Good morning, my name is Sia (ph), and I will be the conference Operator today. At this time, I would like to welcome everyone to the Alaska Air Group 2021 Third Quarter Earnings Release Conference Call. Today's call is being recorded, and will be accessible for future playback at alaskaair.com. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session for analysts. [Operator Instructions]. Thank you. I will now turn the call over to Alaska Air Group's Managing Director of Investor Relations, Emily Halverson. Please go ahead.

Thank you, Sia (ph) and good morning. Thanks for joining us for our third quarter 2021 Earnings calls. This morning, we issued our earnings release, which is available at investor. alaskaair.com. On today's call, you will hear updates from Ben, Andrew, and Shane. Several others of our management team are also on the line to answer your questions during the Q and A portion of our call. This morning, Air Group reported third quarter GAAP net income of $194 million. Excluding special items and mark-to-market fuel hedge adjustments, Air Group recorded adjusted net income of $187 million. Pre -tax margins were 12%, a 15 point improvement from the prior quarter. This marks our first profitable quarter on an adjusted basis since the pandemic began. As a reminder, our comments today will include forward-looking statements about future performance, which may differ materially from our actual results. Information on risk factors that could affect our business can be found in our SEC filings. We will also refer to certain non-GAAP financial measures, such as adjusted earnings and unit costs, excluding fuel. And as usual, we have provided a reconciliation between the most directly comparable GAAP and non-GAAP measures in today's earnings release. Ben, over to you.

Thanks, Emily. And good morning, everyone. Air Group's 187 million adjusted net income marks an inflection point on our path to recovery. During our last earnings call, we forecasted a double-digit third quarter pre -tax margin. And despite the impact of the delta COVID variant, we delivered. A 12% pretax margin solidly lead the industry and was just 6 points shy of our Q3 2019 margin. I'm proud of how our Company is emerging strong from the pandemic, and I'm looking forward to when the recovery is stable and less likely to undergo demand shocks due to variance. Our approach from the beginning has been deliberate, scaling your business back in a measured way, leveraging our strong Balance Sheet, and running our operations to produce consistent industry-leading financial performance. No matter what the external circumstances. Our third quarter results reflect the strength of the summer season, with pent-up leisure demand bringing passengers back to the skies. For 4th of July and Labor Day passenger and planes approached 2019 levels. Even with the dampening impact that the Delta variant had on demand in August and beyond, our third quarter load factor came in at 80% and total revenue was down just 18% on a year over 2 basis, a 15 point improvement sequentially from the second quarter. Our unit costs were up 9% in the third quarter, beating the better end of our guidance range. The solid cost execution reflects incremental progress towards our productivity goals as passengers per FTE increased 6% sequentially, falling just 12 points below 2019 levels for the quarter. Shane will provide more detail about our cost performance, and pressures we're seeing in a few cost categories. Looking forward, our longer term thinking about our approach at recovery remains intact. Despite the transient choppiness we're experiencing from…

Thanks Ben, and good morning everyone. Our comments today will focus on third quarter performance, recent demand trends, progress with our alliances, and revenue guidance for the fourth quarter. Our third quarter revenues came in at $1.9 billion, down 18% versus 2019. This was on flown capacity that was also down approximately 18%, resulting in near flat unit revenues. We were very happy with this result, especially the impact of the Delta variant started showing up in a meaningful way at the end of July. Our revenue performance reflects a 15 point sequential improvement from last quarter, while capacity was just 3.5 points, higher, flow factor sequentially increased 3 points to 80%, but the bigger revenue driver was strong sequential yields, which improved 13 points from last quarter to up 4% versus 2019. On a monthly basis, loads were strongest in July at approximately 88% then deteriorated to 81% in August, and bottomed at 72% in September. In the same timeframe, yield deteriorated about 5 points from up 3.6% in July to down 1.5% in September, both on a year over 2 basis. These negative trends were all driven by the emergence of the Delta variant. Geographically, Hawaii represents 16% of our capacity, and was our weakest performing region during the quarter given the travel advisories for the state, which damaged demand for Hawaii. In fact, the impact to our system results was to reduce RASM by 2.5 points. Considering the headwinds in Hawaii, along with the broader impact of the Delta variant, I would characterize our Q3 revenue performance as strong. Our commercial team did a fantastic job managing revenue in a volatile demand environment. As I'll expand on momentarily, the consequences from the Delta variant have not yet dissipated, and we're still working to build back Q4 bookings…

