Good morning. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Alaska Air Group Fourth Quarter and Full Year 2012 Earnings Conference Call. Today's call is being recorded and will be accessible for future playback at www.alaskaair.com. (Operator Instructions) I would now like to turn the call over to Alaska Air Group’s Managing Director of Investor Relations, Chris Berry. Please go ahead sir.

Thanks, Michelle. Good morning or afternoon for those of you on the other coast. Thank you for joining us for Alaska Air Group’s fourth quarter 2012 earnings call. Today, our CEO, Brad Tilden; and our CFO, Brandon Pedersen, will share their thoughts on our financial results, our operations, and our outlook for 2013. Several members of our senior management team are also here to help answer your questions. As usual, 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 available on our website. We will refer often to certain non-GAAP financial measures, such as adjusted earnings or 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 fourth quarter GAAP net profit of $44 million. Excluding the impact of mark-to-market adjustments related to our fuel hedge portfolio, Air Group reported a record adjusted net profit of $50 million or $0.70 per diluted share. This result is in line with the first call consensus and exceeds last year’s adjusted net income of $37 million or $0.51 per diluted share. For the full year, Air Group reported a record adjusted net profit of $339 million compared to $287 million in 2011. Adjusted earnings per share grew by 21% from $3.92 per share in 2011 to $4.73 per share in 2012. Additional information about our unit cost expectations, capacity plans, future fuel hedge positions, capital expenditures and other items can be found in our Investor Update included in our Form 8-K issued this morning and available on our website at alaskaair.com. And now I’ll turn the call over to Brad.

Thanks, Chris and good morning everyone. Chris mentioned our record fourth quarter results, which represented our 15th consecutive quarterly profit. Our pre-tax margin grew to 7.2% for the quarter, which compares to 5.5% in 2011. For this call, I’d like to focus the majority of my comments on our full year 2012 results and on our plans for 2013. For the full year, we produced our ninth consecutive profit on an adjusted basis and it too was a record result. Here is some additional color on this result. Against a backdrop, where the industry capacity was flat, we grew capacity by 6% and revenues by 8%. 2012 revenues were fueled by our growth into new markets. We added 15 new city pairs net of reductions, including 5 new cities during the year bringing our total new routes over the last five years to 24. This winter, we have 26 flights per day to Hawaii and roughly a 30% share of the West Coast Hawaii market. This region now represents 20% of our network and a second in size only to California. To ensure that growth was profitable, we continued to focus on increasing productivity keeping overhead in check and lowering our unit cost ex-fuel. Our mainline CASM ex-fuel was down about 1.5% and our consolidated CASM ex-fuel was down about 1%. Productivity was up 3.5% representing our fourth consecutive year of improvement. As a result of the revenue growth and the good cost control, our pre-tax income for 2012 was $552 million compared to $463 million in 2011. Our pre-tax margin was 11.9% for 2012, up one point from 2011. And as Chris said our adjusted net income for the year was $339 million, which is an 18% improvement over 2011. This record profit translates to $4.73 per share, an…

Thanks Brad and hi everybody. We are very pleased to report that Air Group’s fourth quarter adjusted earnings grew by 35% to $50 million. The fourth quarter profit brings our full year results to the numbers that Brad mentioned. 11.9% pre-tax margin, $339 million of net profit and 13% after tax ROIC. I want to join Brad in congratulating all of the Alaska and Horizon employees for another outstanding year. Our financial results reflect their efforts along with the structural changes we have made over the last decade such as moving to a single fleet of efficient airplanes of both companies, better matching capacity with demand, reducing our costs, and more efficiently using the capital in our business. Our fourth quarter adjusted pre-tax profit improved by $24 million, a 42% increase. The $88 million or 8% increase in revenues more than off set the $33 million or 10% increase in economic fuel costs and the $42 million or the 7% increase in non-fuel operating expenses. Non-operating expenses were also a $11 million lower this year. About half of the decline is due to lower interest expense. The other half reflects the fact that last year’s results include a $6 million impairment on an MB-80 that we had leased to another operator. Fourth quarter passenger revenue grew by 9% on a nearly 8% increase in capacity and a 1% increase in consolidated PRASM. Our main line PRASM increased 1.1% compares favorably with the A4A domestic PRASM gain of 1.6% particularly given our 5% increase in stage length. We were very pleased with the unit revenue performance in our core markets. New developmental markets such as Seattle, Filly and San Diego, Orlando brought down aggregate trans-con PRASM a bit, but they are meeting our expectations. Hawaii PRASM was down in the fourth…

Thanks, Brandon. And at this time, we are ready for your questions.

