Lavanya Sareen - Managing Director-Investor Relations Bradley D. Tilden - Chief Executive Officer and President Benito Minicucci - Chief Operating Officer and Executive Vice President, Operations, Alaska Airlines, Inc. Andrew R. Harrison - Executive Vice President and Chief Revenue Officer Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance Mark G. Eliasen - Treasurer & Vice President-Finance Joseph A. Sprague - Vice President-Marketing, Alaska Airlines, Inc.

Savanthi N. Syth - Raymond James & Associates, Inc. Julie A. Yates-Stewart - Credit Suisse Securities (USA) LLC (Broker) Hunter K. Keay - Wolfe Research LLC Joseph W. DeNardi - Stifel, Nicolaus & Co., Inc. Helane R. Becker - Cowen & Co. LLC Jamie N. Baker - JPMorgan Securities LLC Duane Pfennigwerth - Evercore ISI Darryl Genovesi - UBS Securities LLC David Fintzen - Barclays Capital, Inc. Michael J. Linenberg - Deutsche Bank Securities, Inc. Dan J. McKenzie - The Buckingham Research Group, Inc. Rajeev Lalwani - Morgan Stanley & Co. LLC

Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Alaska Air Group's Second Quarter 2015 Earnings Conference Call. Today's call is being recorded and will be accessible for future playback at www.alaskaair.com. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session for analysts. Thank you. I would now like to turn the call over to Alaska Air Group's Managing Director of Investor Relations, Lavanya Sareen.

Thanks, Stephanie. Good morning, everyone, and thank you for joining us for Alaska Air Group's second quarter 2015 earnings call. Our CEO, Brad Tilden; our CFO, Brandon Pedersen; Chief Commercial Officer, Andrew Harrison; and Chief Operating Officer, Ben Minicucci, will provide highlights from the second quarter and our outlook for the remainder of the year. Several members of our senior management team are also on hand to help answer your questions. Our comments today will include forward-looking statements regarding our future expectations, which may differ significantly from actual results. Information on risk factors that could affect our business can be found in our SEC filings. We will refer to certain non-GAAP financial measures, such as adjusted earnings and unit costs excluding fuel. We have provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in our earnings release. This morning, Alaska Air Group reported a record quarterly adjusted profit of $230 million or $1.76 per diluted share. This result compares to the First Call consensus of $1.73 per share and exceeds last year's adjusted net income of $157 million or $1.13 per diluted share. Additional information about cost expectations, capacity plans, fuel hedging, capital expenditures, and other items can be found in our investor update included in our Form 8-K filed this morning, and is available on our website at alaskaair.com, And now, I'll turn the call over to Brad.

Thanks, Lavanya. And good morning, everyone. As Lavanya mentioned, we reported a net profit of $230 million for the second quarter, which is 46% higher than 12 months ago. This is our 25th consecutive quarter of profitability and is the highest quarterly profit in our history. The 46% growth in our net profit coupled with the repurchase of 9.5 million shares over the last 12 months drove our earnings per share up by 56% to $1.76 per share. As we pause to take a look at how we're doing midyear and two-and-a-half years into the biggest competitive incursion we've seen in a while, I'm happy to share that we are thriving. Our operation is firing on all cylinders, our leaders are focused on execution, and we are generating returns that far exceed our cost of capital. But before I talk about the returns, I want to spend a few minutes on the underlying drivers of our results. I'll start with safety. Our number one priority is to operate safely. And we think that doing so benefits our overall operation because to be safe, we have to all understand our jobs and we have to have the tools and training to do them well. And this focus on doing things right has benefits that extend throughout our airline. Our commitment to operating safely was recently validated by our maintenance team, earning the FAA's AMT Diamond Award for maintenance training and excellence. This is the 14th consecutive Diamond Award for Alaska Airlines. Horizon Air has also won the award 14 times. Turning to our operation, we continued to operate well despite some headwinds. As you know, we're growing significantly to strengthen and fortify our franchise in Seattle. And we crossed the 1,000-flight-per-day threshold on July 2. The increased flying coupled with runway…

