so economics different. the that I'm

this be more probably point. at would they fact, In challenging

need route. lie-flat have overall enough the product, that. the and really a to sort a AXXXs. to would it the small enough little understand think don't aircraft that Is one different it's percentage I which a humble aircraft about you question going more and to first-class question, the want it's market some I compete time very we're have do of the of good think about to on. got it with is We good lie a today. we're do go we're demands good flat, again a We've do take to just of - to if That's we we

we we us. less our upgrade of before, for if our still to we said to we changes, sort system, able loyalty go we But cabins, all-out that it and looking sort go we'll in could. be of premium cabins into So if right works needed the If is to yield and Throughout premium to. will. and the think view now, more there have lie-flat that

Operator

Your Linenberg with the Bank. question Deutsche levels Mike comes from next

Michael Linenberg

excited prepared Okay. growth year, in profitable next I being something you for want growth your to talked Alaska to go remarks, back you're a and about airline opportunities.

of your or much us XX maybe And you are of? online the have? gauge have and additional some a I'm LAX seems XX% California only how tight on of sort like gauge the you that in so those to just is coming that months at comments SFO space. you not under presumably just space you using your those acquired the and it at give think room - but high, referring there you LA, impression XX% San and may And assets you next Can over I LAX. of airports, current Fran actually aware and maybe your or the pretty sense curious, just of was maybe referenced were is utilization I'm based obviously I

Bradley Tilden

for concerns the put our were - to A and question. in I and about context to know was is Mike, our wanted longer-term I growth are things. our airline, growth there strategy a thanks couple grow. we of

Now two those in we coming considerable I There construction some strength. said There that and California, up, have constraints Francisco San constrains Angeles. is but where us. Los there are some sometimes is places are

So those going to look to network as definitely but grow, have broader we're as at well options are for us well. a we California that

valuable Virgin to of those always California, mindset of course, we So to gauge. the X% And made get X%. America our slots is and acquisition

going on of we're much assets we as get we're much too detail to much take advantage that. have activity grow. So and to as the giving not And

Michael Linenberg

you Andrew, we positive a the in And just of June quarter, problem. to the we XX get regions look a Andrew, not had or maybe where quarter, to Okay, to where X of of going RASM to XX are the be point, - it's XX March is able XX XX? as

Andrew Harrison

Yes, that is the hope.

the in of going on pricing. move we - a industry lot to as think, depend that's I

be are technically may rolling or there. end strength that at the spend fares at day, industrywide not. a I that there of time be think, the off But of We have could lot

On the Hawaii. with say we comments did though

that come I'm the revenue unit just positive to not on given sort get fare that's sure both think of board I capacity the environment. to and going just there

Michael Linenberg

had even Andrew regions. you XX I didn't know

I even name that them, I so So ask just off-line. - couldn't I'll

Operator

next from Oglenski Brandon line comes Bank. of Your the question with Barclays

Brandon Oglenski

of talk season or Andrew heard or soft March World until I get Cup we've as low carriers as too other through guess fares transcon on I mean, here do guess, Shane, beginning the that that others I Where this heard well. go about end we commentary earning leisure - from was we we've April. up of

tweaks not showing these the summer? what confidence Was in up? areas? have the see capacity we demand changed? did things is Or So Where improved into that

Andrew Harrison

they those with think went had actions very, and specially - what starting I - do down taken I it doubled to brought Number very by mid-March. these just on one, pricing low just World fares carriers mean, that and there demand nothing with supply. overnight fairs the really in Cup was doubled

affects think pricing affect specifically, and quarters I to always first the our for Premium seasonally into Class. the quarter up demand weak deeply network, weak is us you

out move. we So across versus summer season, fare as we and in the seeing levels that these year, somewhat to see seen continue the are traditional strength last or we've into spring But at are take in them always the give the and the of the we flat markets. move marketplace the end system day,

So headed. this next we'll learn over is more weeks, the where X or X about

Brandon Oglenski

from Okay, foot more that. production yet? And are out perspective? aircraft you up put then follow thought Have versus XXX that guess, routes to a business-class relative you And First guys domestic the the I would? Class. the question transcon you your wanted the appreciate you getting revenue I like the of about square on I on

Andrew Harrison

and of and San so We JFK that as these only Los and fully actually it really into periods. on ER to Sure. to XXX, demand Angeles just transferred - York get Francisco - the mid-March New was we we all the

the will over how a to more lot visibility next months. get we perform they few So

really that's So as we started speak. just

Operator

the line Your with Suisse. question comes of Caiado Crédit next from Jose

Jose Caiado

there the are the I push said that question back quarter there that confidence statement follow-up quick one forecast wouldn't you some no But where have earnings the RASM guess first conservatism guide. on just QX notion second back embedded, on guidance, I less provided think, when quarter the that was QX you at there in also pricing. think was time explicit I your guidance. in to last close-in call an I

were have at So materially came it characterized worse maybe conservative that obviously then in as expecting. as could been the you time than what well and

your So how specifically, were close-in guide behind assumptions QX the you context just experience in thinking about that given this the in the of first here, quarter?

