<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from . . . . . . . . to . . . . . . .
Commission file number 1-8957
ALASKA AIR GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1292054
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19300 Pacific Highway South, Seattle, Washington 98188
(Address of principal executive offices)
Registrant's telephone number, including area code: (206) 431-7040
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes / X / No / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
The registrant has 26,439,190 common shares, par value $1.00, outstanding
at March 31, 2000.
1
<PAGE>
PART I. FINANCIAL STATEMENTS
ITEM 1. Financial Statements
CONSOLIDATED BALANCE SHEET (UNAUDITED)
Alaska Air Group, Inc.
<TABLE>
<CAPTION>
ASSETS
- -------------------------------------------------------------------------- ------------------
December 31, MARCH 31,
(In Millions) 1999 2000
- -------------------------------------------------------------------------- ------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $132.5 $125.6
Marketable securities 196.5 147.4
Receivables - net 74.6 99.4
Inventories and supplies 54.3 57.7
Prepaid expenses and other assets 124.0 166.9
- -------------------------------------------------------------------------- ------------------
Total Current Assets 581.9 597.0
- -------------------------------------------------------------------------- ------------------
PROPERTY AND EQUIPMENT
Flight equipment 1,386.6 1,422.3
Other property and equipment 337.2 363.7
Deposits for future flight equipment 217.7 245.7
- -------------------------------------------------------------------------- ------------------
1,941.5 2,031.7
Less accumulated depreciation and amortization 486.7 507.8
- -------------------------------------------------------------------------- ------------------
1,454.8 1,523.9
- -------------------------------------------------------------------------- ------------------
Capital Leases:
Flight and other equipment 44.4 44.4
Less accumulated amortization 31.8 32.3
- -------------------------------------------------------------------------- ------------------
12.6 12.1
- -------------------------------------------------------------------------- ------------------
TOTAL PROPERTY AND EQUIPMENT - NET 1,467.4 1,536.0
- -------------------------------------------------------------------------- ------------------
Intangible Assets - Subsidiaries 55.5 55.0
- -------------------------------------------------------------------------- ------------------
Other Assets 75.3 35.6
- -------------------------------------------------------------------------- ------------------
TOTAL ASSETS $2,180.1 $2,223.6
========================================================================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
CONSOLIDATED BALANCE SHEET (UNAUDITED)
Alaska Air Group, Inc.
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------- ------------------
December 31, MARCH 31,
(In Millions Except Share Amounts) 1999 2000
- -------------------------------------------------------------------------- ------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $104.2 $112.4
Accrued aircraft rent 81.8 66.5
Accrued wages, vacation and payroll taxes 83.0 64.7
Other accrued liabilities 99.5 133.7
Air traffic liability 183.7 252.7
Current portion of long-term debt and
capital lease obligations 66.5 97.0
- -------------------------------------------------------------------------- ------------------
TOTAL CURRENT LIABILITIES 618.7 727.0
- -------------------------------------------------------------------------- ------------------
Long-Term Debt and Capital Lease Obligations 337.0 300.1
- -------------------------------------------------------------------------- ------------------
Other Liabilities and Credits
Deferred income taxes 144.0 136.8
Deferred income 37.4 36.4
Other liabilities 112.3 99.1
- -------------------------------------------------------------------------- ------------------
293.7 272.3
- -------------------------------------------------------------------------- ------------------
SHAREHOLDERS' EQUITY
Common stock, $1 par value
Authorized: 100,000,000 shares
Issued: 1999 - 29,157,108 shares
2000 - 29,185,494 shares 29.2 29.2
Capital in excess of par value 480.0 480.8
Treasury stock, at cost: 1999 - 2,746,304 shares
2000 - 2,746,304 shares (62.7) (62.7)
Deferred compensation (0.6) (0.4)
Retained earnings 484.8 477.3
- -------------------------------------------------------------------------- ------------------
930.7 924.2
- -------------------------------------------------------------------------- ------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,180.1 $2,223.6
========================================================================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Alaska Air Group, Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------ --------------
Three Months Ended March 31
(In Millions Except Per Share Amounts) 1999 2000
- ------------------------------------------------------------------------ --------------
<S> <C> <C>
OPERATING REVENUES
Passenger $419.4 $450.6
Freight and mail 20.7 20.3
Other - net 21.1 21.6
- ------------------------------------------------------------------------ --------------
TOTAL OPERATING REVENUES 461.2 492.5
- ------------------------------------------------------------------------ --------------
OPERATING EXPENSES
Wages and benefits 151.9 171.0
Contracted services 15.6 17.7
Aircraft fuel 42.9 90.1
Aircraft maintenance 35.4 40.2
Aircraft rent 51.3 46.4
Food and beverage service 12.4 12.9
Commissions 23.7 16.5
Other selling expenses 24.6 26.2
Depreciation and amortization 19.7 23.0
Loss (gain) on sale of assets 0.1 (0.1)
Landing fees and other rentals 22.2 22.4
Other 32.8 40.0
- ------------------------------------------------------------------------ --------------
TOTAL OPERATING EXPENSES 432.6 506.3
- ------------------------------------------------------------------------ --------------
OPERATING INCOME (LOSS) 28.6 (13.8)
- ------------------------------------------------------------------------ --------------
NONOPERATING INCOME (EXPENSE)
Interest income 4.7 5.2
Interest expense (3.8) (7.9)
Interest capitalized 2.2 3.4
Other - net 1.7 0.5
- ------------------------------------------------------------------------ --------------
4.8 1.2
- ------------------------------------------------------------------------ --------------
Income (loss) before income tax 33.4 (12.6)
INCOME TAX EXPENSE (CREDIT) 13.2 (5.1)
- ------------------------------------------------------------------------ --------------
NET INCOME (LOSS) $20.2 $(7.5)
======================================================================== ==============
BASIC EARNINGS (LOSS) PER SHARE $0.77 $(0.28)
======================================================================== ==============
Diluted Earnings (Loss) Per Share $0.76 $(0.28)
======================================================================== ==============
Shares used for computation:
Basic 26.313 26.426
Diluted 26.504 26.426
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (unaudited)
Alaska Air Group, Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