(Operator Instructions) Your first question comes from John Godyn from Morgan Stanley. Your line is open.

Hey, thanks for taking my question. Brandon, you gave a lot of great detail on demand trends and touched on Hawaii, but I was hoping you or Andrew could elaborate further on what happened with the advanced book factor in January just because it went from up 3 to flat. And also in contrast to some of the risks in Hawaii to what extent are capacity cuts at Virgin America an opportunity?

Hi, John, good morning, I think I’ll turn that one over to Andrew.

Thank you, Brandon. So, John, it’s a couple of things. Yeah, I think in the mid-December guidance, we had January up three points or so at that snapshot in time. There is a few things moving around, but the big picture, number one is the first half of January we had very strong load factor build, Christmas moving out into the Tuesday, we had a strong demand coming in, in January. And the other thing is we still had grown Hawaii 34% in January and those booking start a lot further out. So, overall we expected to see some decline in the advanced book load factor and we are feeling pretty good about where it stands today. As far as Virgin goes, they have launched some new markets mainly Portland to the Bay and Southern California, but overall outside of that, they have just been humming along with a standard capacity with some good winter trims. And then as I understand it, they have slowed their growth in the future. So, it will be interesting to see what they do going forward.

Okay, great. And just changing topics and maybe back to Brandon, you have emerged as a leader in the industry in terms of returning capital to shareholders and recently up the volume there, I think that’s always major stock a bit more investable than some of your less fortunate competitors. But now as other legacy airlines kind of closed in on distributing cash to shareholders, how important is it to maintain leadership in the amount of cash you are returning relative to the peer group?

Well, John maybe I’ll start and then Brad can cleanup my mess. I don’t view this as a race, I think your point about us being a leader in that regard is true with something we are proud of, it goes all the back to the 2010 plan on how we wanted to make sure that things were good for all three important constituents, customers, shareholders and investors. And for us what it really comes down to is a balanced approach to deploying capital. And if that makes us the “leader to the pack” that’s great, but I am not necessarily concerned with watching and keeping up with the Jones as if you will. We have a really good track record. And I think it makes a good case for investors to like Air Group stock.

Brandon, there is no mess to clean up. I think that’s an excellent answer. John, our basic focus has been to run a good business and then do the right thing in terms of capital allocation. We are proud of what we have done for investors. The important recent change was we went from $50 million share repurchases to a $250 million share repurchase. So, and that’s something we are working on now. So, but it’s a good question of something we look at all the time.

Got it, thanks.

Your next question comes from Helane Becker from Dahlman Rose. Your line is open.

Thank you so much. Hi everybody.

Hi Helane.

This is my question. You guys did a really great job last year and it looks like this year it could be more of the same. And then I forwarded this to Chris earlier today, there is this e-mail going around from some of your contractors at Seattle-Tacoma Airport about how you guys are doing well and they are not. And can you just like address that issue I mean they are contracted employee? So, on the one hand, you really don’t have control over them. So, how do you make them understand that and how do you keep them from not delivering a great product to your customers?

Hey, Helane, it’s a good question, and we want to do the right thing at Sea-Tac and be a good corporate citizen. Keith Loveless is our General Counsel and he is in the room, he doesn’t always get a lot of questions, but this might be a good opportunity for Keith to speak, because this group is called Working Washington and Keith is leading our internal effort to address these issues.

Yeah, I guess Helane I might start by saying that, that we are just super proud of what we have been able to do for our employees through this bonus program. It’s been consistently paying out and we feel like the 13,000 employees are – it’s important that we all be aligned around this. In terms of the working Washington group that issued this press release that to be blunt about it that is a group that is largely organized by SEIU and so we see that as a larger effort by SEIU to organize the contract workers have at the Port of Seattle, not just the ones that work on Alaska airplanes, but also the ones that support the other carriers that Sea-Tac. And as you say we really don’t have a lot of control over that. We do have a lot of control over who we contract with out there and we try to pick good quality vendors that treat their employees right and that have good labor standards as well as safety standards and that have good customer service. And it is unfortunate that they have focused on this but our first obligation is to our own employees.

