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Company Profile of Alaska Air Group
Company Profile of Alaska Air Group - April 29th, 2011
Alaska Air Group Inc., is an aviation holding firm / corporation based in SeaTac, Washington which owns two certificated airlines operating in the United States: Alaska Airlines and Horizon Air. In 1985, it was formed and a year later the holding company acquired Horizon Air and Jet America Airlines. Jet America Airlines, and their employees were merged into Alaska Airlines in 1987. Alaska Air Group has no relationship to JetAmerica, an airline proposed in 2009.
Alaska Air Group subsidiaries employed 9,866 staff as recently as 2007, but have cut that number back substantially by 2008. It remains undetermined how many employees actually work for Alaska Air Group itself. Alaska Airlines operates only U.S. built Boeing aircraft with up to 172 seats while Horizon operates only Canadian built Bombardier aircraft with up to 76 seats.
The separation of the two companies is not due to "Scope Clauses," as is the case with other similar holding companies and their airlines such as Mesa Air Group and Freedom Airlines or Republic Airways Holdings and Shuttle America.
Alaska Air Group is the parent company and holding company of both independently "branded" Alaska Airlines and Horizon Air operations.
Alaska Air Group, Inc. (Air Group), incorporated in 1985, has two principal subsidiaries: Alaska Airlines, Inc. (Alaska) and Horizon Air Industries, Inc. (Horizon). Air Group, through these subsidiaries, provides passenger air service to more than 23 million passengers per year to more than 90 destinations. The Company also provides freight and mail services, primarily to and within the state of Alaska and on the West Coast. During the year ended December 31, 2010, Alaska operated an all-jet fleet with an average passenger trip length of 1,232 miles. During 2010, Horizon operated turboprop and jet aircraft, and its average passenger trip length was 359 miles.
Alaska offers north/south service within the western United States, Canada and Mexico, and passenger and dedicated cargo services to and within the state of Alaska. It also provides long-haul east/west service to Hawaii and 13 cities in the mid-continental and eastern United States, primarily from Seattle. During 2010, Alaska carried over 16.5 million revenue passengers in its mainline operations, and it carries more passengers between Alaska and the United States mainland. During 2010, Alaska’s principal airports included Seattle, Los Angeles, Anchorage and Portland. During 2010, its non-stop routes included Seattle-Anchorage, Seattle-Los Angeles, and Seattle-Las Vegas. As of December 31, 2010, Alaska’s operating fleet consisted of 114 jet aircraft.
Horizon is the regional airline in the Pacific Northwest and serves a number of cities in six states, five destinations in Canada, and two destinations in Mexico. During 2010, Horizon carried over 6.8 million revenue passengers. Approximately 91% of Horizon’s revenue passenger miles during 2010 were flown domestically, primarily in the states of Washington, Oregon, Idaho and California. The Canada markets accounted for 8% of revenue passenger miles during 2010. Flying to Mexico accounted for about 1% of total traffic during 2010. During 2010, Horizon’s principal airports included Seattle, Portland, Spokane, and Boise. During 2010, its non-stop routes included Portland-Seattle, Spokane-Seattle, and Portland-San Francisco. As of December 31, 2010, Horizon’s operating fleet consisted of 13 jets and 41 turboprop aircraft. Horizon flights are listed under Alaska's designator code in airline reservation systems. Alaska and Horizon integrate their flight schedules between most points served by their systems. During 2010, approximately 29% of Horizon’s passengers connected to flights operated by Alaska.
The Company competes with Southwest Airlines, United Airlines, Delta Air Lines, American Airlines, US Airways, jetBlue Airways, Virgin America and Allegiant.
In 1990, the company unveiled a strategic plan that included lease orders for 24 new Boeing 737-400 aircraft. One provision of the transaction was the company's sale of a $60 million preferred stock position to International Lease Finance Corporation (ILFC), lessor of the airplanes. A creative feature of the stock transaction was that the conversion rights were purchased by a large group of Alaska's management employees, who were to redeem the stock from ILFC and convert it to common stock no later than 1997. The conversion feature was structured to create an incentive for management to achieve strong stock performance through operating results. At the same time, Alaska announced a large repurchase of shares, using proceeds of the preferred stock sale, and began an employee stock purchase plan.
The airline further expanded its route map in 1991, adding the international destinations of Magadan and Khabarovsk in the Russian far east, and Toronto, its first city served north of the American border and east of the Rockies. (Toronto was eventually dropped in July 1992.) As the company notched awards for customer service and marked its 19th consecutive year of profits in a turbulent industry, Kennedy retired in May 1991 and was succeeded by Raymond J. Vecci.
Furious competition descended on Alaska Air's home turf after the carrier declined to buy its rival MarkAir Inc. in the fall of 1991. Since it began carrying passengers in 1984, MarkAir had worked out feeder arrangements with Alaska Air that kept competition to a minimum. However, after the buyout offer was refused, it unleashed low-cost service on the Anchorage-to-Seattle market and others within Alaska, where Alaska Air earned nearly one-third of its revenues.
