Attached files
| file | filename |
|---|---|
| 8-K - ALASKA AIR GROUP FORM 8-K - ALASKA AIR GROUP, INC. | alaskaairgroup8-k12192016.htm |
| EX-99.2 - PRESS RELEASE - ALASKA AIR GROUP, INC. | alaskaairlinesenhancesmile.htm |
Investor Update: Delta Marketing & Codeshare Agreement
Safe harbor
This presentation may contain forward-looking statements subject to the safe harbor protection provided by Section
27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended,
and the Private Securities Litigation Reform Act of 1995. These statements relate to future events and involve known
and unknown risks and uncertainties that may cause actual outcomes to be materially different from those indicated
by any forward-looking statements. For a comprehensive discussion of potential risk factors, see Item 1A of the
company's Annual Report on Form 10-K for the year ended December 31, 2015. Some of these risks include
competition, labor costs and relations, general economic conditions, increases in operating costs including fuel,
inability to meet cost reduction goals, seasonal fluctuations in our financial results, an aircraft accident, changes in
laws and regulations and risks inherent in the achievement of anticipated synergies and the timing thereof in
connection with the acquisition of Virgin America. All of the forward-looking statements are qualified in their entirety by
reference to the risk factors discussed therein. We operate in a continually changing business environment, and new
risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the
impact, if any, of such new risk factors on our business or events described in any forward-looking statements. We
expressly disclaim any obligation to publicly update or revise any forward-looking statements after the date of this
report to conform them to actual results. Over time, our actual results, performance or achievements will likely differ
from the anticipated results, performance or achievements that are expressed or implied by our forward-looking
statements, and such differences might be significant and materially adverse.
2
Alaska’s marketing & codeshare agreement with Delta is
ending effective April 30th, 2017
3
Backdrop
Revenue and relevance of Delta marketing (“frequent flyer”) and codeshare
relationship had been steadily declining since late 2013
Both parties agreed to accelerated termination of codeshare agreement following
Alaska’s acquisition of Virgin America
Interline agreement remains in place
Impact to Alaska is estimated at $5-$10 million in 2017
Customer impact expected to be minimal, due to growth in Alaska’s own network
and ability to codeshare with other partners
Highlights
4
Total Codeshare
Partners
$320M (6%)
International Interline*
$50M (1%)
Domestic Interline*
$115M (2%)
American $190
Delta $65
Others $65
Total Codeshare
Partners
$486M (9%)
International Interline*
$53M (1%)
Domestic Interline*
$113M (2%)
American $225
Delta $190
Others $71
2014
9% of Revenue
from Codeshare Partners
2016
6% of Revenue
from Codeshare Partners
As Alaska’s own network has grown, total revenue from
domestic codeshare partners has decreased
5
At ~$65M of revenue, the Delta partnership has declined
significantly since its peak in 2013
2013 2014 2015 2016
- 72%
Revenue from Delta Interline & Codeshare (TTM)
$65M
$235M
$190M
$94M
~80% ($50M) of current revenue is from interline agreement (not from code sharing)
6
We believe that financial exposure from codeshare
termination is between $5-$10M
~$50M
Interline
Current Revenue
from Delta
Customer demand in a market does not disappear
when codeshare ends, but revenue may shift between
carriers (“recapture”)
We believe we will be able to recapture between $5-
$10M of current codeshare revenue, since all except
for 8 destinations (<$500K revenue) are already served
by either Alaska or its other codeshare partners
Codeshare agreement ends:
~$50M
Interline
~$15M
Codeshare
~$65M Total
Interline agreement remains in place:
Interline revenue comes from multi-airline itineraries
constructed by online travel agencies that include Delta
& Alaska
7
In addition, the customer impact should be limited as the
combined Alaska-Virgin network provides increased utility…
As a larger airline, we offer customers:
~1,200 daily flights to 118 destinations
in the U.S., Canada, Mexico, Costa
Rica, and soon Cuba
The most non-stop flights and
destinations from the West Coast
The ability for customers of both
airlines to immediately earn miles on
both Virgin America and Alaska flights
8
…and our other international partners have already
replaced the global utility Delta used to provide
Our global partner network offers access to more than 900 destinations worldwide