Yeah.

And Helane you won’t be surprised of this , but we I mean we do understand what our economy needs more than anything right thing now was more jobs and more good jobs. Our philosophy is the best way to do that, the best way to provide more jobs its run a successful business. And so that’s what the 2010 plan was all about, that’s what these five focus areas are all out. That’s why we try to do when we go to work everyday. And we believe that us running this business successfully is the best more good way to provide more good sustainable long-term jobs. So, there is – there is issues we are working with but I think run good path here.

Okay, that’s great. Thank you.

Thanks, Helane.

Your next question comes from Hunter Keay from Wolfe Trahan. Your line is open.

Thanks. Good morning everybody.

Hi Hunrer.

Hey, so the Saber agreement you guys singed last summer I believe was full content agreement. So, I’m curious to know how you think you’re going to able to drive traffic to your website. Wondering if it sort of involves like higher ad spend to get people to go there or you are just sort of banking on participating and sort of a broader consumer shift that’s going out of that area?

Hi, Hunter, this is Joe from marketing. Yeah, it is a couple of different things and to be clear, we absolutely have a goal of boosting our direct share of bookings at alaskaair.com. And it sorts of with having number one good platform. Over the last two or three years we’ve completely redesigned alaskaair.com. It went from being about the slowest just as one major performance of the site at today being the first or second classes. We measure things on this side much more carefully than we’ve done before. I think we have the most robust testing program, where we are testing how to optimize the selling activities on our site and drive more conversion. I would argue better than any other airline out there right now. You mentioned sort of page search, we do our share of that and obviously we’re trying to optimize that as much as we can. Personalization is key we’re trying to do some things that appropriately personal experience for customers coming through alaskaair.com, which great helps greatly in terms of repeat business folks coming back to alaskaair.com. We advertise this side generally, so we expand network into new areas folks that’s the best source for them to come for lower fares. And then mobile as been big factor and this as well having our new mobile site to complement our mobile apps and introducing bookings on the mobile apps is helping us to take advantage of this explosion of mobile commerce and of course step is all coming through us direct. So 2012, I think it was mentioned we had our best share of alaskaair.com bookings ever at 54%. And we look forward to boosting that several points higher as been moving forward into 2013.

Okay, thanks.

Hey, Hunter, it’s Brandon. One more comment on that some of these enhancements don’t necessarily manifest themselves through higher advertising spend, but are really what’s driving some of the increase in IT investment as well we really want to make our mobile site great and takes IT dollars.

Yeah. Thanks Brandon and I will do more on this cash deployment stuff. Just to follow-up from some of the stuff that John was saying. I think investors obviously noticed the buyback, so it’s great. And it’s very differentiated and putting aside competitive concerns from what other guys are doing, let’s just forget that for a second. If you guys look at your free cash flow yield and you look at what you can do on the dividend side, I mean the math is pretty compelling. If you really payout a 25% of your earnings you’re looking at 3% free cash flow yield already factoring in self-funding to CapEx, already factoring in paying off debt maturities. I think one of the reasons Southwest gets a better multiple than everybody else is because they have this very small dividend that passes investor screens. Is there something being said I mean you guys, we talk about all the time, I mean you want to open up your stock to new investors, how do you feel just about the basic concept of opening yourself up to a screen just like being a very, very modest dividend that would still allow you to do all the other stuff you wanted to do?

Yeah, it’s Brandon. I understand that and I think we get that. What I can assure you is that we talk with our board frequently about capital allocation and we are really proud of what we have been able to achieve. Having said that, there are merits to the argument that you are presenting and it’s not lost on us and that’s something that we think about.

Yeah, I agree with what Brandon is saying for a long time there was kind of – if you had cash to return to shareholders, it was kind of a question of do you use that cash to repurchase stock or to pay a dividend. We felt like the returns were better – it’s between those two, the returns were better for investors by us repurchasing stock. I think with the stock price appreciation, that math is getting closer. And I think you are asking a good question that it’s a good issue for the board to wrestle with.

