Earnings call transcript Q2 2023

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Operator

Good morning, ladies and gentlemen, and welcome to the Alaska Air Group 2023 Second Quarter Earnings Call. At this time all participants have been placed on mute to prevent background noise. Today’s call is being recorded and will be accessible for future playback at alaskaair.com. After our speakers’ remarks, we will conduct a question-and-answer session for analysts.

I would like to now turn the call over to Alaska Air Group’s Vice President of Finance, Planning and Investor Relations, Ryan St. John.

Ryan St. John

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

This reported income Group morning, $XXX of net Air GAAP quarter second million.

net adjustments, Excluding of special fuel mark-to-market items million. and Air hedge Group reported adjusted $XXX income

a which will may today include results. our from performance, materially future actual our about As differ reminder, forward-looking comments statements

our Information factors on affect our risk could filings. within SEC that found business be can

We directly measures provided to non-GAAP GAAP and as will adjusted earnings fuel. financial most costs, have measures usual, today’s we release. certain the as comparable non-GAAP unit between such excluding And earnings and in reconciliation refer a also

Over to you, Ben.

Ben Minicucci

Good Thanks Ryan morning, and everyone.

Our unwavering helped solid date, busy our focus, thankful has strength their as of on as capitalize produce excellence well quarter environment team’s the leisure for demand travel the to reliability. I season to operational which and am great results this to these us commitment second reflect results.

margin costs. industry Our coming higher higher structurally in will the pre-tax likely lead despite XX.X% and above XXXX fuel margins,

the above XXXX was to strength we year-to-date most flew quarter single of we XXXX. points share at of better The XXXX per than a June Air evident in this best XXth X.X completing our care. a $X and one and than in ran was serving bringing continued flights $X.XX on a the This better with the earnings in country guests history. XX.X% points completion X.X operations And was rate, as when us prioritize XXXX and Our by demand Group’s day than beating higher basis, passengers of XX%. consensus we on levels,

teams the for into we period, and our are executing. busy planned prepared airline have our summer Heading and flying peak

of rate at XX.X%, load we a Xth the while the performance industry flying July led XX% Over weekend, and time XX.X% at factor. on in completion

in financial As confident we continue started our adjusted targets strong challenges, fares efficiency is focused their come our resilient costs share XX% approach to our targets and but earnings down our it is to without and clear leisure per the environment year of deliver domestic and peaks. of have controlling Delivering X% improvements beyond, year, remain evolving in as be to hitting including rest of this tenets business and remain to to will $X.XX. of We $X.XX performance. the driving unit margin our model, productivity the recently we on restoring financial pre-tax from not on

Now our priorities turning to business on and progress. update an

to to operation we drive foundation have historically is are do capturing to commitment predictability, further stability, We have building and of chosen this to deserve a restoring revenue, reliability imperative prioritize done. but improving business. it like and excellence running the level and our a improvement only strong guests Not

guide. staffing our surpassed X-point have performance rate half of of initial meet year expectations, training, approximately Higher flying. in the enabled in investments of Our completion to capacity and level higher has full our aircraft, driving a us increase

these disruptions supply fleet. continued according delivering this significant. aircraft upgauging and behaviors, work partner, continued also we to close our to their within chain. adjust has despite welcomed operating month, Productivity more to levels. Boeing The Earlier improving the of XXrd MAX the gap is amidst we be work to expectations great environment a into as stable also benefit a are XXXX to new

per hours drove XXXX exceeded year-over-year as were X.X% fixed While year-over-year coupled at gauge much X.X% assets levels this possible. with utilization higher XX.X our as to mainline capacity continue cost as we and leverage down day by up quarter, departures X%

a constrained industry at growth environment. sufficient fleet our to operating transition us a we fully Alaska, As Boeing the growth within helped plan has de-risk

operational year of and adequate have we strong efficient our to Given staffing XXXX. raised to guide our capacity execution, versus growth, expectation continued XX% XX% full

level work all our network to to commitment and resources restore we our meet pre-pandemic areas levels, this balance are our a to with consistent confident aspirations growth As of we to in flying excellence. higher of

to down on is business our and compete profitable to Our advantages reinforce for foundation these configured doubled we’ve core growth.

returning strength of operational a as fleet foundation have our to historical are our We rebuilt excellence. single operator and

on more of push expect our be unit exclude. still in incrementally even factoring costs industry-leading when of performance drive to to and which in pay, We year-over-year the continued peers productivity our industry and one several based costs to only the lower

We our on commercial are progress making and executing initiatives. on roadmap revenue

year unimpaired of our sight Our within despite earnings on XXXX, with have share leverage range, well labor and long-term costs. XX% we balance crisis costs sheet structurally with higher remains full at line of coming out per higher the par least and to target fuel

do For consistent continue and so Group to adapted profitable decades, growth. produce has to will Air

As us productivity far yet know, advantages, and we the measured long-term and excellence, and discipline, well our drivers you to a our strengthening well into now cost will restoring success, this on in operational the of position competitive way future. high continue remain industry focused and challenging, is consistent

with Andrew. it turn I’ll to over And that,

Andrew Harrison

Thanks focus our the good everyone. the and as as of for Ben on rest results, revenue comments well outlook year. My second morning will quarter today

quarter results. produced very second solid We

Our end guide, $X.X demand. record high close-in strong the by billion up X.X% were and leisure the XXXX our second of of versus driven high quarter above revenues of and

second factor highest with XXXX, planes XX.X% our to the full of XX.X% June load increasing revenue our out by history, factors Thanksgiving X.X% to we and best outperformed Sunday the year. in on and second versus monthly April up the our only the our the to in continued be for quarter, recorded of from June, was XXth, in in history. quarter fly May, day close To Capacity last XX.X% in quarter load second

are revenues. Turning unit year-over-year pricing given basis to XXXX. capacity at on X.X% a down Changes in both, volatile and noisy

unit more consistent XXXX, quarter, saw highest month we has June XX% revenues month July up a We of in improvement the However, for with as second when still total in the XX%. the XXXX, which for produce trends, pre-COVID stable is revenue to year, to straight with June for any compared July expect of but yield the us. peak supplanted