Thanks, Brad. And good morning, everyone. At Alaska, we know that a low-cost structure is fundamental to our long-term financial success. And we also believe that our success has been fueled by our rich history and culture of customer service that has been a cornerstone of our sustainability. This year, despite winning an eighth J.D. Power Award, we challenged ourselves to up our game in the area of customer service. We created what we call the Beyond Service workshop that all 8,000 customer-facing employees and their leadership teams will attend throughout 2015. This experience conducted over one-and-a-half days is being held in a really unique venue in South Seattle that's designed to celebrate our rich history and roots of customer service DNA, educate our employees on the competitive landscape, share the essence of our brand with them, and present our service framework built on safety, caring, delivery, and presentation. This framework is designed to engage, empower and align everyone at Air Group in an effort to create a consistent approach to service that results in exceptional customer experience. The workshop is very intimate, hands-on, and two-way dialogue facilitated primarily by frontline employees like flight attendants, customer service agents, and reservation agents. They review real-life examples on how to deliver exemplary service in various and sometimes challenging scenarios. The big takeaway learnings are empowerment, knowing when to make exceptions to policies, and enhancing the trust between management and frontline employees. This investment in our people will help us create additional separation from our competitors and confirm our place on the list of best-in-class service providers. We believe that Beyond Service, when combined with our operational excellence, creates a compelling proposition for our customers and strengthens our brand preference. And now, over to Andrew.

Thanks, Ben. And good morning, everybody. Our second quarter passenger revenue increased $57 million or 4.9% on 10.7% capacity growth. Our second quarter PRASM was down 5.3% as a result of the 13% increase in capacity in our markets. But notwithstanding this, our PRASM gap to the industry narrowed by 300 basis points to 2.1%. In fact, our June PRASM was 2.1% better than the industry despite our capacity growth of 7.2%. As you know, we are growing. And as we grow, we are focused on diversifying our revenue streams and growing our customer base. I want to take a few moments to provide you with some details under each of these areas. I'll start off with diversifying revenue streams. First, we launched 18 new markets since the beginning of Q2 of 2014. Almost 70% of these markets are profitable within their first year of operation. And additionally, half of these markets would be profitable if fuel were $3 a gallon. We expect all new markets to continue to improve as they mature. Secondly, we'll be relaunching 18 new markets in the second half of 2015. All of this growth is undergirded by tremendous customer loyalty, continued cost discipline, and matching the right aircraft to the right market. For example, we are very pleased to introduce new Embraer 175s to the fleet earlier this month. This will be a great airplane for us and allow us to serve long thin markets profitably. By late 2016, we'll have over 15 E175s in the network, all of which will be operated by our CPA partner, SkyWest. Third, we introduced a new revenue stream through the preferred seating this quarter and we are very encouraged to see the highest uptake was on actual shorter stage lengths, which have the highest passenger volumes. We…

Your first question comes from the line of Savi Syth with Raymond James. Your line is open. Savanthi N. Syth - Raymond James & Associates, Inc.: Hey, good morning. Just would like to talk a little bit more on the comments about the new market openings and the comment where you opened 18 over the last two or three years, and you're opening 18 in the second half this year. I was just wondering if that then bodes for greater pressure in unit revenues in the second half. And also, as you think about 2016, is this taking advantage of lower fuel this year and, moving forward, some of the markets you would have opened, or should we expect kind of similar new market additions in 2016?

Hi, Savi. This is Andrew. Savanthi N. Syth - Raymond James & Associates, Inc.: Hey, Andrew.

Just a small correction. The 18 new markets have all been started since the second quarter of 2014, and the additional 18 over the rest of this year. These are not in any way in response to current levels of fuel at all. In fact, if you look at the new markets, 45% of them are actually to destinations that have no year-round, nonstop service today. And as we've shared earlier on the call, these markets are all just expansion and diversification of our revenue streams. As it relates to unit revenue, I don't have the number off the top of my head, but what I will tell you is many of these are mid-continent and transcon longer-stage length markets that we launched.

And then, Savi, it's Brad. I was looking at these numbers a couple of days ago. Of those 18 markets, eight of them are markets you know about. It's Charleston, Raleigh, Nashville, Costa Rica, Milwaukee, Oklahoma City. And then there's a bunch in there like Boise-Reno, L.A.-Monterey, Eugene-San Jose, there's some smaller markets in there. So it's not 18 midcon or transcon routes that are being added, just to make sure you have the correct understanding of what's going on. Savanthi N. Syth - Raymond James & Associates, Inc.: That's helpful. Thank you. And then just a follow-up on another comment about the – being mindful about the third quarter and exposure to Hawaii. And I believe it was the last guy. Could you talk a little bit more about what you're seeing in those markets?

