ALK - Earnings call transcript Q4 2020

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Operator

Good morning. My name is Sia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Alaska Air Group 2020 Fourth Quarter Earnings Release Conference Call. Today's call is being recorded and will be accessible for future playback at alaskaair.com. All lines have been placed on mute to prevent any background noise. there a remarks, analyst. session speakers’ the will question-and-answer be for After Instructions] you. [Operator Thank time, to Relations, At over would I this like Air Managing to turn Group's Director, Halverson. Investor Emily Alaska conference the ahead. Please go

Emily Halverson

our from Sia, during Several investor.alaskaair.com. our quarter team issued On to you'll for management our today's you, joining morning which others release, the updates call. fourth and you your call, XXXX Thank answer Thank on for the Brad, morning. also is Shane. us portion the call. earnings This of of earnings Q&A Ben and we good are available hear at line questions

of Group be and excluding loss and items Our of business are quarter adjusted and the that special to estimate $XXX of million were first at being returning CARES least the from be offset mark-to-market that $XXX this support by $XX impairment Air the charges Act In to items leave certain significantly permanently long-term and economic and continue million. reported return a early. payroll triggered that benefit crises include will program global Special health employees certain of related the and resulting net underway. outlook adjustments million parked. from quarter, eventually wage impacted aircraft million fourth benefit $XXX result expectation as

last me be this on audience, a year, wishing speaking to both and has to XX also CEO as approximately Today license This the Brad the eight call million. Alaska March Andrew also but Please as final for Brad $X.X Andrew XX other his marks he as to cash CEO be join handing was of birthday. time our Harrison’s will be as best. Our Ben. for years quarter daily happens over and investor retiring end an will the and the with average unprecedented for burn important for been the serving well. few milestones this

our earnings future about our materially filings. between and performance, results. refer found measures, And statements risk our reconciliation forward-looking release. actual on include will can today directly to Information We'll from certain unit the affect differ in which comparable comments as Our business could be a may as that also SEC financial costs measures fuel. most we've usual, in provided today's GAAP and such excluding non-GAAP earnings non-GAAP adjusted factors

Brad Tilden

morning actually Emily. forgotten Andrew's that is as so And of you. me birthday, for had good I happy to today Thanks, well Andrew, birthday all and

put roughly as every a XX knows, challenges year to virtually everybody the into world this has deep this and none crisis, a test. one. prolonged the we disruption airline We've a around driven but at which Alaska, over As are difficult seen years such our has COVID of lot

ensure the want the everything recovery, call. emerges they're through talk priorities. focused better that we've and the this pandemic things remained on to From of those stronger. people Our before they've onset this done the Alaska leadership challenge this to to from about rose and crisis for of countless uneven doing on two this We'll them they've team everything rest and thank I times that done and

today. of when and strong competitively First, guests, ideally position our These our priorities in of better our the health safety airline this entered comes and second employees than out crisis and our remain it. a ensuring and we

these around work align Our streams COVID two to priorities. continue our actions

with of need providing care program confidence our the guests fly. the to is safety next On level front, they

highs fourth also our flying for very we've You know guests customer know health And quarter time broadly, We've few but in satisfaction more scores experience. reached about us excellent the our our very positive Alaska are months. good listened are we have on who or survey all many And these, ratings with and implemented. us guests the gave external of last that having XX% safety. received our measures recognition a

we're out That practices. great figure is things case head Alaska with our our certainly and going the often our out there. the of health that leaders is about One next to safety to us figure and how where get people

If you our link it. a video, haven't view today's a had release. safety chance in dance provided We to recommend we press

simple see to For could last some couple ourselves anxious were path time come of fleet. pleased market this We our use determine two in and to reconfigure to to analyzing forward. now, ahead. fleets and were a We and transactions we've to been the with best to we downturn more months bring the streamlined if

And for this. XX AXXXs. of us XX a host provide summer That benefits. more order Airbus owned XXX-X will aircraft. on restructured terms First, will the talk largely and XXXX sold of enhanced we the out will new a that about second we and fleet reached other Shane Boeing of our by with get

employees carbon impact. care and reduce our the given true is greatly about clear the Coast. and emissions our West customers presence this Our And a leader to effort on Alaska especially being in

We the us lead. these per have focus but And carbon fleet to all just further a financial much From numbers. led perspective, two industry we long but I really or want on passenger. couple terms will airlines about, moves of been of emissions could of our talk in there's on the nothing so top do

significant essential else. strong, change. took XX,XXX us. its $XXX our of during grant, obligations very further, as will preserving career our terrific leadership was of of sheet industry support our flows XXXX them reducing time a the new varying save want that that which Air a years and them employees from for CARES I in such forward employees at us the which thank all part It's as the standing business company a also especially extraordinary we balance providing to our that represents to or find my sheet the thank and new debt massive means profitably unchanged lengths grant amount describe and to from the such and receive for $X Group for over to efforts who revenue first the a XX% that loss spending watched I were months ahead can And and in point from vital will it and But two in I've of to of when I thank Alaska sheet Act a a our Alaska with down can't means all opportunities cash the quarter. out unimpaired year. fixed entire someone company I the this aggressively factoring period cash of I Congress's contrast. strong years numbers the of we thank stood is help of is downturn to and a down a billion essentially company both our remember using my but variable debt backing for look last million leaves received to running First, to our or the balance clear between hand spending were industry also starting the team weather and by job horizon variance of bring part, want for stark another for operations. Not to burdening on our to our robust balance second, and Shane and operations, $X.X want and cash million to their and COVID. behind in for billion from outflow total want in revenues our result staggering areas $XXX the million $XXX lease funds

administration leaders call, for to our on both want All of employees. of aisle great will as both thank and Emily support here earnings their said, this this us CEO of company. in and of and the final a Congress industry my the our sides be And the

to to I gratitude you want sign all on and listening the folks the before today, came you. to sell express side Before who of off, and I the side buy my

sheet, all pension establishing years, philosophy to that deliver our the the Alaska and the build airlines. The principles principles balance our that fortress low not by most keeping a to funded, I've be Over by have maintaining you goals, management just many better. you and then after relationships of have In shaped our early financial of underpin industrial a with plans had as pushed structure, cost such high us today, other other and in definitely maintaining chasm and results conversations led like aspiring to with articulated XXXXs, goals, you. that clearly companies, industry ROIC been the quality opportunity