We cabin in out Including gate. were year-over-year, strong X launched I’m by points of strength product, XX% the support points. XXXX. pleased revenue total right row Premium premium outpacing sale have to Main Regarding in the XX% our mid-March, been momentum. seats revenues sales the to exit of report revenues continued revenues and exit rows, of up Class X from from second Premium products, up from approximately and up Cabin XXXX Class In First quarter, both and came

up quarter side, with On the bank cash our remuneration XXXX, performance by XX% second versus rate remains strong system outpacing of growth revenue the loyalty Xx.

As for to our always, loyalty U.S. the are value we been continue through XXXX, and to we airline named have proud guests prioritize XXXX number delivering to program, reward program from best our one

today. earlier News

later we partners sell the partners tickets. year, partner anticipate this is selling now we are bringing and of to capability our ability of vision major Phase to to access Lastly, our on a to will premium But of on on region fall. ticketing global portfolio providing cabins website, X add this XXth seamless on world. and our the our with main our of sell alaskaair.com our service X cabin helping achieve any guests us

would we’ve even turn forward-looking has fares, Demand still for surpassed yield as our XXXX come off an at by strong, happen Notwithstanding remains very is guidance. outlook we capacity point. now XXXX levels XXXX. Now, of levels industry knew half historically this meaningfully estimated high of trend X% the above some and to second on the peak I’ll evolution, that a

capacity be quarter, For This the approximately XX% that to XXXX. revenues up we third is unit to versus midpoint. XX% implies down flat to X% on at up expect the revenues X%

third revenue with XX% see the environment revenues on on we today Our is guide quarter based of the books.

in revenue that X-point other of industry QX up our year-over-year, is holiday directly to to our stage unit and comparing X shifts. growth to implies a length the is capacity roughly while Of a tracking performance. be combination points, timing this revenue related environment, domestic XX% results, the When QX pricing growth half sequential our deceleration half guide

with As been believe We has a primarily seats unprecedented surge June. pool summer are to situation effect international of presents the domestic in than year. would West case. domestic the demand, off not had historically year-over-year the this dissimilar larger Long-haul leisure international demand has unique a carrier, Coast last this surge XX% pent-up domestic be up the travelers from the a international

while a on guests XX% and accrual filling network, alone from XX% international XX up as lounges traveling we’re visits in XXXs our daily in of June, by Our the experienced loyalty our basis a members over year-over-year, internationally. redemption partner equivalent activity, across evidenced increase

we in normalize, which impact While performance guide. this impact approximately by X.X% fares our third there estimate believe will is QX X%, our a quarter, to is ultimately realized we our domestic revenue the in on could which disproportionate reflected

Close-in booking remain address. XXXX QX within XXXX passengers months booked has flown improved business surpassed where to XX%. to advanced demand the during XXXX, both, down when our to and X%, compared passengers is Having given volumes and levels. another length significant is and more important particularly skewed increased This dynamic stage recently, of percentage patterns

trend this this represents revenue Although additional current currently guide. upside forecast, in if basis an of persists, our points quarter third not our XXX to

both managed the have not to around XX% largest with volume meaningful it technology accounting change, California full travel, recovered still recovery. Lastly, for pertains to sector by and the as remaining we any business seen gap

to seen incrementally ceiling. we that break major are we the at optimistic However, through recovered companies finally XX% tech might efforts have office return more and more

Although will watch we continue fall. move guidance, to our we closely baked of into any we not as this this have the into

of full to versus unchanged revenue up on the capacity at XX%. to X% our but higher remains growth XXXX, guide For XX% year, XX%

capacity Alaska’s Airbus the of third benefit is with larger, MAX our gauge and a in the up the quarter is aircraft. it primarily we taking by stage performance, driven efficient part operational full due growth fleet more While in and strong year, to step from replacement as

As we XX brand-new replaced XX seats more will Airbus seats. have MAX all that a an of reminder, XXX by Xs with September have XXth, at average gauge aircraft

opportunities load in year-over-year factor At year-over-year, gauge X.X flown year system half our only restored are areas XXX% benefits the ASMs The results in pre-pandemic what to and industry, we was provide ever approximately our we still but down including grown have not of load there and a of highest California the points our have restoring factor Coast are clear international fully geography focused West that for in to X% are restored. network, XXXX, was second across especially our are partners. feed from is our within upgauging The level, the the still recovered as of Portland yet June where least history. network, has we the on

high in we will as crew to In thoughtfully. maximize our our been if a pockets of to economic relative fleet decision said, That has yields, softening, historically the ASMs right period of and identify fly within deploy we capacity, demand and adjust needed capabilities.

continues environment, and we While we come to with below is in have a XXXX. confidence as and the levels business predictable normalize more to towards there new, towards upside West recovered, plan we historical head industry Coast work lease believe travel commercial the still more our

premium and implementing program. our partnership products oneworld in loyalty profitable specifically, and drivers on strategic the our focused longer-term growth, pursuing of our and West International are Coast We Alliance, our

Our is strong positioning us and suited significant, and well serve needs value post-pandemic, traveler to continue going guests well our initiatives build our to to results forward. proposition our tangible on product

it I’ll Shane. over that, pass with to And

Shane Tackett

Thanks, Andrew, good and morning, everyone.

