Alaska Air Group, Inc. (NYSE:ALK) Q1 2016 Earnings Conference Call - Preliminary Transcript

Apr 21, 2016 • 11:30 am ET

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Alaska Air Group, Inc. (NYSE:ALK) Q1 2016 Earnings Conference Call - Preliminary Transcript

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Q & A
Operator
Operator

[Operator Instructions] And your first question comes from the line of Savi Syth with Raymond James. Your line is now open.

Analyst
Savanthi N. Syth

Hey. Good morning.

Executive
Bradley Tilden

Hey, Savi.

Analyst
Savanthi N. Syth

Based on the -- hey. On the CapEx front, we are seeing this step-up in 2017 even without the options. And wondering if you could provide a little bit more color [Indecipherable] the next couple of years on CapEx and the likelihood of those options. And then also maybe on the funding side, I know there's $2 billion related to the acquisition. Are you planning to raise any more debt beyond that? And with the E175, any chance of the sale leaseback or is that financing?

Executive
Brandon Pedersen

Hey, Savi. It's Brandon. Maybe I'll start with the first, then Mark can take the second. In terms of CapEx specifically for 2017, if you look at our old guidance on the firm, it was about $620 million. Our new guidance on firm is $925 million. That change is about $300 million. Nearly all of that is related to the E175 purchase. So, if you just look at those 30 firms, kind of the way it staggers out is $40 million in 2016, $280 million in 2017, and roughly $250 million in 2018 and 2019. So, the big increase in CapEx is simply related to the regional jet order that we placed.

Executive
Mark Eliasen

Great. Savi, this is Mark. Good morning. On the financing side, we are going to raise the $2 billion as we talked about a couple of weeks ago. And that process is going very well. We're getting strong demand. We've got exceptional collateral and it's a rare opportunity really for a lot of these lenders to work with Alaska because as you know, we haven't been borrowing over the last six or seven years. Going forward, we're going to manage leveraging that 40% to 50% range and borrow for some aircraft and pay cash for some aircraft.

Analyst
Savanthi N. Syth

Very helpful. Thank you. And just for the second question on the State of Alaska and I know there has been some concerns with the budgetary cuts there and the [Indecipherable] oil and gas sector there that there might be some demand impact. Could you talk about what you're seeing there and how's that impacted demand?

Executive
Joseph A. Sprague

5Savi, this is Joe. If I screw this up, Andrew can correct me on the demand, but I don't we've seen anything really appreciable up or down with respect to demand in the State of Alaska. We're heading into the summer months and they are expecting a record summer for tourism. So, I think our numbers over the next few months are likely to be quite strong. But with respect to the oil-and-gas traffic, there's still a fair bit of exploration activity happening on the North Slope and I think things have been more or less steady.

Analyst
Savanthi N. Syth

Yes. It's very helpful. Thank you.

Executive
Joseph A. Sprague

Thanks, Savi.

Executive
Bradley Tilden

Thank you.

Operator
Operator

And your next question comes from Rajeev Lalwani from Morgan Stanley. Your line is now open.

Analyst
Rajeev Lalwani

Hey,