in many radical retained ideas in to and All years for of nothing, had that but accumulate negative were done an ambitious of these earnings. industry they concept, but seem simple those

we've Some then didn't walking of learning’s you. answering love and we from your the away realizing we that came answer had just given greatest the questions

long-winded way a areas. sharpened thinking in many saying our so This you. is You've thank of

all I want better of so importantly, Alaska my thank made I learned really This much we most come far company enjoyed with you You’ve I’ve XX and much. serve. so the business. the a in much, and has years. And time employees last guests perhaps that our to

with were challenged, by are fantastic to we’ve are trenches regularly all all this humbled and of be the us that team. the when And think success challenged I experience. in we honored I airlines was

about and level a as And we’ve that’s future. our in uncommon we’ve I’m a day done loyalty point to you put so this it, of people Our why had on that’s dedication as age. optimistic have is to company and that done and if why their well

to great future Ben. and my Over to all you, to you involved, step has as to of been while and honor. back staying to team, an job thanks they I in So primary is this going company next take great look this Alaska the be serving the Ben forward level. support And the

Ben Minicucci

impact everyone. airlines years. say on of last the more the the a from Thanks, to company, this the to in Brad, good fifth time here being largest And with bit the opportunity pass one country. at smaller morning, can’t the XX about Alaska industry airline the I Alaska Brad’s and went in over

is plan, sustainable CFO industry. groundwork to proud the levels. in accomplishments watch XXX growth Brad’s highlight of business want years, under our And the grew was company his career these of as At from chasm for had event our our and the last long-term As the of tremendous employees, to goals to that or customers, XXXX And with plan. many his February overstayed were Bill our along culture, financial XX decade, people connected million. visit, station Alaska make XX Brad million in Virgin our implementing was XXXX from of transformative drag that our CEO. deeply model fleet the was balanced I Brad value to for the owners mentioned in XXXX, conversation. know, eight Brad including from conceptualizing X to grown lead the this any providing West aircraft today. tenure he But creating revenues of focus and instrumental and employees during last Congress growth most values, and This have has and and acquisition instrumental guests XXXX he great and Coast, to XXX oversaw discipline of from Ayer you By the XX,XXX and to stronger some our ROIC name we’re up it. was which America. Brad’s Over remarkably max six-fold always by times and recalls and all, company. the this communities.

investor of You’ve part this community. as yourself our probably experienced

make all years. earnings that And your not been And incredible speak whole I join I congratulating, hope the so company his for quarterly Brad, over on career. for to is Alaska without leadership XX strong you’ll me have possible after in thank Brad, what you’ve team, it done say, today. the would I XX you our position calls,

has daily down December January, that was been results, to capacity Average prior October, in they $XXX points. each capacity sellable fourth have November. trend in with the employments we year. revenue in and bookings XX,XXX our increased and have wave. prior since into was local XX bookings So XX% closures And improved November month average came over fantastic been points That In fourth several guests. quarter that on stalled sellable boosted improving as trauma daily deteriorated and response bookings team From read QX, the year our down and the the experienced in at was XX% days to to on work from from from promote in peaks Note Sequentially, and million, revenue period. when employments as quarter, last turning to increased while and effect with both the fourth by warnings connected stay from to up results XX,XXX. federal for and commercial state our third this quarter, you pandemic was X last. bookings our stalled spoke XX,XXX we’ve doing XX%

and remain Markets interest with of with day. of normal passengers per stalled future are factors guests, at about bookings. carried and Leisure weather passengers continues activities. are employments XX,XXX travel demonstrating the customers majority levels to both XX% in the in While outdoor be and load future around destinations strongest our warm today places or in travel

this the was carry It’s our our forward and among approximately XX% helps including Horizon the the This in however, system and spot, at of be momentum our the in Transcon lead of in depressed mark performance to you’ve quarter. performance. – to what industry came for normal strongest performer is were QX top in that longer across routes the XXXX. quarter, results important Our distance operational and worst severely levels. the we continues industry. Alaska performance A into fourth similar heard is demand bright on-time were

So results the while there demand distributed. the be step fourth be vaccine been better, cautiously had broadly would hoped we change once quarter optimistic will has a we’re in

couple shared assumptions planning and For using for future. the about the we’re of recovery plan calls, our the past thinking the I’ve

point been First, a thus vaccine able far, and a we been when begin slow States sustained to the that recovery there and are have restrictions. in believe will I’d recently will relax we expect We’ve but water trading has rollout it accelerate say improvement progressive earnest. to begins widespread be

and travel. lead up substantial there we will Leisure is pent leisure confident. are for recovery demand We the believe

our will our corporate many we travel on want end customers. of normal corporate of of and While expect to this levels surveys out we that returned traveling, to guests get only business XX% is of back year based know by

model right focus flying we demand pandemic. that making company our business the strong post and We that confident have does now is a jump is So is sure ready keeping remain for safe. when

consistent to our effective last crew. shared not I well. as This cabin, May recovery, and the provide precaution, the the middle and in taken become for elbow of We’ve create destinations travel offer proof the have more and who main moved cabin for own usage but research consistent through highly required we coupled the are begin on systems passenger passengers studies Hawaii-bound some seats independent potential the masks programs As forward several quarter, first with plan are blocked order the three middle industry a experience reduce And with shown our unblocking to to guests In flow board to airline test have to month, environment safe can filtration we This in benefit guests guests that bypass arrival. accumulated is Pre-clearance a air our the within as accessible with our a Coast maturing looking the for seats anticipate an as antigen testing U.S. requiring don’t PCR days. testing to to announced Affordable that and a upon results clearance be entering impactful prevalent. or have our on left friction. given we new low either the legroom. December, but screening this CDC months. streamlined pre-clearance and safety in were for premium and also few XX, West extra we process a has airport may and of programs

and to currently teams this health guests with in requirement. working centers locations our we partners international We’re our and prepare our serve for the