we the July continued shared, record second the throughout demand to both As period of Andrew and the saw and holiday. Xth a number end quarter, into strong both carrying Ben passengers, of

reliable summer safe, teams have and in full of midst flights the operation job very an busy this done Our excellent delivering airports. a

our coupled deliver on relative operational Now to unit viewed to which driving priority, strong consistent to allow cost-efficient first focus that our we’ve financial improvement industry. and operational profile. together, results restored to to continue forward they leads Ultimately, the we us will we added excellence, as excellence cost within look operations, now

results. Turning to

than million to Our it quarter. $XXX our XXXX from cap approximately quarter. Debt sheet the quarter Debt liquidity at $XXX generated million cash payments were in be and are turn demand the and flow quarter ours. better strong remain the healthy X.X in while and positions for during and start times. summer below quarter and at XX%, X $XX of backdrop core to travel, With second balance a debt-to-EBITDA finished third remains net the we operations where stood strength million expected a in approximately of

very target undrawn trailing cash the year-to-date healthy liquidity quarter. $XX of credit approximately at and have Total this billion. $X.X and year our nearly remains our liquidity, XX% invested million range reached return lines share for Also, within on-hand reached on repurchases of capital inclusive our XX-month and

Turning to costs and capacity results.

running I operation well. been has extremely our As noted,

For a QX high versus we originally the planned. higher second XXXX, quarter, than by was above X.X% which had our capacity guided end up of driven was rate primarily range completion the

XX% full over Our rate versus completion And XX% the the which to capacity be the XX% the year, which higher quarter for higher up we we’ve completion to to given to been third has XX% the slightly now up expect year, expect XXXX. balance few assumed forecasts XX.X% last for this, months. be for resulting in of and we

costs. Moving to

was on CASMex quarter capacity. second incremental within year-over-year, range, X.X% our higher guided albeit up Our

our the be capacity. we midpoint to at profile expect or slower growing and our when of did structural. on we clear, The cost at are rest from not productivity misses not have the than in While sequentially year-on-year. cost aggressive industry, given better be especially we to predominantly are best miss small And were targets. we believe outperform continues drivers They of or the course, improve, to away of better range, and rate comparison trends, somewhat against know what are a our cost many midpoint relatively primary we we, competitors. To both we

overtime related elevated to costs than modestly to and leadership expectation cost priority, Ben appropriately. excellence team we clear first elevated premium including higher with Areas operational our have a running down and now operation, solid that established these the remain areas relative incrementally and levels saw pay. staffing and working been we the company consistency that, and focus The planned having will is on where

of higher Airbus pilots associated fleet We assume Boeing. as the fleet. expected, slightly forecasted and training are, our higher related crew attrition than have transitioning also transition costs out costs levels We Airbus the to with of significant incurring to from

Turning to unit cost guidance.

be We expect to to X%. CASMex down third quarter flat

to still year-over-year. costs X% X% For the down we year, full see to unit expect

we only capacity profit will less and anticipate reductions As the versus guide our a CASMex our unit we includes will that And reminder, do we cost year-over-year. sharing, incremental that airline may achieve on be peers. this

on our guided second gallon the below range per falling expect be and to at current fuel finishing quarter. for we the trends, positively $X.XX trended $X.XX to price fuel Finally, previously $X.XX third quarter. Based for

prices While this XXXX. offers still a benefit compared above to last XX% up year, are fuel approximately

feels to it up, are we years getting wrap after finally To unprecedented of challenges. operations like normalized back three over

to delivering ranges. opportunity have within guided but and we are to work improve our do We results further,

X% we visibility of higher our As restored are higher structurally EPS with fuel to Ben pretax year this the to mentioned, and labor margin levels midpoint XX% to deliver still an towards at costs. XXXX adjusted tracking both

have which providing best year. further further continue recover, the in opportunity international We in including got business West network, absolute further normalization but it pent-up the demand believe is to through, drive down costs our drive will solid the provide arguably next there versus that unit look I We initiatives. and revenue will we trends we demand is believe U.S. I future travel, commercial Coast believe We’ve once region pricing mix, the to cost to have As least run be very international in our a support domestic recovered a forward, tailwinds. think opportunity also the setup. will with

margin again for we the performance also improve years as expect we best know ahead. and full to even we in the further XXXX, the margin in year our opportunity QX compete have the for industry’s So, to

your let’s that, to go with questions. And

Operator

question And Baker our Instructions] JPMorgan. [Operator Jamie from first from comes

Jamie Baker

second RASM the half guide So, clearly in the is disappointing.

year-on-year your You mentioned quarter, forward, terms recovered. could network Hawaii, looking RASM related the West second of and in Seattle buckets, South parse Seattle or four least was Seattle to them that North, the rank change, Coast you Seattle South guide? order into not If we the then East,

Andrew Harrison

Andrew. off little Jamie, the That’s Hey maybe complicated a top.

on network, say XXXX, I recovered, essentially, it’s XXXX to it’s a our what see is least versus both think we our but going and but I but improving, there California lot stronger. getting margins in is would continue the

the said, talked As there. gone. unit growth of said seen planes peak extremely we’ve where full. remarks, revenues. overall, we recent deceleration most the And big guys, strength day, system in far the again, haven’t that’s prepared X is And off in to from say as unit essentially, we’re our But from points. about, a extremely X as our importantly, of a that our QX in. fully the down network, the at they’re high to I from across there That are board things across guide which they really look coming the baked has our points, as across the at X historically half to QX we’ve had the we’re the only still Northwest, got Pacific which been you revenue up again, And of anywhere other decelerating strong, good would the we’ve of lot end if and results international,

good relative feel So, our performance. basis, a really on we about

Jamie Baker

CASM you second, into capacity measurably ex-fuel potentially growth to What push get spoke next year? declining. is required -- to you level down Okay. And of to XXXX ex CASM fuel