Thank you, Andrew, and good morning, everyone. As we highlighted today, another quarter of sequential improvement and strong margins underscore the durability of Alaska's business model. Underlying our industry-leading results were July and August performance that came within about 2 points of 2019 margin levels. I'm impressed by our team's execution and the results they delivered in such an unpredictable environment. In my commentary today, I'll provide insights on these results our cash -flows and liquidity, cost performance, and our expectations going forward. I'll begin with cash -flows and liquidity. We ended the quarter with $3.6 billion in total liquidity, inclusive of on-hand cash and undrawn lines of credit. This is down from $4.4 billion of total liquidity in June, as we paid down nearly $550 million in debt and made $100 million voluntary pension contribution. Debt repayment included retiring our $425 million 364 day loan, and our pension contribution brings our funded status to 94%, and also allowed us to capture a one time permanent tax benefit of $14 million. Q3 cash flows from operations were essentially break-even, excluding pension funding. The sequential decline from Q2 to Q3 was expected due to the absence of PFP grant inflows this quarter, and the normal seasonal draw down of ATL. However, as Andrew described in his commentary, the Delta variant stalled otherwise strong demand recovery in the quarter, and as a result, the ATL draw down was higher than originally forecast. Fourth quarter cash flows from operations are expected to be between negative $100 million and $0 exclusive of tax refunds and payments, which we expect to net to a positive $100 million in the quarter, depending on when we receive our anticipated 2020 tax refund. This forecast factors in the reduced cash intakes due to the impact on bookings of…

At this time I would like to invite analysts who would like to ask a question to [Operator Instructions]. We'll pause for just a moment to compile the Q&A roster. And the first question will come from Savi Syth with Raymond James. Please go ahead.

Hi, good morning, everyone. As you talk about rebuilding the network here, I was just curious there are big airports; Seattle, Portland, San Francisco, and LA as you build those back. This is a mission the way -- the strategy behind those airports, how you operate them, change post-crisis versus before?

Hi Savi. Good morning, this is Andrew. I wouldn't say it's changed, but we have actually made some refinements and tweaks. Obviously, Seattle, we serve everywhere from there and Portland to a lesser extent. I think some of the pivots you've seen us make and given the contours is especially Los Angeles, you're going to see a little more leisure flying for us out of there, we do very, very well. And on I think in San Francisco, we built out a pretty good network and I think what you're going to see us style and more focused on is the largest OND out of there, making sure we drove the top 20, 25 business markets. And so that's sort of where we're landing on all of this.

Got it. And then, just Andrew, maybe if I could follow up on that a little bit more on the other focus cities that you've tried to build in the past or kind of working so we think about kind of San Diego, Salt Lake City, Boise. How do those fit in within the network and any kind of learnings in the past, trying to build those out?

Yeah, we've -- especially on the secondary cities, but we've done a lot of Pacific Northwest to California. We used to flow that traffic over our major hubs and just given the demand and the loyalty strength in the evolution of those markets, we're finding non-stop service to be very good there. I think San Jose is part of the Bay Area and San Diego for us, it's all about loyalty as well and making sure we've got utility for all of our guests. So while we focus mainly on the Seattle, Portland, San Francisco, and Los Angeles, the Boise's and the secondary cities will always be very, very important to us and we're going to continue to grow those over time.

Makes sense. And just one last clarification, where is business demand these days?

Business demand is coming back. In fact, we've had the best day, best week I should say recently versus the previous one in the pandemic, which was just before summer. So what we're seeing is an increased steady forward momentum of business demand starting to return.

Okay. Got it. Thank you.

Thanks, Savi.

The next question will come from Andrew Didora with Bank of America. Please go ahead.