It proven to a up spring operation supports our levels that fly this prepare customers plans all is I summer. business by a believe and summer. in for to XX% are shared our levels this to and for of our to we those traveling XXXX approximately scale with gearing Given measured you, And way.

levels As expect improve of the two to patterns but stalled next and factor a QX capacity, to state in These to carry we XXXX load to health fly employments, a is and current months do between factor to that plan relax. will restrictions reflect expectations begin result, XX% the expect we that XX% of XX%. load

expected the drive is in return continued out doing in to interest people of spring getting things. the warmer and Additionally, weather

improve beyond. we employments in result, and to a As March expect

our that back adding begin there the may any as capacity, more on we planned. we not that that California in we As focus to levels capacity back support plans we hubs reflect posture, adapts Alaska. conditions not on Pacific we well. will strongest to And ultimately Northwest add the as a will open in flying These focus of did closing cancels utilize do have eventually

our previously, have announced that forward business Shane in more we’ll with will recently challenges that capacity our recovery lot been scale what workforce will our planning While with to we our back, of The us fleet to a changes impact moment. we as a are choppy XXXX, but present we share and share look have consistent plans in to.

just Our is guests with opportunities bring with value increased partnership as months for American, our oneworld will our forward our and incredible two move to away entry into this and we airlines.

the like on laser been that are and profitability. in teams financial known Alaska is Our back focused has also am I XXXX productivity to operational cost I the put when on path the other, us year and proud control, crisis. no for. but a we we new discipline This aggressive increases the will and it people we great ready our and what us out carried this of will with ways ahead improve the climb of I days are achieved, are our to year. believe take that what at us look strength for truly into best

to Shane. Now over

Shane Tackett

debt, debt revenue net I’ll order issued flat having the billion also adjusted year costs expectations with sheet to ended comments and good fleet no liquidity plans. were and expenses we With into result the with only recovery. briefly year. $X.X areas the XXXX. are the a which in light and achieve impairment couple before coupled capitalize flat the of secure capital and achieve We We cash to positioned our million business end discuss in Those $X.X My focus revenue with net because recent cost decline structural of and XXXX. $XXX forward. industry XXXX. in we calls which spending moved spend were grant past We because this cash is last the savings was going loss strong to equity. will net everyone. of cover quarter removed maintain $X.X able to to Ben, during in we debt, from and billion direct shrunk the similar from well burden And as to able billion net from airline we’re going in to morning, running and we’ll pandemic, offset reduced maintain jobs, a year that XXXX believe our to Thanks, on fully actions We on essentially speed flat be balance debt. our even with throughout without a Congress aid

to liquidity. $XXX approximately incremental PSP. on we have the hand Regarding liquidity, $X in of that of billion billion access cash $X.X million inclusive during week of second under And we’ve round over XXXX, received created today last we

May We $X.X in we how borrow. program, loan have through incremental CARES which any, have much, also financing we will if until billion available the the additional to determine XX now

be balance from and a plan begin Our year, a forward. in to position XXXX, low reduce assuming this our there to will adjusted repaying right cash debt is with we to recovery in lowering leverage XX% CapEx now debt here stabilized is by cap about

and below repayment, be use towards is return were to know which to hand on debt fact, would you levels debt long-term the as range. we XX%, within cash target our able if cash our In excess current normal to cap

or were permanently operating several XX% adjusted driven resulting QX expenses was savings. fourth capacity costs negotiations parked points. two Airbus time points reduced costs, than while was favorable in better one quarter, aircraft by by the to in lines leaves and X,XXX of in aided performance on now vendor up employees XX XX QX Turning down resolutions This remaining incentive

as align we fourth run based wage the paid reductions, Additionally, for and business safety were rate we the employees costs a our burn added of our you a levels, employees’ on recovery reductions initiatives was cash last program permanent quarter of the reductions. rate detailed saw to This Variable work and reduction in that result structural crisis, program, spend the that goals leading up a call including efforts. drove bonus non-wage fantastic our cost and with out this our the toward COVID several managing designed for capacity cost incremental as around industry supplier ramping target, of the quarter. overhead in

So the this align to an program past way our employees important was effective year. ran tools

of include estimates approximately assets lease I’d operating Our expenses have associated briefly. lease return Including of on we to like several and that the touch impairment permanently cost one-time that aircraft million charges GAAP charges for parked. $XXX with recognition of write-off

million also for a We recognize revision of our the credit $XXX of leaves. incentive estimated pilot

to As then this reason. for know, quarter, that program which We refine us finalized designed just leave flying. now have programs fleet returned impacted to since had and schedule, designed work these schedules we the early higher by to but of allowed a significant third our you the we reflects mix training Cross were changes. Boeing flexibility a in our decision have

spend managing to return variable, unit making have we Alaska more While more and costs. we’ve year, to this cost structure our to well do pre-COVID done work

to Achieving our productivity costs, isn’t which mindset. has XX formula fares been low focus, we the For low leadership easy. from be years to required are operation, our execution those by and same believe driven recovery. In our a enabled overhead best and business takes It have now, these will period, high drive low our by principles of people. excellent buy-in post-pandemic ultimately

you the defined shared we our cash the which with with on month line as in approximately in call. burn QX, outflows $XXX metric per is cash were last Our million average under expectation

and of direct cost burn choppiness will this available initial measure monthly the primarily liquidity business cash was turn demand, With quarter cash liquidity. in will guidance. as guidance that believe a burn in we quarterly quarter December. Beginning we November Instead, sunsetting are driven per $X.X of third and crisis. million fourth phase we in have the introduced improvements in day by that which the the cash of sequential the improvement been that, are mitigated despite approximately today, we developed expectations, more XXXX the Our in our of operating risks flow to our XXXX provide by that mattered health acute I cash from

Ben will As XXXX we Last XX% XX% $XXX in of naturally QX million This costs anticipate secured. by in detailed detailed, capacity operating that summer. incremental been of flying and approximately bring approximately quarter, you business. levels identified cost I back had initiatives for into already the are

We replacing have million of begin reductions $XX Airbus related related in as $XX aircraft, MAX and related in $XX an savings, million fleet in since productivity identified million savings with we initiatives. million real additional including the $XX estate

now the ramp at others rate Some levels, initiatives run are will while through XXXX.