Shane Tackett

the Hey it’s Jamie, Shane. Good way. Yes. Thanks. morning, by

see XXXX. X% a But be It’s capacity of I continue obviously, intent year. drive and our line about that. of in to to to to next to down in -- have range think year-over-year to of sort sight long-term we’d our completely target early, to really it it’s terms our want thinking of reduction X% in

Operator

Global from Andrew comes Research. And question our Bank Didora next of America from

Andrew Didora

completion be Andrew, seems bit I ask in exchanging little -- in of more know maybe little change explained want capacity. it in about a you yield basically to Ben, to change here, strategy just why what a the the for now trading So as you -- And the that year domestic is would you remain but do bit half back right little more consider in a if factor, of cutting capacity the given soft? international share time to shift? fares

Andrew Harrison

and Yes, of new been Thanks, increase capacity tapes guidance. the be some first and is of clear Andrew. completion the on I and want our exceeded X-point year, is in, things. in our side None flying. XX% for It’s of just this been couple a sort to the on time. a of very already But rate of the stale little that guide. we conservative. in came of half we’ve bit we’re the

the So, that technically increased the it’s rate, of year. half in and We’ve for those which Boeing those Airbus Airbus deliveries. of we rest is Boeing all about of strong and And better and completion capacity of has up and been we deliveries, much firmed extremely up, the retirement excuse rest and and our buried -- firmed year. me, have also again, feel the have we --

in really that’s capacity the So, what’s going on side.

thing other high these back highly in the our of efficient. year, very our half the factors with is stage The strong it’s position. load growth And gauge. It’s about and feel demand, we all XX% capacity good of and

Ben Minicucci

it’s Ben. Andrew, Yes.

levels another when actually compare departures are getting X.X%. then on down we’re XXXX, think is our said, to our just put to just I capacity another point to what XXXX you where compared factor is capacity. Andrew just And of back

the right place like feel in capacity. we’re we for So,

Andrew Didora

better. to the your then your this? and process What and it domestic anything or else of couple take shift trough this And full be curves? booking seems revenue on my it. seeing of is points for I year, you’re XQ Thanks. in the if year midpoints XQ RASM to share that second question, a thought Is your international capacity outlooks -- driving with Got were the just XQ just

Andrew Harrison

Thanks that. for Yes.

a that in increasing But remarks, length of As a we the stage shared holiday. the our And of base conservative. shift prepared look have again, quarter we’ve you also accelerate just if the math. there little if deceleration, bit and bit is fourth little showing to lower in to be core and in the do the just indeed is the tried about but a we’re half quarter, we a there’s it you to year. last pricing, capacity fourth And

of quarter, a that business on giving not pure fourth guidance couple fruition quarter. this and today domestic the we’re are demand to While in may fourth of travel abating the the there things international actually like any versus come

Operator

from question TD from And our Cowen. comes next Becker Helane

Helane Becker

So down Ben, on and really positive the yet thought optimistic XX%. I quarter you and both and outlook, is were the stock your

So And that it’s but don’t know obnoxious, capacity. with to my has kind I think do of question that really sounds obviously, people positive.

Ben Minicucci

Yes.

Helane Becker

not and too pent-up domestic the that’s to agree B, market on fares, pushback much capacity rapidly last It sure in pressure shift away really more -- seems the year, that a for not for and growth Andrew’s exist the a would point, A; that I growing of just from is international to Asia. to as exists domestic for with this later with demand because I’m Europe continues that hope

the wondering seeing kind just of saying So, and price? stock what about you’re between in disconnect how thinking the you’re

Ben Minicucci

Hi to Look, Helane, little things margins. just had QX -- be a We great pretax look, in industry-leading fantastic want I with likely a quarter it’s will perspective. put question.

have We’re a QX. strong to still going

X% still year airlines, saw international at calls a domestic quarter. domestically guys think you’re guiding ago. in when demand is fourth look massive you similar travel, done seeing we to surge for domestic XX% other margin reiterate have We’re demand, strong. But demand, to this pretax with as you I about our to what the your And

And is good which view of lot end international a into the towards do XXXX. partners metal, the the strength industry we’re is this loyalty our still we of great to a back, thing a normalizing year our for thing. domestic we on and members the market. see come do So, But that’s see have in putting our

just and terms switch as know, When switch turning can’t on -- you a in on capacity capacity, put it comes airlines it of turning to off.

a from extremely you have perspective. again, am it a towards And of is is is just have dealing You will I every end the to plan, year. business, surge execute. think kind right now, we’re executing which issue have with solid our lever. optimistic normalize well completion demand across question international of we’re -- to the we And a the rate about of The

So, that’s Helane. it, at how I’m looking

Helane Becker

Okay. you. That’s very helpful. Thank

California. airlines some question follow-up a other out been shifted on California, shifted -- markets. noticed you there? have some have have about that guys Just thought I’ve Can have into on the capacity as capacity some of just shifts there but you talk process people shifted

Andrew Harrison

XX% market be California our top recent shared was still we entry out Burbank of general network, looking And referring Thanks there’s to But into stuff. build Helane, shift that no if Latin Rica, I know our felt out that. down XXXX is or continue market more is as needed San in. Costa -- changes which, at don’t levels. than from Francisco, major to and that And or and anything San leaning I earlier, you’re that network. Francisco, we area But a always there. XX our are essentially, out we’re -- good to we Mexico, We’ve an round we