In 1992, Alaska Air posted its first loss--$121 million--in 20 years. Under Vecci, the carrier canceled two planned maintenance facilities and deferred a massive $2 billion aircraft purchase; it was able to increase utilization of its existing planes, however. The company cut back on unprofitable routes and even tampered with its award-winning customer service formula, economizing on in-flight meals and other amenities. Attempting to reduce costs on labor resulted in predictably tense relations with the unions. The strict fiscal regimen produced prompt results; Alaska's losses fell to $45 million in 1993 and produced a $40 million profit in 1994. Record-setting cargo operations accounted for about eight percent of these revenues.
In 1993, competition heated up, as the legendary low-cost airline Southwest Airlines entered the Pacific Northwest market by acquiring regional carrier Morris Air. United Airlines simultaneously transferred many competing routes to its less expensive shuttles. Alaska Air was able to reduce its costs, while maintaining a level of customer service that helped make it the leading carrier out of Seattle, Portland, and Anchorage. Alaska Air billed itself as "the last great airline." Still, analysts argued that Alaska Air was in need of deeper cuts, and the company was also plagued by union strikes by flight attendants.
In early 1995, Vecci was dismissed and replaced by John Kelly, formerly CEO of Horizon Air. Alaska and Horizon expanded West Coast routes to capitalize upon a new "open skies" agreement between the United States and Canada. Alaska Air also added a new Russian destination. Its competitor MarkAir had by then centered its jet service on Denver.
In 1996, Alaska Air conducted the first commercial passenger flight using Global Position System (GPS) navigation technology. It announced plans to become the first airline in the world to integrate GPS and Enhanced Ground Proximity Warning System (EGPWS) technology, adding a real-time, three-dimensional display of terrain. The system was scheduled to be operational in all the carrier's Boeing 737-400s by April 1999.
Innovation was important to the company. In 1989, Alaska Air had become the first airline to use head-up guidance systems to operate in foggy conditions. In 1995, it became the first U.S. carrier to sell tickets over the Internet. The airline installed self-service "Instant Travel Machines" that printed boarding passes and allowed customers to bypass the traditional ticket counter. The addition of an X-ray device to the unit was being tested in Anchorage in the spring of 1999, which would allow passengers to check their own baggage. For in-flight emergencies, the carrier also planned to provided automatic external defibrillators in all planes by the year 2000.
Alaska Air's operating revenues were $1.59 billion in 1996, and increased to $1.74 billion the next year. The impressive revenue growth of 1998&mdash′ofits were up 49 percent to $190.5 million--continued into 1999. Alaska Air had evolved into a lean, low-cost carrier. As it approached a new century, the airline again looked to expand, buying Bombardier regional jets and Boeing 737s and adding new training and maintenance facilities.
Market Cap (Mil.): $2,322.20
Shares Outstanding (Mil.): 36.03
Annual Dividend: --
Yield (%): --
ALK Industry Sector
P/E (TTM): 7.42 18.94 17.41
EPS (TTM): 116.10 -- --
ROI: 8.76 2.36 3.06
ROE: 31.14 6.41 5.59
Incorporated: 1932 as Star Air Service
Sales: $1.89 billion (1998)
Stock Exchanges: New York
Ticker Symbol: ALK
NAIC: 481111 Scheduled Passenger Air Transportation; 551112 Offices of Other Holding Companies
Name Age Since Current Position
Ayer, William 56 2011 Chairman of the Board, Chief Executive Officer
Tilden, Bradley 50 2011 President, Director
Pedersen, Brandon 44 2010 Chief Financial Officer, Vice President - Finance
Johnson, Glenn 52 2010 President of New Horizon Air
Loveless, Keith 54 1999 Vice President - Legal and Corporate Affairs, General Counsel, Corporate Secretary
Berry, Chris Managing Director - Investor Relations
Minicucci, Benito 44 2008 Executive Vice President - Operations and Chief Operating Officer of Alaska Airlines, Inc.
Dobbs, Kelley 44 2009 Vice President - Human Resources and Labor Relations
Langland, R. Marc 69 2006 Lead Independent Director
Mallott, Byron 67 1982 Independent Director
Thompson, J. Kenneth 59 1999 Independent Director
Campbell, Phyllis 59 2002 Independent Director
Knight, Jessie 60 2002 Independent Director
Madsen, Dennis 62 2003 Independent Director
Bedient, Patricia 57 2004 Independent Director
Blakey, Marion 62 2010 Independent Director
19300 Pacific Highway South
P.O. Box 68947
Seattle, Washington 98168-0947
Last edited by pratikkk; April 29th, 2011 at 08:04 PM..
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