Yes, Savi. Just in general, if you look at – we've talked about our industry ASM, both in Hawaii and Alaska, and especially as we move into the peak summer period, we're seeing higher-than-average industry increases in ASMs in those markets. The good news, though, is we still run good load factors and given our outstanding network. I think we have a number of options, whether it's connecting passengers, management of peak flights to continue to improve the performance of these regions. Savanthi N. Syth - Raymond James & Associates, Inc.: Okay. That was helpful. Thanks.

Thanks, Savi.

Your next question comes from the line of Julie Yates with Credit Suisse. Your line is open. Julie A. Yates-Stewart - Credit Suisse Securities (USA) LLC (Broker): Good morning. Thanks for taking my question.

Good morning. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Good morning, Julie. Julie A. Yates-Stewart - Credit Suisse Securities (USA) LLC (Broker): I know it's still early, and you're still finalizing your plans for next year, but any preliminary indication on how you're thinking about capacity and growth opportunities next year, especially if fuel remain sub $60 a barrel?

Hi, Julie. It's Andrew. Thanks for the question. As I mentioned in my prepared remarks, we took a really good look at the fourth quarter and, as I shared, we took five lines of flying out and reallocated those. While we were doing that, we were also looking at our 2016 capacity. And what I can share at this preliminary time is that where we see things today, our growth next year will be lower than our growth this year, and somewhere in the high single-digits. That's all I can share right now. Julie A. Yates-Stewart - Credit Suisse Securities (USA) LLC (Broker): Okay. Very helpful. Thank you. And then another question, the rest of your peers saw a pretty dramatic change in the yield environment midway through Q2, and you guys obviously have less exposure in the most affected areas and are actually performing more in line with the A4A average than you have in the past for some time. So would you say you saw any material change in the yield environment in the quarter? Or is it more status quo for you guys with the exception of Hawaii? I'm just trying to think about that in the context of directionally how PRASM year-over-year changes in the second half of the year.

Yeah. I think as we – if I just look back over the last six months, our yield decline have been fairly consistent, give or take a point. Same with our loads. So we haven't really seen a huge underlying change in the pattern. The only real driver for us I think is as we either launch new markets or industry capacity changes a little bit, but the fundamentals of our business, we haven't seen any really shifting. Julie A. Yates-Stewart - Credit Suisse Securities (USA) LLC (Broker): Okay. And then any comment on just how we should think about PRASM change trending in the second half of the year as comps ease and competitive capacity growth slows?

We don't really provide any type of guidance like that. So I won't be commenting on that, but thanks for the question. Julie A. Yates-Stewart - Credit Suisse Securities (USA) LLC (Broker): Okay. Understood. Thank you.

Thanks, Julie.

Your next question comes from the line of Hunter Keay with Wolfe Research. Your line is open.

Good morning, guys.

Good morning, Hunter. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Hi, Hunter.

So, Brad, did you feel like Alaska has the best opportunity in the industry, at least among airlines that you feel like you're comparable to, so likely excluding some of the ULCCs. Would you say you have the best opportunity in the industry to sustain these margins or at least a level very close to these margins over the next two years to three years in the event that the fuel prices rise, given the huge pill you guys just swallowed from competitive capacity growth that was unique to you and given the line of sight that you have on your non-fuel costs?

Hunter, thanks for the question. I might not bite on the industry part of it. But what I would say is that we're feeling really, really good. These markets that we just launched in the Milwaukee and Oklahoma City, Portland, St. Louis, we're going to do Portland to Austin, they look like they're going to have fantastic returns. We're super excited about moving into Raleigh and Charleston and Nashville, Costa Rica, there's a lot of excitement. When we look at things, and we're sort of following all of the concern about PRASM and all that, when we look at this, we're deploying capacity that's producing great results, great profits for our business. So we're excited about doing that. And I don't know. As I look at us against the industry, what I would say is that we do have great operational performance. We've got a very good competitive position with respect to our cost structure, which gives us the ability to offer low fares. And you hear us talking a little bit more about service. The reason this company is still here today and independent is because we give our customers great service and we're trying to let our employees know that we know that, and we value them, and we value what they're doing for our customers. So without saying too much about the other guys, what I would say is we feel very good about the growth that Alaska's putting into the marketplace and it's great in this environment that we're sort of expanding our capital base and are expanding our revenue base and doing that in a way that's helping the owners of the business.

Okay, Brad. Thanks. And...

Yeah.

