Alaska Air Group, Inc. Q4 FY2024 earnings call

• Launched Alaska Accelerate strategic plan focused on scale, relevance, and loyalty. - Closed acquisition of Hawaiian Airlines in September, combining strategic assets. - Aggressively repurchased shares, launching $1 billion repurchase program in January. - Legacy Alaska assets on track for slight profit in Q1 despite fuel prices. - Hawaiian assets showing improvement with network changes and synergy materialization. - Leveraging combined network, hub banking strategy, and international routes like Seattle to Tokyo. - Loyalty programs generating strong cash remuneration, new premium credit card and Huaka’i by Hawaiian gaining traction. - Managed Corporate business travel showing strength, especially in December.

For the fourth quarter, Alaska Air Group reported adjusted EPS of $0.97, and full year 2024 adjusted EPS of $4.87. Fourth quarter revenue was $3.5 billion, up nearly 10% year-over-year on limited capacity growth of 2.5%. Legacy Alaska assets are on track to deliver slightly positive profits in Q1 despite recent fuel price rise. Hawaiian assets outperformed in Q4, expected to be unprofitable in Q1 but anticipate small pre-tax profit from Q2 onward. Premium Cabin revenues were up in Q4 and expected to outperform Main Cabin in 2025. Cargo business saw growth with six freighters flown in Q4 and aiming to have all 10 by April.

• First quarter: Capacity up 2.5% to 3.5%, RASM up high single digits, CASMex up low-to-mid single digits, loss per share $0.50 to $0.70. - Full year 2025: Expect EPS of more than $5.75, capacity growth 2% to 3%, $1.4 billion to $1.5 billion CapEx, positive free cash flow. - Anticipate RASM to outperform CASM throughout the year, with synergy capture and utilization improvement in back half of the year.

• Fuel price volatility could impact costs. - Competitive pressures in the airline industry. - Labor contract negotiations, such as the pending new agreement with Alaska flight attendants which could affect unit costs. - Uncertainty around international travel recovery and its impact on financial performance.

Q: What is most important in network reallocation this year?

A: Connecting networks, executing single operating certificate and unified reservation system, and capturing synergies from network connections.

Q: Can you elaborate on corporate travel trends?

A: Corporate travel was up 8% in Q4, with shorter haul West Coast traffic returning, and held managed business revenue up 20% as of the call.

Q: Any surprises to the downside with Hawaiian acquisition?

A: No material differences from expectations, with Hawaiian performing better than initially thought, especially in December showing a profit.

Q: Thoughts on debt pay down and payroll relief loans?

A: Major debt opportunities behind us, but will watch environment for buying down rate, and looking at using planned debt repayment or favorable rate debt for payroll relief loans.

Q: When will integration gains like combined booking system be known?

A: Stop at single loyalty process this summer, fully complete including premium credit card launch by October, and single passenger service system by April.

Q: How to think about freighter costs?

A: Fourth quarter had five Alaska freighters and six Amazon freighters, with almost all the way to steady state in 2025 unless more units added.

Q: What about international revenue contribution and oneworld alliance?

A: International represents a small percentage of total revenue now, but seen as key for meeting guest demand, and oneworld alliance tracking well.