COMMON Capital in Treasury Deferred
SHARES Common Excess of Stock Compen- Retained
(In Millions) OUTSTANDING Stock Par Value at Cost sation Earnings Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1999 26.411 $29.2 $480.0 $(62.7) $(0.6) $484.8 $930.7
- ------------------------------------------------------------------------------------------------------------------------
Net loss for the three months
ended March 31, 2000 (7.5) (7.5)
Stock issued under stock plans 0.028 0.0 0.8 0.0 0.8
Employee Stock Ownership Plan
shares allocated 0.2 0.2
- ------------------------------------------------------------------------------------------------------------------------
BALANCES AT MARCH 31, 2000 26.439 $29.2 $480.8 $(62.7) $(0.4) $477.3 $924.2
========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Alaska Air Group, Inc.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------- -----------------
Three Months Ended March 31 (In Millions) 1999 2000
- ----------------------------------------------------------------------------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $20.2 $(7.5)
Adjustments to reconcile net income (loss) to cash:
Depreciation and amortization 19.7 23.0
Amortization of airframe and engine overhauls 11.1 12.5
Loss (gain) on sale of assets 0.1 (0.1)
Deferred income taxes 12.3 (7.2)
Increase in accounts receivable (20.2) (24.8)
Increase in other current assets (10.1) (8.1)
Increase in air traffic liability 55.3 69.0
Increase (decrease) in other current liabilities (13.7) 8.8
Other-net 1.6 (15.4)
- ----------------------------------------------------------------------------------- -----------------
Net cash provided by operating activities 76.3 50.2
- ----------------------------------------------------------------------------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities (25.7) (1.5)
Sales and maturities of marketable securities 74.6 50.6
Additions to flight equipment deposits (24.1) (41.0)
Additions to property and equipment (71.2) (60.8)
Restricted deposits and other 3.1 1.2
- ----------------------------------------------------------------------------------- -----------------
Net cash used in investing activities (43.3) (51.5)
- ----------------------------------------------------------------------------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt and capital lease payments (6.3) (6.4)
Proceeds from issuance of common stock 5.0 0.8
- ----------------------------------------------------------------------------------- -----------------
Net cash used in financing activities (1.3) (5.6)
- ----------------------------------------------------------------------------------- -----------------
Net increase (decrease) in cash and cash equivalents 31.7 (6.9)
Cash and cash equivalents at beginning of period 29.4 132.5
- ----------------------------------------------------------------------------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $61.1 $125.6
=================================================================================== =================
Supplemental disclosure of cash paid during the period for:
Interest (net of amount capitalized) $2.4 $0.0
Income taxes 4.4 $1.7
Noncash investing and financing activities None NONE
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THAT HAVE CHANGED SIGNIFICANTLY
DURING THE THREE MONTHS ENDED MARCH 31, 2000
Alaska Air Group, Inc.
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Alaska Air Group, Inc. (the
Company or Air Group) include the accounts of its principal subsidiaries, Alaska
Airlines, Inc. (Alaska) and Horizon Air Industries, Inc. (Horizon). These
statements should be read in conjunction with the financial statements in the
Company's annual report on Form 10-K for the year ended December 31, 1999. They
include all adjustments that are, in the opinion of management, necessary for a
fair presentation of the results for the interim periods. The adjustments made
were of a normal recurring nature.
NOTE 2. PREPAID EXPENSES AND OTHER CURRENT ASSETS
At March 31, 2000, other current assets included $38.3 million of restricted
deposits which will be used to pay certain current liabilities. At December 31,
1999, these deposits were included with other assets. These deposits are
yen-denominated investments that are held to repay yen-denominated borrowings
that are due in the next 12 months.
NOTE 3. OTHER ACCRUED LIABILITIES
The frequent flyer award liability at December 31, 1999 and March 31, 2000 was
$40.0 million and $44.5 million, respectively.
NOTE 4. EARNINGS PER SHARE (SEE NOTE 9 TO CONSOLIDATED FINANCIAL
STATEMENTS AT DECEMBER 31, 1999)
Earnings per share (EPS) calculations for the three months ended March 31 were
as follows, (in millions except per share amounts):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1999 2000
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $20.2 $(7.5)
Avg. shares outstanding 26.313 26.426
- ---------------------------------------------------------------------------------------------
Basic earnings (loss)per share $0.77 $(0.28)
=============================================================================================
Avg. shares outstanding 26.313 26.426
Assumed exercise of stock options 0.191 --
- ---------------------------------------------------------------------------------------------
Diluted EPS shares 26.504 26.426
- ---------------------------------------------------------------------------------------------
Diluted earnings (loss) per share $0.76 $(0.28)
=============================================================================================
</TABLE>
7
<PAGE>
NOTE 5. OPERATING SEGMENT INFORMATION (SEE NOTE 11 TO CONSOLIDATED
FINANCIAL STATEMENTS AT DECEMBER 31, 1999)
Operating segment information for Alaska Airlines, Inc. (Alaska) and Horizon Air
Industries, Inc. (Horizon) for the three months ended March 31 was as follows
(in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1999 2000
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Operating revenues:
Alaska $371.9 $394.3
Horizon 93.0 101.5
Elimination of
intercompany revenues (3.7) (3.3)
- ---------------------------------------------------------------------------------------------
Consolidated 461.2 492.5
=============================================================================================
Pretax income (loss):
Alaska 30.8 (10.9)
Horizon 3.0 (1.4)
Air Group (0.4) (0.3)
- ---------------------------------------------------------------------------------------------
Consolidated 33.4 (12.6)
=============================================================================================
Total assets at end of period:
Alaska 1,626.3 2,037.2
Horizon 202.7 242.2
Air Group 814.9 939.0
Elimination of
intercompany accounts (835.2) (994.8)
- ---------------------------------------------------------------------------------------------
Consolidated 1,808.7 2,223.6
=============================================================================================
</TABLE>
8
<PAGE>
ALASKA AIRLINES FINANCIAL AND STATISTICAL DATA
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------------------
%
FINANCIAL DATA (IN MILLIONS): 1999 2000 Change
----- ----- ------
<S> <C> <C> <C>