Andrew Harrison

was we is of I saw are the call, and in think of saying, the days were we to the quarter continue - as then part volatility choppiness what - after what on literally our basis saw but say we the real first we we that and were that just fares, them guide, trying down. as and pointing out we

really week into comes demand numerous market. the close that up the as seen carriers and seats we're day, see across could we have end feel is due the that think in move lot last fares we to around fares frequency groundings. markets reductions in. Honestly, is, MAX chance a move out there come seen industries, of here seen today, the what We've late across to out good about seats the of I the pull We've our as good at June. we but see we continue is saying a what still

of things these help will RASM some going actually forward. So

Operator

Vertical Your of line Darryl next question comes J. with from Research. Genovesi the

Darryl Genovesi

But differences. also carriers efforts environment a segmentation that on relative wondering that, yours calendar of thoughts yourselves perhaps that Within to we've more which the to well. first may up quarter fuel while extent bifurcation knew also cetera the Andrew? Delta fuel engendered the seen bifurcated perhaps to pricing revenue American that network progression and a customer cut. Any with year-over-year the like domestic-oriented had while, the global behavior. holding a there are - somewhat more as had and last be related guidance quarter this mature quarter geographic in JetBlue I to we decline by-and-large the first Southwest first in was The construct carriers some I'm and some competitive

Bradley Tilden

I confused, think you've Andrew.

Andrew Harrison

question, was That it an understood it that's. it, was I'm - not off-line. quite impressive I'd but going I I'm sure not. I'm and to take -

Bradley Tilden

segmentation more better asking, fuel with what - to to you're That's history able recover costs. able Darryl? higher - Better

Darryl Genovesi

Yes, know basically. basic I while. Delta a for had have and American economy

You yet. rolled one doesn't yours have guys just out. JetBlue

didn't. Southwest and American [indiscernible] guidance. one I'm of The doesn't wondering Delta you there's just if three there? have a yet. connection United,

Andrew Harrison

that but this what rolled in really not tell change massive Premium year. forget on the you business. I'm on going it. going this, can do have out our on not Got we just last - really about we that We is - Class others going we sure have I

Premium Because in in The first having Saver rolled the seats we So XX% had out, a just increase quarter. Fares fleet. the

So we you. distraction and be honest going to noise on have a lot a choppiness and little just historically, with of bit

So you is of better and I I grasp down next going I'll our don't know levers, our the better time. that question. probably answer to for answer business what forward know get much But we have settles do as a a

Bradley Tilden

competitive I what advantage. is, would has believe, add Alaska we Darryl,

large. Fare there's a pretty introduced, cast But the we've the So And the have don't product. net the premium population lot have Saver on customer Class. lie-flats. from I in but cabin, we a Everything we we know great Cabin, is First industry, think over Main we going

our that and in low we can So we feel feel structure just lot given cost a we're good a weather place. we

Darryl Genovesi

as if on mean, us XX% more mature, you some how think stress it sheet it. go these can with up I understand how may of metrics? I that but Apologies, target came done I sense bit about I target, testing you do a give little Brandon, ask, you particular, cycle gets this debt-to-cap more to before, becomes just balance you've then it And Great. in important probably knew the

Brandon Pedersen

sort that maintain question. kind No, all leverage look, coverage ratio debt want we of usually a a we grade be. you mean, that, to that's view of works that very basically keep the We this of it's with at I for to that look, of generally the did with of us to all think, that - good XX% and answer. industrials was if the place looked It's and no, an that, no. balance into is balance We sheet. blend What investment fair right high-quality I you want blend absolute have around

Operator

comes Your from Research. Mckenzie the line next Buckingham question of with Dan

Daniel Mckenzie

would today. can less to Shane, Saver for From and dynamic Fare the question mechanical more tell what I be guess I appears this you. be

revenue that as dynamic First, we am mean and correct in potential forward to do that look characterization? And I then here? there is be about what how we here think could more for