we throughout Our on a for up improvement back the way expect XX%. even our year are continued we to And smaller current to company. sequential expectation QX pre-COVID approximately if is be CASM ex levels

We $XXX expect our quarter operating funds be to minus PSP of inclusive cash flow the million. first flat to for

will However, snap flows to as up. expect from year. If it be and cash allows vaccine first will the I of works, half operations we positive all rollout the the believe during demand

to no recovery cash have plan until we stable. we confidence quarter. will Given first maintain our that our what the liquidity draw I’ve currently expectations, is be incremental the financing shared conservatism these default flow that in have to Having any and more about said

March existing debt is for or and currently that some extend may renew we repayment April. So slated in

into Airbus and I’m the Boeing about The transition path Christmas Before we course jointly as order for very excited more clear news of future I our is very call came our touch return on of to gauge, strong fleet. regarding a a between the the turn means Boeing both exciting questions, to order aircraft for just would that leased And our of with as what before companies. announced as over provides we ever. like The higher this out partnership efficient fleet. Alaska

employees. know, and in about are you spouses, companies are we located between we’re here excited think, have we are two that and and together. The I employees both futures deep our parents, Seattle Boeing tied daughters sons, our with

four for fleet. have to noted pay older existing a consume order provide in fuel XXXX. flexibility unit the years, as XXX-X aircraft in lower features to which again PDPs our the up Boeing substitution when for above, new additional leased, XX over rights to beginning next the P&L. we then And them first seats. for of largely We revenue revise MAX we technology superior The through orders XX did will will order existing relative significant the lease, material aircraft, the our replace PDPs we majority XX replacement better economics with our will opportunity outlays XXX-X With us rates the delivery growth. to Airbus for allowed into will costs, and for the Each AXXXs, improve sale efficiency, take aircraft have newer before options to of and Shell find opportunities our deferral incremental XX XXXX generation incremental agreement full XXXX models. for maintenance of and cash for other CapEx as costs

our questions. that, capital with at we remain $XXX go a XXXX will low $XXX approximately expenditures As result, million. will million And to to your

Operator

[Operator The ahead. Instructions] question first will Please go Duane from Pfennigwerth Evercore ISI. come with

Duane Pfennigwerth

from Brad over thanks. promise I on a lot and years. that the you you we your the Hey, as team congrats learned transition. And well

Brad Tilden

Duane. you, Thank

Duane Pfennigwerth

picture, So net flat pre-pandemic. big versus debt your is

share count not relatively well. and pre-pandemic changed pretty versus has screens that Your

you of relative of that biggest Appreciate kind performance? how a just you structure in it on how is that were others say simply accomplish strong you that you spending was Is or flexibility where would driver detail what exactly able of So were that integration did the that? had capital the function not to your some contracts? you And have?

Shane Tackett

of are down about CapEx a obviously It’s a with to one of the others where It’s sort of We did have year. It us wanted keep Duane. situated, important question. but you’re next than Boeing. the flexibility revised I required low right. year. We CapEx Thanks, features managing quickly respect good know more to level – this of very deal was of a lot with into

so maintain And posture to them with XXXX. be for happy agreement able and were we a to low restructure CapEx the

And crisis board went thing of late was company got and I for the an period was was spending we immediately. a but participated. lose at to sometime the we or rallied going really company indefinite we’ve other to early of think sort so responded stop day, every decided time. the the a crisis. It March And we was be the across to this on, week the employee I sort of in single immediately where it

As people give take leaves, save what over sort to for their the of in We exactly we job terms. contracts order of We ended we minimums. called had Brad terms were for own We company what with necessarily elective or paying our mentioned, up suppliers. using, payment voluntary up worked help else. somebody income in changed not XX,XXX a

had did pulling cash we’ve – the burned several just, costs been we’ve immediately job, getting but a it’s out, of the months, so lot down. company last phenomenal And a a work over

done. of $XXX go Brandon really in And a biggest a coming back. sort was good done $X million I gotten We then it. reborrow. Brad have to waiting per of And early we to had to it. hovered into phenomenal happy paid I off demand $XXX said, had piece come this, that’s got million there, think that in in day I this think sheet and into we probably position. just And came million the reached debt what balance and for or of we’ve We

a get cash a not, or of the we And billion in out. flow fact that so were pre-pandemic bad producing runway $X.X us to I think in gave position $X.X coming lot billion

Duane Pfennigwerth

you to get to up billion you or $X.X when billion, to make billion lost only $X.X $X.X So had back flat?

Shane Tackett

Correct. Yes.

Duane Pfennigwerth

unchanged? Debt

Shane Tackett

Yes.

Duane Pfennigwerth

those all my on And debt Are impact – just cash are any can that how Appreciate your the then remind does you. leases, just are impacts there other thoughts. for away? go sheet? they how flow follow-up just you us, Thank us how you AXXXs does words, balance do those remind that in gains? leaving, Can cash how

Shane Tackett

but bit, maintenance They’re there’s we on all yes, the leased. or these about Emily have balance have Yes. talking requirements – I’ll a aircraft. all of sheet Chris

way. We maintenance the along have paid reserves

manageable, it’s them be brought to a so some or them these, bring to they we cash Emily? to full less balance a be to going expense perspective, but And as from back the we before but need to will return up or curtail there return amount be to relatively where Chris

Chris Berry

Yes. of these Hey XX Airbus were Duane. We we leased. – with did. year it aircraft of I them mean, all this paired was

million really the well we they’re I in that impact $XX parked. at those think did to own sold on there of reserve those only been to only XXXX. Corp, leases at $XX as we a those money But to well the maintenance is in going paired the lot cash yes, that least million XX we’ve back, because about, of side be were it’s but AirLease

So the charge turn to you not now see on nearly, cash so. going certainly the not or right to P&L going is imminently into

Duane Pfennigwerth

Okay. Appreciate thoughts. the

Chris Berry

Thanks, Duane.

Shane Tackett

Thanks, Duane.