Okay, I appreciate that. Thank you.

Thanks.

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

Hi, everybody and hello to Hunter, you beat me on the dividend question. The current pilot contract at American affords very, very liberal domestic code-sharing significantly beyond what the other, your other legacy partners can do. However, the MOU between U.S. Airways and the APA and USAPA meaningfully tightens up the allowance for code-sharing and though I recognize current flying is grandfathered in. I know you don’t want to comment on how much revenue American currently feeds the Alaska franchise, but I am curious when do scope issues like these even impact your business plan, is it a stretch to declare that a standalone American would be a better outcome for Alaska than a potential merger?

Hey, Jamie, this is Andrew. I suppose a couple of big picture, I mean industry consolidation in one way as you look at it has I think helped the industry with capacity discipline and a lot of good things coming from that. So, that might be one part of the question whether there is a standalone or a merger. On the other hand to your point, we have been very restricted with the American code-share agreement historically. And personally, there is opportunity and some things that may come here soon that will be sharing public when it’s ready to help broaden some of this. I think the way I would characterize it is, is that like everything Delta and American are important cogs in the wheel, but they are not the only cog and then not the most important cog, they are actually very much important through the whole thing. So for us personally, there has been a number of areas in our network that I think from a partnership perspective can get better for both careers with its expanded scope in the code-share namely East West stuff and doing a little bit more through their hubs and one of them in particular. So, we are looking forward to that and then we will just take it as we go.

Okay, good. I appreciate that. I wasn’t asking the question, because I thought it would materially derail your profitability, but at the margin it’s something that’s on my mind. So, I appreciate the feedback.

Yeah.

The next question comes from Glenn Engel from Bank of America. Your line is open.

Few questions. First, your capacity growth is fastest in the first quarter yet you are assuming that the unit cost comparisons get better as the year progresses, what’s going to drive that?

Hi Glenn, it’s Brandon. There is a couple of things. One is that you are right, well it’s actually the capacity is about flat year-over-year. And in terms of how that affects the unit cost performance, I think you see a lot of that maintenance cost increase that I talked about landing in the first half of the year, and then particularly the first quarter of the year. I think looking out at just off the top of my head I think the maintenance expense number will increase probably around $10 million in the first quarter alone. So, that’s driving that.

On the revenue side in the fourth quarter, it looked like December PRASM was down after being up in October-November, why did your numbers get worse in December, it didn’t seem like the industries did?

I think, this is Andrew December PRASM is down marginally mainly driven a little bit by load factor in December, which was down. And the way I would characterize that would be essentially and as Brandon has alluded to, we are still working to finalize our Hawaii seasonality with capacity. And I will tell you most of our regions did very well, but on the load factor front, the new markets in the trans-con that we have just got going in specifically California, Hawaii booked down their load factors. So, overall though we feel very good with the December performance both from a profitability standpoint and then also our trip plan was up significantly. So, no real major aberration there at all, but it was down marginally for the December.

Your fuel price, your first quarter guidance and your fourth quarter is running about $0.25 to $0.30 higher than we’ll say U.S. Airways has un-hedged. Why is the gap so wide, it seems even larger than what the hedge premium would suggest?

Yeah, hey Glenn, this is Mark Eliasen. Just a couple of comments on fuel, to answer your question specifically, hedging cost just about $0.10 and the other thing that we have been wrestling with out here on the West Coast is the jet crack spreads or the refining margins have been about $0.09 to $0.10 higher than the rest of the country. So, that’s been another headwind related to that. I guess, more importantly for us fuel is a real important thing for us all the way around, but what we really focus on is how much profit the business produces from the fuel we do use. And I think if you look at The Wall Street Journal, I would say that we are number one among major U.S. airlines in fuel economy. So, we are really focused on that. And I think both airlines about conserving fuel of both to save money and to protect the environment I think in particular I’d give a shout out to our pilots who have done a lot to conserve fuel at both airlines.

And finally when I looked at the fleet plan, it looked like you are not going to grow your fleet at all now in 2014, I thought previously you are planning on growing that fleet some, so what changed?

