Post on 18-Jan-2016
This presentation may include forward-looking statements regarding the performance of Alaska Air Group or its subsidiaries. Actual results may differ materially from these projections. Please see our most recent Annual Report on Form 10-K for additional information concerning factors that could cause results to differ.
January 8, 2009C F O ROUNDTABLE
Surviving Tough Times
TimelinesMajor “Shocks” We’ve Experienced as an Airline and an
Industry
2000Flight
261
20019/11
Attacks
2003 - 20052010
RestructuringPlan
2007 - 2008Oil priceRun up
2008 - ???Global
Recession
$0
$25
$50
$75
$100
$125
$150
Source: Kiodex as of 1/2/09
Identify controllable vs uncontrollable items and focus energy on what you can
control
Cru
de o
il $
per
barr
el
Example
Fuel hedges have helped control costs
-$5
$0
$5
$10
$15
$20
$25
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$123 million net economic hedge benefit in 2008
(mill
ions
)
Challenge Your Paradigms
High capital investmentin aircraft
Old, legacy thinking
Fuel priceincreases
PlummetingDemand
Aircraft aremoveable
assets
Nimble andlearn from our
past
Reduce Capacity,Create and collect
ancillary fees(2nd bag, itinerary
change fees, reservationservice fee, IFE, Buy on Board)
Reduce capacity,move aircraftto alternate
markets
AAG Cash position
$0
$200
$400
$600
$800
$1,000
$1,200
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
(mill
ions)
11%
12%
14%
15%
17%
19%
19%
23%
29%
32%
0% 10% 20% 30% 40% 50%
US A irways Group
A irTran
United
Delta
J et B lue
C ontinental
American
Northwest
A laska A ir Group
Southwest
Strong cash position andmultiple sources of liquidity
Cash as a % of Revenues Q3 ‘08
Note: All airlines calculated using unrestricted cash and short-term investments at September 30, 2008 divided by revenue for the 12 months ended September 30, 2008. As of December 22, 2008, Southwest had $1.3 billion in cash net of posting $230 million in hedge collateral and not including inflow of $575 million in sale/leasebacks and private placements. Including the inflow, their cash as a % of revenue is approximately 17%. As of November 30 2008, AAG had $1.027 billion in cash and approximately 30% cash to revenue.
Source: All company earnings releases and 10Qs as of Q3 2008. AAG 8K as of December 19, 2008. Southwest 8K as of December 23, 2008.
Fuel hedging cash collateral
Possible sources of liquidity
• Additional capacity available on line of credit
• Additional capacity available on pre-delivery payment facility
• Unencumbered aircraft
• Forward sale of miles
Tools Acquired or Sharpened During these Challenging Times
• LEAN principles (eliminate waste, just in time, etc.)
• Project Management– Clear identification of the problem and solution– Measurable outcomes with dates– Frequent reviews of project progress at senior levels– Absolute accountability (things are green or red; if they are
red - how can we help move them to green?)
• Focus on inputs rather than outputs
• Change management (the human and more difficult part of change)
• Don’t buy things you can’t afford• Don’t borrow money you can’t pay back• Don’t agree to things you don’t understand• If it doesn’t seem right, it probably isn’t
Things your (grand) parents probably taught
you that still have a place in today’s business world: