Alaska Air Group, Inc. (NYSE:ALK) Q4 2022 Earnings Call Transcript

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Conor Cunningham: Just on the capacity outlook, this would be an easy one. Just can you provide some context on what’s new versus core utilization stage gauge. It just feels like a lot of the growth is going to be utilization engage base this year within your core markets, but if you could just clarify that, that would be great.

Andrew Harrison: Yes, I mean, you’re exactly right. At the end of the day, very, very few new cities. This is essentially all core restoration and 85% of all of our growth is stage engaged. So it’s a very efficient growth.

Conor Cunningham: Is that mostly on the Pacific Northwest in California? I mean, I feel like you mentioned that during the prior.

Andrew Harrison: Yes. Yes, that’s correct.

Conor Cunningham: All right. And then I hate to ask a cost question because I know you got a bunch, but it seems like there’s some confusion. Just prior to the 1Q CASMex guide, I would have thought first half versus second half would just look a lot different than it kind of seems like it’s shaping up to be. And when I think about high level, second half benefiting from just easier comps, fleet transition, improved productivity, all that stuff, maybe — maybe the offset is more on like profit share accruals and then another increase in pilot. I’m just struggling with the idea, like are you being ultraconservative? Or is it just — there’s just a lot of uncertainty right now on the second half cost side?

Shane Tackett: Thanks, Conor. I think if you’re implying that you might have thought it would be down more in the second half. I’m not sure if that’s what your sort of question was. But…

Conor Cunningham: Yes, yes, yes.

Shane Tackett: There is not — Okay. Got you. Yes. There’s not a lot of noise, as I think Catie asked earlier, sequentially throughout the quarter. I will say like with respect to our profit sharing accruals, we had a very significant results in Q4 2022 because of our first place performance on the margin side. And while we are still anticipating to lead the industry next year, I think you’ll see those accruals come in differently this year. And it’s significant enough to create a little bit of noise. But no, I think, look, we need to get through the first quarter, all the transition training, make sure the planes come and we’ve got to make some decisions about the A321. And I think what we’ve shared is something we’re highly confident we can get to.

We tend to target internally to do a little bit better, and that’s what we’re going to drive towards. But there’s a lot of year ahead of us, a lot of execution to do. And I think the last couple of years, we’ve been ambitious in our plans and had a lot of setbacks. We don’t anticipate those this year, but — but I think some of that’s informing some conservatism in our capacity and other guides.

Conor Cunningham: Sorry, just 1 clarification. I mean you did have like the lease return expense in the first quarter of last year is maybe that I’m sorry, I’ll take it offline. I’ll ask.

Shane Tackett: Yes, yes, we’re happy to — I mean we’re not going to obviously get into like a lot of the specific details, but we’re happy to give you more color for sure, on the progression.

Operator: And our next question will come from Ravi Shanker with Morgan Stanley.

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