In 2014, the plan right now is to have 10 in and I don’t have the investor update in front of me, probably a whole bunch going out. I think the answer to your question is that there is a lot of things moving around in 2014. We have a lot of flexibility. One of the uncertainties right now is what we do with the Combi fleet there is actually five of those airplanes that we want to retire here as sometime in the next two years. The other thing that we have is a whole lot of flexibility with options. And so to say firmly that we are not going to grow the fleet in 2014, I don’t think its right, I don’t think we have decided. I think the bias is to grow as long as we can do so and meet our return goals, but there is a lot of moving parts between now.

Actually, the update shows you we are going to shrink the fleet by three in 2014?

Yeah, and that reflects the Combi is going out in 2014, there is five of those. We have tentatively packed those to go out in the fourth quarter, but again that’s still moving around.

Thank you very much.

Well, thanks Glenn.

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

Hey, good morning everyone.

Hi, David.

Maybe a question for Andrew just I think in some past quarters you’ve talked about sort of getting the State of Alaska capacity right, I mean, if we look at some of the DOT data, it looks like you definitely achieved that in the second quarter. And it sounds like the core RASM has been holding up pretty well. I am just curious like kind of how you think about that capacity going forward and are you at a point where you can get back to some growth in State of Alaska ASMs or is that an ongoing sort of need to cut?

So, the State of Alaska is interesting only because the summer is obviously very different than the rest of the year. We are still watching how that carry us load or make decisions about the summer in the State of Alaska. One of the things that I will say core Alaska outside of summer seasonality is not really growing, it’s very static it’s in all of that. Our biggest challenge quite honestly, which may not be a significant to your world is that we have peaks and troughs. And even this Christmas we were too tight and I heard about it. And so we need to add some more flights during certain peak periods of the time. Overall, I would say that we are very comfortable with the State of Alaska capacity. And again there’s just tweaking going on there, but I don’t see any major changes in that as we see here today.

Okay, okay, thanks. But maybe just to follow-up on maintenance maybe for Brandon, you mentioned maintenance is sort of front-end loaded, I mean, if I look back over the last number of years on an ASM basis maintenance, that is down, I mean I think it’s down sort of the team, sort of over the last four to five years. Are we going to – is maintenance cost pressure going be an ongoing theme over the next few years or is there will you get past the first of this year and beginning of this year and that sort of the worst of it for the foreseeable future?

David, I think this is the peak, it’s been (in any future) here talking. Yeah, I think this year is a peak with some heavy maintenance visits on our Classics 737s. In terms of going forward, we do plan to level load this thing with power by our contracts on our majority of our Dash 7 engines. So, our goal is to make sure these maintenance costs stay within a tight range.

Dave, this is Brandon just a follow up as I said in my prepared comments a lot of the increase is lease return provision or lease return expense coming through. We had started accruing for those lease return costs about year out. And so as we look at the number of leased aircraft that are going back in the fourth quarter of this year and then the first half of next year, lost of that expense will hit in 2013. So, it’s really the combination of that, the combination of what Ben has talk with – Ben just talked about offset by some maintenance declines at Horizon. I think it’s also important reiterate what you said in your leading which was maintenance expense has comedown and that really reflects the modernization of the fleet and the great works that our maintenance folks have done to improve their processes and just get much better.

Okay. But it’s not like over the next couple of years, you’re at a point where you start hitting a lot of heavy maintenance on sort of the beginning of that fleet modernization and that becomes a big pressure point?

Its Brandon again, I’m trying to convince Ben to get rid of those classics…

I was just going to say that we get - we started getting more expense on those classics and then ultimately we will get to a point where we have the initial wave of 800s that came in, start to need engine overhauls. But as Ben said we’re looking to various – we are looking into a power by the hour deal to try to spread that cost out.

You’ve got these figures, but just as a reminder for everybody on the call about 124 737s, 30 are classics, so it’s a quarter of the airplanes that are kind of subject to the tail end of the maintenance cost curve.

Okay, great. That’s very helpful. I appreciate all the color.

Thanks David.

Your next question comes from Savi Syth from Raymond James. Your line is open.