Hi. Good morning, everyone. Thanks for the questions. I have a question for Andrew. I know industry capacity plans are pretty fluid here, but you've benefited from below average competitive capacity growth through much of the pandemic and I know this has been helping all the yield performance that you talked about earlier. But we do see some of this capacity picking up, particularly into 1Q based on schedules. Can you maybe talk about what you're seeing in the competitive environment and how you see it unfolding over the next quarter or two?

We look at the West Coast, Andrew, and we've looked at how the competitive environment goes. I think a little bit the West Coast is being honestly subjected to weaker demand and risk [Indiscernible] rest of the country. So even though you may see that competitive capacity is not as high vis -a - vis others, I do think when you think about California specifically, demand h as being stopped there. But at the end of the day, we feel really good about our network mix and how it's structured and we feel really good. As you can see by the third quarter that our network is configured for good performance.

Shane and maybe Ben, I mean, Shane, you mentioned in your prepared remarks and I think you're the first airline to say this is that you were looking forward to shareholder returns this time next year? Your Balance Sheet can certainly handle it, but I guess Shane or Ben, when you're allowed, when you think about your capital return policy, do you think it will be as high up on your priority list as it was pre -pandemic? And the way you think about it now, do you think it'll be a little bit more focused on sort of a buyback or a dividend once you're allowed to? And thanks for the questions.

Andrew, I think our thinking here is that we want to put ourselves into a position to be able to do shareholder returns. We're not committing to any particular timeframe today to do that. We'll obviously get together with our Board and make decisions about what the best avenue is and at what levels. But I don't think a lot about our capital deployment and capital allocation philosophy has changed. We do have to understand what our go-forward environment with COVID looks like and how stable demand and returns are. But I think our philosophy that we had going into that the pandemic is going to be very consistent with the one we have coming out in terms of shareholder distribution returns. I will say that our first priority is making sure we have a stable business, enough liquidity on hand to manage the ups and downs and to grow the airline. But shareholder returns are also super important to us.

Thank you.

The next question will come from Jamie Baker with JPMorgan. Please go ahead.

Hey, good morning, everybody. So you echoed what other airlines have said this season about premium demand. To the extent that this phenomenon is permanent and growing, do you need to do anything differently to continue capitalizing on it or are you optimized for this mix demand leg up, however you want to describe it?

Hi, Jamie. Our cabins, I believe, are very well configured with first-class and premium class, so I don't foresee any product changes, but to your point, we are going to definitely -- especially with business demand and our ability to play a much larger place there, is our booking curves and how many seats we hold out and when. I think historically we've probably denied business traffic, that cabin historically, and I think we're going to get more fine-tuned on that. I think that would be the largest change. And then the other part of that, too, is just making sure that our network -- we're going to be a little bit more disciplined about timing our flights for that business demand. I see just increased demand coming for that premium cabin going forward.

Okay. That's helpful. And second, and I apologize for pivoting to the model. Did you say the Delta variant saps fourth quarter revenue by 200 million. Was that right?

That's correct.

Okay. It's on the tape that it was 400 million, so I just wanted to make sure I wasn't wrong. So even if we allow for some variable costs associated with that, if we were to just tack that 200 million to today's guide, it implies that you'd be back in the double digit pre -tax margin territory in the fourth quarter, and I know that's where the fourth quarter plan was in July because you said so, but that was on cheaper fuels. So I guess my question is whether, well 1, is there anything wrong with my math

hopefully not. But if not, it feels like your ex-Delta fourth quarter plan actually strengthened over the summer despite the rise in fuel. Is that a fair, albeit mangled interpretation?

Hey Jamie, it's -- the one thing you can never do is go backwards and redo things over again and know what it turns out if there wasn't a variant. But I think what we had going for us were very, very strong load factor builds. We were above at -- this call in July, we were sitting on load factor builds that were above 2019 levels at almost every forward month and on yields that were above 2019 levels in every single month. And so yeah, I think we were feeling quite optimistic, if that demand pattern played out and wasn't interrupted, then we could've had a really strong fourth quarter. Hard to exactly know if strengthened over between that and now is the right way to think about it. But yeah, it would've been a strong quarter, for sure.

I think, Jamie

Yes. Sorry. Go ahead.