Brandon, a 5% – the cash deployment obviously is great, on many levels, on an absolute level. A 5% capital deployment yield is not that compelling with record margins and peak margins, if you want to call it that. So, I guess, can you help me understand the value proposition of continuing to buy planes with cash? I mean, I think you said you had, what, 80 of them already you own free and clear. So with interest rates at these levels, again, with the caveat that the buyback is already very robust, why aren't you borrowing more money and buying back more stock at this point? Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Hi, Hunter.

Hi. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: That fits squarely into the what have you done for me lately category. I actually don't feel bad about where our balance sheet is. We have kind of a fortress balance sheet going right now. We're proud of the fact that we've been able to finance all our CapEx with operating cash flow and that there's still a whole bunch of money left over for us to return to our shareholders. We've always said that we would use that to manage the capital structure and we originally thought we would probably do that in 2015. But cash flow has been really strong, and so I think that we'll probably end up not doing that in 2015, but perhaps early in 2016. But that doesn't mean that we're not really focused on making sure that our capital structure sits in the right place and that we're doing the right things for our owners in terms of capital return.

All right, Brandon. Thank you a lot.

Thanks, Hunter.

Your next question comes from the line of Joseph DeNardi with Stifel. Your line is open. Joseph W. DeNardi - Stifel, Nicolaus & Co., Inc.: Hey. Thanks. Good morning.

Morning. Joseph W. DeNardi - Stifel, Nicolaus & Co., Inc.: Brad, I think on the last call you talked about kind of maybe revisiting the fourth quarter capacity outlook, and sounds like Andrew did that to some extent and redeployed some of that capacity. So, I guess, why was that decision made? And what makes you feel comfortable that kind of coming in at the higher end of the guidance is the right way to do it?

Yeah. Thanks, Joe. Yeah. So let's just talk about that a little bit more. I think what we would say is that we totally agree with the sort of the premise of your question, which is that understanding the natural demand and getting the capacity right is the best thing you can do to sort of ensure that you have profitable returns on your investment. So we went through our fourth quarter schedule, and we did day of week cuts, we did time of day cuts, and we actually produced five – we reduced our flying by five airplanes, which on a base of 140 is a lot. And then the question is what – and that will help all of the returns and all of those, whatever, 250 city pairs or whatever it is. And then we took those five airplanes and said what's the best thing to do with them. Is the best thing to park them and sort of let them sit idle or is the best thing to deploy them in new markets where we can deploy them and produce returns that exceed our cost of capital. So, I guess, what we're saying, Joe, is we do agree with the premise of the question, and I think you're going to see some of the economic benefit come through with that, but we did redeploy the airplanes. Having said all of that, I will also tell you that as we think about our 2016 growth, our mindset has moved a little bit in the last couple of months. As we look at everything that we're looking at, we were thinking of something a little more robust a couple of months ago and we're actually bringing that number down. We haven't actually shared that number with the Street yet, but our mindset has come down by two percentage points or three percentage points from where it would have been, let's just say 60 days ago or something like that. Joseph W. DeNardi - Stifel, Nicolaus & Co., Inc.: Okay. That's helpful. I guess, kind of following onto that, I mean, should we assume that if your ROIC continues to exceed your cost of capital the way it is, that you're going to exercise all of your CapEx options and that number's going to continue to go up and your capacity run-rate is going to be higher than the historical average?

Yeah. I think – I'm not sure – I might need to think about your question a little bit more. But I do think that we are going to try to do the right thing. I think the company has been a leader in this area. We're going to do the right thing for the owners of this business. If the right thing is to take new capital and deploy it in places that we've got a tremendous economic engine here and it's sort of rooted in Seattle. If the right place is to grow Seattle and invest in Seattle, I think you will see us do that. But we will also – I don't know, as I just said in my earlier response, we do understand that getting capacity right is a big part of having the right returns on an investment and we will – I think this company has been quite good at that and I think you should expect us to continue to be focused on it. Joseph W. DeNardi - Stifel, Nicolaus & Co., Inc.: Okay. And then if I could just slip in a last one for Andrew. American getting to a single res system later this year, can you quantify what benefit you might realize from that based on some discussions you're having with them about new opportunities once they get that?

Yeah, Joe. Actually, I'm going to provide more information later on through the quarter on this. What I will tell you is, to your point, a single res system opens up significant ability for our customers to have a massively expanded network from which to accrue and redeem miles on. We continue to see double-digit growth in our relationship with sharing passengers with American. And again, as this unfolds and we get better visibility, we'll definitely share more with you on this topic. Joseph W. DeNardi - Stifel, Nicolaus & Co., Inc.: Okay. Thank you.

Thanks, Joe.