Hi, good morning everyone.

Hi, Savi.

Just on the Boston market I was wondering if you could comment on some of the new markets that you’ve opened up within the last year and how those are progressing. And also I know this is extremely late stage, so maybe you don’t have any color, but I thought the Boston-San Diego route was interesting and just maybe how that’s looking?

Hi, Savi, it’s Andrew. I think as you might have heard earlier even over 2012 we’ve had 20 new markets, 11 mainline, and nine regional. As it relates specifically to some of the San Diego, I think is what you might be a alluding to. But we’ve had some growth in San Diego, we have had some regional growth in there, while using Horizon Monterey, Santa Rosa and Fresno, we serve Mexico out of there, we serve Hawaii out of there. We’ve been growing that on San Diego-Boston again as in keeping we are there in Portland and Seattle. And really that’s a market where there is no Jet Blue has service there but very much point of sale to the East Coast folks that has no direct service at all to folks living in San Diego. And so we’ve started that. And as you’ve seen Orlando and this is all part of our strategy of balancing you’ve seen us start Philadelphia, you’ve seen us start Salt Lake City, we’ll be starting Salt Lake City markets out of Seattle and also some extra markets out of California. But there all doing as we’ve expected and I will take time to develop.

How do they compare versus markets in the Pacific Northwest in the sense of, is it greater leisure mix and just profitability in general?

On the Orlando that’s very much leisure mix market and we see that all day long just like Fort Lauderdale from Seattle. On the San Diego-Boston to be determined obvious as we haven’t really we haven’t started that, but we do expect to see some mix of business traffic which is certainly in the Boston marketplaces as well as good leisure traffic.

Alright.

It’s booking up quite well just to be honest with you.

Great, thank you.

And Savi, it’s Brad. Just to be really clear I would call that a San Diego strategy not a Boston strategy.

Thanks Brad.

Yeah.

Alright. Thanks guys.

Yeah. Thank you.

Your next question comes from Mike Linenberg from Deutsche Bank. Your line is open.

Hey guys, just two questions here. One, Brandon, when you look at your numbers and whether you look at leverage or coverage ratios, right now Alaska is performing probably the best that it’s performed. And then if you go back 20, 30 years and even profitability etcetera and yet when we go back and we look at how the rating agencies looked at you as a company back in early 90s, in early 90s, you were an investment grade credit on a senior unsecured basis. And you look at a lot of the metrics today and they are a bit higher than what they were back then and yet if I look at just on Bloomberg here, it looks like you are a double B minus on a senior unsecured basis from S&P. What do they tell you now like what do you need to do, you need to get to like a 23% operating margin, I mean, what gets to an investment grade, I just because you are well above what you were back then, what’s changed?

It’s an absolute mystery frankly and you are absolutely right, maybe I’ll ask Mark Eliasen to chime in on that.

Hey Mike, this is Mark. I will just say that we have a great relationship with S&P and we talk to them frequently. We respect what they have done and they will say right away that their standards have changed over time. They changed over time as a result of issues that happen in 2008, but they have I think respect and admiration for what we have done for the business, our leverage going down, they appreciate. We kept them posted before we did our stock buyback we consulted with them. And I think we have a good dialogue there. One thing that they do point out is that we are a smaller airline and that’s the challenge for us. But I think that they respect our numbers and they put us on a positive outlook. So, we are looking for good things coming forward.

Okay. And I didn’t mean to just take on S&P, I would say Fitch and Moody’s, they sort of all take the same view on the industry, which I don’t know arguably it just it feels like it’s a better industry today than what it was in the early 1990s, but I guess it’s an opinion that they are not on the same page as of yet. My, go ahead…

Our creditors look at us and they do look at the S&P rating, but they actually put us in a higher category than S&P does and that’s what really counts is the people who lend us money.

Okay, good. And then just my second question I go back, I think it was about a couple of months back, there was a five or six-page press release out between it was from both you and Delta and it talked about a lot of good things going on in Seattle and it talked about the growth of the code share. And it’s obviously been very positive for both of you. And then not too long after that, we see Delta flying from Seattle to Los Angeles, which is obviously important market for you guys. So, I am curious what’s behind that, I don’t know maybe it was just in response to you guys announcing the Seattle Salt Lake service maybe it’s just some funds borrowing between partners what gives there?