I think this is, and we said in our prepared statements, I think this is why we're confident about our business model. I think it's a business model that when recovery comes back that we're going to produce returns and I think it just goes down to score that. But, go ahead, I think you had a follow-up?

Yes. And that's certainly my modeling interpretation, as well. Just a real quick labor clarification, do I recall correctly that you are the only airline of size in the U.S. that still doesn't have a preferential bidding system? Is that right?

We don't with our pilot group, we do with our flight attendant group. That is true, Jamie.

Okay. Just checking. Thank you.

Thanks, Jamie.

The next question will come from Ravi Shanker with Morgan Stanley Please go ahead.

Thanks. Morning all. If I can just follow up on the last two questions. Are you guys surprised at all that the mix is so strong coming out of the pandemic? Again is that something that you had expected given the people's preference to travel and then the front of the plan e given everything that's going on or is that a surprise? And second, on the competitive side, just given the concentration of travel are you surprised at all that the industry has pulled back on traveling to certain lanes and it's not a free-for-all out there?

Hey, Ravi. I can't speak for the rest of the industry, but I can speak to -- for Alaska is knowing business demand was where it was, we materially reduced space in the front of the cabin. Our first-class fares were coming down, but they will weigh made up plus much on the volume side. So I feel the team did an outstanding job at lowering phase and driving net incremental value through volume. And so that's part of what we're going to have to measure going forward, but let's be clear, Who doesn't want to travel in first or premium class? I mean, I don't believe there's anybody. So it's a matter of what price and volume. So there's demand, that's the first place people want to sit. And so we've been working well there. I think on the industry capacity again, I don't know if you all look at the network and the system. We look at the West Coast. And as I look across the West Coast, you see a lot of adjustments by other carriers coming down closer in. And I think one of the things that I'm particularly proud of, especially with our operations folks and Ben's leadership here is that we have not been volatile; adding back, reducing, adding back, reducing capacity. We've been on a steady path that's allowed for really good cost control, really good selling and inventory and minimal guest disruption. So I feel like all of that has been working for us.

If I can just --

Go ahead. Go ahead.

No, sorry. Go ahead.

I was going to say, just with the leisure travel, I think with this the environment of COVID, I think they are looking for more space and to have more comfort when they're fly, and we have competitive fares up on our premium class and first-class. I do think we're seeing the benefit of that. But sorry, go ahead, you had another question.

Yes, just a follow-up on that specific point. So how do we think about this going into '22 and '23? Are you going to be looking to keep this elevated mix of premium cabin with the fares at current levels? Or are you going to be looking to return fares to where they used to be even if that kind of -- if you see this mix shift back a little bit to main cabin?

The other thing I'll comment on that is it's not so much the fares that we're focused on, but of course, as business travel returns, as our road worriers return and loyalty returns, we are still committed to having robust opportunity for our guest to upgrade into the first-class cabin. So we're going to be balancing phase with first-class upgrade occupancy rates. And that's going to be our challenge going forward, but it's a good problem to have.

Perfect. Thank you.

The next question is from Dan McKenzie with Seaport Global. Please go ahead.

Hey, thanks, guys. Just a question here with respect to the American partnership, what is the aggregate wallet that Alaska can now tap into that it couldn't previously? And I guess I'm really referring part of me to just to a normalized backdrop. So corporate travel managers that for the first time can consider flying in Alaskan - American as an alternative to their current program?

Yeah. Hi, Dan. I'll answer your second one first, I think. But essentially, really the unlock here is a couple of things as to your point. We've had overwhelming response from our corporate clients wanting joint contracts with Alaska and American, providing much more competitive fares and much bigger options. We've also, just to be frank, being more generous now with our big corporate accounts. We're opening up priority seating for them, handling on [Indiscernible] and so the whole dynamic there has really improved. On the first part of your question, could you repeat that?