Operator

And our next Research. question comes from Conor from Melius Cunningham

Conor Cunningham

On the seems guide, the trying near going of and down the come big of the capacity quarter? incremental as year. to full some that there to see leverage. wasn’t Is we the just offset within pretty term year exit a why maybe there’s I’m cost a It bubble step guide, productivity you’re understand the CASMex sort reiteration there fourth in more

parts Thank moving you. there. the So just on curious

Shane Tackett

is morning. the or that terms Conor, terms in category off Good off-trend cost out Shane. Yes. of real the call No, of no Hi expectation forward. there’s go it’s in

it productivity. -- think with I some the to and you be pretty in mentioned script. cost I aggressive we ourselves Number guys I on tend one, of know and think this

It’s transition the year. get carrying We summer. close and the good little we’re as at closer QX. trying are into We’ve up and productivity. we as of had can our a But the is wanted had to of into that be and will getting aircraft. also just that our into other folks pilots were Airbus things things of ultimately really are year we about as we more news we deliberate amount we those end The pushed we we’re on to short training some the retirement to around control can significant retain it. like all QX on to that a to this this several move through get work continue the cost to onto goal Airbus, XXXX significantly months And bit of surplus what moving

weren’t over lot we school of we was house I got Airbus. the that think the lot to program a the who new So, successful. doing of just a get through pilots we’ve training need into Boeings. of to And people And and

I’m So, feeling where good about we sit.

getting Going forward, to targets. we’re on clear, better little to be better. bit cost we I job need do sequentially, think a executing aggressive But

those we QX. think relative also to I periods. expect better get to in both of QX and Year-over-year, we’re better

step-up operation, our this of us we costs, ER And can that performance this up I next year. earlier the we’ve performance. into we next engine We’ll deal. in not maintenance in cost year. costs stable and talked for Airbus completion high operation, year which better term, high long lap and with about our materially think transition year, we well a in we’re all We’ll on-time XXX set know leverage rate, got have

I will So yes, to on you guys, know this. us continue pressure

We’re going quarters going how several And feel on good the costs. to perform over we’re about I pressure ourselves. next to

Conor Cunningham

follow-up a push. as Maybe Okay. pressure

good On plan context that got can pretty you I into that how mean, As that we is? to I you guys a next guide, much cost Is I ‘XX, it guess, I’m think noticeable just everyone of year the trying the year. going understands we costs, moving training the provide we -- to in a amount about sure next magnitude within have make your year? parts, think right, as some specifically? full

Shane Tackett

would mean, relative $X it anticipated. Yes. have quarter just for to in was what extra I we an QX, the million

now as many XX right the XX would normally as on to relative need to aircraft what we carrying We’re captains extra fly aircraft.

pilots to So, in Multiple my it’s not year pilots this or drag, Conor, it get just as events -- I and only XXX number insignificant. to normally XXX this don’t that those you, to year train the the but hundreds, drag Those head. events would have we’ll in more, are we cost We’ve the offline. the Boeing. growth or had provide from training not system. have not that And well. are Airbus training XXX

be significant once this. a we through So, it get very year, change next should

Operator

And Oglenski Barclays. from comes next Brandon our question from

Brandon Oglenski

Ben, look did forward, first because, to I will." know it. to is guys going I just is getting adding stock back just say, volatility not and day. this the different and guess, capacity But like the to half "Hey, about on you’re reacting it I and for today, look, day want ask and obviously, something you the we But off-peak, looks we revenue manage in wanted back quarter

this in you’re can base of normalizing earnings and So, year, maybe the half what the overearned you just more kind or in is the your of this? back you XQ talk case to

Shane Tackett

start. Maybe it’s Brandon, Shane. Hey Yes. I’ll

I think fair to very QX say, look, it’s strong. was

midpoint I their think guidance. has every their beat of airline

think I we well. did as

industry of We’re of think, margins. terms that excited be we at were, the top the going to I in

high base ourselves a comparing that forward. we’re now So, going is it really

haven’t mentioned yet, we I is think one should but thing we fares.

at to relative filling peaks year, those their high While and XXXX, fare unsustainable they’re they’re planes still last off of levels. very we’re up still of

as don’t QX both side prove we think, travel revenue we on the is I the to region healthy could continue of it. So, a business But lot front and business that think for -- high setup recover with be recover see opportunity on have as the cost watermark we good to strong, industry. and a a I and this yes, I and our move forward,

Brandon Oglenski

like also from that, But half bit? I expand you think Shane. another the Could sequential And you from third said impacts that did of upon you capacity. being a industry then, to I appreciate little talk Andrew, RASM deterioration the just pricing.

Andrew Harrison

basically half characterized Brandon, growth. Yes, points it just X industry down peaks the coming being and core were X essentially of pricing the are remaining, then own which elements our capacity off

up minor of more the quite up a length difference. Our which shift of in significantly made stage then growth, the also, and of July, balance but Xth there was the is those

Shane Tackett

what I’ll is this you just I for I asking. might be you Brandon, Shane. think that know unpack because

to we’re of reductions reduction off suggest. over it’s Andrew’s model slightly RASM what pricing coming years. pricing saying is we than is And model higher growth attributing that’s peak capacity We the have normal would assume, that pretty a consistent that the What impact. to the sort

Operator

from James. Savi next Raymond our question comes from And Syth

Savi Syth

the chunks Just able Boeing this again, little and to in curious what year to kind going you’re year, kind from being if on a back a you of I a side? just exiting seeing next high -- into of capacity. year confidence And at cost of the was what bit, could side, big that your headwinds if tailwinds are on able cost to next and kind little going being the at look again, on level, of deliver and change you