Mike, it’s Brad. What I would say is that we have extraordinarily good relationship with both Delta and America and there are two domestic alliances or biggest alliances. And I think the partnerships work really, really well. We have kind of a network where we grow, where we fly a lot up and down the West Coast and out of the West Coast. And Delta in particular has all kinds of wide bodies they fly out of Seattle. I think 8 wide bodies a day between Amsterdam and Charles de Gaulle and Narita and Haneda, they are adding and Beijing and Shanghai, so a big picture. It’s an extraordinarily good relationship and we get that what we do in this relationship is we help them fill those wide bodies flying out of Seattle. And then that feed is really important to Alaska, because it helps us justify more 737s flying in places like Seattle-Salt Lake and Seattle-LA and Seattle-New York and so forth. There is once a while in relationships like this, there are little things and you have mentioned a couple of them. And I think there are little things that happened along the edges, but I don’t think we should let them distract any of us from what overall is an exceptionally good relationship.

Okay, fair enough. Thank you. Thanks everyone.

Your next question comes from Dave Pfennigwerth from Evercore Partners. Your line is open.

Still Duane, good morning guys. Dave does sound cooler though I will admit. Just a couple of quick ones for Andrew, historically how much does an earlier Easter help March PRASM?

So, yeah this year, it’s moving to the Sunday on the March 31. For us Duane, it’s not a huge change basically the schools in the Pacific Northwest are sort of staying put there vacation time, its California that moves. So us personally with this week earlier, we don’t believe it’s going to be a major impact on our first quarter results, that’s out there.

Okay thanks. And then just you may have touched on this, but just in terms of sort of system competing capacity trends in the March quarter versus what you saw on 4Q, and maybe you could comment on the State of Alaska and Hawaii specifically?

So, looking forward, I look forward to a couple of months – excuse me a couple of quarters as you know industry capacity changes for the summer going forward. But looking forward, we see certain pressure in some of the Pacific Northwest to the Bay and Southern California. We see a little bit of pressure in the Bay area to Mexico, but overall on a weighted average, competitive capacity in our markets is marginally down over the next few quarters. So, we see that fairly stable there. I think you mentioned the State of Alaska, I think we have our summer schedule out there right now. We are going to be up just a little bit, but again overall no major changes there.

Okay, thanks very much.

Thanks Dave.

Your next question comes from Kevin Crissey from UBS. Your line is open.

Hi, thank you for taking the question. So, maybe through Andrew/Joe here, I am not sure, but if I think if a flight is not booking up well, it seems that the industry responses to start lowering fares, but that doesn’t necessarily have to be the issue where you could just not be getting enough attention to your website to sell your product, it wasn’t the price that was the sticking point, it was the overall traffic to your selling source. Kind of when I think about it what an OTA does, they might buy more, get more attention on Google or however they want to do it. How should we think as you grow your web direct, how should we think about how your website and that strategy fits in maybe with your revenue management process? Thank you.

It’s a good question Kevin, this is Joe. And I would say Andrew’s team and the marketing team were closely together in a number of different areas and this is a particularly key one. I mentioned earlier that our share of bookings at alaskaair.com has grown substantially over the last couple of years. And one of the fun things to track is how much it spikes up whenever Andrew’s revenue management team does do a fair sale and then we get out and really promote that sale. It has a very direct impact obviously on our alaskaair.com bookings. We try and help that process along. And especially as we are sort of going into some new markets whether it be Hawaii or some of the other California new markets, the nice thing about sort of online bookings is that we are able to target our advertising very, very directly. So we can deal target whether its online advertising or the actual search results that would produce a direction for a consumer to come to alaskaair.com. And so we are spending a bit more on page search, but we are also targeting it pretty aggressively more so than we have done in the past. Then the other thing just sort of general advertising and promotion we are doing a lot more to raise awareness in new markets, both of our new service, but also of alaskaair.com in particular being a great source for those low fares for that new service. So, as we go our customer base, we get people sort of joining the mileage plan. We had big increases in mileage plan membership the last year that allows us to also communicate directly with those customers. We do a lot of e-mail marketing to customers that we have in the database and then also as sort of a channel to shift people directly to alaskaair.com.

