Alaska Air Group (ALK) Earnings Report: Q2 2015 Conference Call Transcript

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July 23, 2015 - The following Alaska Air Group conference call took place on July 23, 2015, 11:30 AM ET. This is a transcript of that earnings call:

Click HERE to listen to the call

 

Company Participants

  • Lavanya Sareen; Alaska Air Group, Inc.; Manager - IR
  • Ben Minicucci; Alaska Air Group, Inc.; COO
  • Andrew Harrison; Alaska Air Group, Inc.; CCO
  • Brad Tilden; Alaska Air Group, Inc.; CEO
  • Brandon Pedersen; Alaska Air Group, Inc.; CFO
  • Mark Eliasen; Alaska Air Group, Inc.; VP Finance, Treasurer
  • Joe Sprague; Alaska Air Group, Inc.; VP - Marketing

 

Other Participants

  • Savi Syth; Raymond James and Associates, Inc.; Anlyst
  • Julie Yates; Credit Suisse; Analyst
  • Hunter Keay; Wolfe Research; Analyst
  • Joseph DeNardi; Stifel Nicolaus; Analyst
  • Helane Becker; Cowen Securities LLC; Analyst
  • Jamie Baker; JPMorgan; Analyst
  • Duane Pfennigwerth; Evercore ISI; Analyst
  • Darryl Genovesi; UBS Securities LLC; Analyst
  • Dave Fintzen; Barclays Capital; Analyst
  • Mike Linenberg; Deutsche Bank; Analyst
  • Daniel McKenzie; Buckingham Research Group; Analyst
  • Rajeev Lalwani; Morgan Stanley; Analyst

MANAGEMENT DISCUSSION SECTION

Operator:

At this time, I would like to welcome everyone to the Alaska Air Group second-quarter 2015 earnings conference call. Today's call is being recorded and will be accessible for future playback and www.alaskaair.com.

(Operator Instructions) 

I would now like to turn the call over to Alaska Air Group's Managing Director of Investor Relations, Lavanya Sareen.

Lavanya Sareen (Manager - IR):

Thank you. Good morning, everyone. Thank you for joining us for Alaska Air Group's second-quarter 2015 earnings call. Our CEO, Brad Tilden; our CFO, Brandon Pedersen; Chief Commercial Officer, Andrew Harrison; and Chief Operating Officer, Ben Minicucci will provide highlights from the second quarter and our outlook for the remainder of the year. Several members of our senior management team are also on-hand to help answer your questions.

Our comments today will include forward-looking statements regarding our future expectations, which may differ significantly from actual results. Information on risk factors that could affect our business can be found in our SEC filings.

We will refer to certain non-GAAP financial measures, such as adjusted earnings and the earned costs excluding fuel. We have provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in our earnings release.

This morning, Alaska Air Group reported [directed] quarterly adjusted profit of $230 million, or $1.76 per diluted share. This result compares to the First Call consensus of $1.73 per share and exceeds last year's adjusted net income of $157 million, or $1.13 per diluted share. 

Additional information about cost expectations, capacity plans, fuel hedging, capital expenditures, and other items can be found in our investor updated included in our Form 8-K filed this morning and is available on our website at Alaskaair.com.

Now I'll turn the call over to Brad.

Brad Tilden (CEO):

Thank you, Lavanya, and good morning, everyone. As Lavanya mentioned, we reported a net profit of $230 million for the second quarter, which is 46% higher than 12 months ago.

This is our 25th consecutive quarter of profitability, and it's the highest quarterly profit in our history. The 46% growth in our net profit, coupled with the repurchase of 9.5 million shares over the last 12 months, drove our earnings per share up by 56% to $1.76 per share.

As we pause to take a look at how we're doing mid-year, and two and-a-half years into the biggest competitive incursion we've seen in a while, I'm happy to share that we are thriving. Our operation is firing on all cylinders, our leaders are focused on execution, and we are generating returns that far exceed our cost of capital.

But before I talk about the returns, I want to spend a few minutes on the underlying drivers of our results. I'll start with safety. Our number one priority is to operate safely, and we think that doing so benefits our overall operation. 

Because to be safe, we have to all understand our jobs and we have to have the tools and training to do them well. And this focus on doing things right has benefits that extend throughout our airline. Our commitment to operating safely was recently validated by our maintenance team earning the FAA's AMT Diamond Award for maintenance, training, and excellence. This is the 14th consecutive Diamond Award for Alaska Airlines. Horizon Air has also won the award 14 times.

Turning to our operation, we continued to operate well despite some headwinds. As you know, we're growing significantly to strengthen and fortify our franchise in Seattle, and we crossed the 1,000 flight per day threshold on July 2nd.

 

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