Shane Tackett

job been a this has Boeing phenomenal doing Savi. Thanks, Yes. for us year.

given blame would anything, planes fact, were to for time. it on be them we us In that if their they’ve all

aircraft think And come we’ve to people which little scheduled questioning a in to delivering I they’ve schedule. after been we’ve service. one so are but today, added had capacity be bit, don’t was on it really good the schedule

So, really to job. good do they’ve continued a

can or where week We December around always have a a is month two. December. deliveries slide things of a bunch in

there be about up or So might X all. we’re that January that at end but in units year, not concerned X next of

of well both the very through that recovered they’ve think sort I the and period spirit escape recently. they quality went from

we’re So, next year. into the fleet good going about feeling plan

lot terms can’t Whenever deliveries. anxious and airplane MAX plan the But really the Boeing of -- good when we’re Dash don’t in for certified. we really, that them get a year for back to that happens, has of to XX wait think know on it getting will, just fly those. take I this been but

Savi Syth

Just next on there day? on major the buckets

Shane Tackett

the the tailwind think sort about the a on mentioned side, Look, these. forgot one. couple of I of liked second I I question, I first

are I’m about mechanics to we’re there million $XXX will actively do additional need engine the some those talk but would flight next that deals those captured which step-up We do of have on ER we of are our year, Look, I lapped. be We sort vast that hope get this some cost on expect not of lapping year, year. to will obviously and of going and we’re working amounts. those. anxious to I costs, costs that be do attendants have fully currently we of deals lapping. with XXX and our to done the contract majority this deal

tailwind. And and then possible. really fully structure we’re like take positive then now And most the that a I performing Airbus will that with is said, really be transition job our translate another which be the cost at is sure efficient will costs good behind to a it’s doing us, -- that operation strong and well making

but really to cost little on of next lots throughout operational structure So, out our year focused the we’re going because those company, leaning excellence. opportunities be the are of

Savi Syth

declines, on are I of Helpful. the or today? on level Just clarify When fare you that kind just that? is, of there investors then this you’re kind something see And quickly is have new to is little saw the a can further that a you going to bit did those that softness. seen start of stabilize? fare you’ve more obviously, and that other question seeing I what start when think

Andrew Harrison

Yes. Hi, Savi.

there’s months the the say of ago. and as been fine think again, X do X over a I last I’d As quarters But coming coming we we high been that in up well down coming reporting But quarter know couple don’t term and ago, third see of use has little starting see Street quarters that the if while there. finding the to the have couple Again, I between the I a into as saw that a bit there were weeks, started of demand softness. the been you ago, off peaked that supply. our the little as we think and build a it’s to to -- know, summer just might months beforehand. off balance

Ben Minicucci

the still And Savi, remember, strong is demand domestic side. very on

load Our the due highest going you of at it’s we’ve surge And really to And think if international seen. to it, were I some factors international. is really look the in get going is be find October. do its to from September, back and to thing as maybe I think normalize, school June this like But kids to start strong things through equilibrium.

to a we’re just So, give I just seeing on context little it. more how wanted

Operator

next Goldman question our O’Brien And from Catherine Sachs. from comes

Catherine O’Brien

I than planned some Shane, coming we is of but last costs capacity expect those on about I spoke year, at operations remarks, touched XXXX labor traditional opportunity? you up this guess. of quarter, in you the as exit Do midpoint performance, shoring Alaska to or a be we the higher costs to not know bit prepared tied is unit little to a able squeeze on the and that more really

Shane Tackett

there. next Not though sort the need to more Yes. even QX you a probably of from capacity growing of year, year-over-year, it will QX be volumes It’s focused is down the potential Thanks, Catie. and it, take few through And and marginally bidding speak still helpful our XXXX, it’s pilots months sequentially QX. efficiency full this the to Airbus other just we ourselves pilot be One be on all and cost feet that -- a under we other us should transition too will tailwind that of the but training. front. the have but get won’t thing, with on to us we be there, get also system on of earlyish the sort bringing for year, our didn’t but a about, April, in much I on maybe preferential productivity

Catherine O’Brien

just some great. international stats Alaska how That’s guys international domestic piece your And hit that if your partners, of carrier. this clubs. mean, gave business do How that shift? benefits Does wondering in from does benefit we you Thanks. How members to on I -- Andrew, loyalty are a going P&L? uptick primarily flying on you that? obviously, think there’s from the does But travelers any all about that? then, that Okay.

Andrew Harrison

for just have as Actually, that importantly, our Catie. global the loyalty Thanks, really you on we with up the Airlines. more us. and we to really that They’re it members our it’s partners we directly globally utility more extremely more provide program for can works. members that fly that exciting It alaskaair.com, opens our using can really benefits and Yes. sell shows move Alaska

proving actually the out as the the rest I’m thesis, it’s move So, we year. through excited of and very

Operator

from comes Bank. Deutsche question from next our And Mike Linenberg

Mike Linenberg

considered the actually time airlines to for point want Have reason I where was a mechanics get deals those Shane, labor to the there to yet I on flight back think the now? does make more. it start be all I got thinking the agreements? is, pilot where ask have just deals. And to the attendants it sense? accrue then accruing accrue your you their I philosophy, deals. used And for why we’re we was seeing What’s then to And And that about for United And Southwest. that your now not one point done.