Operating Revenues:
Passenger $335.0 $355.6 6.1
Freight and mail 18.0 17.8 (1.1)
Other - net 18.9 20.9 10.6
-------------------------
Total Operating Revenues 371.9 394.3 6.0
-------------------------
Operating Expenses:
Wages and benefits 119.8 138.6 15.7
Employee profit sharing 3.0 0.0 (100.0)
Contracted services 13.5 15.2 12.6
Aircraft fuel 35.4 73.8 108.5
Aircraft maintenance 23.0 28.4 23.5
Aircraft rent 40.5 35.8 (11.6)
Food and beverage service 11.8 12.1 2.5
Commissions 22.1 15.6 (29.4)
Other selling expenses 19.4 20.4 5.2
Depreciation and amortization 15.9 18.6 17.0
Loss on sale of assets 0.1 0.0 NM
Landing fees and other rentals 16.7 17.0 1.8
Other 24.6 31.0 26.0
-------------------------
Total Operating Expenses 345.8 406.5 17.6
-------------------------
Operating Income (Loss) 26.1 (12.2)
-------------------------
Interest income 5.2 6.1
Interest expense (3.8) (7.9)
Interest capitalized 1.7 2.6
Other - net 1.6 0.5
-------------------------
4.7 1.3
-------------------------
Income (Loss) Before Income Tax $30.8 $(10.9)
=========================
OPERATING STATISTICS:
Revenue passengers (000) 3,072 3,168 3.1
RPMs (000,000) 2,701 2,814 4.2
ASMs (000,000) 4,117 4,231 2.8
Passenger load factor 65.6% 66.5% 0.9 pts
Breakeven load factor 59.9% 70.1% 10.2 pts
Yield per passenger mile 12.40CENTS 12.64CENTS 1.9
Operating revenue per ASM 9.03CENTS 9.32CENTS 3.2
Operating expenses per ASM 8.40CENTS 9.61CENTS 14.4
Fuel cost per gallon 48.5CENTS 99.1CENTS 104.6
Fuel gallons (000,000) 73.1 74.5 1.9
Average number of employees 8,885 9,279 4.4
Aircraft utilization (block hours/day) 11.1 10.9 (1.8)
Operating fleet at period-end 86 89 3.5
NM = Not Meaningful
</TABLE>
9
<PAGE>
HORIZON AIR FINANCIAL AND STATISTICAL DATA
<TABLE>
<CAPTION>
Three Months Ended March 31
-----------------------------------------
%
FINANCIAL DATA (IN MILLIONS): 1999 2000 Change
----- ----- ------
<S> <C> <C> <C>
Operating Revenues:
Passenger $87.3 $97.5 11.7
Freight and mail 2.7 2.5 (7.4)
Other - net 3.0 1.5 (50.0)
-------------------------
Total Operating Revenues 93.0 101.5 9.1
-------------------------
Operating Expenses:
Wages and benefits 28.6 32.4 13.3
Employee profit sharing 0.5 0.0 (100.0)
Contracted services 2.6 3.1 19.2
Aircraft fuel 7.5 16.3 117.3
Aircraft maintenance 12.5 11.8 (5.6)
Aircraft rent 10.8 10.6 (1.9)
Food and beverage service 0.6 0.8 33.3
Commissions 4.5 3.4 (24.4)
Other selling expenses 5.3 5.8 9.4
Depreciation and amortization 3.8 4.3 13.2
Loss (gain) on sale of assets 0.0 (0.1) NM
Landing fees and other rentals 5.5 5.7 3.6
Other 7.9 8.9 12.7
-------------------------
Total Operating Expenses 90.1 103.0 14.3
-------------------------
Operating Income 2.9 (1.5)
-------------------------
Interest expense (0.5) (0.8)
Interest capitalized 0.5 0.8
Other - net 0.1 0.1
-------------------------
0.1 0.1
-------------------------
Income Before Income Tax $3.0 $(1.4)
=========================
OPERATING STATISTICS:
Revenue passengers (000) 1,146 1,190 3.9
RPMs (000,000) 301 329 9.5
ASMs (000,000) 501 551 10.0
Passenger load factor 60.0% 59.7% (0.3)pts
Breakeven load factor 57.8% 60.7% 2.9 pts
Yield per passenger mile 29.04CENTS 29.62CENTS 2.0
Operating revenue per ASM 18.54CENTS 18.41CENTS (0.7)
Operating expenses per ASM 17.97CENTS 18.68CENTS 4.0
Fuel cost per gallon 51.0CENTS 101.6CENTS 99.4
Fuel gallons (000,000) 14.8 16.0 8.1
Average number of employees 3,305 3,617 9.5
Aircraft utilization (block hours/day) 7.8 8.1 3.8
Operating fleet at period-end 61 62 1.6
NM = Not Meaningful
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION FORWARD-LOOKING INFORMATION
This report may contain forward-looking statements that are based on the best
information currently available to management. These forward-looking statements
are intended to be subject to the safe harbor protection provided by Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Forward-looking statements are indicated by phrases such as
"will", "should", "the Company believes", "we expect" or any other language
indicating a prediction of future events. There can be no assurance that actual
developments will be those anticipated by the Company. Actual results could
differ materially from those projected as a result of a number of factors, some
of which the Company cannot predict or control. For a discussion of these
factors, please see Item 1 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.
RESULTS OF OPERATIONS
FIRST QUARTER 2000 COMPARED WITH FIRST QUARTER 1999
The consolidated net loss for the first quarter of 2000 was $7.5 million, or
$0.28 per share (diluted), compared with a net income of $20.2 million, or $0.76
per share, in 1999. The consolidated operating loss for the first quarter of
2000 was $13.8 million compared to an operating income of $28.6 million for
1999. The $42.4 million reduction in operating income was essentially all due to
higher fuel prices. Financial and statistical data for Alaska and Horizon is
shown on pages 9 and 10. A discussion of this data follows.
ALASKA AIRLINES
REVENUES
Capacity increased by 2.8% primarily due to additional flights in the Southern
California, Mexico and Arizona markets. Traffic grew by 4.2%, resulting in a 0.9
point increase in passenger load factor. The Canada and Northern California
markets experienced the largest increases in load factor. Passenger yields were
up 1.9%, primarily due to fuel-related fare increases. Yields were up in all
major markets, with Canada showing the largest increase. The higher load factor
combined with the higher yield resulted in a 3.2% increase in revenue per
available seat mile (ASM). The combined result of the 2.8% capacity increase and
the 3.2% revenue per ASM increase was a 6.1% increase in passenger revenue.
Freight and mail revenues decreased 1.1%, primarily due to lower mail volumes.
Other-net revenues increased 10.6%, due to increased revenue from travel
partners in Alaska's frequent flyer program.
EXPENSES
Operating expenses grew by 17.6 % as a result of a 14.4% increase in cost per
ASM. The increase in cost per ASM was primarily due to higher fuel prices.
Without the higher fuel prices, cost per ASM would have increased 5.3%.
Explanations of significant year-over-year changes in the components of
operating expenses are as follows:
- - Wages and benefits increased 15.7% due to a 4.4% increase in the number
of employees combined with a 10.8% increase in average wages and
benefits per employee. Employees were added in all areas to service the
3.1% increase in passengers carried. New labor contracts, step
increases for pilots, and annual merit raises for management employees
all contributed to the higher wage rates.
11
<PAGE>
- - Contracted services increased 13% due to higher security costs, higher
rates for ground handling services and increased navigation fees in
Canada and Mexico.
- - Fuel expense increased 109%, primarily due to a 105% increase in the
price of fuel. The fuel consumption rate decreased 3.0% due to the use
of more fuel efficient B737-700 aircraft.
- - Maintenance expense increased 24%, exceeding the 4% increase in block
hours, due to increased airframe component and engine overhaul expense,
and higher costs for landing gear repairs.