I'll take it actually. This is [Indiscernible] and speaking to the value of the American partnership, I think a couple of places. Initially when we announced the WCIA, the focus was on Americans non-stop flights out of Seattle to London, to Shanghai, into Bangalore. And obviously with international travel a bit suppressed, those haven't taken off as actively as we want, but we're excited about the potential there. But what has really come to pass is linking our domestic networks via code share and having the ability out of Los Angeles, San Francisco. And over the Chicago hub for American offering unique destinations that we can't get our passengers to, and so think the Des Moines, the Grand Rapids, Codeshare behind O'Hare and behind the American hubs has really been valuable, and lets us tap into demand streams that before we really couldn't.

Helpful. Okay, an d then one of the comments in your prepared remarks, you're looking to get to a cost structure of 2019 sooner rather than later. Do you have to get to 100% of 2019 capacity to get to a CASMex that's similar, or can you achieve a CASMex of 2019 with less than 2019 flying?

Yeah, thanks Dan, it's Shane. No, we don't -- I don't think that we would have to get back to full 100%. We've got a pretty large cost restructure program and commitment that we're executing on. A big piece of that is movement to single fleet, and that takes a couple of years to get done. And so it's likely that we will actually be above 100% of pre - COVID, sort of coinciding with the full capture of those costs restructure items. But if we, for whatever reason set a 90% or 95% of our pre - COVID capacity for a long time, our commitment will be to get back to 2019 cost levels. It just -- I think the trajectory is going to be a bit different with our order book and with what we think about the opportunities in front of us up and down the West Coast and with our business model, it's likely we'll be growing above the pre -COVID size and at about the same time getting to the pre -COVID cost structure.

And then which?has got doesn't seem we're focused on is productivity.? And we're getting back to our pre -merger productivity targets and that goes hand-in-hand with a single fleet and that's where we're squarely focused on when we get back there. That's going to be the sweet spot for us and we'll see a big benefit with CASM as well.

Perfect. Thanks for the time, guys.

Thanks, Dan.

Thanks, Dan.

The next question is from Duane Pfennigwerth with Evercore ISI. Please go ahead.

Hey thanks. Good morning. You're probably not the best Airline to ask this, because your plan has been appropriately conservative and your schedule hasn't whipped around as much. But on labor availability, airport staffing, ground handling, are you seeing any early signs of clouds parting on that front, are you seeing any relief?

Thanks for the question, Duane, this is Constance. I think as our performance has shown in the third quarter, we've really delivered among the top performers in the industry despite all the challenges we have and that's for two reasons. One, you mentioned, which is disciplined return to capacity. And secondly, really resilient, proactive team in solving all the many challenges we have. Sam, you said in your conversations, those are true across the industry. I think our Mehen leadership team has done a great job addressing those as we see them. I'm confident we'll continue to do address that through the Mehen fourth quarter and beyond.

Fair. All very fair comments which we agree with, I guess the question is, I guess the effort per higher or to the extent you're trying to acquire airport staffing, is that getting any easier or is it just as difficult as it was?

I would say it's consistently difficult. Perhaps the acquisition is one thing and then the retention piece, and the consistently staffing on every day continues to be a challenge. I think that's true across the industry, so we do put an inordinate amount of effort into that, relative to what we may have done in 2019.

Yeah Duane, let me just quickly add because we want to tighten our answers in real quick, but it's a thing -- I think everybody is dealing with it, certainly the Seattle region, it's been tough to get entry-level workers. Just that pool of labor hasn't been what it used to be, but I will say it's improving. I think as we've gotten through the summer and into the fall, our need for staffing is a little bit less, and I think the labor pool is starting to expand a bit. So I think that things are going in the right direction. But one thing I know confidence would also say is we still appreciate the employees who came to work every single day, put everything they had in the operation, worked tons of overtime to keep our guests moving and really minimize operational disruptively. They did a phenomenal job.

That's super helpful. And then just for my follow-up, I apologize if you mentioned this. But how are you thinking about Capex in '22 and '23? And thanks again.

Capex right now, Duane, we're at it -- for 22, we're looking at about a 1.5 billion with airplanes, obviously in the midst of our fleet growth and then a little bit north of that in 2023 as well. Again, based on our liquidity forecast, based on our conservative pre -tax margin forecast, the plan is to pay cash for all of those airplanes and still be well above our minimum liquidity value at year-end 23.

Okay. Thank you.

Thanks, Duane.