Shane Tackett

you right. Daniel, Yes, are

think more sort approach. out initially what traveling, of done far pretty on We've how has out a industry we've essentially or has I really based are I think really and with the flat it and people gone with. gone with less stuck that's

buy to level just - to get flight starting move a to Is think ask little question smarter asked the the around. me. I way is there at same we're there the up you a

product. this loss love of by Our cabin goal fare with would lot main to be into that's pretty at maximize of up buy better would We the low a sort of economics the the price. getting people

so up folks want make we over time. buy And to attractive to that

little motivated as changing history very to couple away. are how but of we we a start it's get dynamic, lot. need We out with probably goal So before say, a figure to more that a quarters you do really this

Daniel Mckenzie

X/X appear upside filtering second second question I it just remarks. here? is was it improvement was I'm Based quarter. here which guess guide, to the doesn't I prepared responsible I correct? for that's going here, okay. the CASMex in first roughly productivity, to guess pilot of potential which And quarter the quarter. believe the - be some Understood, roughly cost back there to on unchanged wondering the Or second if through is in

Shane Tackett

I'll Shane. is this well. take Dan, as that

actually than it fully In asked was. think was I Productivity overhead, other mentioned. we we say number is of was had definitely was - goal as through QX, productivity pretty still distribution our Brandon earlier. we better what well, selling performed we I actually is crew as drive in this that that the little mentioned had on QX, costs, why again and to couple In rest that got areas think what was and driver, year, areas costs, of of than by and plan, a also we one our I by actually but did good we understanding Brandon we're ASMs as were productivity. was would a performance somebody versus plan one which the had better the good We a low actually side. had And planned. the and how

So continue we sure making we understand just fully that what are can we drove doing things. so those

Daniel Mckenzie

and here. one one I Understood, can last just if squeeze

going Just members, shared Xx Investor fact to back the and the Day Plan more generating around you that revenue. Mileage

inflect well? And you that Just that move throughout infect you've if helping wondering just as given to I can extent as the more to loyalty what materially that rates growth here revenue provide does highlighted, am the revenue color year? is more we today? help

Andrew Harrison

Andrew. it's Dan,

of fare, California, average California. in loyalty and look and feeling the shows been we've people than aircraft I of through to into who think does of strength All see percentage The the earlier, the percentage on it AS.com. we as actually as as the members what those shared more that spend loyalty our and true. seats more we folks with more booked percentage have holds of historically, our we of we And

going members as to Pacific and we're that work between up continue Northwest, same value California, as So to the see move loyalty we in we in the expect the relationship to chain. them

Operator

of comes the from question final with Citigroup. Kevin Crissey line Your

Kevin Crissey

put your that well? quick way, revenue doing have traditional have and your that? are results traditionally and another good weakest to been markets, Can what your been talk one. legacy Alaska argues a areas Virgin heard perspective one of results your And We've Virgin routes. maybe you and network assets from Just legacy network

Andrew Harrison

to squarely a the Saver with doing with results cost you initiatives fleeting, marketplace. competitive the focus the of know, And in forward that quarters, with - don't I what are there. continuing have the very trajectory as but Northwest productivity, was with half marketplace, is recall detail, in We I've around of improve level growth, made, Andrew. versus highly going of Pac the we made would, some share what it's I the very Fares, California high-level share maybe acquisition. What which have is and the Kevin, comment earlier California. all with seen I we I initial the is cross you We good that will that that loyalty solid reductions just we

lot improve to no that's to a have We do, our question, of exactly work but looking results what do. and continue to we're

Bradley Tilden

that I've When Kevin, today. really, area. that the to It's Area to on - our highly I valuable contributing it's company Pacific this that Northwest of went the into to sort of Bay a first were Seattle part add of area In bit. a it's franchise Bay was today. challenged transcon's When my little for really of Area seen experience here, a we a and similar joined years. sometimes might first different for a Brad. for reasons I reasons be period challenge time lots -

to was Mexico, back some Cal Southern few years time. was if - go of period a for you underperforming not

should of be advantage. need our some so to And and California shake it aren't shake belief belief there they doesn't believe what we our But doing it do. these our in markets transcon our competitive in doesn't

it a real So we be out, we're add time. competitive markets, of there. over going going to will we'll in and - going has to believe we company our I that advantage we're fight capacity ton don't these stay And are rewarded know that but

Matt Grady

question. I your very think that much And then I Kevin for you thank

second quarter. end to for at think forward the the you Thank our interest. of look been the that We day. talking all last might've questions you of to Thanks. I the

Operator

This at Thank for will future for you call available in be www.alaskaair.com. participating playback today's conference.

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