- - Aircraft rent expense decreased 12%, due to leasing four fewer MD-80
aircraft and two fewer B737-400 aircraft.
- - Commission expense decreased 29% on a 6% increase in passenger revenue.
In 2000, 66% of ticket sales were made through travel agents, versus
69% in 1999. In 2000, 9% of ticket sales were made through Alaska's
Internet web site versus 4% in 1999. In addition, the commission rate
paid to travel agents decreased from 8% to 5%.
- - Depreciation increased 17%, primarily due to owning 10 more aircraft
in 2000.
- - Other expense increased 26%, primarily due to higher expenditures for
operating supplies, insurance, flight crew hotels, legal fees,
passenger remuneration and recruiting.
HORIZON AIR
REVENUES
Capacity grew by 10.0%, primarily due to added flights in the Canada, and
California markets. Traffic grew by 9.5%, resulting in a 0.3 point decrease in
passenger load factor. Passenger yields were up 2.0%, largely due to "fuel
surcharge" fare increases. Passenger revenues increased 11.7%, slightly more
than the 10.0% increase in capacity.
Other-net revenues decreased 50%, or $1.5 million, primarily due to recording
revenues related to aircraft manufacturer's support during the first quarter of
1999.
EXPENSES
Operating expenses grew by 14.3% as a result of a 10.0% increase in capacity and
a 4.0% increase in cost per ASM. Explanations of significant year-over-year
changes in the components of operating expenses are as follows:
- - Wages and benefits increased 13.3% due to a 9.5% increase in the number
of employees combined with a 3.5% increase in average wages and
benefits per employee. Employees were added in all areas to provide
7.8% more block hours of flying and to service the 3.9% increase in
passengers carried.
- - Contracted services increased 19%, higher than the 10% increase in
capacity, due to higher ground handling charges, increased navigation
fees in Canada, and higher security charges.
12
<PAGE>
- - Fuel expense increased 117%, due to an 8% increase in fuel consumption
combined with a 99% increase in the price of fuel.
- - Maintenance expense included a $1.5 million leased aircraft return
credit for 2000. Absent this credit, maintenance expense would have
increased 6%.
- - Commission expense decreased 24% on a 12% increase in passenger
revenue, because a smaller percentage of sales were made through travel
agents and commission rates dropped from 8% to 5%.
- - Depreciation and amortization expense increased 13%, primarily due to
added depreciation on aircraft spare parts and station equipment.
CONSOLIDATED NONOPERATING INCOME (EXPENSE) Net nonoperating income decreased
$3.6 million, primarily due to higher interest expense resulting from new debt
incurred in late 1999.
LIQUIDITY AND CAPITAL RESOURCES
The table below presents the major indicators of financial condition and
liquidity.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
December 31, 1999 MARCH 31, 2000 Change
- ------------------------------------------------------------------------------------------------------------------
(In millions, except debt-to-equity and per share amounts)
<S> <C> <C> <C>
Cash and marketable securities $329.0 $273.0 $(56.0)
Working capital (deficit) (36.8) (130.0) (93.2)
Long-term debt and
capital lease obligations 337.0 300.1 (36.9)
Shareholders' equity 930.7 924.2 (6.5)
Book value per common share $35.24 $34.96 $(0.28)
Debt-to-capital 27%:73% 25%:75% NA
Debt-to-capital assuming aircraft
operating leases are capitalized
at seven times annualized rent 64%:36% 63%:37% NA
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company's cash and marketable securities portfolio decreased by $56 million
during the first three months of 2000. Operating activities provided $50 million
of cash during this period. Cash was used for $102 million of capital
expenditures, including the purchase of one new Boeing 737 aircraft, flight
equipment deposits and airframe and engine overhauls, and for $6 million of debt
repayment.
Shareholders' equity decreased $6.5 million due to the net loss of $7.5 million.
AIRCRAFT ACCIDENT On January 31, 2000, Alaska Airlines flight 261 from Puerto
Vallarta en route to San Francisco, went down in the water off the coast of
California near Point Mugu. The flight carried 83 passengers and five crew
members. There were no survivors. Consistent with industry standards, the
Company maintains insurance against aircraft accidents. The Company expects
substantially all accident response and civil litigation costs to be covered by
insurance. However, any aircraft accident, even if fully insured, could cause a
negative public perception of the Company with adverse financial consequences.
Principally as a result of added maintenance inspections Alaska carried out
13
<PAGE>
after the accident, Alaska estimates that it canceled 6% of its flights in
February and 3% of its flights in March.
SAFETY ACTIVITIES In March 2000, to enhance existing lines of communication,
Alaska established a "safety hotline" for employees to contact the chairman's
office directly regarding any safety concern. In April 2000, an independent team
of outside safety experts began a full audit of the maintenance, flight
operations, hazardous materials handling and security areas of Alaska. The audit
is expected to take two months. In addition, Alaska is in the process of hiring
a vice president of safety, who will report directly to the chairman.
COMMITMENTS As of April 2000, the Company had firm orders for 65 aircraft
requiring aggregate payments of approximately $1.5 billion, as set forth below.
In addition, Alaska has options to acquire 26 more B737s and Horizon has options
to acquire 15 Dash 8-400s and 25 CRJ 700s. Alaska and Horizon expect to finance
the new planes with either leases, long-term debt or internally generated cash.
<TABLE>
<CAPTION>
DELIVERY PERIOD - FIRM ORDERS
- --------------------------------------------------------------------------------------------------------------------------------
AIRCRAFT 2000 2001 2002 2003 2004 2005 TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Boeing 737-700 6 3 -- -- -- -- 9
Boeing 737-900 -- 6 5 -- -- -- 11
de Havilland Dash 8-400 3 12 -- -- -- -- 15
- --------------------------------------------------------------------------------------------------------------------------------
Canadair RJ 700 -- -- 8 6 14 2 30
- --------------------------------------------------------------------------------------------------------------------------------
Total 9 21 13 6 14 2 65
================================================================================================================================
Payments (Millions) $311 $416 $298 $168 $262 $34 $1,489
================================================================================================================================
</TABLE>
RECENT ACCOUNTING DEVELOPMENTS In December 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin 101 (SAB 101), Revenue Recognition
in Financial Statements. SAB 101 gives specific guidance on the conditions that
must be met before revenue may be recognized. In March 2000, the SEC issued SAB
101A that permits the Company to implement SAB 101 in the second quarter of
2000. Four major U.S. airlines have adopted SAB 101 in the first quarter of
2000 and changed their method of accounting for the sale of frequent flyer
miles. Alaska believes that SAB 101 also applies to its sale of frequent flyer
miles. As a result, Alaska expects to implement SAB 101 during the second
quarter of 2000 and change its method of revenue recognition for the sale of
mileage credits. The portion of the proceeds from sales of miles that
represents Alaska's obligation to provide future travel on Alaska will be
deferred and recognized as a component of passenger revenue when the service is
rendered. The portion of the proceeds from sales of miles that represents
Alaska's obligation to provide future travel on other airline partners will be
recorded as a liability to those partners. The remaining portion of the sales
proceeds will continue to be recognized immediately as part of other operating
revenues. During the second quarter of 2000, Alaska plans to recognize the
cumulative effect of adopting SAB 101 as a change in accounting principle as of
January 1, 2000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In December 1998, search warrants and a grand jury subpoena (for the U.S.