Perfect. Thank you for that.

Your next question comes from Steve O’Hara from Sidoti. Your line is open. Steve O’Hara - Sidoti: Hi, good afternoon or good morning.

Hi Steve. Steve O’Hara - Sidoti: I was curious just about the, I guess restructuring of the Horizon business and making it a branded regional. And I am just wondering in terms of maybe the benefits and the costs of having it in in-house regional versus a partner like SkyWest. I mean, what do you gain by having the in-house regional? What do you lose by having it? And then do you ever look at the possibility of either selling that business or spending it all?

Yes, Steve I think maybe just first pause and backup a couple of steps. Horizon has gone through a lot of changes in the last five or six years, but a lot in last couple of years. And you know about the branding stuff, there have been efforts to get some of their costs down to lower levels. A lot of the back office stuff that isn’t completely visible to people outside the company, but back office functions have been hugely streamlined. So there is one team working on all of these functions instead of two. And on other calls we’ve talked about the tremendous job that Glenn Johnson and his leadership team have done. And I look at it and I just I see a lot less effort happening for the two companies and I see regional business its producing $100 million a year of pretax profit. So, it looks really good, your specific question about spinning off Horizon or having someone else do that for us. I think where we look at that is we’ve got something that if we can do it ourselves and make it work well that’s what we wanted to do. And we feel that it is working well, Horizon has the Q400, there is not a lot of those flying and flown in the United States. It’s a tremendous airplane for the markets what we’re using it kind of shorter stage lengths from Seattle and Portland and so forth, it’s a tremendous airplane. And Horizon has a lot of know-how with that airplane and also a great – our long tradition of providing great customer service. So, it’s profitable, it’s producing good returns on capital, it’s meeting our objectives and we like – we like the current setup.

I am sure we have time for maybe one more question here. Okay, Steven, so you got another follow up there. Steve O’Hara - Sidoti: And almost done. Thanks.

Thank you.

Our final question in queue is from Hunter Keay from Wolfe Trahan. Your line is open.

Hey, Thanks a lot for the follow up, do you guys disclose what variable incentive pay would be at baseline target this year?

At target baseline and incentive pay for PBP and OPR is right around $60 million.

Again, okay cool, thanks. And one for Andrew, Andrew as you talked about some adjusting some of the schedule in certain Hawaiian markets. Obviously you can’t down gauge, I don’t think you are going to be taking dots off on the map any time soon. Have you even thought to maybe sort of moving departures around a complement Allegiant in markets where you guys compete? So, they take them out there, you’re taking back or something like that given the fact that some of the markets are very, very low frequency markets?

Sure. So, a couple – to you point Hunter a couple things on Hawaii is, yeah, with legend coming in and doing two or three a week that we get them bring back or whatever. Big picture here is Hawaii is extremely sensitive to the time of the day of the departure and of the West Coast its 9, 8, 9, 10, 11 in morning. Really what we’ve done is looking at the outer islands like (indiscernible) and you are going to see already in the public booking system there that we are going to split Oakland and San Diego, (indiscernible) to go three to four times a week each of those cities and so. That’s what where we are doing half of ou8r capacity is in the Pacific Northwest, the other roughly is in California. And so what are showing is there is not taking dots off the map to your point. But we are going really match supply with demand because Hawaii is extremely seasonal especially in California. And we are just going to be more focused on that going forward and perhaps we have been.

Okay, thank you again.

Thanks, Hunter.

I have no further questions in the queue. I’ll turn the call back over to Mr. Brad Tilden.

Alright, thanks everybody for joining us today. We look forward to talking with you again next quarter. We’ll see you.

Thank you for participating in today’s conference call. This call will be available for replay beginning at 4 o’clock Eastern Standard Time today through 11:59 PM Eastern Standard Time on February 24, 2013. The conference ID number for the replay is 37716850. The number to dial for the replay is 1 (800) 585-8367 or 1 (404) 537-3406. Also, the call will be accessible for future playback at www.alaskaair.com. Thank you. This concludes today’s conference call. You may now disconnect.