ALASKA AIR GROUP, INC.
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(Exact Name of Registrant as Specified in Its Charter)
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1-8957
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91-1292054
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(Commission File Number)
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(IRS Employer Identification No.)
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19300 International Boulevard, Seattle, Washington
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98188
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(Address of Principal Executive Offices)
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(Zip Code)
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(206) 392-5040
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(Registrant’s Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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Exhibit 99.1
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Investor Update dated November 16, 2010
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ALASKA AIR GROUP, INC.
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Registrant
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Date: November 16, 2010
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/s/ Brandon S. Pedersen
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Brandon S. Pedersen
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Vice President/Finance and Chief Financial Officer
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ALASKA AIRLINES – MAINLINE
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October
2010
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Change
Y-O-Y
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|||||||
Capacity (ASMs in millions)
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2,066 | 9.1 | % | |||||
Traffic (RPMs in millions)
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1,691 | 15.9 | % | |||||
Revenue passengers (000s)
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1,352 | 9.9 | % | |||||
Load factor*
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81.8 | % |
4.8 pts
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|||||
RASM (cents)
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11.86 | 7.1 | % | |||||
Passenger RASM (cents)
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10.51 | 5.8 | % | |||||
Raw fuel cost/gal.
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$ | 2.46 | 18.3 | % | ||||
Economic fuel expense/gal.
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$ | 2.48 | 13.2 | % |
*
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percentage of available seats occupied by fare-paying passengers
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Forecast
Q4 2010
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Change
Y-O-Y
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Forecast
Full Year 2010
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Change
Y-O-Y
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|||||||||||||
Capacity (ASMs in millions)
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6,200 | 9 | % | 24,400 | 5.5 | % | ||||||||||
Cost per ASM excluding fuel and special items (cents)*
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8.0 – 8.1 | (5)% – (6) | % | 7.90 – 7.92 | (4 | )% | ||||||||||
Fuel Gallons (000,000)
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81 | 8 | % | 318 | 4 | % | ||||||||||
Economic fuel cost per gallon**
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$ | 2.57 | 14 | % | $ | 2.37 | 16 | % |
*
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For Alaska, our forecasts of mainline cost per ASM excluding fuel are based on forward-looking estimates, which will likely differ from actual results.
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**
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Because of the volatility of fuel prices, actual amounts may differ significantly from our estimates. Our economic fuel cost per gallon estimate for the fourth quarter includes the following per-gallon assumptions: crude oil cost – $2.02 ($85 per barrel); refining margin – 38 cents; taxes and fees – 15 cents; cost of settled hedges – 2 cents.
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November
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December
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January
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Point Change Y-O-Y
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+3.0 pts
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flat
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-1.0 pt
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*
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Percentage point change compared to the same point in time last year.
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ALASKA – PURCHASED CAPACITY
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October
2010
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Change
Y-O-Y
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|||||||
Capacity (ASMs in millions)
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123 | 2.5 | % | |||||
Traffic (RPMs in millions)
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94 | 6.7 | % | |||||
Load factor*
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76.4 | % |
2.9pts
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|||||
Yield (cents)
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27.31 | 1.5 | % | |||||
Passenger RASM (cents)
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20.88 | 5.6 | % |
*
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Percentage of available seats occupied by fare-paying passengers
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Forecast
Q4 2010
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Change
Y-O-Y
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Forecast
Full Year 2010
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Change
Y-O-Y
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|||||||||||||
Capacity (ASMs in millions)
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365 | 2 | % | 1,440 | 5 | % | ||||||||||
Cost per ASM (cents)*
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19.5 | (3 | )% | 19.5 | (0.5 | )% |
November
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December
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January
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Point Change Y-O-Y
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+1.5 pt
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-4.0 pts
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-2.0 pts
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*
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Percentage point change compared to the same point in time last year.
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HORIZON AIR
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October
2010
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Change
Y-O-Y
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|||||||
Capacity (ASMs in millions)
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262 | (5.5 | )% | |||||
Traffic (RPMs in millions)
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196 | (3.5 | )% | |||||
Revenue passengers (000s)
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563 | (1.2 | )% | |||||
Load factor*
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74.9 | % |
1.5 pts
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|||||
System RASM (cents)
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20.85 | 3.2 | % | |||||
Passenger RASM – brand flying (cents)
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21.54 | 6.5 | % | |||||
Raw fuel cost/gal.
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$ | 2.48 | 17.0 | % | ||||
Economic fuel expense/gal.