Operator

go O'Brien ahead. The next Goldman question with come from Sachs. Please will Catherine

Catherine O'Brien

also just sure Alaska. will And Thanks what at everyone. be Brad, your accomplished for you've career your what congratulating time. comments want echo morning, to on Good and everyone's you, I'm

Brad Tilden

Catie. much, so you Thank

Catherine O'Brien

grounding, the orders, net be on on decision all maybe is but better on Nat. MAX with question OEMs, the existing can deliveries to your to versus given on negative dual even the for Shane So perhaps Boeing an back go my orders given keeping or to follow-up that's pricing, decision, fleet, fleet some pricing I and know the costs moving there was assume new fleet no the added a sometimes can around we first create

Shane Tackett

deal. Yes, along way order we've long worked probably thanks, partners that I think sort and lot what time the clear right we firms that might, won't I get specifics I here the to were really especially Boeing of say of And on and though and to needed on getting I of we a this can with place decision. in friends of the good Catie. our where XX the pandemic an add are options. in we a order, now cycle into

them. of all take we is options with history Our

work be it for amount got large go a for quite that us. capital a so of to us, significant order And could and make we've

on deal. now. think and can by won't We're I that we get get lot about we're of with that the on efficiencies than about path getting really savings think So, feel into good very the the single I But more we we I the specifics operational into any There's deal excited a a struck fleet. them. –

Catherine O'Brien

a the ones the happens in like to sounds half sheet. Understood. with more from Fair the And the enough. see then of It of related first waiting cash year. potentially cash positive, no on couple what balance we're recovery, but or ops burn cash

minimum CARES about It the of once you balance or scenario, do in And for those comments higher recovery. want you that May you guess debt before But we on we time. how couple permanently like have more I think weigh of of stick not, at for contemplating through taking end moving your a of and how maybe take pay a down, your more seen that levels liquidity sheet you pieces have now. from the loan you do whether how loan to holding then to to higher there? liquidity you the like do sounded thanks think considering So

Nat Pieper

Thanks question. Catie, it’s Nat. for the

I think clearly Year is than balance XXXX $X.X Alaska higher historically is $X.X carried. we is billion, billion. our current cash which end had

an liquidity have over think So we're us down excess time, an revenue do just then carry pay you're recovery. is, we And think amount XXXX, through landscape until to what going sustained I of revenue we to choice pad sustained the debt. we'll I see see recovery. and going that additional think to see I see until carry certainly

Shane Tackett

that. to add just I'll And

access We and end planning that yet, going have a just ability of do it. In that but higher terms we be the if at make to lot rate ultimately the get we'll we go haven't $X.X down. up We bring there. quick we're quite billion. the posture, haven't done ultimately to But a of want to we way in long-term than cash may decided out a we need balance sure cash

Catherine O'Brien

Understood. so Thank you much.

Operator

Cowen. is with question Helane ahead. from next The Please Becker go

Helane Becker

time I've you. operator. it's known long congratulations, much been And, a that Brad, very Thanks

XX been on those I've all think I conference calls with you.

Brad Tilden

you And right. and go lot. guys All my – I then you Thanks might back. won’t you a probably say. be –

Helane Becker

still remember, I'm XX. Because I think

you. So of couple questions here's a for

are to ready to you network? going break Given on are a poorly. who On get not the – route network, you is that have thinking or you So performing we route spring sure that Are fact the you back giving thinking that so are answer adjusting up traffic that? wants transcon it? the we're or about how to chance at

Andrew Harrison

CEO that's great Helane, question a for elect. our [ph]

Ben Minicucci

still Andrew privileges, increasing and an The closely XX% where his thanks. team route think No, we our network way we're with is focusing working he's has and are Pacific some of Northwest we capacity restrictions and the exercise. the to the Alaska. Brad Pacific XX%, so hopefully had you're adding Northwest, we'll to months the is state ease. going focus of to see going to back as a capacity of in XX in next XX and come lot And months. on California

In terms Helane, and happens I we'd think are people and relaxation of transcon, with rollout spring to the vaccine have see and restrictions. break, how with what feeling of

I can in have think, days XX, million vaccinated. X.X mean Biden he million day, announced just we XXX I'm the that with administration, a maybe people the in country optimistic vaccines XXX a

venturing start might think I out of spring break. seeing, you people

be So I going cautious. to think we're

be anything react to to our toes want going we're Andrew, think appropriately. you and on add? I

Andrew Harrison

numbers Ben it. think, put to answered. I to I just of a couple Just,

it I fourth this down going in New XX%, San quarter. the same XX% be to was quarter fourth the be down as first was quarter. think on a to still like York transcon is as going in the Francisco

then to line be So to are like Ben and in XX of Hawaii. them Pacific one Cancun. Three where points of And then said, Six capacity. Hawaii, main up but like demand, no are going got we've XX additional places we on Northwest, flights. as moving Florida there's things we're them around

where demand around stronger to So as we progress, is. we're moving the go our airplanes

that. where at that's we're So on

Helane Becker

helpful. the goal then Thank Okay. oneworld, I what is I know you. on XX, just That's March very And think.

– getting mostly half – it into it you sense – the that in I And of your thought the international XXXX, it now. but opportunities. or Thanks. that Is you opportunity that's you makes guess so because to is connection oneworld idea don't the question. XXXX do. that's benefits connecting or get then is And second into do Yes,

Ben Minicucci

know and Andrew couple question. got we Nat which world and a of with great the Alliance say We’ve have with but call we you partnership. what things. here, one International it's the West I'll American, a partnership the Coast world, Helane, it's one It's

Doha. and Qatar flights I'm here. have – the see have In starting We we international going next to four we couple from if starting months, have that

got starting We've from Bangalore we in and Seattle. have have We Shanghai London.

with around broad working Not the to and and domestic really with that actually Americans, getting all in domestic customers provide the with think Alaska now world a alliances are your really a to so international Andrew can West Seattle, When coupled the this corporate even the for offer. we side, on from is West excited to Coast only that. network can Seattle, point, we Alaska's hard with that business I travel team with really our that all network So Alliance that on powerful hubs. see leisure the our service and you're have partnership Coast have the we it's

Andrew Harrison

is down the going people they're talk are thinking with international to travel Ben, do can though lot there you to domestic international consolidate or even I down, their the like think that international they're about one is of road. their

or better a So travels eight much a that as but that chance domestically, getting once just customer, Airlines year, of internationally right. or Alaska six twice customer plan, the that times mileage we gives into

Helane Becker

much, That's great. you very Thank everybody.