The next question is from Mike Linenberg with Deutsche Bank. Please go ahead.

Hey, yes. Good morning, everyone. Hey, 2 questions here. Shane, you talked about the headwind with respect to redelivering the Airbus airplanes. I think you said '22, '23 -- 2022 and 2023. How many airplanes are we looking at here? And what is it like a million to 2 million in airplane. I'm just trying to size this cost headwind that will go away in a few years?

Thanks Mike. It's well north of that, these are full to engine restorations airplane restorations as a condition of the lease. If what would've had to do had we extended the leases or really all of these aircraft are due for sort of heavy maintenance cycles. The number of aircraft, specifically by -- I think Chris might have --

Yeah. So we've got about 24 operating Airbus A320 s that will all be gone by the end of 2023. So that's really the number you're looking at and to change point, these are -- we've had some history of returning these. These are anywhere between $6 to $12 million a tail on the return cost. And so that's the bubble you're looking at for the next couple of years. Mike, we've got maintenance incurred for a lot of this. That's the P&L expense potion.

Everyone wants to negotiate.

Now that's actually super helpful, because it gives us a good sense of what's going to go away and then just to my second question, I guess to Andrew, there's been some comments about some commentary -- some very good qualitative commentary about your relationship with American and OneWorld. Interestingly, American on their call, they said that the benefit that they were getting from you and JetBlue was accretive to revenue thus far by I think they throw out a half to 1%. They said something on the order of about 750,000 passengers. And obviously we'd have to split and figure out what's your piece and what's JetBlue's piece. But the fact is they're five times bigger than you are. So I'm curious if anything that you can throw out as it relates to what you've seen on the revenue front. Is it a couple of percentage points, some accretion to revenue since it's been up and running? Any anything quantitative would be helpful. Thank you.

Yeah. That's a great question. And we're not probably prepared to make a whole lot of comments here, other than to say that we're going to unpack this for you on Investor Day. And I mean, we're going to give you a lot more transparency then and that's probably a little later.

We're giving Mike to spend. We're seeing a loss from the value of this partnership with American and OneWorld. Again, it's not totally a lot because of COVID, but we do see upside and will give you more details on Investor Day.

And when is Investor Day by the way?

It's going to be in March.

Very good.

[Indiscernible] will be sent out mid-March.

We promise it won't be raining [Indiscernible]

Very good. Thank you.

The next question is from Helane Becker with Cowen, please go ahead.

Thanks very much, Operator. Hi, everybody. Thank you very much for the time. Just a couple of questions. Actually shifting gears completely to ESG. You've made a number of changes, I guess to the board over the last couple of years. So as you're thinking about that, or is the board where you want it to be? Are there retirements coming off, that gives you a chance, or to change -- to get more diverse, or are you okay with that? And then the other part of my question is with respect to Alaska Star Ventures. What's the focus for that? What are you hoping for it to do? Is that focused on SAF acquisition or maybe you can impact some of that. Thank you.

Good morning it's Kyle. I will take the first question and Diana will take the second, I think. Our board is so fantastic and we just added a new board member bringing us to 12 independent directors. Adrienne Lofton just joined last week, bringing really fantastic marketing and brand experience to our board. I'll also just note, I think currently we're at 50% gender diversity and about 40% plus ethnic diversity. We're super proud of that, and we're very happy with the board composition right now.

And I'll say is our board is squarely focused on ESG and sustainability, it's a big strategic driver for us, and they're really excited about our path forward on this which will dovetail into answering your second question here on we're excited about Alaska Star Ventures, Diana?

Yeah. Thanks [Indiscernible] for asking. So specifically Alaska Star Ventures is right now focused on the 5parts of our path to net zero, which we announced earlier this year. So just briefly, those are operational efficiency. Obviously the fleet evolution, which sort of our interest is not focused on but sustainably the synfuel novel propulsion, incredible carbon offsets to close the gap to our target. So we're looking specifically for technologies or in the case of our first investment specifically sector-focused fund that can help us to accelerate those past. That path and bring Technology into the system that can help us do that in the next 3 to 5 years.

