Alaska Air Group Reports Third Quarter 2017 Results

Financial Highlights:
• Reported net income for the third quarter under Generally Accepted Accounting Principles ("GAAP") of $266 million or $2.14 per diluted share, compared to net income of $256 million, or $2.07 per diluted share in 2016. As the acquisition of Virgin America Inc. ("Virgin America") closed on Dec. 14, 2016, third quarter 2017 information reflects the results of Virgin America, including the impacts associated with purchase accounting. Third quarter 2016 results do not include Virgin America.
• Reported third quarter net income, excluding merger-related costs and mark-to-market fuel hedging adjustments, of $278 million, compared to $272 million in the third quarter of 2016. Adjusted diluted earnings per share were $2.24, compared to $2.20 in the third quarter of 2016.
• Virgin America results were accretive to EPS in the three and nine months ending September 30, 2017.
• Paid $0.30 per-share quarterly cash dividend in the third quarter, a 9% increase over the dividend paid in the third quarter of 2016.
• Repurchased approximately 0.6 million shares of common stock for $50 million in the first nine months of 2017.
• Generated approximately $1.4 billion of operating cash flow and used approximately $840 million for capital expenditures, resulting in approximately $520 million of free cash flow in the first nine months of 2017.
• Held $1.7 billion in unrestricted cash and marketable securities as of September 30, 2017.
• Reduced debt-to-capitalization ratio to 53% as of September 30, 2017, compared to 59% as of December 31, 2016.

Operational Highlights:
• Launched twenty new routes during the quarter, continuing the most significant network expansion in Alaska Air Group's 85-year history, bringing the total new markets since the merger to 37.
• Overall, the integration of Virgin America is going well and a number of significant milestones are expected to be achieved in the next seven months.
• Announced a seven-year partnership to be the official airline of the San Francisco Giants which includes, among other things, exclusive naming rights to the AT&T Park Club Level which will now be called the "Alaska Airlines Club Level."
• Signed an exclusive multi-year partnership with Golden State Warriors star, Kevin Durant, and named him our "Advisor to the CEO."
• Added Singapore Airlines as a global Mileage Plan partner.
• Selected Gogo to provide next-generation satellite-based Wi-Fi across the entire Boeing and Airbus fleets, providing guests a faster and more-reliable internet connection.
• Dropped fees for bikes, golf clubs, skis, surfboards, and other sporting equipment that exceed Alaska’s normal checked baggage weight and dimensions to $25.
• Took delivery of four Embraer 175 jets, bringing the total operated by Horizon to ten as of September 30, 2017.
• Placed the world's first Boeing 737-700 converted from a passenger plane to a freighter into service.

Recognition and Awards:
• Ranked as the top U.S. airline in the Dow Jones Sustainability Index (DJSI), receiving perfect scores for “efficiency” and “reliability”.
• Mileage Plan ranked first in the U.S. News & World Report's list of Best Airline Rewards Programs for the third consecutive year.
• Virgin America named “Best U.S. Airline” by Condé Nast Traveler in their 2017 Reader’s Choice Awards for the 10th year in a row.
• Ranked Best Airline in Customer Service in the 2017 worldwide SimpliFlying Awards for Excellence in Social Media.
• Named Favorite Airline in North America for the second consecutive year by Trazee Travel.
• Mileage Plan ranked Best Airline Elite Status Program in the U.S. by The Points Guy.
• Recognized by the Puget Sound Business Journal as the 2017 Board Diversity Champion, for diversifying Air Group's board composition over the last five years.
• Named one of the overall five-star major regional airlines at the Passenger Choice Awards during the APEX EXPO. Virgin America received a five-star rating for low-cost carrier, and received a top honor with a Passenger Choice Award for “Best Seat Comfort.”

SEATTLE — Alaska Air Group, Inc., (NYSE: ALK) today reported third quarter 2017 GAAP net income of $266 million, or $2.14 per diluted share, compared to $256 million, or $2.07 per diluted share in the third quarter of 2016. Excluding the impact of merger-related costs and mark-to-market fuel hedge adjustments, the company reported adjusted net income of $278 million, or $2.24 per diluted share, compared to $272 million, or $2.20 per diluted share, in 2016.

“Our people delivered very strong results again this quarter,” said CEO Brad Tilden. “At roughly the halfway point in our integration with Virgin America, and despite some unrelated challenges in our regional operation, our business is performing well, and we are very happy with the response we’ve seen in California and throughout the West to our expanding network, our focus on hospitality, and to our industry-leading mileage plan. I want to thank our talented people for their commitment and dedication.”