District Court for the Northern District of California) were served on Alaska,
initiating an investigation into the Company's Oakland maintenance base by the
U.S. Attorney for the Northern District of California.
14
<PAGE>
In addition, the Federal Aviation Administration (FAA) issued a letter of
investigation to Alaska relating to maintenance performed on an MD-80 aircraft.
In April 1999, the FAA issued a notice of proposed civil penalty for $44,000.
In July 1999, Alaska responded informally to the notice, disputing that any
violation occurred, and to date the FAA has not taken any further action. In
November 1999, the grand jury issued a second subpoena on Alaska. The Company
understands that information developed by the National Transportation Safety
Board in connection with the crash of flight 261 on January 31, 2000 is being
shared with the U.S. Attorney and that the U.S. Attorney will use this
information to evaluate whether any crimes were committed in connection with
flight 261. On May 9, 2000 the U.S. Attorney issued a subpoena for records
relating to the aircraft involved in the flight 261 accident. To the
Company's knowledge, no charges have been filed as a result of the grand jury
investigation.
Alaska is currently a defendant in several lawsuits relating to flight 261. The
Company is unable to predict the amount of claims that may ultimately be made
against it or how those claims might be resolved. Consistent with industry
standards, the Company maintains insurance against aircraft accidents. In
April 2000, the FAA began an audit of Alaska's maintenance and flight
operations departments to ensure adherence to mandated procedures. The FAA has
completed the on-site portion of its inspection. During the audit, the FAA
requested that Alaska take several actions, which Alaska has done or is
currently implementing. The Company has not been informed what further
actions, if any, the FAA intends to take as a result of its inspection.
The Company cannot predict the outcome of any of the pending civil or potential
criminal proceedings described above. As a result, the Company can give no
assurance that these proceedings, if determined adversely to Alaska, would not
have a material adverse effect on the financial position or results of
operations of the Company.
ITEM 5. OTHER INFORMATION
ALLIANCES WITH OTHER AIRLINES
During February, 2000, Canadian Airlines gave notice to Alaska that it is
canceling its marketing alliance with Alaska effective in August 2000 due to
it's merger with Air Canada.
EMPLOYEES
During the first quarter of 1999, a federal mediator was assigned to assist
Horizon and the International Brotherhood of Teamsters in the negotiation of an
initial labor contract covering approximately 600 pilots. Negotiations have
taken place since then and further negotiations are planned for the second
quarter of 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 3.(ii) - Bylaws of Alaska Air Group, Inc., as amended through
January 26, 2000 Exhibit 27 - Financial data schedule.
(b) On February 9, 2000 a report on Form 8-K was filed discussing the crash
of Alaska flight 261.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
ALASKA AIR GROUP, INC.
- --------------------------------------------
Registrant
Date: May 9, 2000
/s/ John F. Kelly
- --------------------------------------------
John F. Kelly
Chairman, President and Chief Executive Officer
/s/ Bradley D. Tilden
- --------------------------------------------
Bradley D. Tilden
Vice President/Finance and Chief Financial Officer
16
<PAGE>
Exhibit 3.(ii) to First Quarter 2000 Form 10Q
BYLAWS
OF
ALASKA AIR GROUP, INC.
As Amended and in Effect January 26, 2000
(Date of Previous Amendment: January 26, 1999)
ARTICLE I
REGISTERED OFFICE AND AGENT
The registered office of the corporation is located at Corporate Trust
Center, 1209 Orange Street, 9, County of New Castle, Delaware 19801, and the
name of its registered agent at such address is The Corporation Trust Company.
ARTICLE II
MEETING OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS.
A meeting of the stockholders for the purpose of electing directors and
for the transaction of such other business as may properly be brought before the
meeting shall be held annually at two o'clock in the afternoon on the third
Tuesday of May, or at such other time or such other day as shall be fixed by
resolution of the Board of Directors. If the day fixed for the annual meeting
shall be a legal holiday such meeting shall be held on the next succeeding
business day.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the stockholders for any purpose or purposes may be
called at any time by a majority of the Board of Directors or by the Chairman of
the Board.
SECTION 3. PLACE OF MEETINGS.
All meetings of the stockholders may be held at such places as shall be
stated in the notice of the meeting.
SECTION 4. NOTICE OF MEETINGS.
Except as otherwise provided by statute, notice of each meeting of the
stockholders shall be given not less than thirty and not more than sixty days
before the
<PAGE>
Page 2
date of the meeting to each stockholder entitled to vote at such meeting (i) in
writing or (ii) by United State mail, addressed to the stockholder at the
address of such stockholder appearing on the books of the corporation or given
by the stockholder to the corporation for the purpose of notice. If mailed,
notice will be given when deposited in the United States mail, postage prepaid,
directed to such stockholder at his or her address as it appears in the stock
ledger of the corporation. Any other written notice shall be deemed to have
been given at the time it is personally delivered to the recipient, delivered
to a common carrier for transmission or actually transmitted by the person
giving the notice by electronic means to the recipient.
When a meeting is adjourned to another time and place, notice of the
adjourned meeting need not be given if the time and place thereof are announced
at the meeting at which the adjournment is given. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
SECTION 5. QUORUM.
At any meeting of the stockholders, the holders of record of a majority
of the total number of shares of outstanding stock of the corporation entitled
to vote, present in person or represented by proxy, shall constitute a quorum
for all purposes.
If a quorum is present at any meeting of stockholders, the affirmative
vote of the holders of a majority of the stock present in person or represented
by proxy and entitled to vote on the subject matter shall be the act of the
stockholders, except as otherwise expressly provided in the Certificate of
Incorporation, these Bylaws or applicable law.
In the absence of a quorum at any meeting, the holders of a majority of
the stock entitled to vote thereat, present in person or represented by proxy at
the meeting, may adjourn the meeting, from time to time, until the holders of
the number shares requisite to constitute a quorum shall be present in person or
represented at the meeting.
SECTION 6. ORGANIZATION.