Your next question comes from the line of Helane Becker with Cowen. Your line is open. Helane R. Becker - Cowen & Co. LLC: Thanks, operator. Hi, everybody. Thanks for the time. I have two questions – or three questions. One is, Seattle I think is one of the fastest growing cities in the country, and maybe the fastest. And as you think about all these passengers who are traveling through your airport, what type of investment should we think about that you have to make in airport infrastructure to handle the growth?

Helane, it's Ben. It's a great question, Helane. I'm going to say about a year ago, we did see some issues processing passengers. I'll tell you what we did, at the ticket counter area, we almost doubled our size in taking more ticket counter space. So where it was very congested, now it flows fairly easily. I can tell you on the gates, we optimized how we use our gate to get quicker turns on our gates to make sure we could deal with increased capacity. We're also using gates across the whole airport, so from the south end to the north end. And third, we're investing in technology. I think we're working on technology where customers can quickly get into the gate – get from the curb to the gate in under 60 minutes. And I think that's one thing there. And then the biggest one is an investment in our North Satellite which is about a $400 million investment that will add approximately eight gates over the next two years to four years. Helane R. Becker - Cowen & Co. LLC: You said curb to gate in less than 60 minutes. Isn't that a long time, though?

Well. Sorry. One of the things we were looking at was how you drop your bags. So, for example, if you show up at the curb, you can get through the ticket counter in under 60 seconds. Thank you for correcting me. (39:10) Helane R. Becker - Cowen & Co. LLC: Yeah, all right. I was prepared to be scared. And then I think, Brad, you said there was a board meeting coming up this summer. Is that when we would hear you think about reauthorizing or increasing the share repurchase program? I mean, we think you only have about $120 million left, based on your information today. So why wouldn't you have increased it?

That would be a good time for us to talk with the board about a question like that. In the board meetings in early August, 3rd, 4th, 5th of August, something like that. Helane R. Becker - Cowen & Co. LLC: Okay. Great. All right. Well, thanks. Those were all my questions.

Thanks, Helane.

Thanks, Helane.

Your next question comes from the line of Jamie Baker with JPMorgan. Your line is open.

Hey, good morning, team. Sort of continuing on that last point, I don't want to take anything away from your second quarter. You were absolutely correct to point out the strength in margins, the degree to which ROIC exceeded that of last year, best quarter in the your history, and so forth. No argument. No pushback on any of that. But what is lacking in the release today is how these results might be impacting your behavior going forward. I mean, ordinarily, I also would have expected perhaps an upward revision to your ROIC target or maybe another added layer to the buyback or a boosted dividend. And I don't want to read too much into this, but why the conservatism in light of such strong results? Is it merely that you just haven't met with the board yet? Or are you keeping your powder deliberately dry for something else? And, of course, that will lead us to speculate on what that might be. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Jamie, it's Brandon. Maybe I'll take that and Brad can clean up the mess that I make. I don't think you should read anything into our lack of a big bang of any sort. We're really proud of our second quarter results. We think we're doing the right thing for the business not just in the short-term and the long term. And you know Alaska, we have sort of a methodical way of doing things. We think about longer term, things like the longer-term track record of dividend increases that we want to show you years from now. We think about the timing of board meetings for authorization of share repurchase program. But I don't think you should necessarily read anything into the fact that we had a great quarter, but we didn't take some big bold action. I think those things will come with time and we'll continue our track record of doing the right things for our customers and our owners and our shareholders.

And Jamie, just to put a little bit of punch on that. I think in time you will see a new – and I shouldn't speak for the board, but you know our history with share repurchases, and I think it would be totally appropriate to assume that that continues. We do want to increase the dividend regularly. I think you should expect to see that occur. And we have been talking about this ROIC goal, and what – we've been talking about that a little bit in the last few days, I think as we sort of put the finishing touches on our 2016 plan, that might be a time for us to come out with some new thinking on that. But I'll tell you that we sort of do – we have done a lot of looking not just at airlines but at high-quality industrial companies. And we're sort of getting ourselves schooled up on what are they generally earning in terms of returns – in terms of what's the gap in terms of ROICs above their cost of capital and getting ourselves smarter about that. And I think you'll see something from us there as well.

It's a high-grade analysis to be conducting, I'm sure. Okay. Thanks very much for that color. That was excellent. I appreciate it.

Yeah. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Thanks, Jamie.

Your next question comes from the line of Duane Pfennigwerth with Evercore ISI. Your line is open.

Hey. Thanks.