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$ | 2.50 | 11.6 | % |
*
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percentage of available seats occupied by fare-paying passengers
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Capacity Mix
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Load Factor
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Yield
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RASM
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||||||||||||||||||||||||||||||
Actual (000s)
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Change
Y-O-Y
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Current %Total
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Actual
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Change
Y-O-Y
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Actual
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Change
Y-O-Y
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Actual
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Change Y-O-Y
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|||||||||||||||||||||||||
Brand
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139 | (11.6 | )% | 53 | % | 73.5 | % | 0.2 pts | 29.29 | ¢ | 6.3 | % | 22.25 | ¢ | 7.3 | % | |||||||||||||||||
Alaska CPA
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123 | 2.4 | % | 47 | % |
NM
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NM
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NM
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NM
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19.26 | ¢ | (1.2 | )% | ||||||||||||||||||||
Total
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262 | (5.5 | )% | 100 | % | 74.9 | % | 1.5 pts | 27.33 | ¢ | 0.8 | % | 20.85 | ¢ | 3.2 | % |
HORIZON AIR – (continued)
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Forecast
Q4 2010
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Change
Y-O-Y
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Forecast
Full Year 2010
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Change
Y-O-Y
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|||||||||||||
System-wide capacity (ASMs in millions)*
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775 | (6 | )% | 3,235 | (2 | )% | ||||||||||
Cost per ASM excluding fuel and special items (cents)**
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15.9 – 16.1 | 0% – 2 | % | 15.25 – 15.35 |
flat
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|||||||||||
Fuel gallons (in millions)
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13 | (11 | )% | 57 | (5 | )% | ||||||||||
Economic fuel cost per gallon***
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$ | 2.61 | 13 | % | $ | 2.41 | 17 | % |
*
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Capacity includes brand flying and CPA flying for Alaska. Brand capacity is expected to decline approximately 11% and 7% in the fourth quarter and full-year of 2010, respectively, compared to the prior-year period.
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**
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For Horizon, our forecast of cost per ASM excluding fuel and other items is based on forward-looking estimates, which will likely differ significantly from actual results.
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***
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Because of the volatility of fuel prices, actual amounts may differ significantly from our estimates. Our economic fuel cost per gallon estimate for the fourth quarter includes the following per-gallon assumptions: crude oil cost – $2.02 ($85 per barrel); refining margin – 38 cents; taxes and fees – 19 cents; cost of settled hedges – 2 cents.
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November
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December
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January
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Point Change Y-O-Y
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+3.0 pts
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-1.5 pts
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-1.0 pt
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*
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Percentage point change compared to the same point in time last year.
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AIR GROUP – CONSOLIDATED
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October
2010
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Change
Y-O-Y
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|||||||
Capacity (ASMs in millions)*
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2,333 | 7.2 | % | |||||
Traffic (RPMs in millions)*
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1,890 | 13.5 | % | |||||
Revenue passengers (000s)*
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1,915 | 6.4 | % | |||||
Load factor*
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81.0 | % |
4.5 pts
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|||||
RASM (cents)
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12.96 | 5.3 | % | |||||
Passenger RASM (cents)
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11.75 | 4.8 | % | |||||
Economic fuel expense/gallon
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$ | 2.48 | 12.6 | % |
Forecast
Q4 2010
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Change
Y-O-Y
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Forecast
Full Year 2010
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Change
Y-O-Y
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|||||||||||||
Capacity (ASMs in millions)*
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6,990 | 7 | % | 27,700 | 4.5 | % | ||||||||||
Cost per ASM excluding fuel and special items (cents)**
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8.9 – 8.95 | (5)% – (6) | % | 8.8 – 8.83 | (3)% – (4) | % | ||||||||||
Fuel Gallons (000,000)
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94 | 4 | % | 375 | 3 | % | ||||||||||
Economic fuel cost per gallon***
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$ | 2.58 | 14 | % | $ | 2.38 | 16 | % |
(a)
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Capacity forecast includes Alaska mainline operations, Horizon brand flying, and CPA flying with Horizon only.
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(b)
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Our forecasted CASM amounts are based on consolidated costs per ASM using total ASMs, which include Alaska mainline operations, Horizon brand flying, and all CPA flying. Capacity for third-party CPA flying is expected to be approximately 15 million ASMs and 65 million ASMs for the fourth quarter and full-year 2010, respectively.
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(c)
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Our forecast of cost per ASM excluding fuel is based on forward-looking estimates, which may differ from actual results.