Ben Minicucci

Thanks, Helane.

Andrew Harrison

Thanks, Helane.

Operator

question will go with The ahead. next Baker from JPMorgan. Jamie come Please

Jamie Baker

of morning. with I if me three for Andrew birthday, old I'm about lumping for flying four you'll aged And year. not happy you timers be we've the club good now. heartfelt best my you Hey, and to and curious years this in feel thank know single Brad or your us many means the just doing more last family.

better did than hopefully, that. So you

it and a doesn't that ticket pricing, question answering. that to you're on time So in ask your comfortable a going to way I'm waste try and

personally, ticket that. than be is their complicated discounting to but coax lot level is clear it's necessary, homes. of question any more a pricing going out common what is So discounting needed people not of that would And to be me I to realize

flying. it a that but seems of number perspective cause I people is a reason want to promotions, are nervous you've the been time that fair when last So running about at

you that commenting Is whether the you're a that's that driven should that's something least response comment and can on? what at So of comfortable sort future? on we blueprint for assume

Chris Berry

bookings lot had Thanks, first-class level very we've We marketing of pandemic. the December. point, bookings, our think team. the Jamie. brand that, To proud on all had And employees our of got a out promotions level that we Saturday significant of that focused that Friday, there. We I in stimulation Thursday, I'm traffic. It your highest had got highest future heavy was had of very very engaged. and It

of to lot into sell We have future. a the seats

we so opportunity. use And that

about X.X% coupon was during down yield quarter. this Our

come to be to that fine line, after point, then demand and are So it's your with now volumes going but pricing. we volumes right and

sort of that's right where So are we now.

Jamie Baker

yield isn't is and helpful. with going to That’s dilutive, piggybacks it's that, one And follow-up relates Helane a as presumably in which dilutive. it's of say, world to up connecting off this Okay. bringing kind a was that to accretive, not travel, what just to be

year of is be but that core we coincidence you're the affirming entry? So industry, timing environment connecting our be going should as Is going something to just yield impactful? world same that of Is because to you're your the to be time progresses, mean it could the considering lag carrying more at yield hopefully that travel. the models, one given the an going on that that

Chris Berry

– quarter, I were in I connectivity our the fourth think think I XX%. international mean connections down

be and of world, going on is going news connecting you don't It the I be business, be take good to loyalty back. that's to with at come network our loyalty, to type, think program one all. us. So for on but all think might to tell a on going some yields both I some the give will necessarily I American and the time it's dilutive

Jamie Baker

you a pilot speak third, in That's if quick have the this average could Okay. do last today time helpful. versus And seniority year? I just

Shane Tackett

Shane. ton just Wow. it's XXXX, moved that. retire don't a a We think on is but top at I XXX Jamie, this based did off the

been had took out. attrition that's that. relatively But has we early besides that So XXX, it XXX needed

Jamie Baker

much, very you it. Thank Got everybody.

Brad Tilden

Jamie. Thanks,

Chris Berry

Thanks, Jamie.

Operator

from go ahead. is question next Please James. Savi The Syth with Raymond

Savi Syth

the and Hey, birthday I'm to happy today. I ask with deliveries good least Andrew terms you couple you here on it of on fleet Brad, years, the like for us spending the that Shane, care by and I of if all maybe here that at the and call next morning. year were of kind in you might to what just sorry provide exits. expect comments able

Shane Tackett

numbers? right can, Yes, me. why Nat, I because front these don't there's you Yes of a chart take here with in

Nat Pieper

we've Savi, XXXX Lease nine and lease to. so on But from directly in from XX units spent Happy XXXX, to Corp. XXX-Xs then take with Boeing in XXXX, We'll a of Air take lot going chart. XXXX. time and obviously we're this then XX XX in four XX in

few options and we in So that XX gets then XXXX us XXXX, from then that's XXXX pulled and and in XX XXXX. have a to our

mentioned this gives this Shane lot us and too. optionality. deferral We've rights good a of his on it flexibility script as got in some So well.

our as was that the with be and to bit Want murky. of recovery one is revenue Boeing. flexible motivations still So here a

Savi Syth

helpful. That's

up. when grow expect kind do Airbus the rest Just remaining on the to AXXX some the XP you there's side, of of that

Nat Pieper

parked. part accelerate for less to of to will XXXX, those lease mentioned XX, in are expired. consistent some of most the XX pretty XXX XXXX it's This earlier, we orders work those most is with Chris and as And because airplanes

our going so and share deliveries Airbus Boeing, lion's the away. up to So from those akin units we've pretty matched

Andrew Harrison

the open to in Savi, but I those for they're now think span, them. what are the about future. we and I possibilities and that in our we But fleet going our them, can XXXs to there stay do they're think foreseeable in the the of talked think to fleet XX operate we're tend you've XXXs for that, – I

Savi Syth

much number? kind of of on question in might is much that XXX you're how been just And requirements just for the reflected impacted has the XQ, of of that is I helpful. XXX ask PSPX I'm That's and if kind a clarifying of OpEx it that by targeting, to wondering kind outlook how

Shane Tackett

had on we folks, unfortunately a October few the bring PSP, management X. the we had that so Savi, Yes. riff ended on back mostly up to side to having

entitled through that period through they're PSE back And March. come so the to covers

forward full overhead estate think like the through some today. reductions a line, to there year. with, that specific amount, at that's way happen. a and we're supplier that's on additional already a QX order run we're just the cost volume lot of ramp with of things XX% our all headcount some I towards I honestly, the to costs a the reduction, – savings, XXX, really recall we've is ramp. the ready one that every some And that's stuff that recalling will management today. given negotiations, you're other but you're this We've had tracking get these, deploy. we're On wasn't for little impacted. at non-wage rate some the but full to that. those run need side, the think about to amounts frontline the A that capturing more about don't run discretionary that when the then to of rate minor And capacity going of throughout structural things folks But of the that in yes, and in help to The of cutting Productivity are lot middle of like going QX or talking consultant front we're I And full both like been rate. it's speaking spend we of that go real those XXX

follow specific we'll in are because one my where going by rate but the with on category, from that's here, up head – of a not fly those each it, run get a to of number, I'm tell I'll so And kind at perspective.