That's very helpful. Thank you very much. I just have a question. You're in -- maybe Dan for you, I don't want you to say anything you can't say with respect to the pilot negotiations. But what's up with them?

Helane, first, I want to state we have a fantastic group of pilots. They're highly skilled professionals that keep us safe and on-time and we value their contributions, they do a great job for us. We've got some sticky issues we're working our way through, and we've asked the National Mediation Board for some help, and we're comfortable we are going to get to a deal. We have a history of getting deals with our Unions, and so we know we're going to get there. What I'll say is we have an exciting future for our pilots, you heard our growth plans, we plan to grow the airline a lot over the next 3, 4 years, so this will be a phenomenal place for our pilots to spend their career s. So we'll get there. I appreciate the question.

Thanks Ben, thanks everybody. Thank you.

The next question will come from Conor Cunningham with MKM Partners. Please go ahead.

Hey, everyone. Thank you for the time. I might be wrong, but I think your credit card agreement is up soon. The market's been reset a little with a recent agreement from another carrier. I was wondering if you could just provide some details around how many signups you've had since closing on the Virgin America acquisition, or maybe just how spent has evolved on the card over the past couple of years?

Hi, Conor. We've been -- we've still got a little bit of time on our agreement that said we are very aware of other agreements done, and we 're working very closely with Bank of America, who we have a 30-year relationship with, and things are changing and they're working to change with us. I think as I said in my prepared remarks, I think since the team we've got a compounded annual growth rate of 9% on both our portfolio of members and Spain. So this program has done nothing but deliver and return, and as I also shared, we've had the highest cash receipts we've ever had. So more to come there and as we get into 22, we've got a lot of exciting things planned that I think it's only going to fuel growth in our loyalty program.

Okay. Great. And then Ben, in the past you've talked about making Alaska a national brand and I assume that would involve some further investment in markets that are off the West Coast. I saw that you put in for slots at Newark and clearly that would be big for the brand of the Northeast. Just wondering how you made benchmark that success of just brand awareness outside of the West Coast, outside of where you guys are already pretty dominant. Thanks for the time.

Yeah. No, thanks, Conor. This is a big strategic initiative for us. It won't be just a 6 month or 12 month initiative. This will spend next 3, 4 years. And it's really linked to what Andrew was saying and how we build back our network from 80% to 100% and growth from there. So there will be a focus first on the West Coast in making sure people understand who Alaska is and the strength we bring with our network, and with our brand and with our loyalty and our product. So we're going to focus first on the west coast and then move east from there.

Okay. Thank you.

The next question will come from Catherine O'Brien with Goldman Sachs. Please go ahead. Catherine O’Brien : Hey, everyone. Thanks for the time. So it sounds like you laid out a path to have capacity flat to up for 2022. I mean, I guess, correct me if I'm wrong, and then from earlier comments, it sounds like in that scenario, we should be expecting unit costs down versus 2019. I guess, is anything wrong there and if that's right are there any larger tailwinds you want to flag? Thanks.

Thanks, Katy, hey. I want to stop short of giving guidance for next year because we don't want to be doing that today. We do totally recognize that there's an appetite to understand what our view on 2022 capacity and costs is for the full year. And I think when we have our earnings call in January, we'll strongly consider giving full-year guidance instead of just quarterly guidance. But the essential thing is get back to pre - COVID size by summer of next year and we've got planes coming in, in the second half that could allow us to grow, if the demand there and we're configured to do it. And as we go along that capacity trajectory, we see our unit costs ultimately step back to hopefully flat and then down, but not -- I don't want to commit to a timing for that right now. Catherine O’Brien : Okay that's fair enough. And then it sounds like you've already locked in either some new contracts with corporate clients, or perhaps have made adjustments that give you greater wallet share with existing accounts that have recurred since the onset of pandemic with your American and OneWorld partners. Can you help us frame the upside you have on the books as of now, if you were to assume that all else equals your pre -pandemic corporate volumes returned to 100%. I'm sure you can't give an exact number, but just is it a 110? Is it a 150? This really high-level will be helpful. Thanks, guys.