At each meeting of the stockholders, the Chairman of the Board, or in his
absence such person as shall have been designated by the Board of Directors, or
in the absence of such designation a person elected by the holders of the
majority in number of shares of stock present in person or represented by proxy
and entitled to vote, shall act as chairman of the meeting.
The Secretary, or in his absence, an Assistant Secretary or, in the
absence of the Secretary and all of the Assistant Secretaries, any person
appointed by the chairman of the meeting, shall act as secretary of the meeting.
<PAGE>
Page 3
SECTION 7. VOTING.
Unless otherwise provided in the Certificate of Incorporation or a
resolution of the Board of Directors creating a series of stock, at each meeting
of the stockholders, each holder of shares entitled to vote at such meeting
shall be entitled to one vote for each share of stock having voting power in
respect of each matter upon which a vote is to be taken. Shares of its own
capital stock belonging to the corporation, or to another corporation if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held by the corporation, shall neither be entitled to vote
nor counted for quorum purposes.
SECTION 8. NOTIFICATION OF NOMINATIONS.
Nominations for the election of Directors may be made by or at the
direction of the Board of Directors. A stockholder may also nominate a person
or persons for election as Directors, but only if written notice of such
stockholder's intent to make such nominations is received by the Secretary of
the corporation, not later than (i) with respect to an election to be held at a
regular annual meeting of stockholders, 90 days in advance of the third Tuesday
in May, and (ii) with respect to an election to be held at any other meeting of
the stockholders, the close of business on the 10th day following the date of
the first public disclosure, which may include any public filing by the
corporation with the Securities and Exchange Commission, of the Originally
Scheduled Date of such meeting. Each such notice shall set forth (a) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the stockholder is
a holder of record entitled to vote at such meeting; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming them) pursuant to which the nomination is to be
made; (d) such other information regarding each nominee as would have been
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission had each nominee been nominated by the
Board of Directors; and (e) the consent of each nominee to serve as a Director
if elected. The chairman of any meeting of stockholders to elect Directors and
the Board of Directors shall refuse to recognize the nomination of any person
not made in compliance with the foregoing procedure. For purposes of these
Bylaws, the "Originally Scheduled Date" of any meeting of stockholders shall be
the date such meeting is scheduled to occur in the notice first given to
stockholders regardless of whether such meeting is continued or adjourned or
whether any subsequent notice is gven for such meeting or the record date of
such meeting is changed.
SECTION 9. PROPER BUSINESS FOR STOCKHOLDERS' MEETINGS.
At any annual or special meeting of the stockholders of the corporation,
only business properly brought before the meeting may be transacted. To be
properly brought
<PAGE>
Page 4
before an annual meeting, business (i) must be specified in the notice of the
meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (iii) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before a
meeting by a stockholder, written notice thereof must have been received by the
Secretary of the corporation, not later than (i) with respect to a regular
annual meeting, 90 days in advance of the third Tuesday in May, and (ii) with
respect to any other meeting, the close of business on the 10th day following
the date of the first public disclosure, which may include any public filing by
the corporation with the Securities and Exchange Commission, of the Originally
Scheduled Date of such meeting. Any such notice shall set forth as to each
matter the stockholder proposes to bring before the meeting (i) a brief
description of the business desired to be brought before the meeting, and the
reasons for conducting such business at the meeting and the language of the
proposal, (ii) the name and address of the stockholder proposing such business,
(iii) a representation that the stockholder is a holder of record of stock of
the corporation entitled to vote at such meeting, and (iv) any material
interest of the stockholder in such business. No business shall be conducted
at any meeting of stockholders except in accordance with this paragraph, and
the chairman of any meeting of stockholders and the Board of Directors shall
refuse to permit any business to be brought before meeting without compliance
with the foregoing procedures.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. NUMBER, QUALIFICATION AND TERM OF OFFICE.
A majority of the members of the Board of Directors shall not be
employees of the Company. These Bylaws shall not be amended to change the
requirement for a majority of outside directors unless approved by a vote of the
shareholders, or by a vote of a majority of the outside directors, but in no
case prior to September 14, 1995. The number, qualification and term of office
of the Directors shall be as set forth in the Certificate of Incorporation.
SECTION 2. VACANCIES.
Vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of Directors may be filled
by a majority of the Directors then in office, although less than a quorum, or
by a sole remaining Director, at any regular or special meeting of the Board of
Directors.
<PAGE>
Page 5
SECTION 3. RESIGNATIONS.
Any Director may resign at any time upon written notice to the Secretary
of the corporation. Such resignation shall take effect on the date of receipt
of such notice or at any later date specified therein; and the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 4. MEETINGS.
Meetings of the Board of Directors may be called by the Chairman of the
Board and shall be called by the Secretary on the written request of a majority
of Directors. The Board of Directors may hold its meetings at such place as the
Chairman of the Board or in his absence a majority of Directors from time to
time may determine. Notice of each meeting shall be sent to each Director by
first class mail or by telephone, telegraph or any other means of electronic
communication in each case directed to his residence or usual place of business,
or delivered to him in person or given to him orally. Notice by mail shall be
sent by the Secretary at least ten (10) days previous, and notice by telephone,
telegraph or other electronic communication at least five (5) days previous, to
the time fixed for the meeting; unless, in case of exigency the Chairman of the
Board shall prescribe a shorter notice. A written waiver of notice, signed by
the Director entitled to notice, whether before or after the time of the
meeting, shall be deemed equivalent to notice. The notice of meeting shall
state the time and place of the meeting.
SECTION 5. QUORUM AND MANNER OF ACTING.
Except as otherwise provided by statute, the Certificate of
Incorporation, or these Bylaws, the presence of a majority of the total number
of Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and the act of a majority of the Directors
present at any such meeting at which a quorum is present shall be the act of the
Board of Directors. In the absence of a quorum, a majority of the Directors
present may adjourn the meeting, from time to time, until a quorum is present.
SECTION 6. ORGANIZATION.
At every meeting of the Board of Directors, the Chairman of the Board or
in his absence, a chairman chosen by a majority of the Directors present shall
act as chairman of the meeting. The Secretary, or in his absence, an Assistant
Secretary, or in the absence of the Secretary and all the Assistant Secretaries,
any person appointed by the chairman of the meeting, shall act as secretary of
the meeting.
<PAGE>
Page 6
SECTION 7. CONSENT OF DIRECTORS IN LIEU OF MEETING.
Unless otherwise restricted by the Certificate of Incorporation or by
these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or any committee designated by the Board, may be taken
without a meeting if all members of the Board or committee consent thereto in
writing, and such written consent is filed with the minutes of the proceedings
of the Board or committee.
SECTION 8. TELEPHONIC MEETINGS.
Members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
such a meeting shall constitute presence in person at such meeting.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. EXECUTIVE COMMITTEE.