Shane Tackett

Yes. Thanks, Mike.

cognizant not others we’re -- we’re have -- considered done accruing that. that haven’t We some

economic stuff know let done, other about did. all the kind between really we that not think something timing sense, I’ve that what about between it’s the a been I open. around union -- that to approach companies and think -- to I contracts been more in impacts willing what bit the uncertainty have just we’re to keep of we really since be once little represented talking talk it like that the better goes the the the And it’s here, leaders levels but that those could and keep We folks never to done. and a made been which think ourselves at those and then property be, discussions parties we’ve

Mike Linenberg

realize just later where or changes, meaningful I my seasonally And ago, our our historically in a said I route quarters but two time few what changes. to and second out weakest of a frame. run have came quarter or Okay, then year, perspective a early this Andrew, in next to margin is sort we of from back a winter makes maybe question pretty -- do a more ago goes know year, better you and you have seasonal And is this to sense. this some the airline

new to flying maybe wrong, is I’m few about how you I year, year, it’s stop much anything maybe time, of in could it probably your routes. And that And you’re still historical. feels don’t it about out so versus new a if question sort the know, capacity me does As new feel since I ASMs of it on much will I’ll this think and of early that since some be have in like of do your will Virgin would I seem you there’s been correct that acquisition my good there. address it’s like sort of there, questions next things later early a shout planning markets. like where portion

Andrew Harrison

worry, Mike. you question Don’t and Well, actually really asked glad a Yes. I’m because point. it’s important

but period are X very distinct to really and capacity laser-focused start makeup March in Christmas the being seasons you around difficult will X for is spring. Then of points a reflect schedules then, Our move on holidays. of us moved and off the quarter, got the reflected, the course, and first coming of also into which extremely the we’ve our quarter. the We’ve and about first of

You’ve markets from us. reallocations. obviously seen new number a are Those of

leaning us into see hard Latin. You

types capacity Las during the of part how trying of is of, much of these of those X depths markets some just are Mexico network, New flying things and things. that’s from bigger of Vegas of unserved, We’re like on City impact sort our points across the but getting honestly, we’re all is new But reallocating Nassau some and the which winter, more things. York those to disciplined, we’re our

Operator

Duane from question our Evercore. next comes Pfennigwerth And from

Duane Pfennigwerth

out? travel breakage example, call credit there any that quantify? you could XQ comp year, was the in you from For anything last trend firstly, above Just could

Shane Tackett

the Hey through most breakage sort I on not morning. don’t on had Good there’s We worth already comp stuff. anything think I gotten XQ of think we prior. materially of that Duane, Shane. certainly -- calling it’s out the basis,

Andrew Harrison

other thing third had some that quarter in in way, specifically last coming off that. California pilot the Yes. of the and than impacted pull closer obviously, back we The downs summer operational year, in large but some the a only in challenges pipeline,

Duane Pfennigwerth

Could And you that? on elaborate shifts. mentioned some just you holiday

Andrew Harrison

the minor, just July of That’s fell a Yes. Friday. on Xth the

June versus last July year which was -- think year. we so And this

movement of there’s bit a the into little June. of So month

be noted, to as June interestingly, two and revenue in now, running of years the unit think highest that we our seems continuing. just the I is year,

Duane Pfennigwerth

that interesting just booking the you that quarter a to week, baking for comment does but on -- finer does lower days? quarter, as bookings. with within continuing, you’re it And another then put think Thanks. visibility the these I know relates I Are And made, that in that had? you a the -- you which you Yes. point not XX a quarter was on Could imply curve? than trend within enter historically now

Andrew Harrison

Yes.

I think management the to mean, -- team. kudos revenue I

we amount sold bookings look on -- take to this really when think fly to Hawaii, last had Mid-Con you what too at the referring look month good the in there, the more at availability seeing higher interestingly, and factor. load saw close-in for and that see in we especially have within we you month. what is the essentially, Transcon the Southeast. year, the we’re year improvements of is I the in is demand soons But June, And even California, with we’re you airplanes, When filling you’re we’ve business into even both and down, XXXX. demand

Duane Pfennigwerth

this So, as showing but seen in sorry, change up? to you it your any that into trend baking have you’re relates guidance, not close-in

Andrew Harrison

the XXth -- on to sit this I month. day that the that close-in just continuing see strength July here and I I’m tell of will can you

Operator

from next our Trent Citi. comes question from Stephen And

Stephen Trent

kind to strategy? one, lead the way pertain to does your Northeast of guys eastbound But going that is that pivot Did I in considering know Airlines, to and Just alliance? your directly not American the you. partner, unwind do you on any of it

Nat Pieper

XXXX. pleased Stephen, approved And the it’s offer link We it’s we’re is have a the good loyalty with things with guests. by American; complementary -- in of traditional thing for our with about with reciprocal benefits the very It airline couple links Nat that codeshare. alliance. and we really distinguish that Pieper. Thanks resonated networks much it; question. A, and just to our A partnership DOT B, reviewed partnership

plentiful continuing in customers more forward. weakness each for and link So, of our our joint places see opportunities in utility we networks for American to offer going of with us

Stephen Trent

corporate something travel initiatives about potential also I not rather? but some you’re sort appreciate tech -- any which guys, your up Okay. one quick from to to That’s you on travel. I office I specific of perking you you hearing super directly industry Do the color. -- follow-up, there? customers the helpful. of again very or just Like return have of heard And sort turning I is know any related mentioned Microsoft partners think signposts tech

Andrew Harrison

as the Stephen. the make might move we XX% Hi, that we ceiling did We forward. comment through break

are a XX variability right within levels over of But But of top recovered interesting couple high we accounts. our seeing accounts data Just points. XXXX corporate revenues are those and actually now. XX

We very high-tech are are not companies recovered. we’re but covered some actually companies still seeing low, some recovered, high-tech that also seeing fully

see It’s what a So all we’re thawing. techs starting I is say now. the think that not are you to would down I a to

of to this move of gives We’re here shoots might green really the I hope perk some as some think why start through we there up. the little bit rest be us a year. that And seeing