Savi Syth

Thank you. Helpful.

Operator

is go Research. Vertical next Please from Darryl with question Genovesi The ahead.

Darryl Genovesi

guys, ticket the tax expired there's your that airline purchases time. guess Hey holiday for your end. to – federal this thanks Andrew, excise everybody. at I Congrats on

filing elastic So I I that higher when with to I Jamie's, raising into maybe it fair. a QX, system is I away, out is some a now when think of think that you tax and back in to equates of but guess response base that do specifically particular, that recalling affairs to but booking assume there lasts pressure the plays XX% the the of this how I kind specifically drag is to any probably follow-up coming but seeing kind anticipate curve? tell, revenue tax that? it's think went that yield you of guess and – just is wondering management early because somewhat don't of of Do if kind about related you you

Andrew Harrison

I much don't to too haven't comment I to I I think for us, want And erode. got – about kept started it reinstated, that pricing. when is we're the checked Yes. think in going that then reality we first think recently. fairly And What revenues XX well. back I airplanes. on. the for load to then biggest later But XX, opportunity pockets, industry fill need what's the back our is bring Volume about to and to now, these gaps. going yield this point worry to is

and best our brand for the and to best So flowing the the it's and that's the that's we fare think trail option hubs. keep blood lowest

Darryl Genovesi

of Cool. Thank It's you. for operational And key a think very kind focus. then tenant I excellence that's been been has Ben, that guys. you evident a

mention don't any I that's just generally have don't you of fine, the recall specific names, remembering more CEO any appointments, so you. of personnel announcing to And you've you responsibilities, speaking, what's for doing? been everyone's what but taking What kind what you? backfilling specific kind on happen so wondered and needs if just want name remember you backfill you underneath – to if to strategy

Ben Minicucci

with succession on years operations and over for have succession he's – been hard a for us strong plan. And now. with the us Gary with side on worked we We've right XX here, Gary Beck been

operations solid through. the and So through is team

operational Darryl. mature. I don't Our on worries And side playbook have the is

of feel more the I confident. near that announce we'll So future, in really but

Darryl Genovesi

Great. Thanks, everybody. Appreciate the time.

Emily Halverson

out, question on Before question, of we one if you. people left couple you got it several through. keep could next get a Thank here take to minutes we've all the to only and from

Operator

The come Stifel. DeNardi Please from ahead. next go with will Joseph question

Joseph DeNardi

talk meeting you want of to from for may traffic This terms of have Thank follow-up. what think thinking but your in whether from being the a think whether whether headwind, or some they just you or half, one tech traffic kind I ask what customer the to, Andrew, the come more and kind at a of cabin you moment. uncertainties longer-term perspective. business configuration revisit virtual nature of you Maybe that kind whether in exposure susceptible you industries can be about less potentially then business about to just the evaluated of is Thanks. around the it of you’re now demand light or you. with And of need happy and that’s

Andrew Harrison

Joe. Thanks, Yes.

Our or business by you bookings just is down, whether everybody measure it else. revenues, like

I is commercial strength a especially fishermen, we think unique Alaska in the the types the where workers, have and of those oil slopes things.

bit on travelers, the the no have have ones that of nature and a Microsoft the now We our challenged, Amazon we The We of lot strengths. business, travel. do just – right fair very who of obviously, are small policies the still strict travel. big business a

our change with we it about step was we’re think, and second what really cabin take American. that partnership good. feel is Ben your with And we our international Once configuration, in the and excited then travel. we as participation mentioned, believe oneworld a So business up returns I will in question

We And into and there come of that Ben as little come we heard premium are first spot thankful on period booking seat folks that our the cabins pressure, non-life giving obviously middle under demand. of through are the environment. you we for to business as mentioned, class We a reason demand class with bit are flat position. seats we a the very And that’s this maintained buy cabin time. lack extra why think up

Joseph DeNardi

Thank you.

Operator

is Linenberg question ahead. Deutsche from with next The go Mike Please Bank.

Mike Linenberg

learned morning, fact, I fun a good me sent back lot Brad, from when was that in I I you, an me what to really And Hey, calculating to everyone. wrongly. trip telling email, you the think along just, spend?

you that. calculating – you’re thank for And I So maybe right.

Andrew Harrison

Michael. we it or you, calculating right. I got wrong Hopefully

Mike Linenberg

that’s one, Anyway Andrew. just Andrew I a guess quick super thing,

visual those What in the notice that want means premium from in product you people better class, possible. than as for You middle the space, at first actually maybe lost the two, to as want just be far cabin. seat your that a least

is it’s just great. risk cannibalization? So think the mean, of I I there

for great four premium seats have block, and consequences. seats your to could based You’re four that, doing that it. and It’s on thoughts six going be product, adverse

Andrew Harrison

Yes.

product – service, food come full good other a I cabin seen that and actually obviously, we we’ve of opened with first our and X. have, recently benefits is class we have first haven’t not think, have a a We class just class January and lot But food nice hot, service up but cabin. that but since it cabin, first cost a we

we as and say can along always adjust of So what will we see forward way, go and course what there. pricing happens the

can So make have that, and great want premium I seats we I’m say guests those sitting concerned. overly available. if will in not I those we

Mike Linenberg

All good. right. to Very Thanks everyone.

Andrew Harrison

Thanks, Mike.

Operator

Hunter next The Please question Wolfe is ahead. with Keay from Research. go

Hunter Keay

Brad. Hey, Congratulations, man. Good stuff.

Brad Tilden

I Thank miss you, miss – you Hunter. a And we’re going to lot.