The Board of Directors may, in its discretion, designate annually an
Executive Committee consisting of the Chairman of the Board and not less than
two other Directors as it may from time to time determine, provided that the
majority of Executive Committee members shall be nonemployee directors. The
Board of Directors shall appoint the Chairman of the Executive Committee from
among the members of the Committee. Except as limited by statute, by the
Certificate of Incorporation, by these Bylaws, or by further action of the Board
of Directors, the Executive Committee may exercise all the power of the Board of
Directors. All action taken by the Executive Committee shall be subject to
revision or alteration of the Board; but no such revision or alteration of any
such action shall affect any act or right of any third party dependent upon such
action and having occurred or arisen prior to notice to such third party of such
revision or alteration. Any person dealing with the corporation may rely upon a
copy of any of said minutes, votes or resolution, certified by the Chairman of
the Committee or by the Secretary or any Assistant Secretary of the corporation,
and a copy so certified shall be conclusive evidence of the matters therein
stated. The Executive Committee shall not, unless specifically authorized by a
resolution of the Board of Directors, spend, finance or commit the Company to
any sum exceeding $7.5 million in any one instance for nonaircraft capital
assets or $40 million in any one instance for aircraft acquisitions.
<PAGE>
Page 7
Meetings of the Executive Committee shall be held at the call of the
Chairman of the Executive Committee or the Chairman of the Board. In addition,
the Committee shall hold as many special meetings as it determines necessary.
SECTION 2. OTHER COMMITTEES.
The Board of Directors may, by resolution passed by a majority of the
Directors, designate such other committees, consisting of one or more Directors,
as it may from time to time determine, and each such committee shall serve for
such term and shall have and may exercise such duties, functions and powers as
the Board of Directors may from time to time prescribe. The Chairman of each
such committee shall be designated by the Board of Directors.
SECTION 3. COMMITTEE; BOOKS AND RECORDS.
Notice of committee meetings shall be governed by the provisions of
Article III, Section 4, above. Each committee shall keep a record of its acts
and proceedings, and all action of the committee shall be reported to the Board
of Directors at the next meeting of the Board, except that minutes of each
Executive Committee meeting shall be forwarded to each Director within seven
days of such meeting.
SECTION 4. QUORUM AND MANNER OF ACTION.
At each meeting of any committee the presence of a majority of the
members of such committee shall be necessary to constitute a quorum for the
transaction of business, and if a quorum is present the concurrence of a
majority of those present shall be necessary for the taking of any action.
ARTICLE V
OFFICERS
SECTION 1. NUMBER
The officers of the corporation shall be a Chairman of the Board, a
President, a Secretary, and such other officers as may be elected by the Board
of Directors or appointed by the Chairman of the Board. Any number of offices
may be held by the same person.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS.
The officers of the corporation shall be elected annually by the Board of
Directors. Each officer elected by the Board of Directors shall hold office
until his successor shall
<PAGE>
Page 8
have been duly elected and qualified, or until he shall have died, resigned or
been removed in the manner hereinafter provided.
SECTION 3. RESIGNATIONS.
Any officer may resign at any time upon written notice to the Chairman of
the Board. Such resignation shall take effect on the date of its receipt, or on
any later date specified therein; and the acceptance of such resignation shall
not be necessary to make it effective.
SECTION 4. REMOVALS.
Any officer elected by the Board of Directors may be removed, with or
without cause, by the Board of Directors. Any officer appointed by the Chairman
of the Board may be removed, with or without cause, by the Chairman of the
Board.
SECTION 5. VACANCIES.
Any vacancy occurring in any office of the corporation shall be filled
for the unexpired portion of the term in the same manner as prescribed in these
Bylaws for regular election or appointment to such office.
SECTION 6. COMPENSATION OF OFFICERS
The salaries of all officers elected by the Board of Directors shall be
approved or authorized by the Board of Directors or by the Chairman of the Board
when so authorized by the Board of Directors.
SECTION 7. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall be the Chief Executive Officer of the
corporation and shall have the general and active management of the business of
the corporation and general and active supervision and direction over the other
officers, agents and employees and shall see that their duties are properly
performed. He shall, if present, preside at each meeting of the stockholders
and of the Board. He shall perform all duties incident to the office of
Chairman of the Board and such other duties as may from time to time be assigned
to him by the Board. The Chairman of the Board shall have the power to vote
shares stock of other corporations held by the corporation, except as may be
otherwise determined by the Board.
SECTION 8. PRESIDENT.
The President shall have general and active supervision and direction
over the business and affairs of the corporation and over its several officers,
subject, however, to
<PAGE>
Page 9
the direction of the Chairman of the Board. He shall perform all duties
incident to the office of President and such other duties as may be assigned to
him by the Board, the Chairman of the Board or these Bylaws.
SECTION 9. SECRETARY.
The Secretary or one or more Assistant Secretaries shall attend all
meetings of the Board and all meetings of the stockholders and act as secretary
thereof, and shall record all votes and the minutes of all proceedings in a book
to be kept for that purpose, and shall perform like duties for any committee of
the Board when required. The Secretary shall be given other duties as pertain
to his office. The Secretary shall keep in safe custody the seal of the
corporation and when authorized by the Board of Directors, affix it, when
required, to any instrument. An Assistant Secretary shall perform the duties of
the Secretary in the event of his absence or disability and shall perform such
other duties as may be imposed upon him by the Board of Directors.
SECTION 10. ABSENCE OR DISABILITY OF OFFICERS.
In the absence or disability of the Chairman of the Board or the
President, the Board of Directors may designate, by resolution, individuals to
perform their duties. The Board of Directors may also delegate this power to a
committee.
ARTICLE VI
STOCK CERTIFICATES AND TRANSFER THEREOF
SECTION 1. STOCK CERTIFICATES.
Except as otherwise permitted by statute, the Certificate of
Incorporation or resolution or resolutions of the Board of Directors, every
holder of stock in the corporation shall be entitled to have a certificate,
signed by, or in the name of, the corporation by the Chairman of the Board and
Chief Executive Officer, the President, or a Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the corporation, certifying the number of shares, and the class and series
thereof, owned by him in the corporation. Any and all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
<PAGE>
Page 10
SECTION 2. LOST, DESTROYED OR MUTILATED CERTIFICATES.
In the case of loss or destruction of a certificate of stock, no new
certificate shall be issued in lieu thereof except upon satisfactory proof to
the Secretary of such loss or destruction; and upon the giving of satisfactory
security, by bond or otherwise, against loss to the corporation, if such is
deemed to be required.
SECTION 3. RECORD DATE.
