Proxy Statement Summary

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Proxy Statement Summary

2017 was a great year for Alaska Air Group – we invested in our route network, our fleet, our product, and laid the foundation for our future.

We made great progress in 2017 combining Alaska and Virgin America.

Aligned revenue management across platforms;
Co-located stations in 22 of 31 jointly served airports;
Invested in culture
Received Single Operating Certificate from the Federal Aviation Administration
Achieved single Human Resources, Finance and Payroll Systems
Finalized all aircraft livery and interior design decisions
Merged customer loyalty platforms

The overall integration timeline is tracking well against other recent airline mergers.

Key milestone schedule
(Number of months from deal to close)
Delta/
Northwest
United/
Continental
Airlines
Southwest/
Airtran
American
Airlines/
US Airways
Single passenger service system (PSS)16 mos.
Ranked #1
16 mos.17 mos.43 mos.22 mos.
Single website16 mos.
Ranked #1
16 mos.17 mos.42 mos.22 mos.
Full codeshare (AS partial)At close
Ranked #1
2 mos.11 mos.n/a3 mos.
Frequent flyer plan (FFP) integration13 mos.
Ranked #2
12 mos.17 mos.42 mos.15 mos.
Ability to transfer FFP miles1 mo.
Ranked #2
8 mos.
Prior
5 mos.42 mos.15 mos.
Single operating certificate13 mos.
Ranked #2
15 mos.13 mos. 10 mos16 mos.
Elite upgrade reciprocity*16 mos.
Ranked #3
At close At close42 mos.1 mo.
Single operations control center (OCC)15 mos.
Ranked #3
6 mos. 12 mos.n/an/a
*Status match for Elevate members into Mileage Plan at 1 month; AS elites recognized on Virgin metal at 8 months; full elite benefits reciprocity at PSS (~16 months); all figures +/- 1 month due to rounding.

85% of the integration milestones will be complete by June 2018…

. . . and the passenger service system (PSS) transition, scheduled for April 25, will enable the Company to unlock most of the synergies we expect from the deal.

In 2017, we also continued to execute across five focus areas . . .




Be Safe and On TimeFocus on PeopleBuild a Deep, Emotional Connection with our BrandDefend and Grow Our Customer BaseWin with Low Costs and Low Fares

. . . and implement our proven growth model in West Coast markets.

1. Fly where guests want to go with affordable fares

2. Build loyalty by providing superior value, excellent service and generous benefits

3. With increased loyalty, add network depth and frequency

The Virgin America network gave us expanded reach, and we added 44 additional routes to that foundation last year.

Heading into 2018, Alaska operates a North American network serving 115+ destinations from seven focus cities along the West Coast.

Led by our California-focused expansion, our network now offers the highest relevance in the industry for West Coast passengers.

*Data reflects mid-year 2017 schedules. Relevance is percent of North American O&D passengers in markets that each carrier serves with nonstop service.

While funding our growth, we also reduced balance sheet leverage by 8 points in 2018, with a debt-to-cap target consistent with other high-quality industrials.

We also continued our commitment to growing our dividend and returning capital to stockholders, repurchasing $75 million of stock in 2017.

Our 2017 performance has positioned us well to achieve our purpose:

Creating an Airline People Love.

***

Highlighted below is a summary of select information provided in this Proxy Statement. Please review the entire Proxy Statement and Alaska Air Group’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 before voting your shares.

Matters to Be Voted On

Item of BusinessBoard RecommendationEffect of Abstention
1.Elect 11 DirectorsFOR each Director NomineeNone
2.Approve on an advisory basis the Compensation of the Company’s Named Executive OfficersFORA Vote Against
3.Ratify the Appointment of KPMG LLP as the Company’s Independent Registered Public Accountants for the Fiscal Year 2018FORA Vote Against
4.Consider a Stockholder Proposal Regarding Changes to the Company’s Proxy Access BylawAGAINSTA Vote Against

Governance Highlights

As part of Alaska Air Group’s commitment to high ethical standards, our Board follows sound governance practices. These practices are described in more detail in our Corporate Governance Guidelines, which are available on the Company’s website at www.alaskaair.com.

TopicPractice
Independence
  • 10 out of 11 nominees are independent.

  • Board committees are composed exclusively of independent directors.
Lead Independent Director
  • The Board has appointed a strong lead independent director who:
  • acts as liaison between the independent directors and the board chairman;

  • presides at meetings where the chairman is not present or has a conflict of interest;

  • approves board meeting agendas and meeting schedules;

  • leads the independent directors’ evaluation of the CEO; and

  • interviews independent directors annually prior to nomination.
Executive Sessions
  • Independent directors meet regularly without management.
Annual Election
  • All directors are elected annually to one-year terms.
Majority Voting
  • In uncontested elections, directors are elected by a majority of votes cast.
Director Evaluations
  • ‰ The Board and each committee conduct annual self-evaluations.