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(d)
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Because of the volatility of fuel prices, actual amounts may differ significantly from our estimates.
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(in millions)
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October 31, 2010
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December 31, 2009
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||||||
Cash and marketable securities
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$ | 1,309 | $ | 1,192 | ||||
Common shares outstanding
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35.939 | 35.591 |
AIR GROUP – (continued)
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Total 2010 Estimate*
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||||||||||||
Aircraft-related
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Non-aircraft
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Total
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||||||||||
Alaska
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$ | 126 | $ | 60 | $ | 186 | ||||||
Horizon
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20 | 5 | 25 | |||||||||
Air Group
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$ | 146 | $ | 65 | $ | 211 |
Remainder of 2010
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2011
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2012
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2013
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2014
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Beyond
2014
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Total
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||||||||||||||||||||||
Alaska (B737-800)
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- | 3 | 4 | 2 | 2 | 2 | 13 | |||||||||||||||||||||
Horizon (Q400)
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- | 8 | - | - | - | - | 8 | |||||||||||||||||||||
Totals
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- | 11 | 4 | 2 | 2 | 2 | 21 |
Actual Fleet Count
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Expected Fleet Activity
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||||||||
Alaska
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Seats
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Dec. 31, 2009
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Oct. 31, 2010
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Remaining 2010 Changes
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Dec. 31, 20102
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2011 Changes
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Dec. 31, 20112
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2012 Changes
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Dec. 31, 20122
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737-400F 1
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---
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1
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1
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---
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1
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---
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1
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---
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1
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737-400C 1
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72
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5
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5
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---
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5
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---
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5
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---
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5
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737-400
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144
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27
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24
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---
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24
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---
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24
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(3)
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21
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737-700
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124
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19
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17
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---
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17
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---
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17
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---
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17
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737-800
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157
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51
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55
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---
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55
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3
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58
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4
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62
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737-900
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172
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12
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12
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---
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12
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---
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12
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---
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12
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Totals
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115
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114
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---
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114
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---
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117
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1
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118
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Actual Fleet Count
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Expected Fleet Activity
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||||||||
Horizon
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Seats
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Dec. 31, 2009
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Oct. 31, 2010
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Remaining 2010 Changes
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Dec. 31, 20102
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2011 Changes
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Dec. 31, 20112
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2012 Changes
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Dec. 31, 20122
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Q400
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76
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40
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40
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---
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40
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8
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48
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---
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48
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CRJ-700 3
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70
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18
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13
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---
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13
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(8)
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5
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---
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5
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Totals
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58
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53
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---
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53
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---
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53
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---
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53
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1
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F=Freighter; C=Combination freighter/passenger
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2
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The expected fleet counts at December 31, 2011 and 2012 are subject to change.
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3
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We currently have an agreement to dispose of eight CRJ-700 aircraft in 2011.
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AIR GROUP – (continued)
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Approximate % of Expected Fuel Requirements
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Weighted-Average Crude Oil Price per Barrel
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Average Premium Cost per Barrel
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||||||||||
Fourth Quarter 2010
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50 | % | $ | 83 | $ | 11 | ||||||
Remainder of 2010
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50 | % | $ | 83 | $ | 11 | ||||||
First Quarter 2011
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50 | % | $ | 87 | $ | 11 | ||||||
Second Quarter 2011
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50 | % | $ | 86 | $ | 11 | ||||||
Third Quarter 2011
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50 | % | $ | 86 | $ | 11 | ||||||
Fourth Quarter 2011
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50 | % | $ | 86 | $ | 11 | ||||||
Full Year 2011
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50 | % | $ | 86 | $ | 11 | ||||||
First Quarter 2012
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43 | % | $ | 86 | $ | 12 | ||||||
Second Quarter 2012
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36 | % | $ | 88 | $ | 13 | ||||||
Third Quarter 2012
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31 | % | $ | 90 | $ | 13 | ||||||
Fourth Quarter 2012
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22 | % | $ | 89 | $ | 13 | ||||||
Full Year 2012
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33 | % | $ | 88 | $ | 13 | ||||||
First Quarter 2013
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17 | % | $ | 87 | $ | 13 | ||||||
Second Quarter 2013
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11 | % | $ | 84 | $ | 15 | ||||||
Third Quarter 2013
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6 | % | $ | 86 | $ | 15 | ||||||
Full Year 2013
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8 | % | $ | 86 | $ | 14 |