Hunter Keay

will. true. anytime, that’s me if actually you sure, I’m Call

up. RM get the those get able about get But that it, talked going implement are factors is a right. experience I with to that to get to to you driving is there. talk the volume, you you using during you So think important load how obviously confident COVID how about going Andrew, the forecast tool you’ve to it? performed new you Thanks. your loads if it could And be Giving you’re going system limited and forward to up. how about

Andrew Harrison

Thanks, Hunter.

until I work [indiscernible] with We’ll but you I is Our and some RM they know, go. environment But came that much. the the my point, group, analysts, who obviously Amadeus Yes. heads was the history, get volumes speak pipes, that the and tested ready the help in. that The RM to we demand no on to see manage want it running tools but completely to a we worthless. is to through Team with forecast up reality clever To will had system can’t details, up trained, very your we really fully fantastic pay we’re predict. implementation.

well going as things great that to the confident still occur automation as is I’m there. So

Hunter Keay

you. Thank

Shane Tackett

add train having demand go good for there’s having net we now that comes a as to I new of the spent midstream lot of to over volumes you Like, of risks and our just levels forecast might benefit RM these demand get perfectly cut is sort actually unintended at I back. of think zero in when think I time RM that at normal it back comes tool.

positive on actually I’m So this.

Hunter Keay

Thank you, Shane.

Operator

Oglenski from ahead. The next question will come Brandon with Barclays. Please go

Brandon Oglenski

to what everyone. than post-COVID Hey, balance question longer-term congrats, the time have are the be world? you maybe re-imagining Andrew. up. but coming and birthday more conservative with My this aggressive Ben bright Boeing the a a Brad guys happy agreement good probably is Is future in the you for oneworld pretty Ben, and one, looking deal the past? Is sheet morning, And bit one and a you in

Ben Minicucci

Brandon. question, great a That’s

looking we’re First and and foremost, I long-term. mean, short-term

world First on get in back foremost, sites. getting just is one getting financial our really getting profitability footing, really That’s one, and we’re to solid to partnership work. flows network going and positive to this job to cash and the rebuilding

looking on advantage career. what’s then you our Alaska thanks if is positioned the opportunistic exactly of history, there. with it’s being to this what what – whole and our is is going know being and to as out the always company are, opportunities And on but we’ve and take look we done, toes Brad, at they at environment don’t think I

but also in it going as look we’re we’re out we it do position comes to fantastic a take to have do it. we opportunities there just a a plan, strategic So and and at

Brandon Oglenski

Thank you.

Ben Minicucci

Thanks, Brandon.

Operator

Please The next question Shanker go ahead. Stanley. is from with Ravi Morgan

Ravi Shanker

of Good fair that you be to of filling half And transcontinental for are to year rising your couple discussed the Thanks. little congratulations. say the is route up that mean, of on or the aggressive. you and kind traffic more given the through first, you future. of that going of ramp afternoon, picking in back expect second, the extending you a XXXX, your the Brad, Maybe back of expect follow-ups, to and on and really One I bit seeing the the planes, focus luck everyone. so you you look like tide specifically? the commentary any is, for stands XXXX good far. kind evidence Ben, booking half year a curve what outgrow are out. it

Shane Tackett

this Andrew take curve I’ll Shane. question. is Ravi, booking Hey, the let

rates is our the get is XX% And to I we’re go which us We if may convey yes, to, And thinking new any like, way ramp it. opportunities order grow, the this I a economy be there get beyond that. only capacity them The capacity to – is. what relatively working able growth be have right post full and underneath if it is think the that economic interesting sort talking of want size set, of be and situation. those to think, And it’ll we thing would period got back growth. think financial to the in be are chance good for comes our I about full about we’re we’ll by of former to we’re shape after high of we’ll was you the in pandemic pre-COVID forward. But this there in plan of the potential initial be gives we’ve to of I sort we’ll that, to right been do on how then kind I mean, And now, we back fleet the demand sort investments. back of go the summer. to XXXX, capacity business as good and see as machine if justifying demand first

Andrew Harrison

every to seen downward on a much spring and bookings seven average, just was been And the a this day. into steady a on past increase the we’ve steadily net summer. there I and think, COVID on trend on the book improving have a pretty the our three in and our booking, we’ve steady seen strong rolling for down year-over-year December, cases day bookings weeks demand

yesterday another to little here. solid up a bit day. booking open very, very California’s starting fact, In was

we’re guaranteeing to that’s not come, and a So are trajectory going but improved a certainly in direction. but on I’m headed good lot a to we continue,

Shane Tackett

Andrew, employments. higher weeks had we’ve than XX% that for several are bookings now, our

So the definitely about is there’s optimism future.

Andrew Harrison

That’s right.

Emily Halverson

Yes.

we’ll then take question Let’s one go ahead call and up. the wrap and more

Operator

question will with come The ahead. Okay. Please Global. Dan McKenzie final Seaport from go

Dan McKenzie

And in. course, have just of your squeezing be wouldn’t didn’t course, congrats. to a birthday, of for huge happy question here. echo And a on proper Andrew thanks spot Brad, Ben I Hey, with accomplishments. we birthday. is it me if celebrate with

on year expectation in travel extent, just To by the the get what does return And oneworld you to to business potentially and that into XXXX. guess that XXX%? a there XX% end. relationship March could entry to AA the expectation, I back So as accelerate for

Andrew Harrison

their that going – travel and just when business I I think a Number care to get and out on managers we the people one, well. still get that going they’re decide we And think much go that vaccine is two, ways tell for real the about of put to duty travel. quick, Dan, in to there. got friction after number to need how

going has and are business for as strong network And the think there is budgets terms so for that’s then a half – people believe and I to that CFO in to new at corporate very utility solid and being global provide All that an And oneworld partner fourth happen. obviously, working in interest factor, we’re three with be American corporate open Airlines to shared that be on one awhile. area. strong and said, and reduce America the and Number the is up receive seeing I can yet we do step and we’ve in back contracts demand change contracts. will

we’re share bullish getting on So business very better travel. increase of a

Dan McKenzie

for guys. the Thanks time Okay.

Brad Tilden

talking I company We It’s XX that you very all your the been you the think will days. team on to much. And fantastic. and Dan. Thank Ben Thanks up. and be look this – we’ll you much, very with does down road. forward wrap it know in appreciate Thanks team this interest everybody. I are to talking

Operator

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

may at You all disconnect time. this

Alaska Air (ALK) 26 Jan 212020 Q4 Earnings call transcript