Hi, Duane. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Good morning, Duane.

Just following up to Helane's question a little bit on Seattle and the capacity utilization of that airport today. As it relates to Alaska and also competitors that are trying to grow there, can you talk about how much excess capacity there is in that airport at sort of peak times of the day?

No – Duane, it's Ben. Peak times of the day, there is no capacity. I can tell you that. There are capacity in the shoulders and as we talked to the port here, long term in the next two years to five years, six years when these capital projects get built for bigger gates, there are going to be constraints even at the peak time of day. So peak time of days this airport is full, unless you do some other type of thing. But I would say that that's the quick answer. We're full at the peak, there's some capacity in the shoulders.

Thanks for that. And then, Brandon, just a quick one for you. How do you expect us to believe your cost guidance for the third quarter? Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Duane, I expect you to believe our cost guidance because that's what we've put in our investor update, and we try our best to forecast our costs for the quarter and for the year. And what I will tell you is things come earlier sometimes than we expect, and things come later sometimes than we expect. And our costs – we adjust our cost guidance through the quarter. And as you saw this quarter, our actual cost result was right in the range of our last investor update.

Okay. Thanks very much.

Thanks, Duane. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Thanks, Duane.

Your next question comes from the line of Darryl Genovesi with UBS. Your line is open.

Hi, guys. Thanks for taking the question.

Hi, Darryl.

Brandon, I was going to ask you about the CASM guidance for the third quarter as well. I think Duane kind of took care of it. But, I mean, just thinking about how the guidance has changed for the full year relative to the guidance that you provided us with Q1 results back in April, I heard the list of items that you kind of rattled off. It seem to me that maybe the maintenance credit was perhaps the only one that you wouldn't have seen coming. So just wondering with the level of – with the magnitude of the beat and the Q2 cost trajectory, why wouldn't the full year move? Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Darryl, it's Brandon. Thanks for the questions. Just to give you a little bit of context, there was a big maintenance credit in the quarter and that was worth about 2% of the 3.5% reduction in unit costs and then just good cost performance in the last month and just normal closing stuff was about the other 1.5% of that. Our actual cost result was at the low end of the range that we provided. So we were within the range. You're right. In my prepared remarks, I did try to give context to the Q3 increase in cost. And what I will say is there's things that – as I said to Duane, there are things that result and just timing things landing in one quarter or another, and in this quarter we've got things that make a really hard comp and so we're up 5.5%. Notwithstanding that, we still think that we're down 0.5% for the year. Your question might be how come we're not leveraging more of that cost savings in Q2 into the back half. It's an excellent question. We would like to do more. We're super focused on cost reductions, but there are some things like incentive pay that is higher than we expect, property taxes that were much higher than we expected, and continued investments into the on-board product that's going to eat up some of that goodness that we saw in the second quarter.

Okay. Thanks for that. And then I also just want to ask you quickly on the fuel efficiency of the fleet. I think you said it's up 2.6%, 2.6% better over the course of the last two quarters. I think you were kind of 2.5% better on average in 2014 compared to 2013 as well. Should we essentially assume that you're on kind of a 200 basis points, 250 basis points a year sort of improvement trajectory until you're done retiring all the classics? Mark G. Eliasen - Treasurer & Vice President-Finance: Hey, Daryl. It's Mark Eliasen. I'll just say that we're focused on fuel efficiency in all aspects of our business. We do think that getting the classics out of there, as you know we have 27 of them, they burn the same amount of fuel as a 900ER, yet carry 25% fewer passengers. So as we get those 27 out of the fleet over the next year-and-a half, that will improve our fuel efficiency. I can't give you the exact number as far as how many bps that will improve it. But that, along with many other things we're doing, you should see our fuel efficiency continue to rise.

Right.

Yeah. We could run those numbers, but there's a bunch of retirements. What is it, Mark? 27 737-400 retirements in 2016 and 2017? Mark G. Eliasen - Treasurer & Vice President-Finance: Yeah. In the next year-and-a-half.

It should pop pretty substantially when that occurs. Mark G. Eliasen - Treasurer & Vice President-Finance: Yeah. And our winglet program, we're putting winglets – the split winglets on our NG fleet, so that will help as well. And then, of course, when we get the MAX in 2017, that's going to be another improvement. So we see continued fuel efficiency improvements throughout as long as we can see.

Great. Thanks very much, guys.

Yeah. Mark G. Eliasen - Treasurer & Vice President-Finance: Thank you.

Your next question comes from the line of David Fintzen from Barclays. Your line is open.

