Alaska Air Group, Inc.

Good morning, ladies and gentlemen, and welcome to the Alaska Air Group 2024 fourth quarter earnings call. At this time, all participants have been placed on mute to prevent background noise. Today's call is being recorded and will be accessible for future playback at alaskaair.com. After our speaker's remarks, we will conduct a question and answer session for our analysts. I would now like to turn the call over to Alaska Air Group's Vice President of Finance, Planning, and Investor Relations, Ryan St. John.

Thank you, operator, and good morning. Thank you for joining us for our fourth quarter 2024 earnings call. Yesterday, we issued our earnings release along with several accompanying slides detailing our results, which are available at investor.alaskaair.com. On today's call, you'll hear updates from Ben, Andrew, and Shane. Several others of our management team are also on the line to answer your questions during the Q&A portion of the call. This morning, Air Group reported fourth quarter and full year gap net income of $71 and $395 million, respectively. Excluding special items and mark-to-market fuel hedge adjustments, Air Group reported adjusted net income of $125 and $625 million. Our comments today will include discussion of Air Group reported results, inclusive of Hawaiian Airlines, since the closing of the acquisition on September 18th. Fourth quarter and forward-looking guidance are compared to prior year pro forma results, as if Alaska and Hawaiian were a combined company for the full periods referenced. Lastly, as a reminder, forward-looking statements about future performance may differ materially from our actual results. Information on risk factors that could affect our business can be found within our SEC filings. We will also refer to certain non-GAAP financial measures, such as adjusted earnings and unit cost excluding fuel. And as usual, we have provided a reconciliation between the most directly comparable gap and non-gap measures in today's earnings release. Over to you, Ben.

Thanks, Ryan, and good morning, everyone. Just six weeks ago, we shared our strategic plan, Alaska Accelerate, during our Investor Day. This plan is focused on driving scale, relevance, and loyalty by connecting our guests to the world through remarkable travel experiences rooted in safety, care, and performance. With a clear vision and a strong path forward, we closed out the year with growing momentum, and that momentum has only grown stronger since. We're picking up right where we left off at Investor Day, excited to share our strong results. For the fourth quarter, we delivered an adjusted EPS of $0.97, and for the full year 2024, $4.87, both exceeding our guidance. We reported a full-year adjusted pre-tax margin of 7.1%, and had it not been for the four-week, nine-max grounding, Legacy Air Group would have posted the best margin in the industry. To cap off the year, we aggressively repurchased $248 million in shares during December, bringing full-year repurchases to over $300 million and fully exhausting our existing program. In January, we launched our newly authorized $1 billion share repurchase program and will continue to leverage repurchases to underscore our confidence in our business. Before diving further into our business update, I want to take a moment to reflect on the pivotal year we had in 2024. Just a year ago, following Flight 1282, a third of our Alaska fleet was grounded, operations were severely disrupted, and uncertainty loomed. Yet our teams rose to the challenge with an unwavering commitment to safety and restored Air Group to the safe, reliable operation we're known and trusted for. I want to extend a heartfelt thank you to all our employees for their dedication in helping us deliver another strong year. Their commitment to excellence, care, and service sets us apart. I'm excited to announce that due to Legacy Air Group's outstanding financial performance, Alaska and Horizon employees will receive a record bonus payout this year. We expect to distribute over $300 million, equivalent to six weeks of pay. This is the largest payout in our history, and we believe the highest in the industry. Investing in our people and our culture is important, and we hope to have our Hawaiian employees participate in this plan in 2025. In addition, we couldn't be happier that we reached an agreement in concept with Alaska Airlines flight attendants earlier this month, and we look forward to beginning the joint collective bargaining process with all our unions this year. 2024 was a defining year in which we embarked on the most exciting transformation in our company's proud history. The most significant and foundational piece of that strategy was closing our acquisition of Hawaiian Airlines in September. This combination strengthens Air Group with several key strategic assets, including a leading position in a top 25 U.S. hub, an incredibly valuable brand, a mix of wide-body and narrow-body aircraft, and a legacy of operational reliability and exceptional customer service. Moving to 2025, our work now is geared towards delivering on Alaska Accelerate, our vision for the future, and it's off to a great start. The underlying trends in our core business are improving. Our legacy Alaska assets are on track to deliver slightly positive profits in the first quarter, despite the recent rise in fuel prices. Our Hawaiian assets outperformed expectations in the fourth quarter. And while we expect them to be unprofitable in Q1, from the second quarter on, we anticipate a small pre-tax profit as recent network changes take effect and synergies materialize. Over time, we aim to improve Q1 performance similar to the progress made with Alaska over the last two years. We are confidently shaping the future of our company, building on our strengths, enhancing our business model, and elevating our competitive edge through a strategy centered on maximizing our proven approach as a larger company and unlocking new opportunities across our business. First, We're leveraging the power of our combined network, which Andrew will share more on the benefits we're already seeing. Our Seattle and Portland hub banking strategy is taking effect, and early data from the launch of our first Seattle to Tokyo international route is progressing as planned. This is helping us build our international gateway in Seattle while strengthening our relevance and loyalty across our West Coast hubs and beyond. Second, as Hawaii's trusted airline, We're capitalizing on the combined strength of both networks, One World, a powerful loyalty program, and the Hawaiian brand to become the airline of choice for both domestic and international flights in Hawaii. Third, we're focused on meeting all our guests' needs, including expanding our premium products and experiences at every phase of the travel journey. And lastly, diversifying our business. including growing our cargo business through the combination of Alaska and Hawaiian. Combined with a constructive industry environment, my confidence in our plan and our ability to deliver results has only strengthened. This includes our EPS target of more than $5.75 and no margin dilution in 2025. Additionally, we're set to unlock a billion dollars in incremental pre-tax profit over the next three years through a combination of commercial initiatives and at least $500 million of synergies. Integration is progressing as planned, but the goal of achieving a single operating certificate by the end of 2025, followed by the transition to a unified reservation system shortly thereafter. As we shared at our investor day, This is just the beginning. Our track record and future potential reaffirm our position as industry leaders, driven by clear strategies and the courage to take bold steps. And along the way, we're delivering value to everyone who depends on us, our people, our guests, the communities we serve, and our shareholders. And with that, I'll turn it over to Andrew.