Operator

Dan McKenzie next Global. our And comes question Seaport from from

Dan McKenzie

of revenue I wondering if purchase Andrew, change guess, by of I’m composition couple advanced bucket. here. been questions a a in there’s the

So on if is firmer wondering more your forecast in and, in strong kind quarter. pricing to further third And just out, least, referenced the close-in close-in you of closer at what current strength discounting demand throughout the today. I’m for the quarter predicated

Andrew Harrison

Thanks, Yes. Dan.

the than they You’re actually little are. spot year the in close-in were what a they X But up year. were time are are last in the on, fares lower. down than But like seeing they we sort this sale last as to they’re XX-day what are structured fares of fares,

baked close-in And continued our So you’re strength. overall, booking on the into that not seeing side. softness sale we forecast fare

Dan McKenzie

Perfect. Yes.

you this to it back could just some not year -- or the But weakness California a commentary next, potentially it’s then, later on managers going And has this travel and to that it’s are to year, there lead Okay. view know point? travel corporate is outlook this coming conversations in it the really back at for later year. back believe come I with reverse business

Andrew Harrison

say going Yes. to different. they’re may what do do actually of lot and be people then A things they

we’re our And of think what do at is what there number I a upward an who’s corporates, momentum think I in see across these. just is a doing what. looking I and from soaring

through. driven to And as holding fares budgeting obviously, I’ve is depends And always so, looking quite again, by in and while you the really It I material CFOs on had not see going until and friends, organizations. they’re sure, the change good a to -- make we our well. in a are need these at this just business XXXX. they that move of philosophy rebudgeting by lot And the up

So, that’s see. just I what

Ben Minicucci

Dan, Ben. it’s And

biggest of world Seattle and the we West have Area. You Coast, both got headquartered Coast, to remember, the some the here companies in West in the Bay on on the in

time are And towards biggest the So, come it dry of we’re year. latter world, they’re them, difficult part for it and tailwinds Again, for upside. to companies And and lot is next of more a us. year the is of a out they’ll there of be the come to is but for us. this. out going should it optimistic powder into be going There in the these

Operator

our from Susquehanna Stathoulopoulos question And next Group. comes from Chris

Chris Stathoulopoulos

year, outlined as remind it’s how with us, So, rate, capacity and you about shaping raise, you frequency think completion the this -- XXXX could of that on reliability. prepared on gauge would entirely Normally, prioritizing your mix remarks the in if but is stage spoke you how to buffer your about you’re that and capacity up? that lower. prioritize would guide come think to I And then or you also, the last have trying build

we the the the here So, think want I composition pieces about as Thanks. better half to capacity the here moving of just understand of or back year.

Shane Tackett

think, Chris, was quarter. that’s growth, set -- second quarters. -- Hey gauge, of what and three in stage I XX% of XX% And XX% a We like I you Yes. the of sorry, the saw the the it’s think Shane.

towards that abate that the reflected getting was aggressively start of the we And that end Andrew’s of as in commentary. out some think of when impact I will flying. the lap get to we Airbus year and start

a and had and priority? guide now the could to telling What I down. people you tell that that question than we you even not we the Good reliability planes you can flown are on going is fly. How this with we for we’re have do up, do being then more year,

so, we of this significant into buffer a And put year. amount

Boeing, of quarter I think our rate. own the completion on side last I many we it talked those outperforming delivery both from assumptions, were that about

are fact of the on story. rate outperformed of a assumptions. couple assume much a is we’ve now of the lower sort good normal. overperforming to just with was we that But, we we’re we’ve just completion a year it, need years And now squaring of it prudent lot kind really thought we Company so, last around completion rate today. normalize this And been which given achieving the than And to up those the

Chris Stathoulopoulos

course, excess the travelers or travelers in that, that grow. how are this of of It here. Okay. of going it’s realize But here suggesting duration unit the And on like of continue here And that being to is that kind then mid-single-digitish there the certainly slight debate are X% RASM pool grow respect -- of a by see still pieces to the -- on that and is do pool have domestic and XXXX, could But year down gauge consumed a early. ability you’re debate, moving and lasts? that the we the of type of there out on to I growth think we as miss of about forecasting. we with this international is about international, long to the you or benefit sort for concern there costs think here, if sounds being capacity next

kind you. So, that RASM of is next factors in this CASM for holding it year? to think Thank here year that can excess of grow you your load fair constant

Shane Tackett

we to appreciate everybody’s and practice types totally be, to be. far the to what are although standard on what is -- think I environment speak the a predict I to little pretty too we question. calls, going forward a understand pretty for these capacity economic it’s Hey us of next Look, Chris, not about have going is year

generally, industry, about. of in where were seen sort across think they you’ve I the talking from come guides capacity originally

lot are a focus Andrew a questions about fly point to reconcentrating we’ve do commercial to year. could tailwinds network, on thinking, initiatives. fact on other may with of people the in And going open not than this lot sort QX. region of spoke so So I push And but the longer there’s opportunity I of these some and just at business think recovering the would we’re improving normalizing demand better got really a what -- QX be that can we’ve in point. next travel that we got then it more plus be a international with on a the little it yes, country, to

are be to that in about a guys company just some year. next going to other things obviously, lot there So line you than talking next the the other growth pure should we’re the And couple that of of drive more top calls.

Chris Stathoulopoulos

you. Okay. Thank

Shane Tackett

everybody. All right,

So, our time is up.

so you for in, dialing thank So we’ll you to quarter. much and next talk

Operator

conference for call. This today’s Thank attending. concludes you

Alaska Air (ALK) 25 Jul 232023 Q2 Earnings call transcript