Hey, good morning, everyone. First question really for Andrew. If my memory serves, going back to the Investor Day, you had started to talk about kind of filling out the Seattle markets that you hadn't touched historically. Obviously, you've been doing that this year. Can you just help us think through 2016? I mean, are you largely through that process, or are there sort of another wave of markets that you think could keep you busy in Seattle and maybe then into Portland for a while?

Yeah. Good morning. I think while we don't talk about future markets, I have shared in my prepared remarks, we've got the Embraer 175 coming on-board, which – this aircraft actually allows us to unlock cities that we really can't fly on the Q4s and the mainline jets profitably. So I think you're going to continue to see us continue to work those types of markets. And as such as new markets, I didn't get a chance to mention but like, as Brad mentioned on competition, just looking at the second quarter, about 8.5% of our capacity was driven by first-class ASM. But our revenues contribution by that was over 14%. And so we continue to look at our cabins and our classes of service. And I still believe there's big opportunity to continue to invest in our product in the first class and increase that. But overall, in the Pacific Northwest, as we continue to manage our costs, as we continue to look at our network and grow our network and grow our connections as well as our international connections, we continue to see opportunity to grow in the Pacific Northwest.

Okay. That's helpful. And just to sort of mix a little bit of what you said in terms of improve the product with some of the cost comments, I mean, should we think of that product improvement as sort of when we get a sustained beat in a quarter, not to get too carried away with it over – for some period? Because it will just accelerate some of those investments in on-board product? I mean, is that the way we should translate that comment into cost going forward?

No. I don't think so. I think when you look at, like Brandon shared, around like for instance, food and beverage. But as traditional here, when we launch new products, we have a lot of process, boarded to consumed ratios of foods. We have a lot of opportunity, even though we're adding cost to our aircraft through investments on on-board products to actually continue to get more efficient and productivity. And I think Ben's become – and his team have become just amazing folks of getting capacity out of our core operations. And so, as we invest in our product, we're going to get better about getting efficiency and productivity out of that as well. So, personally, I think you shouldn't expect to see that continued cost increase overall. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Hey, David, it's Brandon. One other thought there. We talk a lot about the drivers of the cost increases and we get into things like food and beverage. A lot of our on-board product is buy-on-board and we're seeing nice growth in buy-on-board sales. The customers really – there is a good uptake of that product and that's pretty small in the context of the revenue line, but it is an offset to the cost that we talk about down below.

Okay. That's helpful. Appreciate all that color. Thanks. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Okay. Thank you.

Your next question comes from the line of Richard Salazaar with Deutsche Bank. Your line is open.

Hey, it's Mike Linenberg. If I could just jump in, in front of Rich, if that's okay. Good morning, everyone. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Hey, Mike.

Good morning.

Two questions here. Andrew, if I could just go back to what you had mentioned earlier about the connection with Emirates. You said that previously it was 200 passengers a day between you and them, and that with the second flight that that had moved to 270 passengers. How much of that is stimulative or is that just all shift – share shift?

I don't know the exact answer to that question. But what I'll tell you is that and you even take out Hainan, for instance, where the marketing machine has been set on idle and has done nothing, we're already seeing significant increases in connecting traffic there. And we haven't even begun to market this new relationship. So I can't speak to where it's coming, where it's going as far as stimulation or share shift. All I know is that there is good demand for these connections and we're going to continue to grow.

And when you mentioned the marketing machine on idle, that's because, as I recall correctly, I don't think you have a codeshare with Emirates. Is that right, or do you have one?

So I think with the Hainan, but even as we think about our international partners and we talk about how we can market better together in the marketplace, we just – we have not done a good job at leveraging our international carriers and working together to become more of a joint force in the marketplace, and you're going to see more of that. And I think there's going to be good things in store.

Okay. Just to be clear, you don't have a codeshare with them, with Emirates, that's right?

Correct.

Okay. And then just secondly, on some of these new markets out of Los Angeles, like Costa Rica, I think Baltimore is another one. Correct me if I'm wrong on that, but they have lower yield. Are these markets going to receive the support of American marketing from day one? Or are you going to have the American codeshare on them or is that a longer-term opportunity?

You know what, I can't really comment on future code and no code. But I think what a fair statement of facts are is that both American and Alaska are very excited about our partnership. We are working together where we can, and Los Angeles is a natural partnership ground for us there. And I think as we launch any new market, we think about our customer base, our alliances and partnerships and how can we work together.

