Alaska Air Group Reports Record First Quarter 2016 Results

Financial Highlights:

• Reported record first quarter net income, excluding special items, of $183 million, a 23% increase over the first quarter of 2015. Adjusted diluted earnings per share of $1.45 was a 29% increase over the first quarter of 2015. This quarter's results exceed First Call analyst consensus estimate of $1.42 per share.
• Reported net income for the first quarter under Generally Accepted Accounting Principles (GAAP) of $184 million or $1.46 per diluted share, compared to net income of $149 million, or $1.12 per diluted share in 2015.
• Paid $0.275 per-share quarterly cash dividend in the first quarter, a 38% increase over the dividend paid in the first quarter of 2015.
• Repurchased 1.7 million shares of common stock for an average price of $74 during the first quarter of 2016 for $127 million.
• Generated approximately $530 million of operating cash flow and $410 million of free cash flow in the first quarter of 2016.
• Grew passenger revenues by 4% compared to the first quarter of 2015.
• Achieved return on invested capital of 25.6% for the twelve-month period ending March 31, 2016, compared to 20.1% for the twelve-month period ending March 31, 2015.
• Lowered adjusted debt-to-capitalization ratio to 26% as of March 31, 2016.
• Held $1.6 billion in unrestricted cash and marketable securities as of March 31, 2016.
• Placed an order on April 12, 2016, for 30 Embraer E175s with the option to purchase an additional 33 E175s. The E175s will be flown by Horizon Air beginning in 2017.

Planned Acquisition of Virgin America:

• Announced an agreement on April 4, 2016, to acquire the outstanding common stock of Virgin America, Inc. (Virgin America) for $2.6 billion in cash. The transaction is expected to close late this year or early 2017, pending Virgin America shareholder and regulatory approval.

Operational Highlights:

• Held the No. 1 spot in U.S. Department of Transportation on-time performance among the six largest U.S. airlines for the 12-months ended February 2016.
• Recognized by Air Transport World as the Airline Market Leader for strong financial performance and outstanding customer service.
• Increased Visa Signature affinity cardholders by 12% compared to the prior year.
• Began offering Mileage Plan members the ability to redeem award miles for flights with Hainan Airlines.
• Announced the formation of McGee Air Services, a wholly-owned subsidiary of Alaska Airlines, which will provide ground handling, aircraft cleaning and airport mobility services

New routes launched and announced in the first quarter are as follows:

Alaska Air Group, Inc., (NYSE: ALK) today reported first quarter 2016 GAAP net income of $184 million, or $1.46 per diluted share, compared to $149 million, or $1.12 per diluted share in the first quarter of 2015. Excluding the impact of mark-to-market fuel hedge adjustments, the company reported record adjusted net income of $183 million, or $1.45 per diluted share, compared to adjusted net income of $149 million, or $1.12 per diluted share, in 2015.

"We are proud to report record first quarter results," said CEO Brad Tilden. "These results are due to the efforts of employees at Alaska and Horizon who share a common sense of mission and a focus on low fares, operational reliability, and delivering a level of genuine and caring service that sets us apart. We see many of these same qualities in Virgin America, and we're very excited about our proposed combination. We are looking forward to the integration process and are confident that our team has what it takes to build the premier airline for people living on the West Coast."

The following table reconciles the company's reported GAAP net income and earnings per diluted share (Diluted EPS) during the first quarters of 2016 and 2015 to adjusted amounts:

Statistical data, as well as a reconciliation of the reported non-GAAP financial measures, can be found in the accompanying tables. A glossary of financial terms can be found on the last page of this release.

A conference call regarding the first quarter results will be simulcast via the Internet at 8:30 a.m. Pacific time on April 21, 2016. It can be accessed through the company's website at www.alaskaair.com/investors. For those unable to listen to the live broadcast, a replay will be available after the conclusion of the call.