  • Every three years, director evaluations are conducted by a third party.
Stock Ownership
  • Each director is expected to hold shares of Alaska Air Group stock equivalent to three times his or her annual cash retainer.
Other Directorships
  • Directors are encouraged to serve on no more than four other public company boards.
Stockholder Communications
  • The Board has adopted a protocol to allow those stockholders with long-term significant holdings of our stock to meet directly with board members on appropriate matters.
Poison Pill
  • The Company does not have a stockholder rights plan.
Proxy Access
  • Stockholders who meet certain requirements may include director nominees in the Company’s proxy statement.
Right to Call Special Meeting
  • Stockholders holding 10 percent or more of the outstanding stock have the right to call a special meeting.
Confidential voting
  • Records that identify the vote of a particular stockholder are kept confidential from the Company except in a proxy contest or as required by law.
Single Voting Class
  • Common stock is the only class of voting shares outstanding.
Director Tenure
  • Directors are subject to term and age limits as described in our Corporate Governance Guidelines.

Our Board

All nominees meet the New York Stock Exchange governance standards for director independence, except for Mr. Tilden, who is not independent due to his position as an executive officer.

Nominee and Principle OccupationAge Director SinceCommittee Membership
Patricia M. Bedient
Former Executive Vice President and CFO
The Weyerhaeuser Company
642004Lead Independent Director
Audit
Governance and Nominating
James A. Beer
Chief Financial Officer
Atlassian Corporation
572017Safety
Compensation and Leadership Development
Marion C. Blakey
President and CEO
Rolls-Royce North America
692010Safety
Compensation and Leadership Development
Phyllis J. Campbell
Chairman
JPMorgan Chase & Co. Pacific
Northwest Region
662002Governance and Nominating (Chair)
Raymond L. Conner
Former Vice Chairman
The Boeing Company
622018Safety
Dhiren R. Fonseca
Partner
Certares LP
532014Audit
Susan J. Li
Vice President, Finance
Facebook, Inc.
32Nominee
Helvi K. Sandvik
Consultant and Former President
NANA Development Corporation
602013Safety (Chair)
J. Kenneth Thompson
President and CEO
Pacific Star Energy LLC
661999Compensation and Leadership Development
Safety
Bradley D. Tilden
Chairman, President and CEO
Alaska Air Group, Inc.
572010
Eric K. Yeaman
President and COO
First Hawaiian Bank
502012Audit (Chair)
Governance and Nominating

Executive Compensation Practices

Our executive compensation program is aligned with our business strategy and is designed to attract and retain top talent and reward the achievement of key business goals. The following practices ensure alignment of interests between stockholders and executives and are considered good governance by our Compensation and Leadership Development Committee (the Committee) and by the majority of our stockholders.

TopicPractice
Pay for Performance
  • A significant percentage of total direct compensation is based on the achievement of performance-based goals that are challenging, yet attainable, and that drive achievement of the Company’s business strategy.

  • The Committee considers Company performance when setting CEO pay.
"Say on Pay"
  • Annually, we ask stockholders to provide an advisory vote on our pay practices, which the Committee considers when setting CEO pay.
Stock Ownership Requirements
  • Our minimum stockholding requirements are 5 times base salary for the CEO, 4 times base salary for the president and 3 times base salary for the executive vice presidents of Alaska Airlines.
Change-in-Control Provisions
  • We have double-trigger change-in-control provisions that require the actual or constructive termination of employment and the consummation of a change-in-control transaction.
Clawback Policy
  • Our policy allows recovery of incentive cash or equity compensation that is based on financial statements that were subsequently restated due to the individual’s fraudulent or grossly negligent act or omission.
Independent Compensation Consultant
  • The Committee retains a compensation consultant that does not provide any other services to the Company.
Hedging of Company Stock
  • Executive officers and board members may not engage in transactions that create a hedge against fluctuations in the price of Alaska Air Group stock.
Pledging of Company Stock
  • Executive officers and board members may not pledge Alaska Air Group stock as collateral for any obligation.
Severance Tax Gross-Ups
  • Our change-in-control and severance arrangements do not provide for tax gross-ups.
Employment Contracts
  • None of our named executive officers has an employment contract.
Repricing of Stock Options
  • Our equity incentive plan does not permit repricing or exchange of underwater stock options without stockholder approval.

 

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