Okay, great. And so they're already being marketed though, right? You've already loaded the flights to Costa Rica and Baltimore?

Correct.

Okay. Okay, great. Okay. Very good. Thank you.

Thanks, Mike.

Your next question comes from the line of Daniel McKenzie with Buckingham Research. Your line is open.

Hey, good morning, guys. Thanks for the time here. A couple questions. Where is the analysis leading you on a more expanded preferred seating product? So call it five or six rows with more legroom versus what's offered today. How are you balancing the pros and cons of that investment with what your codeshare partners are already doing?

Dan, as Brad alluded in his prepared remarks, we're finding some very interesting results just with our preferred seating and the behaviors. And as we've mentioned before, we continue to look at our on-board product in maximizing revenue for each shift that we fly and looking at the loyalty program. So all I can say is that we continue to look at how this plays out for us. And we don't have anything to report other than that.

Okay. Very good. And, I guess, just following up on Mike's question, there's obviously a lot of moving pieces with respect to revenue from codeshare partners. But where are we today exactly? So what is the total revenue from codeshare partners, and does that reflect a decline or an increase from a year ago? And how do we think about that revenue – that piece of the revenue puzzle looking ahead?

I mean, I think – I mean, if you just look at Q2, really big picture including interline, codes, partners, everybody, I think it's about 15% comes from those other carriers. And as we've shared previously income buckets, Delta is down over 40% in the second quarter, but we also have good increases on our own metal and our partner's metal. So it's shifting around. But overall, it's still fairly stable as the big picture pie goes, as it relates to connectivity.

Good job, Andrew. If I can just squeeze one final one here. Bill Gates had a nice interview this quarter on biofuels. And if you believe him, probably will be a huge payday some day. You guys are one of the first to stick your toes in the water here years ago. And I realize the investment is tiny and notwithstanding where oil is today, is this something you guys are still pursuing? And if so, when could the investment realistically drive some kind of a return?

Hey, Dan. This is Joe Sprague. Biofuels is absolutely something we're still interested in. In fact, we're hoping to do yet another demonstration flight later this year with a new type of biofuels. As you pointed out, we were the first airline in the country to fly a series of biofuels flights when we did so a couple of years ago. Notwithstanding the lower fuel prices today, we do believe that this is an important part of our fuel supply going forward, both for fuel efficiency, fuel cost reasons, but also just for really positive environmental reasons. And, in fact, that the airline industry is going to have some sort of standard that they're going to have to adhere to coming down from ICAO in the years ahead, and we think biofuels is going to have to be a part of that solution. So our intent is to absolutely continue to be a leader in this area. A challenge is the lack of production facilities for biofuels, and that's starting to be addressed a little bit around the country. But we're tracking that very closely and working with our good partners at Boeing and elsewhere to make certain that we are in a position that we can optimize that when more fuel supply comes online.

Very good. Thanks, guys.

Thanks, Dan.

Thank you.

We have time for one more question.

Your next question comes from the line of Rajeev Lalwani with Morgan Stanley. Your line is open. Rajeev Lalwani - Morgan Stanley & Co. LLC: Hi. Thanks for squeezing me in here.

Hi, Rajeev. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Hi, Rajeev. Rajeev Lalwani - Morgan Stanley & Co. LLC: Just a question on the cost side. I get there is a fair amount of moving parts this year, but can you just talk going forward maybe what some of the biggest risks are for you in terms of continuing to keep CASMex at sort of a flat to down level? Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Rajeev, good morning. It's Brandon. Thinking into the future, we said a couple of times tonight or this morning that our bias is to continue to work toward driving costs down to make us look more like a low cost carrier and expand the gap that we have over the legacy carriers. In terms of risk, you never know. One thing we do have is nice visibility to our labor costs over the next few years. I think we've talked about the increase in fuel or the increase in our fuel competitiveness, but as we think about fuel CASM coming down. Other than that, it's all about investments that we have and we choose to make. Who knows what's going to happen to pension. That's always one that seems to come out and bite us somehow. But I don't know. It's a good question. I don't have anything specific to offer in terms of risks, because I think we do have pretty good visibility over the next couple of years. Rajeev Lalwani - Morgan Stanley & Co. LLC: Great. That was it, gentlemen. Brandon S. Pedersen - Chief Financial Officer & Executive Vice President, Finance: Thanks.

Thank you.

Okay, everybody. I think we are at the end of the hour, and I'm guessing that there's another call starting now. Thanks for tuning in, and we look forward to speaking with you next quarter.

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