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty nor less than thirty days before the date of such
meeting, nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
ARTICLE VII
DIVIDENDS
Except as otherwise provided by statute or the Certificate of
Incorporation, the Board of Directors may declare dividends upon the shares of
its capital stock whenever, and in such amounts as, in its opinion, the
condition of the affairs of the corporation shall render it advisable.
Dividends may be paid in cash, in property, or in shares of capital stock of the
corporation.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION.
Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved (including, without limitation, as a witness)
in any actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a Director or officer of the corporation or that,
being or having been such a Director or officer or employee of the corporation,
he or she is or was serving at the request of the
<PAGE>
Page 11
corporation as a Director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
Director, officer, employee or agent or in any other capacity while serving as
a Director, officer, employee or agent, shall be indemnified and held harmless
by the corporation to the full extent permitted by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than permitted prior
thereto) or by other applicable law as then in effect, against all expense,
liability and loss (including attorneys' fees, judgments, finds, ERISA excise
taxes or penalties and amounts to be paid in settlement) actually and
reasonably incurred or suffered by such indemnitee in connection therewith and
such indemnification shall continue as to an indemnitee who has ceased to be a
Director, officer, employee, or agent and shall inure to the benefit of his or
her heirs, executors and administrators; provided, however, that except as
provided in Section 2 with respect to proceedings seeking to enforce rights to
indemnification, the corporation shall indemnify any such indemnitee seeking
indemnification in connection with a proceeding (or part theref) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by the
Board of Directors of the corporation. The right to indemnification conferred
in this Section shall be a contract right and shall include the right to be
paid by the corporation the expenses incurred in defending any such proceeding
in advance of its final disposition (hereinafter an "advancement of expenses");
provided, however, that if the Delaware General Corporations Law requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
Director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the corporation of
an undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that such indemnitee is not entitled to be indemnified for such expenses
under this Section 1 or otherwise.
SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT.
If a claim under Section 1 is not paid in full by the corporation within
sixty days after a written claim has been received by the corporation, except in
the case of a claim for advancement of expenses, in which case the applicable
period shall be twenty days, the indemnitee may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, the indemnitee shall be
entitled to be paid also the expense of prosecuting such suit. The indemnitee
shall be presumed to be entitled to indemnification under this Article upon
submission of a written claim (and, in an action brought to enforce a claim for
advancement of expenses, where the required undertaking, if any is required, has
been tendered to the corporation), and thereafter the corporation shall have the
burden of
<PAGE>
Page 12
proof to overcome the presumption that the indemnitee is not so entitled.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee
is proper in the circumstances nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee is not entitled to indemnification shall be a
defense to the suit or create a presumption that the indemnitee is not so
entitled.
SECTION 3. NONEXCLUSIVITY OF RIGHTS.
The right to indemnification and to the advancement of expenses conferred
in this Article shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors
or otherwise. Notwithstanding any amendment to or repeal of this Article, any
indemnitee shall be entitled to indemnification in accordance with the
provisions hereof and thereof with respect to any acts or omissions of such
indemnitee occurring prior to such amendment or repeal.
SECTION 4. INSURANCE, CONTRACTS AND FUNDING.
The corporation may maintain insurance, at its expense, to protect itself
and any Director, officer, employee or agent of the corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law. The corporation may without further
stockholder approval, enter into contracts with any indemnitee in furtherance of
the provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of credit)
to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Article.
SECTION 5. PERSONS SERVING OTHER ENTITIES.
Any person who is or was a Director, officer or employee of the
corporation who is or was serving as a Director or officer of another
corporation of which a majority of the shares entitled to vote in the election
of its directors is held by the corporation shall be deemed to be so serving at
the request of the corporation and entitled to indemnification and advancement
of expenses under Section 1.
<PAGE>
Page 13
SECTION 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE
CORPORATION.
The corporation may, by action of its Board of Directors, grant rights to
indemnification and advancement of expenses to any employee or agent, or any
group or groups of employees or agents, of the corporation with the same scope
and effect as the provisions of this Article with respect to the indemnification
and advancement of expenses of directors and officers of the corporation.
ARTICLE IX
CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. CHECKS, DRAFTS, ETC.; LOANS.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall, from time to time, be determined by resolution of the
Board of Directors. Such authority may be general or confined to specific
circumstances.
SECTION 2. DEPOSITS.
All funds of the corporation shall be deposited, from time to time, to
the credit of the corporation in such banks, trust companies or other
depositories as the Board of Directors may select, or as may be selected by any
officer or officers, agent or agents of the corporation to whom such power may,
from time to time, be delegated by the Board of Directors; and for the purpose
of such deposit, any officer or agent to whom such power may be delegated by the
Board of Directors, may endorse, assign and deliver checks, drafts and other
orders for the payment of money which are payable to the order of the
corporation.
ARTICLE X
AMENDMENTS
These Bylaws may be altered or repealed and new Bylaws may be made by the
affirmative vote of a majority of the Board of Directors, subject to the right
of the stockholders to amend or repeal Bylaws made or amended by the Board of
Directors or to adopt new Bylaws, by the affirmative vote of a majority of the
outstanding stock of the
<PAGE>
Page 14
corporation entitled to vote thereon and the holders of three-fourths of the
stock present in person or represented by proxy at the meeting, provided that
notice of the proposed action be included in the notice of such meeting.
Terms of the masculine gender used for convenience in these Bylaws should
be understood in the feminine gender where appropriate.
* * * * * * *
I, SHANNON K. ALBERTS, being the duly appointed Assistant Corporate
Secretary of Alaska Air Group, Inc., do hereby certify that the foregoing is a
true and correct copy of the Bylaws of Alaska Air Group, Inc., in effect on this
30th day of March, 2000.
/s/ Shannon K. Alberts
--------------------------------------
Shannon K. Alberts
Director, Corporate Affairs and
Assistant Corporate Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALASKA AIR
GROUP, INC. FIRST QUARTER 2000 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 125,600
<SECURITIES> 147,400
<RECEIVABLES> 99,400
<ALLOWANCES> 0
<INVENTORY> 57,700
<CURRENT-ASSETS> 166,900
<PP&E> 2,076,100
<DEPRECIATION> 540,100
<TOTAL-ASSETS> 2,223,600
<CURRENT-LIABILITIES> 727,000
<BONDS> 300,100
0
0
<COMMON> 29,200
<OTHER-SE> 895,000
<TOTAL-LIABILITY-AND-EQUITY> 2,223,600
<SALES> 492,500
<TOTAL-REVENUES> 492,500
<CGS> 506,300
<TOTAL-COSTS> 506,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,900
<INCOME-PRETAX> (12,600)
<INCOME-TAX> (5,100)
<INCOME-CONTINUING> (7,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,500)
<EPS-BASIC> (.28)
<EPS-DILUTED> (.28)
</TABLE>