Thanks. [Indiscernible]. But what I'll say is, is that, you know how these things go. They have RFPs, I cycle through every few years. I think we rapidly in the process of changing at our agreements, for joint contracting agreements, RFPs plan to full. And we've just found an overwhelming engagement and we're also being more and more competitive on businesses and working with big TMCs like GBT. Just going to only help us propel that more. So I think that's what I'll share. And again, on Investor Day, we will share more about our strategy around that. Catherine O’Brien : Thanks for you time.

Katy.

The next question is from Myles Walton with UBS, please go ahead.

Thanks. Morning or afternoon. I was wondering maybe I'll follow up on Katy's question and it's a little bit cart before the horse. But is it reasonable to think '22 is a double-digit margin year and maybe some of the frustration you sensed the market not recognizing your performance is simply that everybody is losing money, losing less isn't necessarily a big deal. But maybe the market isn't differentiating your uniquely higher gearing on the volume as it drops through from a pretax basis?

Yeah. Myles, I appreciate it. It -- that's really hard to say. If you look at the revenue impact that we mentioned from this one wave, it's a couple of 100 million for Q4 alone. It was more than that if you add in Q3 impact. So if there are no more waves and demand comes back and the economy is strong, then yeah we're configured to deliver really strong financial performance. But I think what we've been saying all along and Ben open ed with is we expected choppy recovery, that's what we're mentally prepared for. Oil prices are spiking right now, that's going to be a headwind. So it's hard to give you some exact confidence that we're headed towards those types of margins. We would love it if everything stabilized and we could deliver that. But I think the environment's really too choppy to be able to predict that right now.

Okay. One detail, so your head count's down about 16% roughly in line with capacity, as you get back to 2019 capacity where will your headcount be relative to 2019? Thanks.

Great question there as well. It should be down - ish as we really execute on the productivity targets that we've got, probably not a huge amount, but as we achieved the productivity targets, we will on an average basis do a little bit better. So that's our expectation going forward.

All right, thank you.

And the other thing that I would just say is we've got a really -- we've done a really nice job of managing overhead of the Company, and we'll grow overhead back at a much slower rate over time relative to capacity.

Thanks, Myles.

Thank you.

The next question is from Chris S with Susquehanna, please go ahead.

Good afternoon. Thanks for taking my questions. So appreciate the comments you just gave on your ASMs pro FTE. But if you've spent a lot of time going through the productivity initiatives, I was wondering, could you put a finer point on that and if there are 2 or 3 metrics that we should think about it, it is ASMs per FTE.

As we think about this next stage of the recovery here, 2019 was around 3.3 or is it perhaps something block hours per month per crew? Just a finer point on some of the metrics here that we should consider, as we look at this next leg of the recovery. Thanks.

Hey, Chris. Yeah. Appreciate it. The two that, I think, are most easily consumed externally are passengers per FTE, which obviously has a demand component to it. And then the other is departures per FTE. We do manage a lot of the business from that perspective, in terms of the labor inputs for departure. Internally, we track more than that, at the specific employee group level and certainly block hour production for our crews is something that we look at closely. That is probably something that can be derived externally, but not as easily as those other two numbers.

Okay. And just a follow-up question here. So in your prepared remarks on your signaling capital returns here. As we think about 2022, cash flow from operations have a lot of moving pieces here. You have the partnership, we have concerns around inflation, higher fuel, but if there's any sort of detail, finer point, how we should be thinking about yields. Or more specifically CASM access in the back half of next year, I think you've said that. You're expecting to fly 2019, your 2019 book for next summer and then what would that imply for CASM excess as we think about the second half of 2022? Thank you.

Thanks, Chris. I appreciate the question. I'm going to stay on about my earlier comment that I don't want to give guidance for next year. I totally appreciate that there's desire to hear more about our annual -- full-year expectations, and I do think on our next call, we'll consider giving you guys annual guidance for both CASM and ASMs for all of 2022 so you can get a better sense of the shape of what that looks like quarter-by-quarter.

Okay.

Thank you.

Appreciate all the questions from everyone. Appreciate all the questions, we are out of time. Thank you. And we'll talk to you on the next call. Thanks, everybody.

Thanks, everyone.

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